AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-------------------
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2511 56-1977928
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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1300 NATIONAL HIGHWAY
THOMASVILLE, NORTH CAROLINA 27360
(910) 476-4777
(Address, including zip code, and telephone number, including area code,
of registrant's and co-registrants' principal executive offices)
-------------------
DOUGLAS C. BARNARD, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
1300 NATIONAL HIGHWAY
THOMASVILLE, NORTH CAROLINA 27360
(910) 476-4777
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
With a copy to:
PHILIP H. WERNER, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
101 PARK AVENUE
NEW YORK, N.Y. 10178-0060
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO 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. / /
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 7/8 Senior
Subordinated Notes due
2006.................. $200,000,000 100% $200,000,000 $68,966
Guaranties of 10 7/8
Senior Subordinated
Notes due 2006........ (2) (2) (2) (2)
</TABLE>
(1) Estimated pursuant to Rule 457(f) solely for the purposes of calculating the
registration fee.
(2) Pursuant to Rule 457(n), no registration fee is required with respect to the
Guarantees of the Senior Subordinated Notes registered hereby.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
EXACT NAME OF GUARANTOR PRIMARY STANDARD
REGISTRANT AS SPECIFIED JURISDICTION OF I.R.S. EMPLOYEE INDUSTRIAL CLASSIFICATION
IN ITS CHARTER INCORPORATION IDENTIFICATION NO. CODE NO.
- --------------------------------- --------------- ------------------- --------------------------
<S> <C> <C> <C>
Ametex Fabrics, Inc.............. Delaware 04-2518916 5131
The Berkline Corporation......... Delaware 62-1568223 2512
Blue Mountain Trucking
Corporation...................... Mississippi 64-0625494 4211
Custom Truck Tires, Inc.......... Mississippi 64-0712217 4211
D-H Retail Space, Inc............ Mississippi 56-1726125 9998
Drexel Heritage Advertising,
Inc.............................. Delaware 56-1693295 9998
Drexel Heritage Furnishings,
Inc.............................. New York 13-6087066 2511
Drexel Heritage Home
Inspirations, Inc.............. North Carolina 38-3176528 9998
Henredon Furniture Industries,
Inc.............................. North Carolina 56-0479224 2511
Henredon Transportation Company.. North Carolina 56-1324378 4211
Interior Fabric Design, Inc...... New York 04-2593116 5131
Intro Europe, Inc................ North Carolina 58-1583028 9998
La Barge, Inc.................... Michigan 38-1683907 2514
Lifestyle Holdings Ltd........... Delaware 56-1977929 2511
Lexington Furniture Industries,
Inc............................ North Carolina 56-0201940 2511
Maitland-Smith, Inc.............. North Carolina 31-1252988 9998
Marbro Lamp Company.............. California 95-4089891 3269
Ramm, Son & Crocker, Inc......... New York 38-3036446 5131
Robert Allen Fabrics, Inc........ Delaware 04-2928435 5131
Robert Allen Fabrics
of New York, Inc............... Delaware 04-2827352 5021
Sunbury Textile Mills, Inc....... Delaware 24-0815238 2221
Universal Furniture Industries,
Inc.............................. Delaware 95-3550559 2511
Universal Furniture Limited...... Delaware 38-2885167 2511
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 13, 1996
PROSPECTUS
OFFER FOR ALL OUTSTANDING 10 7/8% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR 10 7/8% SENIOR SUBORDINATED NOTES DUE 2006 OF
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1996, UNLESS EXTENDED
LIFESTYLE FURNISHINGS INTERNATIONAL LTD, a Delaware corporation (the "Company"),
hereby offers to exchange an aggregate principal amount of up to $200,000,000 of
its 10 7/8% Senior Subordinated Notes due 2006 (the "New Notes") for a like
principal amount of its 10 7/8% Senior Subordinated Notes due 2006 (the "Old
Notes") outstanding on the date hereof upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"). The New Notes and
the Old Notes are collectively hereinafter referred to as the "Notes." The terms
of the New Notes are identical in all material respects to those of the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes. The New Notes will be issued pursuant to, and entitled to the
benefits of, the Indenture (as defined) governing the Old Notes. The New Notes
will be unsecured and will be subordinated to all existing and future Senior
Indebtedness (as defined) of the Company. The New Notes will rank pari passu
with any future Senior Subordinated Indebtedness (as defined) of the Company and
will rank senior to all subordinated indebtedness of the Company. The New Notes
will be fully and unconditionally guaranteed (the "Subsidiary Guaranties") on an
unsecured, senior subordinated basis, by each Domestic Subsidiary (as defined)
(other than the Receivables Subsidiary (as defined), the Master Servicer (as
defined) and certain subsidiaries with substantially no assets or operations)
(such guarantors collectively, the "Guarantor Subsidiaries"). The Company is a
holding company that will derive substantially all of its operating income and
cash flow from its subsidiaries. Certain of the Guarantor Subsidiaries are
borrowers under, and the others guarantee, the Senior Bank Facilities (as
defined) and are jointly and severally liable on a senior basis with the Company
for all obligations thereunder. Such obligations are secured by pledges of all
the capital stock of the Guarantor Subsidiaries and 65% of the capital stock of
the Company's first-tier foreign subsidiaries, and security interests in, or
liens on, substantially all other tangible and intangible assets located in the
United States of the Guarantor Subsidiaries. See "Description of Senior Bank
Facilities" and "Description of Notes." As of June 30, 1996, on a pro forma
basis after giving effect to the Transactions (as defined), the Company would
have had no outstanding Senior Indebtedness (excluding unused commitments and
the obligations in respect of borrowings by subsidiaries under the Senior Bank
Facilities), the outstanding Senior Indebtedness of the Guarantor Subsidiaries
would have been $327.2 million (excluding unused commitments) and all
liabilities of the Company and its subsidiaries (including such Senior
Indebtedness but excluding the Notes and the Subsidiary Guaranties) would have
been approximately $766.7 million, and the Company and its subsidiaries would
have had no Senior Subordinated indebtedness outstanding other than the Old
Notes, and no indebtedness outstanding that was subordinate or junior in right
of payment to the Old Notes. See "Description of Notes--Ranking." Interest on
the New Notes will accrue from the last interest payment date on which interest
was paid on the Old Notes surrendered in exchange therefor or, if no interest
has been paid on the Old Notes, from the date of original issue of the Old
Notes. Interest on the New Notes will be payable semi-annually on February 1 and
August 1 of each year, commencing February 1, 1997.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company and the Guarantor Subsidiaries contained in the
Exchange and Registration Rights Agreement dated August 5, 1996 (the
"Registration Rights Agreement"), among the Company, the Guarantor Subsidiaries
and Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "Initial Purchasers"), with respect to the initial sale of the Old Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date (as defined) for the Exchange Offer. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes
with respect to the Exchange Offer, the Company will promptly return such Old
Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivery of 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, as amended (the "Securities Act"). This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Each of the Company and the Guarantor
Subsidiaries has agreed that, for a period of 180 days after the Expiration
Date, it will make this Prospectus available to any broker-dealer for use in
connection with any such release. See "Plan of Distribution."
----------------------------------------------------------------
Prior to the Exchange Offer, there has been no public market for the Old Notes.
If a market for the New Notes should develop, such New Notes could trade at a
discount from their principal amount. The Company currently does not intend to
list the New Notes on any securities exchange or to seek approval for quotation
through any automated quotation system and no active public market for the New
Notes is currently anticipated. There can be no assurance that any public market
for the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" COMMENCING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
----------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL NOR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
AVAILABLE INFORMATION
The Company and the Guarantor Subsidiaries have filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-4
(the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the New
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Company, the Guarantor Subsidiaries and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Exchange Offer
Registration Statement, including the exhibits thereto, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional
Offices of the 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 Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such Web site is:
http://www.sec.gov.
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. In the event the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company will be required under the Indenture to continue to file with
the Commission the annual and quarterly reports, information, documents or other
reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K,
which would be required pursuant to the informational requirements of the
Exchange Act. The Company will also furnish such other reports as may be
required by law.
-------------------
On August 5, 1996, FURNISHINGS INTERNATIONAL INC., a Delaware corporation
("Holdings"), the parent of the Company, acquired from Masco Corporation
pursuant to the Acquisition Agreement (as defined) and contributed to the
Company as common equity all the capital stock of substantially all of the home
furnishings group of Masco Corporation. The net proceeds from the sale of the
Old Notes, together with borrowings under the Senior Bank Facilities, the
initial proceeds from the Receivables Facility (as defined) and other funds,
were used to finance the Transactions. The Company was formed to consummate the
Transactions. See "Summary--The Transactions."
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information, financial statements and notes
thereto included elsewhere in this Prospectus. As used in this Prospectus,
unless the context otherwise requires, the term the "Company" refers (i) for
periods prior to the Transactions (as defined) to the home furnishings group
(the "Home Furnishings Group") of Masco Corporation ("Masco") as constituted
prior to the Transactions, and (ii) for periods after the Transactions to
LIFESTYLE FURNISHINGS INTERNATIONAL LTD. and its consolidated subsidiaries as
constituted after giving effect to the Transactions. Certain assets constituting
part of the Home Furnishings Group (the "Holdings Business") were acquired by,
and remain the property of, FURNISHINGS INTERNATIONAL INC., the parent of the
Company ("Holdings"). The historical financial information for the Company
includes, but the pro forma financial information excludes, the Holdings
Business. See "--The Transactions" and "Unaudited Pro Forma Financial
Information."
THE COMPANY
COMPANY OVERVIEW
The Company is the largest U.S. based manufacturer and marketer of
residential furniture and the nation's largest designer, marketer and
distributor of decorative home furnishing fabrics. The Company markets a
comprehensive selection of quality products under well-known brand names through
an extensive worldwide distribution network. The Company offers products in
price categories ranging from "promotional" to "premium," with a primary
concentration on the "good," "better" and "best" categories. From 1991 to 1995,
the Company's net sales grew from $1.5 billion to $2.0 billion, a compound
annual rate of 8.1%, and its EBITDA grew from $85.2 million to $157.6 million, a
compound annual rate of 16.5%. On a pro forma basis giving effect to the
Transactions as if they had been consummated on January 1, 1995, the Company's
EBITDA for 1995 would have been $174.8 million, and giving effect to the
Transactions as if they had occurred on January 1, 1996, the Company's EBITDA
for the six months ended June 30, 1996 would have been $84.7 million.
Fine Furniture. The Company designs, manufactures and markets a full range
of quality wood and upholstered furniture to furnish any room of a home in
virtually any style, under such well-known brand names as Henredon(R), Drexel
Heritage(R), Lexington(R), Universal(R), Berkline(R) and BenchCraft(R), and a
wide range of furniture accessories under the Maitland-SmithTM and La Barge(R)
brand names. Net sales of fine furniture grew from $1.2 billion in 1991 to $1.7
billion in 1995, a compound annual rate of 9.0%.
Decorative Home Furnishing Fabrics. The Company designs, markets and
distributes over 25,000 decorative home furnishing fabrics, such as fabrics for
upholstery and draperies, under such well-known brand names as Robert AllenTM,
SunburyTM and Beacon Hill(R). Net sales of decorative home furnishing fabrics
grew from $238.2 million in 1991 to $271.4 million in 1995, a compound annual
rate of 3.3%.
INDUSTRY OVERVIEW
Since 1975, the domestic residential furniture industry has grown at a
compound annual rate of 5.9%, from $6.0 billion in shipments in 1975 to $19.0
billion in 1995, according to the American Furniture Manufacturers Association
(the "AFMA"), an industry trade group. While the domestic residential furniture
industry fluctuates with the general economy, periods of decline have been
relatively brief, with industry shipments declining in only two years since
1975. The Company believes that the industry will continue to grow in part due
to favorable demographic and other trends, including: (i) the maturation of the
"baby boom" generation, which will increase the portion of the U.S. population
between the ages of 35-54 by more than 8 million people by the end of the decade
(this age group has historically had the highest level of discretionary income
and consumer spending, and represents the largest number of consumers of
residential furniture, according to the
3
<PAGE>
United States Bureau of the Census (the "Census Bureau")); (ii) increases in
average new home size from approximately 1,400 square feet in 1975 to nearly
2,000 square feet in 1994, according to the Census Bureau, which generally
results in increased purchases of furniture per home and (iii) growth in the
number of Americans who work at home and who therefore require home office
furniture. The Company believes that it is well positioned to capitalize on
these favorable trends as a result of its broad range of products and well-known
brands.
COMPETITIVE ADVANTAGES
The Company believes it benefits from the following competitive advantages
which have helped it to increase sales and operating profitability and to
maintain its leadership position in the home furnishings industry:
Industry Leadership. As the largest U.S. based manufacturer and marketer of
residential furniture and the nation's largest designer, marketer and
distributor of decorative home furnishing fabrics, the Company enjoys several
marketing advantages, including: (i) a strong share of retail floor space; (ii)
the ability to support its products with significant marketing and advertising
resources and (iii) the resources to introduce and support new design and
product innovations. In addition, the Company also benefits from several
operating advantages, including: (i) economies of scale in purchasing raw
materials; (ii) efficient utilization of its worldwide manufacturing base and
distribution network and (iii) complementary sales and marketing activities.
Established, Well-Known Brand Names. The Company markets its products under
some of the most established and well-known brand names in the industry,
including Henredon(R), Drexel Heritage(R), Lexington(R), Universal(R),
Berkline(R), BenchCraft(R), Maitland-SmithTM and La Barge(R) in fine furniture,
and Robert AllenTM, SunburyTM and Beacon Hill(R) in decorative home furnishing
fabrics. The Company believes that brand name recognition is an important
competitive advantage and that retailers and consumers associate its brands with
a high degree of quality, craftsmanship, style and value.
Comprehensive Product Lines. The Company believes it is the most
comprehensive resource in the home furnishings industry, providing retailers and
consumers with more product alternatives than any of its competitors. The
Company offers products across all price categories and in most major style
categories, including American Traditional, Country, Eighteenth Century,
European Country, European Traditional, Casual, Contemporary, Home Office, Youth
and Oriental. By offering such a broad product line, the Company can supply up
to 75% of the product demands of most furniture retailers, and more easily
satisfy furniture retailers who increasingly prefer to buy from a smaller number
of larger suppliers.
Extensive and Diverse Distribution Network. The Company believes it has more
active accounts than any other manufacturer in the furniture or home furnishings
industry. It distributes its fine furniture products through an extensive
worldwide distribution network that includes: (i) more than 25,000 independent
retail locations, including national and regional chains, department stores,
specialty stores and more than 570 galleries within retail stores; (ii) more
than 90 independent dedicated stores exclusively selling Company products and
(iii) 16 Company owned and operated decorator showrooms. The Company also sells
its fine furniture products to the hospitality and government markets. The
Company distributes its decorative home furnishing fabrics through numerous
distribution channels, including its own showrooms, to an extensive customer
base consisting of over 30,000 retailers, decorators and designers worldwide.
The Company also sells decorative home furnishing fabrics to furniture
manufacturers.
Design and Style Leader. Through its new product offerings and other
innovations, the Company believes it has firmly established itself as an
industry design and style leader, which it believes has been essential to its
success. The Company pioneered "Lifestyle" and designer collections, and its
collections such as The World of Bob TimberlakeTM, Ralph Lauren Furniture
4
<PAGE>
CollectionTM, The Palmer Home CollectionTM and Alexander Julian Home ColoursTM
are among the industry's best sellers. In addition, the Company's innovative
Berkline(R) products have enabled it to acquire a significant share of the
rapidly growing market for motion furniture (sofas that incline or recline).
Modern Facilities. The Company operates 89 strategically located,
well-equipped facilities in North America, Asia and Europe with over 24 million
square feet of manufacturing and distribution space. Over the past five years
more than $275.0 million has been invested in the Company's facilities to meet
projected growth, reduce operating costs and maximize operating flexibility. The
Company believes that these facilities enable it to serve its worldwide customer
base efficiently and to allocate capacity to best meet its manufacturing
requirements.
Worldwide Presence. The Company's Asian operations include over five million
square feet of manufacturing and distribution facilities, decorator showrooms
and dedicated galleries throughout the region. As the largest U.S. furniture
manufacturer in Asia, the Company has access to a highly skilled (in such areas
as intricate veneering and hand carving), low-cost workforce, and to scarce raw
materials such as Chinese oak, wicker, rattan and certain exotic woods. Although
the large majority of the Company's Asian-made products are sold in the United
States, certain products are sold in Asia, positioning the Company to increase
the distribution of all of its products into this region. The Company also
manufactures and distributes fine furniture products in Europe. The Company's
decorative home furnishing fabrics are manufactured in the United States and in
Europe, and are distributed worldwide.
The Company's strategy for achieving continued growth in sales and cash flow
includes: (i) enhancing its strong brand names; (ii) increasing customer
satisfaction; (iii) focusing on product innovation; (iv) increasing operating
efficiencies and (v) expanding its worldwide presence. See "Business--Business
Strategy."
RECENT COST REDUCTION INITIATIVES
The Company was formed by Masco through a series of acquisitions of
individual brand name companies. As a result, each of the Company's major brands
has historically operated to a certain degree as an independent business unit.
The Company believes there are significant opportunities to improve operating
efficiencies and reduce costs through intercompany cooperation. The Company has
recently implemented several cost reduction initiatives which have begun to
positively impact the Company's results in 1996. The most significant of these
initiatives include: (i) the consolidation of two smaller product lines into the
Company's Drexel Heritage(R) line; (ii) the consolidation and closing of several
Asian retail facilities and (iii) consolidation and overhead reductions in
European manufacturing and distribution. The Company expects such measures to
result in annual savings of up to approximately $16 million beginning in 1996
(of which an estimated $7.2 million has been realized in the six months ended
June 30, 1996). Furthermore, the Company's intercompany cooperation has been
evidenced by an increase in intercompany sales from $57.8 million in 1991 to
$168.0 million in 1995.
The Company believes there are significant opportunities for additional
improvement in margins and cash flow through intercompany cooperation,
including: (i) realizing economies of scale in the procurement of raw materials;
(ii) reducing working capital levels; (iii) reducing capital expenditures from
coordinated use of manufacturing resources and (iv) focusing on cooperative
sales and marketing efforts. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Business
Strategy."
LIFESTYLE FURNISHINGS INTERNATIONAL LTD., a corporation organized under the
laws of Delaware, has its principal executive offices at 1300 National Highway,
Thomasville, North Carolina 27360, and its telephone number is (910) 476-4777.
5
<PAGE>
THE TRANSACTIONS
On August 5, 1996, pursuant to an acquisition agreement (as amended, the
"Acquisition Agreement") between Holdings, which owns all the capital stock of
the Company, and Masco, the following occurred (the "Acquisition"):
(a) Lineage Home Furnishings, Inc. ("Lineage"), then a subsidiary of
Masco that marketed a line of furniture manufactured by the Home
Furnishings Group, and Masco Home Furnishings, Inc. ("MHF" and,
together with Lineage, the "Holdings Business"), then a subsidiary of
Masco that distributed furniture in the contract market, were
acquired by Holdings by merger with and into Holdings, with Holdings
as the surviving corporation in such merger;
(b) Holdings acquired from Masco all the capital stock of the other
corporations previously comprising the Home Furnishings Group (the
"Capital Stock");
(c) Holdings contributed to the Company the Capital Stock and all assets
of the Holdings Business other than certain immaterial assets and
payables (such contributed assets, the "Specified Assets" and,
together with the Capital Stock, the "Acquired Business");
(d) all outstanding intercompany advances by Masco to the Home
Furnishings Group were repaid; and
(e) Holdings and Masco entered into a transition services agreement (the
"Transition Services Agreement") under which Masco will continue to
perform certain administrative services for the Company until April
30, 1997.
The aggregate consideration paid to Masco in connection with the Acquisition
(the "Acquisition Consideration") consisted of:
(a) approximately $705.3 million in cash (substantially all of which
consisted of the repayment of intercompany advances owing to Masco);
(b) the issuance to Masco of $285.0 million of senior pay-in-kind notes
of Holdings (the "Holdings PIK Notes");
(c) the issuance to Masco of common and preferred stock of Holdings
valued at an aggregate of $59.7 million (collectively, the "Masco
Holdings Stock"); and
(d) the assumption of indebtedness owing to non-affiliates of the Home
Furnishings Group, in an aggregate amount of $28.3 million (the
"Assumed Indebtedness").
The cash portion of the Acquisition Consideration (approximately $705.3
million) and the fees and expenses in connection with the Transactions
(approximately $40.0 million) came from the following sources:
(a) 399 Venture Partners, Inc. ("399 Ventures") and certain other
investors, including affiliates of Travelers Group Inc.
(collectively, "Travelers") (the "Institutional Investors") and Wayne
B. Lyon, who became Chief Executive Officer, President and Chairman
of the Board of Holdings, made a capital contribution to Holdings for
common and preferred stock in an aggregate amount of $65.3 million
(the "Equity Contribution") and Holdings paid the Equity Contribution
to Masco in connection with the acquisition of the Holdings Business
(see "Ownership of Securities" for a description of the stock
ownership of Holdings and certain agreements among its stockholders);
(b) the Company and the Guarantor Subsidiaries obtained senior secured
credit facilities (the "Senior Bank Facilities") in an aggregate
principal amount of $450.0 million consisting of (i) $300.0 million
of term loans (the "Term Loans") and (ii) a $150.0 million revolving
credit facility (the "Revolving Credit Facility");
6
<PAGE>
(c) a wholly-owned, special purpose subsidiary of the Company (the
"Receivables Subsidiary") obtained a receivables purchase facility
(the "Receivables Facility") in an aggregate principal amount of up
to $175.0 million; and
(d) the Company issued, and the Guarantor Subsidiaries guaranteed, the
$200.0 million aggregate principal amount of Old Notes (the
"Offering").
The transactions effected in connection with the Acquisition, the repayment
of debt, the financing thereof and the payment of related transaction fees and
expenses are collectively referred to as the "Transactions."
The following table sets forth the sources and uses of funds in connection
with the consummation of the Transactions:
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
SOURCES OF FUNDS
Senior Bank Facilities(1):
Revolving Credit Facility......................... $ 25.0
Tranche A Term Loan............................... 125.0
Tranche B Term Loan............................... 175.0
Receivables Facility(2)............................... 155.0
Assumed Indebtedness(3)............................... 28.3
Senior Subordinated Notes due 2006.................... 200.0
Stockholder's Equity(4)............................... 410.0
----------
Total............................................. $ 1,118.3
----------
----------
USES OF FUNDS
Acquisition Consideration................................ $ 1,078.3
Transaction Fees and Expenses............................ 40.0
----------
Total................................................ $ 1,118.3
----------
----------
- ------------
(1) Borrowings of up to $150.0 million under the Revolving Credit Facility will
be available for working capital and general corporate purposes, including
up to $50.0 million for letters of credit. See "Description of Senior Bank
Facilities."
(2) See "Description of Receivables Facility."
(3) The Assumed Indebtedness consists of indebtedness to non-affiliates owed by
subsidiaries of the Company at the consummation of the Transactions.
(4) Holdings contributed to the Company as common equity the Acquired Business.
Holdings issued (i) the Holdings PIK Notes ($285.0 million); (ii) common and
preferred stock representing the Equity Contribution (approximately $65.3
million, all of which was paid to Masco in connection with the acquisition
of the Holdings Business) and (iii) the Masco Holdings Stock (approximately
$59.7 million). The common equity of the Company is valued at $410.0
million. See "Ownership of Securities."
7
<PAGE>
OWNERSHIP OF THE COMPANY
The Company is a wholly-owned subsidiary of Holdings. Holdings is owned by
the Institutional Investors (primarily 399 Ventures), Masco and certain members
of management of Holdings (the "Management Investors"). Masco and 399 Ventures
and/or their affiliates have invested together in several companies.
399 Ventures. 399 Ventures is an affiliate of Citicorp Venture Capital,
Ltd., which, together with 399 Ventures and its other affiliated companies, has
a current portfolio of investments in over 100 companies.
Masco. Masco is a manufacturer of brand-name consumer products designed for
the improvement and building of the home. Masco's products include faucets,
kitchen and bath cabinetry, kitchen appliances, plumbing accessories,
ventilating equipment, builders' hardware and other building products. Masco's
1995 net sales (exclusive of the Home Furnishings Group) were approximately $2.9
billion.
Management. Members of the former management of the Home Furnishings Group
joined the Company upon the completion of the Acquisition. The management group
includes Wayne B. Lyon, the former President of Masco (who became the Chief
Executive Officer, President and Chairman of the Board of Holdings and the
Company), each of the divisional presidents and more than 50 other key
employees. See "Management."
The following chart illustrates the corporate structure of the Company. See
"Ownership of Securities."
[CHART]
* Holdings has (i) an additional subsidiary not shown in the chart, Simmons
Upholstered Furniture Corporation ("Simmons"), that is not a subsidiary of the
Company, and (ii) shareholders holding a special class of common stock
designed to track the performance of such subsidiary.
8
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered.......... Up to $200,000,000 aggregate principal amount of 10 7/8%
Senior Subordinated Notes due 2006 (the "New Notes"). The
terms of the New Notes and Old Notes are identical in all
material respects, except for certain transfer restrictions
and registration rights relating to the Old Notes.
The Exchange Offer.......... The New Notes are being offered in exchange for a like
principal amount of Old Notes. Old Notes may be exchanged only
in integral multiples of $1,000. The issuance of the New Notes
is intended to satisfy obligations of the Company and the
Guarantor Subsidiaries contained in the Registration Rights
Agreement.
Expiration Date; Withdrawal
of Tender................... The Exchange Offer will expire 5:00 p.m. New York City time,
on , 1996, or such later date and time to which it is extended
by the Company. The tender of Old Notes pursuant to the
Exchange Offer may be withdrawn at any time prior to the
Expiration Date. Any Old Notes not accepted for exchange for
any reason will be returned without expense to the tendering
holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Certain Conditions to the
Exchange Offer............. The Company's obligation to accept for exchange, or to issue
New Notes in exchange for, any Old Notes is subject to certain
customary conditions relating to compliance with any
applicable law, or any applicable interpretation by any staff
of the Commission, or any order of any governmental agency or
court of law, which may be waived by the Company in its
reasonable discretion. The Company currently expects that each
of the conditions will be satisfied and that no waivers will
be necessary. See "The Exchange Offer--Certain Conditions to
the Exchange Offer."
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 thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise deliver
such Letter of Transmittal, or such facsimile, together with
such Old Notes and any other required documentation, to the
Exchange Agent (as defined) at the address set forth herein.
See "The Exchange Offer--Procedures for Tendering Old Notes."
Use of Proceeds............. There will be no proceeds to the Company from the exchange of
Notes pursuant to the Exchange Offer.
Exchange Agent.............. IBJ Schroder Bank & Trust Company is serving as the Exchange
Agent in connection with the Exchange Offer.
Federal Income Tax
Consequences............... The exchange of Notes pursuant to the Exchange Offer should
not be a taxable event for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
</TABLE>
9
<PAGE>
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that
holders of Old Notes (other than any holder who is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who exchange their Old
Notes for New Notes pursuant to the Exchange Offer generally may offer such New
Notes for resale, resell such New Notes and otherwise transfer such New Notes
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided such New Notes are acquired in the ordinary course
of the holders' business and such holders have no arrangement with any person to
participate in a distribution of such New Notes. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the New Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the Notes
reasonably requests in writing. If a holder of Old Notes does not exchange such
Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will
continue to be subject to the restrictions on transfer contained in the legend
thereon. In general, the Old Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. Holders of Old Notes do not have any appraisal or dissenters' rights under
Delaware General Corporation Law in connection with the Exchange Offer. See "The
Exchange Offer-- Consequences of Failure to Exchange; Resales of New Notes."
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. Following consummation of the
Exchange Offer, the New Notes will not be eligible for PORTAL trading.
THE NEW NOTES
The terms of the New Notes are identical in all material respects to the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes.
<TABLE>
<S> <C>
Issuer...................... LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
Securities Offered.......... $200,000,000 aggregate principal amount of 10 7/8% Senior
Subordinated Notes due 2006.
Maturity.................... August 1, 2006.
Interest Payment Dates...... February 1 and August 1 of each year, commencing February 1,
1997.
Sinking Fund................ None.
Optional Redemption......... Except as described below, the Company may not redeem the New
Notes (or the Old Notes) prior to August 1, 2001. On or after
such date, the Company may redeem the New Notes (and any
outstanding Old Notes), in whole or in part, at the redemption
prices set forth herein together with accrued and unpaid
interest, if any, to the date of redemption. In addition, at
any time and from
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
time to time on or prior to August 1, 1999, the Company, at
its option, may redeem up to 33 1/3% of the original aggregate
principal amount of the Notes, with the net cash proceeds of
one or more Public Equity Offerings (as defined) by the
Company or Holdings following which there is a Public Market
(as defined), at a redemption price equal to 110.875% of the
principal amount to be redeemed, together with accrued and
unpaid interest, if any, to the date of redemption, provided
that at least 66 2/3% of the original aggregate principal
amount of the Notes remains outstanding immediately after each
such redemption. See "Description of Notes--Optional
Redemption."
Change of Control........... Upon the occurrence of a Change of Control, (i) the Company
will have the option, at any time prior to August 1, 2001, to
redeem the New Notes (and any outstanding Old Notes), in whole
or in part, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium (as
defined), together with accrued and unpaid interest, if any,
to the date of redemption and (ii) if the Company does not so
redeem the New Notes (or such Old Notes) or if such Change of
Control occurs on or after August 1, 2001, each holder will
have the right to require the Company to make an offer to
repurchase the New Notes (and such Old Notes) at a price equal
to 101% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of purchase. See
"Description of Notes--Change of Control."
Subsidiary Guaranties....... The New Notes will be (as are the Old Notes) fully and
unconditionally guaranteed on an unsecured, senior
subordinated basis by each of the Guarantor Subsidiaries. See
"Description of Notes--Subsidiary Guaranties."
Ranking..................... The New Notes will be (as are the Old Notes) unsecured and
subordinated in right of payment to all existing and future
Senior Indebtedness (as defined) of the Company. The New Notes
will (as do the Old Notes) rank pari passu with any future
Senior Subordinated Indebtedness (as defined) of the Company
and will rank senior to all other subordinated indebtedness of
the Company. The Subsidiary Guaranties will be general,
unsecured obligations of the Guarantor Subsidiaries,
subordinated in right of payment to all existing and future
Senior Indebtedness of the Guarantor Subsidiaries. As of June
30, 1996, on a pro forma basis after giving effect to the
Transactions, the Company would have had no outstanding Senior
Indebtedness (excluding unused commitments and the obligations
in respect of borrowings by subsidiaries under the Senior Bank
Facilities), the outstanding Senior Indebtedness of the
Guarantor Subsidiaries would have been $327.2 million
(excluding unused commitments) and all liabilities of the
Company and its subsidiaries (including such Senior
Indebtedness but excluding the Notes and the Subsidiary
Guaranties) would have been approximately $766.7 million, and
the Company and its subsidiaries would have had no Senior
Subordinated Indebtedness outstanding other than the Old Notes
and no indebtedness outstanding that was subordinate or junior
in
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
right of payment to the Old Notes. See "Description of Notes--
Ranking."
Restrictive Covenants....... The indenture under which the New Notes will be issued (the
"Indenture"), which is the indenture under which the Old Notes
were issued, limits (i) the incurrence of additional
indebtedness by the Company and its Restricted Subsidiaries
(as defined); (ii) the payment of dividends on, and redemption
of, capital stock of the Company and its Restricted
Subsidiaries and the redemption of certain subordinated
obligations of the Company and its Restricted Subsidiaries;
(iii) investments; (iv) sales of assets and Restricted
Subsidiary stock; (v) certain transactions with affiliates;
(vi) the sale or issuance of capital stock of Domestic
Subsidiaries; (vii) the creation of liens; (viii) the lines of
business in which the Company and its Restricted Subsidiaries
may operate; (ix) sale and leaseback transactions and (x)
consolidations, mergers and transfers of all or substantially
all of the Company's assets. The Indenture also will prohibit
certain restrictions on distributions from Restricted
Subsidiaries. However, all of these limitations and
prohibitions are subject to a number of important
qualifications and exceptions. See "Description of
Notes--Certain Covenants" and "--Merger and Consolidation."
Absence of a Public Market
for the New Notes.......... The New Notes are new securities and there is currently no
established market for the New Notes. Accordingly, there can
be no assurance as to the development or liquidity of any
market for the New Notes. The Initial Purchasers have advised
the Company and the Guarantor Subsidiaries that they currently
intend to make a market in the New Notes. However, they are
not obligated to do so, and any market making with respect to
the New Notes may be discontinued without notice. The Company
and the Guarantor Subsidiaries do not intend to apply for
listing of the New Notes on any national securities exchange
or for their quotation through the National Association of
Securities Dealers Automated Quotation System.
</TABLE>
RISK FACTORS
Holders of Old Notes should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors under "Risk Factors" in connection with the Exchange Offer.
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table presents as of the dates and for the periods indicated
(i) summary historical combined financial information and (ii) summary pro forma
consolidated financial information, after giving effect to the Transactions. The
historical financial information for each of the four years in the period ended
December 31, 1995 has been derived from the audited combined financial
statements of the Company. Such combined financial statements for the three
years in the period ended December 31, 1995 have been audited by Coopers &
Lybrand L.L.P. and are included elsewhere herein. The historical financial
information for the year ended December 31, 1991 has been derived from the
unaudited combined financial statements of the Company not included herein. The
historical information for the six months ended June 30, 1995 and 1996 has been
derived from the unaudited combined financial statements of the Company included
herein. In the opinion of management, the information for the six month periods
ended June 30, 1995 and June 30, 1996 includes all material adjustments
(consisting only of adjustments of a normal and recurring nature) necessary for
a fair presentation of the results for such periods. The results of operations
for any interim period are not necessarily indicative of the results of
operations for a full year. The summary pro forma information does not purport
to represent what the Company's results actually would have been if the
Transactions had occurred at the dates indicated, nor does such information
purport to project the results of the Company for any future period. The summary
financial information should be read in conjunction with "Unaudited Pro Forma
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and the
related notes thereto included elsewhere in this Prospectus.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION(1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------------- -------------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995 1995 1996 1996
-------- -------- -------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS
DATA:
Net sales................... $1,457.6 $1,589.6 $1,763.5 $1,897.5 $1,992.6 $1,975.1 $ 984.4 $ 981.1 $ 973.8
Cost of sales............... 1,120.6 1,192.2 1,326.8 1,434.0 1,501.0 1,489.7 737.7 742.0 735.6
-------- -------- -------- -------- -------- --------- -------- -------- ---------
Gross profit............. 337.0 397.4 436.7 463.5 491.6 485.4 246.7 239.1 238.2
Selling, general and
administrative
expenses(2)................ 304.4 334.6 367.5 385.4 400.3 355.7 202.6 189.4 174.9
-------- -------- -------- -------- -------- --------- -------- -------- ---------
Operating profit......... 32.6 62.8 69.2 78.1 91.3 129.7 44.1 49.7 63.3
Interest expense(3)......... 86.0 84.1 82.7 87.1 94.8 65.6 48.8 44.5 32.4
Other, net(4)............... -- 2.6 3.2 7.3 8.3 10.5 0.8 2.9 4.7
-------- -------- -------- -------- -------- --------- -------- -------- ---------
Income (loss) before
income taxes................ (53.4) (23.9) (16.7) (16.3) (11.8) 53.6 (5.5) 2.3 26.2
Income taxes................ (6.1) 1.0 8.3 6.5 6.1 23.0 3.4 4.9 11.3
-------- -------- -------- -------- -------- --------- -------- -------- ---------
Net income (loss)........ $ (47.3) $ (24.9) $ (25.0) $ (22.8) $ (17.9) $ 30.6 $ (8.9) $ (2.6) $ 14.9
-------- -------- -------- -------- -------- --------- -------- -------- ---------
-------- -------- -------- -------- -------- --------- -------- -------- ---------
OTHER DATA:
Gross profit margin......... 23.1% 25.0% 24.8% 24.4% 24.7% 24.6% 25.1% 24.4% 24.5%
EBITDA(5)................... $ 85.2 $ 120.7 $ 133.6 $ 140.9 $ 157.6 $ 174.8 $ 78.5 $ 81.6 $ 84.7
EBITDA margin............... 5.8% 7.6% 7.6% 7.4% 7.9% 8.9% 7.9% 8.3% 8.7%
Capital expenditures........ $ 35.8 $ 35.1 $ 75.1 $ 68.8 $ 61.0 $ 61.0 $ 32.3 $ 13.9 $ 13.9
Sample book
expenditures(6)............. 16.7 29.2 14.2 14.1 15.2 15.2 7.1 6.6 6.6
Depreciation and
amortization............... 54.6 60.5 66.8 66.4 67.9 48.9 34.8 33.8 25.1
Cash interest expense(7).... 86.0 84.1 82.7 87.1 94.8 61.2 48.8 44.5 30.2
Ratio of total debt to
EBITDA(8)(9)................ 4.0 x
Ratio of EBITDA to cash
interest expense(8)........ 2.9 x 2.8 x
BALANCE SHEET DATA (AT
PERIOD END):
Working capital(10)...................................................................................... $ 752.7 $ 637.0
Total assets............................................................................................. 1,893.6 1,376.7
Total debt............................................................................................... 26.6 706.6
Total liabilities........................................................................................ 293.5 966.7
Masco net investment and advances(11).................................................................... 1,600.1 --
Stockholder's equity..................................................................................... -- 410.0
</TABLE>
- ------------
(1) Historical results include The Berkline Corporation, which was acquired in
April 1994 in a pooling-of-interests transaction. The summary pro forma
financial information for the year ended December 31, 1995 gives effect to
the Transactions as if they had occurred on January 1, 1995. The summary
pro forma financial information for the six months ended June 30, 1996
gives effect to the Transactions as if they had occurred on January 1,
1996. The pro forma balance sheet information at June 30, 1996 gives effect
to the Transactions as if they had occurred on such date. The historical
financial information includes, but the pro forma financial information
excludes, the Holdings Business.
(2) Included in historical selling, general and administrative expenses are
general corporate expenses which represent certain corporate staff support
and administrative services provided by Masco. These expenses, which were
charged to the Company by Masco, consisted of $10.8, $9.8, $10.5, $12.7 and
$16.0 in 1991 through 1995, respectively, and $7.9 and $8.0 for the six
months ended June 30, 1995 and 1996, respectively.
(3) Historical interest expense consists primarily of interest on advances from
Masco.
(4) Other, net, is net of interest income.
(5) EBITDA is defined as net income (loss) before interest expense, income
taxes, depreciation and amortization expense (including amortization of
sample book expenditures) and certain other non-cash charges. Such other
non-cash charges were $(2.0), $0, $0.7, $3.8, $6.7, $0.4 and $1.0 for 1991
through 1995 and the six months ended June 30, 1995 and 1996, respectively.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate whether cash flow will
be sufficient for cash requirements. This definition differs from that
specified for EBITDA under the Indenture. See "Description of
Notes--Certain Definitions."
(6) Sample book expenditures, which consist of the cost of producing books
containing actual samples of the Company's decorative home furnishing
fabrics, are capitalized and amortized over a three-year period.
(7) Cash interest expense is defined as interest expense less amortization of
debt issuance costs.
(8) These ratios are not shown for historical periods because substantially all
debt of the Company during such periods was owed to Masco.
(9) The ratio of total debt to EBITDA for the pro forma year ended December 31,
1995 is calculated using the pro forma total debt outstanding as of June
30, 1996.
(10) Working capital is defined as total current assets (excluding cash and cash
equivalents) less total current liabilities (excluding current maturities
of long-term debt).
(11) At June 30, 1996, advances from Masco totaled $1,163.4. Pursuant to the
Acquisition Agreement, Masco agreed that the outstanding amount of such
advances upon the consummation of the Transactions would not exceed $705.3.
The excess of such advances over $705.3 was converted to equity prior to
the consummation of the Transactions.
14
<PAGE>
RISK FACTORS
Holders of Old Notes should carefully consider the following factors in
addition to the other information set forth in this Prospectus in connection
with the Exchange Offer. The risk factors set forth below are generally
applicable to the Old Notes as well as the New Notes.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged. After giving pro forma effect to the
Transactions as of June 30, 1996, the Company's and its subsidiaries'
indebtedness would have been approximately $706.6 million and the Company's
stockholder's equity would have been $410.0 million. In addition, subject to the
restrictions in the Senior Bank Facilities and the Indenture, the Company may
incur additional indebtedness from time to time. The degree to which the Company
is leveraged could have important consequences to holders of the New Notes (and
to holders of the Old Notes), including the following: (i) the Company's ability
to obtain additional financing for working capital, capital expenditures,
acquisitions or general corporate purposes may be limited; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of interest on the Notes and its other existing indebtedness, thereby
reducing the funds available to the Company for other purposes; (iii) certain
indebtedness under the Senior Bank Facilities will be at variable rates of
interest, which will cause the Company to be vulnerable to increases in interest
rates; (iv) all of the indebtedness outstanding under the Senior Bank Facilities
will be secured by pledges of all the capital stock of the Guarantor
Subsidiaries and 65% of the capital stock of the Company's first-tier foreign
subsidiaries, and security interests in, or liens on, substantially all other
tangible and intangible assets located in the United States of the Guarantor
Subsidiaries, and will become due prior to the time the principal on the Notes
will become due; (v) the Company may be hindered in its ability to adjust
rapidly to changing market conditions and (vi) the Company's substantial degree
of leverage could make it more vulnerable in the event of a downturn in general
economic conditions or in its business.
The Company's ability to pay interest on the New Notes (and on any
outstanding Old Notes) and to satisfy its other debt obligations will depend
upon its future operating performance, which will be affected by prevailing
economic conditions and financial, business and other factors, certain of which
are beyond its control. If the Company's cash flow and capital resources are
insufficient to fund its debt service obligations, the Company may be forced to
reduce or delay capital expenditures, sell assets, obtain additional equity
capital or restructure its debt. There can be no assurance that the Company's
cash flow and capital resources will be sufficient for payment of its
indebtedness in the future. In the absence of such operating results and
resources, the Company could face substantial liquidity problems and might be
required to dispose of material assets or operations to meet its debt service
and other obligations, and there can be no assurance as to the timing of such
sales or the proceeds which the Company could realize therefrom.
SUBORDINATION; ASSET ENCUMBRANCE
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the New Notes will be (as is the case with the Old
Notes) subordinated to the prior payment in full of all existing and future
Senior Indebtedness of the Company, including all amounts owing or guaranteed
under the Senior Bank Facilities. Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the Company, assets of the Company will be available to pay obligations of the
New Notes (and any outstanding Old Notes) only after all Senior Indebtedness of
the Company has been paid in full, and there can be no assurance that there will
be sufficient assets to pay amounts due on all or any of the New Notes (and any
outstanding Old Notes).
15
<PAGE>
Payments in respect of the respective Subsidiary Guaranties of the New Notes
will be (as is the case with the Old Notes) subordinated to the prior payment in
full of all existing and future Senior Indebtedness of the respective Guarantor
Subsidiaries, including all amounts owing or guaranteed in respect of the Senior
Bank Facilities. As of June 30, 1996, on a pro forma basis after giving effect
to the Transactions, the aggregate principal amount of such Senior Indebtedness
would have been the $325.0 million guaranteed or borrowed under the Senior Bank
Facilities and $2.2 million of Assumed Indebtedness. Consequently, in the event
of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding
with respect to a Guarantor Subsidiary, its assets will be available to pay
obligations only after the Senior Indebtedness of such Guarantor Subsidiary has
been paid in full, and there can be no assurance that there will be sufficient
assets to pay amounts due in respect of such Guarantor Subsidiary's guaranty of
the New Notes (or of the Old Notes).
The Indenture permits the Company and the Guarantor Subsidiaries to incur
certain secured indebtedness, including indebtedness under the Senior Bank
Facilities, which is secured by pledges of all the capital stock of the Company,
the Guarantor Subsidiaries and 65% of the capital stock of the Company's
first-tier foreign subsidiaries, and security interests in, or liens on,
substantially all other tangible and intangible assets located in the United
States of the Guarantor Subsidiaries. The New Notes (and the Old Notes) and the
Subsidiary Guaranties are unsecured and therefore do not have the benefit of
such collateral. Accordingly, if an event of default occurs under the Senior
Bank Facilities, the lenders will have a prior right to the assets of the
Company and the Guarantor Subsidiaries, and may foreclose upon such collateral
to the exclusion of the holders of the New Notes (and of any outstanding Old
Notes), notwithstanding the existence of an event of default with respect
thereto. In such event, such assets would first be used to repay in full amounts
outstanding under the Senior Bank Facilities, resulting in all or a portion of
the Company's and the Guarantor Subsidiaries' assets being unavailable to
satisfy the claims of the holders of the New Notes (and of any outstanding Old
Notes) and other unsecured indebtedness.
RESTRICTIVE LOAN COVENANTS
The Senior Bank Facilities include certain covenants that, among other
things, restrict the ability of the Company and its subsidiaries to: (i) dispose
of assets; (ii) incur additional indebtedness; (iii) incur guarantee
obligations; (iv) prepay other indebtedness or amend certain other debt
instruments; (v) pay dividends; (vi) create liens on assets; (vii) enter into
sale and leaseback transactions; (viii) make investments, loans or advances;
(ix) make acquisitions; (x) engage in mergers or consolidations; (xi) change the
business conducted by the Company; (xii) make capital expenditures or (xiii)
engage in certain transactions with affiliates and otherwise restrict certain
corporate activities. In addition, under the Senior Bank Facilities the Company
is required to comply with specified financial ratios and tests, including
minimum interest coverage ratios, maximum leverage ratios, annual capital
expenditures limitations and net worth tests. There can be no assurance that
these requirements will be met in the future. If they are not, the holders of
the indebtedness under the Senior Bank Facilities would be entitled to declare
such indebtedness immediately due and payable. See "Description of Senior Bank
Facilities."
HOLDING COMPANY STRUCTURE; POSSIBLE UNENFORCEABILITY OF THE SUBSIDIARY
GUARANTIES
The Company is a holding company which derives all of its operating income
from its subsidiaries. The holders of the New Notes will have (as is the case
with the holders of the Old Notes) no direct claim against such subsidiaries
other than the claim created by the Subsidiary Guaranties, which may themselves
be subject to legal challenge in the event of the bankruptcy of a subsidiary.
See "--Fraudulent Conveyance." If such a challenge were upheld, the Subsidiary
Guaranties would be unenforceable. To the extent that the Subsidiary Guaranties
are not enforceable, the rights of holders of the New Notes (and of any
outstanding Old Notes) to participate in any
16
<PAGE>
distribution of assets of any Guarantor Subsidiary upon liquidation, bankruptcy,
reorganization or otherwise may, as is the case with other unsecured creditors
of the Company, be subject to prior claims of creditors of that Guarantor
Subsidiary. The Company must rely upon dividends and other payments from its
subsidiaries to generate the funds necessary to meet its obligations, including
the payment of principal of and interest on the New Notes. The Indenture
contains covenants which restrict the ability of Restricted Subsidiaries to
enter into agreements limiting distributions and transfers, including dividends.
However, the ability of the Company's subsidiaries to pay dividends and make
other payments may be restricted by, among other things, applicable state
corporate laws and regulations or by terms of agreements to which they may
become party. See "Description of Notes."
LACK OF INDEPENDENT OPERATING HISTORY
Prior to the consummation of the Transactions, the business of the Home
Furnishings Group had been conducted as a part of Masco. The Company had no
prior operating history and was formed to consummate the Transactions. The
Company will not be able to rely on Masco for financial support (other than with
respect to Masco's agreement to provide up to $15.0 million in credit
enhancement--see "Certain Transactions--Acquisition Arrangements"), or to
benefit from its relationship with Masco, as it has in the past, in order to
obtain credit or receive favorable terms for the purchase of goods and services
from third parties. Holdings and Masco entered into the Transition Services
Agreement under which Masco agreed to provide certain administrative services to
the Company and Holdings until April 30, 1997. Upon expiration of this period,
the Company and Holdings will be responsible for obtaining such services on
their own. If the Company and Holdings are unable to perform such services or
obtain them on acceptable terms, the Company's business, financial condition and
results of operations may be adversely affected. See "Certain
Transactions--Acquisition Arrangements" and "--Transition Services Agreement."
ECONOMIC FACTORS AFFECTING THE INDUSTRY
Historically, the home furnishings industry has been cyclical, fluctuating
with economic cycles, and is highly sensitive to general economic conditions,
housing starts, interest rate levels, credit availability and other factors that
affect consumer spending habits. Purchases of home furnishings are discretionary
and tend to be deferred during times of economic uncertainty. There can be no
assurance that an economic downturn would not have a material adverse effect on
the Company.
FLUCTUATIONS IN PRICE AND SUPPLY OF RAW MATERIALS
The Company is dependent upon outside suppliers for all of its raw material
needs and, therefore, is subject to price increases and delays in receiving
supplies of such materials. An increase in demand for raw materials could
increase delivery times for supplies and possibly further affect prices. No
assurance can be given that the Company will continue to have available
necessary raw materials at a reasonable price or that any increases in raw
material costs would not have a material adverse effect on the Company. See
"Business--Raw Materials."
HIGHLY COMPETITIVE INDUSTRY
The home furnishings industry is highly competitive and includes a large
number of domestic and foreign manufacturers. No company has a dominant position
in the industry. Competition is generally based on product quality, brand name
recognition, price and service. Certain of the Company's competitors may have
greater financial and other resources than the Company and may have greater
sales or brand recognition than the Company in particular industry segments.
Competition could adversely affect the Company's operating results by forcing it
to reduce its sales prices, offer enhanced credit terms, increase customer
discounts or incentives, increase spending
17
<PAGE>
for co-operative advertising arrangements with customers, incur additional
shipping costs or provide other services. See "Business--Competition."
FOREIGN OPERATIONS
Significant portions of the Company's operations are conducted in Taiwan,
Singapore, the Philippines, China, Malaysia, Indonesia and Thailand. As a
result, the Company may be adversely affected by changes in currency values, the
prevailing political climate in such countries, such countries' relations with
the United States and the general economic climate in such countries. The
Company manufactures a number of its products in China. Loss of China's "most
favored nation" trade status would result in an increase in duty for the
Company's products produced in China and imported into the United States, but
would not, the Company believes, have a material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The ability of the Company to maintain its competitive position will depend
to a significant degree upon its ability to continue to attract and maintain
highly qualified managerial, manufacturing and sales and marketing personnel.
There can be no assurance that the Company will be able to continue to recruit
and retain such personnel. In particular, the Company is dependent on certain
key management personnel, and there can be no assurance that the loss of key
personnel would not have a material adverse effect on the Company's results of
operations. All of the key members of management will have an equity interest in
Holdings; however the Company does not presently intend to enter into employment
agreements with any members of management. See "Management."
CONTROLLING STOCKHOLDERS
The Company is a wholly-owned subsidiary of Holdings. The Institutional
Investors, the Management Investors and Masco own all of the voting stock of
Holdings. By virtue of such stock ownership, such persons have the power,
indirectly, to control all matters submitted to stockholders of the Company and
to elect all directors of the Company and its subsidiaries. See "Ownership of
Securities."
Although the terms of the Indenture restrict dividends and distributions to
Holdings, the Company is permitted to make certain payments to Holdings,
including payments: (i) to cover certain operating expenses of Holdings relating
to the Company; (ii) to cover certain tax liabilities allocable to the Company
and (iii) to fund certain losses of Holdings incurred as a result of the
operation of the Holdings Business. The Indenture does not restrict Holdings or
its activities. See "Description of Notes--Certain Covenants."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, unless the Company redeems the
Notes, each holder of the New Notes (and of any outstanding Old Notes) will have
the right to require the Company to repurchase such Notes at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase. The occurrence of a Change of Control would constitute
a default under the Senior Bank Facilities. In addition, the Senior Bank
Facilities prohibit the purchase of the New Notes (and any outstanding Old
Notes) by the Company in the event of a Change of Control, unless and until such
time as the indebtedness under the Senior Bank Facilities is repaid in full. The
Company's failure to purchase the New Notes (and any outstanding Old Notes)
would result in a default under the Indenture. The inability to repay the
indebtedness under the Senior Bank Facilities, if accelerated, would also
constitute an event of default under the
18
<PAGE>
Indenture, which could have adverse consequences to the Company and the holders
of the New Notes (and of any outstanding Old Notes). In the event of a Change of
Control, there can be no assurance that the Company would have sufficient assets
to satisfy all of its obligations under the Senior Bank Facilities and the New
Notes (and any outstanding Old Notes). See "Description of Senior Bank
Facilities" and "Description of Notes--Change of Control."
ENVIRONMENTAL MATTERS
The Company is subject to comprehensive and frequently changing federal,
state, local and foreign environmental laws and regulations, including those
governing emissions of air pollutants, discharges of wastewaters and storm
waters and the disposal of non-hazardous and hazardous wastes. The Company
anticipates that it will incur additional costs in the future to comply with
currently existing laws and regulations, new regulatory requirements arising
from recently enacted statutes and any new statutory requirements. The Company
estimates it will spend approximately $1.0-$1.5 million in 1996 for capital
expenditures to comply with environmental laws. The actual capital expenditures
in 1996 may differ from this amount, and capital expenditures in future years
may significantly exceed the amounts budgeted for 1996. The Company's operating
costs for compliance with environmental requirements also may increase in future
years. Under the provisions of the Clean Air Act Amendments of 1990 (the "CAA"),
in December 1995, the United States Environmental Protection Agency promulgated
hazardous air emission standards for the wood furniture industry. These
regulations, known as the National Emission Standards for Hazardous Air
Pollutants ("NESHAPs"), will require the Company to reduce emissions of certain
volatile organic compounds by November 1997. In order to comply with NESHAPs,
the Company intends to reformulate certain furniture finishes or institute
process changes to reduce emissions of volatile organic compounds. The furniture
industry and its suppliers are attempting to develop water-based and other forms
of compliant finishing materials to replace commonly-used, organic-based
finishes which are a major source of regulated emissions. The Company cannot at
this time estimate the impact of these new standards on the Company's operations
and future capital expenditure requirements, or the cost of compliance. There
can be no assurance that reformulation of finishes or process changes will not
adversely affect the quality or durability of the Company's products.
Furthermore, if the Company cannot satisfy applicable regulatory requirements
following reformulation or process changes, the Company will likely be required
to install air pollution control technology at its facilities.
FRAUDULENT CONVEYANCE
The incurrence by the Company and the Guarantor Subsidiaries of indebtedness
such as the Old Notes (and the New Notes exchanged therefor) and the Subsidiary
Guaranties, respectively, to finance the Transactions may be subject to review
under relevant state and federal fraudulent conveyance laws if a bankruptcy case
or lawsuit is commenced by or on behalf of unpaid creditors of the Company or a
Guarantor Subsidiary. Under these laws, if a court were to find that, after
giving effect to the sale of the Old Notes (and the exchange of the New Notes
therefor) and the application of the net proceeds therefrom, either (a) the
Company or such Guarantor Subsidiary incurred such indebtedness with the intent
of hindering, delaying or defrauding creditors or (b) the Company or such
Guarantor Subsidiary received less than reasonably equivalent value or
consideration for incurring such indebtedness and (i) was insolvent or was
rendered insolvent by reason of such transactions; (ii) was engaged in a
business or transaction for which the assets remaining with the Company or such
Guarantor Subsidiary constituted unreasonably small capital or (iii) intended to
incur, or believed that it would incur, debts beyond its ability to pay as they
matured, such court may subordinate such indebtedness to presently existing and
future indebtedness of the Company or such Guarantor Subsidiary, avoid the
issuance of such indebtedness and direct the repayment of any amounts paid
thereunder to the creditors of the Company or such Guarantor
19
<PAGE>
Subsidiary, as the case may be, or take other action detrimental to the holders
of such indebtedness.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the value of all its property at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its debts,
including contingent liabilities, as they become absolute and matured.
There can be no assurance as to what standard a court would apply in order
to determine solvency. To the extent that proceeds from the sale of the Old
Notes were used to finance the Transactions, a court may find that the Company
or the Guarantor Subsidiaries, as the case may be, did not receive fair
consideration or reasonably equivalent value for the incurrence of the
indebtedness represented thereby (and by the New Notes issued in exchange
therefor). In addition, if a court were to find that any of the components of
the Transactions constituted a fraudulent transfer, to the extent that proceeds
from the sale of the Old Notes were used to finance such Transactions, a court
may find that the Company or the Guarantor Subsidiaries did not receive fair
consideration or reasonably equivalent value for the incurrence of the
indebtedness represented by the Old Notes (and by the New Notes issued in
exchange therefor) or the Subsidiary Guaranties, as the case may be. Pursuant to
the terms of the Subsidiary Guaranties, the liability of each Guarantor
Subsidiary is limited to the maximum amount of indebtedness permitted, at the
time of the grant of such Subsidiary Guaranty, to be incurred in compliance with
fraudulent conveyance or similar laws.
Each of the Company and the Guarantor Subsidiaries believes that it received
equivalent value at the time the indebtedness under the Old Notes was incurred.
In addition, neither the Company nor any Guarantor Subsidiary, after giving
effect to the consummation of the Transactions: (i) believes that it was
insolvent or rendered insolvent; (ii) believes that it was engaged in a business
or transaction for which its remaining assets constituted unreasonably small
capital or (iii) intended to incur, or believed that it would incur, debts
beyond its ability to pay as they mature. These beliefs are based on the
Company's analysis of internal cash flow projections and estimated values of
assets and liabilities of the Company and the Guarantor Subsidiaries at the time
of the offering of the Old Notes. There can be no assurance, however, that a
court passing on the issues would make the same determination.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The New Notes are new securities for which there currently is no market.
Although the Initial Purchasers have informed the Company and the Guarantor
Subsidiaries that they currently intend to make a market in the New Notes, they
are not obligated to do so and any such market making may be discontinued at any
time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Notes. The Old Notes
currently are eligible for trading by qualified buyers in the Private Offerings,
Resale and Trading through Automated Linkages (PORTAL) market. The Company and
the Guarantor Subsidiaries do not intend to apply for listing of the New Notes
on any securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market or by declines in the
market for similar securities. Such declines may adversely affect such liquidity
and trading markets independent of the financial performance of, and prospects
for, the Company.
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes pursuant
to the Exchange Offer.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 on a pro forma basis after giving effect to the Transactions. This
table should be read in conjunction with the "Selected Historical and Pro Forma
Financial Information," "Unaudited Pro Forma Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and the related notes thereto included
elsewhere in this Prospectus. LIFESTYLE FURNISHINGS INTERNATIONAL LTD. was
incorporated in May 1996 for the purpose of consummating the Transactions.
<TABLE>
<CAPTION>
PRO FORMA AS OF
JUNE 30, 1996
---------------------
<S> <C>
(DOLLARS IN MILLIONS)
<CAPTION>
<S> <C>
Long-term debt (including current portion thereof):
Revolving Credit Facility(1)............................................ $ 25.0
Tranche A Term Loan(1).................................................. 125.0
Tranche B Term Loan(1).................................................. 175.0
Receivables Facility(2)................................................. 155.0
Assumed Indebtedness(3)................................................. 26.6
Senior Subordinated Notes due 2006...................................... 200.0
----------
Total long-term debt.................................................. 706.6
Stockholder's equity:
Common stock, $.01 par value, 3,000 authorized and 100 outstanding...... --
Additional paid-in capital(4)........................................... 410.0
----------
Total stockholder's equity............................................ 410.0
----------
Total capitalization.................................................. $ 1,116.6
----------
----------
</TABLE>
- ------------
(1) Borrowings of up to $150.0 million under the Revolving Credit Facility will
be available for working capital and general corporate purposes, including
up to $50.0 million for letters of credit. See "Description of Senior Bank
Facilities."
(2) See "Description of Receivables Facility."
(3) The Assumed Indebtedness consists of indebtedness to non-affiliates to be
owed by subsidiaries of the Company at the consummation of the Transactions.
At the closing of the Transactions on August 5, 1996, the Assumed
Indebtedness was $28.3 million.
(4) Holdings contributed to the Company as common equity the Acquired Business.
Holdings issued (i) the Holdings PIK Notes ($285.0 million); (ii) common and
preferred stock representing the Equity Contribution (approximately $65.3
million, all of which was paid to Masco in connection with the acquisition
of the Holdings Business) and (iii) the Masco Holdings Stock (approximately
$59.7 million). The common equity of the Company is valued at $410.0
million. See "Ownership of Securities."
21
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table presents as of the dates and for the periods indicated
(i) selected historical combined financial information of the Company and (ii)
pro forma consolidated financial information of the Company, after giving effect
to the Transactions. The historical financial information for each of the four
years in the period ended December 31, 1995 has been derived from the audited
combined financial statements of the Company. Such combined financial statements
for the three years in the period ended December 31, 1995 have been audited by
Coopers & Lybrand L.L.P. and are included elsewhere herein. The historical
financial information for the year ended December 31, 1991 has been derived from
the unaudited combined financial statements of the Company not included herein.
The historical information for the six months ended June 30, 1995 and 1996 has
been derived from the unaudited combined financial statements of the Company
included herein. In the opinion of management, the information for the six month
periods ended June 30, 1995 and June 30, 1996 includes all material adjustments
(consisting only of adjustments of a normal and recurring nature) necessary for
a fair presentation of the results for such periods. The results of operations
for any interim period are not necessarily indicative of the results of
operations for a full year. The pro forma information does not purport to
represent what the Company's results actually would have been if the
Transactions had occurred at the dates indicated, nor does such information
purport to project the results of the Company for any future period. The
selected financial information should be read in conjunction with "Unaudited Pro
Forma Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and the
related notes thereto included elsewhere in this Prospectus.
22
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION(1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995 1995 1996 1996
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS
DATA:
Net sales............... $1,457.6 $1,589.6 $1,763.5 $1,897.5 $1,992.6 $1,975.1 $ 984.4 $ 981.1 $ 973.8
Cost of sales........... 1,120.6 1,192.2 1,326.8 1,434.0 1,501.0 1,489.7 737.7 742.0 735.6
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Gross profit......... 337.0 397.4 436.7 463.5 491.6 485.4 246.7 239.1 238.2
Selling, general and
administrative
expenses(2)............ 304.4 334.6 367.5 385.4 400.3 355.7 202.6 189.4 174.9
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Operating profit..... 32.6 62.8 69.2 78.1 91.3 129.7 44.1 49.7 63.3
Interest expense(3)..... 86.0 84.1 82.7 87.1 94.8 65.6 48.8 44.5 32.4
Other, net(4)........... -- 2.6 3.2 7.3 8.3 10.5 0.8 2.9 4.7
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) before
income taxes........ (53.4 ) (23.9 ) (16.7 ) (16.3 ) (11.8 ) 53.6 (5.5 ) 2.3 26.2
Income taxes............ (6.1 ) 1.0 8.3 6.5 6.1 23.0 3.4 4.9 11.3
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss).... $ (47.3 ) $ (24.9 ) $ (25.0 ) $ (22.8 ) $ (17.9 ) $ 30.6 $ (8.9 ) $ (2.6 ) $ 14.9
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
OTHER DATA:
Gross profit margin..... 23.1% 25.0% 24.8% 24.4% 24.7% 24.6% 25.1% 24.4% 24.5%
EBITDA(5)............... $ 85.2 $ 120.7 $ 133.6 $ 140.9 $ 157.6 $ 174.8 $ 78.5 $ 81.6 $ 84.7
EBITDA margin........... 5.8% 7.6% 7.6% 7.4% 7.9% 8.9% 7.9% 8.3% 8.7%
Capital expenditures.... $ 35.8 $ 35.1 $ 75.1 $ 68.8 $ 61.0 $ 61.0 $ 32.3 $ 13.9 $ 13.9
Sample book
expenditures(6)......... 16.7 29.2 14.2 14.1 15.2 15.2 7.1 6.6 6.6
Depreciation and
amortization........... 54.6 60.5 66.8 66.4 67.9 48.9 34.8 33.8 25.1
Cash interest
expense(7).............. 86.0 84.1 82.7 87.1 94.8 61.2 48.8 44.5 30.2
Cash (used for) provided
by operating
activities............. (37.1 ) (56.2 ) (42.9 ) (0.7 ) 34.3 63.7 (32.6 ) 38.2 47.0
Cash (used for) provided
by investing
activities............. (53.1 ) (51.1 ) (77.9 ) (53.1 ) (57.5 ) (57.5 ) (37.2 ) (15.0 ) (15.0 )
Cash (used for) provided
by financing
activities............. 90.7 106.3 129.9 53.1 15.8 15.8 67.8 (28.5 ) (28.5 )
Ratio of earnings to
fixed
charges................ -- (8 ) -- (8 ) -- (8 ) -- (8 ) -- (8 ) 1.8 x -- (8 ) 1.1 x 1.7 x
Ratio of total debt to
EBITDA(9)(10)........... 4.0 x
Ratio of EBITDA to cash
interest expense(9).... 2.9 x 2.8 x
BALANCE SHEET DATA (AT
PERIOD END):
Working capital(11)..... $ 602.8 $ 678.5 $ 734.1 $ 754.9 $ 758.1 $ 808.0 $ 752.7 $ 637.0
Total assets............ 1,662.8 1,743.3 1,863.6 1,919.1 1,913.0 1,987.4 1,893.6 1376.7
Total debt.............. 142.5 124.5 61.9 15.2 27.7 43.7 26.6 706.6
Total liabilities....... 358.1 343.0 295.9 274.4 282.9 312.4 293.5 966.7
Masco net investment and
advances(12)............ 1,304.7 1,400.3 1,567.7 1,644.7 1,630.1 1,675.0 1,600.1 --
Stockholder's equity.... -- -- -- -- -- -- -- 410.0
</TABLE>
- ------------
(1) Historical results include The Berkline Corporation, which was acquired in
April 1994 in a pooling-of-interests transaction. The selected pro forma
financial information for the year ended December 31, 1995 gives effect to
the Transactions as if they had occurred on January 1, 1995. The pro forma
financial information for the six months ended June 30, 1996 gives effect
to the Transactions as if they had occurred on January 1, 1996. The pro
forma balance sheet information at June 30, 1996 gives effect to the
Transactions as if they had occurred on such date. The historical financial
information includes, but the pro forma financial information excludes, the
Holdings Business.
(2) Included in historical selling, general and administrative expenses are
general corporate expenses which represent certain corporate staff support
and administrative services provided by Masco. These expenses, which were
charged to the Company by Masco, consisted of $10.8, $9.8, $10.5, $12.7 and
$16.0 in 1991 through 1995, respectively, and $7.9 and $8.0 for the six
months ended June 30, 1995 and 1996, respectively.
(3) Historical interest expense consists primarily of interest on advances from
Masco.
(4) Other, net, is net of interest income.
(5) EBITDA is defined as net income (loss) before interest expense, income
taxes, depreciation and amortization expense (including amortization of
sample book expenditures) and certain other non-cash charges. Such other
non-cash charges were $(2.0), $0, $0.7, $3.8, $6.7, $0.4 and $1.0 for 1991
through 1995 and the six months ended June 30, 1995 and 1996, respectively.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate whether cash flow will
be sufficient for cash requirements. This definition differs from that
specified for EBITDA under the Indenture. See "Description of
Notes--Certain Definitions."
(6) Sample book expenditures, which consist of the cost of producing books
containing actual samples of the Company's decorative home furnishing
fabrics, are capitalized and amortized over a three-year period.
(7) Cash interest expense is defined as interest expense less amortization of
debt issuance costs.
(8) For the purpose of computing this ratio, earnings consist of income before
income taxes and fixed charges and fixed charges consist of interest
expense plus the interest portion of the Company's rental expense under
operating leases. Earnings were insufficient to cover fixed charges by
$55.9, $24.5, $17.6, $15.6 and $11.4 in 1991 through 1995, respectively and
by $5.7 for the six months ended June 30, 1995.
(9) These ratios are not shown for historical periods because substantially all
debt of the Company during such periods was owed to Masco.
(10) The ratio of total debt to EBITDA for the pro forma year ended December 31,
1995 is calculated using the pro forma total debt outstanding as of June
30, 1996.
(11) Working capital is defined as total current assets (excluding cash and cash
equivalents) less total current liabilities (excluding current maturities
of long-term debt).
(12) Advances from Masco were $847.9, $943.4, $1,091.0, $1,192.0, $1,195.0,
$1,229.8 and $1,163.4 at December 31, 1991 through 1995 and June 30, 1995
and 1996, respectively. Pursuant to the Acquisition Agreement, Masco agreed
that the outstanding amount of such advances upon the consummation of the
Transactions would not exceed $705.3. The excess of such advances over
$705.3 was converted to equity prior to the consummation of the
Transactions.
23
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet of the Company
at June 30, 1996 gives effect to the Transactions as if they had occurred on
such date. The unaudited pro forma consolidated statements of operations for the
year ended December 31, 1995 and for the six months ended June 30, 1996 give
effect to the Transactions as if they had occurred on January 1, 1995 and 1996,
respectively.
The Acquisition has been accounted for by the purchase method of accounting
and, accordingly, the purchase price of approximately $1.1 billion (including
estimated fees and expenses) has been preliminarily allocated to the acquired
assets and assumed liabilities based upon estimated fair values as of the
closing of the Acquisition.
Because the Holdings Business was part of the Home Furnishings Group but is
not part of the Company (except with respect to the Specified Assets),
adjustments are shown first to eliminate the Holdings Business (other than the
Specified Assets) and then to reflect the Transactions.
The unaudited pro forma consolidated balance sheet and statements of
operations are based on the historical combined financial statements for the
Company and the assumptions and adjustments described in the accompanying notes.
The unaudited pro forma consolidated statements of operations do not purport to
represent what the Company's results of operations actually would have been if
the Transactions described above had occurred as of the date indicated or what
results will be for any future periods. The unaudited pro forma financial
information is based upon assumptions that the Company believes are reasonable
and should be read in conjunction with the Financial Statements and the related
notes thereto included elsewhere in this Prospectus.
The pro forma financial statements are based upon available information and
certain assumptions that the Company believes are reasonable in the
circumstances. The Company's preliminary allocation of purchase price was based
upon the estimated fair value of assets acquired and liabilities assumed. The
actual allocation will be based upon further studies and valuations as of the
closing date of the Acquisition and, accordingly, the final allocations will be
different from the amounts herein.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
---------------------------------------------------------------------
ADJUSTMENTS AS ADJUSTED PRO FORMA
FOR EXCLUSION FOR EXCLUSION ADJUSTMENTS
OF HOLDINGS OF HOLDINGS FOR
HISTORICAL BUSINESS (A) BUSINESS TRANSACTIONS PRO FORMA
---------- ------------- ------------- ------------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash and cash investments....... $ 12.1 -$- $ 12.1 $ -- $ 12.1
Receivables..................... 325.8 1.6 327.4 ( 7.7)(b) 319.7
Inventories..................... 568.1 (3.6) 564.5 (48.6)(b) 515.9
Prepaid expenses................ 35.0 (1.4) 33.6 (10.8)(b) 22.8
Deferred income taxes........... 17.0 -- 17.0 (17.0)(b) --
---------- ----- ------------- ------------ ---------
Total current assets...... 958.0 (3.4) 954.6 (84.1) 870.5
Property and equipment, net..... 478.5 -- 478.5 (45.9)(b) 432.6
Excess of cost over acquired net
assets.......................... 395.4 -- 395.4 (395.4)(b) --
Notes receivable................ 18.9 -- 18.9 (2.8)(b) 16.1
Other assets.................... 42.8 -- 42.8 14.7(b)(c) 57.5
---------- ----- ------------- ------------ ---------
Total assets.............. $ 1,893.6 $(3.4) $ 1,890.2 $ (513.5) $1,376.7
---------- ----- ------------- ------------ ---------
---------- ----- ------------- ------------ ---------
LIABILITIES AND EQUITY:
Notes payable................... $ 24.5 -$- $ 24.5 $ 16.0(d) $ 40.5
Accounts payable................ 97.0 (0.3) 96.7 96.7
Accrued liabilities............. 96.2 (3.1) 93.1 31.6(b) 124.7
---------- ----- ------------- ------------ ---------
Total current
liabilities..................... 217.7 (3.4) 214.3 47.6 261.9
Long-term debt.................. 2.1 -- 2.1 664.0(e) 666.1
Deferred income taxes and
other........................... 73.7 -- 73.7 (35.0)(b)(f) 38.7
---------- ----- ------------- ------------ ---------
Total liabilities......... 293.5 (3.4) 290.1 676.6 966.7
Masco net investment and
advances....................... 1,600.1 -- 1,600.1 (1,600.1)(b)(g) --
Stockholder's equity............ -- -- -- 410.0(h) 410.0
---------- ----- ------------- ------------ ---------
$ 1,893.6 $(3.4) $ 1,890.2 $ (513.5) $1,376.7
---------- ----- ------------- ------------ ---------
---------- ----- ------------- ------------ ---------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
(a) Represents elimination of assets and liabilities of the Holdings Business
(other than the Specified Assets).
(b) To record purchase price allocation using the purchase method of accounting
based upon the fair value of the assets acquired and the liabilities
assumed. A reconciliation of the allocation of the excess of the book value
of the net assets acquired over the purchase price as of June 30, 1996 is
provided below:
<TABLE>
<CAPTION>
<S> <C>
Book value of net assets acquired.......................... $1,600.1
To eliminate certain assets and liabilities not
purchased or assumed under the terms of the Acquisition
Agreement:
Deferred income tax assets............................. (17.0)
Deferred income tax liabilities (see footnote (f) below) 69.3
To adjust book value of balance sheet items to their
estimated fair values under Accounting Principles
Board Opinion No. 16
To state inventories at net realizable value........... 3.5
Liabilities assumed for benefit obligations
(see footnote (f) below)............................. (34.3)
Eliminate historical goodwill (excess of cost over
acquired net assets) pertaining to prior acquisitions.. (395.4)
Reduce property and equipment, net to estimated fair
value................................................ (45.9)
Adjustments to reflect acquiring management's plans to
restructure certain portions of the business and to reposition
inventory production and distribution practices:
To adjust carrying value of balance sheet items to reflect
management plans that are demonstrably different
from the plans that served as a basis for the carrying
value in the predecessor financial statements......... (98.7)
To accrue for incremental costs that have no future
economic benefits and will be incurred as a result of
management's plan to restructure its business in
accordance with Emerging Issue Task Force ("EITF")
Issue 95-3 "Recognition of Liabilities in
Connection with a Purchase Business Combination" .... (31.6)
--------
Fair value of assets acquired.............................. 1,050.0
Transaction fees (see footnote c below).................... 40.0
--------
Total purchase price....................................... $1,090.0
--------
--------
</TABLE>
For purposes of these pro forma financial statements, the Company's
preliminary allocation of purchase price has been based upon the estimated
fair value of the assets and liabilities assumed. These estimates are based
upon management's evaluation of the individual assets and liabilities
purchased and include adjustments necessary to reflect planned changes in
the production and distribution strategies of the newly formed Company. The
final allocation will be based upon further studies and valuations and,
accordingly, will be different from the estimated amounts herein.
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(CONTINUED)
(DOLLARS IN MILLIONS)
The proforma adjustments reflect the application of EITF Issue 88-16 in
relation to Masco's carryover interest.
(c) Primarily reflects deferred financing and organization costs of $40.0
million associated with the consummation of the Transactions.
(d) Represents current portion of indebtedness incurred for the Transactions
consisting of amounts due on the Term Loans under of the Senior Bank
Facilities.
(e) Represents long-term debt incurred to finance the Transactions, as follows:
Revolving Credit Facility.................................... $ 25.0
Tranche A Term Loan.......................................... 125.0
Tranche B Term Loan.......................................... 175.0
Receivables Facility......................................... 155.0
Senior Subordinated Notes.................................... 200.0
--------
680.0
Less current portion:
Tranche A Term Loan.......................................... (15.0)
Tranche B Term Loan.......................................... (1.0)
--------
$ 664.0
--------
--------
The $285.0 million Holdings PIK Notes are liabilities of Holdings, and have
not been reflected as liabilities of the Company in this unaudited pro forma
consolidated balance sheet.
(f) Reflects the net effect of the following two purchase price adjustments
discussed above:
To increase liabilities for pension and profit sharing benefits
resulting from the Company assuming these liabilities and
establishing plans independent of those previously
administered by Masco......................................... $ 34.3
To eliminate deferred income tax liabilities not assumed under
the terms of the Acquisition Agreement........................ (69.3)
--------
Net pro forma adjustment........................................ $ (35.0)
--------
--------
(g) Represents elimination of Masco net investment and advances.
(h) Represents capital contribution by Holdings to Company consisting of the
Acquired Business.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-----------------------------------------------------------------------
ADJUSTMENTS AS ADJUSTED PRO FORMA
FOR EXCLUSION FOR EXCLUSION ADJUSTMENTS
OF HOLDINGS OF HOLDINGS FOR
HISTORICAL BUSINESS (A) BUSINESS TRANSACTIONS PRO FORMA
---------- ------------- ------------- ------------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 1,992.6 $ (17.5) $ 1,975.1 $ -- $1,975.1
Cost of sales...................... 1,501.0 (6.5) 1,494.5 (4.8)(b) 1,489.7
---------- ------------- ------------- ------------ ---------
Gross profit................... 491.6 (11.0) 480.6 4.8 485.4
Selling, general and administrative
expenses......................... 400.3 (12.9) 387.4 (31.7)(c) 355.7
---------- ------------- ------------- ------------ ---------
Operating profit............... 91.3 1.9 93.2 36.5 129.7
---------- ------------- ------------- ------------ ---------
Other (income) expense, net:
Interest expense, Masco
Corporation........................ 92.4 (1.7) 90.7 (90.7)(d) --
Interest expense, other.......... 2.4 -- 2.4 63.2(e) 65.6
Other, net....................... 8.3 0.3 8.6 1.9(f) 10.5
---------- ------------- ------------- ------------ ---------
103.1 (1.4) 101.7 (25.6) 76.1
---------- ------------- ------------- ------------ ---------
Income (loss) before taxes......... (11.8) 3.3 (8.5) 62.1 53.6
Income taxes................... 6.1 -- 6.1 16.9(g) 23.0
---------- ------------- ------------- ------------ ---------
Net income (loss).............. $ (17.9) $ 3.3 $ (14.6) $ 45.2 $ 30.6
---------- ------------- ------------- ------------ ---------
---------- ------------- ------------- ------------ ---------
OTHER DATA:
EBITDA (h)........................ $ 157.6 $ 1.6 $ 159.2 $ 15.6 $ 174.8
---------- ------------- ------------- ------------ ---------
---------- ------------- ------------- ------------ ---------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of
Operations.
28
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------------------------------------------------
ADJUSTMENTS AS ADJUSTED PRO FORMA
FOR EXCLUSION FOR EXCLUSION ADJUSTMENTS
OF HOLDINGS OF HOLDINGS FOR
HISTORICAL BUSINESS (A) BUSINESS TRANSACTIONS PRO FORMA
---------- ------------- ------------- ------------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales......................... $981.1 $(7.3) $ 973.8 $-- $ 973.8
Cost of sales..................... 742.0 (4.0) 738.0 (2.4)(b) 735.6
---------- ----- ------------- ------ ---------
Gross profit.................. 239.1 (3.3) 235.8 2.4 238.2
Selling, general and
administrative expenses......... 189.4 (4.3) 185.1 (10.2)(c) 174.9
---------- ----- ------------- ------ ---------
Operating profit.............. 49.7 1.0 50.7 12.6 63.3
Other (income) expense, net:
Interest expense, Masco
Corporation....................... 43.7 -- 43.7 (43.7)(d) --
Interest expense, other......... 0.8 -- 0.8 31.6(e) 32.4
Other, net...................... 2.9 0.8 3.7 1.0(f) 4.7
---------- ----- ------------- ------ ---------
47.4 0.8 48.2 (11.1) 37.1
---------- ----- ------------- ------ ---------
Income (loss) before taxes........ 2.3 0.2 2.5 23.7 26.2
Income taxes.................. 4.9 -- 4.9 6.4(g) 11.3
---------- ----- ------------- ------ ---------
Net income (loss)............. $ (2.6) $ 0.2 $ (2.4) $ 17.3 $ 14.9
---------- ----- ------------- ------ ---------
---------- ----- ------------- ------ ---------
OTHER DATA:
EBITDA (h)........................ $ 81.6 $ 0.4 $ 82.0 $ 2.7 $ 84.7
---------- ----- ------------- ------ ---------
---------- ----- ------------- ------ ---------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of
Operations.
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<C> <S>
(a) Represents elimination of the operating results of the Holdings Business. Eliminations
are net of intercompany transactions since most sales by the Holdings Business
constituted sales of products purchased from other subsidiaries of the Home Furnishings
Group which are part of the Company. In addition, elimination of selling, general and
administrative expenses and interest are net of amounts incurred by the Holdings
Business for the benefit of such other subsidiaries. As set forth in note (c) below,
the Company will be making certain payments to Holdings for services. In addition as
set forth in note (f) below, the Company will be making certain payments to Holdings to
fund operating losses of the Holdings Business.
(b) Represents the decrease in depreciation expense as a result of the write-down in
property and equipment to reflect the allocation of the estimated fair value of the net
assets over the purchase price.
(c) Represents the net amount of the following adjustments:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ------------
<S> <C> <C>
Elimination of fee to Masco for corporate
services.................................. $(16.0) $ (8.0)
Other eliminations:
Participation in a Masco marketing
incentive program................... (4.5) --
Consulting services and staff
consolidations...................... (3.9) --
Additional stand-alone costs............... 6.9 4.3
------------ ------------
Net stand-alone corporate overhead
adjustment................................ (17.5) (3.7)
Elimination of amortization of goodwill.... (14.2) (6.5)
------------ ------------
Net pro forma adjustment................... $(31.7) $(10.2)
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<C> <S>
Included in historical selling, general and administrative expenses are general
corporate expenses which represent certain corporate staff support and administrative
services which were historically provided by Masco and allocated to the Home
Furnishings Group. In addition, the Home Furnishings Group participated in certain
programs provided by Masco, including various insurance, incentive compensation, and
corporate identity marketing programs. Management is currently taking actions to
replace such services previously provided by Masco. The net stand-alone corporate
overhead adjustment reflects the expected savings which would have been achieved if
these actions had been implemented as of January 1, 1995 (for the year ended December
31, 1995) and January 1, 1996 (for the six months ended June 30, 1996), respectively.
The Company has entered into a management agreement (the "Holdings Management
Agreement") with Holdings pursuant to which Holdings will provide the Company executive
management, legal, environmental, audit, treasury and tax services, and the Company
will reimburse Holdings for the cost of such services. The Company estimates that its
annual corporate general and administrative expenses (which will be provided under and
paid for pursuant to the Holdings Management Agreement) on a pro forma basis for 1995
(giving effect to the Transactions as if they had occurred on January 1, 1995) would
have been $15.8 million. The $6.9 million above represents the difference between the
estimated stand-alone annual corporate general and administrative expenses of $15.8
million and the historical corporate general and administrative expenses included in
historical selling, general and administrative expenses. Holdings has in turn entered
into the Transition Services Agreement with Masco pursuant to which Masco will provide
certain of such services during a transitional period. See "Certain
Transactions--Business Arrangements with Holdings" and "--Transition Services
Agreement."
(d) Reflects the elimination of interest expense on advances from Masco which were repaid
or converted into equity in connection with the Transactions.
</TABLE>
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS--(CONTINUED)
(DOLLARS IN MILLIONS)
<TABLE>
<C> <S>
(e) Represents interest expense on financing incurred for the Transactions at the following
assumed rates as of August 5, 1996:
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ------------
<S> <C> <C>
Revolving Credit Facility--$25.0 at 8.00%........... $ 2.0 $ 1.0
Tranche A Term Loan--$125.0 at 8.00%................ 10.0 5.0
Tranche B Term Loan--$175.0 at 8.50%................ 14.9 7.5
Receivables Facility--$155.0 at 6.50%............... 10.1 5.0
Senior Subordinated Notes--$200.0 at 10.875%........ 21.8 10.9
------ ------
58.8 29.4
Estimated amortization of debt issuance costs....... 4.4 2.2
------ ------
Pro forma interest expense.......................... $ 63.2 $ 31.6
------ ------
------ ------
</TABLE>
<TABLE>
<C> <S>
The effects of fluctuations of .125% and .250% in interest rates with respect to the
Senior Bank Facilities and the Receivables Facility on pro forma interest expense would
have been $0.6 and $1.2, respectively, for the year ended December 31, 1995, and $0.3
and $0.6, respectively, for the six months ended June 30, 1996.
(f) Represents estimated payments to Holdings in respect of operating losses of the
Holdings Business.
(g) Adjustment to reflect the assumed 43.0% effective tax rate applied to pro forma income
before income taxes. A reconciliation of the statutory tax rate to the assumed pro
forma tax rate is provided below.
</TABLE>
U.S. Federal statutory tax rate................................. 35.0%
Effective state and local tax rate, net of federal tax
benefit......................................................... 4.9
Effect of higher taxes on foreign earnings and other............ 3.1
----
Pro forma effective tax rate................................ 43.0%
----
----
<TABLE>
<C> <S>
The foregoing does not give effect to the tax sharing agreement (the "Tax Sharing
Agreement") entered into by Holdings and the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Certain Effects of the
Transactions--Taxes" and "Certain Transactions--Tax Sharing Agreement."
(h) EBITDA is defined as net income (loss) before interest expense, income taxes,
depreciation and amortization expense (including amortization of sample book
expenditures) and certain other non-cash charges. Such other non-cash charges were $6.7
and $1.0 for the year ended December 31, 1995 and the six months ended June 30, 1996,
respectively. The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements. EBITDA does not represent
and should not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principles, and EBITDA does
not necessarily indicate whether cash flows will be sufficient for cash requirements.
This definition differs from that specified for EBITDA under the Indenture. See
"Description of Notes--Certain Definitions."
</TABLE>
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations covers periods before completion of the Transactions. As part of
the Transactions, the Holdings Business was acquired by, and (except with
respect to the Specified Assets) remains the property of, Holdings. Thus, the
results of the Holdings Business, which are included in the historical results,
will not be included in future results. The results of the Holdings Business
have not been material to the historical results as a whole. For further
discussion relating to the impact that the Transactions may have on the Company,
see "Summary--The Transactions," "Risk Factors," "Selected Historical and Pro
Forma Financial Information" and "Unaudited Pro Forma Financial Information."
GENERAL
The Company is the largest U.S. based manufacturer and marketer of
residential furniture and the nation's largest designer, marketer and
distributer of decorative home furnishing fabrics. Approximately 86% of 1995 net
sales were derived from residential furniture, which includes decorative
accessories. Decorative home furnishing fabrics accounted for the other 14% of
1995 net sales. Over the last four years, net sales grew at a compound annual
rate of 8.1% from $1.5 billion in 1991 to $2.0 billion in 1995.
The Company's costs and expenses include manufacturing (approximately 75.3%
of 1995 net sales), selling (approximately 11.9% of 1995 net sales) and general
and administrative (approximately 8.2% of 1995 net sales). General and
administrative expenses include an annual management fee paid to Masco for
corporate staff support and administrative services. Over the last four years,
the Company's gross profit grew at a compound annual rate of 9.9%, from $337.0
million in 1991 to $491.6 million in 1995, and its EBITDA increased at a
compound annual rate of 16.5% from $85.2 million in 1991 to $157.6 million in
1995.
Significant amounts are expended on the production of fabric sample books,
containing actual samples of the Company's decorative home furnishing fabrics
for marketing purposes. Sample book expenditures were $14.2 million, $14.1
million and $15.2 million in 1993, 1994 and 1995, respectively, and $7.1 million
and $6.6 million for the six-month periods ended June 30, 1995 and 1996,
respectively. Sample book expenditures are capitalized and amortized over a
three-year period.
RECENT COST REDUCTION INITIATIVES
The Company was formed by Masco through a series of acquisitions of
individual brand name companies. As a result, each of the Company's major brands
has historically operated to a certain degree as an independent business unit,
with its own manufacturing and distribution facilities, distribution network and
employees and has been responsible for purchasing its own raw materials, selling
its own products, collecting receivables, paying suppliers and maintaining
independent financial controls. The Company believes there are significant
opportunities to improve operating efficiencies and reduce costs through
intercompany cooperation. The Company has recently implemented several cost
reduction initiatives which have begun to positively impact the Company's
results in 1996. The most significant of these initiatives include: (i) the
consolidation of two smaller product lines into the Company's Drexel Heritage(R)
line; (ii) the consolidation and closing of several Asian retail facilities and
(iii) consolidation and overhead reductions in European manufacturing and
distribution. The Company expects such measures to result in annual savings of
up to approximately $16 million beginning in 1996 (of which an estimated $7.2
million has been realized in the six months ended June 30, 1996). There can be
no assurance all of such savings will be
32
<PAGE>
realized. Furthermore, the Company's intercompany cooperation has been evidenced
by an increase in intercompany sales from $57.8 million in 1991 to $168.0
million in 1995.
The Company believes there are significant opportunities for additional
improvement in margins and cash flow through intercompany cooperation,
including: (i) realizing economies of scale in the procurement of raw materials;
(ii) reducing working capital levels; (iii) reducing capital expenditures from
coordinated use of manufacturing resources and (iv) focusing on cooperative
sales and marketing efforts. See "Business--Business Strategy."
CERTAIN EFFECTS OF THE TRANSACTIONS
General and Administrative Expenses. In connection with the consummation of
the Transactions, the Company entered into the Holdings Management Agreement
pursuant to which Holdings will provide the Company executive management, legal,
environmental, audit, treasury and tax services. See "Certain
Transactions--Business Arrangements with Holdings." The Company estimates that
its annual corporate general and administrative expenses (which will be provided
under and paid for pursuant to the Holdings Management Agreement) on a pro forma
basis for 1995 (giving effect to the Transactions as if they had occurred on
January 1, 1995) would have been $15.8 million, as compared to actual 1995
corporate general and administrative expenses of $33.3 million. Major components
of such estimated savings would have included: (i) $16.0 million from the
elimination of an annual management fee paid to Masco for corporate staff
support and administrative services; (ii) $4.5 million from the discontinuance
of participation in a Masco marketing incentive program and (iii) $3.9 million
from the reduction of consulting services and staff consolidations. The savings
would have been partially offset by the expenditure of an additional $6.9
million, which is the additional amount the Company estimated it would have
incurred during such period on a stand-alone basis for overhead, legal fees,
corporate staff and auditing. There is no assurance the Company will actually
realize such savings in any future periods. See "Unaudited Pro Forma Financial
Information."
Taxes. The Company had historically been included in the consolidated
federal and certain combined state income tax returns of Masco. The Company will
now be included in the consolidated federal and certain combined state income
tax returns of Holdings. Pursuant to the Tax Sharing Agreement, the Company will
be required to make tax sharing payments to Holdings (or Holdings will be
required to make tax sharing payments to the Company in certain cases) with
respect to the Company's pro rata share of consolidated federal and combined
state and local income tax liabilities (excluding for purposes of this
calculation, the income, deductions, credits, carryovers and tax attributes
associated with the business of Simmons, a subsidiary of Holdings that is not a
subsidiary of the Company). As a result of the deductions available in respect
of the interest accruing on the Holdings PIK Notes and assuming that Holdings
(without regard to its subsidiaries) does not have taxable income, the federal
income tax liabilities of Holdings and its consolidated subsidiaries may be less
than the federal income tax liabilities of the Company and its consolidated
subsidiaries would be on a stand-alone basis. Under the Tax Sharing Agreement,
the Company will share in this benefit by paying tax sharing payments to
Holdings in amounts less than what its stand-alone federal income tax liability
would be. On a pro forma basis for 1995 (giving effect to the Transactions as if
they had occurred on January 1, 1995), such savings would have been $12.0
million.
Certain Pro Forma Effects. On a pro forma basis for 1995 (giving effect to
the Transactions as if they had occurred on January 1, 1995), the Company's net
income would have been $30.6 million, an increase of $48.5 million from the
reported loss in 1995 of $17.9 million (which included a $3.3 million loss
attributable to the Holdings Business). Major components of such increase
include: (i) an $4.8 million decrease in depreciation expense as a result of the
write-down in property and equipment to reflect the allocation of the excess of
the book value of the net assets acquired over
33
<PAGE>
the purchase price in the Acquisition; (ii) a $17.5 million reduction in
selling, general and administrative expenses for the reasons discussed above in
"--General and Administrative Expenses;" (iii) the elimination of $14.2 million
in goodwill amortization and (iv) a $27.5 million reduction in interest expense
resulting from the elimination of $90.7 million in interest expense on advances
from Masco which were repaid or converted to equity in connection with the
Transactions, partially offset by $63.2 million in interest expense resulting
from the financing incurred in connection with the Transactions. See "Unaudited
Pro Forma Financial Information."
The following discussion should be read in conjunction with "Unaudited Pro
Forma Financial Information" and the Financial Statements and the related notes
thereto included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
The following table sets forth certain data from the Company's Combined
Financial Statements expressed as a percentage of net sales.
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------------------- ----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................... 75.2 75.6 75.3 74.9 75.6
-------- -------- -------- ------ ------
Gross profit............................ 24.8 24.4 24.7 25.1 24.4
Selling, general and administrative
expenses................................... 20.8 20.3 20.1 20.6 19.3
-------- -------- -------- ------ ------
Operating profit........................ 4.0 4.1 4.6 4.5 5.1
Interest expense............................ 4.7 4.6 4.8 5.0 4.5
Other, net.................................. 0.2 0.4 0.4 0.1 0.4
-------- -------- -------- ------ ------
Income (loss) before income taxes........... (0.9) (0.9) (0.6) (0.6) 0.2
Income taxes................................ 0.5 0.3 0.3 0.3 0.5
-------- -------- -------- ------ ------
Net income (loss)....................... (1.4)% (1.2)% (0.9)% (0.9)% (0.3)%
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
OTHER DATA:
EBITDA..................................... 7.6% 7.4% 7.9% 7.9% 8.3%
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
</TABLE>
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 TO SIX MONTHS ENDED JUNE 30, 1995
Net sales. Net sales were $981.1 million for the six months ended June 30,
1996, a decrease of $3.3 million, or 0.3%, from $984.4 million in the comparable
period of 1995. Net sales of fine furniture increased 0.5% to $848.0 million in
the six months ended June 30, 1996 from $843.7 million in the six months ended
June 30, 1995. Net sales of fine furniture grew only modestly primarily due to
severe weather conditions in early 1996 which resulted in several
weather-related plant shutdowns, and due to slower industry sales. Net sales of
decorative home furnishings fabrics decreased 5.4% to $133.1 million in the six
months ended June 30, 1996 from $140.7 million in the six months ended June 30,
1995, primarily due to severe weather conditions in early 1996 which caused slow
retail sales, and due to decreased industry demand for certain product lines.
Gross profit. Gross profit was $239.1 million for the six months ended June
30, 1996, a decrease of $7.6 million, or 3.1%, from $246.7 million for the
comparable period of 1995. This decrease was primarily attributable to lower net
sales and a decline in the gross profit margin, which decreased to 24.4% for the
six months ended June 30, 1996 from 25.1% for the comparable
34
<PAGE>
period of 1995. The decrease in gross profit margin was primarily the result of
temporary plant closings due to bad weather and start-up costs related to
substantial new product introductions.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $189.4 million for the six months ended June 30,
1996, a decrease of $13.2 million, or 6.5%, from $202.6 million for the
comparable period of 1995. As a percentage of net sales, selling, general and
administrative expenses improved to 19.3% for the six months ended June 30, 1996
from 20.6% for the six months ended June 30, 1995. Of this total, selling
expense was 11.3%, as compared to 12.0% for the comparable period of 1995, and
general and administrative expenses decreased to 8.0%, from 8.6% for the
comparable period of 1995. This decrease in general and administrative expenses
reflects the benefits of the Company's cost reduction initiatives implemented in
the last half of 1995. These initiatives resulted in approximately $7.2 million
in savings. Included in selling, general and administrative expenses were
general corporate expenses which represent certain corporate staff support and
administrative services provided by Masco.
Operating profit. Operating profit increased to $49.7 million for the six
months ended June 30, 1996, an increase of $5.6 million, or 12.7%, from $44.1
million for the comparable period of 1995. As a percentage of net sales,
operating profit increased to 5.1% for the six months ended June 30, 1996 from
4.5% for the comparable period of 1995. This improvement was achieved primarily
for the reasons discussed above.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Net sales. Net sales were $1,992.6 million for the twelve months ended
December 31, 1995, an increase of $95.1 million, or 5.0%, from $1,897.5 million
for the year ended December 31, 1994. Net sales of fine furniture increased 6.8%
to $1,721.2 million in 1995 from $1,611.5 million in 1994. This increase in net
sales of fine furniture was primarily the result of the success of the
"Lifestyles" collections such as The World of Bob TimberlakeTM, increased sales
of motion furniture products and increased sales of decorative accessories. Net
sales of decorative home furnishing fabrics decreased 5.1% to $271.4 million in
1995 from $285.9 million in 1994. This decline was primarily the result of
softness in the printed fabrics market and management's focus on reducing the
number of lower margin product lines.
Gross profit. Gross profit was $491.6 million for the year ended December
31, 1995, an increase of $28.1 million, or 6.1%, from $463.5 million for the
year ended December 31, 1994, primarily due to an increase in net sales and
gross profit margin. Gross profit margin increased to 24.7% in 1995 from 24.4%
in the prior year. This increase was primarily due to continued rationalization
of manufacturing facilities that resulted in greater capacity utilization,
increased manufacturing efficiency due to cost reduction programs, continued
rationalization of raw materials purchasing and personnel reductions. The
Company also benefitted from the elimination of certain low margin product
lines.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $400.3 million for the year ended December 31,
1995, an increase of $14.9 million, or 3.9%, from $385.4 million for the year
ended December 31, 1994. As a percentage of net sales, selling, general and
administrative expenses decreased slightly to 20.1% for the year ended December
31, 1995 from 20.3% for the year ended December 31, 1994. Of this total, selling
expense was 11.9%, as compared to 11.6% for 1994, and general and administrative
expenses decreased to 8.2%, from 8.7% for 1994. Included in selling, general and
administrative expenses were general corporate expenses which represent certain
corporate staff support and administrative services provided by Masco.
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Operating profit. Operating profit increased to $91.3 million for the year
ended December 31, 1995, an increase of $13.2 million, or 16.9%, from $78.1
million for the year ended December 31, 1994. As a percentage of net sales,
operating profit increased to 4.6% for the year ended December 31, 1995 from
4.1% for the same period in 1994. This improvement was achieved primarily for
the reasons discussed above.
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
Net sales. Net sales were $1,897.5 million for the year ended December 31,
1994, an increase of $134.0 million, or 7.6%, from $1,763.5 million for the year
ended December 31, 1993. Net sales of fine furniture increased 9.1% to $1,611.5
million in 1994 from $1,476.9 million in 1993. This increase was primarily the
result of improved marketing efforts and the introduction of new product lines.
Net sales in the "Lifestyles" collections, motion furniture, decorative
accessories and designer showroom business grew at a rate above that of the
Company's fine furniture products as a whole. Net sales of decorative home
furnishing fabrics decreased 0.2% to $285.9 million in 1994 from $286.6 million
in 1993.
Gross profit. Gross profit was $463.5 million for the year ended December
31, 1994, an increase of $26.8 million, or 6.1%, from $436.7 million for the
year ended December 31, 1993. This increase was principally due to higher sales
volume. Gross profit margin decreased to 24.4% for the year ended December 31,
1994 from 24.8% for the year ended December 31, 1993 due to a slight increase in
the cost of raw materials.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $385.4 million for the year ended December 31,
1994, an increase of $17.9 million, or 4.9%, from $367.5 million for the year
ended December 31, 1993. As a percentage of net sales, selling, general and
administrative expenses decreased to 20.3% for the year ended December 31, 1994
from 20.8% for the year ended December 31, 1993. Of this total, selling expense
was 11.6%, as compared to 11.5% in 1993, and general and administrative expenses
decreased to 8.7%, from 9.3% in 1993, due to cost cutting initiatives involving
significant reductions in salaried overhead. These initiatives resulted in
approximately $1.5 million in savings. Included in selling, general and
administrative expenses were general corporate expenses which represent certain
corporate staff support and administrative services provided by Masco.
Operating profit. Operating profit increased to $78.1 million for the year
ended December 31, 1994, an increase of $8.9 million, or 12.9%, from $69.2
million for the year ended December 31, 1993. As a percentage of net sales,
operating profit increased to 4.1% for the year ended December 31, 1994 from
3.9% for 1993. This improvement was achieved primarily for the reasons discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from debt service on the
indebtedness incurred in connection with the Transactions, working capital needs
and the funding of capital expenditures. At June 30, 1996, on a pro forma basis
after giving effect to the Transactions, the Company's consolidated indebtedness
would have been approximately $706.6 million, consisting of $200.0 million of
the Old Notes, $300.0 million in Term Loans, $25.0 million in borrowings under
the Revolving Credit Facility, $155.0 million under the Receivables Facility and
$26.6 million of Assumed Indebtedness. The degree to which the Company is
leveraged could have a significant effect on its results of operations.
Principal and interest payments under the Senior Bank Facilities, the
Receivables Facility and the Notes will represent significant liquidity
requirements for the Company. Under the terms of the
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<PAGE>
Senior Bank Facilities, the Company will be required to make principal payments
totalling approximately $21.3 million in 1997, $21.0 million in 1998, $21.0
million in 1999, $21.3 million in 2000 and $34.5 million in 2001. Loans under
the Senior Bank Facilities bear interest at floating rates based upon the
interest rate option selected by the Company. Under the terms of the Senior Bank
Facilities, the Company is required to purchase and maintain interest rate
protection with respect to 50% of the Term Loans for three years. For a
description of the Senior Bank Facilities, see "Description of Senior Bank
Facilities."
The Company's capital expenditures were $75.1 million, $68.8 million, and
$61.0 million in 1993, 1994 and 1995, respectively. Of such amounts, capital
expenditures for expansion averaged approximately $30.0 million for each year,
with the balance expended on maintenance/productivity. Significant projects for
expansion over the past three years have included capital expenditures of
approximately $11.4 million on Asian manufacturing facilities ($8.4 million of
this on new facilities), $13.0 million on warehouse and distribution facilities
and $7.0 million on a new High Point, North Carolina furniture showroom. The
Company made capital expenditures of $13.9 million for the six months ended June
30, 1996, which consisted of $10.5 million for maintenance/productivity and $3.4
million for expansion. The Company estimates that for the remainder of 1996,
approximately $26.1 million of capital expenditures will be required, primarily
for maintenance/productivity and $4.5 million for capacity expansion.
Maintenance/productivity capital expenditures consist primarily of machinery
replacement, building renovation, environmental compliance and productivity
improvement. Expansion capital expenditures consist primarily of new capacity to
accommodate increased demand. The Company believes that as a result of the
availability of excess capacity in its manufacturing facilities, it will be able
to pursue its strategy over the next several years without the necessity of
making significant additional capital expenditures to expand capacity. The
Company's ability to make capital expenditures is subject to certain
restrictions under the Senior Bank Facilities. See "Description of Senior Bank
Facilities."
The Company's principal source of cash to fund its liquidity needs will be
net cash from operating activities and borrowings under the Revolving Credit
Facility. The components of net cash from operating activities are detailed in
the Financial Statements and the related notes thereto included elsewhere in
this Prospectus and include net income or loss adjusted for (i) depreciation and
amortization; (ii) bad debt provision; (iii) deferred income taxes and (iv)
changes in operating assets and liabilities. Net cash from operating activities
for the six months ended June 30, 1996 was $38.2 million, an increase of $70.8
million from ($32.6) million in the comparable period of 1995, primarily as a
result of an increase in earnings offset by a smaller increase in inventory and
a decrease in accounts receivable. Net cash from operating activities was $34.3
million for the year ended December 31, 1995, an increase of $35.0 million from
($0.7) million for the year ended December 31, 1994, primarily as a result of a
reduced net loss and a decrease in inventory offset by a larger increase in
accounts receivable. For the year ended December 31, 1994, net cash from
operating activities of ($0.7) million increased $42.2 million from ($42.9)
million for the year ended December 31, 1993, primarily as a result of smaller
increases in inventory and accounts receivable offset by an increase in current
liabilities.
As of June 30, 1996, on a pro forma basis after giving effect to the
Transactions, the amount outstanding under the Revolving Credit Facility would
have been $25.0 million, and $125.0 million would have been available to be
drawn (less the face amount of existing letters of credit of $17.0 million).
Amounts available under the Revolving Credit Facility may be used for working
capital and general corporate purposes (including up to $50.0 million for
letters of credit), subject to certain limitations under the Senior Bank
Facilities. Pursuant to the Acquisition Agreement, Masco has agreed to guarantee
or provide up to $15.0 million in stand-by letters of credit or comparable
credit enhancement arrangements in support of any obligation as to which the
Company is a primary obligor or an account party. See "Certain
Transactions--Acquisition Arrangements." The Company believes that cash
generated from operations, together with the amounts available under the
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Revolving Credit Facility, will be adequate to meet its debt service
requirements, capital expenditures and working capital needs for the foreseeable
future, although no assurance can be given in this regard. The Company's future
operating performance and ability to service or refinance the Notes and to
extend or refinance the Senior Bank Facilities will be subject to future
economic conditions and to financial, business and other factors, many of which
are beyond the Company's control.
INTERNATIONAL OPERATIONS
The Company conducts operations in several foreign countries including
Canada, Taiwan, Singapore, the Philippines, China, Malaysia, Indonesia, Thailand
and several European countries. Net sales from international operations during
1995 were approximately $232.0 million, or 12.0% of net sales. At June 30, 1996,
net assets associated with these operations were approximately 16.3% of total
assets, and the Company had indebtedness denominated in currencies other than
the U.S. dollar of approximately $8.3 million.
The Company's international operations may be subject to volatility because
of currency fluctuations, inflation and changes in political and economic
conditions in these countries. Most of the revenues and costs and expenses of
the Company's operations in these countries are denominated in the local
currencies. The financial position and results of operations of the Company's
foreign subsidiaries are measured using the local currency as the functional
currency, although the dollar would be used if any of these countries were
deemed hyperinflationary in accordance with Statement of Financial Acounting
Standards No. 52 ("FASB 52").
Assets and liabilities of the Company's foreign subsidiaries are translated
at the balance sheet date exchange rate and statement of operations' accounts
are translated at the average rate prevailing during the period. Translation
adjustments, approximately $5.2 million at December 31, 1995 and approximately
$6.5 million at June 30, 1996, arising from differences in exchange rates from
period to period are included in Masco net investment and advances.
Fluctuations in exchange rates, as well as higher inflation rates, may have
an adverse effect on the Company. In the periods discussed, the U.S. dollar has
generally weakened against most of the currencies in which the Company's foreign
operations are conducted. As a result, fluctuations in foreign exchange rates
impacted operating profit negatively by approximately $3.0 million for each of
the years ended December 31, 1993, 1994 and 1995.
The Company may periodically use foreign currency forward option contracts
to offset the effects of exchange rate fluctuations on cash flows denominated in
foreign currencies. The balance of these contracts as of June 30, 1996 was not
material, and the Company does not use derivative financial instruments for
trading or speculative purposes.
In some of the countries (China, the Philippines, Malaysia, Indonesia) where
the Company has manufacturing facilities, the inflation rate for 1995 exceeded
that of the United States, sometimes exceeding 10.0% per annum inflation rates.
No country in which the Company has significant operations is deemed
hyperinflationary in accordance with FASB 52. Management does not believe the
impact of this inflation will significantly impact margins after normal selling
price increases. Inventories in countries outside the United States are
primarily accounted for using the first-in first-out (FIFO) basis; thus, the
charge to cost of sales does not necessarily reflect current cost. However, if
the Company's operations were restated to reflect higher cost of sales charges
related to current cost required to replace existing inventories, the Company
estimates that reported income would not be significantly decreased.
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The Company's financial performance in future periods may be adversely
impacted as a result of changes in the above factors which are largely beyond
the control of the Company. See "Risk Factors--Foreign Operations."
1994 RESTATEMENT
The Company's combined financial statements for 1994 have been restated
primarily to reflect the correction of the accounting for certain Asian joint
ventures. As a result of this restatement, the 1994 net loss has increased by
approximately $3.6 million, while the Masco net investment and advances
decreased by a corresponding amount.
INFLATION
The Company does not believe that inflation has had a material impact on its
financial position or results of operations during the periods covered by the
Combined Financial Statements and the related notes thereto included herein.
SEASONALITY
The Company does not believe that its results of operations fluctuate
materially due to seasonality.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1996; provided, however, that if the Company has
extended the period of time for which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $200.0 million aggregate principal amount
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1996, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions as set
forth under "--Certain Conditions to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for any exchange of any Old Notes, by giving notice of
such extension to the holders thereof. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "--Certain Conditions to the Exchange Offer." The Company
will give notice of any extension, amendment, non-acceptance or termination to
the holders of the Old Notes as promptly as practicable, such notice in the case
of any extension to be issued no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to IBJ Schroder Bank & Trust Company
(the "Exchange Agent") at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date. In addition, either (i) certificates
for such Old Notes must be received by the Exchange Agent along with the Letter
of Transmittal or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
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TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm that is a member or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program, or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If Old
Notes are registered in the name of a person other than a signer of the Letter
of Transmittal, the Old Notes surrendered for exchange must be endorsed by, or
be accompanied by a written instrument or instruments of transfer or exchange,
in satisfactory form as determined by the Company in its sole discretion, duly
executed by, the registered holder with the signature thereon guaranteed by an
Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each broker-dealer holder will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the holder and any
beneficial holder, that neither the holder nor any such beneficial holder has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company. If
the holder is not a broker-dealer, the holder must represent that it is not
engaged in nor does it intend to engage in a distribution of the New Notes.
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ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Old Notes for exchange when, as and if the
Company has given oral and written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly competed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile and transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Notes,
in proper form for transfer, or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
(a "Book-Entry Confirmation"), as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
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WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time 5:00 p.m., New York City
time on the business day prior to the Expiration Date. For a withdrawal to be
effective, a written notice of withdrawal must be received by the Exchange Agent
at one of the addresses set forth below under "Exchange Agent." Any such notice
of withdrawal must specify the name of the person having tendered the Old Notes
to be withdrawn, identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes), and (where certificates for Old Notes have been
transmitted) specify the name in which such Old Notes are registered, if
different from that of the withdrawing holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the release of such certificates, the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such holder is an Eligible Institution. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Old Notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book entry transfer
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of New
Notes for such Old Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
registration statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "TIA"). In any such event the Company is required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible time.
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EXCHANGE AGENT
IBJ Schroder Bank & Trust Company, New York, has been appointed as the
Exchange Agent for the Exchange Offer. All executed Letters of Transmittal
should be directed to the Exchange Agent at one of the addresses set forth
below. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT DELIVERY:
<S> <C> <C>
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attention: Securities Processing Window
Attention: Reorganization Operations Subcellar One (SC-1)
Department
</TABLE>
VIA FACSIMILE:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
FOR INFORMATION CALL:
(212) 858-2103
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount as reflected in the Company's accounting records
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer will be
capitalized for accounting purposes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New 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 thereon.
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CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of, the Securities
Act and applicable state securities law. Old Notes not exchanged pursuant to the
Exchange Offer will continue to accrue interest at 10 7/8% per annum and will
otherwise remain outstanding in accordance with their terms. Holders of Old
Notes do not have any appraisal or dissenters' rights under the Delaware General
Corporation Law in connection with the Exchange Offer. In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. However, (i) if the Initial Purchasers so request with respect to Old Notes
not eligible to be exchanged for New Notes in the Exchange Offer and held by
them following consummation of the Exchange Offer or (ii) if any holder of Old
Notes is not eligible to participate in the Exchange Offer or, in the case of
any holder of Old Notes that participates in the Exchange Offer, does not
receive freely tradable New Notes in exchange for Old Notes, the Company is
obligated to file a registration statement on the appropriate form under the
Securities Act relating to the Old Notes held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such New Notes. If any
holder has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such holder (i)
could not rely on the applicable interpretations of the staff of the Commission
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction. A
broker-dealer who holds Old Notes that were acquired for its own account as a
result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of New Notes. Each such broker-dealer that receives
New Notes for its own account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge in the Letter of Transmittal that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
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BUSINESS
GENERAL
The Company is the largest U.S. based manufacturer and marketer of
residential furniture and the nation's largest designer, marketer and
distributor of decorative home furnishing fabrics. The Company markets a
comprehensive selection of quality products under well-known brand names through
an extensive worldwide distribution network. The Company offers products in
price categories ranging from "promotional" to "premium," with a primary
concentration on the "good," "better" and "best" categories. The Company's
products enjoy an international reputation for quality, craftsmanship, style and
value.
Fine Furniture. The Company designs, manufactures and markets a full range
of quality wood and upholstered furniture to furnish any room of a home in
virtually any style, under such well-known brand names as Henredon(R), Drexel
Heritage(R), Lexington(R), Universal(R), Berkline(R) and BenchCraft(R), and a
wide range of furniture accessories under the Maitland-SmithTM and La Barge(R)
brand names.
Decorative Home Furnishing Fabrics. The Company designs, markets and
distributes over 25,000 decorative home furnishing fabrics, such as fabrics for
upholstery and draperies, under such well-known brand names as Robert AllenTM,
SunburyTM and Beacon Hill(R).
COMPETITIVE ADVANTAGES
The Company believes it benefits from the following competitive advantages
which have helped it to increase sales and operating profitability and to
maintain its leadership position in the home furnishings industry:
Industry Leadership. As the largest U.S. based manufacturer and marketer of
residential furniture and the nation's largest designer, marketer and
distributor of decorative home furnishing fabrics, the Company enjoys several
marketing advantages, including: (i) a strong share of retail floor space; (ii)
the ability to support its products with significant marketing and advertising
resources and (iii) the resources to introduce and support new design and
product innovations. In addition, the Company also benefits from several
operating advantages, including: (i) economies of scale in purchasing raw
materials; (ii) efficient utilization of its worldwide manufacturing base and
distribution network and (iii) complementary sales and marketing activities.
Established, Well-Known Brand Names. The Company markets its products under
some of the most established and well-known brand names in the industry,
including Henredon(R), Drexel Heritage(R), Lexington(R), Universal(R),
Berkline(R), BenchCraft(R), Maitland-SmithTM and La Barge(R) in fine furniture,
and Robert AllenTM, SunburyTM and Beacon Hill(R) in decorative home furnishing
fabrics. The Company believes that brand name recognition is an important
competitive advantage and that retailers and consumers associate its brands with
a high degree of quality, craftsmanship, style and value.
Comprehensive Product Lines. The Company believes it is the most
comprehensive resource in the home furnishings industry, providing retailers and
consumers with more product alternatives than any of its competitors. The
Company offers products across all price categories and in most major style
categories, including American Traditional, Country, Eighteenth Century,
European Country, European Traditional, Casual, Contemporary, Home Office, Youth
and Oriental. By offering such a broad product line, the Company can supply up
to 75% of the product demands of most furniture retailers, and more easily
satisfy furniture retailers who increasingly prefer to buy from a smaller number
of larger suppliers.
Extensive and Diverse Distribution Network. The Company believes it has more
active accounts than any other manufacturer in the furniture or home furnishings
industry. It distributes its
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products through an extensive worldwide distribution network that includes: (i)
more than 25,000 independent retail locations, including national and regional
chains, department stores, specialty stores and more than 570 galleries within
retail stores; (ii) more than 90 independent dedicated stores exclusively
selling Company products and (iii) 16 Company owned and operated decorator
showrooms. The Company also sells its fine furniture products to the hospitality
and government markets. The Company distributes its decorative home furnishing
fabrics through numerous distribution channels, including its own showrooms, to
an extensive customer base consisting of over 30,000 retailers, decorators and
designers worldwide. The Company also sells decorative home furnishing fabrics
to furniture manufacturers.
Design and Style Leader. Through its new product offerings and other
innovations, the Company believes it has firmly established itself as an
industry design and style leader, which it believes has been essential to its
success. The Company pioneered "Lifestyle" and designer collections, and its
collections such as The World of Bob TimberlakeTM, Ralph Lauren Furniture
CollectionTM, The Palmer Home CollectionTM and Alexander Julian Home ColoursTM
are among the industry's best sellers. In addition, the Company's innovative
Berkline(R) products have enabled it to acquire a significant share of the
rapidly growing market for motion furniture.
Modern Facilities. The Company operates 89 strategically located,
well-equipped facilities in North America, Asia and Europe with over 24 million
square feet of manufacturing and distribution space. Over the past five years
more than $275.0 million has been invested in the Company's facilities to meet
projected growth, reduce operating costs and maximize operating flexibility. The
Company believes that these facilities enable it to serve its worldwide customer
base efficiently and to allocate capacity to best meet its manufacturing
requirements.
Worldwide Presence. The Company's Asian operations include over five million
square feet of manufacturing and distribution facilities, decorator showrooms
and dedicated galleries throughout the region. As the largest U.S. furniture
manufacturer in Asia, the Company has access to a highly skilled (in such areas
as intricate veneering and hand carving), low-cost workforce, and to scarce raw
materials such as Chinese oak, wicker, rattan and certain exotic woods. Although
the large majority of the Company's Asian-made products are sold in the United
States, certain products are sold in Asia, positioning the Company to increase
the distribution of all of its products into this region. The Company also
manufactures and distributes fine furniture products in Europe. The Company's
decorative home furnishing fabrics are manufactured in the United States and in
Europe, and are distributed worldwide.
BUSINESS STRATEGY
The Company's strategy for achieving continued growth in sales and cash flow
includes the following elements:
Enhance Strong Brand Names. The Company is committed to enhancing the
reputation and consumer awareness enjoyed by its leading brands, such as
Henredon(R), Drexel Heritage(R), Lexington(R), Universal(R), Berkline(R),
BenchCraft(R), Maitland-SmithTM and La Barge(R) in fine furniture, and Robert
AllenTM, SunburyTM and Beacon Hill(R) in decorative fabrics, through innovative
consumer advertising in various media, promotions and the ongoing development
and sale of well-received products under its brand names. Additionally, the
Company intends to continue the promotional focus on its well-known "Lifestyle"
and designer collections such as The World of Bob TimberlakeTM, Ralph Lauren
Furniture CollectionTM, The Palmer Home CollectionTM and Alexander Julian Home
ColoursTM.
Increase Customer Satisfaction. The Company will continue to implement a
number of initiatives designed to increase retailer and consumer satisfaction.
These include: (i) continuing to shorten delivery times by streamlining
distribution systems and utilizing advanced manufacturing
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processes; (ii) enhancing quality assurance programs and (iii) increasing
product diversity and customization. It is the Company's expectation that these
initiatives will provide consumers with a more enjoyable and satisfying
experience when purchasing furniture.
Focus on Product Innovation. The Company will continue to design and develop
innovative, fashionable and affordable products intended to appeal to a wide
variety of consumers and to provide the Company with attractive operating
margins. In particular, the Company intends to continue to focus its design
capabilities on its successful "Lifestyle" and designer collections and the
growing motion furniture market.
Increase Operating Efficiencies. The Company believes there are significant
opportunities for additional improvement in margins and cash flow through
intercompany cooperation, including: (i) realizing economies of scale in the
procurement of raw materials; (ii) reducing working capital levels; (iii)
reducing capital expenditures from coordinated use of manufacturing resources
and (iv) focusing on cooperative sales and marketing efforts.
Expand Worldwide Presence. The Company intends to increase its market
position in the United States and abroad by expanding its extensive distribution
network and, where appropriate, expanding its product offerings in existing
distribution channels. In international markets, the Company intends to expand
its presence by continuing to take advantage of its production capabilities in
Asia and Europe, its worldwide distribution network and the strength of its
brand names in foreign markets.
INDUSTRY OVERVIEW
Since 1975, the domestic residential furniture industry has grown at a
compound annual rate of 5.9%, from $6.0 billion in shipments in 1975 to $19.0
billion in 1995, according to the AFMA. While the domestic residential furniture
industry fluctuates with the general economy, periods of decline have been
relatively brief, with industry shipments declining in only two years since
1975. The Company believes that the industry will continue to grow in part due
to favorable demographic and other trends, including: (i) the maturation of the
"baby boom" generation, which will increase the portion of the U.S. population
between the ages of 35-54 by more than 8 million people by the end of the decade
(this age group has historically had the highest level of discretionary income
and consumer spending, and represents the largest number of consumers of
residential furniture, according to the Census Bureau); (ii) increases in
average new home size from approximately 1,400 square feet in 1975 to nearly
2,000 square feet in 1994, according to the Census Bureau, which generally
results in increased purchases of furniture per home and (iii) growth in the
number of Americans who work at home and who therefore require home office
furniture. The Company believes that it is well positioned to capitalize on
these favorable trends as a result of its broad range of products and well-known
brands.
The domestic residential furniture industry is highly fragmented with more
than 600 manufacturers in the United States, of which the top ten accounted for
approximately 40% of industry shipments in 1995. Nonetheless, the industry has
experienced significant consolidation since 1985, when the top ten manufacturers
accounted for approximately 23% of the industry shipments. Relative to smaller
competitors, larger manufacturers benefit from several competitive advantages,
including the ability to offer a broad selection of products, diverse
distribution networks, purchasing power and economies of scale in manufacturing,
marketing and product innovation.
The residential furniture market consists of three principal product
categories: wood (principally casegoods), upholstery and metal. Of these
categories, wood is the largest, representing approximately half of industry
sales, with upholstery representing approximately one-third of total industry
sales, and metal and other products accounting for the balance. The wood
furniture market has a high cost of entry and is capital intensive because of
the heavy mechanization needed in the
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manufacturing process, the time-consuming manufacturing process and the need to
purchase raw materials well in advance. In contrast, the upholstery market
(exclusive of recliners, motion furniture and sleep sofas) is characterized by a
low cost of entry and minimal mechanization and technology, and as a result is
more highly fragmented. Certain segments of the upholstered furniture market,
particularly those for recliners, motion furniture and sleep sofas, have grown
more rapidly than others in recent years, and the Company expects opportunities
for growth in these areas to continue. Since a significant portion of
upholstered furniture is used in the entertainment rooms, such as the living
room or family room, consumers desire to have these items new and fashionable.
In addition, due to high use, many upholstered items tend to wear more quickly.
Residential furniture manufacturers have become increasingly focused on
access to diverse distribution channels. Furniture stores with locations in a
single geographic market have seen their share of retail sales decline from 43%
in 1987 to 38% in 1995. This decline can be attributed to increased sales by
multi-market furniture stores, specialty stores, galleries and department
stores. The Company believes that these non-traditional retailers require
suppliers that offer broad product lines combined with substantial marketing and
advertising resources. In addition, because presentation to the consumer has
become more important to residential furniture manufacturers, the "gallery"
concept has been an important industry development. Galleries are dedicated
space within a larger retail store that display products in complete and fully
accessorized room settings instead of as individual pieces. A gallery generally
takes up a significant portion of a retailer's floor space. For example, the
average retail furniture store has approximately 30,000 square feet and up to
7,500 square feet might be dedicated to a single gallery. In return for
featuring a manufacturer's merchandise in a gallery, the retailer receives
layout designs, cooperative promotions and other assistance from the
manufacturer. The Company believes that stores with galleries result in higher
sales per square foot than furniture stores without galleries. Residential
furniture manufacturers have also focused on raising brand awareness with
consumers through "Lifestyle" or designer collections. Such collections are
becoming an increasingly important element of the industry's growth.
PRODUCTS
The Company is the largest U.S. based manufacturer and marketer of
residential furniture and the nation's largest designer, marketer and
distributor of decorative home furnishing fabrics. It believes it offers the
most comprehensive product line in the home furnishings industry, including (i)
bedroom, dining room, living room, family room and home office casegoods; (ii)
stationary upholstered products such as sofas, love seats, sectionals and
chairs; (iii) upholstered recliners, motion furniture and sleep sofas; (iv)
occasional furniture such as home entertainment centers, lamps, chairs, tables,
mirrors and other accent items and (v) decorative home furnishing fabrics.
FINE FURNITURE
The Company designs, manufactures and markets a full range of quality wood
and upholstered furniture to furnish any room of a home in virtually any style,
under such well-known brand names as Henredon(R), Drexel Heritage(R),
Lexington(R), Universal(R), Berkline(R) and BenchCraft(R), and a wide range of
furniture accessories under the Maitland-SmithTM and La Barge(R) brand names.
The Company offers these products across all major price categories, from
"promotional" to "premium," and in every major style category, including
American Traditional, Country, Eighteenth Century, European Country, European
Traditional, Casual, Contemporary, Home Office, Youth and Oriental. By offering
such a broad product line, the Company can supply up to 75% of the product
demands of most furniture retailers, and more easily satisfy retailers who
increasingly prefer to buy from a smaller number of larger suppliers.
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The following table illustrates the product and price category coverage of
the Company's fine furniture brands:
<TABLE>
<CAPTION>
PRODUCT CATEGORY
STATIONARY
PRICE CATEGORY CASEGOODS UPHOLSTERY MOTION/RECLINER OCCASIONAL
<S> <C> <C> <C> <C>
PREMIUM Henredon(R) Beacon Hill(R) Henredon(R)
Maitland-SmithTM Henredon(R) La Barge(R)
Maitland-SmithTM
BEST Drexel Beacon Hill(R) Drexel Drexel
Heritage(R) Drexel Heritage(R) Heritage(R)
Henredon(R) Heritage(R) Henredon(R)
Henredon(R) La Barge(R)
Maitland-SmithTM
BETTER Drexel BenchCraft(R) BenchCraft(R) Drexel
Heritage(R) Drexel Berkline(R) Heritage(R)
Lexington(R) Heritage(R) Lexington(R)
Universal(R) Lexington(R)
Universal(R)
GOOD Lexington(R) BenchCraft(R) BenchCraft(R) Universal(R)
Universal(R) Universal(R) Berkline(R)
PROMOTIONAL Universal(R) BenchCraft(R) BenchCraft(R) Universal(R)
Berkline(R)
</TABLE>
Shaded area indicates product category does not exist.
Henredon(R)
Henredon designs and manufactures wood, upholstered and occasional furniture
for the bedroom, dining room, living room, family room and home office. Its
products are primarily in the "best" and "premium" price categories and are
aimed at the "replacement" market, where customers typically trade-up in price
and quality and demand superior design, materials and craftsmanship. Product
design and development represent an important element of Henredon's success, and
Henredon is considered to be one of the premier names in design for furniture in
the high-end price categories. Henredon currently sells approximately 19
collections, and designs and develops approximately four new product collections
each year. Henredon's products cover all major style categories within the
high-end niche, including Eighteenth Century, European Traditional,
Transitional, Contemporary, Sophisticated Country and Casual. Since 1993,
Henredon has manufactured and marketed products for the Ralph Lauren Furniture
CollectionTM under a special licensing relationship with the Ralph Lauren
organization. Henredon believes this line of high-end wood and upholstered
furniture is an excellent complement to its other product lines.
Drexel Heritage(R)
Drexel Heritage designs and manufactures wood, upholstered, motion and
occasional furniture for the bedroom, dining room, living room, family room and
home office in the "better" to "best" price categories. It currently produces
approximately 26 collections of wood and upholstered furniture. Approximately
four to six new collections are offered each year. Drexel Heritage's product
styles include American Traditional, Country, Eighteenth Century, European
Traditional, Contemporary and Transitional. Drexel Heritage also produces
furniture for sale to the hospitality and government markets.
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Lexington(R)
Lexington designs and manufactures wood, upholstered and occasional
furniture for the bedroom, dining room, living room, family room and home office
primarily in the "better" price category. The Company believes Lexington has one
of the industry's best merchandising and design teams, which currently produces
over 40 collections of furniture and designs and develops four to six new
collections each year. Product design and development represent an integral part
of Lexington's success. Lexington pioneered "Lifestyle" and designer
collections, and its collections currently include the popular The World of Bob
TimberlakeTM, The Palmer Home CollectionTM, Lynn Hollyn at HomeTM, Weekend
RetreatTM, American Country WestTM, Old Salem CollectionTM, DeCristofaroTM,
VestigesTM and Pacific OverturesTM. These collections have become an important
part of Lexington's offerings. Product styles include Traditional, Eighteenth
Century, Country and Casual.
Universal(R)
Universal's products include wood, upholstered and occasional furniture
targeted primarily to the "good" or "better" price categories. Universal
products are manufactured in part in Asia, where the Company is the largest
United States residential furniture manufacturer, with access to a
highly-skilled (in such areas as intricate veneering and hand carving), low-cost
workforce, and to scarce raw materials such as Chinese oak, wicker, rattan and
certain exotic woods. Universal currently sells approximately 20 collections of
furniture, including styles such as Eighteenth Century, Traditional,
Transitional, Oriental and Country, and introduces four to six new collections a
year. Universal's Alexander Julian Home ColoursTM collection is among the
industry's best sellers. Universal's contract furniture is manufactured for
specific contract jobs involving the interior furnishings of hotels located
primarily in Asia.
Berkline(R)
Berkline designs and manufactures a wide range of recliners, motion
furniture and sleep sofas, primarily in the "good" to "better" price categories.
The Berkline(R) brand name is well known in the rapidly growing market for
upholstered modular and motion furniture and free standing recliners. Berkline
offers a wide range of styles, fabrics and leathers for these products, as well
as popular innovative features such as hidden cup holders and built-in tables.
BenchCraft(R)
BenchCraft designs and manufactures a comprehensive line of upholstered
furniture, including stationary, motion, leather, wicker and rattan.
BenchCraft's products are primarily in the "good" price category and are
marketed as fashionable, affordable furniture for "casual living."
Maitland-SmithTM
Maitland-Smith designs and manufactures an innovative line of "best" to
"premium" hand-crafted, antique-inspired furniture, accessories and lighting,
utilizing a wide range of unique materials, including leather, fancy faced
veneer, stone and hand-painted metal.
La Barge(R)
La Barge(R) designs and sells decorative mirrors, metal and glass occasional
tables, decorative lighting and related accessories under three brand names: La
Barge(R), Marbro(R) and EntreeTM, primarily in the "best" and "premium" price
categories. La Barge(R) designs its products, and contracts their manufacture
with established suppliers around the world who it believes can produce high
quality, specialty products with decorative style.
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Beacon Hill(R)
The Company's Beacon Hill Showrooms sell "best" and "premium" fine furniture
products manufactured by the Company and third parties, including certain
products under the Beacon Hill(R) brand name, exclusively to interior design
professionals and their clients.
DECORATIVE HOME FURNISHING FABRICS
The Company designs, markets and distributes over 25,000 decorative home
furnishing fabrics, such as fabrics for upholstery and draperies, under such
well-known brand names as Robert AllenTM, SunburyTM and Beacon Hill(R). The
Company offers decorative home furnishing fabrics (including trim and finished
products) in each of the "good," "better," "best" and "premium" price
categories. The following table illustrates the price category coverage of the
Company's decorative home furnishing fabric brands:
PRICE CATEGORY BRAND
Premium Beacon Hill(R)
Ramm, Son & CrockerTM
Best Beacon Hill(R)
Ramm, Son & CrockerTM
SunburyTM
Better AmetexTM
Robert Allen Total HomeTM
SunburyTM
Good AmetexTM
American Town & CountryTM
Robert AllenTM
Robert Allen's products include over 22,000 different SKU's of upholstery
fabrics, drapery fabrics, trim and finished products (bedspreads, comforters,
pillows, and similar products), sourced from a variety of independent fabric
mills and manufacturers located around the world. Robert Allen offers products
in all price categories. Its American Town & CountryTM fabrics, which are in the
"good" price category, are targeted at smaller upholstery and drapery shops. Its
Robert Allen Total HomeTM fabrics, which are in the "better" price category, are
targeted at designer and specialty stores. Within this line, Robert Allen has
created the "MansfieldTM Collection" targeted at large format home furnishings
stores. Its Beacon Hill(R) fabrics, which are in the "best" and "premium" price
categories, are targeted at upper-end interior designers.
AmetexTM
Ametex's products include a broad line of printed and woven fabrics in the
"good" to "better" price categories. Ametex converts fabrics from both its own
designs and those licensed from third parties, including designs based on the
Vatican Museum collection. Ametex also produces (to order) finished fabric
products such as bedding and draperies. Ametex U.K. produces a line of "better"
printed and woven fabrics, which include many designs that are in the domestic
Ametex line, as well as designs that are made specifically for the European
market.
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SunburyTM
Sunbury designs and weaves a line of proprietary decorative jacquard
upholstery fabrics for the furniture industry in the "better" to "best" price
categories. Fabrics are woven in traditional, transitional, contemporary,
sophisticated country and custom designs. Sunbury strives to produce fabrics
that allow furniture manufacturers to differentiate their products from those of
their competitors, rather than commodity fabric products. Most of Sunbury's
woven designs are protected by exclusive copyright, and all of its products are
woven to order.
Ramm, Son & CrockerTM
Ramm, Son & Crocker produces traditional furnishing fabrics in the "best"
and "premium" price categories. Its product line consists primarily of
decorative printed fabrics, and to a lesser extent, woven fabrics and wallpaper.
It owns a unique archive of approximately 17,000 documented 18th and 19th
Century designs, and also has exclusive United States distribution rights to
such major brands as Liberty of London, Zoffany, Pepe Penalver, Haas and Blue
Home.
DISTRIBUTION
The Company distributes its fine furniture products through an extensive
worldwide distribution network that includes (i) more than 25,000 independent
retail locations, including national and regional chains, department stores,
specialty stores and more than 570 galleries within retail stores; (ii) more
than 90 independent dedicated stores exclusively selling Company products and
(iii) 16 Company owned and operated Beacon Hill(R) decorator showrooms. The
Company also sells its fine furniture domestically and internationally to the
hospitality and government markets and has recently begun offering product
information through non-traditional channels such as the Internet. The Company
distributes over 25,000 different decorative home furnishing fabrics through
numerous distribution channels, including the Beacon Hill(R) showrooms, to an
extensive customer base consisting of over 30,000 retailers, decorators and
designers worldwide. The Company also sells decorative home furnishing fabrics
to furniture manufacturers. The Company's extensive distribution network
provides limited exposure to any one customer. In 1995, the Company's 20 largest
customers represented only 17.6% of net sales, with no single customer
representing more than 2.0%. The Company believes it has more active accounts
than any other manufacturer in the furniture or home furnishings industry.
FINE FURNITURE
The Company believes that it is the most comprehensive and complete resource
in the residential furniture industry, capable of supplying up to 75% of the
product demands of most furniture retailers, whether local, regional or national
in scope. This, in turn, enables the Company to secure additional display space
from retailers, who increasingly are relying on a smaller number of larger
suppliers. The Company sells its fine furniture products worldwide primarily
through approximately 580 commissioned independent representatives. The Company
offers substantial services to retailers to support their marketing efforts,
including national advertising, merchandising and display programs and extensive
dealer training in its High Point, North Carolina training center. The Company
also displays its fine furniture products at the semi-annual International Home
Furnishings Market in High Point.
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The following illustrates the distribution of the Company's fine furniture
products by brand:
<TABLE>
<CAPTION>
DISTRIBUTION CHANNEL
- ------------------------------------------------------------------------------------------
INDEPENDENT DEDICATED DESIGNER
RETAILERS GALLERIES STORES SHOWROOMS
- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C>
BenchCraft(R) Berkline(R) Drexel Heritage(R) Beacon Hill(R)
Berkline(R) Drexel Heritage(R) Drexel Heritage(R)
Drexel Heritage(R) Henredon(R) Henredon(R)
Henredon(R) La Barge(R) La Barge(R)
La Barge(R) Lexington(R) Lexington(R)
Lexington(R) Maitland-SmithTM Maitland-SmithTM
Maitland-SmithTM
Universal(R)
</TABLE>
Furniture retailers remain the most significant distribution channel in the
industry, and the Company is committed to maintaining these important
relationships. The Company's diverse product offerings and national distribution
enable it to effectively service national retailers such as Levitz, Sears,
Montgomery Ward, J.C. Penney and Federated Department Stores and large regional
retailers such as Homestead House, Baers Furniture, Kittles Furniture, Wayside
Furniture and Breunners, as well as independent single store retailers
nationwide. As the furniture retailing industry consolidates, large retailers
are commanding an increasing presence, and management believes that the Company
is better positioned than its competitors to meet their needs.
The Company has developed gallery programs for its Henredon(R), Drexel
Heritage(R), Lexington(R), Berkline(R), Maitland-SmithTM and La Barge(R) product
lines with more than 570 retailers. Galleries are dedicated space within a
larger retail store that display products in complete and fully accessorized
room settings instead of as individual pieces. This presentation format
encourages consumers to purchase an entire room of furniture instead of
individual pieces from different manufacturers. The Company believes that stores
with galleries result in higher sales per square foot than furniture stores
without galleries.
The Company also sells its products through dedicated stores that
exclusively offer the Company's products. Drexel Heritage(R) products are sold
through Drexel Heritage Showcase Stores and the newly formatted Home
Inspirations Stores, a group of more than 90 independently owned and operated
stores which sell Drexel Heritage(R) products exclusively in a gallery format.
Each store employs a consistent, but not identical, lifestyle concept, with
products displayed in complete rooms and eclectic settings, which include
furnishings, wall decor, window treatments and accessories. The Company also
operates seven dedicated retail stores for its Universal(R) products in Asia and
owns and operates a Maitland-SmithTM retail store in Hong Kong.
The Company owns and operates the Beacon Hill(R) Showrooms, a national
network of 16 showrooms for the sale of "best" and "premium" price category
products to interior design professionals and their clients. The showrooms are
located in Atlanta, Boston, Chicago, Cleveland, Dallas, Dania (Florida),
Houston, Los Angeles, New York, Philadelphia, San Francisco, Seattle, Troy
(Michigan) and Washington, D.C. Approximately 50% of Beacon Hill's sales are of
the Company's fine furniture products, primarily Henredon(R), Maitland-SmithTM,
Drexel Heritage(R) and Lexington(R). In addition to Company products, Beacon
Hill offers products manufactured by such well-known, high-end furniture
manufacturers as Kindel Furniture and John Widdicomb Co. The Beacon Hill
Showrooms feature Robert Allen's Beacon Hill(R) fabric line, which is produced
exclusively for sale in the Company's showrooms.
54
<PAGE>
DECORATIVE HOME FURNISHINGS FABRICS
The Company distributes its Robert AllenTM products through numerous
distribution channels, including its own showroom and approximately 55 exclusive
commissioned, independent representatives, to over 30,000 retailers, decorators
and designers worldwide. The Company sells its AmetexTM products through
approximately 36 exclusive commissioned independent representatives primarily to
furniture manufacturers, bedding and drapery manufacturers and contract
purchasing agents. SunburyTM products are sold to furniture manufacturers and
distributors of decorative home furnishing fabrics in the United States and
Canada by eight exclusive commissioned sales representatives. The Company's
decorative home furnishing fabrics are also sold to decorators and designers
through the Company's Beacon Hill(R) showrooms, which offer Robert AllenTM and
Ramm, Son & CrockerTM fabrics on a commission basis.
MARKETING AND ADVERTISING
The Company seeks to increase consumer buying and strengthen relationships
with its retailers through extensive cataloging, cooperative advertising and
selective promotional programs.
The Company promotes its product lines to dealers through advertising in
industry publications, such as Furniture/Today, and uses various means to
strengthen existing dealer relations, including promotions for certain select
lines such as special sale periods, cooperative advertising, merchandising and
display programs, and sales support materials. The Company also provides
extensive dealer training (both live and through the use of videos). Sale
promotions are offered throughout the year on entire product lines and on
selected products. Summer sales typically encompass an entire product line, Fall
sales generally focus on dining room products and December sales feature "gift"
type products.
Designers and decorators are targeted through advertising in publications
such as Architectural Digest, promotions and other special events, such as the
Beacon Hill Showroom educational programs where designers are invited to
participate with noted speakers.
Advertising is used to increase consumer awareness of the Company's brand
names. Consumer advertising is targeted to specific customer segments through
leading shelter magazines. The Company advertises its products in such
periodicals as Architectural Digest, Traditional Home, Country Home, Country
Living, Martha Stewart Living, Metropolitan Home, Brides, House Beautiful and
Southern Accents. The Company benefits from economies of scale in purchasing
advertising due to the large combined volume of advertising among all its
product lines. In addition, the Company attempts to draw the attention of major
shelter publication editors to its innovative products in order to receive
editorial coverage at no cost. For example, Lexington(R) products have received
editorial coverage in Southern Living and elsewhere in connection with the
Company's participation in select showhome and model home projects.
Recently, the Company has created interactive sites on the Internet which
allow users to browse its product lines, learn more about the Company and be
directed to local dealers.
MANUFACTURING
The Company believes that it has a modern and efficient manufacturing base
that will enable it to meet the manufacturing requirements of its business
strategy over the next several years without the necessity of making significant
additional capital expenditures to expand capacity.
Currently, the Company manufactures its products worldwide through 89
manufacturing and distribution facilities, with more than 24 million square
feet, including over 20 million square feet of
55
<PAGE>
production space. These facilities are strategically located to efficiently
supply the Company's worldwide distribution network. The Company's facilities
have benefited from investment in state-of-the-art equipment and other capital
expenditures in excess of $275.0 million over the past five years. The Company
is also beginning to realize the benefits from its continuous improvement
programs directed at manufacturing methods and process improvements
incorporating just-in-time logistics, cellular concepts, quality circles,
reduced cycle times, laser cutting methodologies, computerization and related
modern production methods.
The Company utilizes certain specialized facilities dedicated to
manufacturing a limited number of products, as well as sub-contracted
manufacturing facilities. The Company also promotes intercompany sourcing of
products and components. Intercompany sales grew from $57.8 million in 1991 to
$168.0 million in 1995. These steps have helped the Company balance its global
manufacturing capacity and increase its operating efficiency.
The Company's fine furniture lines are produced in domestic manufacturing
and distribution facilities located in North Carolina, Tennessee, Michigan,
Massachusetts, South Carolina, Mississippi and California, and internationally
in facilities located in Taiwan, Singapore, Malaysia, China, Indonesia, Hong
Kong, Thailand, the United Kingdom, Canada, Sweden, Japan and Germany.
With manufacturing and distribution facilities encompassing over five
million square feet, the Company is the largest U.S. furniture manufacturer in
Asia, and this provides it with access to a highly-skilled (in such areas as
intricate veneering and hand carving), low-cost workforce, and to scarce raw
materials such as Chinese oak, exotic woods, wicker and rattan. Five of the
Asian facilities with over 1.0 million square feet have been built or renovated
in the last five years and all are equipped with the latest manufacturing
technology. In addition, the Asian manufacturing facilities have developed a
process to use readily available rubber tree wood, a fast-growing wood resource.
Substantially all of the Company's decorative home furnishing fabrics are
purchased from third parties.
FACILITIES
As of June 30, 1996, the Company operated manufacturing and distribution
facilities, showrooms, and retail and office space with a total area of
approximately 26.4 million square feet. The Company owns approximately 20
million square feet and leases approximately 6.4 million square feet. Management
believes the Company's facilities and equipment are in good condition and are
adequate for the Company's present and anticipated future operations.
56
<PAGE>
The following is a summary of the Company's total square footage by domestic
and international location and function:
<TABLE>
<CAPTION>
FUNCTION DOMESTIC INTERNATIONAL TOTAL
- ---------------------------------------------------------- -------- -------------- ------
<S> <C> <C> <C>
(SQUARE FEET IN THOUSANDS)
MANUFACTURING & WAREHOUSE/DISTRIBUTION
Wood.................................................... 12,832 4,853 17,685
Upholstery.............................................. 5,380 203 5,583
Wicker, Rattan & Other.................................. 384 776 1,160
-------- ------ ------
Total............................................. 18,596 5,832 24,428
OFFICE.................................................... 596 61 657
SHOWROOM.................................................. 945 55 1,000
RETAIL.................................................... 198 98 296
-------- ------ ------
TOTAL SQUARE FOOTAGE...................................... 20,335 6,046 26,381
-------- ------ ------
-------- ------ ------
</TABLE>
RAW MATERIALS AND SUPPLIERS
The principal raw materials used by the Company in the manufacture of its
products include: lumber, finishing products (stains, sealants, lacquers), glue,
steel, leather, cotton, wool, synthetic and vinyl fabrics, polyester batting and
non-chlorofluorocarbonated polyurethane foam. The various types of wood used in
the Company's products are purchased both domestically and internationally.
Management believes that its supply sources of those materials are adequate. The
Company has no long-term supply contracts and has experienced no significant
problems in supplying its operations. Although the Company has ongoing
relationships with certain suppliers of raw materials, the Company believes that
there are a number of reliable vendors available contributing to its ability to
obtain competitive pricing for raw materials. Raw material prices fluctuate over
time depending on supply, demand and other factors. Increases in raw material
prices may have a short-term impact on the Company's financial performance.
COMPETITION
The furniture manufacturing industry is highly competitive and includes a
large number of domestic and foreign manufacturers. The industry is highly
fragmented, and no one company is dominant. Competition is generally based on
product quality, brand name recognition, price and service. The Company's
furniture products compete with products made by a number of furniture
manufacturers, including Furniture Brands International, Inc., La-Z-Boy Chair
Company, Klaussner Furniture Industries Inc., LADD Furniture, Inc. and Bassett
Furniture Industries, Inc., as well as numerous smaller producers. In decorative
home furnishing fabrics, competition is based upon design, price, style and
quality, and competitors include Schumacher/Waverly, Richloom and Collins &
Aikman.
EMPLOYEES
As of June 30, 1996, the Company employed approximately 33,200 persons.
Virtually all are non-union, although approximately 30%, most of whom are
employed in Asia, are subject to certain government-mandated terms of
employment. The Company believes it has good relations with its employees.
57
<PAGE>
LEGAL PROCEEDINGS
From time to time, the Company is a party to various legal actions in the
normal course of its business. The Company is not currently a party to any
litigation which, if adversely determined, would have a material adverse effect
on the liquidity or results of operations of the Company.
INTELLECTUAL PROPERTY
The Company owns a number of trademarks, copyrights, licenses and patents.
The Company believes that many of its trademarks are important to the Company
because they are well recognized and associated with quality and value in the
home furnishings industry. The Company aggressively protects its major
trademarks, trade names and copyrights.
ENVIRONMENTAL REGULATIONS
The Company is subject to a wide range of federal, state and local
environmental laws and regulations relating to the protection of the
environment, worker health and safety and the emission, discharge, storage,
treatment and disposal of hazardous materials. These laws include the Clean Air
Act of 1970, as amended, the Resource Conservation and Recovery Act, the Federal
Water Pollution Control Act, and the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund" or "CERCLA"). The Company believes
that it is in material compliance with applicable federal, state, local and
foreign environmental regulations. Compliance with these regulations has not in
the past had any material effect on the Company's earnings, capital expenditures
or competitive position; however, the effect of such compliance on the Company
in the future cannot be determined.
Under the provisions of the CAA, in December 1995, the United States
Environmental Protection Agency promulgated hazardous air emission standards for
the wood furniture industry. These regulations, known as the NESHAPs, will
require the Company to reduce emissions of certain volatile organic compounds by
November 1997.
In order to comply with NESHAPs, the Company intends to reformulate certain
furniture finishes or institute process changes to reduce emissions of volatile
organic compounds. The furniture industry and its suppliers are attempting to
develop water-based and other forms of compliant finishing materials to replace
commonly-used, organic-based finishes which are a major source of regulated
emissions. The Company cannot at this time estimate the impact of these new
standards on the Company's operations and future capital expenditure
requirements, or the cost of compliance. There can be no assurance that
reformulation of finishes or process changes will not adversely affect the
quality or durability of the Company's products. Furthermore, if the Company
cannot satisfy applicable regulatory requirements following reformulation or
process changes, the Company likely will be required to install air pollution
control technology at its facilities.
Superfund imposes strict, joint and several liability upon owners or
operators of facilities at, from, or to which a release of hazardous substances
has occurred, upon parties who generated hazardous substances that were released
or threaten to be released at such facilities, and upon parties who arranged for
the transportation or disposal of hazardous substances to such facilities.
As the result of historical operations, spills and releases of hazardous
substances may have occurred at several of the Company's facilities. These
releases may warrant further investigation, including soil and groundwater
sampling. If hazardous substances are detected in the soil or groundwater, the
Company would be required to incur expenses relating to the investigation and
remediation of these releases. Furthermore, the Company could incur liability as
an owner or operator under CERCLA as the result of these releases of hazardous
substances. The Company does not believe that the costs associated with
investigating or remediating these releases or any
58
<PAGE>
associated Superfund liability will have a material adverse effect on the
Company's financial condition, operating expenses or earnings. Furthermore,
pursuant to the Acquisition Agreement, Masco will indemnify the Company for
liabilities relating to the existence of hazardous substances at certain of the
facilities in excess of specified amounts. See "Certain
Transactions--Acquisition Arrangements."
The Company has been named as a potentially responsible party at a total of
seven Superfund sites. The Company believes that any potential liability
relating to these Superfund sites will not have a material adverse effect on the
Company's earnings, capital expenditures or competitive position.
OTHER GOVERNMENT REGULATIONS
The Company's operations must meet extensive federal, state, and local
regulatory standards in the areas of health and safety. Historically, these
standards have not had any material adverse effect on the Company's sales or
operations.
BACKLOG
The combined backlog of the Company as of December 31, 1995 aggregated
approximately $323.0 million, compared to approximately $302.0 million as of
December 31, 1994. The combined backlog as of June 30, 1996 aggregated
approximately $306.7 million, compared to approximately $301.0 million as of
June 30, 1995. Backlog for the first six months of 1996 increased from the 1995
level primarily as a result of increased order rates on certain product lines
partially offset by Company implemented manufacturing initiatives designed to
improve delivery and reduce cycle times.
59
<PAGE>
MANAGEMENT
The following table identifies each of the executive officers and directors
of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Wayne B. Lyon.................. 63 Chairman of the Board, President and
Chief Executive Officer
Douglas C. Barnard............. 37 Vice President, General Counsel and Secretary
Frank W. Burr.................. 63 Senior Vice President
Ronald J. Hoffman.............. 52 Vice President, Treasurer and Chief Financial Officer
James R. Melton................ 53 Vice President and Controller
Ronnie R. Robbins, Jr.......... 49 Vice President--Taxes
Richard M. Cashin, Jr. ........ 43 Director
C. Sean Day.................... 47 Director
Robert George.................. 49 Director
John A. Morgan................. 65 Director
Donald M. Roberts.............. 61 Director
David F. Thomas................ 46 Director
</TABLE>
MR. LYON is Chairman of the Board, President and Chief Executive Officer of
the Company. Mr. Lyon has been a director of Masco since 1988, and was its
President from 1985 until 1996 and its Chief Operating Officer from 1974 to
1996. Prior to joining Masco in 1972, Mr. Lyon served as Vice
President--Business Development for Illinois Tool Works, Inc. Mr. Lyon is also a
director of Comerica Incorporated, Payless Cashways, Inc. and Emco Limited.
MR. BARNARD is Vice President, General Counsel and Secretary of the Company.
Mr. Barnard was an Associate Corporate Counsel of Masco from 1992 to 1996.
Previously, he was a partner at Kirkland & Ellis in Chicago.
MR. BURR is Senior Vice President of the Company. Mr. Burr was Senior Vice
President of the Home Furnishings Group from 1993 to 1996 and was Vice President
of the Home Furnishings Group from 1992 to 1993. Previously, he served as
Executive Vice President of Thomasville Furniture Industries, Inc.
MR. HOFFMAN is Vice President, Treasurer and Chief Financial Officer of the
Company. Mr. Hoffman was Vice President and Group Controller of the Home
Furnishings Group from 1993 to 1996. Mr. Hoffman joined Masco in 1970, serving
as Staff Accountant until 1976, and as Group Controller until he joined the Home
Furnishings Group in April 1993.
MR. MELTON is Vice President and Corporate Controller of the Company. Mr.
Melton was Vice President--Administration and Group Controller of the Home
Furnishings Group from 1987 to 1996. Mr. Melton joined Masco in 1967. During his
tenure at Masco he held the position of chief financial officer of Electra
Corp., a consumer products electronic company.
MR. ROBBINS is Vice President--Taxes of the Company. Mr. Robbins was Vice
President-- Taxes of the Home Furnishings Group from 1994 to 1996. Previously,
he was Assistant Secretary of Masco Building Products from 1985 to 1994 and Vice
President--Taxes from 1989 to 1994, and Assistant Treasurer and Tax Manager from
1983 to 1989, of N.I. Industries Inc. (a Masco affiliate since 1985).
MR. CASHIN is a director of the Company. Mr. Cashin has been President since
1994, and a Managing Director for more than the past five years, of Citicorp
Venture Capital, Ltd. In addition, he serves as a director of Levitz Furniture
Incorporated and Titan Wheel International Inc.
60
<PAGE>
MR. DAY is a director of the Company. Mr. Day has been President and Chief
Executive Officer of Navios Corporation, a ship owning and operating company,
since 1989. He is also a director of Kirby Corporation.
MR. GEORGE is a director of the Company. Mr. George has been Executive Vice
President and a director of Holdings since 1995 and has been a Managing Partner
of Rosenthal & George, Inc., a management consulting firm, for more than the
past five years.
MR. MORGAN is a director of the Company. Mr. Morgan is a partner of Morgan
Lewis Githens & Ahn, investment bankers. He has been a director of Masco since
1969. In addition, he serves as a director of FlightSafety International Inc.,
MascoTech Inc., McDermott International Inc. and TriMas Corporation. Morgan
Lewis Githens & Ahn acted as advisor to Masco in connection with the
Transactions.
MR. ROBERTS is a director of the Company. Mr. Roberts was Vice Chairman and
Treasurer of the United States Trust Company of New York and its parent, U.S.
Trust Corporation, from February 1990 until his retirement in September 1995.
Prior thereto, Mr. Roberts was Executive Vice President and Treasurer of both
companies from January 1989 to February 1990 and Executive Vice President of
both companies from November 1979 to January 1989. Mr. Roberts is a Director of
Burlington Resources Inc. and York International Corporation.
MR. THOMAS is a director of the Company. Mr. Thomas has been President of
399 Ventures since 1994 and has been a Managing Director of Citicorp Venture
Capital, Ltd. for more than the past five years. Mr. Thomas is a director of
Galey & Lord, Inc.
COMPENSATION OF DIRECTORS
The directors of the Company who are officers, employees or otherwise
affiliates of Holdings or the Company do not presently receive compensation for
their services as directors. Directors of the Company are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the board of directors or
committees thereof. No determination has yet been made with respect to annual
fees or board attendance fees, if any, to be paid to directors of the Company
who are not also officers, employees or otherwise affiliates of Holdings or the
Company.
COMPENSATION OF EXECUTIVE OFFICERS
The Company was formed in May 1996 to consummate the Transactions. The
listed individuals became executive officers of the Company upon consummation of
the Transactions on August 5, 1996, and did not receive any compensation from
the Company or Holdings prior to that date.
OWNERSHIP OF SECURITIES
The Company's authorized capital stock consists of 3,000 shares of common
stock, par value $.01 per share (the "Company Common Stock"), 100 shares of
which are issued and outstanding and owned by Holdings.
Holdings' authorized capital stock consists of 6,000,000 shares of Class A
Common Stock, par value $.01 per share (the "Class A Common Stock") (consisting
of four series, 1,000,000 shares of Series A-1 Common Stock, 1,000,000 shares of
Series A-2 Common Stock, 1,000,000 shares of Series A-3 Common Stock and
3,000,000 shares of Series I Common Stock (which will only be issuable after the
occurrence of a Qualifying Offering, as described below under "--Capitalization
of Holdings")), 6,000,000 shares of Class B Common Stock, par value $.01 per
share (the "Class B Common Stock") (consisting of four series, 1,000,000 shares
of Series B-1 Common Stock, 1,000,000 shares of Series B-2 Common Stock,
1,000,000 shares of Series B-3 Common Stock and 3,000,000 shares of Series II
Common Stock (which will only be issuable after a
61
<PAGE>
Qualifying Offering)), 116,100 shares of Class C Common Stock, par value $.01
per share (the "Class C Common Stock" and, together with the Class A Common
Stock and Class B Common Stock, the "Holdings Common Stock"), 100,000 shares of
Class D Common Stock, par value $.01 per share, a special class designed to
track the performance of Simmons, a subsidiary of Holdings that is not a
subsidiary of the Company (the "Class D Common Stock"), and 4,000,000 shares of
Preferred Stock, par value $.01 per share, of which the following series have
been designated: 1,103,320 shares of Series A-1 Preferred Stock, stated value
$100 per share (the "Series A-1 Preferred Stock"), 96,681 shares of Series A-2
Preferred Stock, stated value $100 per share (the "Series A-2 Preferred Stock"
and, together with the Series A-1 Preferred Stock, the "Senior Preferred
Stock"), 303,503 shares of Series B Convertible Preferred Stock, stated value
$6.02 per share (the "Series B Preferred Stock"), and 102,622 shares of Series C
Convertible Preferred Stock, stated value $6.02 per share (the "Series C
Preferred Stock" and, together with the Series B Preferred Stock, the
"Convertible Preferred Stock"). See "--Capitalization of Holdings." There is no
established public trading market for these securities of Holdings.
The table below sets forth certain information regarding the equity
ownership of Holdings as of August 31, 1996 by (i) each person or entity who
beneficially owns five percent or more of any class of voting capital stock;
(ii) each director of the Company; and (iii) the directors and officers of the
Company, as a group. Each holder of Class A Common Stock and each holder of
Class B Common Stock holds an equal number of shares of each series thereof
(other than Series I or II). As described below in "--Capitalization of
Holdings," certain of the securities of Holdings are convertible into other
securities. Except as noted in the footnotes to the table the information in the
table below assumes no such conversion.
<TABLE><CAPTION>
COMMON STOCK PREFERRED STOCK
------------------------------------------- ---------------------------------------------------
NAME AND ADDRESS CLASS A CLASS B CLASS C CLASS D SERIES A-1 SERIES A-2 SERIES B SERIES C
- -------------------------- ------- ------- ------- ------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
399 Venture Partners, 48,999 233,529 -- 6,158 553,230 13,770 -- 90,572
Inc.(1)................... 49.0% 61.8% 64.8% 50.1% 14.2% 88.3%
399 Park Ave.
New York, NY
Travelers(2).............. 4,905 23,385 -- 1,009 -- -- -- 12,050
388 Greenwich St. 4.9% 6.2% 10.6% 11.7%
New York, NY
Masco Corporation(3)...... 15,000 71,490 -- 1,009 550,090 -- 303,503 --
21001 Van Born Rd. 15.0% 18.9% 10.6% 49.9% 100.0%
Taylor, MI
Wayne B. Lyon(4).......... 32,766 90,561 -- 1,009 550,090 23,085 303,503 --
1300 National Highway 32.8% 23.9% 10.6% 49.9% 23.9% 100.0%
Thomasville, NC
Douglas C. Barnard,....... 31,101 49,374 98,978 -- -- * -- --
as voting trustee for 31.1% 13.1% 100.0%
the Management
Investors(5)
1300 National Highway
Thomasville, NC
Richard M. Cashin, Jr.(6). 48,999 233,529 -- 6,317 553,230 13,770 -- 90,572
399 Venture Partners, Inc. 49.0% 61.8% 66.5% 50.1% 14.2% 88.3%
399 Park Avenue
New York, NY
C. Sean Day............... -- -- -- -- -- -- -- --
Navios Corporation
Stamford Harbour Park
333 Ludlow Street
Stamford, CT
Robert George............. * * * -- -- -- --
1314 Hanley Industrial
Court
St. Louis, MO
John A. Morgan(7)......... 15,000 71,490 -- 1,009 550,090 -- 303,503 --
Morgan Lewis Githens & 15.0% 18.9% 10.6% 49.9% 100.0%
Ahn
767 Fifth Avenue
New York, NY
Donald M. Roberts......... -- -- -- -- -- -- -- --
430 Park Avenue Suite 600
New York, NY
David F. Thomas(6)........ 48,999 233,529 -- 6,317 553,230 13,770 -- 90,572
399 Venture Partners 49.0% 61.8% 66.5% 50.1% 14.2% 88.3%
399 Park Avenue
New York, NY
Directors and executive 95,094 354,393 98,978 7,326 1,103,320 36,855 303,503 90,572
officers................. 95.1% 93.8% 100.0% 77.1% 100.0% 35.1% 100.0% 88.3%
of the Company, as
a group (12 persons)(8)
</TABLE>
(Footnotes on following page)
62
<PAGE>
(Footnotes for preceding page)
- ------------
* less than 1.0%
(1) Amounts shown exclude the shares that could be obtained from Travelers as
described in note (2). In connection with the Transactions, 399 Ventures
granted to Travelers an option exercisable for one year to acquire 55,419
shares of Series A-1 Preferred Stock at a price per share equal to the
stated value plus accrued but unpaid dividends, and to Holdings an option to
acquire 4,842 shares of Class A Common Stock (divided equally among the
series thereof other than Series I) and 5,199 shares of Class B Common Stock
(divided equally among the series thereof other than Series II) in each case
at a price per share of $5.44, and 13,770 shares of Series A-2 Preferred
Stock at a price per share equal to the stated value plus accrued but unpaid
dividends for Holdings' use in the event Holdings establishes an employee
stock incentive program within 9 months after consummation of the
Transactions. 399 Ventures' fully-diluted (assuming conversion of all
Convertible Preferred Stock) ownership of Holdings Common Stock, including
shares subject to the option granted to Holdings, will be 38.0%.
(2) Amounts shown exclude the shares that could be obtained from 399 Ventures as
described in note (1). In connection with the Transactions, Travelers
granted to 399 Ventures an option, exercisable for two years commencing on
the first anniversary of the consummation of the Transactions, in the event
the option described in note (1) is not exercised by Travelers, to acquire
all shares of Class A Common Stock and Class B Common Stock held by
Travelers at a price per share equal to the lesser of fair market value or
$5.44, and all shares of Series C Preferred Stock held by Travelers at a
price per share equal to the lesser of fair market value or the stated value
plus accrued but unpaid dividends. Travelers' fully-diluted (assuming
conversion of all Convertible Preferred Stock) ownership of Holdings Common
Stock, including the shares subject to the option granted to 399 Ventures,
will be 4.1%.
(3) Masco's fully-diluted (assuming conversion of all Convertible Preferred
Stock) ownership of Holdings Common Stock is 39.7%. However, Masco is
restricted from holding more than 19.9% of the Holdings Common Stock.
(4) Includes shares held by Masco, which may be deemed to be beneficially owned
by Mr. Lyon. Mr. Lyon disclaims beneficial ownership of such shares. Mr.
Lyon's fully-diluted (assuming conversion of all Convertible Preferred
Stock) ownership of Holdings Common Stock (excluding shares held by Masco)
is 3.7%.
(5) Consists of shares held by Mr. Barnard as voting trustee for the Management
Investors. See "Certain Transactions-- Management Investors." Mr. Barnard
has no pecuniary interest in such shares other than 203 shares of Class A
Common Stock, 218 shares of Class B Common Stock and 2,000 shares of Class C
Common Stock. In addition, Mr. Barnard holds less than 1.0% of Series A-2
Preferred Stock.
(6) Consists of shares held by 399 Ventures, which may be deemed to be
beneficially owned by Messrs. Cashin and Thomas, and 160 shares each of
Class D Common Stock. Messrs. Cashin and Thomas disclaim beneficial
ownership of such shares (except for such 160 shares each of Class D Common
Stock).
(7) Consists of shares held by Masco, which may be deemed to be beneficially
owned by Mr. Morgan. Mr. Morgan disclaims beneficial interest of such
shares.
(8) Includes shares held by 399 Ventures which may be deemed to be beneficially
owned by Messrs. Cashin and Thomas, shares held by Masco which may be deemed
to be beneficially owned by Messrs. Lyon and Morgan, and shares held by Mr.
Barnard, as voting trustee for the Management Investors. Messrs. Cashin and
Thomas disclaim beneficial ownership of shares held by 399 Ventures, Messrs.
Lyon and Morgan disclaim beneficial ownership of shares held by Masco and
Mr. Barnard disclaims beneficial ownership of shares held by him as voting
trustee for other Management Investors.
CAPITALIZATION OF HOLDINGS
The Company is a wholly-owned subsidiary of Holdings. The assets of Holdings
consist of all the issued and outstanding Company Common Stock, all the issued
and outstanding common stock of Simmons and the Holdings Business. See
"Unaudited Pro Forma Financial Information" and "Certain Transactions--Business
Arrangements with Holdings." The following is a summary description of the
capitalization of Holdings and is subject to and qualified in its entirety by
reference to the Holdings PIK Notes and the Certificate of Incorporation of
Holdings.
Holdings PIK Notes
As part of the Transactions, Holdings issued the Holdings PIK Notes to Masco
in an aggregate principal amount of $285.0 million. The Holdings PIK Notes bear
interest at 12% per annum. Interest is payable semi-annually, and may be paid in
kind until and including the eighth anniversary of the original date of
issuance, except that after the fifth anniversary and until and including the
eighth anniversary of the original date of issuance, current interest will be
payable in cash in an amount up to Holdings' Excess Cash Flow (as defined in the
Holdings PIK Notes), provided such cash payments are then permitted under the
terms of Holdings' and its subsidiaries' other indebtedness.
The Holdings PIK Notes may be redeemed by Holdings at any time at par plus
accrued but unpaid interest. However, the terms of the Senior Bank Facilities
prohibit such redemption, except that Holdings is permitted under the Senior
Bank Facilities to redeem Holdings PIK Notes with up to 60% of the net cash
proceeds from any public offering of Holdings' capital stock. Holdings will be
required, commencing February 5, 2007, or if none of the Notes are then
outstanding, December 15, 2006, to redeem 25% of the principal amount
semi-annually. The final maturity of the Holdings PIK Notes will be August 5,
2008. Upon the occurrence of a change of control as defined in the Holdings
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PIK Notes (a "Holdings Change of Control"), the holders may require Holdings to
repurchase the Holdings PIK Notes, in whole or in part, at a purchase price in
cash equal to par plus accrued but unpaid interest.
The Holdings PIK Notes are subordinated to Holdings' obligations as a
guarantor of the Senior Bank Facilities and any increase, refunding or
refinancing thereof that is secured by substantially all the assets of Holdings,
and rank pari passu with or senior to all unsecured indebtedness of Holdings.
The Holdings PIK Notes contain covenants and events of default typical of
instruments of their type.
Subject to the limitations on transfer described below, holders of the
Holdings PIK Notes have the right to require Holdings either to register the
Holdings PIK Notes for sale under the Securities Act and to keep such
registration effective for up to 90 days or, alternatively, to exchange the
Holdings PIK Notes for registered notes of like tenor.
The terms of the Holdings PIK Notes limit the ability of Masco to transfer
such notes until the earlier of (i) the consummation of an underwritten public
equity offering by Holdings that raises at least $100.0 million in net proceeds
and results in at least 25% of Holdings' common equity being sold to the public
(a "Qualifying Offering") and (ii) August 5, 1998, subject in each case to
Holdings' satisfaction of certain financial tests.
Preferred Stock
Holdings is authorized to issue 4,000,000 shares of Preferred Stock, par
value $.01 per share, of which 1,103,320 shares designated as Series A-1
Preferred Stock, 96,681 shares designated as Series A-2 Preferred Stock, 303,503
shares designated as Series B Preferred Stock and 102,622 shares designated as
Series C Preferred Stock are issued and outstanding.
____Senior Preferred Stock. Shares of Series A-1 Preferred Stock have a stated
value of $100 and are entitled to quarterly dividends, which are cumulative and
accrue at a rate per annum of 13%, compounding. Shares of Series A-2 Preferred
Stock have a stated value of $100 and are entitled to quarterly dividends, which
are cumulative and accrue at a rate per annum of 13.5%, compounding. The vote of
67% of the shares of the Senior Preferred Stock, voting as a separate class, is
required to (i) authorize or issue any class of preferred stock of Holdings that
ranks senior to or pari passu with the Senior Preferred Stock with respect to
dividends or upon liquidation or (ii) amend Holdings' Certificate of
Incorporation or By-Laws if such amendment would adversely affect the powers,
rights and privileges of the holders of the Senior Preferred Stock. Except as
described in the foregoing and as otherwise required by law, the Senior
Preferred Stock is not entitled to vote. The Series A-1 Preferred Stock and
Series A-2 Preferred Stock rank pari passu with each other with respect to
dividends and upon liquidation, dissolution and winding up. In the event of the
liquidation, dissolution or winding up of Holdings, the Senior Preferred Stock
will have a preference over all other classes of Holdings' capital stock, except
the Class D Common Stock, in an amount equal to the stated value plus accrued
but unpaid dividends. The Senior Preferred Stock is subject to mandatory
redemption upon the earlier of (i) a Holdings Change of Control or (ii) February
5, 2009. At the option of Holdings in certain circumstances, Senior Preferred
Stock may be exchanged for junior subordinated debentures of Holdings (the
"Holdings Debentures"), at an exchange rate of $1.00 in principal amount of
Holdings Debentures for each $1.00 in stated value of Senior Preferred Stock,
plus an additional principal amount equal to the dollar amount of any accrued
and unpaid dividends. Holdings Debentures, if issued, will bear interest at a
rate per annum of 13%, which interest will be paid in kind semi-annually in lieu
of cash until and including August 5, 2004, and may be paid in kind or in cash,
subject to certain limitations, thereafter. The Holdings Debentures will mature
on February 5, 2009. The Holdings Debentures will be subordinated in right of
payment to the Holdings PIK Notes.
____Convertible Preferred Stock. Shares of Convertible Preferred Stock have a
stated value of $6.02. The Series B Preferred Stock and the Series C Preferred
Stock rank pari passu with each
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other with respect to dividends and upon liquidation, dissolution and winding
up. Such shares have no preferential dividend rights but are entitled to
dividends paid on Holdings Common Stock on an as-if-converted basis. In the
event of the liquidation, dissolution or winding up of Holdings, the Convertible
Preferred Stock will be subject to the liquidation preference of the Senior
Preferred Stock and will have a preference over the Holdings Common Stock in an
amount equal to the stated value per share. Except as required by law, the
Convertible Preferred Stock is not entitled to vote. In certain circumstances,
subject to adjustments in the event of stock splits and the like, the Series B
Preferred Stock is convertible at the option of the holders thereof into shares
of Class A Common Stock on a share-for-share basis. Subject to adjustments in
the event of stock splits and the like, the Series C Preferred Stock is
convertible at the option of the holders thereof into shares of Class A Common
Stock or Class B Common Stock on a share-for-share basis. On the date of
consummation of a sale of all or substantially all of the assets or business or
capital stock of Holdings (a "Sale Transaction"), each share of Convertible
Preferred Stock will be automatically converted, on a share-for-share basis,
into fully paid and nonassessable shares of Class B Common Stock or, if the
holders elect, into fully paid and nonassessable shares of Class A Common Stock.
Common Stock
There are four classes of common stock of Holdings. Class A Common Stock and
Class B Common Stock are each divided into four series. One series of each of
the Class A Common Stock and the Class B Common Stock will be issuable only
after the occurrence of a Qualifying Offering, as described under "Conversion"
below. Except as described below with respect to voting and conversion rights,
the shares of Class A Common Stock, Class B Common Stock and Class C Common
Stock are identical in all respects. The Class D Common Stock is a special class
of non-voting common stock designed to track the performance of Simmons, a
subsidiary of Holdings that is not a subsidiary of the Company.
____Voting. Holders of Series A-1 Common Stock are entitled to elect two members
of Holdings' seven member Board of Directors (the "Holdings Board"), holders of
Series A-2 Common Stock are entitled to elect one member of the Holdings Board,
holders of Series A-3 Common Stock are entitled to elect two members of the
Holdings Board and holders of Class C Common Stock are entitled to elect two
members of the Holdings Board. Holdings' Certificate of Incorporation provides
for weighted voting by the directors such that each director elected by the
Series A-1 Common Stock has a weighted vote of 24.5%, each director elected by
the Series A-2 Common Stock has a weighted vote of 15%, each director elected by
the Series A-3 Common Stock has a weighted vote of 7.5%, and each director
elected by the Class C Common Stock has a weighted vote of 10.5%. Such weighted
voting will shift in certain circumstances and supermajority votes will be
required in certain instances. See "--Holdings Stockholders Agreement." In
addition, Holdings' Certificate of Incorporation provides for the automatic
conversion of Holdings Common Stock into single series of voting and non-voting
common stock. See "--Conversion." Except as otherwise required by law, Class B
Common Stock is non-voting. On all matters other than the election of directors,
Class A Common Stock and Class C Common Stock vote together as a single class.
____Conversion. Under certain circumstances, each share of any series of Class A
Common Stock is convertible into one share of the corresponding series of Class
B Common Stock and each share of any series of Class B Common Stock is
convertible into one share of the corresponding series of Class A Common Stock.
All series of Class A Common Stock and the Class C Common Stock will
automatically convert into Series I Common Stock, a single series of voting
common stock, and all series of Class B Common Stock will automatically convert
into Series II Common Stock, a single series of non-voting common stock in the
event of a Sale Transaction or upon consummation of a Qualifying Offering.
HOLDINGS STOCKHOLDERS AGREEMENT
As part of the Transactions, Holdings entered into an agreement (the
"Holdings Stockholders Agreement") with Masco, the Institutional Investors and
the Management Investors. The following is
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a summary description of the principal terms of the Holdings Stockholders
Agreement. The term "Masco Stockholders" refers to Masco and certain of its
permitted transferees under the terms of the Holdings Stockholders Agreement.
Board of Directors. The Holdings Board is comprised of seven members. The
Holdings Stockholders Agreement provides that two directors are to be designated
and elected by a majority of the holders of the Class C Common Stock (each, a
"Management Director"); two directors are to be designated by the Institutional
Investors and elected by the holders of the Series A-1 Common Stock (each, an
"Institutional Director"); one director is to be designated by the Masco
Stockholders and elected by the holders of the Series A-2 Common Stock (the
"Masco Director"); and two disinterested directors are to be designated by
Holdings' Nominating Committee (described below) and elected by the holders of
the Series A-3 Common Stock (each, a "Disinterested Director"). The Nominating
Committee is to be comprised of one Management Director, one Institutional
Director and one Disinterested Director. In the event the Institutional
Investors determine it is permitted by law, they may cause the removal of any or
all of the Disinterested Directors and thereafter designate his or her
replacement(s). Holdings' Certificate of Incorporation and By-Laws provide for
weighted voting by the Holdings Board on all matters as described above in
"Capitalization of Holdings--Common Stock." In the event there are more than 50
stockholders of Holdings, the Institutional Investors will be entitled to reduce
the weighted vote allocated to the Institutional Directors to 9.5% each, with a
corresponding increase in the votes of the Disinterested Directors to 22.5%
each. If the Masco Stockholders or the Institutional Investors, as the case may
be, either elect not to, or no longer have the right to, designate directors,
the Nominating Committee will designate the Masco Director and the Institutional
Directors, as the case may be. The right of the Institutional Investors to
designate directors will terminate if the Institutional Investors no longer hold
any Senior Preferred Stock and hold less than 10% of Holdings Common Stock (on a
fully-diluted basis). The right of the Masco Stockholders to designate a
director will terminate if the Masco Stockholders no longer hold any Holdings
PIK Notes, no longer hold any Senior Preferred Stock and hold less than 5% of
Holdings Common Stock (on a fully-diluted basis).
Certain actions by Holdings and its subsidiaries require the approval of a
majority of weighted votes of the Holdings Board, including a majority of the
weighted votes of the Institutional Directors. These actions include significant
business combinations, significant asset dispositions, modification of Holdings'
Certificate of Incorporation or By-Laws, certain acquisitions, increases and
decreases in capital, incurring or guaranteeing certain indebtedness,
dissolution, liquidation and bankruptcy, changes in the compensation of senior
management and certain transactions involving stockholders or their affiliates.
Certain actions require the approval of a majority of the weighted votes of the
Holdings Board, including the affirmative vote of the Masco Director. These
actions include certain amendments to Holdings' Certificate of Incorporation or
By-Laws, certain transactions involving stockholders or other affiliates,
certain amendments to the Senior Bank Facilities or the Holdings PIK Notes, the
entry of Holdings or any of its subsidiaries into certain agreements that
contain certain covenants that are more restrictive than similar covenants in
the Credit Agreement (as defined) and the Indenture, and certain transactions
between Holdings and Simmons.
The Holdings Stockholders Agreement provides each of the Masco Stockholders
and the Institutional Investors with the option to designate a director of the
Company and each of its significant subsidiaries. The balance of the directors
of the boards of directors of the Company and its subsidiaries is to be
determined by the Holdings Board.
Rights Offering. The Holdings Stockholders Agreement provides the parties to
that agreement with the right to participate ratably, in accordance with their
fully-diluted common equity ownership (excluding Class D Common Stock), in all
additional offerings of Holdings Common Stock or of securities exercisable,
convertible or exchangeable for or into Holdings Common Stock ("Equity
Equivalents") (other than the issuance of Holdings Common Stock or Equity
Equivalents to
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Management Investors, in a public offering, to a financial institution in
connection with the extension of credit, in connection with acquisitions or upon
the conversion of other securities of Holdings).
Right of First Offer. If Masco makes a good faith determination that there
is a strong likelihood that it will be unable to continue its chosen accounting
treatment to be applied to the Acquisition as a result of its (and/or any Masco
Stockholders') ownership of Holdings Common Stock or Equity Equivalents and is
unable to restructure its ownership of such securities in a manner which
continues such accounting treatment and is not materially adverse to Masco, the
Masco Stockholders shall first offer such Holdings Common Stock or Equity
Equivalents to Holdings and subject to a priority in favor of Holdings, the
Institutional Investors. If such offers are not accepted in full within a total
period of 20 days, the Masco Stockholders may sell such securities to a third
party on terms which are either substantially similar to those offered to
Holdings and the Institutional Investors or are more favorable to the Masco
Stockholders.
Right of First Refusal. Shares of Holdings Common Stock and Equity
Equivalents held by a Masco Stockholder or a Management Investor are subject to
a right of first refusal in favor of Holdings and subject to a priority in favor
of Holdings, in the case of a Masco Stockholder, the Institutional Investors,
and in the case of a Management Investor, the Masco Stockholders and the
Institutional Investors (together on a pro-rata basis based on their
fully-diluted common equity ownership (excluding Class D Common Stock)).
Tag-Along and Drag-Along Rights. If the Institutional Investors propose to
transfer Holdings Common Stock or Equity Equivalents representing more than 10%
of the Holdings Common Stock (on a fully-diluted basis), other than in a
registered public offering or other permitted transaction, or an amount of
Holdings Common Stock or Equity Equivalents that would result in a Holdings
Change of Control, the other stockholders, under certain circumstances, have the
option to sell to the same offeree pursuant to Tag-Along Rights their Holdings
Common Stock or Equity Equivalents on the same terms and on a pro rata basis.
Tag-Along Rights also apply to sales of Class D Common Stock by Institutional
Investors and to sales of Senior Preferred Stock by Institutional Investors,
Masco Stockholders and Management Investors. If the Institutional Investors
propose to sell or otherwise transfer for value to an unaffiliated third party
all of their Holdings Common Stock, Equity Equivalents and Senior Preferred
Stock, the Institutional Investors have the right under certain circumstance to
require the other stockholders to sell or transfer all of their Holdings Common
Stock, Equity Equivalents and Senior Preferred Stock to such party on the same
terms. If the Institutional Investors propose the sale or other transfer for
value of all or substantially all of the assets or business of Holdings to a
third party, the Institutional Investors have the right under certain
circumstances to require the other stockholders to approve such transaction in
their capacity as stockholders of Holdings.
Management Repurchase. All shares of Holdings Common Stock and Senior
Preferred Stock held by a Management Investor are subject to repurchase by
Holdings for a specified period of time following the termination of employment
of such Management Investor for any reason. The Institutional Investors and the
Masco Stockholders have the right for a specified period to purchase, on a
pro-rata basis, such stock not so purchased by Holdings.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a registration rights agreement, the Institutional Investors are
entitled to require Holdings to effect an initial public offering of Holdings
Common Stock underwritten on a firmly committed basis. The Institutional
Investors (as a group) and the Masco Stockholders (as a group) are each entitled
to three long-form registrations and unlimited short-form registrations on
demand, in each case at the expense of Holdings (other than underwriting
commissions and discounts). The Institutional Investors, the Masco Stockholders
and the Management Investors are entitled to include, at the expense of
Holdings, their shares of Holdings Common Stock in any primary registration by
Holdings or any secondary registration on behalf of other stockholders on a
pro-rata basis, subject to customary underwriter's cutback rights.
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CERTAIN TRANSACTIONS
BUSINESS ARRANGEMENTS WITH HOLDINGS
As part of the Transactions, (i) Holdings acquired from Masco the Holdings
Business by the merger of Lineage and MHF into Holdings, (ii) Holdings
contributed the Specified Assets, consisting primarily of inventory, machinery
and equipment, office furniture and receivables to the Company and (iii) the
Company and Holdings entered into leases providing for the rent of certain of
the Specified Assets to Holdings at rates the Company believes to be comparable
to rates that would be negotiated by unrelated parties in arm's length
transactions. Lineage was established by Masco in 1991 as a marketing division
to provide a restricted distribution furniture product line. A key element of
the Lineage concept was to utilize existing but under-utilized facilities. Thus,
Holdings' production needs (as successor to Lineage) will be performed by the
Company, and the Company will be reimbursed by Holdings for such services at
rates the Company believes to be comparable to rates that would be negotiated by
unrelated parties in arm's length transactions. MHF is a distributor of
furniture, accessories and fabrics to the contract industry. Approximately 80%
of its 1995 sales ($35.7 million) were of products manufactured by the Home
Furnishings Group. Holdings (as successor to MHF) will purchase products from
the Company, at prices comparable to those charged by the Company to similarly
situated unrelated third parties.
As part of the Transactions, Holdings and the Company entered into the
Holdings Management Agreement pursuant to which Holdings will provide to the
Company executive management, corporate support, administrative, data
processing, human resources, legal, environmental, audit, treasury, tax and
other management-related services. The Company will compensate Holdings pursuant
to such agreement in an amount equal to Holdings' actual cost of providing such
services. The Company estimates that its annual corporate general and
administrative expenses (which will be provided under and paid for pursuant to
the Holdings Management Agreement) on a pro forma basis for 1995 (giving effect
to the Transactions as if they had occurred on January 1, 1995), would have been
$15.8 million. As part of the Transactions, Holdings entered into the Transition
Services Agreement with Masco, pursuant to which Masco will provide certain
services for Holdings and the Company. As a result, certain services to be
provided to the Company under the Holdings Management Agreement will be provided
by Masco. See "--Transition Services Agreement."
ACQUISITION ARRANGEMENTS
As part of the Transactions, Masco received the cash consideration, Masco
Holdings Stock and the Holdings PIK Notes described in "Summary--The
Transactions." In addition, approximately $705.3 million of indebtedness owed by
the Home Furnishings Group to Masco was repaid.
Certain provisions of the Acquisition Agreement survive the consummation of
the Acquisition and continue for a period as contractual obligations between
Masco and Holdings. The following summarizes the principal such provisions of
the Acquisition Agreement.
Masco has made various representations, warranties and covenants respecting
the Home Furnishings Group, and the Acquisition Agreement provides for
indemnification by Masco for periods of one to three years in the event of any
breach of such representations, warranties or covenants. With certain
exceptions, Masco will not be obligated to make payments for the first $15.0
million of indemnifiable claims nor be obligated to make payments of more than
$100.0 million. The Acquisition Agreement provides that Masco has the exclusive
right to undertake certain activities relating to environmental matters
pertaining to the Company for which Masco may be responsible under the
indemnification provisions with the prior written consent of Holdings, such
consent not to be unreasonably withheld. Holdings will cooperate with Masco
regarding these activities and, with certain exceptions, reimburse Masco for
reasonable costs and expenses until Holdings has incurred damages in specified
amounts.
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Masco has agreed to guarantee or provide up to $15.0 million in stand-by
letters of credit or comparable credit enhancement arrangements (collectively,
"Guaranteed LCs") in support of any obligation as to which the Company or a
subsidiary is a primary obligor or an account party. This obligation will
continue until the earlier of (i) the date on which the Holdings PIK Notes
become due and payable and (ii) any business day if on each business day of the
preceding 18 month period the aggregate amount of unused availability for
borrowings under credit lines available to the Company and its subsidiaries
equaled at least $75.0 million. The Company or a subsidiary will remain
primarily responsible for such obligations and Holdings will indemnify Masco (by
providing a promissory note having the same terms as the Holdings PIK Notes) for
any damages resulting from any breach of the Company's or such subsidiary's
obligations under such Guaranteed LCs.
Masco has agreed to not (i) on or prior to August 5, 2001 engage in the
design or manufacture of certain furniture and fabric products (the "Restricted
Activities") or acquire an interest in an entity that would result in Masco
having annual revenues from Restricted Activities that exceed certain levels or
(ii) on or prior to August 5, 1998 (a) cause or attempt to cause any customer or
supplier of the Company or its subsidiaries to terminate or materially reduce
its business with the Company or its subsidiaries or (b) initiate contact (other
than through general solicitation to the public) with any officer of the Company
or its subsidiaries for the purpose of offering employment by Masco or any of
its subsidiaries.
MANAGEMENT INVESTORS
As part of the Transactions, Masco acquired the Masco Holdings Stock, and
sold to the Management Investors, 15,993 shares of Class B Common Stock (divided
equally among the series thereof other than Series II) at a price per share of
$5.44, and 21,930 shares of Series A-2 Preferred Stock at a price per share of
$100. In addition, Wayne B. Lyon, Chief Executive Officer, President and
Chairman of the Board of Holdings, acquired from Holdings 21,180 shares of Class
A Common Stock (divided equally among the series thereof other than Series I) at
a price per share of $5.44, 9,645 shares of Class A Common Stock (divided
equally among the series thereof other than Series I) for no cash consideration,
22,734 shares of Class B Common Stock (divided equally among the series thereof
other than Series II) at a price per share of $5.44, 10,356 shares of Class B
Common Stock (divided equally among the series thereof other than Series II) for
no cash consideration, and 60,212 shares of Series A-2 Preferred Stock at a
price per share of $100. Mr. Lyon sold to the other Management Investors 13,059
shares of Class A Common Stock (divided equally among the series thereof other
than Series I) at a price per share of $5.44, 14,019 shares of Class B Common
Stock (divided equally among the series thereof other than Series II) at a price
per share of $5.44, and 37,127 shares of Series A-2 Preferred Stock at a price
per share of $100 per share. The Management Investors received from Holdings for
no cash consideration an aggregate of 98,978 shares of Class C Common Stock. As
a result, Mr. Lyon holds 3.7% of the Holdings Common Stock, and all Management
Investors (including Mr. Lyon) hold 18.3%, in each case on a fully-diluted basis
assuming the conversion of all Convertible Preferred Stock. The Management
Investors deposited their shares (other than Series A-2 Preferred Stock) into a
voting trust, the trustees of which must be senior members of management. The
initial voting trustee is Douglas C. Barnard, Vice President, General Counsel
and Secretary of Holdings and the Company.
An aggregate of 17,122 authorized but unissued shares of Class C Common
Stock is reserved by Holdings for issuance to future members of management. In
addition, if, prior to May 5, 1997, Holdings establishes an employee stock
incentive plan, Holdings has the option to purchase from 399 Ventures 4,842
shares of Class A Common Stock (divided equally among the series thereof other
than Series I) and 5,199 shares of Class B Common Stock (divided equally among
the series thereof other than Series II), in each case for a purchase price of
$5.44 per share, and 13,770 shares of Series A-2 Preferred Stock at a price per
share equal to $100 plus accrued but unpaid
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dividends. Giving effect to the foregoing, the Management Investors'
fully-diluted ownership of Holdings Common Stock would be 20.7%.
TRANSITION SERVICES AGREEMENT
As part of the Transactions, Holdings and Masco entered into the Transition
Services Agreement under which until April 30, 1997 Masco will perform certain
services for the Company similar to those provided by Masco to the Home
Furnishings Group prior to the Acquisition (other than legal and litigation
support services). Holdings will make monthly payments to Masco of $500,000, as
reduced to take into account certain current Masco personnel and other personnel
or third parties that are employed or retained by Holdings, the Company or any
of their subsidiaries after the Acquisition. If requested by Holdings, Masco and
Holdings will negotiate in good faith regarding the provision of such
transitional services after April 30, 1997; provided, however, that the fees for
any services provided by Masco after April 30, 1997 shall be based on Masco's
costs (including overhead and other allocated costs). The Transition Services
Agreement provides Masco with customary exculpation, indemnification and other
provisions.
TAX SHARING AGREEMENT
Holdings, the Company and its United States subsidiaries will be included in
the consolidated United States federal income tax return of Holdings. Holdings,
the Company, Simmons and certain of the Company's United States subsidiaries
have entered into the Tax Sharing Agreement whereby the Company will pay
Holdings (or Holdings will pay the Company) its pro rata share of the total tax
liability, as set out in the Tax Sharing Agreement. In the event the Company is
included in a joint, combined, consolidated or unitary state or local income or
franchise tax return with Holdings, the Company shall make payments to Holdings,
and Holdings shall make payments to the Company, in a manner consistent with
that described above for federal tax purposes.
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DESCRIPTION OF SENIOR BANK FACILITIES
As part of the Transactions, the Company and certain of the Guarantor
Subsidiaries (collectively, the "Borrowers") and Holdings entered into a credit
agreement (the "Credit Agreement") with The Chase Manhattan Bank, as
administrative agent and collateral agent (the "Agent"), Chase Manhattan Bank
Delaware as issuing bank and the lenders named therein (the "Lenders") that
provides for term loans of $300.0 million and a revolving credit facility of
$150.0 million. Chase Securities Inc. acted as advisor and arranger in
connection with the Senior Bank Facilities (the "Arranger").
Structure. Loans under the Credit Agreement consist of (i) a term loan (the
"Tranche A Term Loan") in the amount of $125.0 million; (ii) a second term loan
(the "Tranche B Term Loan," and together with the Tranche A Term Loan, the "Term
Loans") in the amount of $175.0 million and (iii) a revolving credit facility
(the "Revolving Credit Facility," and together with the Term Loans, the "Senior
Bank Facilities") in the amount of $150.0 million (of which $50.0 million will
be available for letters of credit). The Company used the Term Loans and $25.0
million of the Revolving Credit Facility to provide funding necessary to
consummate the Transactions, with the remainder of the Revolving Credit Facility
being available for general corporate purposes in the ordinary course of the
Company's business.
Security, Guaranty. The obligations of the Borrowers under the Credit
Agreement are unconditionally guaranteed, jointly and severally, by Holdings and
by each existing domestic subsidiary of the Company that is not a direct
Borrower (other than the Receivables Subsidiary, the Master Servicer and certain
subsidiaries with substantially no assets or operations). In addition, the
Senior Bank Facilities and the guarantees thereunder are secured by
substantially all the assets of the Borrowers and the guarantors (collectively,
the "Collateral"), including but not limited to (i) a first priority pledge of
all the capital stock of the Company and of each subsidiary (other than the
Receivables Subsidiary) of the Company (which pledge, in the case of foreign
subsidiaries, will be limited to 65% of the capital stock of each first-tier
foreign subsidiary) and (ii) perfected first priority security interests in, and
mortgages on, substantially all tangible and intangible assets of the Borrowers
and the guarantors (including but not limited to accounts receivable (other than
those sold in connection with the Receivables Facility), inventory, equipment,
intellectual property, general intangibles, owned real property, cash and
proceeds of the foregoing), in each case subject to certain limited exceptions.
Amortization, Interest. The Tranche A Term Loan is repayable in quarterly
principal payments over six years and bears interest at a rate per annum equal
(at the Borrowers' option) to: (i) an adjusted London inter-bank offered rate
("Adjusted LIBOR") plus 2.5% or (ii) an Alternate Base Rate (equal to the
highest of the Agent's prime rate, a certificate of deposit rate plus 1% and the
Federal Funds effective rate plus 1/2 of 1%) plus 1.5%, in each case subject to
certain reductions based on financial performance. The Tranche B Term Loan is
repayable in quarterly principal payments over eight years and bears interest at
a rate per annum equal (at the Borrowers' option) to: (i) Adjusted LIBOR plus
3.0% or (ii) the Alternate Base Rate plus 2.0%. The Revolving Credit Facility is
a six-year facility and bears interest at a rate per annum equal (at the
Borrowers' option) to: (i) Adjusted LIBOR plus 2.5% or (ii) the Alternate Base
Rate plus 1.5%, in each case subject to certain reductions based on the
Company's financial performance. Amounts relating to principal under the Senior
Bank Facilities not paid when due bear interest at a default rate equal to 2.0%
above the otherwise applicable rate.
Prepayments. The Senior Bank Facilities permit the Borrowers to prepay loans
and to permanently reduce revolving credit commitments, in whole or in part, at
any time. In addition, the Borrowers are required to make mandatory prepayments
of Term Loans, subject to certain exceptions, in amounts equal to (i) 75% of
excess cash flow (as such term is defined in the Credit
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Agreement) (subject to a reduction to 50% based upon financial performance and
the Borrowers having repaid a certain amount of the Term Loans); (ii) 100% of
the net proceeds of certain dispositions of assets or issuances of debt or
equity of the Company or any of its subsidiaries and (iii) 40% of the net
proceeds of equity issuances of Holdings. Mandatory and optional prepayments of
the Term Loans will be allocated pro rata between the Tranche A Term Loan and
the Tranche B Term Loan and applied pro rata against the remaining scheduled
amortization payments of such Term Loans, except that, so long as the Tranche A
Term Loan is outstanding, any Lender participating in the Tranche B Term Loan
will have the right to refuse mandatory prepayments, in which case such
prepayments will be applied to the Tranche A Term Loan. Any prepayment of LIBOR
loans other than at the end of an interest period is subject to reimbursement of
breakage costs.
Fees. The Borrowers are required to pay the Lenders under the Revolving
Credit Facility, on a quarterly basis, a commitment fee equal to 1/2 of 1% per
annum on the undrawn portion of the Revolving Credit Facility. The Borrowers are
also required to pay (i) a per annum letter of credit fee on the aggregate
undrawn amount of outstanding letters of credit equal to the interest rate
spread over Adjusted LIBOR applicable to loans under the Revolving Credit
Facility from time to time; (ii) a fronting bank fee for the letter of credit
issuing bank; (iii) annual administration fees and (iv) agent, arrangement and
other similar fees.
Covenants. The Senior Bank Facilities contain a number of covenants that,
among other things, restrict the ability of Holdings or the Company and its
subsidiaries to dispose of assets, incur additional indebtedness, incur
guarantee obligations, prepay other indebtedness or amend certain other debt
instruments, pay dividends, create liens on assets, enter into sale and
leaseback transactions, make investments, loans or advances, make acquisitions,
engage in mergers or consolidations, change the business conducted by Holdings
or the Company or its subsidiaries, make capital expenditures, or engage in
certain transactions with affiliates and otherwise restrict certain corporate
activities. In addition, under the Senior Bank Facilities the Company is
required to comply with specified financial ratios and tests, including minimum
interest coverage ratios, maximum leverage ratios, annual capital expenditures
limitations and net worth tests.
The Senior Bank Facilities also contain provisions that prohibit any
modification of the Indenture in any manner adverse to the Lenders and that
limit the Company's ability to refinance the Notes without the consent of such
Lenders.
Events of Default. The Senior Bank Facilities contain customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, cross-defaults and cross-acceleration to certain other
indebtedness, certain events of bankruptcy and insolvency, ERISA, judgment
defaults, actual or asserted invalidity of any security interest and change of
control.
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DESCRIPTION OF RECEIVABLES FACILITY
As part of the Transactions, the Company established the Receivables
Facility, with Chase Securities Inc. as arranger, pursuant to which The Chase
Manhattan Bank ("Chase"), and if Chase elects at any time, a syndicate of banks
and other financial institutions (together with Chase, the "Participants")
agreed to purchase up to $175.0 million in investor certificates (the "Investor
Certificates") representing fractional undivided interests in the Receivables
(defined below) held by the Master Trust (defined below).
In connection with the establishment of the Receivables Facility, the
Company formed and capitalized the Receivables Subsidiary, a wholly owned,
bankruptcy-remote subsidiary. The Receivables Subsidiary purchases, on a
revolving basis, all trade receivables and related property (collectively, the
"Receivables") generated by Holdings and certain of the Company's subsidiaries
(in such capacity, the "Sellers"). The Receivables Subsidiary purchases, at a
discount from face, the Receivables from the Sellers pursuant to a receivables
sale agreement (the "Receivables Sale Agreement"). Such discounting reflects
historical losses, interest costs, servicing fees and other ongoing expenses
associated with the Receivables. Pursuant to a pooling agreement (the "Pooling
Agreement"), the Receivables Subsidiary established a master trust (the "Master
Trust") to which it transfered and assigned all its rights in the Receivables in
exchange for (i) an exchangeable investor certificate (the "Exchangeable
Certificate"), which represents the entire undivided interest in the Receivables
not represented by other outstanding investor certificates; (ii) a subordinated
investor certificate (the "Subordinated Certificate"), which represents credit
enhancement for the Investor Certificates purchased by the Participants and
(iii) the proceeds from the sale of Investor Certificates to the Participants.
The Receivables Subsidiary financed its initial purchase of Receivables from
the Sellers with a combination of cash proceeds from the sale of Investor
Certificates to Participants, an initial capital contribution by the Company and
a subordinated unsecured note issued to the Sellers in payment of the
Receivables. Ongoing purchases of Receivables by the Receivables Subsidiary will
be financed with a combination of collections in respect of the Receivables,
proceeds from new purchases of Investor Certificates made by the Participants,
an increase in the amount of the subordinated unsecured note issued to the
Sellers in payment of the Receivables, further capital contributions by the
Company and (to a limited extent) through offsets against certain repurchase
obligations of the Sellers to the Receivables Subsidiary.
The purchase by the Participants of Investor Certificates under the
Receivables Facility was made with limited recourse and at an interest cost to
the Receivables Subsidiary equal to, at the Receivables Subsidiary's election,
Adjusted LIBOR plus 1.00% per annum or the Alternate Base Rate. The
Participants' interest in Receivables of up to $175.0 million is an undivided
senior interest in all Receivables held by the Master Trust. If at any point in
time the Sellers generate insufficient Receivables, the character of the
Receivables held by the Master Trust do not satisfy customary eligibility
criteria (such as no bankruptcy, no delinquency and no excessive concentration
levels) or the Company elects to reduce the size of the Receivables Facility,
the investment of the Participants may be less than $175.0 million. The
investment of the Participants at August 5, 1996 was $155.0 million.
The Receivables Subsidiary has retained a pari passu interest (represented
by the Exchangeable Certificate) and a subordinated interest (represented by the
Subordinated Certificate) in the Receivables, both of which will vary in amount
from time to time. The Receivables Subsidiary will generally apply any
distributions it receives in respect of the Exchangeable Certificate or
Subordinated Certificate in the following priority: first, to purchase
Receivables from the Sellers; second, to make payments in respect of any
unsecured subordinated notes issued to any Seller and third, to pay dividends to
the Company.
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The Receivables Sale Agreement contains certain restrictions on the Sellers
customary for facilities of this type, including, but not limited to,
limitations on liens on the Receivables, limitations on modifications of the
terms of the Receivables, limitations on changes from historical credit and
collection practices and limitations on changes in payment instructions. The
Sellers continue to service the receivables (including all billing and
collection activities) and receive a customary servicing fee from the Master
Trust for providing such services. A subsidiary of the Company acts as a master
servicer, overseeing the servicing activities of the Sellers.
The Pooling Agreement contains certain restrictions on the Receivables
Subsidiary customary for facilities of this type, including, but not limited to,
limitations on liens on the Receivables, limitations on indebtedness (including
guarantee obligations), limitations on changes from historical credit and
collection practices and limitations on fundamental changes. The Pooling
Agreement also contains certain conditions precedent customary for facilities of
this type.
The Participants' commitments under the Receivables Facility will terminate
on the earlier of (i) January 1, 2002 and (ii) the occurrence of certain early
amortization events, including but not limited to nonpayment by the Sellers or
the Receivables Subsidiary of amounts when due, violation of covenants by the
Sellers or the Receivables Subsidiary, incorrectness of the representations and
warranties of the Sellers or the Receivables Subsidiary, cross-default and
cross-acceleration (including under the Senior Bank Facilities), a material
insolvency event with respect to the Sellers or the Receivables Subsidiary,
material judgments against the Sellers or the Receivables Subsidiary and
invalidity of any transaction documents relating to the Receivables Facility.
The Company anticipates that the Receivables Facility will be replaced by a
similar facility under which the Master Trust will issue asset-backed investor
certificates (which may have additional or re-sized classes as compared with the
Investor Certificates purchased by the Participants) in one or more
transactions. If the Receivables Facility has not been replaced 180 days after
the date of initial purchase of Investor Certificates by the Participants, the
interest rate on the Receivables Facility will increase by 1.5%, or if less, to
the rate equal to the then applicable rate on the Revolving Facility.
The Receivables Facility requires a commitment fee of 1/2 of 1% per annum on
the Facility Amount minus the amount of Investor Certificates held by the
Participants for Investor Certificates (net of any amounts that have been paid
to the Participants out of collections).
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DESCRIPTION OF NOTES
GENERAL
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes will have been registered under the
Securities Act and thus will not bear restrictive legends restricting their
transfer pursuant to the Securities Act and (ii) holders of New Notes will not
be entitled to certain rights of holders of the Old Notes under the Registration
Rights Agreement which will terminate upon the consummation of the Exchange
Offer. The Old Notes have been, and the New Notes are to be, issued under an
Indenture, dated as of August 5, 1996 (the "Indenture"), among the Company, the
Guarantor Subsidiaries and IBJ Schroder Bank & Trust Company, as Trustee (the
"Trustee").
The following summary of certain provisions of the Indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended ("TIA"). Capitalized terms used herein
and not otherwise defined have the meanings set forth in the section "Certain
Definitions."
Principal of, premium, if any, and interest on the Notes is payable, and the
Notes may be exchanged or transferred, at the office or agency of the Company in
the Borough of Manhattan, The City of New York (which initially shall be the
corporate trust office of the Trustee, at One State Street, New York, New York
10004), except that, at the option of the Company, payment of interest may be
made by check mailed to the registered holders of the Notes at their registered
addresses.
The Notes may be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $200.0 million aggregate principal amount, and will mature on August
1, 2006. Each Note will bear interest at a rate per annum shown on the front
cover of this Prospectus from August 5, 1996 or from the most recent date to
which interest has been paid or provided for, payable semiannually to Holders of
record at the close of business on the January 15 or July 15 immediately
preceding the interest payment date on February 1 and August 1 of each year,
commencing February 1, 1997.
OPTIONAL REDEMPTION
Except as set forth below, the Notes are not redeemable at the option of the
Company prior to August 1, 2001. On and after such date, the Notes are
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's registered address, at the following redemption prices (expressed
in percentages of principal amount), plus accrued and unpaid interest, if any,
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on
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the relevant interest payment date that is on or prior to the date of
redemption), if redeemed during the 12-month period commencing on August 1 of
the years set forth below:
REDEMPTION
PERIOD PRICE
- --------------------------------------------------------------- ----------
2001........................................................... 105.438%
2002........................................................... 103.625%
2003........................................................... 101.813%
2004 and thereafter............................................ 100.000%
In addition, at any time and from time to time on or prior to August 1,
1999, the Company may redeem in the aggregate up to 33 1/3% of the original
aggregate principal amount of the Notes ($200.0 million) with the proceeds of
one or more Public Equity Offerings following which there is a Public Market, at
a redemption price (expressed as a percentage of principal amount thereof) of
110.875% plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of redemption); provided, however, that at least 66 2/3% of the
original aggregate principal amount of the Notes must remain outstanding after
each such redemption.
The Notes are subject to redemption at the option of the Company, prior to
August 1, 2001, in whole or in part, at any time within 180 days after a Change
of Control on not less than 30 nor more than 60 days' prior notice to each
holder of Notes to be redeemed, in amounts of $1,000 or an integral multiple
thereof, at a redemption price equal to the sum of (i) the principal amount
thereof plus (ii) accrued and unpaid interest, if any, to the redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of redemption) plus (iii) the Applicable Premium. Each holder of
Notes also has certain rights to require the Company to purchase such Notes upon
the occurrence of a Change of Control. See "--Change of Control" below.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less will be redeemed
in part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
RANKING
The indebtedness evidenced by the Notes is unsecured Senior Subordinated
Indebtedness of the Company. The payment of the principal of, premium (if any)
and interest on the Notes is subordinate in right of payment, as set forth in
the Indenture, to all existing and future Senior Indebtedness of the Company,
ranks pari passu in right of payment with all existing and future Senior
Subordinated Indebtedness of the Company and is senior in right of payment to
all existing and future Subordinated Obligations of the Company. The Notes are
also effectively subordinated to any Secured Indebtedness of the Company to the
extent of the value of the assets securing such Indebtedness. However, payment
from the money or the proceeds of U.S. Government Obligations held in any
defeasance trust described under "Defeasance" below is not subordinated to any
Senior Indebtedness or subject to the restrictions described herein.
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The indebtedness evidenced by a Subsidiary Guaranty is unsecured Senior
Subordinated Indebtedness of such Guarantor Subsidiary. The payment of a
Subsidiary Guaranty is subordinated in right of payment, as set forth in the
Indenture, to all existing and future Senior Indebtedness of such Guarantor
Subsidiary, ranks pari passu in right of payment with all existing and future
Senior Subordinated Indebtedness of such Guarantor Subsidiary and is senior in
right of payment to all existing and future Subordinated Obligations of such
Guarantor Subsidiary. Each Subsidiary Guaranty is also effectively subordinated
to any Secured Indebtedness of the Guarantor Subsidiary to the extent of the
value of the assets securing such Indebtedness.
As of June 30, 1996, after giving pro forma effect to the consummation of
the Transactions, including the issuance and sale of the Notes and the
application of the net proceeds therefrom as described under "Use of Proceeds,"
the Company would have had no outstanding Senior Indebtedness (excluding unused
commitments and the obligations in respect of borrowings by subsidiaries under
the Senior Bank Facilities), the outstanding Senior Indebtedness of the
Guarantor Subsidiaries would have been $327.2 million (excluding unused
commitments) and all liabilities of the Company and its subsidiaries (including
such Senior Indebtedness but excluding the Notes and the Subsidiary Guaranties)
would have been approximately $766.7 million. Although the Indenture contains
limitations on the amount of additional Indebtedness that the Company and its
Guarantor Subsidiaries may Incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness of the Company or a Guarantor Subsidiary, as the case may
be. See "Certain Covenants--Limitation on Indebtedness" below.
"Senior Indebtedness" of the Company means all principal of, premium (if
any), accrued interest (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and other amounts owing
with respect to all Indebtedness of the Company, and including all Bank
Indebtedness, whether outstanding on the Issue Date or thereafter Incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such obligations are not superior in
right of payment to the Notes; provided, however, that Senior Indebtedness shall
not include (1) any obligation of the Company to any Subsidiary, (2) any
liability for Federal, foreign, state, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities), (4) any Indebtedness or obligation of the Company
which is subordinate or junior in any respect (other than as a result of the
Indebtedness being unsecured) to any other Indebtedness or obligation of the
Company, including any Senior Subordinated Indebtedness and any Subordinated
Obligations, (5) any obligations with respect to any Capital Stock or (6) any
Indebtedness Incurred in violation of the Indenture. "Senior Indebtedness" of
any Guarantor Subsidiary has a correlative meaning.
Only Indebtedness of the Company or a Guarantor Subsidiary that is Senior
Indebtedness will rank senior to the Notes and the relevant Subsidiary Guaranty
in accordance with the provisions of the Indenture. The Notes and each
Subsidiary Guaranty will in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company and the relevant Guarantor Subsidiary,
respectively. The Company and each Guarantor Subsidiary has agreed in the
Indenture that it will not Incur, directly or indirectly, any Indebtedness which
is subordinate or junior in ranking in any respect to Senior Indebtedness unless
such Indebtedness is Senior Subordinated Indebtedness, or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured
Indebtedness of the Company or a Guarantor Subsidiary is not deemed to be
subordinate or junior to Secured Indebtedness, as the case may be, merely
because it is unsecured.
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The Company may not pay principal of, or premium (if any) or interest on,
the Notes or make any deposit pursuant to the provisions described under
"Defeasance" below, and may not otherwise purchase, redeem or otherwise retire
any Notes (collectively, "pay the Notes"), if (i) any Senior Indebtedness of the
Company is not paid when due or (ii) any other default on Senior Indebtedness of
the Company occurs and the maturity of such Senior Indebtedness is accelerated
in accordance with its terms unless, in either case, the default has been cured
or waived and any such acceleration has been rescinded or such Senior
Indebtedness has been paid in full. However, the Company may pay the Notes
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the holders of the
Senior Indebtedness with respect to which either of the events set forth in
clause (i) or (ii) of the immediately preceding sentence has occurred and is
continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the second preceding sentence) with respect
to any Designated Senior Indebtedness pursuant to which the maturity thereof may
be accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Company may not pay the Notes for a period (a "Payment Blockage
Period") commencing upon the receipt by the Trustee (with a copy to the Company)
of written notice (a "Blockage Notice") of such default from the Representative
of the holders of the Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of such Designated Senior Indebtedness have, or the
Representative of such holders has, accelerated the maturity of such Designated
Senior Indebtedness, the Company may resume payments on the Notes after the end
of such Payment Blockage Period, including any missed payments. Not more than
one Blockage Notice may be given in any consecutive 360-day period, irrespective
of the number of defaults with respect to Designated Senior Indebtedness during
such period. However, if any Blockage Notice within such 360-day period is given
by or on behalf of any holders of Designated Senior Indebtedness other than the
Bank Indebtedness, the Representative of the Bank Indebtedness may give another
Blockage Notice within such period. In no event, however, may the total number
of days during which any Payment Blockage Period or Periods is in effect exceed
179 days in the aggregate during any 360 consecutive day period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness of
the Company will be entitled to receive payment in full of the Senior
Indebtedness of the Company before the Noteholders are entitled to receive any
payment and until the Senior Indebtedness of the Company is paid in full, any
payment or distribution to which Noteholders would be entitled but for the
subordination provisions of the Indenture will be made to holders of the Senior
Indebtedness of the Company as their respective interests may appear. If a
payment or distribution is made to Noteholders that due to the subordination
provisions should not have been made to them, such Noteholders are required to
hold such payment or distribution in trust for the holders of Senior
Indebtedness and pay it over to them as their respective interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the holders of the Designated Senior Indebtedness receive
notice of such acceleration and, thereafter, may pay the Notes only if the
subordination provisions of the Indenture otherwise permit payment at that time.
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The terms of the subordination provisions described above with respect to
the Company's obligations under the Notes apply equally to a Subsidiary
Guarantor and the obligations of such Subsidiary Guarantor under its Subsidiary
Guaranty.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company or a Subsidiary Guarantor who
are holders of Senior Indebtedness of the Company or a Subsidiary Guarantor, as
the case may be, may recover more, ratably, than the Noteholders, and creditors
of the Company who are not holders of Senior Indebtedness of the Company or of
Senior Subordinated Indebtedness (including the Notes) may recover less,
ratably, than holders of Senior Indebtedness of the Company.
SUBSIDIARY GUARANTIES
Each of the Company's Domestic Subsidiaries (other than the Receivables
Subsidiary, any Master Servicer and certain subsidiaries with substantially no
assets or operations), as primary obligors and not merely as sureties, has
irrevocably and unconditionally Guaranteed on an unsecured senior subordinated
basis the performance and punctual payment when due, whether at Stated Maturity,
by acceleration or otherwise, of all obligations of the Company under the
Indenture and the Notes, whether for payment of principal of or interest on the
Notes, expenses, indemnification or otherwise (all such obligations guaranteed
by the Guarantor Subsidiaries being herein called the "Guaranteed Obligations").
The Guarantor Subsidiaries have agreed to pay, in addition to the amount stated
above, any and all expenses (including reasonable counsel fees and expenses)
incurred by the Trustee or the Holders in enforcing any rights under the
Subsidiary Guaranties. Each Subsidiary Guaranty is limited in amount to an
amount not to exceed the maximum amount that can be Guaranteed by the applicable
Guarantor Subsidiary without rendering such Subsidiary Guaranty voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. The Company will cause
each Domestic Subsidiary (other than the Receivables Subsidiary or the Master
Servicer) that is not at the time a Guarantor Subsidiary which Incurs
Indebtedness to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Domestic Subsidiary will Guarantee payment of the Notes.
See "Certain Covenants--Future Guarantor Subsidiaries" below.
Each Subsidiary Guaranty is a continuing guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon each Guarantor Subsidiary and (c) enure to the benefit of
and be enforceable by the Trustee, the Holders and their successors, transferees
and assigns.
A Subsidiary Guaranty will be released upon the sale of the capital stock,
or all or substantially all of the assets, of the applicable Guarantor
Subsidiary if such sale is made in compliance with the Indenture.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date that
is on or prior to the date of purchase), pursuant to the offer described below
and the other procedures set forth in the Indenture; provided, however, that
notwithstanding the occurrence of a Change of Control, the Company shall not be
obligated to purchase the Notes pursuant to this covenant in the event that it
has exercised its rights to redeem all of the Notes as described under
"--Optional Redemption":
(a) prior to the earlier to occur of the first public offering of Voting
Stock of Holdings or the Company, the Permitted Investors cease to be
entitled (by "beneficial ownership" (as defined
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in Rules 13d-3 and 13d-5 under the Exchange Act) of Voting Stock, contract
or otherwise) to elect or cause the election of directors of Holdings having
a majority of the total voting power of the board of directors of Holdings,
whether as a result of issuance of securities of Holdings, any merger,
consolidation, liquidation or dissolution of Holdings, any direct or
indirect transfer of securities by any Permitted Investor or otherwise (for
purposes of this clause (a), the Permitted Investors shall be deemed to
beneficially own any Voting Stock of a corporation (the "specified
corporation") held by any other corporation (the "parent corporation") so
long as one or more of the Permitted Investors beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent corporation);
(b) prior to the first public offering of Voting Stock of the Company,
Holdings shall cease to own 100% of the issued and outstanding Voting Stock
of the Company, whether as a result of issuance of securities of the
Company, any merger, consolidation, liquidation or dissolution of the
Company, any direct or indirect transfer of securities by Holdings or
otherwise;
(c) after the first public offering of Voting Stock of Holdings or the
Company, any person or group (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more of the Permitted Holders,
is or becomes the beneficial owner (as defined in clause (a) above),
directly or indirectly, of Voting Stock that represents more than 30% of the
aggregate ordinary voting power of all classes of the Voting Stock of the
Company or Holdings, voting together as a single class, and either (x) the
Permitted Holders beneficially own (as defined in clause (a) above),
directly or indirectly, in the aggregate Voting Stock that represents a
lesser percentage of the aggregate ordinary voting power of all classes of
the Voting Stock of the Company or Holdings, as the case may be, voting
together as a single class, than such other person or group and are not
entitled (by voting power, contract or otherwise) to elect directors of the
Company or Holdings having a majority of the total voting power of the Board
of Directors or the board of directors of Holdings, as the case may be, or
(y) such other person or group is entitled to elect directors of the Company
or Holdings having a majority of the total voting power of the Board of
Directors or the board of directors of Holdings, as the case may be; or
(d) after the first public offering of Voting Stock of Holdings or the
Company, during any period of not greater than two consecutive years
beginning after the Issue Date, individuals who at the beginning of such
period constituted the Board of Directors or the board of directors of
Holdings, as the case may be (together with any new directors whose election
by such Board of Directors or such board of directors of Holdings, as the
case may be, or whose nomination for election by the shareholders of the
Company or Holdings, as the case may be, was approved by a vote of a
majority of the directors of the Company or Holdings, as the case may be,
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved), cease for any reason to have a majority of the total voting power
of the Board of Directors or the board of directors of Holdings, as the case
may be.
Subject to the provision in the first paragraph in this section, within 30
days following any Change of Control, the Company shall mail a notice to each
Holder with a copy to the Trustee stating, among other things: (1) that a Change
of Control has occurred and that such Holder has the right to require the
Company to purchase all or any portion of such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on a record date to receive interest on the relevant interest
payment date that is on or prior to the date of purchase); (2) the circumstances
and relevant facts and financial information regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor later than
60 days from the date such notice is mailed); and (4) the instructions
determined by the Company, consistent with this covenant, that a Holder must
follow in order to have its Notes or any portion thereof purchased.
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The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations described above by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company or Holdings would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit ratings.
The occurrence of a Change of Control would constitute a default under the
Credit Agreement. Future Senior Indebtedness of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
Holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any repurchases required in connection with a
Change of Control. The Company's failure to purchase the Notes in connection
with a Change of Control would result in a default under the Indenture.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness unless on the date of such
Incurrence the Consolidated Coverage Ratio exceeds 2.25:1 if such Indebtedness
is Incurred on or prior to December 31, 1998, and 2.50:1 if such Indebtedness is
Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness
consisting of the Term Loans in an aggregate principal amount outstanding of up
to $300.0 million less the amount of any principal payments thereon; (ii)
Indebtedness consisting of revolving credit, working capital or letters of
credit financing in an aggregate principal amount at any time outstanding not in
excess of $150.0 million (less the aggregate amount of all repayments of
principal actually made thereunder since the Issue Date with Net Available Cash
from Asset Dispositions pursuant to clause (a)(iii)(A) of the covenant described
under "--Limitation on Sales of Assets and Subsidiary Stock"); (iii)
Indebtedness of the Receivables Subsidiary pursuant to a Permitted Receivables
Financing; (iv) Indebtedness of the Company owing to and held by any Wholly
Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by
the Company or any Wholly Owned Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock or any other event which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Indebtedness (except to the
Company or a Wholly Owned Subsidiary) will be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof; (v)
Indebtedness of the Company represented by the Notes; (vi) any Indebtedness of
the Company and its Restricted Subsidiaries (other than (x) the Indebtedness
described in clauses (i), (ii), (iii) or
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(iv) above and (y) Indebtedness of any Foreign Subsidiary) outstanding on the
Issue Date; (vii) Indebtedness of the Company and its Restricted Subsidiaries
(A) in respect of performance bonds, bankers' acceptances, letters of credit and
surety or appeal bonds provided by the Company and its Restricted Subsidiaries
in the ordinary course of their business and which do not secure other
Indebtedness and (B) under Currency Agreements and Interest Rate Agreements that
are designed to protect the Company and its Restricted Subsidiaries against
fluctuations in interest rates or currency exchange rates and not for the
purposes of speculation; (viii) Indebtedness represented by Guarantees by the
Company of Indebtedness of a Restricted Subsidiary (other than Indebtedness of
the Receivables Subsidiary), or in respect of letters of credit provided by the
Company to support such Indebtedness, or Guarantees by a Restricted Subsidiary
(other than the Receivables Subsidiary) of Indebtedness of the Company or a
Restricted Subsidiary (other than Indebtedness of the Receivables Subsidiary),
or in respect of letters of credit provided by a Restricted Subsidiary (other
than the Receivables Subsidiary) to support such Indebtedness; provided,
however, that only Indebtedness that is Incurred in compliance with this
covenant may be guaranteed pursuant to this clause (viii); (ix) Purchase Money
Indebtedness, industrial revenue bond or similar indebtedness and Capitalized
Lease Obligations of the Company and its Restricted Subsidiaries in an aggregate
principal amount at any time outstanding not in excess of $30.0 million; (x)
Indebtedness of the Company and its Restricted Subsidiaries, to the extent the
proceeds thereof are immediately used after the Incurrence thereof to purchase
Notes tendered in an offer to purchase made as a result of a Change of Control;
(xi) Indebtedness of the Company and its Restricted Subsidiaries arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, in any case Incurred in connection with the disposition of
any business, assets or Subsidiary of the Company (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such acquisition),
in a principal amount not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary of the Company in connection with such
disposition; (xii) Indebtedness of Foreign Subsidiaries in an aggregate
principal amount at any time outstanding not in excess of $50.0 million; (xiii)
Indebtedness of the Company or a Restricted Subsidiary owed to (including
obligations in respect of letters of credit for the benefit of) any Person in
connection with worker's compensation, health, disability or other employee
benefits or property, casualty or liability insurance provided by such Person to
the Company or such Restricted Subsidiary, pursuant to reimbursement or
indemnification obligations to such Person, in each case Incurred in the
ordinary course of business; (xiv) Indebtedness to Masco in an aggregate
principal amount not to exceed $15.0 million in respect of reimbursement
obligations for letters of credit or credit support provided by Masco under the
terms of the Acquisition Agreement; (xv) any Refinancing Indebtedness Incurred
in respect of any Indebtedness Incurred pursuant to paragraph (a) or pursuant to
clauses (i), (ii), (vi), (x), (xiv) or (xv) of this paragraph (b) and (xvi)
Indebtedness of the Company or any Restricted Subsidiary in an aggregate
principal amount at any time outstanding not in excess of $50.0 million.
(c) Notwithstanding the foregoing, the Company may not Incur any
Indebtedness if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior Indebtedness of the Company unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness of the Company. In addition, the
Company may not Incur any Secured Indebtedness which is not Senior Indebtedness
of the Company unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with (or on a senior basis to, in the case
of Indebtedness subordinated in right of payment to the Notes) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A
Guarantor Subsidiary may not Incur any Indebtedness if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness of
the Subsidiary Guarantor unless such Indebtedness is Senior Subordinated
Indebtedness of such Subsidiary Guarantor or is expressly subordinated in right
of payment to Senior Subordinated Indebtedness of
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such Subsidiary Guarantor. In addition, a Guarantor Subsidiary may not Incur any
Secured Indebtedness which is not Senior Indebtedness of such Guarantor
Subsidiary unless contemporaneously therewith effective provision is made to
secure the Subsidiary Guaranty equally and ratably with (or on a senior basis
to, in the case of Indebtedness subordinated in right of payment to such
Subsidiary Guaranty) such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and except dividends or distributions
payable to the Company or another Restricted Subsidiary (and, if such Restricted
Subsidiary has shareholders other than the Company or other Restricted
Subsidiaries, to its other shareholders on a pro rata basis or on a basis that
results in the receipt by the Company or a Restricted Subsidiary of dividends or
distributions of equal or greater value); (ii) purchase, redeem, retire or
otherwise acquire for value any Capital Stock of the Company or any Restricted
Subsidiary held by Persons other than the Company or another Restricted
Subsidiary; (iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition);
(iv) make any Investment (other than a Permitted Investment) in any Person or
(v) make any payment pursuant to the Management Agreement or any similar
agreement entered into with Holdings or extension or renewal thereof (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement, Investment or payment being herein referred to as a
"Restricted Payment") if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment: (1) a Default will have occurred and be
continuing (or would result therefrom); (2) the Company could not Incur at least
$1.00 of additional Indebtedness under paragraph (a) of the covenant described
under "--Limitation on Indebtedness"; or (3) the aggregate amount of such
Restricted Payment and all other Restricted Payments (the amount so expended, if
other than in cash, to be determined in good faith by the Board of Directors,
whose determination will be conclusive and evidenced by a resolution of the
Board of Directors) declared or made subsequent to the Issue Date would exceed
the sum of: (A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the Issue Date to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income will be a deficit,
minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the
Company as a capital contribution or from the issue or sale of its Capital Stock
(other than Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company or an employee stock ownership
plan or other trust established by the Company or any of its Subsidiaries to the
extent the purchase by such plan or trust is financed by Indebtedness of such
plan or trust and for which the Company or a Subsidiary is liable, directly or
indirectly, as a guarantor or otherwise (including by the making of cash
contributions to such plan or trust which are used to pay interest or principal
on such Indebtedness)); (C) the amount by which Indebtedness of the Company or
its Restricted Subsidiaries is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date
of any Indebtedness of the Company or its Restricted Subsidiaries convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash or other property (other than such Capital Stock)
distributed by the Company or any Restricted Subsidiary upon such conversion or
exchange) and (D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends, repayments
of the principal of loans, return of capital or advances or other
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transfers of assets to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in the definition of
"Investment") or the receipt of proceeds from the sale or other disposition of
any portion of any Investment in an Unrestricted Subsidiary not to exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments previously
made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was included in the calculation of the amount of
Restricted Payments.
(b) The provisions of the foregoing paragraph (a) will not prohibit: (i) any
purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries to the extent the purchase by such plan or trust is financed by
Indebtedness of such plan or trust and for which the Company or a Subsidiary is
liable, directly or indirectly, as a guarantor or otherwise (including by the
making of cash contributions to such plan or trust which are used to pay
interest or principal on such Indebtedness)); provided, however, that (A) such
purchase or redemption will be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale to the extent
so used will be excluded from clause (3)(B) of paragraph (a) above; (ii) any
purchase or redemption of (A) Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
paragraph (b) of the covenant described under "--Limitation on Indebtedness" or
(B) Subordinated Obligations of a Restricted Subsidiary made by exchange for, or
out of the proceeds of the substantially concurrent sale of, Indebtedness of any
Restricted Subsidiary or the Company which is permitted to be Incurred pursuant
to paragraph (b) of the covenant described under "--Limitation of Indebtedness";
provided, however, that such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments; (iii) any purchase or
redemption of Disqualified Stock made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Disqualified Stock; provided, however,
that such purchase or redemption will be excluded in the calculation of the
amount of Restricted Payments; (iv) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted by the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock";
provided, however, that such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments; (v) upon the occurrence of a
Change of Control and within 60 days after the completion of the offer to
repurchase the Notes pursuant to the covenant described under "--Change of
Control" above (including the purchase of all Notes tendered), any purchase or
redemption of Subordinated Obligations of the Company required pursuant to the
terms thereof as a result of such Change of Control; provided, however, that
such purchase or redemption will be included in the calculation of the amount of
Restricted Payments; (vi) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however, that such dividend will be
included in the calculation of the amount of Restricted Payments; (vii) the
repurchase, for cash or notes, of shares of, or options or warrants to purchase
shares of, or payments to Holdings to enable Holdings to repurchase shares of,
or options or warrants to purchase shares of, Capital Stock of Holdings, the
Company or any of the Subsidiaries of the Company from employees, former
employees, officers, former officers, directors or former directors of Holdings,
the Company or any of the Subsidiaries of the Company (or permitted transferees
of such employees, former employees, directors or former directors) (or
repayments of, or payments to Holdings to permit Holdings to repay, notes
previously issued to so purchase such shares, options or warrants), pursuant to
the terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors or the board of directors
of Holdings, as applicable, under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such capital stock;
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provided, however, that the aggregate amount of such repurchases (including the
amount of any such notes issued by the Company or any of its Restricted
Subsidiaries, and cash payments to pay principal and interest with respect to
any such notes issued by Holdings, but excluding the amount of any such notes
issued by Holdings until so paid) shall not exceed as of any date the product of
(x) $5.0 million and (y) the number of years (or fractions thereof) elapsed
since the Issue Date; provided further, however, that (x) the first $5.0 million
in aggregate amount of such purchases shall be excluded in the calculation of
the amount of Restricted Payments and (y) any amount of such purchases greater
than $5.0 million in the aggregate shall be included in the calculation of the
amount of Restricted Payments; (viii) to the extent otherwise deemed Restricted
Payments, payments to Holdings made pursuant to the Tax Sharing Agreement;
provided however, that such payments shall be excluded in the calculation of the
amount of Restricted Payments; (ix) payments to Holdings pursuant to the
Management Agreement for operating costs of Holdings but only to the extent such
costs (w) constitute or are directly related to the corporate general and
administrative expenses of the Company and its Restricted Subsidiaries and not
to any other business, subsidiary or investment of Holdings, (x) are not
otherwise paid for by the Company or its Restricted Subsidiaries and (y) do not
constitute payments in respect of the Masco Notes or otherwise in respect of any
Capital Stock of Holdings or in respect of Indebtedness held by an Affiliate of
Holdings; provided, however, that (A) the Company shall provide within 30 days
of the end of each fiscal quarter in which such payments are made a certificate
to the Trustee signed by the chief financial officer of the Company certifying
that such payments comply with the provisions hereof (which shall include a
report with respect to such certificate prepared by the independent accountants
to the Company in accordance with attestation standards established by the
American Institute of Certified Public Accountants if the payments in such
quarter exceed 1% of the consolidated revenues of the Company); (B) if the
Company provides such certificate, such payments shall be excluded from the
calculation of the amount of Restricted Payments; (C) if the Company fails to
provide such certificate or if all or any portion of such payments are not
certified to be in compliance with the provisions hereof, such payments (or
portions thereof) shall be included in the amount of Restricted Payments as of
such 30th day (or, if earlier, the date on which such certificate is provided)
and (D) if as a result of the inclusion of such payments as set forth in clause
(C) the aggregate amount of Restricted Payments declared or made subsequent to
the Issue Date would exceed the amount permitted to be so expended, the Company
shall be deemed to be in default of its obligations hereunder unless and until
such payments (or portions thereof) are repaid by Holdings; (x) advances or
loans to Holdings evidenced by a note in an amount for any year not in excess of
the amount which management estimates will be the Specified Loss of the Holdings
Business for such year but in no event in excess of $2.5 million in any year;
provided, however, that (A) the Company shall provide within 90 days of the end
of each fiscal year in which such payments are made a certificate to the Trustee
signed by the chief financial officer of the Company certifying that such
payments comply with the provisions hereof; (B) if the Company provides such
certificate, such payments shall be excluded from the calculation of the amount
of Restricted Payments; (C) if the Company fails to provide such certificate or
if all or any portion of such payments are not certified to be in compliance
with the provisions hereof, such payments (or portions thereof) shall be
included in the amount of Restricted Payments as of such 90th day (or, if
earlier, the date on which such certificate is provided) and (D) if as a result
of the inclusion of such payments as set forth in clause (C) the aggregate
amount of Restricted Payments declared or made subsequent to the Issue Date
would exceed the amount permitted to be so expended, the Company shall be deemed
to be in default of its obligations hereunder unless and until such payments (or
portions thereof) are repaid by Holdings and (xi) payments to Holdings to enable
Holdings to make payments to Masco consisting of indemnification obligations and
reimbursement of amounts expended by Masco for the benefit of the Company and
its Restricted Subsidiaries required to be made pursuant to the Acquisition
Agreement and payments required by Section 12(r) of the Acquisition Agreement;
provided, however, that such payments shall be excluded in the calculation of
the amount of Restricted Payments; provided further, however, that, at the time
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any such payment is to be made, the Company shall have received all
indemnification or similar payments made by Masco to or for the benefit of
Holdings or the Company pursuant to the Acquisition Agreement.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except: (1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date; (2) any encumbrance or restriction
with respect to a Restricted Subsidiary pursuant to an agreement entered into
prior to the date on which such Restricted Subsidiary was acquired or designated
as a Restricted Subsidiary by the Company (other than as consideration in, in
contemplation of, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was otherwise acquired by the Company); (3) any encumbrance or
restriction pursuant to an agreement constituting Refinancing Indebtedness of
Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2)
of this covenant or this clause (3) or contained in any amendment to an
agreement referred to in clause (1) or (2) of this covenant or this clause (3);
provided, however, that the encumbrances and restrictions contained in any such
refinancing agreement or amendment are, collectively, no more restrictive in any
material respect, than the encumbrances and restrictions contained in such
agreements; (4) in the case of clause (iii) above, any encumbrance or
restriction contained in security agreements securing Indebtedness of a
Restricted Subsidiary which are not prohibited by the covenant described under
"--Limitation of Liens" to the extent such encumbrances or restrictions restrict
the transfer of the property subject to such security agreements; (5) any
encumbrance or restriction existing under or by reason of applicable law; (6)
any encumbrance or restriction with respect to the Receivables Subsidiary
pursuant to an agreement relating to Indebtedness of the Receivables Subsidiary
which is permitted under the covenant described under "--Limitation on
Indebtedness" or pursuant to an agreement relating to a Financing Disposition to
or by the Receivables Subsidiary; (7) customary non-assignment provisions of any
licensing agreement or of any lease; (8) any encumbrance or restriction
contained in contracts for sales of assets otherwise permitted by the Indenture;
(9) with respect to a Restricted Subsidiary, any encumbrance or restriction
imposed pursuant to an agreement that has been entered into for the sale of all
or substantially all of the Capital Stock of such Restricted Subsidiary and (10)
any encumbrance or restriction with respect to a Foreign Subsidiary pursuant to
an agreement relating to Indebtedness Incurred by such Foreign Subsidiary which
is permitted under the covenant described under "--Limitation on Indebtedness."
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value, as determined
in good faith by the Board of Directors, whose determination will be conclusive
and evidenced by a resolution of the Board of Directors (including as to the
value of all noncash consideration), of the shares and assets subject to such
Asset Disposition, (ii) at least 80% (or 100% in the case of lease payments) of
the consideration thereof received by the Company or such Restricted Subsidiary
is in the form of cash or cash equivalents and (iii) an amount equal to 100% of
the Net Available Cash from such Asset Disposition is applied by the Company (or
such Restricted Subsidiary, as the case may be) (A) first, to the extent the
Company or such Restricted Subsidiary elects (or is required by the terms of any
Senior Indebtedness), to prepay, repay or purchase Senior Indebtedness of the
Company or a Wholly Owned Subsidiary or, in the case of a sale by a Restricted
Subsidiary which
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is not a Wholly Owned Subsidiary, to prepay, repay or purchase Senior
Indebtedness of such Restricted Subsidiary (in each case other than Indebtedness
owed to the Company or an Affiliate of the Company) within 360 days after the
later of the date of such Asset Disposition or the receipt of such Net Available
Cash; (B) second, to the extent of the balance of Net Available Cash after
application in accordance with clause (A), to the extent the Company or such
Restricted Subsidiary elects, to reinvest (or enter into a binding contract to
do so) in Additional Assets (including by means of an Investment in Additional
Assets by a Restricted Subsidiary with Net Available Cash received by the
Company or another Restricted Subsidiary) or to repay amounts borrowed under a
revolving credit facility or line of credit to the extent such funds were
invested in Additional Assets within 360 days prior to such Asset Disposition,
within 360 days from the later of such Asset Disposition or the receipt of such
Net Available Cash; (C) third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A) and (B), to make
an Offer (as defined below) to purchase Notes pursuant to and subject to the
conditions set forth in section (b) of this covenant and (D) fourth, to the
extent of the balance of such Net Available Cash after application in accordance
with clauses (A), (B) and (C), to fund (to the extent consistent with any other
applicable provision of the Indenture) any corporate purpose; provided, however
that in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A) above, the Company or such Restricted Subsidiary will
retire such Indebtedness and will cause the related loan commitment (if any) to
be permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this covenant,
the Company and its Restricted Subsidiaries will not be required to apply any
Net Available Cash in accordance with this covenant except to the extent that
the aggregate Net Available Cash from all Asset Dispositions in any year which
are not applied in accordance with this covenant exceed $3.0 million in such
year.
For the purposes of clause (ii) of this covenant, the following are deemed
to be cash: (x) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition and (y) securities
received by the Company or any Restricted Subsidiary from the transferee that
are promptly converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(C) of this covenant, the Company will be required to
purchase Notes tendered pursuant to an offer, commenced within 30 days following
the expiration of the 360 day period referred to in clause (a)(iii)(B) of this
covenant (or, if the Company so elects, at any time within such 360 day period),
by the Company for the Notes (the "Offer") at a purchase price of 100% of their
principal amount plus accrued and unpaid interest, if any, to the date of
purchase in accordance with the procedures (including prorationing in the event
of oversubscription) set forth in the Indenture. If the aggregate purchase price
of Notes tendered pursuant to the Offer is less than the Net Available Cash
allotted to the purchase of the Notes, the Company will apply the remaining Net
Available Cash in accordance with clause (a)(iii)(D) of this covenant. The
Company will not be required to make an Offer for Notes pursuant to this
covenant if the Net Available Cash available therefor (after application of the
proceeds as provided in clauses (A) and (B) of section (a)(iii) of this
covenant) is less than $10 million (which lesser amount will be carried forward
for purposes of determining whether an Offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable
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securities laws and regulations and will not be deemed to have breached its
obligations under this covenant by virtue thereof.
(d)(1) The Company will not, and will not permit any Restricted Subsidiary
to, make any Financing Disposition unless the Board of Directors shall have
determined in good faith, which determination will be conclusive and evidenced
by a resolution of the Board of Directors, that such Financing Disposition is
economically fair and reasonable to the Company or such Subsidiary.
(2) The Company shall not permit Sunbury to make any sale of a Receivable,
or interest therein, pursuant to the Sunbury Factoring Arrangement unless the
Board of Directors shall have determined in good faith, which determination
shall be conclusive and evidenced by a resolution of the Board of Directors,
that such sale is economically fair and reasonable to Sunbury.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
or conduct any transaction (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with any Affiliate of the Company
(an "Affiliate Transaction") on terms (i) that are less favorable to the Company
or such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate and (ii) that, in the event such Affiliate
Transaction involves an aggregate amount in excess of $2.5 million, are not in
writing and have not been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction. In addition,
if such Affiliate Transaction involves an amount in excess of $15.0 million, a
fairness opinion must be obtained from a nationally recognized appraisal or
investment banking firm; provided no such opinion shall be required with respect
to (i) any series of transactions that comply with the requirements of clauses
(i) and (ii) of the preceding sentence (it being understood that annual approval
by the Board of Directors of such transaction will be sufficient) and that
consist of the sale by the Company or any Restricted Subsidiary of goods and
inventory in the ordinary course of business to a Person to whom the Home
Furnishings Group sold more than $15.0 million of goods and inventory in 1995;
and (ii) the sale by Holdings of Receivables to the Receivables Subsidiary
pursuant to a Permitted Receivables Financing.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment or Permitted Investment permitted to be made pursuant to the
covenant described under "-- Limitation on Restricted Payments," (ii) fees,
compensation or employee benefit arrangements paid to and any indemnity provided
for the benefit of directors, officers or employees of the Company or any
Subsidiary of the Company in the ordinary course of business, (iii) any issuance
of securities, or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment arrangements, stock options
and stock ownership plans approved by the Board of Directors, (iv) transactions
pursuant to agreements entered into or in effect on the Issue Date, including
amendments thereto entered into after the Issue Date, provided that the terms of
any such amendment are not, in the aggregate, less favorable to the Company or
such Restricted Subsidiary than the terms of such agreement prior to such
amendment and provided further that such agreements are set forth in a schedule
to the Indenture, (v) loans or advances to employees that are Affiliates of the
Company in the ordinary course of business, but in any event not to exceed $2.5
million in the aggregate outstanding at any one time, (vi) any transaction
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries (so long as the other stockholders of any participating Restricted
Subsidiaries which are not Wholly Owned Subsidiaries are not themselves
Affiliates of the Company) or (vii) payments with respect to Indebtedness
Incurred pursuant to clause (xiv) of paragraph (b) of the covenant described
under "--Limitation on Indebtedness."
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Limitation on the Sale or Issuance of Capital Stock of Domestic
Subsidiaries. The Company will not sell any shares of Capital Stock of a
Domestic Subsidiary, and will not permit any Domestic Subsidiary, directly or
indirectly, to issue or sell any shares of its Capital Stock, except (i) to the
Company or a Wholly Owned Subsidiary, (ii) directors' qualifying shares, (iii)
if, immediately after giving effect to such issuance or sale, such Domestic
Subsidiary would no longer constitute a Restricted Subsidiary or (iv) in a
Public Equity Offering as a result of or after which a Public Market exists. The
proceeds of any sale of such Capital Stock permitted by clauses (iii) and (iv)
will be treated as Net Available Cash from an Asset Disposition and must be
applied in accordance with the terms of the covenant described under
"--Limitation on Sales of Assets and Subsidiary Stock."
Limitation on Liens. The Company will not, and will not permit any Guarantor
Subsidiary to, directly or indirectly, create or permit to exist any Lien on any
of its property or assets (including Capital Stock), whether owned on the Issue
Date or thereafter acquired, securing any Indebtedness other than Senior
Indebtedness of the Company, in the case of the Company, or Senior Indebtedness
of a Guarantor Subsidiary, in the case of a Guarantor Subsidiary, unless
contemporaneously therewith effective provision is made to secure the Notes and,
in respect of Liens on any Guarantor Subsidiary's property or assets, the
Subsidiary Guaranty of such Guarantor Subsidiary equally and ratably with (or on
a senior basis to, in the case of Indebtedness subordinated in right of payment
to the Notes and such Subsidiary Guaranty) such obligation for so long as such
obligation is so secured.
SEC Reports. Notwithstanding that the Company may not be required to be or
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file with the Commission and provide the Trustee
and Noteholders and prospective Noteholders (upon request) with the annual
reports and the information, documents and other reports which are specified in
Sections 13 and 15(d) of the Exchange Act. The Company also will comply with the
other provisions of TIA Sec. 314(a).
Future Guarantor Subsidiaries. The Company will cause each Domestic
Subsidiary (other than the Receivables Subsidiary and any Master Servicer) which
Incurs Indebtedness to execute and deliver to the Trustee a supplemental
indenture pursuant to which such Subsidiary will Guarantee payment of the Notes;
provided, however, that such Subsidiary shall not be required to execute and
deliver a supplemental indenture pursuant to this section in the event that such
Subsidiary is a party to the Indenture at the time of such Incurrence of
Indebtedness. Each Subsidiary Guaranty will be limited to an amount not to
exceed the maximum amount that can be Guaranteed by that Subsidiary without
rendering the Subsidiary Guaranty, as it relates to such Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
Limitation on Lines of Business. (a) The Company will not, and will not
permit any Restricted Subsidiary (other than the Receivables Subsidiary) to,
engage in any business other than (i) a Related Business and (ii) the making of
Permitted Investments.
(b) The Company will not permit the Receivables Subsidiary to engage in any
business or transaction other than the purchase and sale of Receivables (or
participation interests therein) of Holdings and the Subsidiaries of the Company
and activities incidental thereto.
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless (i) the Company or such
Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an amount
equal to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to the covenant described under "--Limitation on Indebtedness" and (B)
create a Lien on such property securing such Attributable Debt without equally
and ratably securing the Notes pursuant to the covenant described under
"--Limitation on Liens," (ii) the net cash proceeds
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received by the Company or any Restricted Subsidiary in connection with such
Sale/Leaseback Transaction are at least equal to the fair market value (as
determined in good faith by the Board of Directors, whose determination will be
conclusive and evidenced by a resolution of the Board of Directors) of such
property and (iii) the transfer of such property is permitted by, and the
Company applies the proceeds of such transaction in compliance with, the
covenant described under
"--Limitation on Sale of Assets and Subsidiary Stock."
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company") will
be a corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor Company
(if not the Company) will expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred by
the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing; (iii) except in
the case of a merger the sole purpose of which is to change the Company's
jurisdiction of incorporation, immediately after giving effect to such
transaction, the Successor Company would be able to Incur an additional $1.00 of
Indebtedness under paragraph (a) of the covenant described under "--Limitation
on Indebtedness"; (iv) immediately after giving effect to such transaction, the
Successor Company will have Consolidated Net Worth in an amount which is not
less than the Consolidated Net Worth of the Company immediately prior to such
transaction and (v) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets will not be released from the obligation to pay the
principal of and interest on the Notes.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due (whether or not such payment is
prohibited by the provisions described under "Ranking" above), continued for 30
days, (ii) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise (whether or not such payment is prohibited by the
provisions described under "Ranking" above), (iii) the failure by the Company to
comply with its obligations under the covenant described under "Merger and
Consolidation" above, (iv) the failure by the Company to comply for 30 days
after notice with any of its obligations under the covenants described under
"Change of Control" or "Certain Covenants" above (in each case, other than a
failure to purchase Notes), (v) the failure by the Company or any Guarantor
Subsidiary to comply for 60 days after notice with its other agreements
contained in the Indenture, (vi) the failure by the Company or any Significant
Subsidiary to pay any Indebtedness within any applicable grace period after
final maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default, if the total amount of such Indebtedness unpaid or
accelerated exceeds $10.0 million or its foreign currency equivalent (the "cross
acceleration provision"), (vii) certain events of bankruptcy, insolvency or
reorganization of
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the Company or a Significant Subsidiary (the "bankruptcy provisions"), (viii)
the rendering of any judgment or decree not covered by insurance for the payment
of money in excess of $10.0 million or its foreign currency equivalent against
the Company or a Significant Subsidiary and (A) an enforcement proceeding is
commenced with respect to such judgment or decree or (B) such judgment or decree
remains outstanding for a period of 60 days following such judgment or decree
and is not discharged, waived or stayed (the "judgment default provision") or
(ix) any Subsidiary Guaranty ceases to be in full force and effect (except as
contemplated by the terms thereof) or any Guarantor Subsidiary denies or
disaffirms its obligations under the Indenture or any Subsidiary Guaranty and
such Default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a default under clauses (iv) or (v) will not constitute an Event of
Default until the Trustee or the Holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued but unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and
interest will be due and payable immediately. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company occurs
and is continuing, the principal of and interest on all the Notes will become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within the earlier of 90 days after it
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occurs or 30 days after it is known to a Trust Officer or written notice of it
is received by the Trustee. Except in the case of a Default in the payment of
principal of, premium (if any) or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding notice is in the interests of the Noteholders. In
addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding. However, without the consent of each Holder of an outstanding Note
affected, no amendment may (i) reduce the amount of Notes whose Holders must
consent to an amendment or waiver, (ii) reduce the rate of or extend the time
for payment of interest on any Note, (iii) reduce the principal of or extend the
Stated Maturity of any Note, (iv) reduce the premium payable upon the redemption
of any Note or change the time at which any Note may be redeemed as described
under "Optional Redemption" above, (v) make any Note payable in money other than
that stated in the Note, (vi) make any change to the subordination provisions of
the Indenture that adversely affects the rights of any Holder, (vii) impair the
right of any Holder to receive payment of principal of and interest on such
Holder's Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes, (viii)
make any change in the amendment provisions which require each Holder's consent
or in the waiver provisions or (ix) make any change in any Subsidiary Guaranty
that would adversely affect the Noteholders.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add further Guarantees with respect to the Notes, to release Guarantor
Subsidiaries when permitted by the Indenture, to secure the Notes, to add to the
covenants of the Company for the benefit of the Noteholders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder or to comply with any requirement of
the Commission in connection with the qualification of the Indenture under the
TIA. However, no amendment may be made to the subordination provisions of the
Indenture that adversely affects the rights of any holder of Senior Indebtedness
then outstanding unless the holders of such Senior Indebtedness (or any group or
representative thereof authorized to give a consent) consent to such change.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Noteholders a notice briefly describing such amendment.
However, the failure to give such notice to all Noteholders, or any defect
therein, will not impair or affect the validity of the amendment.
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TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Noteholder to pay any taxes
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Note selected for redemption or to transfer or exchange
any Note for a period of 15 days prior to a selection of Notes to be redeemed.
The Notes will be issued in registered form and the registered holder of a Note
will be treated as the owner of such Note for all purposes.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "Certain Covenants," the operation of the cross acceleration
provision, the bankruptcy default provisions with respect to Subsidiaries and
the judgment default provision described under "Defaults" above and the
limitations contained in clauses (iii) and (iv) under "Merger and Consolidation"
above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect to
Significant Subsidiaries only), (viii) (with respect to Significant Subsidiaries
only), (ix) or (x) under "Defaults" above or because of the failure of the
Company to comply with clause (iii) or (iv) under "Merger and Consolidation"
above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company is the Trustee under the Indenture and has
been appointed by the Company as Registrar and Paying Agent with regard to the
Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
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CERTAIN DEFINITIONS
"Acquisition Agreement" means the Acquisition Agreement dated as of March
29, 1996 between Holdings and Masco as amended and as in effect on the Issue
Date.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock), including improvements to existing assets, to
be used by the Company or a Restricted Subsidiary in a Related Business; (ii)
the Capital Stock of a Person that becomes a Restricted Subsidiary as a result
of the acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary; provided, however, that, in
the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily
engaged in a Related Business.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants--Limitation on
Transactions with Affiliates" and "--Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial
owner of shares representing 5% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Voting Stock (whether or not currently exercisable) and any Person
who would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Applicable Premium" means, with respect to a Note, the greater of (i) 1.0%
of the then outstanding principal amount of such Note and (ii) the excess of (A)
the present value of all remaining required interest and principal payments due
on such Note, computed using a discount rate equal to the Treasury Rate plus 75
basis points, over (B) the then outstanding principal amount of such Note.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares and, in the case of Foreign Subsidiaries, to the extent
required by local ownership laws in foreign countries, shares owned by foreign
shareholders), property or assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary; (ii) a disposition of property or assets, including inventory, in
the ordinary course of business consistent with past practices of the Home
Furnishings Group; (iii) a Financing Disposition; (iv) any sale of a Receivable,
or interest therein, pursuant to the Sunbury Factoring Arrangement and (v) for
purposes of the provisions described under "--Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock" only, a disposition subject to the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments."
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
assumed in making calculations in accordance with FAS 13) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment
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of such Indebtedness or scheduled redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (ii) the sum of
all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Credit Agreement or any refinancing or replacements thereof including
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not a claim for post-filing interest is allowed in such
proceeding), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Bridge Receivables Financing" means (a) the sale by Holdings and the
Subsidiaries of the Company of Receivables to the Receivables Subsidiary
pursuant to the Receivables Sale Agreement, (b) the sale of such Receivables (or
participation interests therein) by the Receivables Subsidiary pursuant to the
Receivables Pooling Agreement and (c) the servicing of such Receivables pursuant
to the Receivables Servicing Agreement.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The amount of Indebtedness represented by a
Capitalized Lease Obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP, and the Stated Maturity thereof shall be the
date of the last scheduled payment of rent or any other amount due under the
relevant lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Citicorp" means Citicorp, a Delaware corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination (determined, for the four fiscal quarters ending prior to the
Issue Date, or any thereof, on a pro forma basis to give effect to the
acquisition of the Home Furnishings Group by the Company as if it occurred at
the beginning of such period) to (ii) Consolidated Interest Expense for such
four fiscal quarters (determined, for the four fiscal quarters ending prior to
the Issue Date, or any thereof, on a pro forma basis to give effect to the
acquisition of the Home Furnishings Group by the Company as if it had occurred
at the beginning of such period); provided, however, that (1) if the Company or
any Restricted Subsidiary has Incurred any Indebtedness since the beginning of
such period that remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio
is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period (except that in the case
of Indebtedness to finance seasonal fluctuations in working capital needs
Incurred under a revolving credit or similar arrangement, the amount thereof
shall be deemed to be the average daily balance of such Indebtedness during such
four quarter period), (2) if since the beginning of such period the Company or
any Restricted Subsidiary shall have made any Asset Disposition, (x) the
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EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Disposition for such period or increased by an amount equal to the EBITDA
(if negative) directly attributable thereto for such period and (y) Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of the assets of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness in connection therewith) as if such Investment or acquisition
occurred on the first day of such period and (4) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(2) or (3) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries for
such period, plus, to the extent Incurred by the Company and its Restricted
Subsidiaries in such period but not included in such interest expense, (i)
interest expense attributable to Capitalized Lease Obligations, (ii)
amortization of debt discount, (iii) capitalized interest, (iv) noncash interest
expense, (v) commissions, discounts and other fees and charges with respect to
letters of credit and bankers' acceptance financing, (vi) net costs associated
with Hedging Obligations, (vii) the interest portion of any deferred payment
obligation, (viii) interest actually paid on any Indebtedness of any other
Person that is Guaranteed by the Company or any Restricted Subsidiary, (ix) the
cash contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company or a Wholly Owned Subsidiary) in
connection with Indebtedness Incurred by such plan or trust and (x) the earned
discount or yield with respect to the sale of receivables (without duplication
of amounts included in Consolidated Net Income); but in no event shall include
(i) amortization of debt issuance costs, (ii) Preferred Stock dividends in
respect of all Preferred Stock of Subsidiaries of the Company and Disqualified
Stock of the Company held by Persons other than the Company or a Wholly Owned
Subsidiary, or (iii) interest Incurred in connection with Investments in
discontinued operations.
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"Consolidated Net Income" means, for any period, the consolidated net income
(loss) of the Company and its Subsidiaries for such period; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income (loss) of any Person if such Person is not a Restricted Subsidiary,
except that (A) subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net Income, (ii) for
purposes of subclause (a)(3)(A) of the covenant described under "Limitation on
Restricted Payments" only, any net income (loss) of any person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition, (iii) any net income (loss) of any
Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the limitations contained in (iv) below, the Company's equity in the
net income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in the case of
a dividend that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the Company's equity in a net loss
of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income, (iv) any gain (or loss) realized upon
the sale or other disposition of any asset of the Company or its consolidated
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not
sold or otherwise disposed of in the ordinary course of business and any gain
(or loss) realized upon the sale or other disposition of any Capital Stock of
any Person, (v) any extraordinary gain or loss, and (vi) the cumulative effect
of a change in accounting principles after the Issue Date. Notwithstanding the
foregoing, for the purpose of the covenant described under "Certain
Covenants--Limitation on Restricted Payments" only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (a)(3)(D) thereof. Nothwithstanding anything to the contrary
in the covenant described under "Certain Covenants-- Limitation on Restricted
Payments," all amounts paid, advanced or loaned to Holdings pursuant to clauses
(ix) or (x) of such covenant shall be deducted in computing Consolidated Net
Income and all repayments by Holdings of advances or loans made pursuant to such
clause (x) shall be included in calculating Consolidated Net Income. For
purposes of determining Consolidated Net Income for a period, tax expense with
respect to taxes covered by the Tax Sharing Agreement shall equal the amount of
payments required to be made by the Company and its Subsidiaries under the Tax
Sharing Agreement for such period.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Consolidated Non-Cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization (including the amortization of the cost of
the fabric sample books) and other non-cash charges of such Person and its
Consolidated Subsidiaries for such period, on a
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consolidated basis, as determined in accordance with GAAP (excluding any such
other non-cash charge which requires an accrual or reserve for cash charges for
any future period).
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the Credit Agreement dated as of the Issue Date, as
amended, waived or otherwise modified from time to time, among Holdings, the
Company, the other borrowers party thereto from time to time, the lenders party
thereto from time to time and The Chase Manhattan Bank, a New York banking
corporation, as administrative agent, and Chase Manhattan Bank Delaware, as
issuing bank (except to the extent that any such amendment, waiver or other
modification thereto would be prohibited by the terms of the Indenture).
"Currency Agreement" means with respect to any Person any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement as
to which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend at least
$10.0 million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to ninety-one days after the
Stated Maturity of the Notes. Disqualified Stock shall not include any Capital
Stock that is not otherwise Disqualified Stock if by its terms the holders have
the right to require the issuer to repurchase such stock upon a Change of
Control (or upon events substantially similar to a Change of Control).
"Domestic Subsidiary" means any Restricted Subsidiary of the Company other
than a Foreign Subsidiary.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense, (ii) Consolidated Interest Expense and (iii)
Consolidated Non-Cash Charges, in each case for such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income (loss) of such Subsidiary was included in
calculating Consolidated Net Income. For purposes of determining EBITDA for a
period, tax expense with respect to taxes covered by the Tax Sharing Agreement
shall equal the amount of payments required to be made by the Company and its
Subsidiaries under the Tax Sharing Agreement for such period.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing Disposition" means any sale of a Receivable, or interest therein,
by the Company or any Subsidiary to the Receivables Subsidiary, or by the
Receivables Subsidiary, pursuant to the Permitted Receivables Financing.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company which is
not organized under the laws of the United States of America or any State
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, in statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor Subsidiary" means any Person that has issued a Subsidiary
Guaranty.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Holdings" means Furnishings International Inc., a Delaware corporation.
"Holdings Business" means the business conducted by Holdings (i) as
successor to Lineage Home Furnishings, Inc. ("Lineage") and Masco Home
Furnishings, Inc. ("MHF") and (ii) that is substantially consistent with the
business of Lineage and MHF as conducted immediately prior to the Issue Date.
"Home Furnishings Group" means the corporations comprising the home
furnishings group of Masco as constituted immediately prior to the Issue Date.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such person at the time it becomes a Restricted Subsidiary; provided further,
however, that in the case of a discount security, the accretion of original
issue discount on such security shall not be considered an Incurrence of
Indebtedness but the whole face amount of such security shall be deemed Incurred
upon issuance of such security.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money; (ii) the principal
of and premium (if any) in respect of obligations of such Person
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evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) other
than letters of credit or similar instruments supporting trade payables entered
into in the ordinary course of business of such person to the extent that such
letters of credit are not drawn upon or, if and to the extent drawn upon, such
drawing is reimbursed not later than the third business day following such
drawing; (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which purchase
price is due more than six months after the date of placing such property in
service or taking delivery and title thereto or the completion of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of such Person;
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in
each case, any accrued dividends); (vii) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person; provided, however, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of such other
Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person; and (ix) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance or loan
(other than advances or loans to customers or suppliers in the ordinary course
of business that are recorded as accounts receivable on the balance sheet of the
Person making such loan or advance) or other extension of credit (including by
way of Guarantee or similar arrangement) or capital contribution to (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary" and the covenant
described under "--Certain Covenants--Limitation on Restricted Payments," (i)
"Investment" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Agreement" means the Management Agreement dated as of the Issue
Date, between Holdings and the Company as in effect on the Issue Date.
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"Management Investors" means the officers and employees of Holdings, the
Company or a Subsidiary of the Company who acquire Voting Stock of Holdings on
or after the Issue Date and any of their Permitted Transferees.
"Masco" means Masco Corporation, a Delaware corporation.
"Masco Investors" means Masco and its Permitted Transferees.
"Masco Notes" means the senior pay-in-kind notes of Holdings issued to Masco
on the Issue Date in an aggregate amount of $285.0 million.
"Master Servicer" means any entity formed for purposes of acting as a master
servicer under a Permitted Receivables Financing, in each case, a special
purpose Wholly Owned Subsidiary.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or from an escrow account or
otherwise, in each case only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other noncash form)
therefrom, in each case net of (i) all legal, title and recording expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon such assets, or
which must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition and (iv) appropriate amounts to be provided by the party or
parties making such Asset Disposition as a reserve, in accordance with GAAP,
against any liabilities associated with the assets disposed of in such Asset
Disposition and retained by the Company or any Restricted Subsidiary after such
Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, filing and registration fees, trustee's fees,
consultant and other fees actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means the 399 Investors, the Masco Investors and the
Management Investors provided that any Management Investor and any 399 Investor
(other than 399 Venture Partners, Citicorp or any direct or indirect
wholly-owned Subsidiary of Citicorp) shall not be a "Permitted Holder" if such
Person is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of Voting Stock that represents at least
30% of the aggregate ordinary voting power of all classes of the Voting Stock of
the Company or Holdings, voting together as a single class (without giving
effect to the attribution of beneficial ownership as a result of any
stockholders agreement as in effect on the Issue Date, and any amendment to such
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agreement that does not materially change the allocation of voting power
provided for in such agreement).
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, (ii) a Restricted Subsidiary or a Person which
will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (iii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iv) Temporary Cash Investments; (v) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (vi) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vii) loans or advances to employees made in the ordinary course of business and
not exceeding $5.0 million in the aggregate outstanding at any one time; and
(viii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (ix) Investments in property or
assets to be used in (or in Restricted Subsidiaries and any entity that, as a
result of such Investment, is a Restricted Subsidiary engaged in) a Related
Business; (x) securities received as consideration in sales of assets made in
compliance with the covenant described under "-- Limitation on Sales of Assets
and Subsidiary Stock"; (xi) Guarantees relating to Indebtedness which is
permitted to be Incurred under the covenant described under "--Limitation on
Indebtedness" or (xii) other Investments, of any type, provided that the amount
of such Investments made after the Issue Date in reliance on this clause (xii)
and outstanding at any time does not exceed the amount of the Investments set
forth on a Schedule to the Indenture, plus $25.0 million.
"Permitted Investors" means (i) the Masco Investors, (ii) 399 Venture
Partners, Citicorp and any direct or indirect wholly-owned Subsidiary of
Citicorp and (iii) any voting trust for shares held by Management Investors the
voting trustees of which trust are (and must be) Management Investors and which
voting trust does not have the power (taking into account any voting agreement)
to elect or cause the election of directors having more than 30% of the total
voting power of directors on the board of directors of Holdings.
"Permitted Receivables Financing" means (a) the Bridge Receivables Financing
and (b) any subsequent financing secured substantially by Receivables (and
related assets) originated by Holdings and any Restricted Subsidiary in any
amount, provided that (i) such subsequent receivables financing has a later or
equal final maturity and a longer or equal weighted average life than the Bridge
Receivables Financing, (ii) all sales of Receivables to or by the Receivables
Subsidiary are made at fair market value (as determined in good faith by the
Board of Directors) (iii) the interest rate applicable to such subsequent
receivables financing shall be a market interest rate (as determined in good
faith by the Board of Directors) as of the time such financing is entered into,
(iv) such financing is non-recourse to the Company and its Subsidiaries (other
than the Receivables Subsidiary) except to a limited extent customary for such
financings and (v) the covenants, events of default and other provisions
thereof, collectively, shall be market terms (as determined in good faith by the
Board of Directors).
"Permitted Transferee" means (a) with respect to 399 Venture Partners (i)
Citicorp, any direct or indirect wholly owned subsidiary of Citicorp, and any
officer, director or employee of 399 Venture Partners, Citicorp or any wholly
owned subsidiary of Citicorp, (ii) any spouse or lineal descendant (including by
adoption and stepchildren) of the officers, directors and employees referred to
in clause (a)(i) above, (iii) any trust, corporation or partnership 100% in
interest of the beneficiaries,
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stockholders or partners of which consists of one or more of the persons
described in clause (a)(i) or (ii) above; (b) with respect to Masco, any direct
or indirect Subsidiary of Masco; and (c) with respect to any officer or employee
of Holdings, the Company or a Subsidiary of the Company, (i) any spouse or
lineal descendant (including by adoption and stepchildren) of such officer or
employee and (ii) any trust, corporation or partnership 100% in interest of the
beneficiaries, stockholders or partners of which consists of such officer or
employee, any of the persons described in clause (c)(i) above or any combination
thereof.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company or Holdings (or, for purposes of the covenant
described under "--Limitation on the Sale or Issuance of Capital Stock of
Domestic Subsidiaries," any Domestic Subsidiary) pursuant to an effective
registration statement (other than a registration statement on Form S-4, S-8 or
any successor or similar forms) under the Securities Act (whether alone or in
conjunction with any secondary public offering).
"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of the Company or Holdings (or, for purposes of the covenant described
under "--Limitation on the Sale or Issuance of Capital Stock of Domestic
Subsidiaries," any Domestic Subsidiary) has been distributed by means of an
effective registration statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of an asset, any conditional sale obligation, any
obligation under any title retention agreement or any other purchase money
obligation, in each case where the maturity of such Indebtedness does not exceed
the anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; provided, that such Indebtedness is
incurred within 180 days after the acquisition by the Company or Restricted
Subsidiary of such asset, or is in existence with respect to any asset or other
property at the time such asset or property is acquired.
"Receivable" means a right to receive payment arising from a sale or lease
of goods or services by a Person pursuant to an arrangement with another Person
pursuant to which such other Person is obligated to pay for goods or services
under terms that permit the purchase of such goods and services on credit, as
determined in accordance with GAAP.
"Receivables Pooling Agreement" means the Pooling Agreement relating to a
Permitted Receivables Financing, among the Receivables Subsidiary, the Master
Servicer and the Receivables Trustee.
"Receivables Sale Agreement" means the Receivables Sale Agreement relating
to a Permitted Receivables Financing, among the Receivables Subsidiary,
Holdings, the Company and the Subsidiaries of the Company party thereto.
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<PAGE>
"Receivables Servicing Agreement" means the Servicing Agreement relating to
a Permitted Receivables Financing, among the Receivables Subsidiary, the Master
Servicer, the Subsidiaries of the Company party thereto and the Receivables
Trustee.
"Receivables Subsidiary" means LFI Receivables Corporation or any successor
thereto or other entity formed for purposes of a Permitted Receivables
Financing, in each case a bankruptcy-remote, special-purpose Wholly Owned
Subsidiary.
"Receivables Trustee" means the trustee on behalf of the holders of
participation interests in the receivables sold pursuant to a Permitted
Receivables Financing.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances" and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the Issue Date or Incurred
in compliance with the Indenture (including Indebtedness of the Company that
refinances Indebtedness of any Restricted Subsidiary (other than the Receivables
Subsidiary) (to the extent permitted in the Indenture) and Indebtedness of any
Restricted Subsidiary that refinances Indebtedness of that or another Restricted
Subsidiary (other than the Receivables Subsidiary) or of the Company), including
Indebtedness that refinances Refinancing Indebtedness; provided, however, that
(i) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced, (iii) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or, if issued with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or, if issued with original issue discount, the aggregate accreted
value) then outstanding of the Indebtedness being refinanced plus the amount of
any premium reasonably determined by the Company or such Restricted Subsidiary,
as applicable, as necesary at the time of such refinancing to accomplish such
refinancing or required pursuant to the terms thereof, plus the amount of
expenses the Company or such Restricted Subsidiary, as applicable, Incurred in
connection with such refinancing and (iv) if the Indebtedness being refinanced
is subordinated in right of payment to the Notes, such Refinancing Indebtedness
is subordinated in right of payment to the Notes to the extent of the
Indebtedness being refinanced; provided further, however, that Refinancing
Indebtedness shall not include (x) Indebtedness of the Receivables Subsidiary
that refinances Indebtedness of the Company or (y) Indebtedness of the Company
or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Related Business" means any business of the Company and the Restricted
Subsidiaries as conducted on the Issue Date and any business related, ancillary
or complementary thereto.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc. and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or such Restricted Subsidiary transfers such property to a Person
and the Company or such Restricted Subsidiary leases it from such Person, other
than leases between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
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"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Guarantor Subsidiary has a correlative
meaning.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes and is not subordinated by its terms to any
Indebtedness or other obligation of the Company which is not Senior
Indebtedness. "Senior Subordinated Indebtedness" of any Guarantor Subsidiary has
a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of clause (w)(1) or
(2) of Rule 1-02 under Regulation S-X promulgated by the SEC.
"Simmons" means Simmons Upholstered Furniture Corporation, a Delaware
corporation.
"Specified Loss of the Holdings Business" means, for any period, the amount,
if any, by which the Cash Flow of the Holdings Business for such period is less
than zero. For such purpose, "Cash Flow of the Holdings Business" for any period
shall be calculated in accordance with the formula set forth in the next
sentence, for which purpose each item specified therein shall be determined on
an unconsolidated basis in accordance with GAAP on the basis of the
unconsolidated financial statements of Holdings for such period and in
accordance with such pro forma adjustments as are necessary (as determined in
the reasonable judgment of the Company) so as to take into account, with respect
to each item in such calculation, only the business and operations of Holdings
as they pertain to the Holdings Business in the form in which it is conducted on
the Issue Date and not to any other business, operation, investment or
subsidiary of Holdings (including the Company and including any other business
or investment undertaken by the entities comprising the Holdings Business),
whether in existence on the Issue Date or thereafter made, developed or
acquired. Cash Flow of the Holdings Business shall equal (a) the sum of (i) net
income for such period, (ii) the provision for income taxes to the extent such
provision reduces net income for such period, (iii) the amount of depreciation,
amortization and other non-cash expenses (including non-cash interest expense),
losses or other charges that were deducted in determining net income for such
period, and (iv) all Impermissible Expenses to the extent deducted in
calculating net income; minus (b) the sum of (i) any non-cash gains included in
net income and not otherwise excluded from clause (a) above, (ii) capital
expenditures paid for by Holdings with cash from operations during such period
for the sole purpose of the operations of the Holdings Business and (iii)
payments in respect of income taxes during such period but only to the extent
attributable to the taxable income, if any, of Holdings attributable to the
Holdings Business.
For purposes of the foregoing, non-cash interest expense shall be deemed to
include any interest expense (whether or not actually paid in cash) on the Masco
Notes prior to the eighth anniversary of the original issuance of the Masco
Notes. "Impermissible Expenses" shall mean all payments of any kind to, and
expenses or costs incurred by Holdings on behalf or for the benefit of, any
holder of any security of Holdings, any subsidiary of Holdings or any other
Affiliate of Holdings, except for payments for goods or services provided by
such Person but only to the extent of the fair market value of such goods and
services provided to or for the benefit of the Holdings Business.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes
105
<PAGE>
pursuant to a written agreement. "Subordinated Obligation" of any Guarantor
Subsidiary has a correlative meaning.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, trustees or members of any other governing body
thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person or (ii) one or more Subsidiaries of such Person.
"Subsidiary Guaranty" means any Guarantee of the Notes which may from time
to time be executed and delivered pursuant to the terms of the Indenture. Each
such Subsidiary Guaranty shall be in the form prescribed in the Indenture.
"Sunbury" means Sunbury Textile Mills., Inc., a New York corporation.
"Sunbury Factoring Arrangement" means factoring arrangements entered into in
the ordinary course of business by Sunbury in an aggregate amount not to exceed
$20.0 million at any time outstanding.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of the
Issue Date among Holdings, the Company, Simmons and the Receivables Subsidiary
as in effect on the Issue Date.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations (x) of the United States of America or any agency thereof
or obligations Guaranteed by the United States of America or any agency thereof
or (y) of any foreign country recognized by the United States of America rated
at least "A" by S&P or "A-1" by Moody's, (ii) investments in time deposit
accounts, certificates of deposit and money market deposits maturing within 365
days of the date of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having capital
and surplus in excess of $250.0 million (or the foreign currency equivalent
thereof) and whose long-term debt is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act), (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 270 days after the date of acquisition, issued by
a corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of which
any investment therein is made of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P, (v) investments in securities with
maturities of six months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's, (vi) any money market deposit accounts
issued or offered by a domestic commercial bank or a commercial bank organized
and located in a country recognized by the United States of America, in each
case, having capital and surplus in excess of $250.0 million (or the foreign
currency equivalent thereof), or investments in money market funds complying
with the risk limiting conditions of Rule 2a-7 (or any successor rule) of the
Commission under the Investment Company Act of 1940, as amended, and (vii)
similar investments approved by the Board of Directors in the ordinary course of
business.
"Term Loans" means the Tranche A Term Loans and the Tranche B Term Loans
available pursuant to the Credit Agreement.
"399 Investors" means 399 Venture Partners and its Permitted Transferees.
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"399 Venture Partners" means 399 Venture Partners, Inc., a Delaware
corporation.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two business days prior to the date
fixed for redemption of the Notes following a Change of Control (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Average Life to
Stated Maturity of the Notes; provided, however, that if the Average Life to
Stated Maturity of the Notes is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Average Life to
Stated Maturity of the Notes 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.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
that either (A) the Subsidiary to be so designated has total consolidated assets
of $1,000 or less or (B) if such Subsidiary has consolidated assets greater than
$1,000, then such designation would be permitted under the covenant entitled
"Limitation on Restricted Payments." The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under paragraph (a) of the covenant described
under "Limitation on Indebtedness" and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and, to the extent
required by local ownership laws in foreign countries, shares owned by foreign
shareholders) is owned by the Company or another Wholly Owned Subsidiary
(including shares held of record by a nominee for the benefit of the Company or
another Wholly Owned Subsidiary).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Morgan, Lewis & Bockius LLP, counsel to the Company, the
following discussion summarizes the material United States federal income tax
consequences of the Exchange Offer to a holder of Old Notes that is an
individual citizen or resident of the United States or a United States
corporation that purchased the Old Notes pursuant to their original issue (a
"U.S. Holder"). It is based on the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), existing and proposed Treasury regulations, and
judicial and administrative determinations, all of which are subject to change
at any time, possibly on a retroactive basis. Moreover, U.S. Holders should note
that there are no Treasury Regulations, judicial decisions or other authority
that have considered a transaction closely comparable to the Exchange Offer and
there can be no assurance that the Internal Revenue Service (the "IRS") will not
take a contrary position to the positions taken herein. The following relates
only to the Old Notes, and the New Notes received therefor, that are held as
"capital assets" within the meaning of Section 1221 of the Code by U.S. Holders.
It does not discuss state, local, or foreign tax consequences, nor does it
discuss tax consequences to categories of holders that are subject to special
rules, such as foreign persons, tax-exempt organizations, insurance companies,
banks, and dealers in stocks and securities. Tax consequences may vary depending
on the particular status of an investor. No rulings will be sought from the IRS
with respect to the federal income tax consequences of the Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE OLD NOTES
FOR NEW NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING
THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS
PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE OLD NOTES FOR NEW
NOTES.
THE EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should be treated as a continuation of the corresponding Old Notes because the
terms of the New Notes are not materially different from the terms of the Old
Notes. Accordingly, such exchange should not constitute a taxable event to U.S.
Holders and, therefore, (i) no gain or loss should be realized by a U.S. Holder
upon receipt of a New Note; (ii) the holding period of the New Note should
include the holding period of the Old Note exchanged therefor and (iii) the
adjusted tax basis of the New Note should be the same as the adjusted tax basis
of the Old Note exchanged therefor immediately before the exchange.
STATED INTEREST
Stated interest on a Note will be taxable to a U.S. Holder as ordinary
interest income at the time that such interest accrues or is received, in
accordance with the U.S. Holder's regular method of accounting for federal
income tax purposes. The Notes are not considered to have been issued with
original issue discount ("OID") for federal income tax purposes.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
A U.S. Holder's tax basis in a Note generally will be its cost. A U.S.
Holder generally will recognize gain or loss on the sale, exchange or retirement
of a Note in an amount equal to the difference between the amount realized on
the sale, exchange or retirement and the tax basis of the Note. Gain or loss
recognized on the sale, exchange or retirement of a Note (excluding amounts
received in respect of accrued interest, which will be taxable as ordinary
interest income) generally
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will be capital gain or loss and will be long-term capital gain or loss if the
Note was held for more than one year.
BACKUP WITHHOLDING
Under certain circumstances, a U.S. Holder of a Note may be subject to
"backup withholding" at a 31% rate with respect to payments of interest thereon
or the gross proceeds from the disposition thereof. This withholding generally
applies if the U.S. Holder fails to furnish his or her social security number or
other taxpayer identification number ("TIN") in the specified manner and in
certain other circumstances. Any amount withheld from a payment to a U.S. Holder
under the backup withholding rules is allowable as a credit against such U.S.
Holder's federal income tax liability, provided that the required information is
furnished to the IRS. Corporations and certain other entities described in the
Code and Treasury regulations are exempt from backup withholding if their exempt
status is properly established.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. Each of the Company and the Guarantor Subsidiaries has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 1996 (90
days after the date of this Prospectus), all dealers effecting transactions in
the New Notes may be required to deliver a prospectus.
Neither the Company nor the Guarantor Subsidiaries will receive any proceeds
from any sale of New Notes by broker-dealers. New Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New Notes.
Any broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company and each of the Guarantor Subsidiaries has 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 and will indemnify the
holders of the Old Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Morgan, Lewis & Bockius LLP, New York, New York.
EXPERTS
The combined balance sheets as of December 31, 1995 and 1994 and the
combined statements of income and cash flows for each of the three years in the
period ended December 31, 1995, of Masco's Home Furnishings Group included in
this prospectus, have been included herein in reliance on the report, which
includes explanatory paragraphs related to the restatement of the 1994 financial
statements and the sale of the Group subsequent to December 31, 1995, of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
The balance sheet as of June 30, 1996, of LIFESTYLE FURNISHINGS
INTERNATIONAL LTD. included in this prospectus, has been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MASCO HOME FURNISHINGS GROUP:
Report of Independent Accountants.................................................... F-2
Combined Balance Sheets at June 30, 1996 (unaudited), December 31, 1994 and 1995..... F-3
Combined Statements of Operations for the six months ended June 30, 1995 and 1996
(unaudited) and the years ended December 31, 1993, 1994 and 1995.................... F-4
Combined Statements of Cash Flows for the six months ended June 30, 1995 and 1996
(unaudited) and the years ended December 31, 1993, 1994 and 1995..................... F-5
Notes to Combined Financial Statements............................................... F-6
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.:
Report of Independent Accountants.................................................... F-25
Balance Sheet and Notes to Financial Statement at June 30, 1996...................... F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Masco Corporation:
We have audited the accompanying combined balance sheet of the Masco Home
Furnishings Group (certain subsidiaries of Masco Corporation, as described in
the Basis of Presentation Note) as of December 31, 1994 and 1995, and the
related combined statements of operations and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of Masco Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Masco Home
Furnishings Group as of December 31, 1994 and 1995, and the combined results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
As discussed in the Accounting Policies Note, the accompanying 1994
financial statements have been restated.
As discussed in the Subsequent Event Note, Masco Corporation entered into an
agreement to sell the Masco Home Furnishings Group for proceeds (excluding
assumed indebtedness) of approximately $1,050.0 million. The accompanying
combined financial statements do not reflect the impact of this transaction.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 1, 1996, except for the last Note for
which the date is August 5, 1996
F-2
<PAGE>
MASCO HOME FURNISHINGS GROUP
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------------- --------------
1994 1995 1996
-------------- -------------- --------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash investments............. $ 24,710,000 $ 17,310,000 $ 12,050,000
Receivables........................... 309,910,000 325,420,000 325,750,000
Inventories........................... 570,330,000 559,940,000 568,160,000
Prepaid expenses...................... 39,450,000 35,430,000 35,030,000
Deferred income taxes................. 19,900,000 17,000,000 17,000,000
-------------- -------------- --------------
Total current assets.............. 964,300,000 955,100,000 957,990,000
Property and equipment, net............. 466,400,000 484,100,000 478,470,000
Excess of cost over acquired net
assets................................. 415,450,000 402,280,000 395,380,000
Notes receivable........................ 29,140,000 31,010,000 18,890,000
Other assets............................ 43,790,000 40,480,000 42,870,000
-------------- -------------- --------------
Total assets...................... $1,919,080,000 $1,912,970,000 $1,893,600,000
-------------- -------------- --------------
-------------- -------------- --------------
LIABILITIES AND MASCO CORPORATION NET
INVESTMENT AND ADVANCES
CURRENT LIABILITIES:
Notes payable......................... $ 9,720,000 $ 25,500,000 $ 24,510,000
Accounts payable...................... 90,240,000 92,350,000 97,040,000
Accrued liabilities................... 94,480,000 87,300,000 96,170,000
-------------- -------------- --------------
Total current liabilities......... 194,440,000 205,150,000 217,720,000
Long-term debt.......................... 5,450,000 2,150,000 2,070,000
Deferred income taxes and other......... 74,480,000 75,570,000 73,710,000
-------------- -------------- --------------
Total liabilities................. 274,370,000 282,870,000 293,500,000
MASCO CORPORATION NET INVESTMENT AND
ADVANCES............................... 1,644,710,000 1,630,100,000 1,600,100,000
-------------- -------------- --------------
Total liabilities and Masco
Corporation Net Investment and
Advances........................ $1,919,080,000 $1,912,970,000 $1,893,600,000
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-3
<PAGE>
MASCO HOME FURNISHINGS GROUP
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------ ---------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................... $1,763,490,000 $1,897,480,000 $1,992,610,000 $984,430,000 $981,120,000
Cost of sales................. 1,326,800,000 1,434,030,000 1,500,990,000 737,710,000 741,960,000
-------------- -------------- -------------- ------------ ------------
Gross profit............. 436,690,000 463,450,000 491,620,000 246,720,000 239,160,000
Selling, general and
administrative expenses....... 367,450,000 385,350,000 400,330,000 202,630,000 189,390,000
-------------- -------------- -------------- ------------ ------------
Operating profit......... 69,240,000 78,100,000 91,290,000 44,090,000 49,770,000
-------------- -------------- -------------- ------------ ------------
Other expense, net:
Interest expense, Masco
Corporation................. 75,610,000 84,840,000 92,470,000 48,020,000 43,730,000
Interest expense, other...... 7,070,000 2,250,000 2,360,000 820,000 780,000
Other, net................... 3,210,000 7,280,000 8,260,000 800,000 2,930,000
-------------- -------------- -------------- ------------ ------------
85,890,000 94,370,000 103,090,000 49,640,000 47,440,000
-------------- -------------- -------------- ------------ ------------
Income (loss) before
income taxes............ (16,650,000) (16,270,000) (11,800,000) (5,550,000) 2,330,000
Income taxes................. 8,370,000 6,560,000 6,090,000 3,380,000 4,930,000
-------------- -------------- -------------- ------------ ------------
Net loss................. $ (25,020,000) $ (22,830,000) $ (17,890,000) $ (8,930,000) $ (2,600,000)
-------------- -------------- -------------- ------------ ------------
-------------- -------------- -------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-4
<PAGE>
MASCO HOME FURNISHINGS GROUP
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------ ---------------------------
1993 1994 1995 1995 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM (FOR): (UNAUDITED)
OPERATING ACTIVITIES:
Net income (loss)............ $(25,020,000) $(22,830,000) $(17,890,000) $ (8,930,000) $ (2,600,000)
Depreciation and
amortization................ 66,810,000 66,380,000 67,920,000 34,790,000 33,830,000
Bad debt provision........... 7,050,000 5,720,000 6,620,000 2,550,000 1,590,000
Deferred income taxes........ 890,000 (3,260,000) 4,560,000 -- --
------------ ------------ ------------ ------------ ------------
Total from earnings...... 49,730,000 46,010,000 61,210,000 28,410,000 32,820,000
(Increase) decrease in
receivables................. (30,790,000) (10,240,000) (19,120,000) (18,030,000) 7,990,000
(Increase) decrease in
inventories................. (52,860,000) (38,130,000) 10,390,000 (45,740,000) (8,220,000)
(Increase) in prepaid
expenses.................... (21,670,000) (21,050,000) (13,090,000) (7,110,000) (7,930,000)
Increase (decrease) in
current liabilities......... 12,740,000 22,730,000 (5,070,000) 9,850,000 13,560,000
------------ ------------ ------------ ------------ ------------
Net cash from (for)
operating activities...... (42,850,000) (680,000) 34,320,000 (32,620,000) 38,220,000
------------ ------------ ------------ ------------ ------------
INVESTING ACTIVITIES:
Capital expenditures......... (75,130,000) (68,790,000) (61,030,000) (32,300,000) (13,870,000)
Issuance of notes
receivable.................. (10,020,000) (1,000,000) (10,260,000) (9,160,000) (3,280,000)
Collection of notes
receivable.................. 5,440,000 3,710,000 5,020,000 3,030,000 5,490,000
Other, net................... 1,770,000 12,970,000 8,790,000 1,240,000 (3,350,000)
------------ ------------ ------------ ------------ ------------
Net cash (for) investing
activities................ (77,940,000) (53,110,000) (57,480,000) (37,190,000) (15,010,000)
------------ ------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
Increase in Masco Corporation
net investment and
advances................... 192,640,000 99,830,000 3,280,000 39,210,000 (27,400,000)
Increase in other debt....... 4,640,000 5,360,000 16,200,000 31,340,000 65,460,000
Payment of other debt........ (67,380,000) (52,090,000) (3,720,000) (2,780,000) (66,530,000)
------------ ------------ ------------ ------------ ------------
Net cash from financing
activities................ 129,900,000 53,100,000 15,760,000 67,770,000 (28,470,000)
------------ ------------ ------------ ------------ ------------
CASH:
Increase (decrease) for the
year....................... 9,110,000 (690,000) (7,400,000) (2,040,000) (5,260,000)
Beginning of period.......... 16,290,000 25,400,000 24,710,000 24,710,000 17,310,000
------------ ------------ ------------ ------------ ------------
End of period................ $ 25,400,000 $ 24,710,000 $ 17,310,000 $ 22,670,000 $ 12,050,000
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-5
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION. The combined financial statements reflect the
historical financial position, results of operations and cash flows of certain
subsidiaries of Masco Corporation, hereinafter called the Masco Home Furnishings
Group ("Group"), for the years presented. The Group is not a legal entity and
includes certain Masco subsidiaries whose operations consist of the manufacture
and sale of home furnishings products including quality furniture, fabrics and
other home furnishings. The financial position and results of operations, as
presented herein, may not be the same as would have occurred had the Group been
an entity independent of Masco Corporation.
Included in selling, general and administrative expenses in the financial
statements are general corporate expenses which represent certain corporate
staff support and administrative services provided by Masco Corporation. These
expenses are charged to the Group by Masco Corporation based upon approximately
1 percent of sales of most domestic Group operations. In addition, the Group
participates in certain programs provided by Masco Corporation including various
insurance programs and incentive compensation plans; related costs of these
programs that exceed amounts included in general corporate expenses are
separately charged to the Group by Masco Corporation. Outstanding liabilities
related to the above services and programs are included in Masco Corporation Net
Investment and Advances in the accompanying balance sheet.
INTERIM FINANCIAL INFORMATION. The financial information for June 30, 1995
and 1996, included herein is unaudited. In the opinion of management, the June
30, 1995 and 1996 financial information reflects all adjustments necessary,
consisting only of normal recurring adjustments for a fair presentation of such
financial information.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation
of financial statements in conformity with generally accepted accounting
principles requires the Group to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from such estimates and assumptions.
RESTATEMENT OF 1994. The 1994 financial statements have been restated
primarily to reflect the correction of the accounting for certain Asian joint
ventures. As a result of this restatement, the 1994 net loss has increased by
approximately $3.6 million, while the Masco Corporation Net Investment and
Advances decreased by a corresponding amount.
PRINCIPLES OF COMBINATION. The accompanying combined financial statements
include the accounts and transactions of the Group. All significant intra-group
transactions have been eliminated.
CASH AND CASH INVESTMENTS. The Group considers all highly liquid investments
with an original maturity of three months or less to be cash and cash
investments.
RECEIVABLES. Accounts and notes receivable are presented net of aggregate
allowances for doubtful accounts of $7.7 million at December 31, 1994, $9.0
million at December 31, 1995, and $9.7 million at June 30, 1996.
PROPERTY AND EQUIPMENT. Property and equipment, including significant
betterments to existing facilities, are recorded at cost. Upon retirement or
disposal, the cost and accumulated depreciation are removed from the accounts
and any gain or loss is included in income. Maintenance and repair costs are
charged to expense as incurred.
F-6
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
1. ACCOUNTING POLICIES--(CONTINUED)
DEPRECIATION AND AMORTIZATION. Depreciation is computed principally using
the straight-line method over the estimated useful lives of the assets. Annual
depreciation rates are as follows: buildings and land improvements, 2 to 10
percent, and machinery and equipment, 5 to 33 percent. Depreciation was $34.5
million, $34.1 million and $36.0 million in 1993, 1994, and 1995, respectively
and $18.6 million and $18.7 million at June 30, 1995 and 1996, respectively. The
excess of cost over net assets of acquired companies is being amortized using
the straight-line method over periods not exceeding 40 years; at December 31,
1994, 1995 and June 30, 1996, such accumulated amortization totaled $98.6
million, $112.8 million and $119.3 million, respectively. At each balance sheet
date, Masco Corporation assesses whether there has been an impairment in the
carrying value of excess of cost over net assets of acquired companies of the
Group, primarily by comparing current and projected annual sales, operating
income and cash flows with the related annual amortization expense as well as
considering the equity of such companies. Amortization of intangible assets was
$13.0 million in each of 1993 and 1994, $14.2 million in 1995 and $7.7 million
and $6.8 million as of June 30, 1995 and 1996, respectively.
The Group produces fabric sample books which are used to market some of its
products. The Group capitalizes the cost of these sample books and amortizes
their cost over three years as a selling expense. The unamortized net cost of
the sample books is included in other assets and prepaid expenses and at
December 31, 1994 and 1995 and June 30, 1996 aggregated $27.8 million, $24.4
million and $23.6 million, respectively, and the related amounts charged to
selling expense in 1993, 1994, and 1995 were $19.3 million, $19.3 million, and
$17.1 million, respectively. Amounts charged to selling expense through June 30,
1995 and 1996 were $8.5 million and $8.3 million, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying value of financial
instruments reported in the balance sheet for current assets and current
liabilities approximates fair value. The carrying values of notes receivable and
bank debt approximate fair value as the floating rates inherent in the related
financial instruments reflect changes in overall market interest rates.
The Group may periodically use foreign currency forward and option contracts
to offset the effects of exchange rate fluctuations on cash flows denominated in
foreign currencies. The balance of these contracts at December 31, 1995 is not
material and the Group does not use derivative financial instruments for trading
or speculative purposes.
FOREIGN CURRENCY TRANSLATION. The financial position and results of
operations of the Group's foreign subsidiaries are measured using the local
currency as the functional currency. Assets and liabilities of these
subsidiaries are translated at the balance sheet date exchange rate and
statement of operations' accounts are translated at the average rate prevailing
during the year. Translation adjustments, approximating $8.7 million, $5.2
million and $5.2 million at December 31, 1993, 1994 and 1995, arising from
differences in exchange rates from period to period are included in Masco
Corporation Net Investment and Advances.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS. Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of," will not have a
material impact on the Group's financial statements when adopted in 1996. SFAS
No. 123, "Accounting for Stock-Based Compensation," becomes effective in 1996.
The Group intends to adopt the pro forma disclosure provisions of SFAS No. 123
and will account for stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
F-7
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. INVENTORIES
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------- -----------
1994 1995 1996
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Finished goods........................................... $270,440 $262,930 $ 264,260
Raw material............................................. 210,420 206,820 215,650
Work in process.......................................... 89,470 90,190 88,250
-------- -------- -----------
$570,330 $559,940 $ 568,160
-------- -------- -----------
-------- -------- -----------
</TABLE>
Inventories are stated at the lower of cost or net realizable value, with
cost determined principally by use of the first-in, first-out method.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------------- -----------
1994 1995 1996
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Land and improvements.................................... $ 26,250 $ 26,970 $ 27,710
Buildings................................................ 306,670 321,090 329,720
Machinery and equipment.................................. 370,810 398,320 399,770
-------- -------- -----------
703,730 746,380 757,200
Less accumulated depreciation............................ 237,330 262,280 278,730
-------- -------- -----------
$466,400 $484,100 $ 478,470
-------- -------- -----------
-------- -------- -----------
</TABLE>
The companies within the Group lease various facilities and equipment under
noncancelable lease arrangements. Certain of these lease arrangements have been
guaranteed by Masco Corporation. Rent expense for 1993, 1994, and 1995 was $21.9
million, $19.2 million, and $21.5 million, respectively. Rent expense for the
six months ended June 30, 1995 and 1996 was $11.2 million and $10.3 million,
respectively.
At December 31, 1995, future minimum rental commitments for operating leases
with noncancellable terms in excess of one year are as follows: 1996--$22.0
million; 1997--$18.4 million; 1998--$15.0 million; 1999--$13.3 million;
2000--$10.1 million; and thereafter--$21.1 million.
4. NOTES RECEIVABLE
The Group has notes receivable from certain of its customers. Generally,
these notes require periodic payments of principal and interest and are
collateralized by inventory and personal guarantees of the customers. These
notes bear interest based predominately on the prevailing prime rate.
Approximately $19.4 million of these notes are due from one customer at December
31, 1995. Although the Group does not currently foresee a material credit risk
associated with this receivable, repayment is dependent upon the financial
stability of this customer.
F-8
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
------------------ -----------
1994 1995 1996
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Salaries, wages and commissions............................. $31,270 $25,930 $ 33,870
Employee retirement plans................................... 9,550 11,380 11,870
Advertising and sales promotion............................. 8,690 9,310 8,340
Insurance................................................... 8,260 6,050 13,840
Property, payroll and other taxes........................... 5,090 3,780 5,320
Income taxes................................................ 1,990 1,920 1,920
Other....................................................... 29,630 28,930 21,010
------- ------- -----------
$94,480 $87,300 $ 96,170
------- ------- -----------
------- ------- -----------
</TABLE>
<TABLE>
<CAPTION>
6. LONG-TERM DEBT
AT DECEMBER 31, AT JUNE 30,
---------------- -----------
1994 1995 1996
------ ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable to banks........................................ $3,400 $ 220 $ 180
Other......................................................... 3,050 2,250 2,150
------ ------ -----------
6,450 2,470 2,330
Less current portion.......................................... 1,000 320 260
------ ------ -----------
$5,450 $2,150 $ 2,070
------ ------ -----------
------ ------ -----------
</TABLE>
The notes payable to banks relate to revolving-credit agreements with
various banks in Europe, North America and the Far East aggregating
approximately $131 million, most of which are guaranteed by Masco Corporation to
secure more favorable interest rates. Interest is payable on borrowings based
upon various floating rates as selected by the Group.
At December 31, 1995, the maturities of long-term debt during each of the
next five years were approximately as follows: 1996--$.3 million; 1997--$.4
million; 1998--$.2 million; 1999--$.1 million; and 2000--$.1 million.
The Group may periodically guarantee loans, leases or other credit
facilities for its customers and joint venture partners. At December 31, 1995,
the outstanding balance of these guarantees approximated $4.3 million. In
addition, the Group has guaranteed to certain joint venture partners a minimum
return on investment. Future guarantees under these arrangements aggregated
approximately $4.4 million at December 31, 1995.
Interest paid on total debt and net advances from Masco Corporation was
approximately $83.1 million, $87.0 million, and $94.7 million in 1993, 1994, and
1995, respectively.
F-9
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. MASCO CORPORATION NET INVESTMENT AND ADVANCES
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------------------- ------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, Beginning of
period.................... $1,400,090 $1,567,710 $1,644,710 $1,644,710 $1,630,100
Net Income (loss).......... (25,020) (22,830) (17,890) (8,930) (2,600)
Additional net investment
and advances.............. 192,640 99,830 3,280 39,210 (27,400)
---------- ---------- ---------- ---------- ----------
Balance, End of period..... $1,567,710 $1,644,710 $1,630,100 $1,674,990 $1,600,100
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
Investment and advances reflect the accumulation of transactions between the
Group and Masco Corporation. These transactions include operating results,
management fees, advances and other intercompany transactions.
Interest on funds advanced by Masco Corporation was charged to the Group
based on interest rates which approximated the bank prime rate, adjusted
monthly. Such interest rates approximated 6.0 percent, 7.1 percent, and 8.8
percent in 1993, 1994, and 1995, respectively. The outstanding balance of funds
advanced by Masco Corporation including accrued interest at December 31, 1993,
1994, and 1995 approximated $1,091.0 million, $1,192.0 million, and $1,195.0
million, respectively. The outstanding balance of funds advanced by Masco
Corporation including accrued interest at June 30, 1995 and 1996 approximated
$1,229.8 million and $1,163.4 million, respectively.
8. EMPLOYEE RETIREMENT PLANS
The Group sponsors defined-benefit and defined-contribution retirement plans for
most of its employees. The Group's defined contribution plans, available to most
domestic employees, contain a limited employer-matched savings provision that
permits pre-tax employee contributions. Aggregate charges to income under these
plans were $6.0 million in 1993, $5.8 million in 1994, and $7.1 million in 1995.
Net periodic pension cost for the Group's pension plans includes the
following components:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost--benefits earned during the year.............. $ 6,250 $ 6,980 $ 6,080
Interest cost on projected benefit obligation.............. 10,700 11,280 12,010
Actual return on assets.................................... (18,860) 5,870 (16,540)
Net amortization and deferral.............................. 3,520 (22,550) 3,540
-------- -------- --------
Net periodic pension cost.................................. $ 1,610 $ 1,580 $ 5,090
-------- -------- --------
-------- -------- --------
</TABLE>
Major assumptions used in accounting for the Group's pension plans are as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Discount rate for obligations.............................. 7.25% 8.5% 7.25%
Rate of increase in compensation levels.................... 5.0% 5.0% 5.0%
Expected long-term rate of return on plan assets........... 12.0% 12.0% 11.0%
</TABLE>
F-10
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. EMPLOYEE RETIREMENT PLANS--(CONTINUED)
The funded status of the Group's pension plans is summarized as follows, in
thousands, at December 31:
<TABLE>
<CAPTION>
1994 1995
------------------------- -------------------------
<S> <C> <C> <C> <C>
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------- ----------- ----------- -----------
Actuarial present value of benefit
obligations:
Vested benefit obligation.................. $ 111,770 $ 4,840 $19,560 $ 126,660
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulated benefit obligation............... $ 115,240 $ 5,120 $20,090 $ 130,040
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Projected benefit obligation................. $ 136,750 $ 7,110 $20,870 $ 159,810
Assets at fair value......................... 122,740 1,490 20,640 114,350
----------- ----------- ----------- -----------
Projected benefit obligation in excess of
plan assets................................ (14,010) (5,620) (230) (45,460)
Reconciling items:
Unrecognized net loss (gain)............... 14,900 (280) 3,970 33,980
Unrecognized prior service cost............ 9,210 5,630 330 13,870
Unrecognized net (asset) obligation at
transition................................ (10,470) (140) (1,540) (7,830)
Requirement to recognize minimum
liability................................. -- (3,220) -- (10,250)
----------- ----------- ----------- -----------
(Accrued)/prepaid pension cost............... $ (370) $(3,630) $ 2,530 $ (15,690)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Statement of Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions, and Statement of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment Benefits,
became effective in 1993 and 1994, respectively. These standards did not
materially affect the Group's financial position or results of operations.
F-11
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
9. GEOGRAPHIC INFORMATION
The group is engaged principally in one line of business--the manufacture
and sale of home furnishings products including quality furniture, fabrics and
other home furnishings.
The following table presents information about the Group by geographic area:
<TABLE>
<CAPTION>
NET SALES(1) OPERATING PROFIT (LOSS) ASSETS AT DECEMBER 31,
------------------------------------ ------------------------------- ------------------------------------
1993 1994 1995 1993 1994 1995 1993 1994 1995
---------- ---------- ---------- -------- -------- --------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Group's
operations by
geographic area
were:
United States.... $1,544,000 $1,673,000 $1,761,000 $ 60,000 $ 74,000 $ 88,000 $1,587,000 $1,616,000 $1,613,000
Pacific Rim...... 123,000 126,000 141,000 23,000 22,000 22,000 219,000 242,000 243,000
European Union
and other
foreign
countries...... 96,000 98,000 91,000 (4,000) (5,000) (3,000) 58,000 61,000 57,000
---------- ---------- ---------- -------- -------- --------- ---------- ---------- ----------
Total.......... $1,763,000 $1,897,000 $1,993,000 79,000 91,000 107,000 $1,864,000 $1,919,000 $1,913,000
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Other expense,
net.............. (86,000) (94,000) (103,000)
General corporate
expense from
Masco
Corporation...... (10,000) (13,000) (16,000)
-------- -------- ---------
Loss before income
taxes............ $(17,000) $(16,000) $ (12,000)
-------- -------- ---------
-------- -------- ---------
</TABLE>
- ------------
(1) After elimination of intra-group sales between geographic areas of:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C> <C>
United States.......................................... $ 17,000 $ 13,000 $ 12,000
-------- -------- --------
-------- -------- --------
Pacific Rim............................................ $235,000 $267,000 $289,000
-------- -------- --------
-------- -------- --------
European Union and other foreign countries............. $ 1,000 $ 1,000 $ 1,000
-------- -------- --------
-------- -------- --------
</TABLE>
F-12
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------------- ---------
1993 1994 1995 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Income (loss) before income taxes:
Domestic............................................. $(29,070) $(33,460) $(11,770) $ 1,620
Foreign.............................................. 12,420 17,190 (30) 710
-------- -------- -------- ---------
$(16,650) $(16,270) $(11,800) $ 2,330
-------- -------- -------- ---------
-------- -------- -------- ---------
Provision (credit) for income taxes:
Currently payable:
Federal -- U.S. losses............................. $ (7,450) $ (6,550) $ (5,710) $ 2,000
-- Certain foreign earnings........................ 10,380 10,640 3,030 350
State and local.................................... 3,950 5,050 3,200 1,800
Foreign............................................ 600 680 1,010 780
Deferred:
Federal............................................ 890 (3,290) 4,560 --
Foreign............................................ -- 30 -- --
-------- -------- -------- ---------
$ 8,370 $ 6,560 $ 6,090 $ 4,930
-------- -------- -------- ---------
-------- -------- -------- ---------
Deferred tax assets at December 31:
Inventories.......................................... $ 6,660 $ 6,670 $ 6,670
Accrued liabilities.................................. 13,930 10,710 10,710
Alternative minimum tax.............................. 860 860 860
-------- -------- ---------
21,450 18,240 18,240
-------- -------- ---------
Deferred tax liabilities at December 31:
Property and equipment............................... 68,010 69,220 69,220
Other................................................ 1,140 1,280 1,280
-------- -------- ---------
69,150 70,500 70,500
-------- -------- ---------
Net deferred tax liability at December 31............ $ 47,700 $ 52,260 $52,260
-------- -------- ---------
-------- -------- ---------
</TABLE>
The following is a reconciliation of tax computed at the U.S. federal
statutory rate to the provision for income taxes allocated to loss before income
taxes:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
U.S. federal statutory rate........................ 35% 35% 35% 35% 35%
Tax (credit) at U.S. federal statutory rate........ $(5,830) $(5,690) $(4,050) $(1,940) $ 820
Higher taxes on foreign earnings................... 6,630 5,330 4,050 1,630 880
Amortization in excess of tax...................... 4,450 4,450 4,460 2,230 2,230
State and local taxes, net of federal tax
benefit........................................... 2,570 3,280 2,080 1,630 1,170
Change in tax rate................................. 1,300
Other.............................................. (750) (810) (450) (170) (170)
------- ------- ------- ------- ------
Income taxes...................................... $ 8,370 $ 6,560 $ 6,090 $ 3,380 $4,930
------- ------- ------- ------- ------
------- ------- ------- ------- ------
</TABLE>
The Group is included in the consolidated federal income tax returns of
Masco Corporation. Accordingly, substantially all income tax-related assets and
liabilities are due from or to Masco Corporation. Income taxes and credits are
computed on a separate return basis.
Income taxes paid were approximately $8 million, $10 million, and $2 million
in 1993, 1994, and 1995, respectively.
Earnings of foreign subsidiaries generally become taxable upon the
remittance of dividends and under certain other circumstances. Provision has not
been made for U.S. or additional foreign taxes on approximately $14 million of
remaining undistributed earnings of foreign subsidiaries, as those earnings are
intended to be permanently reinvested; it is not practical to estimate the
amount of deferred tax liability on such earnings.
11. SUBSEQUENT EVENT
On August 5, 1996, the Group was sold to FURNISHINGS INTERNATIONAL INC.
("FII") for approximately $1.05 billion. The combined financial statements of
the Group do not reflect the impact of this transaction which resulted in a $650
million write-down of the Group's net assets in Masco's December 31, 1995
financial statements. FII contributed the businesses acquired to its
wholly-owned subsidiary, LIFESTYLE FURNISHINGS INTERNATIONAL LTD. ("LFI"). In
connection with the sale and as partial consideration, LFI issued, in a private
placement, $200 million
F-13
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
aggregate principal amount of 10 7/8% unsecured Senior Subordinated Notes
maturing August 1, 2006 ("the Notes"). Interest on the Notes is payable
semi-annually at 10 7/8% commencing on February 1, 1997. The Notes may be
redeemed by LFI subsequent to August 1, 2001 at premiums which begin at 5.438%
and decline each year to face for redemptions taking place after August 1, 2004.
In addition, at any time prior to August 1, 1999, LFI may redeem up to 33 1/3%
of the original aggregate principal amount of the Notes with the proceeds of one
or more public equity offerings at a redemption price of 110.875%. Also, upon
the occurrence of a qualifying Change of Control as defined in the Notes, the
Notes may be redeemed at the option of LFI or in certain instances at the option
of the Note holders at a premium of 1%. The Notes contain certain covenants
which, among others, limit the incurrence of additional indebtedness and
restrict capital transactions, distributions, and asset dispositions of certain
subsidiaries.
In connection with the Note offering, each of LFI's domestic operating
subsidiaries ("the Guarantor Subsidiaries") fully and unconditionally guarantee
LFI's performance under the Notes on a joint and several basis. The Guarantor
Subsidiaries are direct or indirect wholly-owned subsidiaries of LFI. The
remaining subsidiaries are direct or indirect subsidiaries of the Guarantor
Subsidiaries. The following combining condensed financial data provides
information regarding the financial position, results of operations and cash
flows of the Guarantor Subsidiaries prior to the acquisition by FII
("predecessor combining condensed financial data"). Separate financial
statements of the Guarantor Subsidiaries are not presented because management
has determined those would not be material to the investors.
For purposes of the predecessor combining condensed financial data the
Guarantor Subsidiaries include all domestic subsidiaries of the Group, except
for certain subsidiaries with substantially no assets or operations. The
Guarantor Subsidiaries account for their investments in the non-guarantor
subsidiaries on the equity method. The principal elimination entries are to
eliminate the investments in subsidiaries and intercompany balances and
transactions.
F-14
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING BALANCE SHEETS
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash investments............. $ 6,840 $ 17,870 $ 24,710
Receivables........................... 243,460 67,160 $ (710) 309,910
Inventories........................... 438,610 131,720 570,330
Prepaid expenses...................... 24,140 15,310 39,450
Deferred income taxes................. 19,900 -- 19,900
Intercompany account.................. 159,630 4,280 (163,910) 0
------------ ------------- ------------ ----------
Total current assets................ 892,580 236,340 (164,620) 964,300
Property and equipment, net............. 360,920 105,480 466,400
Excess of cost over acquired net
assets................................. 406,790 8,660 415,450
Notes receivable........................ 11,150 17,990 29,140
Investments in affiliates............... 345,720 -- (345,720) 0
Other assets............................ 25,630 23,550 (5,390) 43,790
------------ ------------- ------------ ----------
Total assets........................ $ 2,042,790 $ 392,020 $ (515,730) $1,919,080
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
LIABILITIES AND MASCO CORPORATION NET INVESTMENT AND ADVANCES
Current Liabilities
Notes payable......................... $ 2,420 $ 7,300 $ 9,720
Accounts payable...................... 64,270 26,680 $ (710) 90,240
Accrued liabilities................... 58,390 36,090 94,480
Intercompany account.................. 4,280 159,630 (163,910) 0
------------ ------------- ------------ ----------
Total current liabilities........... 129,360 229,700 (164,620) 194,440
Long-term debt.......................... 1,890 3,560 5,450
Deferred income taxes and other......... 67,750 6,730 74,480
------------ ------------- ------------ ----------
Total liabilities................... 199,000 239,990 (164,620) 274,370
Masco Corporation net investment and
advances............................... 1,843,790 152,030 (351,110) 1,644,710
------------ ------------- ------------ ----------
Total liabilities and Masco
Corporation net investment and
advances.......................... $ 2,042,790 $ 392,020 $ (515,730) $1,919,080
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
</TABLE>
F-15
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING BALANCE SHEETS
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash investments............. $ 4,540 $ 12,770 $ 17,310
Receivables........................... 253,940 73,390 $ (1,910) 325,420
Inventories........................... 429,880 130,060 559,940
Prepaid expenses...................... 19,800 15,630 35,430
Deferred income taxes................. 17,000 -- 17,000
Intercompany account.................. 161,420 21,980 (183,400) 0
------------ ------------- ------------ -----------
Total current assets................ 886,580 253,830 (185,310) 955,100
Property and equipment, net............. 373,370 110,730 484,100
Excess of cost over acquired net
assets................................. 394,100 8,180 402,280
Notes receivable........................ 4,540 26,470 31,010
Investments in affiliates............... 394,720 -- (394,720) 0
Other assets............................ 23,670 22,210 (5,400) 40,480
------------ ------------- ------------ -----------
Total assets........................ $ 2,076,980 $ 421,420 $ (585,430) $ 1,912,970
------------ ------------- ------------ -----------
------------ ------------- ------------ -----------
LIABILITIES AND MASCO CORPORATION NET INVESTMENT AND ADVANCES
Current liabilities:
Notes payable......................... $ 220 $ 25,280 $ 25,500
Accounts payable...................... 67,540 26,690 $ (1,880) 92,350
Accrued liabilities................... 64,070 23,230 87,300
Intercompany account.................. 21,980 161,420 (183,400) 0
------------ ------------- ------------ -----------
Total current liabilities........... 153,810 236,620 (185,280) 205,150
Long-term debt.......................... 1,910 240 2,150
Deferred income taxes and other......... 69,350 6,220 75,570
------------ ------------- ------------ -----------
Total liabilities................... 225,070 243,080 (185,280) 282,870
Masco Corporation net investment and
advances............................... 1,851,910 178,340 (400,150) 1,630,100
------------ ------------- ------------ -----------
Total liabilities and Masco
Corporation net investment and
advances.......................... $ 2,076,980 $ 421,420 $ (585,430) $ 1,912,970
------------ ------------- ------------ -----------
------------ ------------- ------------ -----------
</TABLE>
F-16
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELMINATIONS COMBINED
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
1993
Net sales.................................... $ 1,522,100 $ 514,430 $ (273,040) $1,763,490
Cost of sales................................ 1,163,220 427,780 (264,200) 1,326,800
------------ ------------- ------------ ----------
Gross profit............................. 358,880 86,650 (8,840) 436,690
------------ ------------- ------------ ----------
Selling, general and administrative
expenses.................................... 287,120 89,240 (8,910) 367,450
------------ ------------- ------------ ----------
Operating profit......................... 71,760 (2,590) 70 69,240
Other (income) expense, net.................. 51,510 13,170 21,210 85,890
------------ ------------- ------------ ----------
Income (loss) before income taxes........ 20,250 (15,760) (21,140) (16,650)
Income taxes (credit)........................ 17,130 (8,760) -- 8,370
------------ ------------- ------------ ----------
Net income (loss)........................ $ 3,120 $ (7,000) $ (21,140) $ (25,020)
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
1994
Net sales.................................... $ 1,640,060 $ 551,740 $ (294,320) $1,897,480
Cost of sales................................ 1,256,440 462,800 (285,210) 1,434,030
------------ ------------- ------------ ----------
Gross profit............................. 383,620 88,940 (9,110) 463,450
------------ ------------- ------------ ----------
Selling, general and administrative
expenses.................................... 299,660 95,320 (9,630) 385,350
------------ ------------- ------------ ----------
Operating profit......................... 83,960 (6,380) 520 78,100
Other (income) expense, net.................. 58,170 16,230 19,970 94,370
------------ ------------- ------------ ----------
Income (loss) before income taxes........ 25,790 (22,610) (19,450) (16,270)
Income taxes (credit)........................ 16,420 (9,860) 6,560
------------ ------------- ------------ ----------
Net income (loss)........................ $ 9,370 $ (12,750) $ (19,450) $ (22,830)
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
1995
Net sales.................................... $ 1,728,250 $ 580,000 $ (315,640) $1,992,610
Cost of sales................................ 1,317,550 486,500 (303,060) 1,500,990
------------ ------------- ------------ ----------
Gross profit............................. 410,700 93,500 (12,580) 491,620
------------ ------------- ------------ ----------
Selling, general and administrative
expenses.................................... 315,060 98,120 (12,850) 400,330
------------ ------------- ------------ ----------
Operating profit......................... 95,640 (4,620) 270 91,290
Other (income) expense, net.................. 65,000 23,680 14,410 103,090
------------ ------------- ------------ ----------
Income (loss) before income taxes........ 30,640 (28,300) (14,140) (11,800)
Income taxes (credit)........................ 15,540 (9,450) -- 6,090
------------ ------------- ------------ ----------
Net income (loss)........................ $ 15,100 $ (18,850) $ (14,140) $ (17,890)
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
</TABLE>
F-17
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING CASH FLOWS STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM (FOR):
OPERATING ACTIVITIES:
Net income (loss)............................... $ 3,120 $ (7,000) $(21,140) $(25,020)
Depreciation and amortization................... 53,000 13,810 0 66,810
Bad debt provision.............................. 5,300 1,750 0 7,050
Deferred income taxes........................... 890 0 0 890
------------ ------------- ------------ ----------
Total from earnings......................... 62,310 8,560 (21,140) 49,730
(Increase) decrease in receivables.............. 9,400 (40,190) 0 (30,790)
(Increase) decrease in inventories.............. (31,060) (21,800) 0 (52,860)
Increase (decrease) in prepaid expenses......... (13,830) (7,840) 0 (21,670)
(Increase) decrease in current liabilities...... 18,050 (5,310) 0 12,740
(Increase) decrease in intercompany account,
net........................................... (65,330) 65,330 0 0
------------ ------------- ------------ ----------
Net cash from (for) operating activities...... (20,460) (1,250) (21,140) (42,850)
------------ ------------- ------------ ----------
INVESTING ACTIVITIES:
Capital expenditures............................ (56,920) (18,210) (75,130)
Issuance of notes receivable.................... (900) (9,120) (10,020)
Collection of notes receivable.................. 4,400 1,040 5,440
Other, net...................................... (68,970) 38,620 32,120 1,770
------------ ------------- ------------ ----------
Net cash (for) investing activities........... (122,390) 12,330 32,120 (77,940)
------------ ------------- ------------ ----------
FINANCING ACTIVITIES:
Increase (decrease) in Masco Corporation net
investment and advances........................ 138,230 65,390 (10,980) 192,640
Payment of other debt........................... (430) (66,950) (67,380)
Increase in other debt.......................... 4,430 210 4,640
------------ ------------- ------------ ----------
Net cash from (for) financing activities...... 142,230 (1,350) (10,980) 129,900
------------ ------------- ------------ ----------
CASH:
Increase (decrease) for the year................ (620) 9,730 0 9,110
At Jaunary 1.................................... 4,520 11,770 0 16,290
------------ ------------- ------------ ----------
At December 31.................................. $ 3,900 $ 21,500 $ 0 $ 25,400
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
</TABLE>
F-18
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING CASH FLOWS STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM (FOR):
OPERATING ACTIVITIES:
Net income (loss)............................... $ 9,370 $ (12,750) $(19,450) $(22,830)
Depreciation and amortization................... 53,480 12,900 0 66,380
Bad debt provision.............................. 3,680 2,040 0 5,720
Deferred income taxes........................... (3,260) 0 0 (3,260)
------------ ------------- ------------ ----------
Total from earnings........................... 63,270 2,190 (19,450) 46,010
(Increase) decrease in receivables.............. 850 (11,800) 710 (10,240)
(Increase) decrease in inventories.............. (27,180) (10,950) 0 (38,130)
(Increase) decrease in prepaid expenses......... (18,810) (2,240) 0 (21,050)
Increase (decrease) in current liabilities...... 11,480 11,960 (710) 22,730
(Increase) decrease in intercompany account,
net............................................ 4,290 (4,290) 0 0
------------ ------------- ------------ ----------
Net cash from (for) operating activities...... 33,900 (15,130) (19,450) (680)
INVESTING ACTIVITIES:
Capital expenditures............................ (57,140) (11,650) (68,790)
Issuance of notes receivable.................... 0 (1,000) (1,000)
Collection of notes receivable.................. 3,130 580 3,710
Other, net...................................... (15,340) 11,380 16,930 12,970
------------ ------------- ------------ ----------
Net cash from (for) investing activities...... (69,350) (690) 16,930 (53,110)
FINANCING ACTIVITIES:
Increase (decrease) in Masco Corporation net
investment and advances........................... 73,110 24,200 2,520 99,830
Increase (decrease) in other debt............... 5,360 5,360
Payment of other debt........................... (34,720) (17,370) (52,090)
------------ ------------- ------------ ----------
Net cash from (for) financing activities...... 38,390 12,190 2,520 53,100
CASH:
Increase (decrease) for the year................ 2,940 (3,630) 0 (690)
At January 1.................................... 3,900 21,500 0 25,400
------------ ------------- ------------ ----------
At December 31.................................. $ 6,840 $ 17,870 $ 0 $ 24,710
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
</TABLE>
F-19
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM (FOR):
Operating Activities:
Net income (loss)....................... $ 15,100 $ (18,850) $ (14,140) $ (17,890)
Depreciation and amortization........... 55,630 12,290 67,920
Bad debt provision...................... 6,190 430 6,620
Deferred income taxes................... 4,560 -- 4,560
------------ ------------- ----------- -----------
Total from earnings................... 81,480 (6,130) (14,140) 61,210
(Increase) decrease in receivables...... (16,670) (3,650) 1,200 (19,120)
(Increase) decrease in inventories...... 8,730 1,660 0 10,390
(Increase) decrease in prepaid
expenses............................... (11,370) (1,720) 0 (13,090)
Increase (decrease) in current
liabilities............................ 8,950 (12,850) (1,170) (5,070)
(Increase) decrease in intercompany
accounts, net.......................... 15,910 (15,910) 0 0
------------ ------------- ----------- -----------
Net cash from (for) operating
activities........................... 87,030 (38,600) (14,110) 34,320
Investing Activities:
Capital expenditures.................... (42,550) (18,480) (61,030)
Issuance of notes receivable............ (1,480) (8,780) (10,260)
Collection of notes receivable.......... 3,000 2,020 5,020
Other, net.............................. (4,600) (1,070) 14,460 8,790
------------ ------------- ----------- -----------
Net cash from (for) investing
activities........................... (45,630) (26,310) 14,460 (57,480)
Financing Activities:
Increase (decrease) in Masco Corporation
net investment and advances........... (41,530) 45,160 (350) 3,280
Increase (decrease) in other debt....... 120 16,080 16,200
Payment of other debt................... (2,290) (1,430) (3,720)
------------ ------------- ----------- -----------
Net cash from (for) financing
activities........................... (43,700) 59,810 (350) 15,760
Cash:
Increase (decrease) for the year........ (2,300) (5,100) 0 (7,400)
At January 1............................ 6,840 17,870 0 24,710
------------ ------------- ----------- -----------
At December 31.......................... $ 4,540 $ 12,770 $ 0 $ 17,310
------------ ------------- ----------- -----------
------------ ------------- ----------- -----------
</TABLE>
F-20
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash investments............... $ 2,590 $ 9,460 $ $ 12,050
Receivables............................. 254,810 73,650 (2,710) 325,750
Inventories............................. 455,150 113,010 568,160
Prepaid expenses........................ 18,110 16,920 35,030
Deferred income taxes................... 17,000 17,000
Intercompany account.................... 158,230 17,360 (175,990) 0
------------ ------------- ------------ ----------
Total current assets................ 905,890 230,800 (178,700) 957,990
Property and equipment, net............... 376,550 101,920 478,470
Excess of cost over acquired net assets... 387,230 8,150 395,380
Notes receivable.......................... 2,780 16,110 18,890
Investments in affiliates................. 202,170 (202,170) 0
Other assets.............................. 23,460 19,410 42,870
------------ ------------- ------------ ----------
Total assets........................ $ 1,898,080 $ 376,390 $ (380,870) $1,893,600
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
LIABILITIES AND MASCO CORPORATION NET
INVESTMENT AND ADVANCES
CURRENT LIABILITIES:
Notes payable........................... $ 220 $ 24,290 $ $ 24,510
Accounts payable........................ 72,940 26,820 (2,720) 97,040
Accrued liabilities..................... 75,410 20,760 96,170
Intercompany account.................... 17,760 158,230 (175,990) 0
------------ ------------- ------------ ----------
Total current liabilities........... 166,330 230,100 (178,710) 217,720
Long-term debt............................ 1,890 180 2,070
Deferred income taxes and other........... 69,420 4,290 73,710
------------ ------------- ------------ ----------
Total liabilities................... 237,640 234,570 (178,710) 293,500
MASCO CORPORATION NET INVESTMENT AND
ADVANCES................................. 1,660,440 141,820 (202,160) 1,600,100
------------ ------------- ------------ ----------
Total liabilities and Masco
Corporation Net Investment and
Advances......................... $ 1,898,080 $ 376,390 $ (380,870) $1,893,600
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
</TABLE>
F-21
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales................................ $864,990 $ 252,150 $ (136,020) $981,120
Cost of sales............................ 666,180 211,800 (136,020) 741,960
------------ ------------- ------------ ----------
Gross profit....................... 198,810 40,350 0 239,160
------------ ------------- ------------ ----------
Selling, general and administrative
expenses................................ 153,980 35,410 189,390
------------ ------------- ------------ ----------
Operating profit..................... 44,830 4,940 0 49,770
Other (income) expense, net:............. 39,240 5,980 2,220 47,440
------------ ------------- ------------ ----------
Income (loss) before income taxes.... 5,590 (1,040) (2,220) 2,330
Income taxes (credit).................... 5,430 (500) 4,930
------------ ------------- ------------ ----------
Net income (loss).................... $ 160 $ (540) $ (2,220) $ (2,600)
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
</TABLE>
F-22
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. SUBSEQUENT EVENT--(CONTINUED)
MASCO HOME FURNISHINGS GROUP
COMBINING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
MASCO HOME
GUARANTOR NON-GUARANTOR FURNISHINGS
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS COMBINED
------------ ------------- ------------ ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM (FOR):
OPERATING ACTIVITIES:
Net income (loss)............................... $ 160 $ (540) $ (2,220) $ (2,600)
Depreciation and amortization................... 27,010 6,820 33,830
Bad debt provision.............................. 1,380 210 1,590
------------ ------------- ------------ ----------
Total from earnings......................... 28,550 6,490 (2,220) 32,820
(Increase) decrease in receivables.............. (2,250) 9,440 800 7,990
(Increase) decrease in inventories.............. (25,270) 17,050 (8,220)
(Increase) decrease in prepaid expenses......... (5,970) (1,960) (7,930)
(Increase) decrease in intercompany accounts,
net........................................... (1,030) 1,030 0
Increase (decrease) in current liabilities...... 16,740 (2,340) (840) 13,560
------------ ------------- ------------ ----------
Net cash from (for) operating activities...... 10,770 29,710 (2,260) 38,220
------------ ------------- ------------ ----------
INVESTING ACTIVITIES:
Capital expenditures............................ (11,630) (2,240) (13,870)
Issuance of notes receivable.................... (3,280) (3,280)
Collection of notes receivable.................. 3,180 2,310 5,490
Other, net...................................... (4,100) 3,930 (3,180) (3,350)
------------ ------------- ------------ ----------
Net cash from (for) investing activities...... (15,830) 4,000 (3,180) (15,010)
------------ ------------- ------------ ----------
FINANCING ACTIVITIES:
Increase (decrease) in Masco Corporation net
investment and advances........................ 3,140 (35,980) 5,440 (27,400)
Increase (decrease) in other debt............... 800 64,660 65,460
Payment of other debt........................... (830) (65,700) (66,530)
------------ ------------- ------------ ----------
Net cash from financing activities............ 3,110 (37,020) 5,440 (28,470)
------------ ------------- ------------ ----------
CASH:
Increase (decrease) for the period.............. (1,950) (3,310) (5,260)
At January 1.................................... 4,540 12,770 17,310
------------ ------------- ------------ ----------
At June 30...................................... $ 2,590 $ 9,460 $ 0 $ 12,050
------------ ------------- ------------ ----------
------------ ------------- ------------ ----------
</TABLE>
F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of LifeStyle Furnishings International Ltd.:
We have audited the accompanying balance sheet of LifeStyle Furnishings
International Ltd. (the "Company") as of June 30, 1996. This financial statement
is the responsibility of management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of financial
position. We believe that our audit of the balance sheet provides a reasonable
basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of LifeStyle Furnishings
International Ltd. as of June 30, 1996, in conformity with generally accepted
accounting principles.
As discussed in the Subsequent Event Note, the Company's parent, Furnishings
International Inc. (FII) acquired the Home Furnishings Group businesses of Masco
Corporation for $1.1 billion. Substantially all of the businesses were
contributed to the Company by FII. The accompanying financial statements do not
reflect the impact of this transaction.
Coopers & Lybrand L.L.P.
Greensboro, North Carolina
August 5, 1996
F-24
<PAGE>
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
BALANCE SHEET
<TABLE>
<CAPTION>
AT JUNE 30, 1996
---------------------------
(DOLLARS IN ACTUAL DOLLARS)
<S> <C>
Assets:
Cash............................................................... $ 100
-----
-----
Stockholder's equity:
Common stock, par value $.01 per share, 3000 shares authorized, 100
shares issued and outstanding.................................... $ 1
Capital surplus.................................................... 99
-----
Total stockholder's equity....................................... $ 100
-----
-----
</TABLE>
See accompanying notes.
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
NOTES TO BALANCE SHEET
1. BASIS OF PRESENTATION
LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the "Company") was formed in May
1996. In the formation of the Company, 100 shares of common stock were issued to
FURNISHINGS INTERNATIONAL INC. ("FII"), the Company's stockholder. Since
formation, the Company has not engaged in any activities other than those
incident to its formation and capitalization, therefore, no statements of
operations or cash flows have been presented.
2. SUBSEQUENT EVENT
On August 5, 1996, FII acquired the Home Furnishings Group businesses from
Masco Corporation for approximately $1.1 billion. FII contributed substantially
all of the businesses acquired to the Company. The Company incurred $680 million
in debt to partially finance the acquisition. Debt outstanding as of August 5,
1996, is as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Revolving credit facility with interest at 8.0%................................ $ 25.0
Tranche A term loan, quarterly principal payments through 2002, with interest
at 8.0%..................................................................... 125.0
Tranche B term loan, quarterly principal payments through 2004, with interest
at 8.5%..................................................................... 175.0
Receivables facility with interest at 6.5%.................................... 155.0
Senior subordinated notes due 2006 with interest at 10.875%................... 200.0
-------------
680.0
Assumed indebtedness.......................................................... 28.3
-------------
$ 708.3
-------------
-------------
</TABLE>
In connection with the Senior Subordinated Note offering, each of the
Company's domestic operating subsidiaries ("the Guarantor Subsidiaries") fully
and unconditionally guarantee the Company's performance under the Notes on a
joint and several basis. The Guarantor Subsidiaries are direct or indirect
wholly-owned subsidiaries of the Company. The remaining subsidiaries are direct
or indirect subsidiaries of the Guarantor Subsidiaries.
F-25
<PAGE>
No person has been authorized to give any
information or to make any representations
other than those contained in this [FILESTYLE FURNISHINGS
Prospectus, and, if given or made, such INTERNATIONAL LOGO]
information or representations must not be
relied upon as having been authorized. This
Prospectus does not constitute an offer to
sell or the solicitation of an offer to buy
any securities other than the securities to
which it relates or any offer to sell or the
solicitation of an offer to buy such
securities in any circumstances in which such
offer or solicitation is unlawful. Neither
the delivery of this Prospectus nor any sale
made hereunder shall, under any
circumstances, create any implication that
there has been no change in the affairs of
the Company since the date hereof or that the
information contained herein is correct as of
any time subsequent to its date.
- -------------------------------------------
Table of Contents
Available Information................. 2 ---------------
Summary............................... 3 PROSPECTUS
Risk Factors.......................... 15 ---------------
Use of Proceeds....................... 20
Capitalization........................ 21
Selected Historical and Pro Forma
Financial Data....................... 22
Unaudited Pro Forma Financial
Information.......................... 24
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 32
Exchange Offer........................ 40
Business.............................. 46
Management............................ 60 OFFER TO EXCHANGE
Ownership of Securities............... 61 10 7/8% SENIOR SUBORDINATED
Certain Transactions.................. 68 NOTES DUE 2006 FOR 10 7/8%
Description of Senior Bank SENIOR SUBORDINATED NOTES
Facilities........................... 71 DUE 2006
Description of Receivables Facility... 73
Description of Notes.................. 75
Certain Federal Income Tax
Considerations........................ 108
Plan of Distribution.................. 110
Legal Matters......................... 110
Experts............................... 110
Index to Financial Statements......... F-1
UNTIL , 199 (90 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. September , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") (other than an action by or in the right of the corporation) by
reason of the fact that such person 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 such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person 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 or her conduct was unlawful. A Delaware corporation may indemnify any person
under such section in connection with a proceeding by or in the right of the
corporation to procure judgment in its favor, as provided in the preceding
sentence, against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action, except that no indemnification shall be made in respect thereof unless,
and then only to the extent that, a court of competent jurisdiction shall
determine upon application that such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper. A Delaware
corporation must indemnify any peson who was successful on the merits or
otherwise in defense of any action, suit or proceeding or in defense of any
claim, issue or matter in any proceeding, by reason of the fact that such person
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 such person in connection therewith. A Delaware corporation may pay
for the expenses (including attorneys' fees) incurred by an officer or director
in defending a proceeding in advance of the final disposition upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation.
The Certificate of Incorporation and By-laws of LIFESTYLE FURNISHINGS
INTERNATIONAL LTD. (the "Company") provide for indemnification of directors and
officers to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law provides that a
Delaware corporation may in its articles of incorporation eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director except for
liability: for any breach of the director's duty of loyalty to the corporation
or its stockholders; for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; under Section 174
(pertaining to certain prohibited acts including unlawful payment of dividends
or unlawful purchase or redemption of the corporation's capital stock); or for
any transaction from which the director derived an improper personal benefit.
The Company's Certificate of Incorporation eliminates the liability of directors
for monetary damages for breach of fiduciary duty as a director unless, and only
to the extent that, such director is liable (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law or any
amendment thereto or successor provision thereto, or (iv) for any transaction
from which the director derived an improper personal
II-1
<PAGE>
benefit. The Delaware General Corporation Law permits the purchase of insurance
on behalf of directors and officers against any liability asserted against
directors and officers and incurred by such pesons in such capacity, or arising
out of their status as such, whether or not the corporation would have the power
to indemnify offices and directors against such liability. The Company's
corporate parent, FURNISHINGS INTERNATIONAL INC., has obtained liability
insurance coverage, which includes coverage to reimburse the Company (and the
Company's subsidiaries) for amounts required or permitted by law to be paid to
indemnify directors and officers.
The foregoing summary of the Delaware General Corporation Law, the Company's
Certificate of Incorporation and the Company's By-Laws is qualified in its
entirety by reference to the relevant provisions of the Delaware General
Corporation Law and by reference to the relevant provisions of the Company's
Certificate of Incorporation (filed as Exhibit 3.1) and the relevant provisions
of the Company's By-Laws (filed as Exhibit 3.25).
The Company provides for indemnification of directors and officers of its
subsidiaries, including the co-registrants, substantially to the same extent and
under the same conditions that such indemnification is provided at the Company
level.
See Item 22 for a statement of the co-registrants' undertaking as to the
Securities and Exchange Commission's position respecting indemnification for
liabilities arising under the Securities Act of 1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
<C> <S>
3.1* Certificate of Incorporation of LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the
"Company")
3.2* Certificate of Incorporation of Ametex Fabrics, Inc.
3.3* Certificate of Incorporation of The Berkline Corporation
3.4* Articles of Incorporation of Blue Mountain Trucking Corporation
3.5* Articles of Incorporation of Custom Truck Tires, Inc.
3.6* Certificate of Incorporation of D-H Retail Space, Inc.
3.7* Certificate of Incorporation of Drexel Heritage Advertising, Inc.
3.8* Certificate of Incorporation of Drexel Heritage Furnishings Inc.
3.9* Articles of Incorporation of Drexel Heritage Home Inspirations, Inc.
3.10* Certificate of Incorporation of Henredon Furniture Industries, Inc.
3.11* Articles of Incorporation of Henredon Transportation Company
3.12* Certificate of Incorporation of Interior Fabric Design, Inc.
3.13* Articles of Incorporation of Intro Europe, Inc.
3.14* Articles of Incorporation of La Barge, Inc.
3.15* Certificate of Incorporation of Lexington Furniture Industries, Inc.
3.16* Certificate of Incorporation of Lifestyle Holdings Ltd.
3.17* Articles of Incorporation of Maitland-Smith, Inc.
</TABLE>
- -------------------
* Filed herewith
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
<C> <S>
3.18* Articles of Incorporation of Marbro Lamp Company
3.19* Certificate of Incorporation of Ramm, Son & Crocker, Inc.
3.20* Certificate of Incorporation of Robert Allen Fabrics, Inc.
3.21* Certificate of Incorporation of Robert Allen Fabrics of N.Y., Inc.
3.22* Certificate of Incorporation of Sunbury Textile Mills, Inc.
3.23* Certificate of Incorporation of Universal Furniture Industries
3.24* Certificate of Incorporation of Universal Furniture Limited
3.25* By-Laws of the Company
3.26* By-Laws of Ametex Fabrics, Inc.
3.27* By-Laws of The Berkline Corporation
3.28* By-Laws of Blue Mountain Trucking Corporation
3.29* By-Laws of Custom Truck Tires, Inc.
3.30* By-Laws of D-H Retail Space, Inc.
3.31* By-Laws of Drexel Heritage Advertising, Inc.
3.32* By-Laws of Drexel Heritage Furnishings Inc.
3.33* By-Laws of Drexel Heritage Home Inspirations, Inc.
3.34* By-Laws of Henredon Furniture Industries, Inc.
3.35* By-Laws of Henredon Transportation Company
3.36* By-Laws of Interior Fabric Design, Inc.
3.37* By-Laws of Intro Europe, Inc.
3.38* By-Laws of La Barge, Inc.
3.39* By-Laws of Lexington Furniture Industries, Inc.
3.40* By-Laws of Lifestyle Holdings Ltd.
3.41* By-Laws of Maitland-Smith, Inc.
3.42* By-Laws of Marbro Lamp Company
3.43* By-Laws of Ramm, Son & Crocker, Inc.
3.44* By-Laws of Robert Allen Fabrics, Inc.
3.45* By-Laws of Robert Allen Fabrics of N.Y., Inc.
3.46* By-Laws of Sunbury Textile Mills, Inc.
3.47* By-Laws of Universal Furniture Industries
3.48* By-Laws of Universal Furniture Limited
4* Indenture between the Company and IBJ Schroder Bank & Trust Company, as Trustee,
dated as of August 5, 1996.
5+ Opinion of Morgan, Lewis & Bockius LLP
8+ Opinion of Morgan, Lewis & Bockius LLP regarding tax matters
</TABLE>
- -------------------
* Filed herewith
+ To be filed by amendment
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
<C> <S>
10.1* Acquisition Agreement between FURNISHINGS INTERNATIONAL INC. and Masco Corporation
dated as of March 29, 1996
10.2* Amendment No. 1 to Acquisition Agreement dated as of June 21, 1996
10.3* Amendment No. 2 to Acquisition Agreement dated as of August 5, 1996
10.4* Credit Agreement dated as of August 5, 1996 among FURNISHINGS INTERNATIONAL INC.,
the Company, the subsidiary borrowers named therein, the lenders named therein and
The Chase Manhattan Bank, as Swingline Lender, Administrative Agent and Collateral
Agent, Chase Manhattan Bank Delaware as Issuing Bank
10.5* Exchange and Registration Rights Agreement between the Company, the Guarantors
named therein, Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, dated as of August 5, 1996.
10.6* Pooling Agreement, dated as of August 5, 1996, among LFI Receivables Corporation,
LFI Servicing Corporation and The Chase Manhattan Bank, as Trustee.
10.7* Series 1996-A Supplement, dated as of August 5, 1996, among LFI Receivables
Corporation, LFI Servicing Corporation, Chemical Bank, as Agent and as Initial
Purchaser, and The Chase Manhattan Bank, as Trustee.
10.8* Servicing Agreement, dated as of August 5, 1996, among LFI Receivables
Corporation, LFI Servicing Corporation, as Master Servicer, each of the Servicers
party thereto and The Chase Manhattan Bank, as Trustee.
10.9* Receivables Sale Agreement, dated as of August 5, 1996, among LFI Receivables
Corporation, the Sellers named therein and the Servicers named therein.
10.10* Stockholders' Agreement, dated as of August 5, 1996, among Masco Corporation,
FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc., Associate Madison
Companies, Inc., and the other stockholders named therein.
10.11* Registration Rights Agreement, dated as of August 5, 1996, among Masco
Corporation, FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc., Associate
Madison Companies, Inc., and the other stockholders named therein.
10.12* Management Agreement, dated as of August 5, 1996, by and between FURNISHINGS
INTERNATIONAL INC. and the Company.
10.13* Tax Sharing Agreement, dated as of the 5th day of August, 1996, by and between
FURNISHINGS INTERNATIONAL INC., Simmons Upholstered Furniture Corporation, the
Company and LFI Receivables Corporation.
10.14* Transition Services Agreement, dated as of August 5, 1996, among FURNISHINGS
INTERNATIONAL INC. and Masco Corporation.
10.15* 12.0% Senior Pay-in-Kind Note of FURNISHINGS INTERNATIONAL INC. dated August 5,
1996.
10.16* Purchase Agreement dated July 31, 1996 between the Company, Chase Securities Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and the Guarantors named
therein.
12* Statement re: Computation of Ratio of Earnings to Fixed Charges
21* Subsidiaries of the Company
23.1+ Consent of Morgan, Lewis & Bockius LLP (included in opinion filed as Exhibits 5)
23.2+ Consent of Morgan, Lewis & Bockius LLP (included in opinion filed as Exhibit 8)
23.3* Consent of Coopers & Lybrand L.L.P.
</TABLE>
- -------------------
* Filed herewith
+ To be filed by amendment
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
<C> <S>
23.4* Consent of Coopers & Lybrand L.L.P.
24* Powers of Attorney (included on the signature pages to this Registration
Statement)
25* Statement of Eligibility of IBJ Schroder Bank & Trust Company, as Trustee
27* Financial Data Schedule
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
(b) Financial Statement Schedules:
1. Financial Statement Schedules filed herewith:
Schedule II Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
co-registrants pursuant to the provisions described under Item 20 or otherwise,
the the co-registrants have 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 a co-registrant of expenses incurred or paid by a director, officer
or controlling person of such co-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, such co-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.
The undersigned co-registrants hereby undertake:
To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
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.
- ------------
* Filed herewith.
+ To be filed by amendment.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
LIFESTYLE FURNISHINGS
INTERNATIONAL LTD.
By /s/ WAYNE B. LYON
...................................
Wayne B. Lyon
Chairman of the Board,
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board, President September 13, 1996
................................... and Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Vice President, Treasurer and September 13, 1996
................................... Chief Financial Officer
Ronald J. Hoffman (principal financial and
acounting officer)
/s/ RICHARD M. CASHIN, JR. Director September 13, 1996
...................................
Richard M. Cashin, Jr.
/s/ C. SEAN DAY Director September 13, 1996
...................................
C. Sean Day
/s/ ROBERT L. GEORGE Director September 13, 1996
...................................
Robert L. George
/s/ JOHN A. MORGAN Director September 13, 1996
...................................
John A. Morgan
/s/ DONALD M. ROBERTS Director September 13, 1996
...................................
Donald M. Roberts
/s/ DAVID F. THOMAS Director September 13, 1996
...................................
David F. Thomas
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
AMETEX FABRICS, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
THE BERKLINE CORPORATION
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
BLUE MOUNTAIN TRUCKING
CORPORATION
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
CUSTOM TRUCK TIRES, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
D-H RETAIL SPACE, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
DREXEL HERITAGE ADVERTISING, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
DREXEL HERITAGE FURNISHINGS, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
DREXEL HERITAGE HOME
INSPIRATIONS, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
HENREDON FURNITURE INDUSTRIES, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
HENREDON TRANSPORTATION COMPANY
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
INTERIOR FABRIC DESIGN, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
INTRO EUROPE, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
LA BARGE, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
LIFESTYLE HOLDINGS LTD.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President, General September 13, 1996
................................... Counsel and Secretary
Douglas C. Barnard
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
LEXINGTON FURNITURE INDUSTRIES, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
MAITLAND-SMITH, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
MARBRO LAMP COMPANY
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
RAMM, SON & CROCKER, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
ROBERT ALLEN FABRICS, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
ROBERT ALLEN FABRICS
OF NEW YORK, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
SUNBURY TEXTILE MILLS, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
UNIVERSAL FURNITURE INDUSTRIES, INC.
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 13th day of September, 1996.
UNIVERSAL FURNITURE LIMITED
By: /s/ WAYNE B. LYON
..................................
Wayne B. Lyon
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Wayne B. Lyon, Douglas C.
Barnard, Ronald J. Hoffman and James R. Melton, any of whom may act without the
joinder of the other, as his 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 to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration statement has been signed below by the following persons in the
capacities at the above-named registrant and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------- ---------------------------------- -------------------
<S> <C> <C>
/s/ WAYNE B. LYON Chairman of the Board and September 13, 1996
................................... Chief Executive Officer
Wayne B. Lyon (principal executive officer)
/s/ RONALD J. HOFFMAN Director, Vice President and September 13, 1996
................................... Treasurer (principal financial
Ronald J. Hoffman and accounting officer)
/s/ DOUGLAS C. BARNARD Director, Vice President and September 13, 1996
................................... Secretary
Douglas C. Barnard
</TABLE>
II-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Masco Corporation:
In connection with our audits of the combined financial statements of the
Masco Home Furnishings Group as of December 31, 1995 and 1994, and for each of
the three years in the period ended December 31, 1995, which financial
statements are included in the Prospectus, we have also audited the financial
statement schedule listed in Item 21 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included herein.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 1, 1996
S-1
<PAGE>
MASCO HOME FURNISHINGS GROUP
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN C
--------------------------
ADDITIONS
COLUMN B -------------------------- COLUMN E
------------ CHARGED ----------
BALANCE AT CHARGED (CREDITED) COLUMN D BALANCE AT
BEGINNING TO COSTS TO OTHER ---------- END OF
OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts,
deducted from accounts
receivable in the balance sheet:
1995.................... $7.7 $6.6 $5.3 $9.0
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
1994.................... $9.9 $5.7 $7.9 $7.7
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
1993.................... $7.7 $7.1 $4.9 $9.9
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
<C> <S>
3.1* Certificate of Incorporation of LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the
"Company")
3.2* Certificate of Incorporation of Ametex Fabrics, Inc.
3.3* Certificate of Incorporation of The Berkline Corporation
3.4* Articles of Incorporation of Blue Mountain Trucking Corporation
3.5* Articles of Incorporation of Custom Truck Tires, Inc.
3.6* Certificate of Incorporation of D-H Retail Space, Inc.
3.7* Certificate of Incorporation of Drexel Heritage Advertising, Inc.
3.8* Certificate of Incorporation of Drexel Heritage Furnishings Inc.
3.9* Articles of Incorporation of Drexel Heritage Home Inspirations, Inc.
3.10* Certificate of Incorporation of Henredon Furniture Industries, Inc.
3.11* Articles of Incorporation of Henredon Transportation Company
3.12* Certificate of Incorporation of Interior Fabric Design, Inc.
3.13* Articles of Incorporation of Intro Europe, Inc.
3.14* Articles of Incorporation of La Barge, Inc.
3.15* Certificate of Incorporation of Lexington Furniture Industries, Inc.
3.16* Certificate of Incorporation of Lifestyle Holdings Ltd.
3.17* Articles of Incorporation of Maitland-Smith, Inc.
3.18* Articles of Incorporation of Marbro Lamp Company
3.19* Certificate of Incorporation of Ramm, Son & Crocker, Inc.
3.20* Certificate of Incorporation of Robert Allen Fabrics, Inc.
3.21* Certificate of Incorporation of Robert Allen Fabrics of N.Y., Inc.
3.22* Certificate of Incorporation of Sunbury Textile Mills, Inc.
3.23* Certificate of Incorporation of Universal Furniture Industries
3.24* Certificate of Incorporation of Universal Furniture Limited
3.25* By-Laws of the Company
3.26* By-Laws of Ametex Fabrics, Inc.
3.27* By-Laws of The Berkline Corporation
3.28* By-Laws of Blue Mountain Trucking Corporation
3.29* By-Laws of Custom Truck Tires, Inc.
3.30* By-Laws of D-H Retail Space, Inc.
3.31* By-Laws of Drexel Heritage Advertising, Inc.
3.32* By-Laws of Drexel Heritage Furnishings Inc.
3.33* By-Laws of Drexel Heritage Home Inspirations, Inc.
3.34* By-Laws of Henredon Furniture Industries, Inc.
3.35* By-Laws of Henredon Transportation Company
3.36* By-Laws of Interior Fabric Design, Inc.
3.37* By-Laws of Intro Europe, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
<C> <S>
3.38* By-Laws of La Barge, Inc.
3.39* By-Laws of Lexington Furniture Industries, Inc.
3.40* By-Laws of Lifestyle Holdings Ltd.
3.41* By-Laws of Maitland-Smith, Inc.
3.42* By-Laws of Marbro Lamp Company
3.43* By-Laws of Ramm, Son & Crocker, Inc.
3.44* By-Laws of Robert Allen Fabrics, Inc.
3.45* By-Laws of Robert Allen Fabrics of N.Y., Inc.
3.46* By-Laws of Sunbury Textile Mills, Inc.
3.47* By-Laws of Universal Furniture Industries
3.48* By-Laws of Universal Furniture Limited
4* Indenture between the Company and IBJ Schroder Bank & Trust Company, as Trustee,
dated as of August 5, 1996.
5+ Opinion of Morgan, Lewis & Bockius LLP
8+ Opinion of Morgan, Lewis & Bockius LLP regarding tax matters
10.1* Acquisition Agreement between FURNISHINGS INTERNATIONAL INC. and Masco Corporation
dated as of March 29, 1996
10.2* Amendment No. 1 to Acquisition Agreement dated as of June 21, 1996
10.3* Amendment No. 2 to Acquisition Agreement dated as of August 5, 1996
10.4* Credit Agreement dated as of August 5, 1996 among FURNISHINGS INTERNATIONAL INC.,
the Company, the subsidiary borrowers named therein, the lenders named therein and
The Chase Manhattan Bank, as Swingline Lender, Administrative Agent and Collateral
Agent, Chase Manhattan Bank Delaware as Issuing Bank
10.5* Exchange and Registration Rights Agreement between the Company, the Guarantors
named therein, Chase Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, dated as of August 5, 1996.
10.6* Pooling Agreement, dated as of August 5, 1996, among LFI Receivables Corporation,
LFI Servicing Corporation and The Chase Manhattan Bank, as Trustee.
10.7* Series 1996-A Supplement, dated as of August 5, 1996, among LFI Receivables
Corporation, LFI Servicing Corporation, Chemical Bank, as Agent and as Initial
Purchaser, and The Chase Manhattan Bank, as Trustee.
10.8* Servicing Agreement, dated as of August 5, 1996, among LFI Receivables
Corporation, LFI Servicing Corporation, as Master Servicer, each of the Servicers
party thereto and The Chase Manhattan Bank, as Trustee.
10.9* Receivables Sale Agreement, dated as of August 5, 1996, among LFI Receivables
Corporation, the Sellers named therein and the Servicers named therein.
10.10* Stockholders' Agreement, dated as of August 5, 1996, among Masco Corporation,
FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc., Associate Madison
Companies, Inc., and the other stockholders named therein.
10.11* Registration Rights Agreement, dated as of August 5, 1996, among Masco
Corporation, FURNISHINGS INTERNATIONAL INC., 399 Venture Partners, Inc., Associate
Madison Companies, Inc., and the other stockholders named therein.
10.12* Management Agreement, dated as of August 5, 1996, by and between FURNISHINGS
INTERNATIONAL INC. and the Company.
10.13* Tax Sharing Agreement, dated as of the 5th day of August, 1996, by and between
FURNISHINGS INTERNATIONAL INC., Simmons Upholstered Furniture Corporation, the
Company and LFI Receivables Corporation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
<C> <S>
10.14* Transition Services Agreement, dated as of August 5, 1996, among FURNISHINGS
INTERNATIONAL INC. and Masco Corporation.
10.15* 12.0% Senior Pay-in-Kind Note of FURNISHINGS INTERNATIONAL INC. dated August 5,
1996.
10.16* Purchase Agreement dated July 31, 1996 between the Company, Chase Securities Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, and the Guarantors named
therein.
12* Statement re: Computation of Ratio of Earnings to Fixed Charges
21* Subsidiaries of the Company
23.1+ Consent of Morgan, Lewis & Bockius LLP (included in opinion filed as Exhibits 5)
23.2+ Consent of Morgan, Lewis & Bockius LLP (included in opinion filed as Exhibit 8)
23.3* Consent of Coopers & Lybrand L.L.P.
23.4* Consent of Coopers & Lybrand L.L.P.
24* Powers of Attorney (included on the signature pages to this Registration
Statement)
25* Statement of Eligibility of IBJ Schroder Bank & Trust Company, as Trustee
27* Financial Data Schedule
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
- ------------
<TABLE>
<C> <S>
* Filed herewith.
+ To be filed by amendment.
</TABLE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
The undersigned incorporator, for the purpose of incorporating or
organizing a corporation under the General Corporation Law of the State of
Delaware, hereby certifies that:
FIRST: The name of the corporation (the "Corporation") is: Lifestyle
Furnishings International Ltd.
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware
19801. 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 of capital stock which the
Corporation shall have authority to issue is Three Thousand (3,000) shares with
a par value of $0.01 per share, all such shares will be one class and designated
"Common Stock".
FIFTH: The name and mailing address of the incorporator are as
follows:
Name Mailing Address
---- ---------------
Catherine I. Jourdan Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178.
SIXTH: Elections of directors need not be by ballot unless the
By-Laws of the Corporation shall so provide. Meetings of stockholders may be
held within or without the State of Delaware, as the By-Laws may provide. The
books of the Corporation may be kept (subject to any provision contained in the
General Corporation Law of the State of Delaware) 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.
SEVENTH: The Board of Directors is expressly authorized to adopt,
amend or repeal the By-Laws of the Corporation, subject to the reserved power of
the stockholders to amend and repeal any By-Laws adopted by the Board of
Directors.
<PAGE>
EIGHTH: No person who is or was a director of the Corporation shall
be personally liable to the Corporation for monetary damages for breach of
fiduciary duty as a director unless, and only to the extent that, such director
is liable (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or any
amendment thereto or successor provision thereto, or (iv) for any transaction
from which the director derived an improper personal benefit. No amendment to,
repeal or adoption of any provision of this Certificate of Incorporation
inconsistent with this article shall apply to or have any effect on the
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision.
NINTH: Each person who at any time is or shall have been a director,
officer, employee or agent of the Corporation and is threatened to be or is made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was 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, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any such action, suit or
proceeding to the fullest extent authorized under Section 145 of the General
Corporation Law of the State of Delaware. The foregoing right of indemnification
shall in no way be exclusive of any other rights of indemnification to which
such director, officer, employee or agent may be entitled under any By-Law,
agreement, vote of stockholders or disinterested directors, or otherwise.
IN WITNESS WHEREOF, I have signed this Certificate this 21st day of
May, 1996.
_______________________________
Catherine I. Jourdan
Sole Incorporator
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
------------------------------
(Pursuant to Section 241 of the General Corporation Law
of the State of Delaware)
The undersigned, Douglas C. Barnard, Secretary of Lifestyle Furnishings
International Ltd., a corporation existing under the laws of the State of
Delaware (the "Corporation"), hereby certifies on behalf of the Corporation as
follows:
1. The Certificate of Incorporation of Lifestyle Furnishings
International Ltd. is hereby amended by changing Article FIRST
thereof which now reads as follows:
"FIRST: The name of the corporation (the "Corporation") is:
Lifestyle Furnishings International Ltd."
to read as follows:
"FIRST: The name of the corporation (the "Corporation") is:
LIFESTYLE FURNISHINGS INTERNATIONAL LTD."
2. The foregoing amendment has been duly adopted in accordance with the
provisions of Section 241 of the General Corporation Law of the
State of Delaware.
[Remainder of the Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this Certificate
this __ day of August, 1996.
______________________________________
Name: Douglas C. Barnard
Title: Secretary
[Signature Page to
Lifestyle Furnishings International Ltd.
Amendment to Certificate of Incorporation]
Exhibit 3.2
CERTIFICATE OF INCORPORATION
OF
AMETEX FABRICS, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that :
FIRST: The name of the corporation (hereinafter called the "corporation"),
-----
is
AMTEX FABRICS, INC.
SECOND: The address, including street, number, city, and county, of the
------
registered office of the corporation in the State of Delaware is 229 South State
Street, City of Dover, County of Kent; and the name of the registered agent of
the corporation in the State of Delaware at such address is the Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any unlawful 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 of stock which the corporation shall
------
have authority to issue is One Thousand (1,000), all of which are without par
value. All such shares are of the class and are Common Stock.
FIFTH: The name and the mailing address of the incorporation are as
-----
follows:
NAME MAILING ADDRESS
---- ---------------
T.M. Bonovich 229 South State Street, Dover, Delaware 19901
SIXTH: The corporation is to have perpetual existence.
-----
<PAGE>
SEVENTH: Whenever a compromise or arrangement is proposed between this
-------
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 221 of Title 8 of the Delaware Code or on the
applications of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this corporas as the case
court directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
this corporation, as the case may be, and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
------
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class whereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
filed by, or in the manner provided, the By-Laws. The phrase "whole Board"
and the phrase "total number of directors" shall be deemed to have the
same meaning, to wit, the total number of directors which the corporation
would have if there were no vacancies. No election of directors need to be
by written ballot.
2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with
-2-
<PAGE>
the provisions of Section 190 of the General Corporation Law of the State
of Delaware, and, after the corporation has received any payment for any
of its stock, the power to adopt, amend, or repeal the By-Laws of the
corporation may be exercised by the Board of Directors of the Corporation;
provided, however, that any provision for the classification of directors
of the corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial By-Law or in a By-Law adopted
by the stockholders entitled to vote of the corporation unless provisions
for such classification shall be set forth in this certificate of
incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) of Section 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
NINTH: 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.
TENTH: The corporation shall, to the fullest extent permitted by Section
-----
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and
the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those
-3-
<PAGE>
indemnified may be entitled under any 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, and shall
continue as to a person has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
ELEVENTH: From time to time any of the provisions of this certificate
--------
of incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on August 14, 1987.
/s/ T. M. Bonovich
--------------------------
T. M. Bonovich
Incorporator
-4-
Exhibit 3.3
CERTIFICATE OF INCORPORATION
OF
THE BERKLINE CORPORATION
1. The name of the corporation is:
Masco Acquisition BC, Inc.
2. The address of its registered office in the state of Delaware is 1209
Orange Street in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purpose to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is One Thousand (1,000) and the par value of each of the
shares is One Dollar ($1.00) amounting in the aggregate to One Thousand Dollars
($1,000).
5. The board of directors is authorized to make, alter, or repeal the
Bylaws of the corporation. Election of directors need not be by ballot.
6. The name and mailing address of the incorporator is:
Sharon O'Brien
21001 Van Born Road
Taylor, Michigan 48180
I, the undersigned, being the incorporator of the above-named corporation,
for the purpose of forming a corporation pursuant to the General Corporation Law
of Delaware, do make this certificate hereby declaring and certifying that this
is my act and deed and the facts herein stated are true and accordingly
hereunder set my hand on this 19th day of April, 1994.
/S/ Sharon O'Brien
---------------------------------------------
Sharon O'Brien
<PAGE>
CERTIFICATE OF MERGER
OF
BERKLINE CORPORATION AND CORBER CORPORATION
INTO
MASCO ACQUISITION BC, INC.
The undersigned corporation organized and existing under and by virtue of
the General Corporation Law of Delaware,
DOES HEREBY CERTIFY:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
Masco Acquisition BC, Inc. Delaware
("Masco Acquisition")
The Berkline Corporation Delaware
("Berkline")
Corber Corporation New Jersey
("Corber")
SECOND: An Agreement and Plan of Reorganization dated May 16, 1994 (the
"Agreement") among Masco Corporation, a Delaware corporation, Masco Acquisition,
Berkline, Corber and the stockholders of Berkline and Corber, with respect to
the merger of Berkline and Corber with and into Masco Acquisition has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of section 252 of
the General Corporation Law of Delaware.
<PAGE>
THIRD: The Certificate of Incorporation of Masco Acquisition BC, Inc.,
a Delaware corporation which will survive the merger, shall be the Certificate
of Incorporation of the surviving corporation, except that the name of the
surviving corporation shall hereby be changed to The Berkline Corporation.
FOURTH: The executed Agreement is on file at the principal place of
business of the surviving corporation, the address of which is One Berkline
Drive, Morristown, Tennessee 37813.
FIFTH: A copy of the Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any constituent
corporation.
SIXTH: The authorized capital stock of each foreign corporation which
is a party to the merger is as follows:
Corporation Class Number of Shares Par value per share
- ----------- ----- ---------------- or statement that
shares are without
par value
--------------------
Corber common 2,000 no par
Dated: May 27, 1994
---------------------------
MASCO ACQUISITION BC, INC.
By:
-------------------------
Vice President
ATTEST:
By:
-------------------------
Secretary
Exhibit 3.4
ARTICLE OF INCORPRATION
OF
BLUE MOUNTAIN TRUCKING CORPORATION
We, the undersigned natural persons of the age of twenty-one (21)
years, or more, acting as Incorporators of the corporation under the Mississippi
Business Corporation Act, adopt the following Articles of Incorporation for such
corporation.
1. The Corporate Title of this Company is: BLUE MOUNTAIN TRUCKING
CORPORATION.
2. The names and post office address of the Incorporators, all being the
age of twenty-one (21) years, are:
(a) James Michael Long
General Delivery
Blue Mountain, Mississippi
38610
(b) Charles E. Carr
102 Robbins Drive
New Albany, Mississippi
38652
3. The registered offices of the corporation will be at Highway #15 North,
Blue Mountain, Mississippi 38610, and the registered agent for process at said
address is James Michael Long.
4. The number of Directors constituting the Initial Board of Directors is
Three (3) and the names and post office addresses of the persons who are to
serve as Directors until the first annual meeting of Shareholders or until their
successors be elected and qualified.
(a) James Michael Long
General Delivery
Blue Mountain, Mississippi
38610
(b) Charles E. Carr
102 Robbins Drive
New Albany, Mississippi
38652
(c) Hugh W. McLarty
221 Shady Lane Drive
New Albany, Mississippi
38652
<PAGE>
5. The aggregate number of shares of which the corporation will have
authority to issue is:
Twenty-Five Thousand (25,000) shares of the par value of One ($1.00)
Dollar per share.
6. The sale price of the capital stock is One ($1.00) per share,
and authority is granted to the Board of Directors to fix or change such sale
price. In no event shall the shares of this corporation be sold for less than
One ($1.00) Dollar per share.
7. The period of existence shall be for ninety-nine (99) years.
8. The purposes for which the corporation is created are:
(A) To engage in the leasing of all type commercial trucks and
trailers to individuals, partnerships or corporations, and conducting other
activities necessary and customary in connection with the overall operation of
the aforesaid business, as the officers of the corporation see fit so long as it
is not in violation of the laws of the State of Mississippi.
(B) To buy, acquire, hold, own, sell, pledge, apothecate and/or
mortgage any and all property, real or personal, stocks, securities, bonds
warrants and rights of every kind and nature as shall from time to time be
deemed desirable and advisable.
(C) To apply for, obtain, register, purchase, or otherwise hold, own,
use, develop, operate and introduce and to sell, assign, grant license or
territorial rights in respect to or otherwise grant franchise or buy same in
connection with the type operation.
(D) To acquire, own, purchase, exchange, rent, lease, mortgage, sell
and otherwise dispose of real estate of every kind, and character, improved and
unimproved and any right of interest therein.
(E) To do business on credit as well as for cash; to lend money, to
borrow money, to acquire, own, and purchase accounts, notes, deeds in trust,
mortgages, evidences of debt and any and all kinds of security, real and
personal, for any money and debts due to any other person, firm, association or
corporation and to collect accounts, notes, deeds
<PAGE>
in trust, mortgages and evidences of debt for any money and debts due to any
other person, firm, association, partnership or corporation, to take notes,
deeds in trust, mortgages, evidence of debts and any and all kinds of security,
real and personal, for money and debts due to the corporation and to mortgage,
pledge, sell, transfer, assign and otherwise dispose of its personal property.
(F) To own, acquire, purchase, rent, lease, construct, establish,
operate and maintain any and all offices, buildings, improvements, plants,
factories, structures, mills and yards, necessary for the business interest of
and the possible production of retail items for the aforementioned outlets. For
any other enterprise necessary, or otherwise desirable in the operation,
business or conduct of the corporation not in violation of the Laws of the State
of Mississippi, though not hereinabove specifically provided for herein.
9. The number of shares of stock to be subscribed and paid for before the
corporation shall commence business is One Thousand ($1,000.00) Dollars.
10. This corporation reserves the right to amend, alter, change, or repeal
any provision contained in these Articles of Incorporation in the manner now or
hereinafter prescribed by statute, and all rights conferred upon Stockholders
herein are granted subject to this reservation.
11. Provisions granting to Shareholders the pre-emptive right to acquire
additional or treasury shares of the corporation.
The Shareholder of record immediately following the initial issue of
stock on organization shall have pre-emptive rights to acquire from
the corporation any treasury stock reissued any subsequent stock
issue whether previously of subsequently authorized in the same
proportion which their initial ownership of stock bears to the total
number of shares initially issued which right shall expire thirty
(30) days after Shareholder received written notice of the
availability of aforesaid stock.
12. Provisions for the regulation of the internal affairs of the
corporation, including provisions restricting the transfer of shares, and any
provisions which under the Act is required or permitted to be set forth in the
By-Laws.
<PAGE>
Each share of stock issued by this corporation and the Certificate
evidencing said share, shall be subject to the condition and
agreement on the part of the owner or holder thereof, and that no
such share or certificate may be transferred, whether by inter vivos
gift, donation, by will, operation of law, or otherwise without the
owner or holder thereof first offering this corporation the option
to purchase such stock at such price and on the same terms and
conditions as such owner has been offered in good faith by any other
bona fide purchaser, and, before a transfer may be made the said
owner or holder shall notify the Secretary-Treasurer of this
corporation in writing of the number of shares to be transferred,
the certificates involved, the price offered therefore, name and
post office address of prospective purchaser, and evidence
supporting the validity of the offer to purchase. This corporation
shall have the option to purchase such shares at the same price and
upon the same terms and conditions or at the same price for cash,
offered to the owner or holder for a period of thirty (30) days from
the date of actual receipt of the said written notice by the
Secretary-Treasurer of this corporation.
13. We, the undersigned, for the purpose of forming this corporation under
the Laws of the State of Mississippi, do make, file and record this Charter of
Incorporation and do certify that the facts herein stated are true and we
accordingly herein have set our hand and seals.
Dated at Booneville, Mississippi, on this the 30th day of November, 1978.
/s/James Michael Long
---------------------------------
JAMES MICHAEL LONG - INCORPORATOR
/s/Charles E. Carr
---------------------------------
CHARLES E. CARR - INCORPORATOR
STATE OF MISSISSIPPI
COUNTY OF PRENTISS
Personally appeared before me, the undersigned authority in and for the
aforesaid State and County, the within named JAMES MICHAEL LONG, and CHARLES E.
CARR, Incorporators, each of whom acknowledged that they executed and delivered
the foregoing Charter of Incorporation of BLUE MOUNTAIN TRUCKING CORPORATION, on
the day and year therein written.
Given under my hand and official seal of office this the 30th day of
November, 1978.
/s/Janice Sims
---------------------------------
NOTARY PUBLIC
<PAGE>
FILED
JUNE 20 1980
Edwin Lloyd
SECRETARY
OF STATE
ARTICLES OF AMENDMENT
OF
BLUE MOUNTAIN TRUCKING CORPORATION
1. The Corporate title of this company is BLUE MOUNTAIN TRUCKING
CORPORATION.
2. The Amendment adopted by the Board of Directors and passed by the
Shareholders is as follows:
That the twelfth paragraph of the Articles of Incorporation which
restricts the stock of the corporation be deleted.
3. That the Shareholders adopted said amendment on January 23, 1980.
4. We, the undersigned, for the purpose of amending this corporation under
the laws of the State of Mississippi do make and file and record this Article of
Amendment and do certify that the facts herein stated are true and we
accordingly herein have set our respective hands and seals.
Dated at Booneville, Mississippi this the 24th day of June, 1980.
/s/ Hugh McLarty
----------------------------------------
HUGH McLARTY - PRESIDENT OF BLUE MOUNTAIN
TRUCKING CORPORATION
/s/ Charles E. Carr
----------------------------------------
CHARLES E. CARR - SECRETARY OF BLUE
MOUNTAIN TRUCKING CORPORATION
STATE OF MISSISSIPPI
COUNTY OF PRENTISS
Personally appeared before me, the undersigned authority in and for the
aforesaid State and County, the within named HUGH McLARTY and CHARLES E. CARR,
each of whom acknowledged that they executed and delivered the foregoing
Articles of Amendment of BLUE MOUNTAIN TRUCKING CORPORATION on the day and year
therein mentioned.
Given under my had and seal of office this the 10th day of June, 1980.
----------------------------------------
NOTARY PUBLIC
My Commission Expires 1981
-----------------
Exhibit 3.5
ARTICLES OF INCORPORATION
OF
CUSTOM TRUCK TIRES, INC.
We, the undersigned natural persons of the age of twenty-one (21) years of
age or more, acting as incorporators of the corporation under the Mississippi
Business Corporation Act, adopt the following Articles of Incorporation for such
corporation.
1. The corporate title of this company is : CUSTOM TRUCK TIRES, INC.
2. The names and post office addresses of the incorporators, all being
above the age of twenty-one (21) years, are:
(a) Ronald W. Gaunt
4010 South 133rd East Avenue
Tusla, Oklahoma 74134
(b) Hugh W. McLarty
719 East Shady Lane Drive
New Albany, Mississippi 38652
3. The registered offices of the corporation will be at Airport Road,
Airport Industrial Park, Tupelo, Mississippi 38801, and the registered agent for
process at said address will be RONALD W. GAUNT.
4. The number of Directors constituting the initial Board of Directors is
six (6) and the names and post office addresses of the persons who are to serve
as Directors until the first annual meeting of Shareholders or until their
successors be elected and qualified.
(a) Ronald W. Gaunt
4010 South 133rd East Avenue
Tulsa, Oklahoma 74134
(b) Hugh W. McLarty
719 East Shady Lane Drive
New Albany, Mississippi 38652
(c) Douglas Jumper
601 North Smith Street
Booneville, MS 38829
(d) Don Murphy
405 George E. Allen Drive
Booneville, MS 38829
(e) Emmett Carr
103 Cherokee Park
Booneville, MS 38829
(f) Thomas D. Keenum, Sr.
3018 College Street
Booneville, MS 38829
<PAGE>
5. The aggregate number of shares of which the corporation will have
authority to issue is:
Ten Thousand (10,000) shares of common stock with a par value of One
($1.00) Dollar per share.
Ten Thousand (10,000) shares of non-voting cumulative preferred stock with
a par value of One ($1.00) Dollar per share.
6. The sale price of capital stock as One ($1.00) Dollar per share, and
authority is granted to the Board of Directors to fix or change such sale price.
In no event shall the shares of this corporation be sold for less than One
($1.00) Dollar.
7. The period of existence shall be for ninety-nine (99) years.
8. The purposes for which the corporation is created are:
(a) To engage in the manufacturing, processing and retreading all types of
truck and commercial trailer tires of every kind pertaining to the trucking
industry. To engage in any activity and with the same powers permitted within
the purposes for which corporations may be organized under the Mississippi
Business Corporation Act and acts amendatory thereof and supplementary thereto.
To carry on any business or exercise any power or part thereof to promote the
interest of the corporation acting directly or through a subsidiary or
subsidiaries or in association with or as agent or trustee of other
corporations, firms, partnerships or individuals not contrary to law or
otherwise provided by statute which the corporation deems proper or convenient
and consistent with the purposes for which the corporation is organized.
(b) To buy, acquire, hold, own, sell, pledge, apothecate and/or mortgage
any and all property, real or personal, stocks, securities, bonds, warrants and
rights of every kind and nature as shall from time to time be deemed advisable
and desirable.
(c) To apply for, obtain, register, purchase or otherwise hold, own, use,
develop, operate and introduce and to sell, assign, grant license or territorial
rights in respect to, or otherwise grant franchise or buy same in connection
with this type operation.
(d) To acquire, own, purchase, exchange, rent, lease, mortgage and
otherwise dispose of real estate of every kind and character, improved and
unimproved and any right of interest therein.
-2-
<PAGE>
(e) To do business on credit as well as for cash; to lend money, to borrow
money; to acquire, own and purchase accounts, notes, deeds in trust, mortgages,
evidences of debt and any and all kinds of security, real and personal, for
money and debts due to the corporation, and to mortgage, pledge, sell, transfer,
assign and otherwise dispose of its personal property.
(f) To own, acquire, purchase, rent, lease, construct, establish, operate
and maintain any and all offices, buildings, improvements, plants, factories,
structures, mills and yards necessary for the business interest of and the
possible production of retail items for the aforementioned outlets. For any
other enterprise necessary or otherwise desirable in the operation, business or
conduct of the corporation not in violation of the laws of the State of
Mississippi, though not hereinabove specifically provided for herein.
9. The number of shares of stock to be subscribed and paid for before the
corporation shall commence business is One Thousand (1,000) shares.
10. This corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation in the manner now or
hereinafter prescribed by statute, and all rights conferred upon Stockholders
herein are granted subject to this reservation.
11. Provisions granting to Shareholders the pre-emptive right to acquire
additional or treasury shares of the corporation.
The shareholders of record immediately following the initial issue of
stock on organization shall have pre-emptive rights to acquire from the
corporation any treasury stock reissued, any subsequent stock issued,
whether previously or subsequently authorized in the same proportion which
their initial ownership of stock bears to the total number of shares
initially issued, which right shall expire thirty (30) days after said
shareholder receives written notice of the availability of said stock.
12. Provisions for the regulation of the internal affairs of the
corporation, including provisions restricting the transfer of shares and any
provision which under the Act is required or permitted to be set forth in the
By-Laws.
Each share of stock issued by this corporation and the certificate
evidencing said share, shall be subject to the condition and agreement on
the part of the owner or holder thereof, that no such share or certificate
may be transferred whether by intervivos gift, donation, by will,
operation of law, or otherwise, without the owner or holder thereof first
offering this corporation the option to purchase such stock at such price
-3-
<PAGE>
and on the same terms and conditions as owner has been offered in good
faith by any other bonafide purchaser; and, before a transfer may be made,
said owner or holder shall notify the Secretary-Treasurer of this
corporation in writing of the number of shares to be transferred, the
certificates involved, the notice offered therefor, names and post office
address of prospective purchase, and evidence supporting the validity of
the offer to purchase. This corporation shall have the option to purchase
such shares at the same price and upon the terms and conditions, or at the
same price for cash, offered to the owner or holder, for a period of
thirty (30) days from the date of actual receipt of the said written
notice by the Secretary-Treasurer of this corporation.
13. We, the undersigned, for the purpose of forming this corporation under
the laws of the State of Mississippi, do make, file and record this Charter of
Incorporation, and do certify that the facts therein stated are true, and we
accordingly herein have set our respective hands and seals.
Dated, this 20 day of April, 1985.
/s/ Ronald W. Gaunt
----------------------------
RONALD W. GAUNT-INCORPORATOR
/s/ Hugh W. McLarty
----------------------------
HUGH W. McLARTY-INCORPORATOR
STATE OF Oklahoma
COUNTY OF Tulsa
PERSONALLY appeared before me, the undersigned authority in and for the
aforesaid State and County, the within named, RONALD W. GAUNT, who, being by me
first duly sworn, acknowledged that he signed the foregoing Articles of
Incorporation of CUSTOM TRUCK TIRES, INC. on the day and year therein mentioned.
GIVEN UNDER MY HAND and seal of office, this the 20th day of April, 1985.
/s/ Debra J. Martin
----------------------------
NOTARY PUBLIC
My commission expires:
March 7, 1988
- ----------------------
STATE OF MISSISSIPPI
COUNTY OF PRENTISS
PERSONALLY appeared before me, the undersigned authority in and for the
aforesaid State and County, the within named, HUGH W. McLARTY, who, being by me
first duly sworn, acknowledged that he signed the foregoing Articles of
Incorporation of CUSTOM TRUCK TIRES, INC. on the day and year therein mentioned.
GIVEN UNDER MY HAND and seal of office, this the 30th day of April, 1985.
----------------------------
NOTARY PUBLIC
My commission expires:
November 13, 1988
- ----------------------
-4-
Exhibit 3.6
CERTIFICATE OF INCORPORATION
OF
D-H RETAIL SPACE, INC.
1. The name of the corporation is:
D-H Retail Space, Inc.
2. The address of its registered office in the state of Delaware is 1209
Orange Street in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business of purpose to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is One Thousand (1,000) and the par value of each of the
shares is One Dollar ($1.00) amounting in the aggregate to One Thousand Dollars
($1,000).
5. The board of directors is authorized to make, alter, or repeal the
Bylaws of the corporation. Election of directors need not be by ballot.
6. The name and mailing address of the incorporator is:
Marylou Zimmerman
21001 Van Born Road
Taylor, Michigan 48180
I, the undersigned, being the incorporator of the above-named corporation,
for the purpose of forming a corporation pursuant to the General Corporation Law
of Delaware, do make this certificate hereby declaring and certifying that this
is my act and deed and the facts herein stated are true and accordingly
hereunder set my hand on this 12th day of July, 1990.
/s/ Marylou Zimmerman
-------------------------
Marylou Zimmerman
Exhibit 3.7
CERTIFICATE OF INCORPORATION
OF
DREXEL HERITAGE ADVERTISING, INC.
1. The name of the corporation is:
Drexel Heritage Advertising, Inc.
2. The address of its registered office in the state of Delaware is 1209
Orange Street in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purpose to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is One Thousand (1,000) and the par value of each of the
shares is One Dollar ($1.00) amounting in the aggregate to One Thousand Dollars
($1,000).
5. The board of directors is authorized to make, alter, or repeal the
By-laws of the corporation. Election of directors need not be by ballot.
6. The name and mailing address of the incorporator is:
Sharon O' Brien
21001 Van Born Road
Taylor, Michigan 48180
I, the undersigned, being the incorporator of the above named corporation,
for the purpose of forming a corporation pursuant to the General Corporation Law
of Delaware, do make this certificate hereby declaring and certifying that this
is my act and deed and the facts herein stated are true and accordingly
hereunder set my hand on this 12th day of February, 1990.
/s/ Sharon O' Brien
-----------------------
Sharon O'Brien
Exhibit 3.8
CERTIFICATE OF CHANGE
OF
DREXEL HERITAGE FURNISHINGS INC.
UNDER SECTION 805-A OF THE BUSINESS CORPORATION LAW
WE , THE UNDERSIGNED, Wayne B. Lyon and Gerald Bright being respectively
the Vice President and the Secretary of DREXEL HERITAGE FURNISHINGS INC. hereby
certify:
1. The name of the corporation is DREXEL HERITAGE FURNISHINGS INC. It was
incorporated under the name D & D EQUIPMENT CO., INC.
2 The Certificate of Incorporation of said corporation was filed by the
Department of State on September 29, 1961.
3. The following authorized by the Board of Directors:
To designate C T CORPORATION SYSTEM, 1633 Broadway, New York, NY 10019 as
its registered agent in New York upon whom all process against the corporation
may be served.
IN WITNESS WHEREOF, we have signed this certificate on the 14th day of
September, 1988 and we affirm the statements contained therein as true under
penalties of perjury.
/s/ Wayne B. Lyon
-----------------------------------------
Wayne B. Lyon Vice President
/s/ Gerald Bright
-----------------------------------------
Gerald Bright Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DREXEL HERITAGE FURNISHINGS INC.
UNDER SECTION 805 0F THE BUSINESS CORPORATION LAW
WE THE UNDERSIGNED, Frederick L. Copeland and Donald B. Biggerstaff,
being, respectively, the President and the Secretary of Drexel Heritage
Furnishings Inc. (the "Corporation"), hereby certify:
1. The name of the Corporation is Drexel Heritage Furnishings Inc., and
the name under which the Corporation was formed is D & D Equipment Co., Inc.
2. The Certificate of Incorporation was filed by the Department of State
on the 29th day of September, 1961 and a Restated Certificate of Incorporation
was filed by the Department of State on the 9th day of August, 1977.
3. The Certificate of Incorporation, as heretofore amended, is hereby
further amended:
(a) to change the number of authorized shares which the Corporation shall
have authority to issue 38,000, by eliminating the Senior Cumulative Preferred
Stock, par value $100 per share, none of which is presently outstanding, and
authorizing a new class of 28,000 shares of Preferred Stock, par value $1,000
per share; and
(b) to change the location of the office of the Corporation.
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<PAGE>
4. To effect the foregoing, Article THIRD of said Certificate of
Incorporation, which provides for an authorized capitalization of 40,000 shares
of capital stock divided into 30,000 shares of preferred stock, of which 22,683
shares have been issued and reacquired by the Corporation (and, pursuant to the
Certificate of Incorporation, cancelled and not to be reissued) and 10,000
shares of common stock, is stricken in its entirety, and there is substituted in
lieu thereof a new Article THIRD reading as follows:
THIRD: The aggregate number of shares which the Corporation shall have
authority to issue is 38,000 divided into 28,000 shares of preferred stock of
the par value of $1,000 per share and 10,000 shares of common stock of the par
value of $0.10 per share. All of such shares shall be issued as full-paid and
non-assessable shares, and the holders thereof shall not be liable for any
further payments in respect thereto.
A statement of the designations, preferences, privileges and voting powers
of the shares of each class and the restrictions and qualifications thereof
shall be as follows:
(a) Preferred Stock
1. Designation and Number of Shares. The class of preferred stock provided
for herein is designated as "Preferred Stock" and shall have a par value of
$1,000 per share. The number of shares which shall constitute preferred stock is
28,000. Shares of Preferred Stock which have been issued and reacquired by the
Corporation, through redemption, purchase or otherwise, shall be cancelled and
shall not be reissued.
2. Redemption. (a) The Corporation, by resolution of its Board of
Directors, may redeem out of funds legally available therefor, in whole at any
time or in part from time to time, shares of Preferred Stock by paying in cash
an amount equal to $1,000 for each share being
2
<PAGE>
redeemed. Notice of any such redemption shall be given by first class registered
or certified mail, postage prepaid, return receipt requested, to each holder of
record of shares of Preferred Stock at the last address of such holder appearing
on the books of the Corporation not less than 10 days nor more than 50 days
prior to the date fixed for such redemption. The notice of redemption shall
specify the number of shares to be redeemed, the date fixed for redemption, the
redemption price per share, and where payment of the redemption price is to be
made upon surrender of the certificates representing such shares. The giving of
such notice shall obligate the Corporation to redeem the shares to which the
notice relates on the date specified therein as the date fixed for redemption.
(b) In the case of a redemption of less than all shares of Preferred Stock
then outstanding, the number of shares to be redeemed shall be allocated among
all holders thereof at the time such redemption becomes effective, on the basis
of the number of such shares held by each such holder, so that, as nearly as may
be practicable, the number of such holder's shares being redeemed (which number
shall be a whole number) represents the same proportion of such holder's total
holdings of Preferred Stock as the aggregate number of shares being redeemed
represents of the total number of shares of Preferred Stock at the time
outstanding. In connection with any redemption of shares of Preferred Stock, the
redemption payment shall be payable only upon surrender of the certificates for
the shares to be redeemed; and if less than all of the shares represented by a
surrendered certificate are to be redeemed, the Corporation will forthwith issue
one or more certificates evidencing the shares which shall not have been so
redeemed.
3. Liquidation. The shares of Preferred Stock shall be preferred over the
shares of all other classes or series of the Corporation. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of shares of Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for distribution to its
shareholders, whether from capital, surplus or earnings of any nature, an amount
equal to $1,000 per share before any payment shall be made or any assets
distributed to the holders of any shares of any other class or series of the
Corporation.
4.. Voting. Except as otherwise expressly provided by law, the holders of
shares of Preferred Stock shall have no voting rights.
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<PAGE>
5. Dividends. If any shares of Preferred Stock are outstanding on any date
that a dividend is declared on the Common Stock, a dividend in the same amount
per share shall at the same time(s) be declared and paid on such shares of
Preferred Stock.
6. Restrictions Applicable to Common Stock. If and so long as any shares
of Preferred Stock are outstanding, no shares of Common Stock may be purchased
by the Corporation except with the prior written consent of the holders of a
majority of the shares of outstanding Preferred Stock; provided, however, the
Corporation may reacquire an aggregate of 900 shares of Common Stock pursuant to
those certain Stock Purchase and Redemption Agreements dated June 10, 1986;
(b) Common Stock
1. Issuance. From time to time common stock (hereinafter the "Common
Stock") may be issued in such amounts and for such purposes as shall be
determined by the Board of Directors.
2. Dividends. Subject to all of the rights of the Preferred Stock, such
dividends as may be determined by the Board of Directors may be declared and
paid on the Common Stock from time to time out of the surplus of the Corporation
legally available for the payment of dividends.
3. Voting Rights. Except as otherwise expressly provided with respect to
the Preferred Stock, the Common Stock shall have the exclusive right to vote for
the election of directors and for all other purposes, each holder of the Common
Stock being entitled to one vote for each share thereof held.
4. Liquidation. Upon any liquidation, dissolution of winding up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Preferred Stock shall have been paid in full the amounts to which they shall be
entitled, or an amount sufficient to pay the aggregate amount to which the
holders of the Preferred Stock shall be entitled shall have been deposited with
a bank or trust company having its principal office in the Borough of Manhattan,
the City of New York, and having a capital, surplus and undivided profits of at
least twenty-five million dollars ($25,000,000) as a trust fund for the benefit
of holders of such Preferred Stock, the remaining net assets of the Corporation
shall be distributed pro rata to the holders of the Common Stock in accordance
with their respective rights and interests, to the exclusion of the holders of
the Preferred Stock.
4
<PAGE>
(c) General Provisions
1. A consolidation or merger of the Corporation with or into another
corporation or corporations or a sale, whether for cash, shares of stock,
securities or properties, of all or substantially all of the assets of the
Corporation shall not be deemed or construed to be a liquidation, dissolution or
winding up of the Corporation.
2. No stockholder of the Corporation shall be entitled, as such, as a
matter of right, to subscribe for or purchase any part of any new or additional
issue of stock of any class or series whatsoever, any rights or options to
purchase stock of any class or series whatsoever, or any securities convertible
into any stock of any class or series whatsoever, whether or not hereafter
authorized, and whether issued for cash or other consideration, or by way of
dividend.
3. The Board of Directors may from time to time issue scrip in lieu of
fractional shares of stock. Such scrip shall not confer upon the holder any
right to the Corporation, but the Corporation shall from time to time, within
such time as the Board of Directors may determine or without limit of time if
the Board of Directors so determines, issue one or more whole shares of stock
upon the surrender of scrip for fractional shares aggregating the number of
whole shares issuable in respect of the scrip so surrendered, provided that the
scrip so surrendered shall be properly endorsed for transfer if in registered
form.
5. To effect further the foregoing, Article FIFTH is hereby amended to
read in its entirety as follows:
FIFTH: The office of the Corporation shall be located in the County and
State of New York, and the address to which the Secretary of State shall mail a
copy of process in any action or proceeding against the Corporation which may be
served upon him is Drexel Heritage Furnishings Inc., Drexel, North Carolina
28619, Attention: President.
6. The Amendment of the Certificate of Incorporation was authorized,
pursuant to Section 615 of the New York Business Corporation Law, by a vote of
the Board of Directors, followed by Unanimous Written
5
<PAGE>
Consent setting forth the action taken, signed by the holders of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have signed this certificate on the 10th day of
June, 1986 and we affirm the statements contained therein as true under
penalties of perjury.
/s/ Frederick L. Copeland
----------------------------
Frederick L. Copeland
President
/s/ Donald B. Biggerstaff
----------------------------
Donald B. Biggerstaff
Secretary
6
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DREXEL HERITAGE FURNISHINGS INC.
Under Section 805 of the Business Corporation Law
-----------------------------------
WE, the undersigned, Howard H. Haworth and Donald B. Biggerstaff, being
respectively the President and Secretary of Drexel Heritage Furnishings Inc.
(the "Corporation"), hereby certify:
1. The name of the Corporation is DREXEL HERITAGE FURNISHINGS INC.
It was formed under the name D & D EQUIPMENT CO., INC.
2. The Certificate of Incorporation of the Corporation was filed by
the Department of State on September 29, 1961.
3. The Certificate of Incorporation is amended to modify the
statement of the designations, preferences, privileges and voting powers
of the Senior Cumulative Preferred Stock, and the restrictions and
qualifications thereof, set forth in Article THIRD in the following
respects:
(a) Section 2(b) is deleted, so that Section 2 shall read in
its entirety as follows:
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<PAGE>
"2. Dividends. Subject to section 8(b) hereof, holders of
shares of Senior Preferred Stock shall be entitled to receive, out
of any funds of the Corporation at the time legally available for
the declaration of dividends, cash dividends at the rate of $70 per
share per annum. Dividends on the share of Senior Preferred Stock
shall accrue cumulatively from day to day from and after the date of
original issuance of any shares of Senior Preferred Stock, whether
or not earned or declared and whether or not there shall be net
income or surplus available for the payment of dividends. Dividends
accrued through the end of each fiscal year ended September 30th
shall be payable annually on the next succeeding 31st day of each
January, commending January 31, 1978. Dividends shall be paid to the
holders of record of Senior Preferred Stock at the close of business
on the business day next preceding the date of payment."
(b) The reference in section 5 to section 2(b) is deleted so that
section 5 shall read in its entirety as follows:
"5. Voting. Except as otherwise expressly provided by law and
except as provided in sections 6 or 8 hereof, the holders of shares
of the Senior Preferred Stock shall have no voting rights."
(c) Section 6(v) is amended to read in its entirety as follows:
"(v) enter into any agreement or create any obligation, other
than the agreements entered into on the date of original issuance of
the shares of Senior Preferred Stock, that would result, as the
consequence of any contractual provisions thereby imposed upon the
Corporation, in the impairment of the dividend, redemption,
liquidation or any other rights of the holders of Senior Preferred
Stock;"
(d) Section 7 is deleted and sections 8 and 9 are renumbered
sections 7 and 8, respectively, and all references to such sections
elsewhere in this Certificate are so renumbered.
2
<PAGE>
4. The above amendments to the Certificate of Incorporation were
authorized (a) by the vote of the holders of a majority of all outstanding
shares entitled to vote thereon and (b) by the vote of the holders of at
least 66-2/3% of the shares of Senior Cumulative Preferred Stock at the
time outstanding pursuant to a provision contained in the Certificate of
Incorporation.
5. The Corporation has reacquired 16,291 shares of Senior Preferred
Stock through redemption and purchase. In accordance with Article THIRD
(a) 1, these reacquired shares have been cancelled and shall not be
reissued. Additionally, the number of shares of Senior Preferred Stock
authorized is reduced from 30,000 shares to 13,709 shares as approved by
the Board of Directors.
IN WITNESS WHEREOF, WE have subscribed this Certificate and affirm this
Certificate as true under the penalties of perjury, on this 30th day of July,
1982.
/s/ Howard H. Haworth
-----------------------------------------
Howard H. Haworth, President
/s/ Donald B. Biggerstaff
-----------------------------------------
Donald B. Biggerstaff, Secretary
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
DREXEL HERITAGE FURNISHINGS INC.
--------------------
Under Section 805 of the Business Corporation Law
---------------------
Pursuant to the provisions of Section 805 of the Business Corporation Law,
the undersigned hereby certify:
FIRST: The name of the Corporation is
DREXEL HERITAGE FURNISHINGS INC.
SECOND: That the Certificate of Incorporation of D & D EQUIPMENT CO., INC.
was filed by the Secretary of State of New York on September 29, 1961. That the
Restated Certificate of Incorporation of the Corporation was filed by the
Secretary of State of New York on the 10th day of August, 1977, and the name was
change to DREXEL HERITAGE FURNISHINGS INC.
THIRD: The Restated Certificate of Incorporation is hereby amended (i) to
exempt 1,000 shares of Senior Cumulative Preferred Stock of the Corporation to
be sold by Champion International Corporation to Dominick International
Corporation from the restrictions applicable to any shares of Senior Cumulative
Preferred Stock held by Dominick International Corporation or any of its
subsidiaries or affiliates if and for so long as any shares of senior Cumulative
Preferred Stock are hold by Champion International Corporation and (ii) to
change the location of the office of the Corporation in the City, County and
State of New York.
FOURTH: Article THIRD (a) of the Restated Certificate of Incorporation
which sets forth the designations, preferences, privileges and voting powers of
the Preferred Stock and the
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<PAGE>
restrictions and qualifications thereon is hereby amended by inserting at the
end of Section 7(a) thereof the following sentence:
"The foregoing provisions shall not apply to the first 1,000 shares of
Senior Cumulative Preferred Stock sold by Champion International
Corporation to Dominick International Corporation on or after the date of
this certificate."
FIFTH: Article FIFTH of the Restated Certificate of Incorporation which
sets forth the office of the Corporation and the address to which the Secretary
of State shall mail a copy of process served upon him is hereby amended to read
as follows:
"FIFTH: The office of the Corporation shall be located in the City, County
and State of New York, at 90 Broad Street, 10th Floor, New York, New York
10004, and the address to which the Secretary of State shall mail a copy
of process in any action or proceeding against the Corporation which may
be served upon him is Drexel Heritage Furnishings Inc., Drexel, North
Carolina 28619, Attention: President."
SIXTH: The foregoing Amendments of the Restated Certificate of
Incorporation were authorized by the affirmative vote of a majority of the
outstanding shares of Common Stock of the Corporation.
SEVENTH: The amendment of Article THIRD of the Restated Certificate of
Incorporation as set forth above as authorized by the affirmative vote of the
holders of at least 66-2/3% for the outstanding shares of Senior Cumulative
Preferred Stock of the Corporation.
IN WITNESS WHEREOF, we, the undersigned, subscribe this Certificate and
affirm that the statements made herein are true under the penalties of perjury,
this the 10th day of May, 1979.
/s/ Howard H. Haworth
--------------------------------------
Howard H. Haworth, President of
Drexel Heritage Furnishings Inc.,
Drexel, North Carolina 28619
/s/ W. Paul Monroe
--------------------------------------
Prepared and submitted by: W. Paul Monroe, Secretary
BYRD, BYRD, ERVIN, BLANTON Drexel Heritage Furnishings Inc.,
& WHISNANT, P.A. Drexel, North Carolina 28619
BY /s/ Robert B. Byrd
- --------------------------------------
Robert B. Byrd
P.O. Drawer 1269
Morganton, North Carolina 28655
Counsel for Drexel Heritage Furnishings Inc.
2
<PAGE>
RELATED CERTIFICATE OF INCORPORATION
OF
D & D EQUIPMENT CO., INC.
UNDER SECTION 807 OF THE BUSINESS CORPORATION LAW
WE THE UNDERSIGNED, Peter M. Kennedy and Robert C. Harrison, being
respectively the Chairman of the Board and the Secretary of D & D Equipment Co.,
Inc., (The "Corporation") hereby certify:
1. The name of the Corporation is D & D Equipment Co., Inc., and the name
under which the Corporation was formed is D & D Equipment Co., Inc.
2. The certificate of incorporation of the Corporation was filed by the
Department of State on the 29th day of September, 1961.
3. The certificate of incorporation is amended:
(a) to change the name of the Corporation;
(b) to increase the number of authorized shares which the
Corporation shall have authorized to issue to 40,000;
(c) to change the designation of the present Class B Stock (of which
150 shares are issued and outstanding and 850 shares are authorized but
unissued) to Common Stock;
(d) to decrease the par value of the newly designated Common Stock
from $10 per share to $0.10 per share;
(e) to decrease the authorized number of shares of the newly
designated Common Stock from 1,000 to 10,000 (of which 9,250 shares will
automatically be issued and outstanding, in lieu of the 150 shares
presently issued and outstanding, upon filing of this certificate by the
Department of State and 750 will be authorized but unissued);
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<PAGE>
(f) to change the rights of the holders of stock with general voting
rights;
(g) to authorize a class of 30,000 shares of Senior Cumulative
Preferred Stock, $100 par value per share;
(h) to change the location of the office of the Corporation;
(i) to change the post office address to which the Secretary of
State shall mail a copy of any process against the Corporation served upon
him; and
(j) to amend the purposes and powers of the Corporation;
thereby amending Articles First, Second, Third and Fourth of the
certificate of incorporation.
4. The text of the certificate of incorporation, as amended heretofore, is
hereby restated as further amended and changed to read as herein set forth in
full:
FIRST: The name of the Corporation is:
DREXEL HERITAGE FURNISHINGS, INC.
SECOND: The purposes for which it is to be formed are to do any and all of
the things hereafter set forth to the same extent as natural persons might or
could do in any part of the world, namely:
To design, manufacture, construct, install, repair, remodel,
recondition, service, buy or otherwise acquire, sell, re-sell, license
upon a royalty basis, lease, or otherwise dispose of, import, export,
exchange, obtain licenses for, act as distributors for, trade and deal in,
as contractor, sub-contractor, principal, agent, commission merchant,
broker, factor, or any combination of the foregoing, at wholesale or
retail or both, any and all kinds of casegoods, tables, chairs, cabinets,
beds, sofas, seats, dressers, chests of drawers, mirrors, servers,
occasional pieces, desks, bookcases, shelving,
2
<PAGE>
frames, pulpits, pews, altars, kneelers, chancel furniture and furniture
of any type whatsoever and all parts, dowels, fabrics, webbing,
appurtenances, appliances, equipment and supplies useful or necessary in
connection with the same.
To purchase, sell and generally to trade and deal in and with goods,
wares, products and merchandise of every kind, nature and description; and
to engage and participate in any mercantile, manufacturing or trading
business of any kind or character whatsoever; in each case to such extent
as a corporation organized under the Business Corporation Law of the State
of New York may now or hereafter lawfully do.
To acquire by purchase, exchange, or otherwise, all, or any part of,
or any interest in, the properties, assets, business and good-will of any
one or more corporations, associations, partnerships, firms, syndicates or
individuals, engaged in any business which this corporation is authorized
to carry on; to pay for the same in cash, property or its own or other
securities; to hold, operate, reorganize, liquidate, mortgage, pledge,
sell, exchange, or in any manner dispose of the whole or any part thereof;
and, in connection therewith, to assume or guarantee performance of any
liabilities, obligations or contracts of corporations, associations,
partnerships, firms, syndicates or individuals, and to conduct in any
lawful manner the whole or any part of any business thus acquired.
To purchase, lease or otherwise acquire and to hold, own, maintain,
manage, improve, rent, sell or otherwise dispose of real and personal
property of all kinds and in particular lands, building, shares of stock,
mortgages, bonds, debentures and other securities, merchandise, book-debts
and claims and any interest in real or personal property.
To adopt, apply for, obtain, register, purchase, lease or otherwise
acquire and to maintain, protect, hold, use, own, exercise, develop,
manufacture under, operate and introduce, and to
3
<PAGE>
sell and grant licenses or other rights in respect of, assign or otherwise
dispose of, turn to account, or in any manner deal with and contract with
reference to any trademarks, trade names, patents, patent rights,
concessions, franchises, designs, copyrights and distinctive marks and
rights analogous thereto, and inventions, devices, improvements,
processes, recipes, formulas and the like, including such thereof as may
be covered by, used in connection with, or secured or received under,
Letters Patent of the United States of America or elsewhere or otherwise,
and any licenses in respect thereof and any or all rights connected
therewith or appertaining thereto.
To borrow money for its corporate purposes, and to make, accept,
endorse, execute and issue promissory notes, bills of exchange, bonds,
debentures or other obligations from time to time for the purchase of
property, or for any purpose relating to the business of the company, and,
if deemed proper, to secure the payment of any such obligations by
mortgage, pledge, deed of trust or otherwise.
To lend its uninvested funds from time to time to such extent, on
such terms and on such security, if any, as the Board of Directors of the
corporation may determine.
To sell, improve, manage, develop, lease, mortgage, dispose of or
otherwise turn to account or deal with, all or any part of the property of
the corporation.
To conduct its business in all or any of its branches, so far as
permitted by law, in the State of New York and in other states of the
United States of America, and in the territories and the District of
Columbia, and in any or all dependencies, colonies or possessions of the
United States of America, and in foreign countries; and for and in
connection with such business, to hold, possess, purchase, lease, mortgage
and convey real and personal property and to maintain offices and agencies
either within or without the State of New York.
4
<PAGE>
To carry out all or any part of the foregoing objects as principal,
factor, agent, broker, contractor or otherwise, either alone or in
conjunction with any persons, firms, associations, corporations or others
in any part of the world; and in carrying on its business and for the
purpose of attaining or furthering any of its objects, to make and perform
contracts of any kind and description, and to do anything and everything
necessary, suitable, convenient or proper for the accomplishment of any of
the purposes or the attainment of any one or more of the objects herein
enumerated or incidental to the powers herein specified, or which shall at
any time appear conducive to or expedient for the accomplishment of any of
the purposes or the attainment of any of the objects hereinbefore
enumerated.
Nothing herein contained shall be deemed to limit or exclude any
power, right or privilege given to the Corporation by law, or shall be
construed to give the corporation any right, power or privilege not
permitted by the laws of the State of New York to corporations organized
under the Business Corporation Law of the State of New York.
The foregoing clauses in this Article shall be construed as stating
both purposes and powers.
It is the intention that the purposes and powers specified in said clauses
shall be in no wise limited or restricted by reference to or inference
from the terms of any other clause of this or any other Article in this
certificate, but that the purposes and powers specified in each of the
clauses of this Article shall be rewarded as independent and cumulative
purposes and powers.
THIRD: The aggregate number of shares which the Corporation shall have
authority to issue is 40,000 divided into 30,000 shares of preferred stock of
the par value of $100 per share, and 10,000 shares of common stock of the par
value of $0.10 per share. All of such shares shall be issued as full-paid and
non-assessable shares, and the holders thereof shall not be liable for any
further payments in respect thereto.
5
<PAGE>
A statement of the designation, preferences, privileges and voting powers
of the shares of each class and the restrictions and qualifications thereof
shall be as follows:
(a) Preferred Stock
1. Designation and Number of Shares. The class of preferred stock provided
for herein is designated as "Senior Cumulative Preferred Stock" and shall have a
par value of $100 per share (hereinafter called "Senior Preferred Stock"). The
number of shares which shall constitute Senior Preferred Stock is 30,000. The
number of shares of Senior Preferred Stock from time to time authorized shall
not be increased, but may be decreased by the Board of Directors to a number not
less than the number of such shares then outstanding. Shares of Senior Preferred
Stock which have been issued and reacquired by the Corporation, through
redemption, purchase or otherwise, shall be cancelled and shall not be reissued.
2. Dividends. (a) Subject to section 8(b) hereof, holders of shares of
Senior Preferred Stock shall be entitled to receive, out of any funds of the
Corporation at the time legally available for the declaration of dividends, cash
dividends at the rate of $70 per share per annum. Dividends on the shares of
Senior Preferred Stock shall accrue cumulatively from day to day from and after
the date of original issuance of any shares of Senior Preferred Stock, whether
or not earned or declared and whether or not there shall be net income or
surplus available for the payment of dividends. Dividends accrued through the
end of each fiscal year ended September 30 shall be payable annually on the next
succeeding 31st day of each January, commencing January 31, 1978. Dividends
shall be paid to the holders of record of Senior Preferred Stock at the close of
business on the business day next preceding the date of payment.
(b) As long as any shares of Senior Preferred Stock are outstanding, no
distribution, whether by dividend or otherwise, shall be declared or paid upon,
or set apart for, any other shares of capital stock of the Corporation nor shall
any shares of capital stock (or warrants, options
6
<PAGE>
or rights to acquire any shares of capital stock) be redeemed, purchased or
acquired (other than Senior Preferred Stock and other than pursuant to the
Deferred Compensation Plan, existing on the date of original issuance of any
shares of Senior Preferred Stock) without the prior affirmative vote or the
prior written consent of the holders of at least 66-2/3% of the shares of Senior
Preferred Stock at the time outstanding.
3. Redemption. (a) The Corporation, by resolution of its Board of
Directors, may redeem out of funds legally available therefor, in whole at any
time or in part from time to time, shares of Senior Preferred Stock by paying in
cash an amount equal to $1,000 for each share being redeemed together with all
cumulative dividends unpaid and accrued as provided in section 2 hereof on each
share being redeemed through the date fixed for redemption (hereinafter the
"Redemption Price Per Share"). Notice of any such redemption shall be given by
first class registered or certified mail, postage prepaid, return receipt
requested, to each holder of record of shares of Senior Preferred Stock at the
last address of such holder, appearing on the books of the Corporation not less
than 10 days nor more than 50 days prior to the date fixed for such redemption.
the notice of redemption shall specify the number of shares to be redeemed, the
dated fixed for redemption, the Redemption Price per Share, and where payment of
the redemption price is to be made upon surrender of the certificates
representing such shares. The giving of such notice shall obligate the
Corporation to redeem the shares to which the notice relates on the date
specified therein as the date fixed for redemption.
(b) As long as any shares of Senior Preferred Stock are outstanding, the
Corporation shall establish a sinking fund (hereinafter the "Sinking Fund") for
the redemption of such Senior Preferred Stock. On January 31, 1978, and on
January 31 in each subsequent year as long as any shares of Senior Preferred
Stock are outstanding (each such date being hereinafter called a "Mandatory
Redemption Date"), the Corporation shall redeem, by paying in cash therefor an
amount per share equal to the Redemption Price Per Share, such number of shares
of Senior Preferred stock (rounded down to the largest whole number) as is
determined by dividing (i) the amount allocated to the Sinking Fund (as
determined in the following sentence) by (ii) the Redemption Price Per Share.
Before each Mandatory Redemption Date there shall be allocated to the Sinking
Fund an amount equal
7
<PAGE>
to Funds Available for Sinking Fund Payments for the immediately preceding
fiscal year.
(c) In the case of a redemption of less than all shares of Senior
Preferred Stock then outstanding, the number of shares to be redeemed shall be
allocated among all holders thereof at the time such redemption becomes
effective, on the basis of the number of such shares held by each such holder,
so that, as nearly as may be practicable, the number of such holder's shares
being redeemed (which number shall be a whole number) represents the same
proportion of such holder's total holdings of Senior Preferred Stock as the
aggregate number of shares being redeemed represents of the total number of
shares of Senior Preferred Stock at the time outstanding. In connection with any
redemption of shares of Senior Preferred Stock, the redemption payment shall be
payable only upon surrender of the certificates for the shares to be redeemed;
and if less than all of the shares represented by a surrendered certificate are
to be redeemed, the Corporation will forthwith issue one or more certificates
evidencing the shares which shall not have been so redeemed.
4. Liquidation. The shares of Senior Preferred Stock shall be preferred
over the shares of capital stock of all other classes or series of the
Corporation. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the shares of
Senior Preferred Stock shall be entitled to receive out of the assets of the
Corporation available for distribution to its stockholders, whether from capital
surplus or earnings of any nature, an amount equal to $1,000 per share and, in
addition to such amount, a further amount equal to all cumulative dividends
unpaid and accrued thereon as provided in section 2 hereof through the date of
such distribution, before any payment shall be made or any assets distributed to
the holders of any shares of capital stock of any other class or series of the
Corporation.
5. Voting. Except as otherwise expressly provided by law and except as
provided in sections 2(b), 6 or 8 hereof, the holders of shares of the Senior
Preferred Stock shall have no voting rights.
6. Action Requiring Vote of Senior Preferred Stock. So long as any shares
of Senior Preferred Stock
8
<PAGE>
shall be outstanding; the Corporation, without the affirmative vote or written
consent of the holders of at least 66-2/3% of the shares of Senior Preferred
Stock at the time outstanding shall not:
(i) create or authorize any class of capital stock ranking senior to
or on a parity with the Senior Preferred stock as to dividends,
redemptions, distributions in liquidation or any other matter (hereinafter
"Prohibited Stock");
(ii) create, authorize, issue or grant any obligation or security
convertible into, or warrant, option or right to purchase or acquire, any
Prohibited Stock;
(iii) increase the authorized number of shares of Senior Preferred
Stock;
(iv) amend, alter or repeal Article THIRD of the Corporation's
certificate of incorporation or, in any way which adversely affects the
rights of the holders of Senior Preferred Stock, the Certificate of
Incorporation or the By-laws of the Corporation;
(v) enter into any agreement or create any obligation, other than
the agreements entered into on the date of original issuance of the shares
of Senior Preferred Stock, restricting or limiting directly or indirectly,
the dividend, redemption, liquidation or any other rights of the holders
of Senior Preferred Stock;
(vi) take any action, or permit any Subsidiary to take any action,
which would constitute an event of default under any indebtedness for
borrowed money or represented by a note or written instrument of the
Corporation or any Subsidiary.
7. Restrictions Applicable to Certain Shares. (a) If and so long as any
shares of Senior Preferred Stock are held by Champion International Corporation,
no shares of Senior Preferred Stock held by Dominick International Corporation
or any of its subsidiaries or affiliates shall be entitled to any dividends,
redemption payments, payments or
9
<PAGE>
distributions upon liquidation, voting rights or any other rights. Each
certificate representing shares of Senior Preferred Stock transferred into the
name of Dominick International Corporation or any of its subsidiaries,
affiliates or nominees shall conspicuously recite the foregoing restriction and,
in addition, shall conspicuously state that the shares represented by such
certificate are subject to such restriction.
(b) In addition to the above, each certificate of every class of stock of
the Corporation shall have noted conspicuously on its front or back the
following legend:
"The certificate of incorporation of the Corporation contains a provision
authorized under section 620(b) of the New York Business Corporation Law."
8. Miscellaneous. (a) Except as otherwise provided, the Corporation shall
give to each holder of shares of Senior Preferred Stock at least ten days
written notice in advance of each annual and each special meeting of the
stockholders of the Corporation irrespective of whether the holders of shares of
Senior Preferred Stock would otherwise be entitled to receive such notice. The
Corporation shall give to each holder of shares of Senior Preferred Stock at
least ten days written notice in advance of the taking of any action without a
meeting pursuant to Section 61 of the New York Business Corporation Law.
(b) No allocation to the Sinking Fund or redemption under section 3(b)
hereof and no declaration or payment of dividends on Senior Preferred Stock
shall be made if at the time of such proposed allocation, redemption,
declaration or payment there shall have occurred and be continuing any event
which gives (or which, after the giving of notice or lapse of time or both,
would give) the holders of the $24,500,000 of 10% Secured Notes due July 15,
1992 of the Corporation, to be issued under those certain Note Purchase
Agreements between the Corporation and several institutional investors, or the
holders of Bank Indebtedness, the right to accelerate the payment of such Notes
prior to their stated maturity; and at no time shall the Corporation make any
such allocation, redemption, declaration or payment unless (i) at the date
thereof there shall be Funds Available for Other Contingent Payments for the
immediately preceding fiscal year, (ii) the amount of such allocation or
redemption does not exceed Funds Available for Sinking Fund Payments for the
immediately preceding fiscal year and the amount of such
10
<PAGE>
declaration or payment of dividends does not exceed Funds Available for
Dividends for the immediately preceding fiscal year, and (iii) such allocation,
redemption, declaration or payment is made not less than 100 days nor more than
150 days after the end of the immediately preceding fiscal year.
(c) Pursuant to the authority granted by section 620 of the New York
Business Corporation Law, the Board of Directors is required (i) to declare and
pay the annual dividends on Senior Preferred Stock pursuant to section 2(a)
hereof, and (ii) to make payments in redemption of shares of Senior Preferred
Stock on the Mandatory Redemption Dates pursuant to section 3(b) hereof, in each
case whenever allowed pursuant to the terms of section 8(b) hereof. If for any
reason the Board of Directors fails to declare and pay such dividends and/or to
make payments in redemption of shares of Senior Preferred Stock pursuant to the
above direction, the holders of Senior Preferred Stock shall have the power to
carry out either or both such directions and to take all action necessary and
appropriate in connection therewith.
If the right to declare and pay dividends, and/or to make payment in
redemption of shares, as herein provided, shall accrue to the holders of shares
of Senior Preferred Stock, the Board of Directors or a proper officer of the
Corporation shall, upon the written request of the holders of record of at least
25% of the shares of Senior Preferred Stock then outstanding, addressed and
delivered to the President or Secretary of the Corporation, call a special
meeting of the holders of shares of Senior Preferred Stock and shall notify the
holders of shares of all other classes of such meeting. If such special meeting
shall not be so called within five days after service of such request in the
manner set forth above, then any holder of record of shares of Senior Preferred
Stock then outstanding may call such special meeting, with notice thereof being
given as aforesaid. Any expenses incurred in calling such special meeting and
providing such notice shall be borne by the Corporation. The holders of at least
66-2/3% of the outstanding shares of Senior Preferred Stock shall be entitled to
declare and pay dividends and to make payments in redemption of shares of Senior
Preferred Stock as herein provided, and may take such action at a meeting as
herein provided or without a meeting pursuant to section 615 of the New York
Business Corporation Law.
11
<PAGE>
9. Definitions. For the purposes of these provisions, the following
definitions shall obtain:
(a) "Bank Indebtedness" means the principal of and interest on the
indebtedness of the Corporation to be incurred under that certain loan agreement
among the Corporation, the several lending banks which are parties to said
agreement, and Manufacturers Hanover Trust Company, as agent for said banks, as
the same may be duly amended or supplemented from time to time in accordance
with the terms thereof, evidenced by term notes in an aggregate principal amount
not to exceed $15,500,000 payable in 30 consecutive approximately equal
quarterly installments of principal, but does not mean revolving credit notes
which may be issued from time to time thereunder in an aggregate principal
amount not to exceed $3,000,000.
(b) "Consolidated Net Income" for any period means the aggregate of the
Net Income of the Corporation and its Subsidiaries for such period, after
eliminating all intercompany items, all computed in accordance with generally
accepted accounting principles (except that there shall be no deduction or
accrual for any liabilities for deferred compensation permitted pursuant to the
Deferred Compensation Plan or the deferred compensation arrangements with Howard
H. Haworth until the same shall become due and owing), provided that there shall
be excluded therefrom:
(i) the Net Income of any person (other than a Subsidiary) in which
the Corporation or one or more Subsidiaries has an ownership interest
unless such Net Income shall have actually been received by the
Corporation or such Subsidiary in the form of cash dividends or similar
cash distributions.
(ii) the Net Income of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Subsidiary (A) is at the time not permitted by the terms of any agreement
or instrument or any requirement of law applicable to such Subsidiary or
(B) would result in the imposition of tax liabilities on the Corporation
or any Subsidiary which have not been provided for and deducted in
determining Consolidated Net Income for such period.
12
<PAGE>
(iii) the Net Income of any Subsidiary for the period prior to its
acquisition.
(iv) the Net Income of any person (other than a Subsidiary) for the
period prior to the date on which such Person was consolidated with or
merged into the Corporation or any Subsidiary or the date on which
substantially all of the assets of such Person were purchased or otherwise
acquired by the Corporation or any Subsidiary.
(c) "Fiscal Year" means a 12-month period ending on a September 30
following the date of the original issuance of any shares of Senior Preferred
Stock, except that "Fiscal Year 1977" means the period from such date through
September 30, 1977.
(d) "Funds Available for Dividends") for any fiscal year means the lesser
of
(i) all dividends accrued on the Senior Preferred Stock at the rate
specified in section 2 hereof through the end of such fiscal year, whether
or not declared or paid, or
(ii) Funds Available for Other Contingent Payments for such fiscal
year.
(e) "Funds Available for Other Contingent Payments" for any fiscal year
means:
(i) the sum of
(A) the lesser of
(1) the sum of (x) all dividends accrued but unpaid on
Senior Preferred Stock through the end of such fiscal year and
(y) $3,751,000 and
(2) the excess of Consolidated Net Income for such
fiscal year over $4,000,000; and
(B) if at the end of such fiscal year, the Bank Indebtedness
shall have been paid in full, the aggregate amount of all
13
<PAGE>
repayments of principal thereof which, had there been no repayments
of Bank Indebtedness constituting Other Contingent Payments, would
have been required to be paid during such fiscal year as part of the
30 consecutive approximately equal quarterly installments of
principal thereof referred to in the definition of Bank
Indebtedness.
less
(ii) if during any previous fiscal year or years Consolidated Net
Income shall have been less than $4,000,000, the amount by which
(A) the aggregate amount arrived at by totalling the amounts
by which Consolidated Net Income shall have been less than
$4,000,000 in each such fiscal year exceeds
(B) the aggregate amount arrived at by totalling the amounts
by which the excess of Consolidated Net Income for each previous
fiscal year or years over $4,000,000 shall have been greater than
the aggregate of all Other Contingent Payments for each such fiscal
year.
Notwithstanding the foregoing provisions of this definition, the above dollar
amounts shall be adjusted downward, in the case of the Fiscal Year 1977, through
application thereto of a fraction, the numerator of which shall be the number of
days in such fiscal year and the denominator of which shall be 365.
(f) "Funds Available for Sinking Fund Payments" for any fiscal year means
70% (or, if all Bank Indebtedness has been paid at the end of such fiscal year,
100%) of the excess of (i) Funds Available for other Contingent Payments for
such fiscal year over (ii) the sum of (A) Funds Available for Dividends for such
fiscal year and (B) the lesser of $500,000 or the total amount of unpaid
principal on Bank Indebtedness at the end of such fiscal year.
(g) "Net Income" means, for any period for any person, the net income (or
net loss) of such person after deducting all operating expenses, provisions for
all taxes
14
<PAGE>
and reserves (including reserves for deferred income tax) and all other proper
deductions for such period, all determined in accordance with generally accepted
accounting principles but in any event excluding:
(i) any extraordinary items of gain or loss, any gain or loss
arising from any sale of capital assets, and any gain or loss resulting
from the revaluation of assets;
(ii) the proceeds of any life insurance policies;
(iii) any restoration to income of any reserve, except to the extent
that provision for such reserve was made out of income of such person
which is otherwise properly included in determining Net Income for such
period;
(iv) any gain arising from the acquisition, retirement or sale of
securities of such person or any of its subsidiaries; and
(v) any deferred credit, or amortization thereof, arising from the
purchase or other acquisition directly or indirectly of all or
substantially all of the assets or shares of any person.
(h) "Other Contingent Payment" means any payment in respect of the Senior
Preferred Stock and any optional payment (including any payment out of Funds
Available for Other Contingent Payments) in respect of the prepayment,
retirement, redemption or purchase of Bank Indebtedness.
(i) "Person" or "persons" include natural persons, groups, corporations,
partnerships, joint ventures, trusts, associations, and all other entities.
(j) "Redemption Price Per Share" has the meaning set forth in section 3(a)
hereof.
(k) "Subsidiary" means any corporation (i) incorporated under the laws of
one of the States of the United States of America or of the District of Columbia
or under the laws of Canada or any province thereof, (ii) which maintains
substantially all its assets and business operations within the
15
<PAGE>
United States of America or Canada, and (iii) of which all of the Voting
Securities (other than directors' qualifying shares) are owned by the
Corporation or another Subsidiary.
(l) "Voting Securities" means capital stock of any class or classes of a
corporation having general voting power under ordinary circumstances to elect a
majority of the board of directors of such corporation, or persons performing
similar functions (irrespective of whether or not at the time stock of any other
class or classes shall have or might have special voting power or rights by
reason of the happening of any contingency).
(b) Common Stock
1. Issuance. From time to time common stock (hereinafter the "Common
Stock") may be issued in such amounts and for such purposes as shall be
determined by the Board of Directors.
2. Dividends. Subject to all of the rights of the Senior Preferred Stock,
such dividends as may be determined by the Board of Directors may be declared
and paid on the Common Stock from time to time out of the surplus of the
Corporation legally available for the payment of dividends.
3. Voting Rights. Except as otherwise expressly provided with respect to
the Senior Preferred Stock, the Common Stock shall have the exclusive right to
vote for the election of directors and for all other purposes, each holder of
the Common Stock being entitled to one vote for each share thereof held.
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, and after the holders of the
Senior Preferred Stock of each series shall have been paid in full the amounts
to which they respectively shall be entitled, or an amount sufficient to pay the
aggregate amount to which the holders of the Senior Preferred Stock of each
series shall be entitled shall have been deposited with a bank or trust company
having its principal office in the Borough of Manhattan, the City of New York,
and having a capital, surplus and undivided profits of at least twenty-five
million dollars ($25,000,000) as a trust fund for the benefit of the holders of
such Senior Preferred Stock, the remaining net assets of the Corporation shall
be distributed pro rata to the holders
16
<PAGE>
of the Common Stock in accordance with their respective rights and interests, to
the exclusion of the holders of the Senior Preferred Stock.
(c) General Provisions and Definitions
1. A consolidation or merger of the Corporation with or into another
corporation or corporations or a sale whether for cash, shares of stock,
securities or properties, of all or substantially all of the assets of the
Corporation shall not be deemed or construed to be a liquidation, dissolution or
winding up of the Corporation provided that the merger is not in violation of
Section 6 hereof.
2. No stockholder of the Corporation shall be entitled, as such, as a
matter of right, to subscribe for or purchase any part of any new or additional
issue of stock of any class or series whatsoever, any rights or options to
purchase stock of any class or series whatsoever, or any securities convertible
into any stock of any class or series whatsoever, whether nor or hereafter
authorized, and whether issued for cash or other consideration, or by way of
dividend.
3. The Board of Directors may from time to time issue scrip in lieu of
fractional shares of stock. Such scrip shall not confer upon the holder any
right to dividends or any voting or other rights of a stockholder of the
Corporation, but the Corporation shall from time to time, within such time as
the Board of Directors may determine or without limit of time if the Board of
Directors so determines, issue one or more whole shares of stock upon the
surrender of scrip for fractional shares aggregating the number of whole shares
issuable in respect of the scrip so surrendered, provided that the scrip so
surrendered shall be properly endorsed for transfer if in registered form.
FOURTH: The Secretary of State of the State of New York is hereby
designated as the agent of the Corporation upon whom process in any action or
proceeding against it may be served.
FIFTH: The office of the Corporation shall be located in the City, County
and State of New York, at 55 Water Street, 43rd Floor, New York, New York 10041,
and the address to which the Secretary of State shall mail a copy of process in
any action or proceeding against the Corporation which may be served upon him is
Drexel Heritage Furnishings, Inc., Drexel, North Carolina 28619, Attention:
President.
17
<PAGE>
SIXTH: The following provisions are inserted for the regulation and
conduct of the affairs of the Corporation, and it is expressly provided that
they are intended to be in furtherance and not in limitation or exclusion of the
powers conferred by statute:
(a) All corporate powers except those which by law expressly require the
consent of the stockholders shall be exercised by the Board of Directors.
(b) The Board of Directors shall have power from time to time to fix and
determine and vary the amount of the working capital of the Corporation and to
direct and determine the use and disposition of any surplus or net profits over
and above its capital, and in its discretion the Board of Directors may use and
apply any such surplus or accumulated profits in purchasing or acquiring bonds
or other obligations of the Corporation or shares of its own capital stock, to
such extent and in such manner and upon such as the Board of Directors shall
deem expedient, but any shares of such capital stock so purchased or acquired
may be resold unless such shares shall have been retired in the manner provided
by law for the purpose of decreasing the Corporation's capital.
(c) Any one or more or all of the directors may be removed for or without
cause, at any time, by the vote of the stockholders holding a majority of the
stock of the Corporation entitled to vote, at any special meeting, and thereupon
the term of each director or directors who shall have been so revoked shall
forthwith terminate, and there shall be a vacancy or vacancies in the Board of
Directors to be filled as provided in the By-Laws.
(d) No contract or other transaction between the Corporation and any other
corporation shall be affected or invalidated by the fact that any one or more of
the directors of this Corporation is or are interested in, or is a director or
officer, or are directors or officers of such other corporation, and any
director or directors, individually or jointly, may be a party or parties to or
may be interested in any contract or transaction of this Corporation or in which
this Corporation is interested; and no contract, act or transaction of this
Corporation with any persons, firms or corporations, shall be affected or
invalidated by the fact that any director or directors of this Corporation is a
party, or are parties, to or interested
18
<PAGE>
in such contract, act or transaction, or in any way connected with such persons,
firms or corporations, and each and every person who may become a director of
this Corporation is hereby relieved from any liability that might otherwise
exist from contracting with the Corporation for the benefit of himself or any
firm or corporation in which he may be in any wise interested.
(e) The Board of Directors may make By-Laws and from time to time may
alter, amend or repeal any By-Laws, but any By-Laws made by the Board of
Directors may be altered or repealed by the stockholders.
SEVENTH: The number of Directors of the Corporation shall be governed by
the By-Laws.
5. The restatement of the Certificate of Incorporation was authorized by
the written consent of its sole common stockholder, the sole stockholder
entitled to vote thereon.
IN WITNESS WHEREOF, we have signed this certificate on the 9th day of
August, 1977 and we affirm the statements contained therein as true under
penalties of perjury.
D & D EQUIPMENT CO., INC.
By /s/ Peter M. Kennedy
-------------------------------------
Peter M. Kennedy,
Chairman of the Board
By /s/ Robert C. Harrison as Secretary
-------------------------------------
Robert C. Harrison.
Secretary
19
Exhibit 3.9
940399005
State of North Carolina
Department of the Secretary of State
ARTICLES OF INCORPORATION
Pursuant to ss. 55-2-02 of the General Statutes of North Carolina, the
undersigned does hereby submit these Articles of Incorporation for the purpose
of forming a business corporation.
1. The name of the corporation is Drexel Heritage Inspiration, Inc.
2. The number of shares the Corporation is authorized to issue is: 1,000
These shares shall be: (check either a or b)
a. X all of one class, designated as common stock; or
---
b.___ divided into classes or series within a class as provided in the
attached schedule, with the information required by NCGS ss. 55-6-01.
3. The street address and county of the initial registered office of the
corporation is:
Number and Street 225 Hillsborough Street
City State Zip Code Raleigh, NC 27603 County Wake
4. The mailing address if different from the street address of the initial
registered office is:
________________________________________________________________________
5. The name of the initial registered agent is: CT Corporation System
6. Any other provisions which the corporation elects to include are
attached.
7. The name and address of each incorporator is as follows:
Sharon O'Brien 21001 Van Born Road, Taylor, Michigan 48180
8. These articles will be effective upon filing, unless a date and/or time
is specified:
This the 21 day of February, 1994
DREXEL HERITAGE INSPIRATION, INC.
/s/Sharon O'Brien /s/Gerald Bright
- ----------------------------- ---------------------------------
Sharon O'Brien Signature
Incorporator
Gerald Bright, Vice President
---------------------------------
Type or Print Name and Title
NOTES:
1. Filing fee is $100. This document and one exact or conformed copy of these
articles must be filed with the Secretary of State. (Revised October 1991)
CORPORATIONS DIVISION 300 N. SALISBURY ST. RALEIGH, NC 27603-5909
<PAGE>
State of North Carolina
Department of the Secretary of State
ARTICLES OF AMENDMENT
Pursuant to ss. 55-10-06 of the General Statutes of North Carolina, the
undersigned corporation hereby submits the following Articles of Amendment for
the purpose of amending its Articles of Incorporation:
1. The name of the corporation is: Drexel Heritage Home Inspiration, Inc.
2. The text of each amendment adopted is as follows: (State below or
attach)
"The name of the Company is Drexel Heritage Home Inspirations, Inc."
3. If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing
the amendment, if not contained in the amendment itself, are as follows:
4. The date of adoption of each amendment was as follows: June 22, 1994.
5. (Check with a, b, c, or d, whichever is applicable)
a._____The amendment(s) was (were) duly adopted by the incorporators
prior to the issuance of shares.
b._____The amendment(s) was (were) duly adopted by the board of
directors prior to the issuance of shares.
c._____The amendment(s) was (were) duly adopted by the board of
directors without shareholder approval as shareholder
approval was not required because (set forth a brief explanation
of why shareholder action was not required)
________________________________________________________________
________________________________________________________________
________________________________________________________________
d. X The amendment(s) was (were) approved by shareholder action, and
-----such shareholder approval was obtained as required by Chapter 55
of the North Carolina General Statutes.
(N. C. - 1216 - 10/16/91)
CORPORATIONS DIVISION 300 N. SALISBURY ST. RALEIGH, NC 27603-5909
<PAGE>
ARTICLES OF AMENDMENT
Page 2
6. These articles will be effective upon filing, unless a delayed time and
date is specified:
This the 22 day of June, 1994
DREXEL HERITAGE HOME INSPIRATION, INC.
--------------------------------------
Name of Corporation
/s/Gerald Bright
--------------------------------------
Signature
Gerald Bright, Secretary
--------------------------------------
Type or Print Name and Title
NOTES:
1. Filing fee is $50. This document and one exact or conformed copy of these
articles must be filed with the Secretary of State.
CORPORATIONS DIVISION 300 N. SALISBURY ST. RALEIGH, NC 27603-5909
(N. C. - 1216)
<PAGE>
State of North Carolina
Department of the Secretary of State
ARTICLES OF AMENDMENT
Pursuant to ss. 55-10-06 of the General Statutes of North Carolina, the
undersigned corporation hereby submits the following Articles of Amendment for
the purpose of amending its Articles of Incorporation:
1. The name of the corporation is: Drexel Heritage Inspiration, Inc.
2. The text of each amendment adopted is as follows: (State below or
attach)
The name of the Company is Drexel Heritage Home Inspiration, Inc.
3. If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the
amendment, if not contained in the amendment itself, are as follows:
N/A
4. The date of adoption of each amendment was as follows:
March 31, 1994.
5. (Check with a, b, c, or d, whichever is applicable)
a.______The amendment(s) was (were) duly adopted by the incorporators
prior to the issuance of shares.
b.______The amendment(s) was (were) duly adopted by the board of
directors prior to the issuance of shares.
c.______The amendment(s) was (were) duly adopted by the board of
directors without shareholder approval as shareholder approval
was not required because (set forth a brief explanation of why
shareholder action was not required)
________________________________________________________________
________________________________________________________________
________________________________________________________________
d. X The amendment was approved by shareholder action, and such
------shareholder approval was obtained as required by Chapter 55 of
the North Carolina General Statutes
(N. C. - 1216 - 10/16/91)
CORPORATIONS DIVISION 300 N. SALISBURY ST. RALEIGH, NC 27603-5909
<PAGE>
ARTICLES OF AMENDMENT
Page 2
6. These articles will be effective upon filing, unless a delayed time and
date is specified:_________________________________________________
This the 5th day of April, 1994
DREXEL HERITAGE INSPIRATION, INC.
---------------------------------
Name of Corporation
/s/Gerald Bright
---------------------------------
Signature
Gerald Bright - Vice President
---------------------------------
Type or Print Name and Title
NOTES:
1. Filing fee is $50. This document and one exact or conformed copy of these
articles must be filed with the Secretary of State.
CORPORATIONS DIVISION 300 N. SALISBURY ST. RALEIGH, NC 27603-5909
(N. C. - 1216)
Exhibit 3.10
RESTATED CHARTER OF
HENREDON FURNITURE INDUSTRIES, INC.
The undersigned corporation, pursuant to action by its Board of Directors
and without a vote of its shareholders, hereby executes this Restated Charter
for the purpose of intergrating into one document its original Certificate of
Incorporation and all amendments thereto:
1. The name of this corporation is Henredon Furniture Industries, Inc.
2. The location of the principal office of the corporation in this state
is in the city of Morganton, Burke County, North Carolina, but the corporation
may have one or more branch offices and places of business out of the State of
North Carolina, as well as in said state.
3. The period of existence of this corporation is unlimited.
4. The nature of the business proposed to be transacted and the objects
and purposes for which this corporation is organized and the powers given to
this organization are as follows:
a. To design, manufacture, fabricate, cut, fashion, mould, assemble,
prepare, adapt, process, use, buy, sell and otherwise acquire, deal in and
dispose of furniture and furniture products of all kinds and descriptions,
whether made of wood, metal, compositions of metals and wood, alloys, plastics,
glass, or any other materials; and likewise to design, manufacture, tool,
fabricate, cut, fashion, mould, assemble, compound, prepare, adapt, process,
use, buy, sell and otherwise acquire, deal in and dispose of any materials,
articles, processes, or things required for, in connection with, or incidental
to the manufacture, production, use, purchase, sale of, or other dealing in any
and all kinds of furniture, furniture hardware, lumber and wood products,
veneers, plywoods, mirrors and other articles and products of glass used in
connection with furniture or furnishings, paints, varnishes, glues, felts,
fabrics, pads and padding, tools, equipment, packing cases and cartons and other
supplies; and generally to carry on any other business, whether manufacturing or
otherwise, which needs to be, should be or can conveniently be carried on in
conjunction with any of the objects and purposes aforesaid or hereinafter more
fully described.
<PAGE>
b. To lease, purchase, sell, hold, use and otherwise deal in timber
lands, timber leases, rights and concessions, and other lands, leases, rights
and concessions in connection therewith; to buy or otherwise acquire, sell or
otherwise dispose of, grow, develop, cut, process, manufacture, export, import,
ship, or in any way deal in timber, lumber, tanbark, and the products thereof;
to construct, purchase, own, lease or otherwise acquire, operate and dispose of
saw mills, lumber yards, veneer mills, planing mills and other mills, also side
booms and pocket booms and sheer booms, at or near said mills, for the purpose
of catching and holding logs and other timber to be used, processed and
manufactured at said mills; to operate tram roads, railroads and other roads,
and boats and barges for the transportation of the said commodities to and from
said mills; and to carry on a general merchandising business in connection with
said lumber and milling business.
c. To design, manufacture, forge, weld, fabricate, process, and
otherwise construct, develop, use and deal in tools, machines parts, castings,
dies, forgings, and other articles needed or used in connection with or
incidental to the manufacture of furniture; and likewise operate forges, blast
furnaces, welding and repair shops, foundries and machine shops for such
purposes.
d. To manufacture, use, treat, process, buy or otherwise acquire,
deal in and sell or otherwise dispose of all kinds and types of veneer; to
operate veneer plants; to veneer woods and furniture, whether manufactured from
wood, metal, plastic, glass, or other materials; and to veneer, galvanize, and
coat woods, metals, plastics and glass, or any of them; and to sell the products
so manufactured.
e. To design, manufacture, fabricate, process, forge, weld or
otherwise construct, develop, use, buy, sell and deal in all kinds, types, and
classes of furniture, hardware, castings, rollers, locks, keys and other items
of metal used in connection with, or incidental to the manufacture of furniture,
furniture products or furnishings.
-2-
<PAGE>
f. To compund, mix, refine, process, prepare, manufacture, buy or
otherwise acquire, use, deal in, and sell or otherwise dispose of all kinds,
types and descriptions of varnishes, paints, and glues used in connection with
or incidental to the manufacture of furniture, furniture products or
furnishings; and to manufacture, prepare, compound, use and deal in chemical
compounds, processes, methods, solutions, concentrates, bases, solvents, and
mixtures of any and all kinds for preserving, flameproofing, waterproofing,
curing, cleansing, dyeing, coloring, surfacing, treating, embalming,
impregnating, seasoning and hardening timber, wood products, fabricated wood,
wood furniture, plywood, veneer, paper board and other forms, types and kinds of
wood, timber and fibew products.
g. To manufacture, mould, fashion, process, buy or otherwise
acquire, use, deal in, and sell or otherwise dispose of all forms, types,
shapes, and all kinds and descriptions of mirrors, glass tops, and other glass
used in connection with or incidental to the manufacture of furniture, furniture
products or furnishings; and to bevel, polish, silver and resilver mirrors and
reflecting surfaces of all kinds and descriptions, designed, prepared and
manufactured for the purposes aforesaid.
h. To design, fabricate, manufacture, process, develop, use, buy or
otherwise acquire, sell or otherwise dispose of and deal in woven fabrics,
whether of silk, wool, cotton, linen, rubber, glass, plastics or other
materials, used in connection with or incidental to the manufacture, finishing
and sale of furniture, furniture products and furnishings.
i. To manufacture, fabricate, process, use, buy or otherwise
acquire, sell or otherwise dispose of and deal in burlap and other bagging and
covering materials and twines, rope and cordage made of flax, jute, wool, hemp,
wire or other metals, or alloys, glass, or other suitable materials.
j. To manufacture, fabricate, process, develop, use, buy or
otherwise acquire, sell or otherwise dispose of, and deal in all forms, types
and kinds of materials used in wrapping, crating, packaging and shipping
furniture, furniture products and furnishings, whether
-3-
<PAGE>
made of wood, cardboard, paper, cloth, cotton batting, metals, plastics,
fabricated materials, or other suitable materials; and to do any and all things
necessary and proper in carrying on a general cooperage business.
k. To design, manufacture, fabricate, prepare, adapt, process, use,
buy, sell or otherwise acquire and dispose of and to deal in any and all other
articles and things used in connection with or incidental to the manufacture of
furniture, furniture products, or furnishings, or which needs to be, should be
or can be conveniently and profitably carried on in conjunction with any of the
objects and purposes aforesaid.
l. For the accomplishment of the objects and purposes aforesaid this
corporation is authorized to purchase, lease, or otherwise acquire standing
timber, timber lands, products of the forest, logging and cutting rights,
privileges, and concessions anywhere in the United States and in any part of the
world; to purchase, lease or otherwise acquire or to construct logging camps,
sawmills, conversion and disposal plants for waste products, and other mills,
plants and structures necessary for or incidental to the cutting and removal of
timber so acquired and for the processing and utilization of the same; and to
use, develop, and deal in such items and, when deemed advisable or desirable, to
sell, lease or release, or otherwise dispose of the same.
m. To buy, lease or otherwise acquire real estate and to buy, lease
or otherwise acquire or to erect, develop, use and operate buildings, factories,
plants, warehouses, shops, mills, foundries, plants for the conversion and
disposal of waste products and by-products of lumber and the like, research
laboratories and foundations, railroad sidings, and any and all other buildings
and structures necessary for or incidental to the operations of this corporation
and for the accomplishment of the objects and purposes for which this
corporation is formed.
n. To buy, lease or otherwise acquire, or to design, manufacture,
fabricate or otherwise produce any and all kinds, types, forms and classes of
machinery, tools, equipment, furniture, fixtures,
-4-
<PAGE>
parts and any and all other articles and things necessary for or incidental to
the operations of this corporation and for the accomplishment of the objects and
purposes for which this corporation is formed.
o. To purchase or otherwise acquire, own, hold, use, mortgage,
pledge, sell, assign and transfer or otherwise dispose of, invest, trade, deal
in and deal with goods, wares, merchandise, supplies, and real and personal
property of every class, kind and description.
p. To enter into agreements and cooperative relations not in
contravention of law with any person, firm, association or corporation (public,
quasi-public or private) for the purpose of carrying on all or any of the
objects and purposes for which this corporation is organized. Power is hereby
expressly given to this corporation to enter into any partnership agreement with
other corporations, associations, trusts, firms or individuals (where not in
contravention of law) and, in the manner provided but pursuant to the provisions
of the laws of the State of North Carolina, to become a member of any general or
limited partnership; provided, however, that the officers, directors and
stockholders of this corporation shall not be or become individually liable for
any of the debts or other obligations of this corporation by reason of its
becoming a member of any general or limited partnership.
q. To acquire, hold, use, sell, assign, lease, grant licenses in
respect thereto, mortgage or otherwise dispose of rights, patents of the United
States or any foreign country, patent rights, licenses and privileges, leases,
options, concessions, inventions, improvements and process copyrights,
trade-marks and trade names relating to or useful in connection with any
business of this corporation.
r. To acquire and pay for in cash, stock or bonds of this
corporation or otherwise, the good will, rights, assets and properties, and to
undertake or assume the whole or any part of the obligations or liabilities of
any person, firm, association or corporation.
-5-
<PAGE>
s. Without in any particular limiting or restricting any of the
objects and purposes of the corporation, the corporation shall have the power to
use bonds and other obligations and shares of its capital stock in payment for
property purchased or acquired by it or for any other lawful object or purpose
in and about its business; to mortgage or pledge any stocks, bonds or other
obligations or property which may be acquired by it; to secure any bonds,
guaranty or other obligations by it issued or incurred; to guarantee any
dividends or or bonds or contracts or other obligations; to make and perform
contracts of every kind and description in connection with the operations of its
business or for the purpose of carrying on said business or for the purposes of
attaining or furthering any of the objects and purposes for which this
corporation is formed; to do any and all other things and exercise any and all
other powers which a co-partnership or natural business could do and exercise,
or which now or hereafter may be authorized by law.
t. To purchase or otherwise acquire, hold, use, deal in, sell,
assign, transfer, mortgage, pledge or otherwise dispose of shares of capital
stock of, or any bonds, securities, or evidences of indebtedness created by any
other corporation or any governmental unit of any country, nation or government,
and while the owner thereof, to exercise all the rights, powers and privileges
of ownership.
u. To issue bonds, notes, debentures or other obligations of this
corporation from time to time for any of the objects and purposes of this
corporation and to secure the same by mortgage, pledge, deed of trust or
otherwise.
v. To purchase, hold, sell and transfer the shares of its own
capital stock; provided, however, that the corporation shall not use its own
funds or properties for the purchase of its own shares of capital stock when
such use would cause any impairment in its capital, and further provided that it
shall not use its funds or properties for the purchase of its own shares of
capital stock in violation of any contract or agreement prohibiting the same or
so long as the corporation has outstanding any indebtness, other than current
accounts payable or accrued items of expense, without the specific consent and
-6-
<PAGE>
approval of the person, firm or corporation to whom such indebtedness, other
than current accounts payable or accrued expense, is owing. Shares of its own
capital stock belonging to this corporation shall not be entitled to a vote at
any corporate meeting.
w. To have plants, factories, warehouse, mills, laboratories,
offices and branch places of business; to carry on all or any of its operations
and business; to purchase or otherwise acquire, hold, own, use, develop,
mortgage, sell, convey or otherwise dispose of real and personal property of
every class and description in any of the states, districts, territories,
mandates or colonies of the United States and in any and all foreign countries
subject to the laws of such state, district, territory, mandate, colony or
country.
x. In general, to carry on any other business in connection with the
foregoing, whether manufacturing or otherwise, and to have and exercise all the
rights, privileges and powers conferred by the laws of the State of North
Carolina upon corporations formed under the laws of said state, and to do any
and all other things hereinbefore set forth to the same extent as natural
persons might or could do.
The foregoing clauses shall be construed both as to objects, purposes and
powers; and is hereby expressly provided that the foregoing enumeration of
specific objects, purposes and powers shall not be held to limit or restrict in
any manner the powers of this corporation but this corporation shall have, in
addition to the foregoing enumerated objects, purposes and powers, all of the
rights, privileges and powers given to it by the laws of the State of North
Carolina.
5. The corporation shall have authority to issue twenty-two million
(22,000,000) shares with a par value of Two Dollars ($2.00) per share, all of
which shall be common stock. On and afte rMay 25, 1965 no shareholder shall have
the pre-emptive right to acquire additional or treasury shares of the
corporation, whether then or thereafter authorized.
-7-
<PAGE>
6. The stated capital of the corporation is $10,850,600.
7. The address of the registered office of the corporation in the State of
North Carolina is Office Building of Henredon Furniture Industries, Inc.,
Henredon Road, Morganton, Burke County, North Carolina; and the name of its
registered agent at such address is B.B. Isaacs.
8. The vote of two-thirds of all outstanding shares of the corporation
shall be required to be the act of the shareholders in approving a merger,
consolidation, sale or disposition of all, or substantially all, of the assets
of the corporation, and any other procedure having substantially the same effect
as any of the procedures above set forth. The same vote shall be required to
repeal this article or to reduce the fraction of two-thirds required by the
first sentence of this article.
9. The business and resources of this corporation shall be managed and
controlled by a board of directors, and the said board, by a majority of all
their number, at any regular meeting, or at any special meeting called for that
purpose, shall have the power to make, alter, amend and rescind the by-laws of
this corporation.
10. This Restated Charter was adopted by the Board of Directors of the
corporation on the 9th day of October, 1981 and it supersedes the original
Articles of Incorporation and all amendments thereto.
12. Such adoption does not give rise to dissenters' rights nor to class
voting rights for the reason that the only effect of this Restated Charter is to
set forth without change the corresponding provisions of the Certificate of
Incorporation as heretofore amended.
IN WITNESS WHEREOF, this statement is executed by the __________ president
and _____________ secretary of the corporation this the 10th day of November,
1981.
HENREDON FURNITURE
INDUSTRIES, INC.
By /s/ William E. Smith
-------------------------
President
ATTEST:
- ----------------------
Secretary
-8-
<PAGE>
STATE OF NORTH CAROLINA )
)
COUNTY OF BURKE )
I, Thelma Conley, a Notary Public, hereby certify that this 10th day of
November, 1981, personally appeared before me William E. Smith and B.B. Isaacs ,
each of whom being by me first duly sworn, declared that he signed the foregoing
document in the capacity indicated, that he was authorized so to sign, and that
the statements therein contained are true.
/s/ Thelma Conley
-------------------------
Notary Public
My Commission Expires:
My Commission Expires March 7, 1993
- -----------------------------------
Exhibit 3.11
ARTICLES OF INCORPORATION
OF
HENREDON TRANSPORTATION COMPANY
The undersigned, being of the age of eighteen (18) years or more, does
hereby make and acknowledge these Articles of Incorporation for the purpose of
forming a business corporation under and by virtue of the laws of the State of
North Carolina.
1. The name of the corporation is: Henredon Transportation Company.
2. The period of duration of the corporation is perpetual.
3. The purposes for which this corporation is organized are:
(a) To own, lease, or otherwise operate motor vehicles ofr transporting
property as a common or contract carrier for compensation over and
upon the public highways of North Carolina and all other states; to
arrange for transportation by other common carriers or contract
carriers either by motor vehicle, rail, or otherwise; to trip-lease
tractors and trailers from and to other common or contract carriers;
to own, control, lease, or otherwise operate offices, garages, and
terminal yards in connection with the aforementioned business; to
own, obtain, purchase, or lease certificates of public convenience
and necessity, and permits authorizing such operations as granted by
the North Carolina Utilities Commission, the Interstate Commerce
Commission, and the various commissions of other states having
authority to issue same; and to do all acts and things necessary,
convenient, expedient, or incident to carrying out the purpose of
operating a motor truck line, engaging in the business of a broker,
and engaging in the business of preparing property so that it may be
moved by other transportation agencies. It is further the purpose of
this corporation to transport or
<PAGE>
arrange for the transportation of property of all types.
(b) To engage in any lawful act or activity for which corporations may
be organized under Chapter 55 of the General Statutes of North
Carolina, and nothing contained herein shall in any way limit or
restrict or take away from this corporation the general powers
granted to it under and by virtue of the provisions of Chapter 55 of
the General Statutes of North Carolina and the several amendments
thereto.
4. The total authorized capital stock of this corporation shall be One
Hundred Thousand Dollars ($100,000.00) to consist of One Hundred Thousand
(100,000) shares of common stock of a par value of One Dollar ($1.00) each.
5. The minimum amount of consideration to be received by the corporation
for its shares before it shall commence business is One Thousand Dollars
($1000.00) in cash or property of equivalent value.
6. The shareholders of the corporation shall not have the preemptive right
to acquire additional or treasury shares of the corporation.
7. The initial registered office of the corporation shall be located at
the corporate offices of Henredon Furniture Industries, Inc. at Henredon Road,
Post Office Box 70, Morganton, Burke County, North Carolina 28655 and the name
of its initial registered agent at such address is B.B. Isaacs.
8. The number of directors of this corporation constituting the Board of
Directors shall be as set forth in the bylaws, but shall not be less than three
(3) unless there are fewer than three (3) shareholders of the corporation, in
which event the number of directors may be the same as the number of
shareholders. The names and addresses of the persons constituting the initial
Board of Directors who shall serve as directors until the first meeting of
shareholders or until successors shall be duly elected and qualified are as
follows:
2
<PAGE>
Name Address
---- -------
Thomas Luckadoo Henredon Road
Post Office Box 70
Morganton, NC 28655
B.B. Isaacs Henredon Road
Post Office Box 70
Morganton, NC 28655
John N. Jokinen Henredon Road
Post Office Box 70
Morganton, NC 28655
9. The name and address of the incorporator is
Name Address
---- -------
James M. Iseman, Jr 1001 West Fourth Street
Winston-Salem, NC 27101
Witness my hand and seal this the 5th day of March, 1982.
/s/James M. Iseman, Jr.
------------------------------
James M. Iseman, Jr.
STATE OF NORTH CAROLINA )
)
COUNTY OF FORSYTH )
I, Matilda M. Omwake, a notary public, do hereby certify that James M.
Iseman, Jr. personally appeared before me this 5th day of March, 1982, and
acknowledged the due execution of the foregoing Articles of Incorporation.
/s/Matilda M. Omwake
------------------------------
Notary Public
My Commission Expires:
-----------------------------------
December 25, 1983 [Seal] OFFICIAL SEAL
- ---------------------- Notary Public, North Carolina
County of Forsyth
Matilda M. Omwake
My commission expires Dec. 25, 1983
-----------------------------------
3
Exhibit 3.12
CERTIFICATE OF INCORPORATION
OF
INTERIOR FABRIC DESIGN INC.
Under Section 402 of the Business Corporation Law
The undersigned, being a natural person of at least 18 years of age and
acting as the incorporator of the corporation hereby being formed under the
Business Corporation Law, certifies that:
FIRST: The name of the corporation is INTERIOR FABRIC DESIGN INC.
SECOND: The corporation is formed for the following purpose or purposes:
To originate, create, prepare, buy, sell, import, export, furnish,
produce, print, apply, reproduce, promote, license the use of as licensor
and licensee, lease as lessor and lessee, distribute, enter into,
negotiate, execute, acquire, and assign contracts in respect of, acquire,
receive, grant and assign licensing arrangements, options, franchises, and
other rights in respect of, and generally deal in and with, at wholesale
and retail, and as principal, agent, broker, contractor, advisor,
consultant, sales or other representative, or in any other lawful
capacity, designs, drawings, sketches, patterns, prints, creations,
devices, and equipment of all kinds used or useful in connection with
textiles and other products.
To create, establish, build up and maintain a public relations,
selling or purchasing organization for the promotion, sale, advertisement,
distribution or introduction of any and all manufactured products,
merchandise, personal property and subjects of trade or commerce of every
kind and nature, or any rights or interests therein and thereto, and to
manufacture, handle on commission or otherwise deal in contract for or
otherwise acquire, advertise, promote, introduce, distribute, buy, sell or
otherwise dispose of, for itself or for any other or others, any of the
aforesaid.
1
<PAGE>
To carry on a general mercantile, industrial, investing, and trading
business in all its branches, to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export,
license as licensor or licensee, lease as lessor or lessee, distribute,
job, enter into, negotiate, execute, acquire, and assign contracts in
respect of, acquire, receive, grant, and assign licensing arrangements,
options, franchises, and other rights in respect of, and generally deal in
and with, at wholesale and retail, as principal, and as sales, business,
special, or general agent, representative, broker, factor, merchant,
distributor, jobber, advisor, and in any other lawful capacity, goods,
wares, merchandise, commodities, and unimproved, improved, finished,
processed, and other real, personal, and mixed property of any and all
kinds, together with the components, resultants, and by-products thereof;
to acquire by purchase or otherwise own, hold, lease, mortgage, sell, or
otherwise dispose of, erect, construct, make, alter, enlarge, improve, and
to aid or subscribe toward the construction, acquisition or improvement of
any factories, shops, storehouses, buildings, and commercial and retail
establishments of every character, including all equipment, fixtures,
machinery, implements and supplies necessary, or incidental to, or
connected with, any of the purposes or business of the corporation; and
generally to perform any and all acts connected therewith or arising
therefrom or incidental thereto, and all acts proper or necessary for the
purpose of the business. To engage generally in the real estate business
as principal, agent, broker, and in any lawful capacity, and generally to
take, lease, purchase, or otherwise acquire, and to own, use, hold, sell,
convey, exchange, lease, mortgage, work, clear, improve, develop, divide,
and otherwise handle, manage, operate, deal in and dispose of real estate,
real property, lands, multiple-dwelling structures, houses, buildings, and
other works, and any interest or right therein; to take, lease, purchase
or otherwise acquire and to own, use, hold, sell, convey, exchange, hire,
lease, pledge, mortgage, and otherwise handle, and deal in and dispose of,
as principal, agent, broker, and in any lawful capacity,
2
<PAGE>
such personal property, chattels, chattels real, rights, easements,
privileges, choses in action, notes, bonds, mortgages, and securities as
may lawfully be acquire, held, or disposed of, and to acquire, purchase,
sell, assign, transfer, dispose of, and generally deal in and with, as
principal, agent, broker, and in any lawful capacity, mortgages, and other
interests in real, personal, and mixed properties; to carry on a general
construction, contracting, building, and realty management business as
principal, agent, representative, contractor, subcontractor, and in any
other lawful capacity.
To apply for, register, obtain, purchase, lease, take licenses in
respect of or otherwise acquire, and to hold, own, use, operate, develop,
enjoy, turn to account, grant licenses and immunities in respect of,
manufacture under and to introduce, sell, assign, mortgage, pledge or
otherwise dispose of, and, in any manner deal with and contract with
reference to:
(a) inventions, devices, formulas, processes, and any
improvements and modifications thereof;
(b) letters patent, patent rights, patented processes, copy-
rights, designs, and similar rights, trade-marks, trade symbols and
other indications of origin and ownership granted by or recognized
under the laws of the United States of America or of any state or
subdivision thereof, or of any foreign country or subdivision,
thereof, and all rights connected therewith or appertaining
thereunto;
(c) franchises, licenses, grants and concessions.
To have, in furtherance of the corporate purposes, all of the powers
conferred upon corporations organized under the Business Corporation Law
subject to any limitations thereof contained in this certificate of
incorporation or in the laws of the State of New York.
3
<PAGE>
THIRD: The office of the corporation is to be located in the City of New
York, County of New York, State of New York.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 200 shares of Common Stock, all of which are without par
value, and all of which are of the same class.
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against the corporation may be served. The post
office address without the State of New York to which the Secretary of State
shall mail a copy of any process against the corporation served upon him is: c/o
Robert J. Weissman, 25 Wells Avenue, Newton Centre, Massachusetts 02139.
SIXTH: The duration of the corporation is to be perpetual.
SEVENTH: Any action required or permitted to be taken by the Board of
Directors of the corporation or of any committee thereof may be taken without a
meeting if all members of the Board of Directors or of any committee thereof
consent in writing to the adoption of a resolution authorizing the action.
Any one or more members of the Board of Directors of the corporation or of
any committee thereof may participate in a meeting of said Board or of any such
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the same
time.
EIGHTH: Except as may otherwise be specifically provided in this
certificate of incorporation, no provision of this certificate of incorporation
is intended by the corporation to be construed as limiting, prohibiting,
denying, or abrogating any of the general or specific powers or rights conferred
under the Business Corporation Law upon the corporation, upon its shareholders,
bondholders, and security holders and upon its directors, officers, and other
corporate personnel, including, in particular, the power of the corporation to
furnish indemnification to directors and officers in the capacities defined and
prescribed by the Business Corporation Law and the defined and prescribed rights
of said persons to indemnification as the same are conferred by the Business
Corporation Law.
4
<PAGE>
NINTH: The accounting period which the corporation intends to establish as
its first calendar or fiscal year for reporting the Franchise Tax on business
corporations imposed by Article 9-A of the Tax Law of the State of New York is
as follows: The period January 1 to December 31.
Signed on March 9, 1976.
/s/ Mark A. Leahy
---------------------
Mark A. Leahy, Incorporator
84 State Street
Boston, MA 02109
Commonwealth of Massachusetts )
) SS.:
County of Suffolk )
On the date hereinafter set forth, before me came Mark A. Leahy, to me
known to be the individual who is described in, and who signed the foregoing
certificate of incorporation, and he acknowledged to me that he signed the same.
Signed on March 9, 1976.
/s/ Marie F. Di Battista
-------------------
Notary Public
My Commission Expires
3/6/81
5
<PAGE>
CERTIFICATE OF RESERVATION P-H
1621
STATE OF NEW YORK DEPARTMENT OF STATE
================================================================================
I DO HEREBY CERTIFY TO THE
RESERVATION OF NAME
- --------------------------------------------------------------------------------
(corporation of name) ON (date filed)
OF
INTERIOR FABRIC DESIGN INC. March 9, 1976
- --------------------------------------------------------------------------------
TO BE FILMED AS MICROFILM FRAME NUMBER
298844-1
- --------------------------------------------------------------------------------
THE ABOVE CORPORATE NAME HAS BEEN RESERVED FOR A PERIOD OF
SIXTY DAYS FROM THE ABOVE DATE FOR THE USE OF
Mintz Levin Cohn Glovsky & Poppeo
FOR
Secretary of State
Creation of a domestic corporation
- --------------------------------------------------------------------------------
NAME Mintz Levin Cohn Glovsky & Poppeo
AND 1 Center Plaza
ADDRESS Boston, Mass.
OF
FILER
- --------------------------------------------------------------------------------
X CHK. [ ] M.O. [ ] CASH $10.00
- --------------------------------------------------------------------------------
$10.00 CERTIFICATE TOTAL $10.00
REFUND OF $ TO FOLLOW
- --------------------------------------------------------------------------------
CERTIFICATE OF RESERVATION MUST ACCOMPANY CERTIFICATE OF INCORPORATION
OR APPLICATION OF AUTHORITY WHEN PRESENTED FOR FILING.
- --------------------------------------------------------------------------------
6
<PAGE>
Certificate of Amendment of the Certificate of Incorporation
of
INTERIOR FABRIC DESIGN, INC.
Under Section 805 of the Business Corporation Law
It is hereby certified that:
FIRST: The name of the corporation is Interior Fabric Design, Inc.
SECOND: The certificate of incorporation of the corporation was filed by
the Department of State on March 16, 1976.
THIRD: The amendment of the certificate of incorporation of the
corporation effected by this certificate of amendment is as follows:
to change the name of the corporation.
FOURTH: To accomplish the foregoing amendment, Article First of the
certificate of incorporation of the corporation, relating to the name of the
corporation, is hereby amended to read as follows:
The name of the corporation is Ametex Interior Fabric Design, Inc.
FIFTH: The foregoing amendment of the certificate of incorporation of the
corporation was authorized by the unanimous written consent of the holders of
all of the outstanding shares of the corporation entitled to vote on the said
amendment of the certificate of incorporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained therein have been examined by us and are true and correct.
Date: December 22, 1980.
/s/ Richard G. Mintz
--------------------------
Richard G. Mintz, Vice President
/s/ B. Minde Kornfeld
---------------------------
B. Minde Kornfeld, Assistant Secretary
<PAGE>
CERTIFICATE OF MERGER
OF
MASCO INTERIOR FABRIC DESIGN, INC.
INTO
AMETEX INTERIOR FABRIC DESIGN, INC.
UNDER
SECTION 904 OF THE NEW YORK BUSINESS CORPORATION LAW
We, the undersigned, Allen S. Wyett and Richard C. Endruschat, being
respectively the President and Secretary of Ametex Interior Fabric Design, Inc.,
(formerly operated as Interior Fabric Design; Inc.), a New York corporation, a
corporation organized and existing under and by virtue of the Business
Corporation Law of the State of New York (the "Act"), and Wayne B. Lyon and
Gerald Bright, being respectively the President and Secretary of Masco Interior
Fabric Design, Inc., a corporation organized and existing under and by virtue of
the Act, hereby certify that:
FIRST: The name and state of incorporation of each of the constituent
corporations are as follows
Number Class
State of of Shares (All
Name Incorporation Outstanding Voting)
- ---- ------------- ----------- -------
Ametex Interior New York 200 Common Stock
Fabric Design, Inc.
("Ametex")
Masco Interior New York 1,000 Common Stock
Fabric Design, Inc.
("Masco Interior
Fabrics")
SECOND: Ametex, Masco Interior Fabrics and Masco Corporation, a Delaware
corporation, are parties to an Agreement and Plan and Reorganization dated as of
April 15, 1988 (the "Agreement"), which provides for the merger of Masco
Interior Fabrics with and into Ametex (the "Merger"), has been approved,
adopted, certified, executed and acknowledged by each of Masco Interior Fabrics
and Ametex in accordance with Sections 902 and 903 of the Act.
THIRD: The Plan of Merger was authorized by the unanimous vote of the
respective Boards of Directors and stockholders of Ametex and Masco Interior
Fabrics.
FOURTH: The name of the surviving corporation of the Merger is "Ametex
Interior Fabric Design, Inc." and the certificate of incorporation of Ametex
shall be the certificate of Incorporation of the Surviving Company.
FIFTH: The certificate of incorporation of Ametex was originally filed
with the Department of State of the State of New York on March 16, 1976.
1
<PAGE>
Certificate of Amendment of the Certificate of Incorporation of
Ametex Interior Fabric Design, Inc.
under Section 805 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is Ametex Interior Fabric Design, Inc.
(2) The certificate of incorporation was filed by the department of
state on the 16th day of March 1976. The original name of the
corporation was Interior Fabric Design, Inc.
(3) The certificate of incorporation of this corporation is hereby
amended to effect the following change*. This Amendment is to change
the name of the Corporation. The name of the Corporation is Interior
Fabric Design, Inc.
<PAGE>
(4) The amendment to the certificate of incorporation was authorized:
first, by unanimous written consent of all the directors.
2
<PAGE>
IN WITNESS WHEREOF, this certificate has been subscribed this 20th day of
October, 1988, by the undersigned who affirm (s) that the statements made herein
are true under the penalties of perjury.
Type name Capacity in which signed Signature
- --------- ------------------------ ---------
Wayne B. Lyon President /s/ Wayne B. Lyon
Gerald Bright Vice President/Sec. /s/ Gerald Bright
Richard G. Mosteller Vice President/Treas. /s/ Richard G. Mosteller
Certificate of Amendment of the Certificate of Incorporation of
Ametex Interior Fabric Design, Inc.
under Section 805 of the Business Corporation Law
Filed By: Margaret M. Feher
Legal Assistant
Address: Masco Corporation
21001 Van Born Rd.
Taylor, MI 48180
<PAGE>
SIXTH: The certificate of incorporation of Masco Interior Fabrics was
filed with the Department of State of the State of New York on April 21, 1988.
IN WITNESS WHEREOF, we have signed this certificate on the 27th day of
May, 1988 and we affirm the statements contained therein as true under penalties
of perjury.
AMETEX INTERIOR FABRIC DESIGN,
INC.
By /s/ Allen S. Wyett
--------------
Allen S. Wyett
President
/s/ Richard C. Endruschat
---------------------
Richard C. Endruschat
Secretary
MASCO INTERIOR FABRIC DESIGN,
INC.
By /s/ Wayne B. Lyon
-------------
Wayne B. Lyon
President
/s/ Gerald Bright
-------------
Gerald Bright
Secretary
<PAGE>
CERTIFICATE OF CHANGE
OF
INTERIOR FABRIC DESIGN, INC.
UNDER SECTION 805-A OF THE BUSINESS CORPORATION LAW
WE, THE UNDERSIGNED, Richard G. Mosteller and Gerald Bright being
respectively the Vice-President and the Secretary of
INTERIOR FABRIC DESIGN, INC. hereby certify:
1. The name of the corporation is INTERIOR FABRIC DESIGN, INC. It was
incorporated under the name INTERIOR FABRIC DESIGN INC.
2. The Certificate of Incorporation of said corporation was filed by the
Department of State on March 16, 1976.
3. The following was authorized by the Board of Directors:
To change the post office address to which the Secretary of State
shall mail a copy of process in any action or proceeding against the
corporation which may be served on him from Robert J. Weissman, 25 Wells
Avenue, Newton Centre, Massachusetts 02139 to C T CORPORATION SYSTEM, 1633
Broadway, New York, New York 10019.
To designate C T CORPORATION SYSTEM, 1633 Broadway, New York, New
York 10019 as its registered agent in New York upon whom all process
against the corporation may be served.
IN WITNESS WHEREOF, we have signed this certificate on the 4th day of
November, 1988 and we affirm the statements contained therein as true under
penalties of perjury.
/s/ Richard G. Mosteller
------------------------------------
Richard G. Mosteller, Vice President
/s/ Gerald Bright
------------------------------------
Gerald Bright, Secretary
1
Exhibit 3.13
DOCUMENT #377365
DATE 03/18/86 TIME 14:32
FILED
THAD EURE
SECRETARY OF STATE
NORTH CAROLINA
ARTICLES OF INCORPORATION
OF
INTRO EUROPE, INC.
I, the undersigned natural person of the age of eighteen (18) years or
more, do make and acknowledge these Articles of Incorporation for the purpose of
forming a business corporation under the laws of the State of North Carolina as
contained in Chapter 55 of the General Statutes of North Carolina, as amended,
and to that end, hereby set forth the following:
1. The name of the corporation is INTRO EUROPE, INC.
2. The period of duration of the corporation is perpetual.
3. The purpose for which the corporation is formed are as follows:
a. To engage in the importation, marketing, distribution and sale of
furniture and accessories; and
b. To engage in any lawful act or activity for which corporations
may be organized under Chapter 55 of the General Statutes of North Carolina.
4. The total authorized capital stock of the corporation is One Hundred
Thousand Dollars ($100,000) consisting of 100,000 shares of common stock with
the par value of $1.00 per share.
5. The minimum amount of consideration for its shares to be received by
the corporation before it shall commence business is $100.00.
6. The address of the initial registered office of the corporation is 101
W. Green Drive, P. O. Box 2556, High Point, Guilford County, NC 27261, and the
name of the initial registered agent at that address is Margret D. Bloom.
<PAGE>
7. The number of directors constituting the initial Board of Directors of
the corporation shall be one and the name and address, including the street and
number of the person who is to serve as director of the corporation until the
first meeting of shareholders and until his successor is elected and qualified
is:
Name Address
---- -------
Hans Zogg Burstwiesen str. 63
8606 Greifensee
Schweiz, Switzerland
8. The name and address, including the street and number of the
incorporator of the corporation is:
Name Address
---- -------
George W. House 1400 Wachovia Building
Greensboro, NC 27401
IN WITNESS WHEREOF, I hereunto set my hand and seal this the 19th day of
March, 1986.
/s/George W. House (SEAL)
------------------------------
George W. House
NORTH CAROLINA
GUILFORD COUNTY
I, the undersigned Notary Public, do hereby certify that GEORGE W. HOUSE
personally appeared before me this day and acknowledged the execution of the
foregoing instrument.
WITNESS my hand and notarial seal, this the 19th day of March, 1986.
/s/Cynthia A. Brown
-----------------------------------
Notary Public
My Commission Expires: 12/3/86
Exhibit 3.14
ARTICLES OF INCORPORATION
of
LA BARGE MIRRORS, INC.
These Articles of Incorporation are signed and acknowledged by the
Incorporator for the purpose of forming a corporation for profit under the
provisions of Act No. 327 of the Public Acts of 1931, as amended, as follows:
ARTICLE I.
The name of the corporation is:
LA BARGE MIRRORS, INC.
ARTICLE II.
The purpose or purposes of this corporation are as follows:
To engage in any kind of commercial, industrial or mercantile enterprise,
including, but not by way of limitation, to manufacture, assemble,
fabricate, sell, distribute and generally to trade in and deal with
mirrors and associated products.
To invent, develop, design, patent, trademark, and experiment with all
things in connection therewith;
To purchase, own, lease, hold, exchange, develop, deal in, mortgage and
pledge any and all real and personal property of every kind and nature,
including rights,
<PAGE>
interests, franchises, licenses, privileges, patents, designs, processes
and inventions;
to acquire by purchase, subscription, contract or otherwise, and to hold,
sell, exchange, mortgage, pledge or otherwise dispose of and deal in all
forms of securities, including shares, stocks, bonds, debentures, notes,
mortgages, evidences of indebtedness, and certificates of interest by
whomsoever issued;
To issue, purchase, hold, sell, transfer, reissue or cancel shares of its
own capital stock, or its securities or obligations, in the manner and to
the extent now or hereafter authorized or permitted by the State of
Michigan;
To act in any and all parts of the world in any capacity whatsoever as
financial or business agent or representative, general or special, and to
do all other acts and things incidental to or in aid of any of the objects
or purposes of this corporation.
Nothing herein shall be construed as granting the corporation the right to
operate as a public utility either in interstate or intrastate commerce,
or authorize or permit the corporation to conduct any business of selling
of tangible personal property, unless a license shall have been obtained
as required by the provisions of Act 167 of the Public Acts of Michigan of
1933 as amended, or as giving the corporation any rights, powers or
privileges not permitted to it by the laws of the State of Michigan.
ARTICLE III.
Location of the first registered office is:
74 River Avenue
Holland, Ottawa County
Michigan.
-2-
<PAGE>
Post office address of the first registered office is:
74 River Avenue
Holland, Michigan
ARTICLE IV.
The name of the first Resident Agent is:
William E. La Barge.
ARTICLE V.
The total authorized capital stock is fifty thousand (50,000) shares of
Common Stock of the par value of One Dollar ($1.00) per share.
The authorized shares of stock of the par value of One Dollar ($1.00) per
share are all of one class, with equal voting powers and each such share shall
be equal to every other such share.
ARTICLE VI.
The name and place of residence or business of the Incorporator and the
number and class of shares subscribed for by him are as follows:
Number of Shares
Name Address Common
- ---- ------- ----------------
William E. La Barge 111 East 31st Street 1
Holland, Michigan.
-3-
<PAGE>
ARTICLE VII.
The names and addresses of the first Board of Directors are as follows:
Name Address
---- -------
William E. La Barge 111 East Thirty-First Street
Holland, Michigan
Eileen B. La Barge 111 East Thirty-First Street
Holland, Michigan
John F. Donnelly 131 East Twenty-Sixth Street
Holland, Michigan
ARTICLE VIII.
The term of the corporate existence is thirty years.
ARTICLE IX.
All of the powers of this corporation, insofar as the same may be lawfully
vested by these Articles of Incorporation in the Board of Directors, are hereby
conferred upon the Board of Directors of this corporation.
ARTICLE X.
The Board of Directors of the corporation is hereby empowered to authorize
and cause to be executed mortgages and liens without limit as to amount, on the
real and personal property of this corporation.
-4-
<PAGE>
ARTICLE XI.
In the absence of fraud, no contract or other transaction between the
corporation and any other corporation or any individual, association or firm
shall be in any way affected or invalidated by the fact that any of the
directors of the corporation are interested in such other corporation,
association or firm, or personally interested in such contract or transaction,
nor shall any director so interested be liable to account to the corporation for
any profit made by him from or through any such contract or arrangement so
adopted by the Board of Directors, or which may be ratified and approved by the
shareholders entitled to vote, by reason of such director holding such office,
or the fiduciary relation thereby established. Any director of the corporation
may vote upon any contract, or other transaction between this corporation and
any subsidiary or affiliated corporation without regard to the fact that he is
also a director of such subsidiary or affiliated corporation.
Any transaction, contract or act of the corporation or of the Board of
Directors which shall be ratified by a majority of a quorum of the shareholders
entitled to vote at any annual meeting, or at any special meeting called for
such purpose, shall, except as otherwise specifically provided by law or by
these Articles of Incorporation, be as valid and as binding as though ratified
by every shareholder of the corporation; provided, however, that any failure of
the shareholders to approve or ratify such contract, transaction or act, when
and if submitted, shall not be deemed in any way to render the same invalid, nor
deprive the directors and officers of their right to proceed with such contract,
transaction or act.
ARTICLE XII.
The shareholders of the corporation, by a majority vote thereof, shall
have the exclusive right, and the Board of Directors shall have no such right,
to authorize the issuance, from time to time, of capital stock of the
corporation authorized and unissued or which may hereafter become authorized and
unissued,
-5-
<PAGE>
or any shares which are or may become treasury stock, for such price and for
such consideration and upon such terms as shall be approved as aforesaid by the
shareholders of the corporation, subject always, to the laws of the State of
Michigan relating thereto. The provisions of this ARTICLE XII may be waived by
the shareholders at any time by vote of a majority of the outstanding shares of
capital stock, and in that event all of the authority vested in the shareholders
herein may be exercised by the Board of Directors.
ARTICLE XIII.
Anything in these Articles of Incorporation to the contrary
notwithstanding, each shareholder shall have the preemptive right to subscribe
for, purchase or receive any shares of the stock or any rights or options of the
corporation which it may issue or sell, for cash or otherwise, whether out of
the number of shares authorized by this certificate of incorporation or by
amendment thereof, or out of the shares of the stock of the corporation acquired
by it after the issuance thereof, and each shareholder shall be entitled as a
matter of right to subscribe for, purchase or receive any bonds, debentures or
other securities which the corporation may issue or sell that shall be
convertible into or exchangeable for stock, or which shall have attached or
appertain to any warrant or warrants, or other instrument or instruments that
shall confer upon the holder or owner of such obligation the right to subscribe
for, purchase or receive from the corporation any shares of its capital stock.
Any additional issues of stock, rights and options, or of bonds, debentures or
other securities convertible or exchangeable for stock, or to which warrants
shall be attached or appertain, or which shall confer upon the holder the right
to subscribe for, purchase or receive any shares of stock which have been
offered to shareholders and which have not been subscribed for by them within a
time duly fixed by the Board of Directors, which in no case shall be less than
fifteen (15) days, may thereafter be issued and disposed of by the Board of
Directors to such persons, firms or corporations, and upon such terms as in its
absolute discretion it may deem advisable, but not at a price and upon terms
less favorable to the corporation than those at which they were offered to
shareholders.
-6-
<PAGE>
ARTICLE XIV.
The corporation shall be entitled to treat the person in whose name any
share, right or option is registered as the owner thereof, for all purposes, and
shall not be bound to recognize any equitable or other claim to or interest in
such share, right or option on the part of any other person, whether or not the
corporation shall have notice thereof, save as may be expressly provided by the
laws of the State of Michigan.
A director shall be fully protected in relying in good faith upon the
books of account of the corporation or statements prepared by any of its
officials as to the value and amount of the assets, liabilities and/or net
profits of the corporation, or any other facts pertinent to the existence and
amount of surplus or other funds from which dividends might properly be declared
and paid.
ARTICLE XV.
The shareholders of this corporation at any annual or special meeting
thereof shall have the right to remove any director at any time, with or without
cause, provided that no director shall be removed at such meeting by such vote
if a sufficient number of votes of shareholders to elect such director by
cumulative vote shall be cast against his removal.
ARTICLE XVI.
The corporation reserves the right to amend, alter, change, add to or
repeal any provision contained in these Articles of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights and powers conferred by
these Articles of Incorporation on shareholders, directors and officers are
granted subject to this reservation.
-7-
<PAGE>
IN WITNESS WHEREOF, the Incorporator has signed these Articles of
Incorporation this 15th day of March, 1962.
/S/ William E. La Barge
-----------------------
William E. La Barge.
STATE OF MICHIGAN )
) SS.
County of Ottawa )
On this 15th day of March, 1962, before me, a Notary Public in and for
said County, personally appeared WILLIAM E. LA BARGE, to me known to be the
person described in and who executed the foregoing instrument, and acknowledged
that he executed the same as his free act and deed.
/s/ DALE E. VAN LENTE
---------------------
Notary Public, Ottawa County, Mich.
My commission expires April 26, 1964
DALE E. VAN LENTE
Notary Public, Ottawa County, Mich.
My Commission Expires April 26, 1964
-8-
<PAGE>
RECEIVED
MAR 23 1962
MICHIGAN CORPORATION AND
SECURITIES COMMISSION
==========================
ARTICLES OF INCORPORATION
of
LA BARGE MIRRORS, INC.
===========================
FILED
MAR 23 1962
===========================
MICHIGAN CORPORATION AND
SECURITIES COMMISSION
MAR , 1962
[Name]
- ------------------
Compared by
=========================
WARNER, NORCROSS & JUDD
GRAND RAPIDS, MICHIGAN
<PAGE>
STATE OF MICHIGAN
CORPORATION AND SECURITIES COMMISSION
LANSING, MICHIGAN
- --------------------------------------------------------------------------------
DO NOT WRITE IN SPACE BELOW - FOR COMMISSION USE
- --------------------------------------------------------------------------------
Date Received Compared by: FILED
[DATE]
[ Nov 1966 ] Allison Green
Date: NOV 14 1966
MICHIGAN DEPARTMENT
Examiner: OF TREASURY
- --------------------------------------------------------------------------------
CERTIFIED RESOLUTION OF CHANGE OF REGISTERED OFFICE
I, Eileen La Barge, Secretary or Assistant Secretary, of La Barge Mirrors,
Inc., a Michigan corporation, do hereby certify that the following is a true
and correct copy of the resolution adopted by the board of directors of said
corporation by written consent or at a meeting called and held on the 15th day
of April, 1965.
"RESOLVED, that the location of the registered office of this corporation
within the State of Michigan is changed from 74 River Avenue, Holland, County of
Ottawa, Michigan 49423, to 104 colonial, Zeeland, County of Ottawa, Michigan
49464."
Signed on October 28, 1966.
/S/ Eileen La Barge
-------------------
(Signature of Secretary or
Assistant Secretary)
(DESIGNATE OFFICE HELD BY SIGNER)
Note: Mail three signed copies, except in case of change of location from
one county to another, in which case four copies of this Certificate are
required, to Michigan Corporation and Securities Commission Box 898, Lansing,
Michigan 48904. fee payable to state of Michigan.
Filing fee $5.00
<PAGE>
STATE OF MICHIGAN
MICHIGAN DEPARTMENT OF TREASURY
Corporation Division Lansing, Michigan
- --------------------------------------------------------------------------------
DO NOT WRITE IN SPACE BELOW - FOR DEPARTMENT
- --------------------------------------------------------------------------------
USE
NOTE Date received
Mail ONE signed copy to SEP-8 1971 FILED
Michigan Department of Treasury
Corporation Division SEP 10 1971
P.O. Drawer C Allison Green
Lansing, Michigan 48904 STATE TREASURER
Michigan Department
of Treasury
Filing Fee $5.00
(Make fee payable to
State of Michigan)
- --------------------------------------------------------------------------------
CERTIFIED RESOLUTION OF CHANGE OF REGISTERED OFFICE
I, Eileen B. La Barge, Secretary or Assistant Secretary of La Barge
Mirrors, Inc. a Michigan corporation, do hereby certify that the following is
a true and correct copy of the resolution adopted by the board of directors of
said corporation by written consent or at a meeting called and held on the 23
day of July, 1971.
"RESOLVED, that the location of the registered office of this corporation
within the State of Michigan is changed from, 104 Colonial, Zeeland, County of
Ottawa, Michigan 49646, to 875 Brooks, Holland, County of Ottawa, Michigan
49423."
Signed on July 23, 1971.
/s/ Eileen B. La Barge - Secretary
----------------------------------
(Signature of Secretary or
Assistant Secretary)
<PAGE>
(For Use by Domestic or Foreign Corporation)
CERTIFICATE OF ASSUMED NAME
Pursuant to the provisions of Section 217 Act 284, Public Acts of
1972, as amended, the undersigned corporation executes the following
Certificate:
1. The true name of the corporation is La Barge Mirrors, Inc.
2. The location of the registered office is 875 Brooks Holland, Michigan
49423
3. The assumed name under which the business is to be transacted is LMI
Advertising Agency
Signed this 21st day June, 1979
LA BARGE MIRRORS, INC
BY /s/ William E. La Bage
----------------------
(Signature of President, Vice
President, Chairman or Vice
Chiarman)
William E. La Barge, President
------------------------------
(Type or Print Name and Title)
(Please do not write ins spaces below -- for Department use )
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE-CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
Date Received
JUN 22 1979 FILED
Michigan Department of Commerce
JUL 2 1979
DIRECTOR
EXPIRATION DATE: December 31, 1984
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSTRUCTIONS
1. The Certificate shall be effective for a period expiring on December 31,
of the fifth full calendar year following the year in which it was filed.
2. The Certificate is required to be signed in ink by the chairman or
vice-chairman of the board, or the president or a vice-president of the
corporation.
3. One original copy is required. A true copy will be prepared by the
Corporation and Securities Bureau and returned to the person submitting
the Certificate for filing.
4. Filing Fee.......................$10.00
(Make fee payable to State of Michigan)
5. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Drawer C
Lansing, Michigan 48904
- --------------------------------------------------------------------------------
<PAGE>
(Please do not write in spaces below-for Department use)
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE-CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
FILED Date Received
Michigan Department of Commerce FEB 12 1981
FEB 26 1981
Acting Director
CORPORATION NUMBER 010 - 657
- --------------------------------------------------------------------------------
CERTIFICATE OF CHANGE OF REGISTERED OFFICE AND/OR CHANGE OF RESIDENT AGENT
(For Use by Domestic and Foreign Corporations)
(See instructions on Reverse Side)
This certificate is executed in accordance with the provisions of Section
242, of Act 284, Public Acts of 1972, as amended, as follows:
- --------------------------------------------------------------------------------
1. The name of the corporation is LA BARGE MIRRORS, INC.
2. The address of its registered office is: (See Part 1 of instructions on
reverse side) 875 Brooks, Holland, Michigan 49423,
The mailing address of its registered office is: (Need not be completed
unless different from the above address, see Part 2 of instructions)
_______________________________________________________Michigan_______________
(No. and Street or P.O.Box) (Town or City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. (The following is to be completed if the address of the registered office
is changed.)
The address of the registered office is changed to: (Need not be completed
unless different from the above address, see Part 2 of instructions)
300 E. 40th Street Holland Michigan 49423
(No. and Street) (Town or City) (Zip Code)
The mailing address of the registered office is changed to: (Need not be
completed unless different from the above address, see Part 2 of
instructions)
______________________________________________________Michigan_________________
(No. and Street or P.O. Box) (Town or City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. The name of the resident agent is William E. La Barge
(See Part 3 of instructions)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. (The following is to be completed if the resident agent is changed.)
The name of the successor resident agent is ______________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. The corporation further states that the address of its registered office
and the address of the business office of its resident agent, as changed,
are identical.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. The changes designated above were authorized by resolution duly adopted by
its board of directors or trustees.
- --------------------------------------------------------------------------------
MAKE REMITTANCE PAYABLE TO: Signed this 10th day of February, 1981
"STATE OF MICHIGAN" By
FILING FEE: $5.00 --------------------------------------
(Signature of President, Vice-President,
Secretary, Assistant Secretary,
Chairperson or Vice-Chairperson)
William E. La Barge, Jr., Vice-President
----------------------------------------
(Type or Print Name Title)
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE-CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
SEP 12 1984
FILED
OCT 30 1984
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporations
(Please read instructions on last page before completing form)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended
(profit corporations), or Act 162, Public Acts of 1982 (nonprofit corporations),
the undersigned corporation executes the following Certificate:
- --------------------------------------------------------------------------------
1. The name of the corporation is: LA BARGE MIRRORS, INC.
2. The corporation identification number (CID) assigned by the Bureau is:
010-657
3. The location of its registered office is:
300 East 40th Street, Holland, Michigan 49423
(Street Address) (city) (Zip code)
- --------------------------------------------------------------------------------
4. Article III of the Articles of Incorporation is hereby amended to read as
follows:
The total authorized capital stock is:
Class A Voting Non-Cumulative Preferred Stock -
Total Authorized Shares - 4,669 Par Value $100.00 per share
Class B Non-Voting Non-Cumulative Preferred Stock
Total Authorized Shares - 1,521 Par Value $1.00 per share
Class C Non-Voting Common Stock
Total Authorized Shares - 11,095 Par Value $1.00 per share
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
5. The foregoing amendment to the Articles of incorporation was duly adopted
on the
23rd day of August, 1984 in accordance with the provisions of the Act.
- --------------------------------------------------------------------------------
This Amendment (Complete and execute either a or b below, but not both)
a. | | was duly adopted by the unanimous consent of the incorporator(s)
before the first meeting of the board of directors or trustees.
Signed this______day of___________________________,19_____________________
_____________________________________ _________________________________
_____________________________________ _________________________________
_____________________________________ _________________________________
_____________________________________ _________________________________
(Signatures of all incorporators: type or print name under each signature)
b. (check one of the following)
|_| was duly adopted by the shareholders or members, or by the directors
if it is a nonprofit corporation organized on a nonstock
directorship basis, in accordance with Section 611(2) of the Act.
The necessary votes were cast in favor of the amendment.
|_| was duly adopted by written consent of the shareholders or members
having not less than the minimum number of votes required by statute
in accordance with Section 407 (1) and (2) of the Act. Written
notice to shareholders or members who have not consented in writing
has been given. (Note: Written consent by less than all of the
shareholders or members is permitted only if such provision appears
in the Articles of Incorporation.)
|X| was duly adopted by written consent of all the shareholders or
members entitled to vote in accordance with Section 407 (3) of the
Act.
Signed this 23rd day of August, 1984
By /s/ Wiliam E. La Barge, Sr.
---------------------------
(Signature)
William E. LaBarge, Sr., President
----------------------------------
(Type or Print Name and Title)
<PAGE>
DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS INDICATED
IN THE BOX BELOW. Include name, street and number (or PO. box),
city, state and ZIP code.
- ----------------------------------------
Stephen M. Tuuk, Esq. Telephone:
LANDMAN, LUYENDYK, LATIMER, CLINK & ROBB Area Code 616
400 Calder Plaza Building
Grand Rapids, Michigan 49503 Number 774-8031
- ----------------------------------------
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing.
Since this document must be microfilmed, it is important that the filing
be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
2. This document is to be used pursuant to the provisions of section 631 of
the Act for the purpose of amending the articles of incorporation of a
domestic corporation.
3. Item 2--Enter the identification number previously assigned by the Bureau.
If this number is unknown, leave it blank.
4. Item 4--The entire article being amended must be set forth in its
entirety. However, if the article being amended is divided into separately
identified sections, only the sections being amended need to be included.
5. This document is effective on the date approved and filed by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be started.
6. If the amendment is adopted before the first meeting of the board of
directors, item 5(a) must be completed and signed in ink by all of the
incorporators. If the amendment is otherwise adopted, item 5(b) must be
completed and signed in ink by the president, vice-president, chairperson,
or vice-chairperson of the corporation.
7. FEES: Filing fee (Make remittance payable to State of
Michigan).....................$10.00 Franchise fee for profit corporations
(payable only if authorized capital stock has increased) -- 1/2 mill
(.0005) on each dollar of increase over highest previous authorized
capital stock.
8. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O.Box 30054
Lansing, Michigan 48909
Telephone: (517) 373-0493
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT A TO CERTIFICATE OF
AMENDMENT TO ARTICLES OF INCORPORATION
A statement of the preferences, privileges and restrictions of the
respective classes of stock shares is as follows:
A. DIVIDENDS.
1. Class A Voting Non-Cumulative Preferred Stock.
The holders of Class A Voting Non-Cumulative Preferred shares shall
be entitled to receive dividends each year out of any funds of this Corporation
at the time legally available for the declaration of dividends. The amount of
the annual dividends shall be calculated at the rate of ten (10%) percent per
annum of the par value thereof, and no more, payable in cash annually, or at
such intervals as the Board of Directors may from time to time determine, when
and as declared by the Board of Directors. Dividends on the Voting
Non-Cumulative Preferred shares first issued shall accrue from the date of
issuance of such shares, but the payment shall be contingent upon sufficient
funds legally available to the Corporation to pay such dividends. Dividends on
all preferred shares thereafter issued shall accrue from the day following the
last day of the period for which dividends have already been paid on outstanding
preferred shares. Dividends on all issued and outstanding preferred shares shall
accrue from day to day, whether or not earned or declared. Such dividends shall
be payable before any dividends shall be declared or paid upon or set apart for
the common shares, but shall be non-cumulative, so that if in any year or years
dividends upon the outstanding preferred shares at the rate of ten (10%) percent
per annum of the par value thereof shall not have been paid thereon or declared
and set apart therefor, the amount of the deficiency shall not accrue or be paid
or declared or set apart for payment in future years. However, in any year,
payment of the dividend on the Non-Voting Cumulative Preferred shares shall be
prior to any dividend payment on the common shares. If there are insufficient
funds legally available to the Corporation to pay all the dividends on the Class
A Voting Non-Cumulative Preferred stock and the Class B NonVoting Non-Cumulative
Preferred stock, but there are sufficient funds available to pay a portion of
such dividends, then the amount legally available to pay such dividends shall
first be paid to satisfy in full the dividends owed to the Class A Voting
Non-Cumulative Preferred stock and then to satisfy dividends owed to the Class B
Non-Voting Non-Cumulative Preferred stock.
1
<PAGE>
2. Class B Non-Voting Non-Cumulative Preferred Stock.
The holders of Class B Non-Voting Non-Cumulative Preferred shares
shall be entitled to receive dividends each year out of any funds of this
Corporation at the time legally available for the declaration of dividends. The
amount of the dividends shall be the following amounts for each share of Class B
Non-Voting NonCumulative Preferred stock computed by the following fraction:
One-fourth (1/4) of one (1%) percent of the Annual
After Tax Earnings of the Corporation
--------------------------------------------------
507
Provided, however, that the annual dividend paid to any share of Class B
Non-Voting Non-Cumulative Preferred shall not be greater than Fourteen and
80/100ths ($14.80) Dollars per share. The Annual After Tax Earnings of the
Corporation shall be the net after-tax earnings of the Corporation as reported
on the annual statement prepared in accordance with generally accepted
accounting principles by the certified public accountants working with the
Corporation. The above annual dividend shall be paid by the Corporation to the
holders of Class B Non-Voting non-Cumulative Preferred stock in cash and as soon
as practicable after the issuance of the annual statement by the Corporation's
certified public accountants. The payment of such an annual dividend shall be
contingent upon sufficient funds legally available to the Corporation to pay
such dividends. Such dividends shall be payable before any dividends shall be
declared or paid upon or set apart for the common shares, but shall be
non-cumulative, so that if in any year or years dividends upon the outstanding
shall not have been paid thereon or declared and set apart, the amount of the
deficiency shall not accrue or be paid or declared or set apart for payment in
future years. However, in any year payment of the dividend on the Class B
Non-Voting Non-Cumulative Preferred stock shall be prior to any dividend payment
on the Class C Non-Voting Common stock. If there are insufficient funds legally
available to the Corporation to pay all the dividends on the Class A Voting
Non-Cumulative Preferred stock and the Class B Non-Voting Non-Cumulative
Preferred stock, but there are sufficient funds available to pay a portion of
such dividends, then the amount legally available to pay such dividends shall
first be paid to satisfy in full the dividends owed to the Class A Voting
NonCumulative Preferred stock and then to satisfy dividends owed to the Class B
Non-Voting Non-Cumulative Preferred stock.
2
<PAGE>
3. Class C Non-Voting Common Stock.
The holders of Class C Non-Voting Common shares shall be entitled to
receive dividends out of any funds of this Corporation at the time legally
available for the declaration of dividends. The amount of the dividends shall be
of such amounts at such intervals as the Board of Directors may from time to
time determine, when and as declared by the Board of Directors. The payment of
any dividends shall be contingent upon sufficient funds legally available to the
Corporation to pay such dividends. The dividends paid on the Class C Non-Voting
Common stock shall not be entitled to any preference or priority over payment of
dividends to the other class of stock of the Corporation.
B. LIQUIDATION.
1. Class A Voting Non-Cumulative Preferred Stock.
a. Par Value. The par value of Class A Voting Non-Cumulative
Preferred Stock shall be One Hundred and 00.100ths ($100.00) Dollars per share.
b. Equity Ownership. The Class A Voting Non-Cumulative Preferred
stock shall have no equity ownership of the Corporation other than the stated
par value for the shares of such stock.
c. Voluntary Liquidation. In the event of a voluntary liquidation,
dissolution, or winding up of this Corporation, the holders of Class A Voting
Non-Cumulative Preferred shares shall be entitled to receive out of the assets
of this Corporation, whether such assets are capital or surplus of any nature,
an amount equal to one hundred (100%) percent of the par value of such preferred
shares and, in addition to such amount, a further amount equal to the dividends
unpaid and accumulated thereon, as provided in Paragraph A-1 of this Article, to
the date of such distribution, whether earned or declared or not. This amount
shall be paid to the holders of Class A Voting Non-Cumulative Preferred stock
prior to any liquidation amounts to holders of other classes of stock of the
Corporation.
d. Involuntary Liquidation. In the event of an involuntary
liquidation, dissolution, or winding up of this Corporation, the holders of the
preferred shares shall be entitled to receive out of the assets of this
Corporation, whether such assets are capital or surplus of any nature, an amount
equal to one hundred (100%) percent of the par value of such preferred shares,
and a further amount equal to the dividends unpaid as provided in paragraph A-1
of this Article, to the date of such distribution, whether earned or
3
<PAGE>
declared or not. This amount shall be paid to the holders of Class A Voting
Non-Cumulative Preferred stock prior to any liquidation amounts to holders of
the classes of stock of the Corporation.
e. Insufficient Assets. If upon such liquidation, dissolution, or
winding up, whether voluntary or involuntary, the assets thus distributed among
the holders of the Class B Non-Voting Non-Cumulative Preferred shares and the
Class A Voting Non-Cumulative Preferred shares shall be insufficient to permit
the payment, then the entire assets of this Corporation to be distributed shall
be distributed ratably among the holders of the Class A Voting Non-Cumulative
Preferred shares. A consolidation or merger of this Corporation with or into any
other corporation or corporations shall not be deemed to be a liquidation,
dissolution, or winding up, within the meaning of this clause.
2. Class B Non-Voting Non-Cumulative Preferred Stock.
a. Par Value. The par value of Class B Non-Voting Non-Cumulative
Preferred stock shall be One and 00/100ths ($1.00) Dollar per share.
b. Equity Ownership. The Class B Non-Voting Non-Cumulative Preferred
stock and the Class C NonVoting Common stock together shall own and represent
the ownership of all the equity in the Corporation, except for the equity
ownership provided for the Class A Voting Non-Cumulative Preferred stock. The
Class B Non-Voting Non-Cumulative Preferred stock shall own and represent the
ownership of all the equity in the Corporation on a pro rata basis in accordance
with the total number of issued and outstanding shares of both of those classes
of stock.
c. Voluntary Liquidation. In the event of a voluntary liquidation,
dissolution, or winding up of this Corporation, the holders of non-voting
cumulative preferred shares shall be entitled to receive out of the assets of
this Corporation, whether such assets are capital or surplus of any nature, an
amount equal to one hundred (100%) percent of the par value of such preferred
shares, and, in addition to such amount, to the date of such distribution,
whether earned or declared or not, and no more. This amount shall be paid to the
holders of Class B Non-Voting Non-Cumulative Preferred stock prior to any
liquidation amounts paid to the holders of Class C Non-Voting Common stock, but
shall be subordinate to the liquidation amounts payable to the holders of Class
A Voting Non-Cumulative Preferred stock as provided in Article B-1.
4
<PAGE>
d. Involuntary Liquidation. In the event of an involuntary
liquidation, dissolution, or winding up of this Corporation, the holders of the
preferred shares shall be entitled to receive out of the assets of this
Corporation, whether such assets are capital or surplus of any nature, an amount
equal to one hundred (100%) percent of the par value of such preferred shares,
and a further amount equal to the dividends unpaid and accumulated thereon, as
provided in Article A-2, to the date of such distribution, whether earned or
declared or not, and no more. This amount shall be paid to the holders of Class
B Non-Voting Non-Cumulative Preferred stock prior to any liquidation amounts
paid to the holders of Class C NonVoting Common stock, but shall be subordinate
to the liquidation amounts payable to the holders of Class A Voting
Non-Cumulative Preferred stock as provided in Article B-1.
e. Insufficient Assets. If upon such liquidation, dissolution, or
winding up, whether voluntary or involuntary, the assets thus distributed among
the holders of the Class B Non-Voting Non-Cumulative Preferred shares shall be
insufficient to permit the payment to such shareholders of the full preferential
amounts, then the entire remaining assets of this Corporation to be distributed
shall be distributed ratably among the holders of the Class B Non-Voting
Non-Cumulative Preferred shares. A Consolidation or merger of this Corporation
with or into any other corporation or corporations shall not be deemed to be a
liquidation, dissolution, or winding up, within the meaning of this clause.
3. Class C Non-Voting Common Stock.
a. Par Value. The par value of the Class C Non-Voting Common stock
shall be One and 00/100 ($1.00) Dollar per share.
b. Equity Ownership. The Class B Non-Voting Non-Cumulative Preferred
stock and the Class C NonVoting Common stock together shall own and represent
the ownership of all thee equity in the Corporation, except for the equity
ownership provided for the Class A Voting Non-Cumulative Preferred stock. The
Class B Non-Voting Non-Cumulative Preferred stock and the Class C Non-Voting
Common stock shall own and represent the ownership of all the equity in the
Corporation on a pro rata basis in accordance with the total number of issued
and outstanding shares of both of those classes of stock.
c. Voluntary Liquidation. In the event of a voluntary liquidation,
dissolution, or winding up of this Corporation, the holders of the common stock
shall be entitled to receive out of the assets of this Corporation,
5
<PAGE>
whether such assets are capital or surplus of any nature, that amount remaining
after the distribution of the Class B Non-Voting Non-Cumulative Preferred
shares, and the Class A Voting Non-Cumulative Preferred shares. This amount
shall be paid to the holders of Class C Non-Voting Common stock after
Satisfaction of all other payments in liquidation to the other classes of stock
of the Corporation.
d. Involuntary Liquidation. In the event of an involuntary
liquidation, dissolution, or winding up of this Corporation, the holders of the
preferred shares shall be entitled to receive out of the assets of this
Corporation, whether such assets are capital or surplus of any nature, an amount
equal to one hundred (100%) percent of the par value of such preferred shares.
This amount shall be paid to the holders of Class C Non-Voting Common stock
after satisfaction of all other payments in liquidation to the other classes of
stock of the Corporation.
e. Insufficient Assets. If upon such liquidation, dissolution, or
winding up, whether voluntary or involuntary, the assets thus distributed among
the holders of the common shares shall be insufficient to permit the payment to
such shareholders of the full amounts, then the entire assets of this
Corporation to be distributed shall be distributed ratably among the holders of
the Class C Non-Voting Common shares. A consolidation or merger of this
Corporation with or into any other corporation or corporations shall not be
deemed to be a liquidation, dissolution, or winding up, within the meaning of
this clause.
C. VOTING.
The Corporation shall have three classes of stock. The classes of stock
are Class A Voting NonCumulative Preferred stock, Class B Non-Voting
Non-Cumulative Preferred stock, and Class C NonVoting Common stock. The Class A
Voting Non-Cumulative Preferred stock shall be the only class of stock of the
Corporation entitled to a vote. The owners of Class A Voting Non-Cumulative
Preferred stock at the time of the adoption of this Amendment to the Articles of
Incorporation, are William E. LaBarge, Sr. and Eileen B. LaBarge, jointly as
tenants by the entireties. Upon the death or total incompetency of both William
E. LaBarge, Sr. and Eileen B. LaBarge, the Class A Voting Non-Cumulative
Preferred stock shall no longer be entitled to any vote whatsoever. Upon the
death or total incompetency of both William E. LaBarge Sr. and Eileen B,
LaBarge, the present class of Class C Non-Voting Common stock shall receive the
right to vote on the basis of one (1) vote per share of said class of stock.
6
<PAGE>
MICHIGAN DEPARTMENT OF COMMERCE CORPORATION AND SECURITIES BUREAU
(FOR BUREAU USE ONLY)
FILED Date Received
NOV 07 1984 NOV 01 1984
Administrator
MICHIGAN DEPT. OF COMMERCE
Corporation Securities Bureau
EXPIRATION DATE: DECEMBER 31, 1989
CERTIFICATE OF RENEWAL OF ASSUMED NAME
For use by Corporation and Limited Partnerships
(Please read instructions on reverse side before completing form)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended
(profit corporations), Act 182, Public Acts of 1982 (nonprofit corporations), or
Act 213, Public Acts of 1982 (limited partnerships), the corporation or limited
partnership in item one below executes the following Certificate:
- --------------------------------------------------------------------------------
1. The true name and address of the corporate registered office or the
address of the limited partnership's agent for service of process is:
LA BARGE MIRRORS, INC.
WILLIAM E. LA BARGE 010654
300 E. 40TH ST. Identification Number
HOLLAND MI 49423
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. The assumed name under which business is transacted is:
LMI ADVERTISING AGENCY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. The registration of the assumed name is extended for a period expiring on
December 31, of the fifth full calendar year following the year in which
this renewal is filed, unless sooner terminated.
- --------------------------------------------------------------------------------
Signed this 29TH day of OCTOBER, 1984
By /s/ Gerald L. Mullin
---------------------
(Signature)
GERALD L. MULLIN, TREASURER
------------------------------
(Type or Print Name and Title)
------------------------------
(Limited Partnership Only
Indicate Name of General
Partner if different from
person signing)
<PAGE>
DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS
INDICATED IN THE BOX BELOW. Include name, street and
number (or P.O.box), city, state and ZIP code.
- ----------------------------------------------------
LA BARGE MIRRORS, INC. Telephone:
300 E. 40TH STREET Area Code 616
HOLLAND, MICHIGAN 49423 Number 392-1473
- ----------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS.
1. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing.
Since this document must be microfilmed, it is important that the filing
be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
2. This document is to be used pursuant to section 217 of the Act (for
corporations) and section 103 of the Act (for limited partnerships) for
the purpose of extending the registration of an assumed name previously
filed with the Bureau for an additional five year period.
The registration of the assumed name appearing in item 2 will
automatically expire on December 31 of this year unless this certificate
is filed within 90 days preceding the expiration date. This certificate
must be received and filed at the offices of the Bureau on or before
December 31. Please allow ample time for mailing and processing.
This certificate is to be used only for the purpose of renewing and
extending the assumed name appearing in item 2. It may not be used to
change the assumed name in any manner. If a corporation or limited
partnership desires to change its assumed name or use a different assumed
name, form CBS-541, certificate of assumed name, should be filed.
3. If a corporation, this certificate must be signed in ink by an authorized
officer or agent of the corporation. If a limited partnership, it must be
signed by at least on general partner.
4. FEES: Filing fee (Make remittance payable to State of Michigan)....$10.00
5. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O.Box 30054
Lansing, MI 48909
Telephone: (517) 373-0493
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY)
Date Received
JAN 15 1986
FILED
FEB 5 1986
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
- --------------------------------------------------------------------------------
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporation
(Please read instructions and Paperwork Reduction Act notice on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended
(profit corporations), or Act 162, Public Acts of 1982 (nonprofit corporations),
the undersigned corporation executes the following Certificate:
- --------------------------------------------------------------------------------
1. The present name of the corporation is: LaBARGE MIRRORS, INC.
2. The corporation identification number (CID) assigned by the Bureau is
010-657
3. The location of its registered office is:
300 East 40th Street, Holland, Michigan 49423
(Street Address) (City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Article III of the Articles of Incorporation is hereby amended to read as
follows:
Exhibit A to the Amendment to the Articles of Incorporation dated
August 23, 1984 and filed with the Michigan Department of Commerce,
Corporation and Securities Bureau on October 30, 1984 is hereby
revised and amended as stated on the document entitled "Revision to
Exhibit A to Amendment to Articles of Incorporation" and attached
hereto.
- --------------------------------------------------------------------------------
<PAGE>
5. COMPLETE SECTION (a) IF THE AGREEMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS
OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b)
a. |_| The foregoing amendment to the Articles of Incorporation was duly
adopted on the _______day of _______________, 19_______, in accordance
with the provisions of the Act by the unanimous consent of the
incorporator(s) before the first meeting of the board of directors or
trustees.
Signed this___________day of ___________________________,19_________
______________________________ _________________________________
______________________________ _________________________________
______________________________ _________________________________
______________________________ _________________________________
(Signatures of all incorporators; type or print name under each signature)
b. |X| The foregoing amendment to the Articles of Incorporation was duly
adopted on the 10th day of January, 1986. The amendment: (check one
of the following)
|_| was duly adopted in accordance with Section 611(2) of the Act by the
vote of the shareholders if a profit corporation, or by the vote of
the shareholders or members if a nonprofit corporation, or by the
vote of the directors if a nonprofit corporation organized on a
nonstock directorship basis. The necessary votes were cast in favor
of the amendment.
|_| was duly adopted by the written consent of all the directors
pursuant to Section 525 of the Act and the corporation is a
nonprofit corporation organized on a nonstock directorship basis.
|_| was duly adopted by the written consent of the shareholders or
members having not less than the minimum number of votes required by
statute in accordance with Section 407(1) and (2) of the Act.
Written notice to shareholders or members who have not consented in
writing has been given. (Note: Written consent by less than all of
the shareholders or members is permitted only if such provision
appears in the Articles of Incorporation.)
|X| was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407(3) of the
Act.
Signed this 10th day of January, 1986
By /s/ William E. LaBarge, Sr.
---------------------------
William E. LaBARGE, Sr. (SIGNATURE)
President and Chairman of the Board of Directors
------------------------------------------------
(Type or Print Name and Title)
<PAGE>
DOCUMENT WILL BE RETURNED TO NAME AND Name of person or organization
MAILING ADDRESS remitting fees:
INDICATED IN THE BOX BELOW. Include __________________________
name, street and number (or P.O.box),
city, state and ZIP code. __________________________
- ------------------------------------- Preparer's name and business
Stephen M. Tuuk, Esq. telephone number:
MILLER, CANFIELD, PADDOCK & STONE
901 Mutual Home Building _____ ____________________
171 Monroe Avenue NW
Grand Rapids, MI 49503 (____)____________________
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. This form is issued under the authority of Act 284, P.A. of 1972, as
amended, and Act 162, P.A. of 1982. The amendment cannot be filed until
this form, or a comparable document is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing.
Since this document must be microfilmed, it is important that the filing
be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
3. This document is to be used pursuant to the provisions of section 631 of
the Act for the purpose of amending the articles of incorporation of a
domestic profit or nonprofit corporation. A nonprofit corporation is one
incorporated to carry out any lawful purpose or purposes not involving
pecuniary profit or gain for its directors, officers, shareholders, or
members. A nonprofit corporation organized on a nonstock directorship
basis, as authorized by Section 302 of the Act, may or may not have
members, but if it has members, the members are not entitled to vote.
4. Item 2 - Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
5. The entire article being amended must be set forth in its entirety.
However, if the article being amended is divided into separately
identifiable sections, only the sections being amended need be included.
6. This document is effective on the date approved and filed by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be started.
7. If the amendment is adopted before the first meeting of the board of
directors, item 5(a) must be completed and signed in ink by all of the
incorporators. If the amendment is otherwise adopted, item 5(b) must be
completed and signed in ink by the president, vice-president, chairperson,
or vice-chairperson of the corporation.
8. FEES: Filing fee (Make remittance payable to State of
Michigan).....................$10.00 Franchise fee for profit corporations
(payable only if authorized capital stock has increased) - 1/2 mill
(.0005) on each dollar of increase over highest previous authorized
capital stock.
9. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O.Box 30054
Lansing, Michigan 48909
Telephone: (517) 373-0493
- --------------------------------------------------------------------------------
<PAGE>
REVISION TO EXHIBIT A
of
AMENDMENT TO ARTICLES OF INCORPORATION
On August 23, 1984, the Shareholders of LaBarge Mirrors, Inc.
("Corporation") amended the Articles of Incorporation for such Corporation as
stated in the Certificate of Amendment to Articles of Incorporation and the
Exhibit A attached thereto as filed with the Michigan Department of Commerce,
Corporation and Securities Bureau, on October 10, 1984 ("Amendment"). Exhibit A
of the Amendment is hereby revised and duly adopted by unanimous approval of all
the Shareholders of the Corporation entitled to vote. The revisions to Exhibit A
of the Amendment are as follows:
1. Subparagraph 2(b) of paragraph B of Exhibit A of the Amendment is
hereby revoked and the following substituted in its stead:
b. Equity Ownership. The Class B Non-Voting Non-Cumulative Preferred
stock and the Class C NonVoting Common stock together shall own and
represent the ownership of all the equity in the Corporation, except for
the equity ownership provided for the Class A Voting Non-Cumulative
Preferred shares. The Class B Non-Voting Non-Cumulative Preferred stock
and the Class C Non-Voting Common stock shall own and represent the
ownership of all the equity in the Corporation, other than the equity
ownership of the Class A Voting Cumulative Preferred stock, on a pro rata
basis in accordance with the total number of issued and outstanding shares
of both of those classes of stock.
2. Subparagraph 2(c) of paragraph B of Exhibit A of the Amendment is
hereby revoked and the following substituted in its stead:
1
<PAGE>
c. Voluntary Liquidation. In the event of a voluntary liquidation,
dissolution or winding up of this Corporation, the holders of Class B
Non-Voting Non-Cumulative Preferred stock shall be entitled to receive out
of the assets of this Corporation, whether such assets are capital or
surplus of any nature, an amount equal to one hundred (100%) percent of
the par value of such preferred stock. This amount shall be paid to the
holders of Class B Non-Voting Non-Cumulative Preferred stock prior to any
liquidation amounts paid to the holders of Class C Non-Voting Common
stock, but shall be subordinate to the liquidation amounts payable to the
holders of Class A Voting Non-Cumulative Preferred stock as provided in
Article B-1.
3. Subparagraph 2(b) of paragraph B of Exhibit A of the Amendment is
hereby revoked and the following substituted in its stead:
b. Equity Ownership. The Class B Non-Voting Non-Cumulative Preferred
stock and the Class C NonVoting Common stock together shall own and
represent the ownership of all the equity in the Corporation, except for
the equity ownership provided for the Class A Voting Non-Cumulative
Preferred stock. The Class B Non-Voting Non-Cumulative Preferred stock and
the Class C Non-Voting Common stock shall own and represent the ownership
of all the equity in the Corporation, other than the equity ownership of
the Class A Voting Cumulative Preferred stock, on a pro rata basis in
accordance with the total number of issued and outstanding shares of both
of those classes of stock.
4. Subparagraph 3(d) of paragraph B of Exhibit A of the Amendment is
hereby revoked and the following substituted in its stead:
d. Involuntary Liquidation. In the event of an involuntary
liquidation, dissolution or winding up of this Corporation, the holders of
the Class C Non-Voting Common stock shall be entitled to receive out of
the assets of this Corporation, whether such assets are capital or surplus
of any nature, that amount remaining after the distribution of the Class B
Non-Voting Non-Cumulative Preferred stock and the Class A Voting
Non-Cumulative Preferred stock. This
2
<PAGE>
amount shall be paid to the holders of Class C Non-Voting Common stock
after satisfaction of all other payments in liquidation to the other
classes of stock of the Corporation.
CLASS A VOTING NON-CUMULATIVE
PREFERRED STOCKHOLDER:
Dated: January 10, 1986. By: /s/ Eileen B. LaBarge
-----------------------------
Eileen B. LaBarge
CLASS A VOTING NON-CUMULATIVE
PREFERRED STOCKHOLDER:
Dated: January 10, 1986. By:/s/ William E. LaBarge, Sr.
------------------------------
William E. LaBarge, Sr.
CORPORATION:
LA BARGE MIRRORS, INC.
Dated: January 10, 1986. By/s/ William E. LaBarge, Sr.,
------------------------------
William E. LaBarge, Sr.,
President and Chairman of the
Board of Directors
3
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) DATE RECEIVED
FEB 5 1987
FILED
FEBRUARY 5, 1987
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
- --------------------------------------------------------------------------------
CERTIFICATE OF MERGER/CONSOLIDATION
For use by Domestic or Foreign Corporations
(Please read instructions and Paperwork Reduction Act notice on last page)
Pursuant to the provisions of Ac 284, Public Acts of 1972, as amended
(profit corporations), and/or Act 152, Public Acts of 1982 (nonprofit
corporations), the undersigned corporations execute the following Certificate:
- --------------------------------------------------------------------------------
1. The Plan of Merger (Consolidation ) is as follows:
a. The name of each constituent corporation and its corporation
identification number (CID) is:
Masco Acquisition, Inc. 330-601
LaBarge Mirrors, Inc. 101-657
b. The name of the surviving (new) corporation and its corporation
identification number (CID) is:
LaBarge Mirrors, Inc. 010-657
c. For each constituent stock corporation, state:
<TABLE>
<CAPTION>
Designation and
number of outstanding Indicate class or Indicate class or
shares in each class series of shares series entitled
Name of corporation or series entitled to vote to vote as a class
- ------------------- ------------------------ ---------------- ------------------
<S> <C> <C> <C>
Masco Acquisition, Inc. Common Stock 1,000 Common Stock None
shares outstanding
LaBarge Mirrors, Inc. Class A Preferred Stock, Class A Class A
4,669 shares outstanding Preferred Stock Preferred Stock
- ---------------------------------------------------------------------------------------
Class B Preferred Stock, Class B
1,521 shares outstanding Preferred Stock
- ---------------------------------------------------------------------------------------
Class C Common Stock
8,412 shares outstanding Class C
Common Stock
- ----------------------------------------------------------------------------------------
</TABLE>
If the number of shares is subject to change prior to the effective dat of the
merger or consolidation, the manner in which the change may occur is as follows:
N/A
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
d. For each constituent nonstock corporation N/A
(i) If it is organized on a membership basis, state (a) the name of the
corporation, (b) a description of its members, and the (c) number,
classification and voting rights of its members.
(ii) If it is organized on a directorship basis, state (a) the name of
the corporation, (b) a description of the organization of its board,
and (c) the number, classification and voting rights of its
directors.
e. The terms and conditions of the proposed merger, including the manner and
basis of converting the shares of, or membership or other interests in,
each constituent corporation into shares, bonds, or other securities or,
or membership or other interest in, the surviving corporation, or into
cash or other consideration are set forth in the Plan of Merger attached
hereto and incorporated herein by reference (the "Plan of Merger").
f. If a consolidation, the Articles of Incorporation of the consolidated
corporation are attached to this Certificate and are incorporated herein.
If a merger, the amendments to the Articles, or a restatement of the
Articles, of the surviving corporation to be effected by the merger are
xxxxx set forth in Annex A to the Plan of Merger.
g. Other provisions with respect to the merger (consolidation) are set forth
in the Plan of Merger.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. (Complete for any foreign corporation only)
This merger (consolidation) is permitted by the laws of the state of
_________________, the jurisdiction under which ______________________
(name of foreign corporation) is organized and the plan of merger
(consolidation) was adopted and approved by such corporation pursuant to
and in accordance with the laws of that jurisdiction.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. (Complete only if an effective date is desired other than the date of
filing)
The merger (consolidation) shall be effective on the ______ day of
______________, 19__.
- --------------------------------------------------------------------------------
<PAGE>
4. (Complete applicable section for each constituent corporation)
a. (For domestic profit corporations only) The plan of merger
(consolidation) was approved by the unanimous consent of the
incorporators of ____________________________, which has not
commenced business, has not issued any share, and has elected a
Board of Directors. (Incorporators must sign on this page of the
Certificate.)
b. (For profit corporations involved in a merger only) The plan of
merger was approved by the Board of Directors of _____________, the
surviving corporation, without the approval of the shareholders of
that corporation in accordance with Section 704 of the Act.
c. (For profit corporations only) The plan of merge or consolidation
was adopted by the Board of Directors of the following constituent
corporations: Masco Acquisition, Inc.
LaBarge Mirrors, Inc.
and was approved by the shareholders of those corporations in
accordance with Sections 701 to 704, or pursuant to Section 407 by
written consent and written notice, if required by that section.
d. (For nonprofit corporations only) The plan of merger or
consolidation was adopted by the Board of Directors (i) (Complete if
organized upon a stock or membership basis) of
_________________________________________ and was approved by the
shareholders or members of that corporation in accordance with
Sections 701 and 703(1) and (2), or pursuant to Section 407 by
written consent and written notice, if required. (ii) (Complete of
organized upon a directorship basis) of
_________________________________________ in accordance with Section
703(3).
- --------------------------------------------------------------------------------
Sign this area for Item 4(a)
Signed this _______ day of __________________________, 19______.
______________________________________ ______________________________________
______________________________________ ______________________________________
Sign this area for items 4(b), 4(c),or 4(d).
Signed this 4th day of February, 1987
Masco Acquisition, Inc.
--------------------------------------------------
(Name of Corporation)
By /s/ John R. Leekley
-----------------------------------------------
(Signature)
John R. Leekley, Vice President
-----------------------------------------------
(Type or Print Name and Title)
Signed this 4th day of February, 1987
LaBarge Mirrors, Inc.
--------------------------------------------------
(Name of Corporation)
By /s/ William E. LaBarge, Sr.
-----------------------------------------------
(Signature)
William E. LaBarge, Sr., Chairman of the Board
------------------------------------------------
(Type or Print Name and Title)
<PAGE>
DOCUMENT WILL BE RETURNED TO NAME AND MAILING Name of person or organization
ADDRESS remitting fees:
INDICATED IN THE BOX BELOW. Include name,
street and number (or P.O. box),city, state Masco Corporation
and ZIP code.
Preparer's name and business
David B. Liner telephone number:
Masco corporation
21001 Van Born Road David B. Liner
Taylor, Michigan 48180
(313) 274-7400
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. This form is issued under the authority of Act 284, P.A. of 1972, as
amended, and Act 162, P.A. of 1982. The merger/consolidation cannot be
filed until this form, or a comparable document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing.
Since this document must be microfilmed, it is important that the filing
be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
3. This certificate is to be used pursuant to sections 701 through 707 of the
Act for the purpose of merging or consolidating two or more domestic
and/or foreign corporations and pursuant to section 731 if the merger or
consolidation involves one or more foreign corporations.
4. If more than two corporations are merging or consolidating, the
certificate may be adjusted as necessary, or the format may be used as a
guide in drafting your own certificate. If additional space is required
for any section, continue the section on an attachment.
5. Item 3 - This document is effective on the date approved and filed by the
Bureau. A later effective date, no more than 90 days after the date of
delivery, may be stated.
6. If a domestic corporation is merging or consolidating into a foreign
corporation that does not have a certificate of authority, this
certificate cannot be filed until a tax clearance is received. To obtain
such a clearance, contact the Tax Clearance Division, Michigan Department
of Treasury, Treasury Building, Lansing, Michigan 48922, and request that
the tax clearance be sent to the Corporation Division.
7. A domestic nonprofit charitable purpose corporation must obtain the
consent of the Michigan Attorney General if it is merging or consolidating
into a for profit or a foreign nonprofit corporation that does not have a
certificate of authority with Michigan. Contact the Charitable Trust
Division, Michigan Attorney General, Room 670, Law Building, 525 West
Ottawa, Lansing, Michigan 48913 at least 45 days before the desired
effective date of the merger or consolidation.
8. This certificate must be signed in ink by the president, vice-president,
chairperson, or vice-chairperson of each corporation that is merging or
consolidating, unless the incorporators of a domestic profit corporation
approve the merger or consolidation pursuant to sections 706 and 707 of
the Act. In that event, the certificate must be signed in ink by all of
the incorporators of that corporation in Item 4.
9. FEES: Filing fee (Make remittance payable to State of
Michigan)...$50.00
Merger - If the survivor is a domestic profit corporation whose authorized
capital stock is increased, an additional fee is due equal
to 1/2 mill (.0005) on each dollar of the increase over the
previous highest authorized capital stock on which a franchise
fee was paid.
Consolidation - Franchise fees are required for the articles of
incorporation of the new consolidated corporation, if it
is a domestic corporation.
Credit - If a foreign corporation authorized to transact business in this
State merges or consolidated into a domestic profit corporation,
the amount of franchise fees required to be paid by that domestic
corporation shall be reduced by the initial or additional
franchise fees paid to this State by the foreign corporation.
10. Mail form and fee to:
Michigan Department of Commerce, Corporation and Securities
Bureau, Corporation Division, P.O. Box 30054, Lansing, MI
48909, Telephone: (517) 373-0493
- --------------------------------------------------------------------------------
<PAGE>
PLAN OF MERGER
PLAN OF MERGER, dated as of February 5, 1987 between LaBarge Mirrors,
Inc., a Michigan corporation (the "Company"), and Masco Acquisition, Inc., a
Michigan corporation ("Subsidiary") and a wholly-owned subsidiary of Masco
Corporation, a Delaware corporation ("Masco") (with the Company and Subsidiary
being collectively referred to herein as the "Constituent Corporations").
A. The Company, Masco and Subsidiary have entered into an Agreement and
Plan of Reorganization, dated as of December 29, 1986 (the "Merger Agreement"),
providing for the merger (the "Merger") of Subsidiary with and into the Company
upon the terms set forth in this Plan.
B. The terms and conditions of the Merger, the mode of carrying the same
into effect, the manner of converting the shares of Common Stock of Subsidiary
outstanding immediately prior to the effective time of the Merger and the shares
of Class A Preferred Stock, Class B Preferred Stock and Class C Common Stock of
the Company outstanding immediately prior to the effective time of the Merger,
and other pertinent provisions of the Merger, are hereinafter set forth.
ARTICLE I
In accordance with the provisions of the laws of the State of Michigan,
Subsidiary shall be merged with and into the Company, which shall be, and is
herein sometimes referred to as the "Surviving Corporation."
ARTICLE II
The Merger shall become effective upon the filing of a Certificate of
Merger with the Department of Commerce of the State of Michigan, pursuant to
Section 707 of the Michigan Business Corporation Act (the "Act"). The time when
the Merger becomes effective shall be the "Effective Date" of the Merger
referred to in this Plan.
ARTICLE III
The Company has issued and outstanding 4,669 shares of Class A voting
noncumulative Preferred Stock, pay value $100 per share ("Class A Preferred
Stock"), 1, 521 shares of Class B nonvoting noncumulative Preferred Stock, par
value $1 per
<PAGE>
share ("Class B Preferred Stock") and 8,412 shares of Class Cl nonvoting Common
Stock, par value $1 per share ("Class C Common Stock"), and Subsidiary has
issued and outstanding 1,000 shares of Common Stock, par value $1 per share. All
of such shares are entitled to vote on the Merger.
ARTICLE IV
From and after the Effective Date, the Restated Articles of Incorporation
as set forth in Annex A attached hereto shall be the Articles of Incorporation
of the Surviving Corporation until amended in accordance with applicable law.
From and after the Effective Date, the by-laws of the Subsidiary as i effect on
the Effective Date shall be the by-laws of the Surviving Corporation until
amended in accordance with applicable law.
ARTICLE V
At the Effective Date the Directors of Subsidiary immediately prior to the
Effective Date shall be the Directors of the Surviving Corporation, each of such
Directors to hold office, subject to the applicable provisions of the articles
of incorporation and by-laws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their successors
shall be elected or appointed and shall duly qualify. From and after the
Effective Date, each officer of the Company immediately prior to the Effective
Date shall be an officer of the Surviving Corporation in the same capacity or
capacities, until his successor is elected and qualified or until his earlier
death, resignation or removal.
ARTICLE VI
On the Effective Date the issued shares of capital stock of the company
and Subsidiary shall become converted into shares of Masco common Stock or into
shares of Common Stock of the Surviving Corporation or be cancelled as follows:
(a) each outstanding share of the Company's Class A Preferred Stock,
shall by virtue of the Merger be converted into 19.381 shares of Masco
Common Stock, par value $1 per share, provided that fractional shares
shall not be issued and the aggregate shares of Masco common Stock
issuable to each stockholder of the Company shall be rounded down to the
nearest whole share;
(b) each outstanding share of the Company's Class B Preferred Stock
shall by virtue of the Merger be converted into 18.263 shares of Masco
Common Stock, par value $1 per share, provided that fractional shares
shall not be issued and the aggregate shares of Masco Common Stock
-2-
<PAGE>
issuable to each stockholder of the Company shall be rounded down to the
nearest whole share;
(c) each outstanding share of the Company's Class C Common Stock
shall by virtue of the Merger be converted into 10.273 shares of Masco
Common Stock, par value $1 per share, provided that fractional shares
shall not be issued and the aggregate shares of Masco Common Stock
issuable to each stockholders of the Company shall be rounded down to the
nearest whole share;
(d) each outstanding share of common Stock of Subsidiary shall by
virtue of the Merger be converted into one share of Common Stock of the
Surviving Corporation; and
(e) each outstanding share of Class A Preferred Stock, Class B
Preferred Stock and Class C Common Stock of the Company held by Masco or
the Company, or any direct or indirect subsidiary of Masco or the Company,
or held by the Company as treasury shares, shall by virtue of the Merger
forthwith cease to exist and be cancelled without payment or any
consideration therefor.
ARTICLE VII
(a) After the Effective Date, each holder of a certificate which formerly
represented any shares of Class A Preferred Stock, Class B Preferred Stock and
Class C Common Stock of the Company outstanding on the Effective Date which
shall have been converted in accordance with Article VI(a) (a "Share
Certificate") shall be entitled, subject to surrender of such Share Certificate
to Masco (or, in the case of a lost, stolen or destroyed Share Certificate, such
other documents (including, without limitation, surety bonds) as Masco may
request) to receive a certificate representing the shares of Masco Common Stock
into which such shares of Class A Preferred Stock, Class B Preferred Stock and
Class C Common Stock of the Company have been converted. Promptly after the
Effective Date, Masco will distribute to all such stockholders of the Company
appropriate materials to effect such surrender. Until so surrendered, each Share
Certificate shall upon and after the Effective Date be deemed for all purposes
to represent and evidence only the right to receive a certificate representing
Masco Common Stock; provided that the right to receive such certificate shall
expire on the sixth anniversary of the Effective Date. Prior to such surrender
the holders of Share Certificates shall have no right to receive any dividends
with respect to such shares of Masco Common Stock or to exercise any rights as
stockholders thereof. Upon the delivery of the certificates representing shares
of Masco Common Stock, the stockholders thereof shall be entitled to receive all
dividends payable with respect thereto, without interest thereon.
-3-
<PAGE>
(b) Certificates representing shares of Masco Common Stock may bear a
legend, in substantially the following form, to the extent Masco deems such
legend to be appropriate for purposes of compliance with the Securities Act of
1933:
"The shares represented by this Certificate have not been registered under
the Securities Act of 1933. The shares may not be sold except in
accordance with the registration requirements of said Act or an exemption
therefrom."
(c) Upon the Effective Date the stock transfer books of the Company shall
be closed for transfers of shares of Class A Preferred Stock, Class B Preferred
Stock and Class C Common Stock of the Company and no transfer of such shares
shall thereafter be made.
ARTICLE VIII
On the Effective Date, the Constituent Corporations shall be a single
corporation, which shall be the Surviving Corporation, the separate existence of
Subsidiary shall cease, and the Surviving Corporation shall have all of the
rights, privileges, immunities, and powers and be subject to all of the duties
and liabilities of a corporation organized under the Act. The Surviving
Corporation shall have all the rights, privileges, immunities, and franchises,
public or private, and all property, real, personal, and mixed, and all debts
due on whatever account, including subscriptions to shares, and all other choses
in action, of each of the Constituent Corporations. All interests of or
belonging to or due to each of the Constituent Corporations shall be considered
transferred to and vested in the Surviving Corporation without further act or
deed. The title to real estate or any interest in real estate vested in a
Constituent Corporation shall not revert or be in any way impaired because of
the Merger. The Surviving Corporation shall thenceforth be responsible and
liable for all liabilities and obligations of each of the Constituent
Corporations. A claim existing or action or proceeding pending by or against a
Constituent Corporation may be prosecuted as if the Merger had not taken place.
The rights of creditors and a lien upon the property of a Constituent
Corporation shall not be impaired by the Merger.
ARTICLE IX
From time to time, as and when requested by the Surviving Corporation, or
by its successors or assigns, Subsidiary shall execute and deliver or cause to
be executed and delivered all such other instruments, and shall take or cause to
be taken all such further or other actions, as the Surviving Corporation, or its
successors or assigns, may deem necessary or desirable in order to vest in and
confirm to the Surviving Corporation, and its successors and assigns, title to
and pos-
-4-
<PAGE>
ession of all property, rights, privileges, powers and franchises referred to in
Article VIII herein and otherwise to carry out the intent and purpose of this
Plan.
-5-
<PAGE>
ANNEX A
RESTATED ARTICLES OF INCORPORATION
OF
LaBARGE MIRRORS, INC.
The present name of the corporation is LaBarge Mirrors, Inc.
The corporation identification number (CID) assigned by the Michigan
Department of Commerce, Corporation and Securities Bureau is 010-657.
The date of filing of the original Articles of Incorporation was March 2,
1962.
The Articles of Incorporation are amended and restated to read as set
forth herein in full.
ARTICLE I.
The name of the corporation is LaBarge Mirrors, Inc.
ARTICLE II.
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Business Corporation Act of Michigan.
ARTICLE III.
The total authorized capital stock is 1,000 shares of Common Stock, par
value $1.00 per share.
ARTICLE IV.
All shares of Common Stock have equal rights.
ARTICLE V.
The address of the registered office is 21001 Van Born Road, Taylor,
Michigan 48180.
The name of the resident agent at the registered office if Gerald Bright.
ARTICLE VI.
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this
<PAGE>
corporation and its shareholders or any class of them, a court of equity
jurisdiction within the state, on application of this Corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or a reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application has
been made, shall be binding on all the creditors or class of creditors, or on
all the shareholders or class of shareholders and also on this corporation.
ARTICLE VII
Each shareholder shall be entitled to as many votes as shall equal the
number of votes which he would be entitled to cast for the election of directors
with respect to his shares of stock multiplied by the number of directors to be
elected, and he may cast all of such votes for a single director or may
distribute them among the number to be voted for, or any two or more of them, as
he may see fit.
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) DATE RECEIVED
FILED MAR 22 1989
MAR 20 1989
Administrator
MICHIGAN DEPT OF COMMERCE
Corporation & Securities Bureau
- --------------------------------------------------------------------------------
CERTIFICATE OF CHANGE OF REGISTERED OFFICE AND/OR CHANGE OF RESIDENT AGENT
For use by Domestic Corporation
(Please read instructions and Paperwork Reduction Act notice on reverse side)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended
(profit corporations), or Act 162, Public Acts of 1982, as amended (nonprofit
corporations), the undersigned corporation executes the following Certificate.
- --------------------------------------------------------------------------------
1. The name of the corporation is: LaBarge Mirrors, Inc.
2. The corporation identification number (CID) assigned by the Bureau is:
010-657
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. a. The address of the registered office as currently on file with the
Bureau is:
21001 Van Born Rd. Taylor , Michigan 48180
(Street Address) (City) (Zip Code)
b. The mailing address of the above registered office, if different is:
, Michigan 48180
(P.O. Box) (City) (Zip Code)
c. The name of the resident agent as currently on file with the Bureau
is: Gerald Bright
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. (Complete if the address of the registered office is changed) The address
of the registered office is changed to:
_____________________________________________________, Michigan __________
(Street Address) (City) (Zip Code)
The mailing address of the above registered office, if different is: ,
_____________________________________________________, Michigan __________
(P.O. Box) (City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. (Complete if the resident agent is changed)
The name of the successor resident agent is:
John R. Leekley
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. The corporation further states that the address of registered office and
the address of the business office of its resident agent, as changed, are
identical.
The above changes were authorized by resolution duly adopted by its board
of directors or trustees.
- --------------------------------------------------------------------------------
Signed this 1st day of March 19889
By /s/ Gerald Bright
-----------------
Gerald Bright, Vice President-Secretary
(Type or Print Name)
<PAGE>
DOCUMENT WILL BE RETURNED TO NAME AND MAILING Name of person or
ADDRESS INDICATED IN THE BOX BELOW. Include name, organization remitting
street and number (or P.O. box),city, state fees:
and ZIP code. Masco Corporation
- ------------------------------------------ Preparer's name and business
Maggie Feher telephone number:
Masco Corporation
21001 Van Born Road Maggie Feher
Taylor, Michigan 48180
- ------------------------------------------- (313) 274-7400
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. This form is issued under the authority of Act 284, P.A. of 1972, as
amended, and Act 162, P.A. of 1982, as amended. The certificate of change
of registered office and/or change of resident agent cannot be filed until
this form, or a comparable document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing.
Since this document must be microfilmed, it is important that the filing
be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
3. This document is to be used pursuant to sections 242 of the Act by
domestic profit and nonprofit corporations for the purpose of changing
their registered office or resident agent or both. Changes of the
registered office and/or resident agent for Foreign corporations must be
made by filing an Amended Application for Certificate of Authority to
Transact Business in Michigan.
4. Item 2 - Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
5. Item 3 - The address of the registered office and the name of the resident
agent must be the same as are designated in the articles of incorporation
or subsequent change filed with the Bureau.
6. Item 4 - A post office box may not be designated as the address of the
registered office.
7. This certificate must be signed in ink by the president, vice- president,
chairperson, vice-chairperson, secretary or assistant secretary of the
corporation.
8. FEES: Filing fee (Make remittance payable to State of Michigan)...$5.00
9. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Box 30054
Lansing, MI 48909
Telephone: (517) 334-6302
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Recorded
FILED OCT 17 1989
OCT 11 1989
Administrator
MICHIGAN DEPT OF COMMERCE
Corporation & Securities Bureau
EXPIRATION DATE: DECEMBER 31, 1994
- --------------------------------------------------------------------------------
CERTIFICATE OF RENEWAL OF ASSUMED NAME
For use by Corporations and Limited Partnerships
(Please read instructions and Paperwork Reduction Act notice on reverse side)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), Act 162, Public Acts of 1982 (nonprofit corporations), or Act
213, Public Acts of 1982 (limited partnerships), the corporation or limited
partnership in item one below executes the following Certificate:
- --------------------------------------------------------------------------------
1. The true name and the address of the corporate registered office or the
address of the limited partnership's agent for service of process is:
LA BARGE MIRRORS, INC.
% JOHN R. LEEKLEY 010657
21001 VAN BORN RD. Identification Number
TAYLOR MI 48180
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. The assumed name under which business is transacted is:
LMI ADVERTISING AGENCY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. The registration of the assumed name is extended for a period expiring on
December 31 of the fifth full calendar year following the year in which
this renewal is filed, unless sooner terminated.
- --------------------------------------------------------------------------------
Signed this 9th day of October, 1989
By /s/ Gerald Bright
---------------------------------------------
(Signature)
Gerald Bright, Vice President
--------------------------------------------
(Type or Print Name) (Type or Print Title)
---------------------------------------------
(Limited Partnerships Only - Name of General
Partner if a corporation or other entity)
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
AUG 29 1991
The certificate must reflect FILED
the registered office and/or
resident agent on record SEP 18 1991
prior to filing this change.
We have adjusted the certificate Administrator
accordingly. MICHIGAN DEPARTMENT OF
COMMERCE
Corporation & Securities
EXPIRATION DATE: December 31, 1996 Bureau
- --------------------------------------------------------------------------------
CERTIFICATE OF ASSUMED NAME
For use by Corporations and Limited Partnerships
(Please read instructions and Paperwork Reduction Act notice on reverse side)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended
(profit corporations), Act 162, Public Acts of 1982, as amended (nonprofit
corporations), or Act 213, Public Acts of 1982, as amended (limited
partnerships), the corporation or limited partnership in item one below executes
the following Certificate:
- --------------------------------------------------------------------------------
1. The true name of the corporation or limited partnership is:
La Barge Mirrors, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. The identification number assigned by the Bureau is: 010-657.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. The location of the corporate registered office or the office at which the
limited partnership records are maintained is:
21001 Van Born Rd., Taylor, MI 48180
(Street Address) (City) (State) (ZIP Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. The assumed name under which business is to be transacted is:
La Barge / Marbro Factory Outlet Store
- --------------------------------------------------------------------------------
Signed this ________ day of ________ , 1991
By /s/ Wayne B. Lyon
------ -------- ----
(Signature)
Wayne B. Lyon Vice President
--------------------------------------------
(Type or Print Name) (Type or Print Title)
-------------------------------------------
(Limited Partnerships Only -
Indicate Name of General Partner
if a corporation or other entity)
<PAGE>
DOCUMENT WILL BE RETURNED TO NAME AND Name of person or corporation
MAILING ADDRESS INDICATED IN THE BOX BELOW. remitting fees:
Include name, street, and number (or P.O.
box), city, state and ZIP code.
MASCO CORPORATION Preparer's name and business
Marylou Zimmerman telephone number:
Masco Corporation
21001 Van Born Rd. Marylou Zimmerman
Taylor, Mi 48180 (313) 374-6652
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. In order to file an assumed name with this agency form, or a comparable
document, must be submitted. This certificate of assumed name is to be
used by a corporation or limited partnership desiring to transact business
under an assumed name other than the true name of the corporation or
limited partnership.
2. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing.
Since this document must be microfilmed, it is important that the filing
be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
3. The certificate shall be effective for a period expiring on December 31 of
the fifth full calendar year following the year in which it was filed,
unless a certificate of termination is filed.
4. The same name may be assumed by two or more corporations participating
together in any partnership or joint venture; similarly, the same name may
be assumed by two or more limited partnerships participating together in
any partnership or joint venture.
5. Item 1 - For domestic corporations and limited partnerships, the true name
is the name contained in its current articles of incorporation or
certificate of limited partnership (as amended or restated). For foreign
corporations and limited partnerships the true name is that name under
which it obtained its authority to transact business or conduct affairs in
Michigan.
6. Item 2 - Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
7. Item 3 - If a foreign limited partnership, this address must be shown in
item 6 of the application for registration to transact business in
Michigan.
8. If a corporation, this certificate must be signed in ink by an authorized
officer or agent of the corporation. If a limited partnership, it must be
signed in ink by at least one general partner.
9. FEES: Filing fee (Make remittance payable to State of Michigan).....$10.00
10. Mail form and fee to:
Michigan Department of Commerce, Corporation and Securities Bureau,
Corporation Division, P.O. Box 30054, 6546 Mercantile Way, Lansing,
MI 48909, Telephone (517) 334-6302
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
MAR 23 1993 FILED
MAR 26 1993
- ------------------------------------ Administrator
Name MICHIGAN DEPARTMENT OF COMMERCE
Maggie Feher, Masco Corporation Corporation & Securities Bureau
Address
21001 Van Born Rd.
City State ZIP Code
Taylor MI 48180 EFFECTIVE DATE:
- --------------------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
CERTIFICATE OF AMENDMENT OT THE ARTICLES OF INCORPORATION
For use by Domestic Corporation
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of
1972 (profit corporations), or Act 162, Public Acts of 1982
(nonprofit corporations),
the undersigned corporation executed the following Certificate:
- --------------------------------------------------------------------------------
1. The present name of the corporation is: La Barge Mirrors, Inc.
2. The corporation identification number (CID) assigned by the Bureau is:
010-657
3. The location of its registered office is:
21001 Van Born Rd. Taylor Michigan 48180
(Street Address) (City) (ZIP Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. Article I of the Articles of Incorporation is hereby amended to read as
follows:
The name of the corporation is:
La Barge, Inc.
- --------------------------------------------------------------------------------
<PAGE>
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS
OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b)
a. | | The foregoing amendment to the Articles of Incorporation was duly
adopted on the ______ day of ______, 19___, in accordance with the
provisions of the Act by the unanimous consent of the incorporator(s)
before the first meeting of the board of directors or trustees.
Signed this day of , 19 .
- ------------------------------------------ ------------------------------------
(Signature) (Signature)
- ------------------------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
- ------------------------------------------ ------------------------------------
(Signature) (Signature)
- ------------------------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
b. |X| The foregoing amendment to the Articles of Incorporation was duly
adopted on the 22nd day of March, 1993. The amendment: (check one of
the following)
| | was duly adopted in accordance with Section 611(2) of the Act by the
vote of the shareholders if a profit corporation, or by the vote of
the shareholders or members if a nonprofit corporation, or by the
vote of the directors if a nonprofit corporation organized on a
nonstock directorship basis. The necessary votes were cast in favor
of the amendment.
| | was duly adopted by the written consent of all the directors
pursuant to Section 525 of the Act and the corporation is a
nonprofit corporation organized on a nonstock directorship basis.
| | was duly adopted by the written consent of the shareholders or
members having not less than the minimum number of votes required by
statue in accordance with Section 407 (1) and (2) of the Act if a
nonprofit corporation, and Section 4007 (1) of the Act if a profit
corporation. Written notice to the shareholders or member who have
not consented in writing has been given. (Note: Written consent by
less than all of the shareholders or members is permitted only if
such provision appears in the Articles of Incorporation.)
|X| was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407 (3) of the
Act if a non-profit corporation, and Section 407 (2) of the Act if a
profit corporation.
Signed this 22nd day of March, 1993
By /s/ Richard G. Mosteller
----------------------------
(Only signature of: President,
Vice-President and Vice-Chairman)
Richard G. Mosteller Vice President
--------------------------------------------
(Type or Print Name) (Type or Print Title)
Exhibit 3.15
CERTIFICATE OF INCORPORATION
OF
DIXIE FURNITURE COMPANY, INCORPORTED
This is to certify, That we, the undersigned, do hereby associate ourselves
into a corporation under and by virtue of the laws of the State of North
Carolina, as contained in Chapter 22 of the Consolidated Statutes, entitled
"Corporations," and the several amendments thereto, and do severally agree to
take the number of shares of capital stock in the said corporation set opposite
our respective names, and to that end do hereby set forth:
1. The name of this corporation is DIXIE FURNITURE COMPANY, INCORPORATED
2. The location of the principal office of the corporation in this State is
at Lexington, in the County of Davidson; but it may have one or more branch
offices and places of business out of the State of North Carolina, as well as in
said State.
3. The objects for which this corporation is formed are as follows:
manufacturing, buying and selling furniture, lumber, machinery, saw mills,
planing mills and everything of whatever kind that is made of wood, lumber or
other building material
And in order properly to prosecute the objects and purposes above set
forth, the corporation shall have full power and authority to purchase, lease
and otherwise acquire, hold, mortgage, Convey and otherwise dispose of all kinds
of property, both real and personal, both in this State and in all other
<PAGE>
States, Territories and dependencies of the United States; to purchase the
business, good-will and all other property of any individual, firm or
corporation as a going concern, and to assume all its debts, contracts and
obligations, provided said business is authorized by the powers contained
herein; to construct, equip and maintain buildings, works, factories and plants;
to install, maintain and operate all kinds of machinery and appliances; to
operate same by hand, steam, water, electric or other motive power, and
generally to perform all acts which may be deemed necessary or expedient for the
proper and successful prosecution of the objects and purposes for which the
corporation is created.
4. The total authorizes capital stock of this corporation is 2500 shares,
no par value.
5. The names and postoffice addresses of the subscribers for stock, and the
number of shares subscribed for by each, the aggregate of which being the amount
of capital stock with which the company will commence business, are as follows:
NAME POSTOFFICE ADDRESS NO. OF SHARES
J.R. McCrary Lexington, N.C. 215
T.E. McCrary " " 130
J.V. Moffitt " " 66
E.B. Craven " " 24
H.T. Link " " 1618
----
2053
6. The period of existence of this corporation is unlimited.
7. The board of directors of this corporation shall have power, by vote of
a majority of all the directors, and without the assent or vote of the
stockholders, to make, alter, amend and rescind the bylaws of this corporation.
<PAGE>
In Testimony Whereof, We have hereunto set out hands and affixed our seals,
this the 28th day of September, A.D. 1936.
/s/ J.R. McCrary (Seal)
----------------------
/s/ T.E. McCrary (Seal)
----------------------
/s/ J.V. Moffitt (Seal)
----------------------
/s/ E.B. Craven (Seal)
----------------------
/s H.T. Link (Seal)
----------------------
(Seal)
----------------------
(Seal)
----------------------
(Seal)
----------------------
(Seal)
----------------------
STATE OF North Carolina )
) ss.
COUNTY OF Davidson )
This is to Certify, That on this 28th day September, A.D. 1936, before me,
a Notary Public, personally appeared
J.R. McCray
T.E. McCray
J.V. Moffitt
E.B. Craven
H.T. Link
who, I am satisfied, are the persons named in and who executed the foregoing
certificate of incorporation of Dixie Furniture Company, Incorporated, and I
having first made known to them the contents thereof, they did each acknowledge
that they signed, sealed and delivered the same as their voluntary act and deed,
for the uses and purposes therein expressed.
In Testimony Whereof, I have hereunto set my hand and affixed my official
seal, this the 28th day of September A.D. 1936.
(L.S.) /s/ Pauline S. Greene
------------------------------------
My Commission Expires June 8, 1937
------------------
FILED
SEP 29 1936
STACEY W. WADE
SECRETARY OF STATE
------------------
<PAGE>
ARTICLES OF MERGER
OF
DIXIE FURNITURE COMPANY (ASHEBORO DIVISION) INC.
INTO
DIXIE FURNITURE COMPANY, INCORPORATED
-----------------------
The undersigned corporations hereby execute these Articles of Merger for
the purpose of merging the wholly owned subsidiary corporation into its parent
corporation.
I. The following Plan of Merger was duly approved by the board of directors
of each of the undersigned corporations in the manner prescribed by law:
A. CORPORATIONS PARTICIPATING IN MERGER.
Dixie Furniture Company (Asheboro Division) Inc. proposes to merge
into Dixie Furniture Company, Incorporated, and Dixie Furniture
Company, Incorporated, shall be the surviving corporation.
B. NAME OF SURVIVING CORPORATION.
The name of the surviving corporation shall be Dixie Furniture
Company, Incorporated.
C. MERGER OF MERGING COMPANY INTO SURVIVING COMPANY.
Pursuant to the terms and conditions of this Plan, Dixie Furniture
Company (Asheboro Division) Inc. shall be merged into Dixie Furniture
Company, Incorporated. Upon the merger of Dixie Furniture Company
(Asheboro Division) Inc. into Dixie Furniture Company, Incorporated,
the corporate existence of Dixie Furniture Company (Asheboro
<PAGE>
Page Two
Division) Inc. shall cease and the corporate existence of Dixie
Furniture Company, Incorporated, shall continue.
D. CONVERSION AND EXCHANGE OF SHARES.
Dixie Furniture Company (Asheboro Division) Inc. is the wholly owned
subsidiary of Dixie Furniture Compnay, Incorporated, and no cash or
shares or other securities or obligations will be distributed or
issued upon conversion or cancellation of the shares of Dixie
Furniture Company (Asheboro Division) Inc.
II. At the time of the approval of the foregoing Plan of Merger by the
board of directors of each of the undersigned corporations, the Dixie Furniture
Company, Incorporated, was the owner of all the outstanding shares of Dixie
Furniture Company (Asheboro Division) Inc., and the foregoing Plan of Merger
does not provide for any changes in the charter of, or the issuance of any
shares by, Dixie Furniture Company, Incorporated.
IN WITNESS WHEREOF, these articles are signed by the president and
secretary of each corporation, this 27th day of February, 1979.
DIXIE FURNITURE COMPANY (ASHEBORO
DIVISION) INC.
By /s/ J. Smith Young
------------------------------
President
By /s/ William A. Sprager
------------------------------
Secretary
DIXIE FURNITURE COMPANY, INCORPORATED
By /s/ J. Smith Young
------------------------------
President
By /s/ William A. Sprager
------------------------------
Secretary
<PAGE>
Page Three
STATE OF NORTH CAROLINA
COUNTY OF DAVIDSON
I, H. Max Lemming, a notary public, hereby certify that on this 27th day of
February, 1979, personally appeared before me J. Smith Young and W. Allen
Sparger, each of whom being by me first duly sworn, declared that he signed the
foregoing Document in the capacities indicated, that he was authorized so to
sign, and that the statements therein contained are true.
/s/ H. Max Lemming
------------------------
Notary Public
My commission expires: 1-23-81
<PAGE>
CERTIFICATE OF AMENDMENT TO THE CHARTER
OF
DIXIE FURNITURE COMPANY, INCORPORATED
The location of the principal office in this State is in the city of
Lexington, County of Davidson.
The name of the agent therein and in charge thereof, upon whom process
against this corporation may be served, is H.T. Link.
----------
Resolution of Directors
The Board of Directors of the Dixie Furniture Company, Incorporated, a
corporation of North Carolina, on this 5th day of November, 1947, do hereby
resolve and declare that it is advisable:
That the Certificate of Incorporation of Dixie Furniture Company,
Incorporated, be amended in the following particulars:
That paragraph 3 of the original Charter be amended to read as follows:
3. The objects for which this corporation is formed are as follows:
Manufacturing, buying and selling furniture, lumber, machinery, saw mills,
planing mills and everything of whatever kind that is made of wood, lumber or
other building material.
And in order properly to prosecute the objects and purposes above set
forth, the Corporation shall have full power and authority to purchase, lease
and otherwise acquire, hold, mortgage, convey and otherwise dispose of all kinds
of property, both real and personal, both in this State and in all other States,
territories and dependencies of the United States; to purchase or otherwise
acquire, hold and sell or otherwise dispose of stock and obligations of other
corporations and associations, including this Corporation's own stock, bonds,
notes, tax notes and certificates of indebtedness of the Federal Government and
State and Municipal bonds and notes of North Carolina, or any of its political
subdivisions or bonds of any other state of the United States; to purchase the
business,
<PAGE>
-2-
good-will and all other property of any individual, firm or corporation as a
going concern, and to assume all its debts, contracts and obligations, provided
said business is authorized by the powers contained herein; to construct, equip,
and maintain buildings, works, factories and plants; to install, maintain and
operate all kinds of machinery and appliances; to operate same by hand, steam,
water, electric or other motive power, and generally to perform all acts which
may be deemed necessary or expedient for the proper and successful prosecution
of the objects and purposes for which the Corporation is created.
That paragraph 4 of the original Charter be amended to read as follows:
4. The total authorized capital stock of this Corporation shall be Two
Hundred Five Thousand, Three Hundred (205,300) shares of a par value of One
Dollar ($1.00) per share.
That the officers of the Corporation shall have full power and authority,
when authorized by the stockholders and directors, to retire all of the present
outstanding shares of no par value stock of Two Thousand, Fifty-three (2,053)
shares now shown to be outstanding by the records of the Corporation, and to
issue in lieu thereof Two Hundred Five Thousand, Three Hundred (205,300) shares
of a par value of One Dollar ($1.00) per share herein above authorized.
And they do hereby call a meeting of the stockholders, to be held at the
company's office in the city of Lexington, on Monday, the 30th day of December,
1947, at 3 o' clock, p.m. to take action upon the above resolution.
Certificate of Change
The Dixie Furniture Company, Incorporated, a corporation of North Carolina,
doth hereby certify that pursuant to said resolution, and upon notice duly given
to all voting stockholders, as provided by law and the by-laws of this
corporation, a meeting of the stockholders was held at the time and place
specified, and at least a majority in interest of each class of the stockholders
of
<PAGE>
-3-
said corporation having voting powers being represented in person or by proxy, a
resolution was unanimously adopted approving the amendment proposed by the Board
of Directors, as follows:
That the Certificate of Incorporation of Dixie Furniture Company,
Incorporated be amended in the following particulars:
That Paragraph 3 of the original Charter be amended to read as follows:
3. The objects for which this corporation is formed are as follows:
Manufacturing, buying and selling furniture, lumber, machinery, saw mills,
planing mills and everything of whatever kind that is made of wood, lumber or
other building material.
And in order properly to prosecute the objects and purposes set forth, the
Corporation shall have full power and authority to purchase, lease and otherwise
acquire, hold, mortgage, convey and otherwise dispose of all kinds of property,
both real and personal, both in this State and in all other States, territories
and dependencies of the United States; to purchase or otherwise acquire, hold
and sell or otherwise dispose of stock and obligations of other corporations and
associations, including this Corporation's own stock, bonds, notes, tax notes
and certificates of indebtness of the Federal Government and State and Municipal
bonds and notes of North Carolina, or any of its political subdivisions or bonds
of any other state of the United States; to purchase the business, good-will and
all other property of any individual, firm or corporation as a going concern,
and to assume all its debts, contracts and obligations, provided said business
is authorized by the powers contained herein; to construct, equip and maintain
buildings, works, factories and plants; to install, maintain and operate all
kinds of machinery and appliances; to operate same by hand, steam, water,
electric or other motive power, and generally to perform all acts which may be
deemed necessary or expedient for the proper and successful prosecution of the
objects and purposes for which the Corporation is created.
<PAGE>
-4-
That paragraph 4 of the original Charter be amended to read as follows:
4. The total authorized capital stock of this Corporation shall be Two
Hundred Five Thousand, Three Hundred (205,300) shares of a par value of One
Dollar ($1.00) per share.
That the officers of the Corporation shall have full power and authority,
when authorized by the stockholders and directors, to retire all of the present
outstanding shares of no par value stock of Two Thousand, Fifty-three (2,053)
shares now shown to be outstanding by the records of the Corporation, and to
issue in lieu thereof Two Hundred Five Thousand, Three Hundred (205,300) shares
of a par value of One Dollar ($1.00) per share herein above authorized.
That the written asset of at least a majority in interest of each class of
stockholders having voting powers is hereto appended.
In witness whereof, said corporation has caused this certificate to be
signed by its President and Secretary, and its corporate seal to be hereto
affixed, the 30th day of December, A.D. 1947.
(L. S.)
Dixie Furniture Co. Inc.
------------------------
By /s/ H. T. Link
----------------------
President
Attest: /s/ W. F. Sparger
------------------------
Secretary
STATE OF NORTH CAROLINA
COUNTY OF DAVIDSON
Be it remembered, that on this 30th day of December, A.D. 1947, before me,
the subscriber, a Notary Public for said county, personally appeared W. F.
Sparger, Secretary of the Dixie Furniture Company, Incorporated, the corporation
mentioned in and which executed the foregoing certificate, who, being by me duly
sworn, on his oath says that he is such Secretary, and that the seal affixed to
said certificate is the corporate seal of said corporation, the
<PAGE>
same being well known to him, that H.T. Link is President of said corporation,
and signed said certificate and affixed said seal thereto, and delivered said
certificate by authority of the Board of Directors and with the assent of at
least a majority in interest of each class of the stockholders of said
corporation having voting powers as and for his voluntary act and deed, and the
voluntary act and deed of said corporation, in presence of deponent, who
thereupon subscribed his name thereto as witness.
And he further says that the assent hereto appended is signed by at least
two-thirds in interest of each class of the stockholders of said corporation
having voting powers, either in person or by their several duly constituted
attorneys in fact, thereunto duly authorized in qriting.
----------------------
My Commission Expires
October 10, 1949
Stockholders' Assent To Change
We, the subscribers, being at least a majority in interest of each class of
stockholders of the Dixie Furniture Company, Incorporated, having voting powers,
having a meeting regularly called for the purpose, voted in favor of amending
the certificate of incorporation as above set out do now, pursuant to the
statute, hereby give our written assent to said change.
Witness our hands, this 30th day of December, A.D. 1947.
Carrie P. Leonard,
Trustee 144
Henna Hall and
Katherine Hall Cross 5
Glenna Hall 1
Katherine Hall Cross 1
James M. Hall 1
Katherine Walker White 200
T.C. Hinkle 25
J.K. McCray 215
James Adderton 50
E.B. Cravan 24
J.V. Moffitt 89
J.B. Young 16
Edgar Bruce Hinkle 26
H.T. Link 500
W.F. Sparger 75
<PAGE>
Lillian Frank
By H.T. Link, Atty. in fact 20
Maurice Frank
By H.T. Link, Atty. in fact 10
Mrs. Clayton Walker 73
By Dunlop White,
Atty. in fact
Mrs. Helen McCrary Arendell 80
by J.R. McCrary,
Atty. in fact
Roy Armstrong 10
by J.R. McCrary,
Atty. in fact
Mrs. Frances Hinkle 20
Barnhardt
by J.R. McCrary,
Atty. in fact
J.S. Bassett 20
by J.R. McCrary,
Atty. in fact
A. Bruce Conrad 2
by J.R. McCrary,
Atty. in fact
Mrs. Flora A. Gallimore 6
by J.R. McCrary,
Atty. in fact
Mrs. Helen Hinkle Gray 7
by J.R. McCrary,
Atty. in Fact
Sam Gourley, Jr. 10
By J.R. McCray,
Atty. In Fact
George L.Hackney 15
By J. R. McCray,
Atty. In Fact
Miss Ann Hinkle 6
by J.R. McCray,
Atty. In Fact
Henry Etta Link 21
by J.R. McCrary,
Atty. in Fact
Mrs. L. M. Koonts 5
by J.R. McCrary,
Atty, in Fact
Etta Smith Link 25
by J.R. McCrary,
Atty. in Fact
Hubert E. Olive 10
by J. R. McCrary,
Atty. in Fact
H.E. Orenberg 6
by J.R. McCrary,
Atty. in Fact
R.T. Phillips 7
by J.R. McCrary,
Atty. in Fact
G.H. Phillips 7
by J.R. McCrary,
Atty. in Fact
B.C. Philpott 50
by J.R. McCrary,
Atty. in Fact
Mrs. Daisy H. Philpott 10
by J.R. McCrary,
Atty. in Fact
H.C. Philpott 5
by J.R. McCrary,
Atty. in Fact
Mrs. W.H. Sachriest 5
by J.R. McCrary,
Atty. in Fact
W.H. Sachriest 10
by J.R. McCrary,
Atty. in Fact
Irving Zimmerman 3
by J.R. McCrary,
Atty in Fact
-------------------
FILED
JAN 31 1948
THAD EURE
SECRETARY OF STATE
-------------------
<PAGE>
Hubert E. Olive 10
by J. R. McCrary,
Atty. in Fact
H.E. Orenberg 6
by J.R. McCrary,
Atty. in Fact
R.T. Phillips 7
by J.R. McCrary,
Atty. in Fact
G.H. Phillips 7
by J.R. McCrary,
Atty. in Fact
B.C. Philpott 50
by J.R. McCrary,
Atty. in Fact
Mrs. Daisy H. Philpott 10
by J.R. McCrary,
Atty. in Fact
H.C. Philpott 5
by J.R. McCrary,
Atty. in Fact
Mrs. W.H. Sachriest 5
by J.R. McCrary,
Atty. in Fact
W.H. Sachriest 10
by J.R. McCrary,
Atty. in Fact
Irving Zimmerman 3
by J.R. McCrary,
Atty in Fact
<PAGE>
FILED
MAR 25 11 49 AM 1966
THAD EURE
SECRETARY OF STATE
NORTH CAROLINA
ARTICLES OF AMENDMENT
TO THE CHARTER OF
DIXIE FURNITURE COMPANY, INCORPORATED
The undersigned corporation, for the purpose of amending its Articles of
Incorporation and pursuant to the provisions of Section 55-103 of the General
Statues of North Carolina, hereby executes the following Articles of Amendment:
1. Name of the corporation: Dixie Furniture Company, Incorporated.
2. At a regularly convened meeting of the shareholders of the corporation
held on the 24th day of March, 1966, the following amendment to the charter of
the corporation was adopted by vote of the shareholders:
"Be it resolved that Article IV of the Amendment to the Charter of
Dixie Furniture Company, Incorporated be amended by deleting the same and
inserting in lieu thereof the following:
ARTICLE IV. The total authorized capital stock of this corporation
shall be $500,000.00 divided into 500,000 shares of a par value of $1.00
each."
3. The number of shares of the corporation outstanding at the time of the
adoption of the amendment was 205,300 shares of common stock only, with no
shares of any class, entitled to vote as a class, authorized or outstanding.
4. The number of shared voted for the amendment was 193,465, and the number
of shares voted against the amendment was -0-. There are no shares of any class
entitled to vote as a class, all stock authorized and outstanding being common
stock.
5. The amendment does not provide for an exchange, reclassification or
cancellation of issued shares.
6. The amendment does not effect a change in the stated capital of the
corporation.
7. The amendment herein effected does not give rise to dissenter's rights
to payment for the reason that it in no way affects the currently outstanding
issued stock.
<PAGE>
IN TESTIMONY WHEREOF, THIS statement is signed by the President and
Secretary this 24th day of March, 1966.
/s/ J. Smith Young
----------------------
President
/s/ William A. Sprager
- ----------------------
Secretary
STATE OF NORTH CAROLINA
COUNTY OF DAVIDSON
J. Smith Young, being the president, and William A. Sparger, being the
secretary of the above-named corporation, each being duly sworn, deposes and
says that the facts stated in the foregoing "Articles of Amendment" are true and
correct.
/s/ J. Smith Young
-----------------------
/s/ William A. Sprager
-----------------------
Sworn to and subscribed before me, this the
24th day of March, 1966.
/s/ Marguerite Ehlein
- -----------------------
Notary Public
My Commission Expires October 17, 1967
<PAGE>
NORTH CAROLINA
ARTICLES OF MERGER
OF
HENRY LINK CORPORATION, LINK-TAYLOR CORPORATION,
YOUNG-HINKLE CORPORATION AND LEXINGTON FURNITURE
INDUSTRIES, INC.
INTO
DIXIE FURNITURE COMPANY, INCORPORATED
* * * * *
Pursuant to the provisions of Section 55-106 of the North Carolina Business
Act, the undersigned corporations adopt the following Articles of Merger for the
purpose of merging them into one of such corporations:
FIRST: The names of the corporations are:
Name of Corporation State
------------------- -----
Henry Link Corporation North Carolina
Link-Taylor Corporation North Carolina
Young-Hinkle Corporation North Carolina
Lexington Furniture Industries, Inc. North Carolina
Dixie Furniture Company, Incorporated North Carolina
SECOND: The name of the surviving corporation is Dixie Furniture Company,
Incorporated.
THIRD: The Plan of Merger, attached as Attachment A, was duly adopted by
the board of directors and thereafter approved by the shareholders of each of
the corporations in the manner prescribed by the North Carolina Business
Corporation Act.
FOURTH: As to each of the undersigned corporations, the number of shares
outstanding, and the designation and number of outstanding shares of each class
entitled to vote as a class on such plan, are as follows:
Name of Corporation Number of Shares Outstanding
- ------------------- ----------------------------
Henry Link Corporation 1,000
Link-Taylor Corporation 1,000
Young-Hinkle Corporation 1,000
Lexington Furniture Industries, Inc. 1,000
Dixie Furniture Company, Incorporated 1,000
<PAGE>
STATE OF MICHIGAN
COUNTY OF WAYNE
David A. Doran, being the Vice President, and Richard G. Mosteller, being
the Assistant Secretary of each of the above named corporations each being duly
sworn, deposes and says that the facts stated in the foregoing "Articles of
Merger" are true and correct.
/s/ David A. Doran
------------------------
David A. Doran
/s/ Richard G. Mosteller
------------------------
Richard G, Mosteller
Sworn to and subscribed before me this 22nd day of December, 1989.
/s/ Suzanne Mary Baker
------------------------
Notary Public
SUZANNE MARY BAKER
Notary Public, Monroe County, MI
My Commission Expires Aug. 17, 1992
Acting in Wayne County, MI
<PAGE>
PLAN OF MERGER
PLAN OF MERGER dated as of December 22, 1989 between Dixie Furniture
Company, Incorporated, a North Carolina corporation (the "Surviving
Corporation"), and Henry Link Corporation, Link-Taylor Corporation, Young-Hinkle
Corporation, and Lexington Furniture Industries, Inc. (the "Merging
Corporations") (with the Surviving Corporation and the Merging Corporations
collectively referred to herein as the "Constituent Corporations").
A. The Constituent Corporations in consideration of the mutual agreements
of each corporation as set forth hereinafter, deem it advisable and generally
for the welfare of said corporations, that the Merging Corporations merge with
and into the Surviving Corporation under and pursuant to the terms and
conditions set forth in this Agreement.
B. The terms and conditions of the Merger, the mode of carrying the same
into effect, the manner of dealing with the shares of the Constituent
Corporations outstanding immediately prior to the effective time of the Merger,
and other pertinent provisions of the Merger, are hereinafter set forth.
ARTICLE I
In accordance with the provisions of the laws of the State of North
Carolina, the Merging Corporations shall be merged with and into the Surviving
Corporation.
ARTICLE II
The Merger shall become effective upon the filing of the Articles and Plan
of Merger with the Secretary of State of North Carolina, in accordance with the
North Carolina Business Corporation Act, (the"Act"). The date when the Merger
becomes effective shall be the "Effective Date" of the Merger referred to in the
Articles of Merger.
ARTICLE III
The surviving Corporation has issued and outstanding 1,000 shares of Common
Stock, par value $1 per share, and the Merging Corporations each have issued and
outstanding 1000 shares of Common Stock, par value $1 per share. All of such
shares are entitled to vote on the Merger.
<PAGE>
ARTICLE IV
The Articles of Incorporation of the Surviving Corporation are to be
amended by virtue of the merger as follows:
1. The name of the corporation is: Lexington Furniture Industries, Inc.
ARTICLE V
At the Effective Date the directors and officers of the Dixie Furniture
Company, Incorporated shall be the directors and officers of the Surviving
Corporation. Each director and officer shall hold office subject to the
applicable provisions of the Articles of Incorporation and bylaws of the
Surviving Corporation, until the next annual stockholders' meeting of the
Surviving Corporation and until their successors shall be elected or appointed
and shall duly qualify.
ARTICLE VI
At the Effective Date the separate existence of the Merging Corporations
shall cease and all the property, rights privileges, franchises, patents,
trademarks, licenses, registrations and other assets and property of every kind
and description of the Merging Corporations shall be transferred to, vested in
and devolve upon the Surviving Corporation without further act or deed and all
property, rights, and every other interest of the Surviving Corporation and the
Merging Corporations, shall be as effectively the property of the Surviving
Corporation as they were of the Surviving Corporation and the Merging
Corporations respectively. The Merging Corporations hereby agree, from time to
time, as and when requested by the Surviving Corporation or by its successors or
assigns, to execute and deliver or cause to be executed and delivered all such
deeds and instruments and to take or cause to be taken such further or other
action as the Surviving Corporation may deem necessary or desirable in order to
vest in and confirm to the Surviving Corporation title to and possession of any
property of each of the Merging Corporations acquired or to be acquired by
reason of or as a result of the merger herein provided for and otherwise to
carry out the intent and purposes provided and otherwise to carry out the intent
and purposes hereof and the proper officers and directors of the Merging
Corporations and the proper officers and directors of each of the Surviving
Corporation are fully authorized in the name of the Merging Corporations or
otherwise to take any and all such action.
All rights of creditors and all liens upon the property of either said
corporation shall be preserved unimpaired, and all debts, liabilities and duties
of each of the Merging Corporations shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if
-2-
<PAGE>
said debts, liabilities and duties had been incurred or contracted by it.
ARTICLE VII
From and after the Effective Date the outstanding shares of the Merging
Corporations shall be cancelled and no shares of the Surviving Corporation shall
be issued in exchange thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be executed by their respective officers and duly authorized on this 22nd day of
December, 1989.
YOUNG-HINKLE CORPORATION HENRY LINK CORPORATION
By /s/ David A. Doran By /s/ David A. Doran
------------------------ ------------------------
David A. Doran David A. Doran
Vice President Vice President
LEXINGTON FURNITURE LINK-TAYLOR CORPORATION
INDUSTRIES, INC.
By /s/ David A. Doran By /s/ David A. Doran
------------------------ ------------------------
David A. Doran David A. Doran
Vice President Vice President
DIXIE FURNITURE COMPANY,
INCORPORATED
By /s/ David A. Doran
------------------------
David A. Doran
Vice President
-3-
<PAGE>
FIFTH: As to each of the undersigned corporations, the total number of
shares voted for and against such Plan, are as follows:
Total Total
Name of Corporation Voted for Voted Against
- ------------------- --------- -------------
Henry Link Corporation 1,000 -0-
Link-Taylor Corporation 1,000 -0-
Young-Hinkle Corporation 1,000 -0-
Lexington Furniture Industries, Inc. 1,000 -0-
Dixie Furniture Company, Incorporated 1,000 -0-
SIXTH: The name which the surviving corporation is to have after the merger
is as follows:
Lexington Furniture Industries, Inc.
SEVENTH: The effective date of the certificate of merger shall be on the
1st day of January, 1990 at 12:01 A.M.
Dated December 22, 1989.
YOUNG-HINKLE CORPORATION HENRY LINK CORPORATION
By /s/ David A. Doran By /s/ David A. Doran
------------------------ ------------------------
David A. Doran David A. Doran
Its Vice President Its Vice President
And /s/ Richard G. Mosteller And /s/ Richard G. Mosteller
------------------------ ------------------------
Richard G. Mosteller Richard G. Mosteller
Assistant Secretary Assistant Secretary
LEXINGTON FURNITURE LINK-TAYLOR CORPORATION
INDUSTRIES, INC.
By /s/ David A. Doran By /s/ David A. Doran
------------------------ ------------------------
David A. Doran David A. Doran
Its Vice President Its Vice President
And /s/ Richard G. Mosteller And /s/ Richard G. Mosteller
------------------------ ------------------------
Richard G. Mosteller Richard G. Mosteller
Assistant Secretary Assistant Secretary
DIXIE FURNITURE COMPANY,
INCORPORATED
By /s/ David A. Doran
------------------------
David A. Doran
Vice President
And /s/ Richard G. Mosteller
------------------------
Richard G. Mosteller
Assistant Secretary
<PAGE>
State of North Carolina
Department of the Secretary of State
ARTICLES OF MERGER OR SHARE EXCHANGE
Pursuant to ss.55-11-05 of the General Statutes of North Carolina, the
undersigned corporation as the surviving corporation in a merger or the
acquiring corporation in a share exchange, as the case may be, hereby submits
the following Articles of Merger or Share Exchange.
1. The name of the surviving or acquiring corporation is Lexington Furniture
Industries, Inc., corporation organized under the laws of North Carolina;
the name of the merged or acquired corporation is Hickorycraft, Inc., a
corporation organized under the laws of North Carolina.
2. Attached is a copy of the Plan of Merger or Share Exchange that was duly
adopted in the manner prescribed by law by the board of directors of each
of the corporations participation in the merger of share exchange.
3. With respect to the surviving/acquiring corporation (check either a or b,
whichever is applicable):
a.____ Shareholder approval was not required for the merger or share
exchange.
b._X__ Shareholder approval was required for the merger or share exchange,
and the merger or share exchange was approve by the shareholders as
required by Chapter 55 of the North Carolina General Statutes.
4. With respect to the merged/acquired corporation (check either a or b,
whichever is applicable):
a.____ Shareholder approval was not required for the merger or share
exchange.
b._X__ Shareholder approval was required for the merger or share exchange,
and the merger or share exchange was approved by the shareholders as
required by Chapter 55 of the North Carolina General Statutes.
5. These articles will be effective upon filing, unless a delayed date and/or
time is specified: January 1, 1995
This the 1st day of December, 1994
Lexington Furniture Industries, Inc.
--------------------------------------
Name of Corporation
/s/ Gerald Bright
--------------------------------------
Signature
Gerald Bright Vice President/Secretary
--------------------------------------
Type or Print Name and Title
NOTES:
1. Filing fee is $50. This document and one exact or conformed copy of these
articles must be filed with the Secretary of State.
2. Certificate(s) of Merger must be filed pursuant to the requirements of NCGS
ss.47-18.1.
CORPORATIONS DIVISION 300 N. SALISBURY ST. RALEIGH, NC 27603-5909
(N. C. - 1188 - 4/13/92)
<PAGE>
PLAN OF MERGER
PLAN OF MERGER, dated as of December 1, 1994, between Lexington Furniture
Industries, Inc., a North Carolina corporation (the "Surviving Corporation") and
Hickorycraft, Inc., a North Carolina corporation (the "Merging Corporation")
(with the Surviving Corporation and the Merging Corporation collectively
referred to herein as the "Constituent Corporations").
A. The Constituent Corporations in consideration of the mutual agreements
of each corporation as set forth hereinafter, deem it advisable and generally
for the welfare of said corporations, that the Merging Corporation merge with
and into the Surviving Corporation under and pursuant to the terms and
conditions set forth herein (the "Merger").
B. The terms and conditions of the Merger, the mode of carrying the same
into effect, the manner of dealing with the shares of the Constituent
Corporations outstanding immediately prior to the effective time of the Merger,
and other pertinent provisions of the Merger, are hereinafter set forth.
ARTICLE I
In accordance with the provisions of the laws of the State of North
Carolina, the Merging Corporation shall be merged with and into the Surviving
Corporation.
ARTICLE II
The Merger shall become effective upon filing the Articles of Merger with
the Secretary of State of State of North Carolina on January 1, 1995 (the
"Effective Date.")
ARTICLE III
The Articles of Incorporation of the Surviving Corporation are not to be
amended by virtue of the Merger and the name of the Surviving Corporation shall
remain the same.
ARTICLE IV
At the Effective Date the directors and officers of the Surviving
Corporation shall be the directors and officers of the Surviving Corporation.
Each director and officer shall hold office, subject to the applicable
provisions of the Articles of Incorporation and Bylaws of the Surviving
Corporation, until the next annual stockholders meeting of the Surviving
Corporation and until their successors shall be elected or appointed and duly
qualified.
<PAGE>
ARTICLE V
On the Effective Date the issued shares of capital stock of the Merging
Corporation shall by virtue of the Merger forthwith cease to exist and be
canceled without payment of any consideration therefor.
ARTICLE VI
At the Effective Date the separate existence of the Merging Corporation
shall cease and all the property, rights, privileges, franchises, patents,
trademarks, licenses, registrations and other assets and property of every kind
and description of the Merging Corporation shall be transferred to, vested in
and devolve upon the Surviving Corporation without further act or deed and all
property, rights, and every other interest of the Surviving Corporation and the
Merging Corporation, shall be as effectively the property of the Surviving
Corporation as they were of the Surviving Corporation and the Merging
Corporation respectively. The Merging Corporation hereby agrees, from time to
time, as and when requested by the Surviving Corporation or by its successors or
assigns, to execute and deliver or cause to be executed and delivered all such
deeds and instruments and to take or cause to be taken such further or other
action as the Surviving Corporation may deem necessary or desirable in order to
vest in and confirm to the Surviving Corporation title to and possession of any
property of the Merging Corporation acquired or to be acquired by reason or as a
result of the merger herein provided for and otherwise to carry out the intent
and purposes hereof and the proper officers and directors of the Merging
Corporation and the proper officers and directors of the Surviving Corporation
are fully authorized in the name of the Merging Corporation are fully authorized
in the name of the Merging Corporation otherwise to take any and all such
action.
ARTICLE VII
All rights of creditors and all liens upon the property of either said
corporation shall be preserved unimpaired, and all debts, liabilities and duties
of the Merging Corporation shall thenceforth attach to the Surviving Corporation
and may be enforce against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
ARTICLE VIII
The officers of each of the corporations party to the merger are authorized
to do all acts and things necessary and proper to effect the merger.
LEXINGTON FURNITURE HICKORYCRAFT, INC.
By /s/ Gerald Bright By /s/ Gerald Bright
--------------------------- ---------------------------
Gerald Bright Gerald Bright
Vice President/Secretary Vice President/Secretary
<PAGE>
ARTICLES OF MERGER OF
MASCO ACQUISITION, INC. INTO
DIXIE FURNITURE COMPANY, INCORPORATED
The undersigned corporations hereby execute these Articles of Merger for
the purpose of merging into one of such corporations:
I.
The Following Plan of Merger was duly approved by the shareholders of each
of the undersigned corporations in the manner prescribed by law:
PLAN OF MERGER
PLAN OF MERGER, dated as of July 23, 1987 between Dixie Furniture
Company, Incorporated, a North Carolina corporation (the "Company"), and
Masco Acquisition, Inc., a North Carolina corporation ("Acquisition") and a
wholly-owned subsidiary of Masco Corporation, a Delaware
corporation ("Masco") (with the Company and Acquisition being collectively
referred to herein as the "Constituent Corporations").
A. The Company and Masco have entered into an Agreement and Plan of
Merger dated as of July 23, 1987 (the "Merger Agreement"), providing for
the merger (the "Merger") of Acquisition with and into the Company upon the
terms set forth in this Plan.
B. The terms and conditions of the Merger, the mode of carrying the
same into effect, the manner of converting the shares of Common Stock of
Acquisition outstanding immediately prior to the effective time of the
Merger and the share of Common Stock of the Company outstanding immediately
prior to the effective time of the Merger, are hereinafter set forth.
ARTICLE I
In accordance with the provisions of the laws of the State of North
Carolina, Acquisition shall be merged with and into the Company, which
shall be, and is herein sometimes referred to as, the "Surviving
Corporation." The name of the Company shall be the name of the Surviving
Corporation.
<PAGE>
ARTICLE II
The Merger shall become effective upon the filing of Articles of
Merger by the Secretary of State of the State of North Carolina, pursuant
to Section 55-4 of the North Carolina Business Corporation Act (the "ACT").
The time when the Merger becomes effective shall be the "Effective Date" of
the Merger referred to in this Plan.
ARTICLE III
The Company has issued and outstanding 410,600 shares of common stock,
par value $1 per share, and Acquisition has issued and outstanding 1,000
shares of common stock, par value $1 per share. All of such shares are
entitled to vote on the Merger.
From and after the Effective Date, the Charter of Acquisition, which
is set forth in Annex A attached hereto, shall be the Charter of the
Surviving Corporation, except that such Charter shall be amended to provide
that the name of the corporation shall be "Dixie Furniture Company,
Incorporated." From and after the Effective Date, the bylaws of Acquisition
as in effect on the Effective Date, shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
ARTICLE IV
At the Effective Date the Directors of Acquisition immediately prior
to the Effective Date shall be the Directors of the Surviving Corporation,
each of such Directors to hold office, subject to the applicable provisions
of the Charter and bylaws of the Surviving Corporation, until the next
annual stockholders' meeting of the Surviving Corporation and until their
successors shall be elected or appointed and shall duly qualify. From and
after the Effective Date, each officer of the Company immediately prior to
the Effective Date shall be an officer of the Surviving Corporation in the
same capacity or capacities, until his successor is elected and qualified
or until his earlier death, resignation or removal.
ARTICLE V
On the Effective Date the issued shares of capital stock of the
Company shall become converted into the right to receive a cash payment
from Masco or into shares of common stock of the Surviving Corporation or
be cancelled as follows:
-2-
<PAGE>
a. (i) Each Share (as defined in the Merger Agreement) then
outstanding immediately prior thereto (other than any Shares belonging to
Stockholders (as defined in the Merger Agreement or as set forth in
subsection (ii) below) who exercise their dissent and appraisal rights)
shall, by virtue of the Merger and without any action on the part of the
record holder thereof, be converted into the right to receive, (a) without
interest, $292.11 in cash from Masco payable upon surrender of the
certificate or certificates representing such Shares and (b) $39.83 to be
deposited by Masco in the Dixie Escrow Fund (as defined in the Merger
Agreement) on behalf of the record holder thereof in a non-transferable
account in order to secure and satisfy any claims under the Merger
Agreement and to pay all fees and expenses pursuant to Article VIII
thereof;
(ii) Each share of the Company's Common Stock, $1 par value, which
shall be held in the treasury of the Company immediately prior thereto,
shall be cancelled and extinguished; and
(iii) Masco will hold, without interest, $292.11 per Share and will
deposit $39.83 per Share in the Dixie Escrow Fund on behalf of each record
holder who exercises his or her dissent and appraisal rights. The amount
deposited in the Dixie Escrow Fund will be held in a non-transferable
account until the appraisal proceedings with respect to such stockholder
are finally concluded and then disposed of as directed by the court which
conducted such proceedings.
b. each outstanding share of common stock of Acquisition shall by
virtue of the Merger be converted into one share of common stock of the
Surviving Corporation; and
c. each outstanding share of common stock of the Company held by Masco
or the Company, or any direct or indirect subsidiary of Masco or the
Company, or held by the Company as treasury shares, shall by virtue of the
Merger forthwith cease to exist and be cancelled without payment of any
consideration therefor.
ARTICLE VI
The stock transfer books of the Company shall be closed for transfer
of shares of common stock on September 15, 1987 and no transfers of such
shares shall thereafter be made.
-3-
<PAGE>
ARTICLE VII
On the Effective Date, the Constituent Corporations shall be a single
corporation, which shall be the Surviving Corporation, the separate
existence of Acquisition shall cease, and the Surviving Corporation shall
have all the rights, privileges, immunities and powers and be subject to
all the duties and liabilities of a corporation organized under the Act.
The Surviving Corporation shall have all the rights, privileges,
immunities, and franchises, public or private, and all property, real,
personal, and mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, of each of the
Constituent Corporations. All interests of or belonging to or due to each
of the Constituent Corporations shall be considered to be transferred to
and vested in the Surviving Corporation without further act or deed. The
title to real estate or any interest in real estate vested in a Constituent
Corporation shall not revert or be in any way impaired because of the
Merger. The Surviving Corporation shall thenceforth be responsible and
liable for all liabilities and obligations of each of the Constituent
Corporations. A claim existing or action or proceeding pending by or
against a Constituent Corporation may be prosecuted as if the Merger had
not taken place. The rights of creditors and a lien upon the property of a
Constituent Corporation shall not be impaired by the Merger.
ARTICLE VIII
From time to time, as and when requested by the Surviving Corporation,
or by its successors or assigns, Acquisition shall execute and deliver or
cause to be executed and delivered all such further or other instruments,
and shall take or cause to be taken all such further or other actions, as
the Surviving Corporation, or its successors or assigns, may deem necessary
or desirable in order to vest in and confirm to the Surviving Corporation,
and its successors and assigns, title to and possession of all property,
rights, privileges, powers and franchises referred to in Article VII herein
and otherwise to carry out the intent and purpose of this Plan.
-4-
<PAGE>
II.
As each constituent corporation, the number of shares of a single
class of common stock outstanding and entitled to one vote per share (being
the only outstanding class of either Constituent Corporation) upon such
Plan of Merger and the number of such shares voted for and against such
Plan of Merger were as follows:
No. of Shares No of Shares No of Shares
Name of Outstanding and Voted For Voted Against
Corporation Entitled to Vote Plan of Merger Plan of Merger
- ----------- ---------------- -------------- --------------
Dixie Furniture
Company, Incorporated 410,600 401,751 1,329
Masco Acquisition,
Inc. 1,000 1,000 None
IN WITNESS WHEREOF, these Articles are signed by the President and
Secretary of each corporation this 24 of September, 1987.
DIXIE FURNITURE COMPANY, INCORPORATED
By /s/ J. Smith Young
------------------------------
President
ATTEST:
/s/ E. B. Hinkel
- --------------------------
Secretary
MASCO ACQUISITION, INC.
By: /s/ Wayne B. Lyon
------------------------------
President
ATTEST:
/s/ John R. Leekley
- --------------------------
Secretary
-5-
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF DAVIDSON
J. Smith Young and E. B. Hinkel, being respectively the President and
Secretary of Dixie Furniture Company, Incorporated, having been duly sworn, each
deposes and says: that he signed the foregoing Articles of Merger in a
representative capacity as such officer of Dixie Furniture Company,
Incorporated, that he was authorized so to sign and that the statements and made
in such Articles of Merger are true.
/s/ J. Smith Young
------------------------------
President
/s/ E. B. Hinkel
------------------------------
Secretary
SWORN TO and certified by the
undersigned, a Notary Public in
and for the State of North Carolina,
this 24th day of September, 1987
/s/ [Illegible]
- -------------------------------
Notary Public
My commission expires:
1-23-91
- --------------------
-6-
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF FORSYTH
Wayne B. Lyon and John R. Leekley, being respectively the President and
Secretary of Masco Acquisition, Inc., having been duly sworn, each deposes and
says: that he signed the foregoing Articles of Merger in a representative
capacity as such officer of Masco Acquisition, Inc., that he was authorized so
to sign and that the statements and made in such Articles of Merger are true.
/s/ Wayne B. Lyon
-----------------------------
President
/s/ John R. Leekley
-----------------------------
Secretary
SWORN TO and certified by the
undersigned, a Notary Public in
and for the State of North Carolina,
this 24th day of September, 1987
/s/ Darlene Reinhardt
- -------------------------------
Notary Public
My commission expires:
Jan. 25, 1988
-----------------------------------
OFFICIAL SEAL
(SEAL) NOTARY PUBLIC, NORTH CAROLINA
COUNTY OF FORSYTH
DARLENE REINHARDT
My Commission Expires Jan. 25, 1988
-----------------------------------
-7-
<PAGE>
ARTICLES OF INCORPORATION
OF
MASCO ACQUISITION, INC.
(NAME OF CORPORATION)
We, the undersigned natural persons of the age of twenty-one years or more,
do hereby associate ourselves into a business corporation under the laws of the
State of North Carolina, as contained in Chapter 33 of the General Statutes of
North Carolina, entitled "Business Corporation Act," and the several amendments
thereto, and to that end do hereby set forth:
1. The name of the Corporation is MASCO ACQUISITION, INC.
2. The period of duration of the corporation shall be perpetual (May be
perpetual or for a limited period)
3. The purposes for which the corporation is organized are:
That the purpose for which the corporation is organized is to engage
in any lawful act or activity.
4. The aggregate number of shares which the corporation shall have
authority to issue is 1,000, divided into one classes. The designation of each
class, number of shares of each class, series, if any, within each class, and
the par value, if any, of the shares of each class, or a statement that the
shares of any class are without par value, is as follows:
Number of Par Value
Class Series Shares per share
Common - 1,000 $1.00
The preferences, limitations and relative rights in respect of the shares
of each class are as follows: None
5. The minimum amount of consideration for its shares to be received by the
corporation before it shall commence business is $ illegible.
6. The address of the initial registered office of the corporation
(including county and city or town and street and number, if any) is 3101 Petty
Rd. c/o C T CORPORATION SYSTEM, DURHAM, DURHAM COUNTY, NORTH CAROLINA 27707 and
the name of the initial registered agent at such address is C T CORPORATION
SYSTEM
(N. C. - 12 - 1/22/70)
-1-
<PAGE>
7. The number of directors of the corporation may be fixed by the by-laws,
but illegible than three, except as provided in Sec. 55-25.
The number of directors constituting the initial board of directors shall
be three (3) and the names and addresses (including street and number, if any)
of the persons who are to serve as directors until the first meeting of
shareholders or until their successors are elected and qualified are:
NAMES ADDRESSES
Wayne B. Lyon ALL AT:
- ----------------------------------- ------------------------------------
Gerald Bright 21001 Van Born Road
- ----------------------------------- ------------------------------------
Richard G. Mosteller Taylor, MI 48180
- ----------------------------------- ------------------------------------
8. The names and addresses (including street and number, if any) of all of
the incorporators are:
NAMES ADDRESSES
Thomas E. Foster 21001 Van Born Rd.
- ----------------------------------- ------------------------------------
Taylor, MI 48180
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
9. In addition to the general powers granted corporations under the laws of
the State of North Carolina, the corporation shall have full power and authority
to
10.
IN TESTIMONY WHEREOF, we have hereunto set our hands, this the 10th day
of August, A.D. 1987.
/s/ Thomas E. Foster
-------------------------
Thomas E. Foster
-------------------------
-------------------------
*Insert any provision desired to be included in the Articles of Incorporation
such as: preemptive rights of shareholders, regulation of internal affairs of
the corporation, any matters required to be set forth in the by-laws, etc. See
chapter 55 of the General Statutes.
<PAGE>
STATE OF MICHIGAN
COUNTY OF WAYNE
THIS IS TO CERTIFY, that on the 10th day of August, A.D. 1987, before me, a
Notary Public personally appeared Thomas E. Foster ,
__________________________________ __________________________, and
_________________________________, who I am satisfied are the persons named in
and who executed the foregoing Articles of Incorporation, and I having first
made known to them the contents thereof, they did each acknowledge that they
signed and delivered the same as their voluntary act and deed for the uses and
purposes therein expressed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal, this the 10th day of August, A.D. 1987.
/s/ Cheryl D. Hammer
-----------------------------------
CHERYL D. HAMMER
Notary Public, Wayne County, MI
My Commission Expires July 16, 1990
Exhibit 3.16
CERTIFICATE OF INCORPORATION
OF
LIFESTYLE HOLDINGS LTD.
The undersigned incorporator, for the purpose of incorporating or
organizing a corporation under the General Corporation Law of the State of
Delaware, hereby certifies that:
FIRST: The name of the corporation (the "Corporation") is: LIFESTYLE
HOLDINGS LTD.
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware
19801. 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 of capital stock which the
Corporation shall have authority to issue is Three Thousand (3,000) shares with
a par value of $0.01 per share, all such shares will be one class and designated
"Common Stock".
FIFTH: The name and mailing address of the incorporator are as
follows:
Name Mailing Address
---- ---------------
Catherine I. Jourdan Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178.
SIXTH: Elections of directors need not be by ballot unless the
By-Laws of the Corporation shall so provide. Meetings of stockholders may be
held within or without the State of Delaware, as the By-Laws may provide. The
books of the Corporation may be kept (subject to any provision contained in the
General Corporation Law of the State of Delaware) 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.
SEVENTH: The Board of Directors is expressly authorized to adopt,
amend or repeal the By-Laws of the Corporation, subject to the reserved power of
the stockholders to amend and repeal any By-Laws adopted by the Board of
Directors.
<PAGE>
EIGHTH: No person who is or was a director of the Corporation shall
be personally liable to the Corporation for monetary damages for breach of
fiduciary duty as a director unless, and only to the extent that, such director
is liable (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or any
amendment thereto or successor provision thereto, or (iv) for any transaction
from which the director derived an improper personal benefit. No amendment to,
repeal or adoption of any provision of this Certificate of Incorporation
inconsistent with this article shall apply to or have any effect on the
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision.
NINTH: Each person who at any time is or shall have been a director,
officer, employee or agent of the Corporation and is threatened to be or is made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was 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, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any such action, suit or
proceeding to the fullest extent authorized under Section 145 of the General
Corporation Law of the State of Delaware. The foregoing right of indemnification
shall in no way be exclusive of any other rights of indemnification to which
such director, officer, employee or agent may be entitled under any By-Law,
agreement, vote of stockholders or disinterested directors, or otherwise.
IN WITNESS WHEREOF, I have signed this Certificate this 17th day of
June, 1996.
_______________________________
Catherine I. Jourdan
Sole Incorporator
-2-
Exhibit 3.17
ARTICLES OF INCORPORATION
OF
MAITLAND-SMITH U.S., INC.
I, the undersigned natural person of the age of eighteen years of more, do
hereby establish a business corporation under the laws of the State of North
Carolina, as contained in Chapter 55 of the General Statutes of North Carolina,
entitled "Business Corporation Act", and the several amendments thereto, and to
that end do hereby set forth:
ARTICLE I
The name of the Corporation is:
Maitland-Smith U.S., Inc.
ARTICLE II
The period of duration of the corporation shall be perpetual.
ARTICLE III
The purpose for which the corporation is organized is:
To engage in any lawful act or activity for which corporations may be
organized under the North Carolina Business Corporation Act.
ARTICLE IV
The aggregate number of shares which the corporation shall have authority
to issue is One Thousand (1,000) limited to a single class, to wit:
Full voting common stock having a par value of One Dollar ($1.00) per
share.
ARTICLE V
The minimum amount of consideration for its shares to be received by the
corporation before it shall commence business is One Thousand Dollars ($1,000).
<PAGE>
ARTICLE VI
The address of the initial registered office of the corporation in North
Carolina is:
3101 Petty Road
Durham, North Carolina 27707
County of Durham
and the name of the initial registered agent at such address is:
C T Corporation System
ARTICLE VII
The number of Directors of the corporation may be fixed by the Bylaws, but
shall not be less than three.
The number of directors constituting the intial Board of Directors shall
be three, and the names and addresses of the persons who are to serve as
Directors until the first meeting of the shareholders, or until their successors
are elected and qualified, are:
Name Address
---- -------
Wayne B. Lyon 21001 Van Born Road
Taylor, Michigan 48101
Gerald Bright 21001 Van Born Road
Taylor, Michigan 48101
Richard G. Mosteller 21001 Van Born Road
Taylor, Michigan 48101
ARTICLE VIII
The name and address of the incorporator is
Name Address
---- -------
Jennifer Wareham 21001 Van Born Road
Taylor, Michigan 48101
<PAGE>
IN TESTIMONY WHEREOF, I have hereunto set my hand this 1st day of August,
1988.
/s/ Jennifer Wareham
---------------------------------------
Jennifer Wareham
STATE OF MICHIGAN )
) ss.
COUNTY OF WAYNE )
This is to certify, that on the 1st day of August, 1988, before me, a
Notary Public, personally appeared Jennifer Wareham, who I am satisfied is the
person named in and who executed the foregoing Articles of Incorporation, and I
having first made known to her the contents thereof, she did acknowledge that
she signed and delivered the same as her voluntary act and deed for the uses and
purposes therein expressed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official
seal, this 1st day of August, 1988.
/s/ Cheryl D. Hammer
----------------------------------------
Cheryl D. Hammer
(Seal) Notary Public
Wayne County, Michigan
My Commission expires: 7/16/90
<PAGE>
State of North Carolina
Department of the Secretary of State
ARTICLES OF AMENDMENT
Pursuant to ss. 55-10-06 of the General Statutes of North Carolina, the
undersigned corporation hereby submits the following Articles of Amendment for
the purpose of amending its Articles of Incorporation:
1. The name of the corporation is: Maitland-Smith U.S., Inc.
2. The text of each amendment adopted is as follows: (State below or attach)
"The name of the Company is Maitland-Smith, Inc."
3. If an amendment provides for an exchange, reclassification or cancellation
of issued shares, provisions for implementing the amendment, if not
contained in the amendment itself, are as follows:
4. The date of adoption of each amendment was as follows:
November 21, 1994
5. (Check with a, b, c, or d, whichever is applicable)
a.___ The amendment(s) was (were) duly adopted by the incorporators prior
to the issuance of shares.
b.___ The amendment(s) was (were) duly adopted by the board of directors
prior to the issuance of shares.
c.___ The amendment(s) was (were) duly adopted by the board of directors
without shareholder approval as shareholder approval was not
required because (set forth a brief explanation of why shareholder
action was not required)
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
d. X The amendment(s) was (were) approved by shareholder action, and
--- such shareholder approval was obtained as required by Chapter 55 of
the North Carolina General Statutes
(N. C. - 1216 - 10/16/91)
CORPORATIONS DIVISION 300 N. SALISBURY ST. RALEIGH, NC 27603-5909
<PAGE>
ARTICLES OF AMENDMENT
Page 2
6. These articles will be effective upon filing, unless a delayed time
and date is specified:
This the 22nd day of November, 1994
MAITLAND-SMITH U.S., INC.
--------------------------------------------
Name of Corporation
/s/ Gerald Bright
--------------------------------------------
Signature
Gerald Bright, Secretary
--------------------------------------------
Type or Print Name and Title
NOTES:
1. Filing fee is $50. This document and one exact or conformed copy of these
articles must be filed with the Secretary of State.
CORPORATIONS DIVISION 300 N. SALISBURY ST. RALEIGH, NC 27603-5909
(N. C. - 1216)
Exhibit 3.18
ARTICLES OF INCORPORATION
OF M. LAMP COMPANY
I
The name of this corporation is M. LAMP COMPANY.
II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business, or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's
initial agent for service of process is:
R. James Shaffer
One Golden Shore
Long Beach, California 90802
IV
This corporation is authorized to issue only one class of shares of stock;
and the total number of shares which this corporation is authorized to issue is
1,000.
DATED: December 12, 1986.
/s/ R. James Shaffer
-----------------------------------
(signature)
R. James Shaffer
------------------------------------
(Typed name of incorporator)
I hereby declare that I am the person who executed the foregoing Articles
of Incorporation, which execution is my act and deed.
/s/ R. James Shaffer
-----------------------------------
(Signature of Incorporator)
<PAGE>
MARBRO LAMP COMPANY
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
R. James Shaffer certifies that:
1. He is the sole incorporator of M. Lamp Company, a California
corporation.
2. He hereby adopts the following amendment of the articles of
incorporation of this corporation:
Article I is amended to read as follows: "The name of this
corporation is Marbro Lamp Company."
3. No directors were named in the original articles of incorporation
and none have been elected.
4. No shares have been issued.
I further declare under the penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true and correct
of my own knowledge.
Date: December 24, 1986.
/s/ R. James Shaffer
--------------------------------------
R. James Shaffer, Incorporator
Exhibit 3.19
CERTIFICATE OF INCORPORATION
OF
RAMM, SON & CROCKER, INC.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
* * * * * * * *
WE, THE UNDERSIGNED, all the of the age of eighteen years or over, for the
purpose of forming a corporation pursuant to Section 402 of the Business
Corporation Law of New York, do certify:
FIRST: The name of the corporation is
RAMM, SON & CROCKER, INC.
SECOND: The purpose for which it is formed are:
To engage in any lawful act or activity for which corporations may be
organized under the Business Corporation Law provided that the corporation is
not formed to engage in any act or activity which requires the consent or
approval of any state official, department, board, agency or other body, without
such consent or approval first being obtained.
THIRD: The office of the corporation is to be located in the County of New
York, State of New York.
FOURTH: The aggregate number of shares which the corporation shall have
the authority to issue is One Thousand (1,000) common of the par value of One
Dollar ($1.00) each.
FIFTH: The Secretary of State is designated as the agent of the
corporation upon whom process against the corporation may be served. The post
office address to which the Secretary of State shall mail a copy of any process
against the corporation served upon his is: c/o C T Corporation System, 1633
Broadway, New York, New York 10019.
1
<PAGE>
SIXTH: The name and address of the registered agent which is to be the
agent of the corporation upon whom process against it may be served, is C T
Corporation System, 1633 Broadway, New York, New York 10019
IN WITNESS WHEREOF, we have made and signed this certificate this 5th day
of December, A.D. 1991 and we affirm the statements contained therein as true
under penalties of perjury.
/s/ Marylou Zimmerman
--------------------------------------
Marylou Zimmerman
21001 Van Born Road
Taylor, MI 48180
/s/ Margaret M. Feher
--------------------------------------
Margaret M. Feher
21001 Van Born Road
Taylor, MI 48180
2
Exhibit 3.20
CERTIFICATE OF INCORPORATION
OF
ROBERT ALLEN FABRICS, INC.
----------------------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter call the "corporation") is
ROBERT ALLEN FABRICS, INC.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 229 South State
Street, City of Dover, County of Kent; and the name of the registered agent of
the corporation in the State of Delaware at such address is the Prentice-Hall
Corporation System, Inc.
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 of stock which the corporation shall
have authroity to issue is One Thousand (1,000), all of which are wihout par
value. All such shares are of one class and are Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
J. A. Kent 229 South State Street, Dover, Delaware 19901
SIXTH: The corporation is to have perpetual existence.
<PAGE>
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of
directors need be by written ballot.
2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with
-2-
<PAGE>
the provisions of Section 190 of the General Corporation Law of the State
of Delaware, and, after the corporation has received any payment for any
of its stock, the power to adopt, amend, or repeal the By-Laws of the
corporation may be exercised by the Board of Directors of the corporation;
provided, however, that any provision for the classification of directors
of the corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial By-Law or in a By-Law adopted
by the stockholders entitled to vote of the corporation unless provisions
for such classification shall be set forth in this certificate of
incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) of section 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
NINTH: 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.
TENTH: The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provide for herein shall not be deemed exclusive of any other
rights to which those
-3-
<PAGE>
TENTH From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article TENTH.
Signed on August 11, 1986.
/s/ J. A. Kent
---------------------------------------------
J. A. Kent
Incorporator
-4-
Exhibit 3.21
CERTIFICATE OF INCORPORATION
OF
ROBERT ALLEN FABRICS OF N.Y., INC.
----------------------
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the "corporation")
is
ROBERT ALLEN FABRICS OF N.Y., INC.
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 229 South State
Street, City of Dover, County of Kent; and the name of the registered agent of
the corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
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 of stock which the corporation shall
have authority to issue is One Thousand (1,000), all of which are without par
value. All such shares are of one class and are Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
R. G. Dickerson 229 South State Street, Dover, Delaware
SIXTH: The corporation is to have perpetual existence.
<PAGE>
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of
directors need be by written ballot.
2. After the original or other By-Laws of the corporation have been
adopted, amended, or
-2-
<PAGE>
appealed, as the case may be, in accordance with the provisions of Section
109 of the General Corporation Law of the State of Delaware, and, after
the corporation has received any payment for any of its stock, the power
to adopt, amend, or repeal the By-Laws of the corporation may be exercised
by the Board of Directors of the corporation; provided, however, that any
provision for the classification of directors of the corporation for
staggered terms pursuant to the provisions of subsection (d) of Section
141 of the General Corporation Law of the State of Delaware shall be set
forth in an initial By-Law or in a By-Law adopted by the stockholders
entitled to vote of the corporation unless provisions for such
classification shall be set forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (c)(2) of section 242 of the General
Corporation Law of the State of Delaware shall otherwise require; provided
that no share of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase or decrease in
the number of authorized shares of said class.
NINTH: The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provide for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any 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
-3-
<PAGE>
capacity while holding such office, and shall continue as to a person who has
ceased to be director, officer, employee or agent and shall inure to the benefit
of the heirs, executors and administrators of such a person.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article TENTH.
Signed on September 28, 1983.
/s/ R. G. Dickerson
-----------------------------------------
R. G. Dickerson
Incorporator
-4-
Exhibit 3.22
Exhibit "A"
CERTIFICATE OF INCORPORATION
OF
SUNBURY TEXTILE MILLS, INC.
1. The name of the corporation is:
Sunbury Textile Mills, Inc.
2. The address of its registered office in the state of Delaware is 1209
Orange Street in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purpose to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
the authority to issue is One Thousand (1,000) and the par value of each of the
shares is One Dollar ($1.00), amounting in the aggregate to One Thousand Dollars
($1,000).
5. The corporation is to have perpetual existence.
6. The board of directors is authorized to make, alter, and repeal the
Bylaws of the corporation.
7. Election of directors need not be by written ballot unless the By-laws
of the corporation shall so provide.
8. The name and mailing address of the incorporators are:
H.K. Webb H.C. Broadt A.D. Atwell
Wilmington, DE Wilmington, DE Townsend, DE
<PAGE>
CERTIFICATE OF MERGER
OF
ACQUISITION SUBSIDIARY, INC.
WITH AND INTO
SUNBURY TEXTILE MILLS, INC.
Sunbury Textile Mills, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the "GCL"),
hereby certifies that:
FIRST: The name and state of incorporation of each of the constituent
corporations are as follows:
State of
Name Incorporation
---- -------------
Sunbury Textile Mills, Inc. Delaware
("Sunbury")
Acquisition Subsidiary, Inc. Delaware
("Subsidiary")
SECOND: An Agreement and Plan of Merger as of September 5, 1989 (the
"Agreement"), among Sunbury, Subsidiary and Masco Corporation, a Delaware
corporation and the owner of all of the outstanding capital stock of Subsidiary,
with respect to the merger of Subsidiary with and into Sunbury (the "Merger"),
has been approved, adopted, certified, executed and acknowledged by each of
Subsidiary and Sunbury in accordance with Section 251 of the GCL.
THIRD: The name of the surviving corporation of the Merger is "Sunbury
Textile Mills, Inc."
FOURTH: The certificate of incorporation of the surviving corporation
shall be amended as shown in Exhibit A attached hereto.
FIFTH: The executed Agreement is on file at the principal place of
business of the surviving corporation, Miller Street, Sunbury, Pennsylvania
17801.
SIXTH: A copy of the Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of Sunbury or
Subsidiary.
<PAGE>
This Certificate of Merger shall be effective as of the date on which this
Certificate of Merger is filed with the Secretary of State of the State of
Delaware, and the Merger shall be effective at such time.
SUNBURY TEXTILE MILLS, INC.
By: /s/ Donald L. Summers
______________________________
Donald L. Summers
Executive Vice President
ATTEST:
/s/ Thomas R. Smith
_______________________________
Thomas R. Smith
Secretary
Exhibit 3.23
CERTIFICATE OF INCORPORATION
OF
UNIVERSAL FURNITURE INDUSTRIES, INC.
* * * * *
1. The name of the corporation is
UNIVERSAL FURNITURE INDUSTRIES, INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act of activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is one thousand (1,000) and the par value of each of such
shares is one Cent ($0.01) amounting in the aggregate to Ten Dollars ($10.00).
<PAGE>
5. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
V. A. Brookens Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
J. L. Austin Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
M. C. Kinnamon Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
6. The corporation is to have perpetual existence.
7. 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.
8. Elections of directors need not be by written ballot unless the by-laws
of the corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. 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
-2-
<PAGE>
time to time by the board of directors or in the by-laws of the corporation.
9. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, hereby declaring and
certifying that this is our act and deed and the facts herein stated are true,
and accordingly have hereunto set our hands this 30th day of July, 1987.
/s/ V. A. Brookens
-----------------------------------------
V. A. Brookens
/s/ J. L. Austin
-----------------------------------------
J. L. Austin
/s/ M. C. Kinnamon
-----------------------------------------
M. C. Kinnamon
-3-
Exhibit 3.24
CERTIFICATE OF INCORPORATION
OF
ACQUISITION SUBSIDIARY, INC.
1. The name of the corporation is :
ACQUISITION SUBSIDIARY, INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is the
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporaion Law of Delaware.
4. The total number of shares of common stock which the corporation shall
have authority to issue is One Thousand (1,000) and the par value of each of
such shares is One Dollar ($1.00) amounting in the aggregate to One Thousand
Dollars ($1,000.00).
5. The board of directors is authorized to make, alter or repeal the
by-laws of the corporation. Election of directors need not be by written ballot.
6. The name and mailing address of the incorporator is:
J. L. Austin
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of
Delaware, do make this certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 14th day of April, 1986.
/s/ J. L. Austin
--------------------------
J. L. Austin
<PAGE>
CERTIFICATE OF MERGER
OF
UNIVERSAL FURNITURE LIMITED
WITH AND INTO
ACQUISITION SUBSIDIARY, INC.
Acquisition Subsidiary, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"GCL"), hereby certifies that:
FIRST: The name and state of incorporation of each of the constituent
corporations are as follows:
Jurisdiction of
Name Incorporation
---- -------------
Acquisition Subsidiary, Inc. Delaware
("Subsidiary")
Universal Furniture Limited British Virgin Islands
("Company")
SECOND: An Agreement and Plan of Merger dated as of March 12, 1989 (the
"Agreement"), among the Company, Subsidiary and Masco Corporation, a Delaware
corporation, with respect to the merger of the Company with and into Subsidiary
(the "Merger"), has been approved, adopted, certified, executed and acknowledged
by each of the Subsidiary and the Company in accordance with Section 252 of the
GCL.
THIRD: The name of the surviving corporation of the Merger is "Acquisition
Subsidiary, Inc." whose name shall be changed to "Universal Furniture Limited."
FOURTH: The certificate of incorporation of the Acquisition Subsidiary,
Inc. shall be the certificate of incorporation of the surviving corporation
except that Article 1 shall be amended as follows:
ARTICLE 1. The name of the corporation is:
UNIVERSAL FURNITURE LIMITED
FIFTH: The executed Agreement is on file at the principal place of
business of the surviving corporation, 21001 Van Born Road, Taylor, Michigan
48180.
SIXTH: A copy of this Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of Subsidiary or
the Company.
<PAGE>
This Certificate of Merger shall be effective as of the close of the date
on which this Certificate of Merger is filed with the Secretary of State of the
State of Delaware, and the Merger shall be effective at such time.
ACQUISITION SUBSIDIARY, INC.
By /s/ Wayne B. Lyon
-------------------------------
Wayne B. Lyon
President
ATTEST:
/s/ Gerald Bright
- -------------------------------
Gerald Bright
Secretary
Exhibit 3.25
ADOPTED MAY 21, 1996
BY-LAWS
OF
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
ARTICLE I - Stockholders
1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on such date, at such time and at such place within or
without the State of Delaware as may be designated by the Board of Directors,
for the purpose of electing Directors and for the transaction of such other
business as may be properly brought before the meeting.
2. Special Meetings. Except as otherwise provided in the Certificate of
Incorporation, a special meeting of the stockholders of the Corporation may be
called at any time by the Board of Directors and shall be called by the
Chairman, the President or the Secretary at the request in writing of
stockholders holding together at least twenty-five percent of the total number
of shares of the Corporation's Common Stock, par value $.01 per share (the
"Common Stock"). Any special meeting of the stockholders shall be held on such
date, at such time and at such place within or without the State of Delaware as
the Board of Directors or the officer calling the meeting may designate. At a
special meeting of the stockholders, no business shall be transacted and no
corporate action shall be taken other than that stated in the notice of the
meeting unless all of the stockholders entitled to notice are present in person
or by proxy and consent thereto, in which case any and all business may be
transacted at the meeting even though the meeting is held without notice.
3. Notice of Meetings. Except as otherwise provided in these By-Laws or
by law, a written notice of each meeting of the stockholders shall be given not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each holder of shares of Common Stock at his address as it appears on the
records of the Corporation. The notice shall state the place, date and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
4. Quorum. At any meeting of the stockholders, the holders of a
majority in number of the total outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a quorum
for purposes of such class vote unless the
<PAGE>
representation of a larger number of shares of such class shall be required by
law, by the Certificate of Incorporation or by these By-Laws.
5. Adjourned Meetings. Whether or not a quorum shall be present in
person or represented at any meeting of the stockholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting may adjourn from
time to time; provided, however, that if the holders of any class of stock of
the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the stockholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been transacted by them at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the adjourned meeting.
6. Organization. The Chairman or, in his absence, the President or any
Vice President shall call all regular meetings of the stockholders to order, and
shall act as Chairman of such meetings. In the absence of the Chairman, the
President and all Vice Presidents or in the case of any special meeting, the
holders of a majority in number of the votes of all voting securities of the
Corporation present in person or represented by proxy and entitled to vote at
such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all regular
meetings of the stockholders; but in the absence of the Secretary or in the case
of any special meeting, the Chairman may appoint any person to act as Secretary
of the meeting. It shall be the duty of the Secretary to prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting or, if not so specified, at the place where the
meeting is to be held, for the ten (10) days next preceding the meeting, to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, and shall be produced and kept at the time and place of
the meeting during the whole time thereof and subject to the inspection of any
stockholder who may be present.
7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, each stockholder shall be entitled to one (1) vote for
each share of the capital stock of the Corporation registered in the name of
such stockholder upon the books of the Corporation. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. When
directed by the presiding officer or upon the demand of any stockholder, the
vote upon any matter before a meeting of stockholders shall be by ballot. Except
as otherwise
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provided by law or by the Certificate of Incorporation, Directors shall be
elected by a plurality of the votes cast at a meeting of stockholders by the
stockholders entitled to vote in the election and, whenever any corporate
action, other than the election of Directors is to be taken, it shall be
authorized by a majority of the votes cast at a meeting of stockholders by the
stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.
8. Inspectors. When required by law or directed by the presiding
officer or upon the demand of any stockholder entitled to vote, but not
otherwise, the polls shall be opened and closed, the proxies and ballots shall
be received and taken in charge, and all questions touching the qualification of
voters, the validity of proxies and the acceptance or rejection of votes shall
be decided at any meeting of the stockholders by two (2) or more Inspectors who
may be appointed by the Board of Directors before the meeting, or if not so
appointed, shall be appointed by the presiding officer at the meeting. If any
person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner.
ARTICLE II - Board of Directors
1. Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of Directors,
the members of which need not be stockholders of the Corporation. The number of
Directors constituting the Board of Directors shall be fixed from time to time
by resolution passed by a majority of the Board of Directors. The Directors
shall, except as hereinafter otherwise provided for filling vacancies, be
elected at the annual meeting of stockholders, and shall hold office until their
respective successors are elected and qualified or until their earlier
resignation or removal.
2. Removal, Vacancies and Additional Directors. The stockholders may,
at any special meeting the notice of which shall state that it is called for
that purpose, remove, with or without cause, any Director and fill the vacancy;
provided that whenever any Director shall have been elected by the holders of
any class of stock of the Corporation voting separately as a class under the
provisions of the Certificate of Incorporation, such Director may be removed and
the vacancy filled only by the holders of that class of stock voting separately
as a class. Vacancies caused by any such removal and not filled by the
stockholders at the meeting at which such removal shall have been made, or any
vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
When one (1) or more Directors shall resign effective at a future date,
a majority of the Directors then in office, including those who have so
resigned, shall have power to fill such vacancy
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<PAGE>
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office as herein provided in connection with the filling of other vacancies.
3. Place of Meeting. The Board of Directors may hold its meetings in
such place or places in the State of Delaware or outside the state of Delaware
as the Board from time to time shall determine.
4. Regular Meetings. Regular meetings of the Board of Directors shall
be held at such times and places as the Board from time to time by resolution
shall determine. No notice shall be required for any regular meeting of the
Board of Directors; but a copy of every resolution fixing or changing the time
or place of regular meetings shall be mailed to every Director at least five (5)
days before the first meeting held in pursuance thereof.
5. Special Meetings. Special meetings of the Board of Directors shall
be held whenever called by direction of the Chairman and President or by any two
(2) of the Directors then in office.
Notice of the day, hour and place of holding of each special meeting
shall be given by mailing the same at least five (5) days before the meeting or
by causing the same to be transmitted by telegraph, cable or wireless at least
one (1) day before the meeting to each Director. Unless otherwise indicated in
the notice thereof, any and all business other than an amendment of these
By-Laws may be transacted at any special meeting, and an amendment of these
By-Laws may be acted upon if the notice of the meeting shall have stated that
the amendment of these By-Laws is one of the purposes of the meeting. At any
meeting at which every Director shall be present, even though without any
notice, any business may be transacted, including the amendment of these
By-Laws.
6. Quorum. Subject to the provisions of Section 2 of this Article II, a
majority of the members of the Board of Directors in office (but, unless the
Board shall consist solely of one (1) Director, in no case less than one-third
of the total number of Directors nor less than two (2) Directors) shall
constitute a quorum for the transaction of business and the vote of the majority
of the Directors present at any meeting of the Board of Directors at which a
quorum is present shall be the act of the Board of Directors. If at any meeting
of the Board there is less than a quorum present, a majority of those present
may adjourn the meeting from time to time.
7. Organization. The Chairman shall preside at all meetings of the
Board of Directors. In the absence of the Chairman, a Chairman shall be elected
from the Directors present. Unless otherwise determined by a majority of the
members of the Board of Directors present at a meeting at which a quorum is
present, the Secretary of the Corporation shall act as Secretary of all meetings
of the Directors; and in the absence of the Secretary, the Chairman may appoint
any person to act as Secretary of the meeting.
8. Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one (1) or more committees, each
committee to consist of one (1) or more of the Directors of the Corporation. The
Board may designate one (1) or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members
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<PAGE>
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided by resolution
passed by a majority of the whole Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and the affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending these By-Laws; and unless such resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
9. Conference Telephone Meetings. Unless otherwise restricted by the
Certificate of Incorporation or by these By-Laws, the members of the Board of
Directors or any committee designated by the Board, may participate in a meeting
of the Board or such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
10. Consent of Directors or Committee in Lieu of Meeting. Unless
otherwise restricted by the Certificate of Incorporation or by these By-Laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee, as the case may be.
ARTICLE III - Officers
1. Officers. The officers of the Corporation shall be a Chairman, a
President, one (1) or more Vice Presidents, a Secretary and a Treasurer, and
such additional officers, if any, as shall be elected by the Board of Directors
pursuant to the provisions of Section 7 of this Article III. The Chairman,
President, one (1) or more Vice Presidents, the Secretary and the Treasurer
shall be elected by the Board of Directors at its first meeting after each
annual meeting of the stockholders. The failure to hold such election shall not
of itself terminate the term of office of any officer. All officers shall hold
office at the pleasure of the Board of Directors. Any officer may resign at any
time upon written notice to the Corporation. Officers may, but need not, be
Directors. Any number of offices may be held by the same person.
All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the Board of Directors. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights. All agents and employees other than officers elected by the Board of
Directors shall also be subject to removal, with or without cause, at any time
by the officers appointing them.
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<PAGE>
Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the Corporation
as set forth in these By-Laws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
2. Powers and Duties of the Chairman of the Board. The Chairman of the
Board shall have the responsibility of guiding the Board of Directors in
effectively discharging its responsibilities, including, but not limited to,
providing for the execution of the Corporation's objectives; safeguarding and
furthering shareholders' interests; and appraising the adequacy of overall
results as reported by the President or the Chief Operating Officer. He shall
see that all orders and resolutions of the Board of Directors are carried into
effect and shall from time to time report to the Board of Directors on matters
within his knowledge which the interests of the Corporation may require to be
brought to the attention of the Board of Directors. The Chairman of the Board
shall preside at all meetings of the Board of Directors and the stockholders at
which he is present.
3. Powers and Duties of the President. The President shall be the Chief
Executive Officer of the Corporation. The President shall be responsible for the
management of the business, affairs and operations of the Corporation. He may
execute and deliver in the name of the Corporation, powers of attorney,
contracts, bonds, and other obligations and instruments. The President shall
also perform all duties incident to the office of President and such other
duties as may from time to time be assigned to him by the Board of Directors.
4. Powers and Duties of the Vice Presidents. Each Vice President shall
have all powers and shall perform all duties incident to the office of Vice
President and shall have such other powers and perform such other duties as may
from time to time be assigned to him by these By-Laws or by the Board of
Directors, the Chairman or the President. A Vice President may be designated by
the Board of Directors as the Chief Operating Officer of the Corporation.
5. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Board of Directors and the minutes of all
meetings of the stockholders in books provided for that purpose; he shall attend
to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors, the Chairman of the
Board or the President shall authorize and direct; he shall have charge of the
stock certificate books, transfer books and stock ledgers and such other books
and papers as the Board of Directors, the Chairman or the President shall
direct, all of which shall at all reasonable times be open to the examination of
any Director, upon application, at the office of the Corporation during business
hours; and whenever required by the Board of Directors, the Chairman or the
President shall render statements of such accounts; and he shall have all powers
and shall perform all duties incident to the office of Secretary and shall also
have such other powers and shall perform such other duties as may from time to
time be assigned to him by these By-Laws or by the Board of Directors, the
Chairman or the President.
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<PAGE>
6. Powers and Duties of the Treasurer. The Treasurer shall have custody
of, and when proper shall pay out, disburse or otherwise dispose of, all funds
and securities of the Corporation which may have come into his hands; he may
endorse on behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in such
bank or banks or depositary or depositaries as the Board of Directors may
designate; he shall sign all receipts and vouchers for payments made to the
Corporation; he shall enter or cause to be entered regularly in the books of the
Corporation kept for the purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of by him and whenever required by the
Board of Directors, the Chairman, the President or the Chief Operating Officer
shall render statements of such accounts; he shall, at all reasonable times,
exhibit his books and accounts to any Director of the Corporation upon
application at the office of the Corporation during business hours; and he shall
have all powers and he shall perform all duties incident to the office of
Treasurer and shall also have such other powers and shall perform such other
duties as may from time to time be assigned to him by these By-Laws or by the
Board of Directors, the Chairman, the President or the Chief Operating Officer.
The Board of Directors may designate the Treasurer to be the Chief Financial
Officer of the Corporation.
7. Additional Officers. The Board of Directors may from time to time
elect such other officers (who may but need not be Directors), including one or
more Controllers, Assistant Treasurers, Assistant Secretaries and Assistant
Controllers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chairman or the President.
The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.
8. Powers with respect to Ownership of Stock. Unless otherwise ordered
by the Board of Directors, the Chairman or the President shall have full power
and authority on behalf of the Corporation to attend and to act and to vote, or
in the name of the Corporation to execute proxies to vote, at any meeting of
stockholders of any corporation in which the Corporation may hold stock, or to
execute any consent in lieu of such a meeting, and at any such meeting or by any
such consent shall possess and may exercise, in person or by proxy, any and all
rights, powers and privileges incident to the ownership of such stock. The Board
of Directors may from time to time, by resolution, confer like powers upon any
other person or persons.
9. Compensation of Officers. The officers of the Corporation shall be
entitled to receive such compensation for their services as shall from time to
time be determined by the Board of Directors.
ARTICLE IV - Indemnification of Directors and Officers
1. Nature of Indemnity. 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, by reason of the fact that he is or was or has
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agreed to become a Director or officer of the Corporation, or is or was serving
or has agreed to serve at the request of the Corporation as a Director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity, and may indemnify any person who was or is a party or is
threatened to be made a party to such an action, suit or proceeding by reason of
the fact that he is or was or has agreed to become an employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as an 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 or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, 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; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) 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
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
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.
2. Successful Defense. To the extent that a Director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 1 of this
Article IV or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
3. Determination that Indemnification is Proper. Any indemnification of
a Director or officer of the Corporation under Section 1 of this Article IV
(unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the Director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 1. Any indemnification of an employee or agent of
the Corporation under Section 1 (unless ordered by a court) may be made by the
Corporation upon a determination that indemnification of the employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 1. Any such determination shall be made (1) 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 (2) 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 (3) by the
stockholders.
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4. Advance Payment of Expenses. Unless the Board of Directors otherwise
determines in a specific case, expenses incurred by a Director or officer 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 Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article IV.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's legal counsel to represent
such Director, officer, employee or agent in any action, suit or proceeding,
whether or not the Corporation is a party to such action, suit or proceeding.
5. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a contract right may not be
modified retroactively without the consent of such Director, officer, employee
or agent.
The indemnification provided by this Article IV shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any 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, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
Corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses,
including attorneys' fees, that may change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article IV.
6. Severability. If this Article IV or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article IV that shall not have been invalidated and to the
fullest extent permitted by applicable law.
7. Subrogation. In the event of payment of indemnification to a person
described in Section 1 of this Article IV, the Corporation shall be subrogated
to the extent of such payment to any right of recovery such person may have and
such person, as a condition of receiving indemnification from the Corporation,
shall execute all documents and do all things that the Corporation may deem
necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
- 9 -
<PAGE>
8. No Duplication of Payments. The Corporation shall not be liable
under this Article IV to make any payment in connection with any claim made
against a person described in Section 1 of this Article IV to the extent such
person has otherwise received payment (under any insurance policy, by-law or
otherwise) of the amounts otherwise payable as indemnity hereunder.
ARTICLE V - Stock-Seal-Fiscal Year
1. Certificates For Shares of Stock. The certificates for shares of
stock of the Corporation shall be in such form, not inconsistent with the
Certificate of Incorporation, as shall be approved by the Board of Directors.
All certificates shall be signed by the Chairman or the President or a Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as
the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
2. Lost, Stolen or Destroyed Certificates. Whenever a person owning a
certificate for shares of stock of the Corporation alleges that it has been
lost, stolen or destroyed, he shall file in the office of the Corporation an
affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and, if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate in replacement therefor. Thereupon the Corporation may cause to
be issued to such person a new certificate in replacement for the certificate
alleged to have been lost, stolen or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number, date
and the name of the registered owner of the lost, stolen or destroyed
certificate in lieu of which the new certificate is issued.
3. Transfer of Shares. Shares of stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof, in person or
by his attorney duly authorized in writing, upon surrender and cancellation of
certificates for the number of shares of stock to be transferred, except as
provided in Section 2 of this Article IV.
- 10 -
<PAGE>
4. Regulations. The Board of Directors shall have power and authority
to make such rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of stock of the
Corporation.
5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
as the case may be, the Board of Directors may fix, in advance, a record date,
which shall not be (i) more than sixty (60) nor less than ten (10) days before
the date of such meeting, or (ii) in the case of corporate action to be taken by
consent in writing without a meeting, prior to, or more than ten (10) days
after, the date upon which the resolution fixing the record date is adopted by
the Board of Directors, or (iii) more than sixty (60) days prior to any other
action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is delivered to the Corporation; and
the record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
6. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law. Subject to the
provisions of the Certificate of Incorporation, any dividends declared upon the
stock of the Corporation shall be payable on such date or dates as the Board of
Directors shall determine. If the date fixed for the payment of any dividend
shall in any year fall upon a legal holiday, then the dividend payable on such
date shall be paid on the next day not a legal holiday.
7. Corporate Seal. The Board of Directors shall provide a suitable
seal, containing the name of the Corporation, which seal shall be kept in the
custody of the Secretary. A duplicate of the seal may be kept and be used by any
officer of the Corporation designated by the Board of Directors, the Chairman or
the President.
8. Fiscal Year. The fiscal year of the Corporation shall be such fiscal
year as the Board of Directors from time to time by resolution shall determine.
ARTICLE VI - Miscellaneous Provisions
- 11 -
<PAGE>
1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the Corporation and/or other persons as the Board of Directors from
time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depository
by the Treasurer and/or such other officers or persons as the Board of Directors
from time to time may designate.
2. Loans. No loans and no renewals of any loans shall be contracted on
behalf of the Corporation except as authorized by the Board of Directors. When
authorized so to do, any officer or agent of the Corporation may effect loans
and advances for the Corporation from any bank, trust company or other
institution or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the Corporation. When authorized so to do, any
officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
3. Contracts. Except as otherwise provided in these By-Laws or by law
or as otherwise directed by the Board of Directors, the Chairman and the
President shall be authorized to execute and deliver, in the name and on behalf
of the Corporation, all agreements, bonds, contracts, deeds, mortgages, and
other instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and the seal of the Corporation, if appropriate, shall be
affixed thereto by any of such officers or the Secretary or an Assistant
Secretary. The Board of Directors or the Chairman or the President may authorize
any other officer, employee or agent to execute and deliver, in the name and on
behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, and
other instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and, if appropriate, to affix the seal of the Corporation
thereto. The grant of such authority by the Board or any such officer may be
general or confined to specific instances.
4. Waivers of Notice. Whenever any notice whatever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws to any
person or persons, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
5. Offices Outside of Delaware. Except as otherwise required by the
laws of the State of Delaware, the Corporation may have an office or offices and
keep its books, documents and papers outside of the State of Delaware at such
place or places as from time to time may be determined by the Board of Directors
or the Chairman.
ARTICLE VII - Amendments
- 12 -
<PAGE>
These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of the
members of the Board provided in the case of any special meeting at which all of
the members of the Board are not present, that the notice of such meeting shall
have stated that the amendment of these By-Laws was one of the purposes of the
meeting; but these By-Laws and any amendment thereof, may be altered, amended or
repealed or new By-Laws may be adopted by the holders of a majority of the total
outstanding stock of the Corporation entitled to vote at any annual meeting or
at any special meeting, provided, in the case of any special meeting, that
notice of such proposed alteration, amendment, repeal or adoption is included in
the notice of the meeting.
[End of By-Laws]
- 13 -
Exhibit 3.26
BYLAWS
OF
AMETEX FABRICS, INC.
ARTICLE 1
Stockholders
Section1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of Delaware
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the for noon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Delaware as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than three (3) days before the meeting; provided, that no notice of adjourned
meetings need be given. If mailed, the notice shall be directed to each
stockholder entitled to notice at his address as it appears on the stock books
of the corporation unless he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. Such further
notice shall be given as may be required by law. Meetings may be held without
notice if all stockholders entitled to vote thereat are present in person or by
proxy or if notice of the time, place and purpose of such meeting is waived by
telegram, radiogram, cablegram or other writing, either before or after the
holding thereof, by all stockholders not present and entitled to vote at such
meeting.
Section 4. Quorom. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as
<PAGE>
otherwise provided by law or by the Articles of Incorporation of the corporation
as from time to time amended, constitute a quorom at all meetings of the
stockholders; if there be no such quorom, the holders of a majority of such
shares so present or represented may adjourn the meeting from time to time to a
further date without further notice other than the announcement at such meeting,
and when a quorom shall be present upon such later day, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or Assisant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenge, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorom. The property,
business and affairs of the corporation shall be mananged by its Board of
Directors to consist of three (3) members, all of whom shall be of full age. The
directors shall be elected at the annual meeting of the stockholders in each
year and shall hold office until the next succeeding annual meeting of the
stockholders and thereafter until their successors shall be elected and
qualified in their stead. A majority of the directors shall constitute a quorom
for the transaction of business and the act of a majority of the directors
present at a meeting at which a quorom is present shall be the act of the Board
of Directors; provided, that if the directors shall severally and/or
collectively consent in writing to any action to be taken by the corporation,
such action shall be as valid corporate action as though it had been authorized
at a meeting of the directors. If at any meeting of the Board there shall be
less than a quorom present, a majority of those present may adjourn the meeting
from time to time until a quorom shall have been obtained.
-2-
<PAGE>
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors than in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting duly
called for that purpose and held prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Delaware as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram, or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors the management of the business of the corporation between the
meetings of the Board; but subject to the limitations set forth in the Articles
of Incorporation of the corporation, provided expressly however, that any
executive committee so designated shall have the power and authority to declare
dividends.
-3-
<PAGE>
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as may
be after the annual election of the directors in each year shall elect a
President of the corporation, a Secretary and a Treasurer; and may from time to
time select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices
except those of President and Secretary. No officer shall execute, acknowledege
or verify any instrument in more than one capacity. The Board of Directors may
also appoint such other officers and agents as they may deem necessary for the
transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vancancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Delaware. Shares of stock of the
-4-
<PAGE>
corporation may be transferred on the books of the corporation in the manner
prescribed by the laws of the State of Delaware by the holder thereof in person
or by his duly authorized attorney upon surrender for cancellation of
certificates for the same number of shares of the same class with an assignment
and power of attorney duly endorsed thereon or attached thereto, duly executed
and such proof of the authenticity of the signature as the corporation or its
agents may reasonably require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the same name of the
corporation by the President or a Vice President, and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the corporation and countersigned and registered in such
manner, if any, as the Board of Directors may by resolution prescribe; and to
this end the Board of Directors may, from time to time, appoint such Transfer
Agents and Registrars of stock of any class within or outside of the State of
Delaware as to it may seem expedient; provided, that where such certificate is
signed (1) by a Transfer Agent or an Assistant Transfer Agent, or (2) by a
Transfer Clerk acting on behalf of such corporation and a Registrar, the
signature of any such President, Vice President, Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer and/or the seal of the corporation may be a
facsimile. In case any officer or officers, who shall have signed, or whose
facsimile signature or signatures shall have been used on any certificate or
certificates, shall cease to be such officer or officers, whether because of
death, resignation, or otherwise, before such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons signed such certificate or certificates or whose facsimile signature or
signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared or made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of Delaware for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and holding in the aggregate at least two
percent (2%) of the outstanding capital stock of the corporation; and shall be
produced and kept at the time and place of election during the whole time
thereof, and shall be subject to the inspection of any registered stockholder or
his proxy who may be present. The original or duplicate stock ledger or a list
shall be the
-5-
<PAGE>
shall be the only evidence as to who are stockholders entitled to examine such
list or the books of such corporation, or to vote in person or by proxy at such
election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding sixty (60) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty
(60) days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
as a record date for the determination of the stockholders entitled to notice
of, and to vote at, at such meeting, or entitled to receive payment of any
dividend, or to ant such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, only such stockholder as shall be stockholders of record on the date so
fixed, shall be entitled to such notice of, and to vote, at such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights as the case may be, notwithstanding any transfer of any
stock on the books of the corporation or otherwise after such record date fixed
as aforesaid.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
th 1st day of January of each year and shall end on the 31st day of December
following.
-6-
<PAGE>
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
-7-
Exhibit 3.27
BYLAWS
OF
THE BERKLINE CORPORATION
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of Delaware
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the Chairman, President or Secretary or of the Board of
Directors at such place within or without the State of Delaware as may be stated
in the notice thereof, and at such time and for such purpose as may be stated in
the notice. It shall be the duty of the Chairman, President or the Secretary or
of the Board of Directors to call a special meeting of the stockholders whenever
requested in writing so to do by the holders of at least twenty-five percent
(25%) in amount of the stock, regardless of class, then outstanding and entitled
to vote at such meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the Chairman, President or a Vice
President or the Secretary or an Assistant Secretary shall be served either
personally or by mail upon each stockholder of record entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the meeting;
provided, that no notice of adjourned meetings need be given. If mailed, the
notice shall be directed to each stockholder entitled to notice at his address
as it appears on the stock books of the corporation unless he shall have filed
with the Secretary a written request that notices intended for him be mailed to
some other address, in which case it shall be mailed to the address designated
in such request. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote thereat
are present in person or by proxy or if notice of the time, place and purpose of
such meeting is waived by telegram, radiogram, cablegram or other writing,
either before or after the holding thereof, by all stockholders not present and
entitled to vote at such meeting.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person
<PAGE>
or by proxy, shall, except as otherwise provided by law or by the Articles of
Incorporation of the corporation as from time to time amended, constitute a
quorum at all meetings of the stockholders; if there be no such quorum, the
holders of a majority of such shares so present or represented may adjourn the
meeting from time to time to a further date without further notice other than
the announcement at such meeting, and when a quorum shall be present upon such
later day, any business may be transacted which might have been transacted at
the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the Chairman, or if he is not present by the President, or if
neither is present by a Chairman to be chosen at the meeting. The Secretary or
an Assistant Secretary of the corporation, or in their absence, a person chosen
at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors; provided, that if the
directors shall severally and/or collectively consent in writing to any action
to be taken by the corporation, such action shall be a valid corporate action as
though it had been authorized at a meeting of the directors. If at any meeting
of the Board there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time until a quorum shall have been
obtained.
Section 2. Vacancies. Whenever any vacancies shall have
2
<PAGE>
occurred in the Board of Directors by reason of death, resignation, or
otherwise, it shall be filled by the votes of a majority of the directors then
in office at any meeting and the person so elected shall be a director until his
successor is elected by the stockholders, who may make such election at the next
annual meeting of the stockholders, or at any special meeting duly called for
that purpose and held prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Delaware as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the Chairman, President or Vice President or of not less than a
majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly serviced on or sent, mailed or telegraphed to each director not less
than three (3) days before the meeting, except that a regular meeting of the
Board may be held without notice immediately after the annual meeting of
stockholders at the same place as such meeting was held, for the purpose of
electing or appointing officers for the ensuing year and the transaction of
other business, provided, that no notice of adjourned meetings need be given.
Meetings may be held at any time without notice if all the directors are present
or if those not present waive notice of the time, place and purpose of such
meeting by telegram, radiogram, cablegram or other writing, either before or
after the holding thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Articles of Incorporation of the corporation, provided
expressly however, that any executive committee so designated shall have the
power and authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a Chairman of the corporation, a President, Secretary and a Treasurer; and may
from time
3
<PAGE>
select a Chief Executive Officer, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices
No officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board of Directors may also appoint such other officers and agents
as they may deem necessary for the transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Hoard of Directors may, from time to time, prescribe in accordance with
the laws of the State of Delaware. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of Delaware by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the same
number of shares of the same class with an assignment and power of attorney duly
endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
4
<PAGE>
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the Chairman, President or a Vice President, and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be
sealed with the seal of the corporation and countersigned and registered in such
manner, if any, as the Board of Directors may by resolution prescribe; and to
this end the Board of Directors may, from time to time, appoint such Transfer
Agents and Registrars of stock of any class within or outside of the State of
Delaware as to it may seem expedient; provided, that where such certificate is
signed (1) by a Transfer Agent or an Assistant Transfer Agent, or (2) by a
Transfer Clerk acting on behalf of such corporation and a Registrar, the
signature of the Chairman, President, Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer and/or the seal of the corporation
may be a facsimile. In case any officer or officers, who shall have signed, or
whose facsimile signature or signatures shall have been used on any certificate
or certificates, shall cease to be such officer or officers, whether because of
death, resignation, or otherwise, before such certificate or certificates shall
have been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of Delaware for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and shall be produced and kept at the time and
place of election during the whole time thereof, and shall be subject to the
inspection of any registered stockholder or his proxy who may be present. The
original or duplicate stock ledger or a list shall be the only evidence as to
who are stockholders entitled to examine such list or the books of such
corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking
5
<PAGE>
before the corporation receives notice that such certificate has been acquired
by a purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing with a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other action,
the Board may fix, in advance, a date as the record date of any such
determination of stockholders. Such date shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors, Officers and Employees
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law, indemnify any person whom it shall have power to indemnify
under such Act from and against any and all of the expenses, liabilities or
other matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws my be adopted in lieu thereof, by the Board of Directors of
the corporation.
6
Exhibit 3.28
BYLAWS
OF
BLUE MOUNTAIN TRUCKING CORPORATION
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of
Mississippi as may from time to time be designated by the Board of Directors, on
the 15th day of December in each year (or if said day be a legal holiday, then
on the next succeeding business day), at 9:00 o'clock in the forenoon, for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Mississippi as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least ten percent (10%) in amount of the
stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days, nor more than sixty (60) days, before the meeting; provided,
that no notice of adjourned meetings need be given. If mailed, the notice shall
be directed to each stockholder entitled to notice at his address as it appears
on the stock books of the corporation unless he shall have filed with the
Secretary a written request that notices intended for him be mailed to some
other address, in which case it shall be mailed to the address designated in
such request. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote thereat
are present in person or by proxy or if notice of the time, place and purpose of
such meeting is waived by telegram, radiogram, cablegram or other writing,
either before or after the holding thereof, by all stockholders not present and
entitled to vote at such meeting.
<PAGE>
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice other than the announcement at such meeting, and when a
quorum shall be present upon such later day, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice president, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors;
-2-
<PAGE>
provided, that if the directors shall severally and/or collectively consent in
writing to any action to be taken by the corporation, such action shall be as
valid corporate action as though it had been authorized at a meeting of the
directors. If at any meeting of the Board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Mississippi as may from
time to time be determined by a majority of the Board. Regular meetings of the
Board shall be held at such time and place as shall from time to time be
determined by resolution of the Board of Directors. Special meetings may be held
at any time upon the call of the President or Vice President or of not less than
a majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate two or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set
-3-
<PAGE>
forth in the Articles of Incorporation of the corporation, provided expressly
however, that any executive committee so designated shall have the power and
authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, one or more Vice presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices.
No officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board of Directors may also appoint such other officers and agents
as they may deem necessary for the transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
-4-
<PAGE>
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Mississippi. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of Mississippi by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the same
number of shares of the same class with an assignment and power of attorney duly
endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Mississippi as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical
-5-
<PAGE>
order. Such list shall be open at the place where said election is to be held or
at the principal office of the corporation in the State of Mississippi for at
least ten (10) days before such election, for examination by any registered
stockholder entitled to vote at such election and holding in the aggregate at
least two percent (2%) of the outstanding capital stock of the corporation; and
shall be produced and kept at the time and place of election during the whole
time thereof, and shall be subject to the inspection of any registered
stockholder or his proxy who may be present. The original or duplicate stock
ledger or a list shall be the only evidence as to who are stockholders entitled
to examine such list or the books of such corporation, or to vote in person or
by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding seventy (70) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding
seventy (70) days preceding the date of any meeting of stockholders, or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, or entitled to receive payment of
any dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, only such stockholder as shall be stockholders of record on the date so
fixed, shall be entitled to such
-6-
<PAGE>
notice of, and to vote, at such meeting, or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights as the case
may be, notwithstanding any transfer of any stock on the books of the
corporation or otherwise after any such record date fixed as aforesaid.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Mississippi
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
-7-
Exhibit 3.29
BYLAWS
OF
CUSTOM TRUCK TIRES, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of
Mississippi as may from time to time be designated by the Board of Directors, on
the 15th day of December in each year (or if said day be a legal holiday, then
on the next succeeding business day), at 9:00 o'clock in the forenoon, for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Mississippi as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least ten percent (10%) in amount of the
stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days, nor more than sixty (60) days, before the meeting; provided,
that no notice of adjourned meetings need be given. If mailed, the notice shall
be directed to each stockholder entitled to notice at his address as it appears
on the stock books of the corporation unless he shall have filed with the
Secretary a written request that notices intended for him be mailed to some
other address, in which case it shall be mailed to the address designated in
such request. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote thereat
are present in person or by proxy or if notice of the time, place and purpose of
such meeting is waived by telegram, radiogram, cablegram or other writing,
either before or after the holding thereof, by all stockholders not present and
entitled to vote at such meeting.
<PAGE>
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice other than the announcement at such meeting, and when a
quorum shall be present upon such later day, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice president, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors;
-2-
<PAGE>
provided, that if the directors shall severally and/or collectively consent in
writing to any action to be taken by the corporation, such action shall be as
valid corporate action as though it had been authorized at a meeting of the
directors. If at any meeting of the Board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Mississippi as may from
time to time be determined by a majority of the Board. Regular meetings of the
Board shall be held at such time and place as shall from time to time be
determined by resolution of the Board of Directors. Special meetings may be held
at any time upon the call of the President or Vice President or of not less than
a majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate two or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set
-3-
<PAGE>
forth in the Articles of Incorporation of the corporation, provided expressly
however, that any executive committee so designated shall have the power and
authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, one or more Vice presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices.
No officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board of Directors may also appoint such other officers and agents
as they may deem necessary for the transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
-4-
<PAGE>
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Mississippi. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of Mississippi by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the same
number of shares of the same class with an assignment and power of attorney duly
endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Mississippi as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical
-5-
<PAGE>
order. Such list shall be open at the place where said election is to be held or
at the principal office of the corporation in the State of Mississippi for at
least ten (10) days before such election, for examination by any registered
stockholder entitled to vote at such election and holding in the aggregate at
least two percent (2%) of the outstanding capital stock of the corporation; and
shall be produced and kept at the time and place of election during the whole
time thereof, and shall be subject to the inspection of any registered
stockholder or his proxy who may be present. The original or duplicate stock
ledger or a list shall be the only evidence as to who are stockholders entitled
to examine such list or the books of such corporation, or to vote in person or
by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding seventy (70) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding
seventy (70) days preceding the date of any meeting of stockholders, or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, or entitled to receive payment of
any dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, only such stockholder as shall be stockholders of record on the date so
fixed, shall be entitled to such
-6-
<PAGE>
notice of, and to vote, at such meeting, or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights as the case
may be, notwithstanding any transfer of any stock on the books of the
corporation or otherwise after any such record date fixed as aforesaid.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Mississippi
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
-7-
Exhibit 3.30
BYLAWS
OF
D-H RETAIL SPACE, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of Delaware
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Delaware as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days before the meeting; provided, that no notice of adjourned
meetings need be given. If mailed, the notice shall be directed to each
stockholder entitled to notice at his address as it appears on the stock books
of the corporation unless he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. Such further
notice shall be given as may be required by law. Meetings may be held without
notice if all stockholders entitled to vote thereat are present in person or by
proxy or if notice of the time, place and purpose of such meeting is waived by
telegram, radiogram, cablegram or other writing, either before or after the
holding thereof, by all stockholders not present and entitled to vote at such
meeting.
<PAGE>
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice other than the announcement at such meeting, and when a
quorum shall be present upon such later day, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; provided, that if the directors
shall severally and/or collectively consent in writing to any action to be taken
by the corporation, such action shall be as valid corporate action as though it
had been authorized at a meeting of the directors. If at any meeting of the
Board there shall
<PAGE>
be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Delaware as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Articles of Incorporation of the corporation, provided
expressly however, that any executive committee so designated shall have the
power and authority to declare dividends.
<PAGE>
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices.
No officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board of Directors may also appoint such other officers and agents
as they may deem necessary for the transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Delaware. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of Delaware by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the
<PAGE>
same number of shares of the same class with an assignment and power of attorney
duly endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Delaware as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of Delaware for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and shall be produced and kept at the time and
place of election during the whole time thereof, and shall be subject to the
inspection of any registered stockholder or his proxy who may be present. The
original or duplicate stock ledger or a list shall be the only evidence as to
who are stockholders entitled to examine such list or the books of such
corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost,
<PAGE>
destroyed or wrongfully taken, the corporation shall issue a new certificate for
the same number of shares of the same class in lieu thereof, provided that the
owner of such original certificate notifies the corporation in writing of such
loss, destruction or wrongful taking before the corporation receives notice that
such certificate has been acquired by a purchaser for value and without notice,
files with the corporation a bond indemnifying the corporation, its officers and
directors, and its transfer agents and registrars, if any, to the satisfaction
of the Board of Directors, and satisfies any other reasonable requirements
imposed by the Board of Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing with a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other action,
the Board may fix, in advance, a date as the record date of any such
determination of stockholders. Such date shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
BYLAWS
OF
DREXEL HERITAGE ADVERTISING, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of Delaware
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Delaware as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days before the meeting; provided, that no notice of adjourned
meetings need be given. If mailed, the notice shall be directed to each
stockholder entitled to notice at his address as it appears on the stock books
of the corporation unless he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. Such further
notice shall be given as may be required by law. Meetings may be held without
notice if all stockholders entitled to vote thereat are present in person or by
proxy or if notice of the time, place and purpose of such meeting is waived by
telegram, radiogram, cablegram or other writing, either before or after the
holding thereof, by all stockholders not present and entitled to vote at such
meeting.
<PAGE>
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice other than the announcement at such meeting, and when a
quorum shall be present upon such later day, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; provided, that if the directors
shall severally and/or collectively consent in writing to any action to be taken
by the corporation, such action shall be as valid corporate action as though it
had been authorized at a meeting of the directors. If at any meeting of the
Board there shall
<PAGE>
be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Delaware as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Articles of Incorporation of the corporation, provided
expressly however, that any executive committee so designated shall have the
power and authority to declare dividends.
<PAGE>
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices.
No officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board of Directors may also appoint such other officers and agents
as they may deem necessary for the transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Delaware. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of Delaware by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the
<PAGE>
same number of shares of the same class with an assignment and power of attorney
duly endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Delaware as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of Delaware for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and shall be produced and kept at the time and
place of election during the whole time thereof, and shall be subject to the
inspection of any registered stockholder or his proxy who may be present. The
original or duplicate stock ledger or a list shall be the only evidence as to
who are stockholders entitled to examine such list or the books of such
corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost,
<PAGE>
destroyed or wrongfully taken, the corporation shall issue a new certificate for
the same number of shares of the same class in lieu thereof, provided that the
owner of such original certificate notifies the corporation in writing of such
loss, destruction or wrongful taking before the corporation receives notice that
such certificate has been acquired by a purchaser for value and without notice,
files with the corporation a bond indemnifying the corporation, its officers and
directors, and its transfer agents and registrars, if any, to the satisfaction
of the Board of Directors, and satisfies any other reasonable requirements
imposed by the Board of Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing with a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other action,
the Board may fix, in advance, a date as the record date of any such
determination of stockholders. Such date shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
BYLAWS
OF
DREXEL HERITAGE FURNISHINGS INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of New York
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of New York as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days nor more than fifty (50) days before the meeting (a copy of
such notice may be given by third class mail not fewer than twenty-four (24) nor
more than fifty (50) days before the date of the meeting); provided, that no
notice of adjourned meetings need be given. If mailed, the notice shall be
directed to each stockholder entitled to notice at his address as it appears on
the stock books of the corporation unless he shall have filed with the Secretary
a written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request. Such
further notice shall be given as may be required by law. Meetings may be held
without notice if all stockholders entitled to vote thereat are present in
person or by proxy or if notice of the time, place and purpose of such meeting
is waived by telegram, radiogram, cablegram or other writing, either before or
after the holding thereof, by all stockholders not present and entitled to vote
at such meeting.
<PAGE>
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Certificate of Incorporation of the corporation as
from time to time amended, constitute a quorum at all meetings of the
stockholders; if there be no such quorum, the holders of a majority of such
shares so present or represented may adjourn the meeting from time to time to a
further date without further notice other than the announcement at such meeting,
and when a quorum shall be present upon such later day, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; provided, that if the directors
shall severally and/or collectively consent in writing to any action to be taken
by the corporation, such action shall be as valid corporate action as though it
had been authorized at a meeting
<PAGE>
of the directors. If at any meeting of the Board there shall be less than a
quorum present, a majority of those present may adjourn the meeting from time to
time until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, except for the
removal of directors without cause, it shall be filled by the votes of a
majority of the directors then in office at any meeting and the person so
elected shall be a director until his successor is elected by the stockholders,
who may make such election at the next annual meeting of the stockholders, or at
any special meeting duly called for that purpose and held prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of New York as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate at least three (3)
of their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Certificate of Incorporation of the corporation, provided
expressly however, that any executive committee so designated shall not have the
power and authority to declare dividends.
<PAGE>
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices.
No officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board of Directors may also appoint such other officers and agents
as they may deem necessary for the transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of New York. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of New York by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the
<PAGE>
same number of shares of the same class with an assignment and power of attorney
duly endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of New York as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of, New York for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and shall be produced and kept at the time and
place of election during the whole time thereof, and shall be subject to the
inspection of any registered stockholder or his proxy who may be present. The
original or duplicate stock ledger or a list shall be the only evidence as to
who are stockholders entitled to examine such list or the books of such
corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost,
<PAGE>
destroyed or wrongfully taken, the corporation shall issue a new certificate for
the same number of shares of the same class in lieu thereof, provided that the
owner of such original certificate notifies the corporation in writing of such
loss, destruction or wrongful taking before the corporation receives notice that
such certificate has been acquired by a purchaser for value and without notice,
files with the corporation a bond indemnifying the corporation, its officers and
directors, and its transfer agents and registrars, if any, to the satisfaction
of the Board of Directors, and satisfies any other reasonable requirements
imposed by the Board of Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing with a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other action,
the Board may fix, in advance, a date as the record date of any such
determination of stockholders. Such date shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the New York
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the stockholders of the
corporation.
BYLAWS
OF
DREXEL HERITAGE HOME INSPIRATION, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of North
Carolina as may from time to time be designated by the Board of Directors, on
the 15th day of December in each year (or if said day be a legal holiday, then
on the next succeeding business day), at 9:00 o'clock in the forenoon, for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of North Carolina as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the meeting; provided, that
no notice of adjourned meetings need be given. If mailed, the notice shall be
directed to each stockholder entitled to notice at his address as it appears on
the stock books of the corporation unless he shall have filed with the Secretary
a written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request. Such
further notice shall be given as may be required by law. Meetings may be held
without notice if all stockholders entitled to vote thereat are present in
person or by proxy or if notice of the time, place and purpose of such meeting
is waived by telegram, radiogram, cablegram or other writing, either before or
after the holding thereof, by all stockholders not present and entitled to vote
at such meeting.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding
<PAGE>
regardless of class and entitled to vote thereat, present in person or by proxy,
shall, except as otherwise provided by law or by the Articles of Incorporation
of the corporation as from time to time amended, constitute a quorum at all
meetings of the stockholders; if there be no such quorum, the holders of a
majority of such shares so present or represented may adjourn the meeting from
time to time to a further date without further notice other than the
announcement at such meeting, and when a quorum shall be present upon such later
day, any business may be transacted which night have been transacted at the
meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; provided, that if the directors
shall severally and/or collectively consent in writing to any action to be taken
by the corporation, such action shall be a valid corporate action as though it
had been authorized at a meeting of the directors. If at any meeting of the
Board there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
2
<PAGE>
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of North Carolina as may
from time to time be determined by a majority of the Board. Regular meetings of
the Board shall be held at such time and place as shall from time to time be
determined by resolution of the Board of Directors. Special meetings may be held
at any time upon the call of the President or Vice President or of not less than
a majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly serviced on or sent, mailed or telegraphed to each director not less
than three (3) days before the meeting, except that a regular meeting of the
Board may be held without notice immediately after the annual meeting of
stockholders at the same place as such meeting was held, for the purpose of
electing or appointing officers for the ensuing year and the transaction of
other business, provided, that no notice of adjourned meetings need be given.
Meetings may be held at any time without notice if all the directors are present
or if those not present waive notice of the time, place and purpose of such
meeting by telegram, radiogram, cablegram or other writing, either before or
after the holding thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Articles of Incorporation of the corporation, provided
expressly however, that any executive committee so designated shall have the
power and authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a
3
<PAGE>
Chairman of the Board, Chief Executive Officer, one or more Vice Presidents,
Assistant Secretaries and Assistant Treasurers. The same person may hold any two
offices. No officer shall execute, acknowledge or verify any instrument in more
than one capacity. The Board of Directors may also appoint such other officers
and agents as they may deem necessary for the transaction of business of the
corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of North Carolina. Shares of stock of the corporation may
be transferred on the books of the corporation in the manner prescribed by the
laws of the State of North Carolina by the holder thereof in person or by his
duly authorized attorney upon surrender for cancellation of certificates for the
same number of shares of the same class with an assignment and power of attorney
duly endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
4
<PAGE>
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of North Carolina as to it
may seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of North Carolina for at least
ten (10) days before such election, for examination by any registered
stockholder entitled to vote at such election and shall be produced and kept at
the time and place of election during the whole time thereof, and shall be
subject to the inspection of any registered stockholder or his proxy who may be
present. The original or duplicate stock ledger or a list shall be the only
evidence as to who are stockholders entitled to examine such list or the books
of such corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has
5
<PAGE>
been acquired by a purchaser for value and without notice, files with the
corporation a bond indemnifying the corporation, its officers and directors, and
its transfer agents and registrars, if any, to the satisfaction of the Board of
Directors, and satisfies any other reasonable requirements imposed by the Board
of Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing with a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other action,
the Board may fix, in advance, a date as the record date of any such
determination of stockholders. Such date shall not be more than sixty nor less
than ten days before the date of such meeting, nor more than sixty days prior to
any other action.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors, Officers and Employees
The corporation shall, to the fullest extent permitted by the North
Carolina Business Corporation Act, indemnify any person whom it shall have power
to indemnify under such Act from and against any and all of the expenses,
liabilities or other matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws my be adopted in lieu thereof, by the Board of Directors of
the corporation.
6
B Y L A W S
OF
HENREDON FURNITURE INDUSTRIES INC.
ARTICLE I.
OFFICES:
Section 1. Registered Office: The registered office of the Corporation shall
be located at Henredon Road, Morganton, North Carolina but the
Board of Directors of the Corporation may change the location of
such registered office upon compliance with any provisions of the
law relating thereto.
Section 2. Other Offices: The Corporation may have offices at such other
places, either within or without the State of North Carolina, as
the Board of Directors may from time to time determine, or as the
affairs of the Corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS:
Section 1. Place of Meetings: All meetings of shareholders shall be held at
the registered office of the Corporation, or at such other place,
either within or without the State of North Carolina, as shall be
designated in the notice of the meeting or agreed on by a majority
of the shareholders entitled to vote thereat.
Section 2. Annual Meetings: The Annual Meeting of Shareholders shall be held
at 10:00 a.m. on the second Thursday in April of each year, if not
a legal holiday, then on the next day following not a legal
holiday, for the purpose of electing directors of the Corporation
and for the transaction of such other business as may be brought
before the meeting. [Amended 4/11/85]
Section 3. Substitute Annual Meeting. A day other than the day designated by
these bylaws for the annual
<PAGE>
meeting may be fixed by the Board of Directors for a substitute
annual meeting called in accordance with the provisions of Section
4 of this Article. A meeting so called shall be designated and
treated for all purposes as the annual meeting.
Section 4. Special Meetings: Special meetings of the shareholders may be
called at any time by the President, Secretary, Board of Directors
of the Corporation, or by any shareholder pursuant to the written
request of the holders of not less than one-tenth of all the
shares entitled to vote at the meeting.
Section 5. Notice of Meetings:
(a) Written or printed notice stating the time and place of
the meeting shall be delivered not less than ten nor more than
fifty days before the date thereof, either personally or by mail,
by or at the direction of the President, the Secretary, or other
person calling the meeting, to each shareholder of record entitled
to vote at such meeting.
(b) In the case of an annual or substitute annual meeting,
the notice shall state that such meeting is an annual meeting or
substitute annual meeting, but the notice need not specifically
state the business to be transacted unless specific notice thereof
is expressly required by law.
(c) In the case of a special meeting, the notice of meeting
shall specifically state the purpose or purposes for which the
meeting is called.
(d) In the case of a meeting which is adjourned for 30 days
or more, notice of the adjourned meeting shall be given as in the
case of an original meeting. In the case of a meeting adjourned
for less than 30 days, no notice of the adjourned meeting shall be
necessary except the announcement thereof at the meeting at which
the adjournment is taken.
Section 6. Voting Lists: All provisions of the law in effect from time to
time relating to the preparation and availability of voting lists
of
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<PAGE>
shareholders shall be complied with, and the Secretary of the
Corporation shall be the officer of the Corporation charged with
compliance with such provisions of the law.
Section 7. Quorum:
(a) The holders of a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at
meetings of shareholders. If there is no quorum at the opening of
a meeting of the shareholders or if there is a quorum but there is
some other reason for adjournment satisfactory to a majority of
the shares voting on the motion to adjourn, such meeting may be
adjourned from time to time by the vote of a majority of the
shares voting on the motion to adjourn; and, at any adjourned
meeting at which a quorum is present, any business may be
transacted at the time originally fixed for the meeting.
(b) The shareholders at a meeting at which a quorum is
present may continued to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
Section 8. Voting of Shares:
(a) Each outstanding share having voting rights shall be
entitled to one vote on each matter submitted to a vote at a
meeting of shareholders.
(b) The vote of a majority of the shares voted on any matter
at a meeting of shareholders at which a quorum is present shall be
the act of the shareholders on that matter, unless the vote of a
greater number is required by law or by the charter or bylaws of
this Corporation.
(c) Voting on all matters except the election of directors
shall be by voice vote or by a show of hands unless the holders of
one-tenth of the shares represented at the meeting shall, prior to
the voting on any matter, demand a ballot vote on that particular
matter. The election of directors shall be by ballot.
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<PAGE>
ARTICLE III.
DIRECTORS:
Section 1. Number, Term and Qualifications: The number of the Board of
Directors of the Corporation shall be nine. Each director shall
hold office until his death, resignation, retirement, removal,
disqualification, or the election and qualification of his
successor. Directors need not be residents of the State of North
Carolina or shareholders of the Corporation.
Section 2. Election of Directors: Except as provided in Section 6 of this
Article, the directors shall be elected at the annual meeting of
shareholders; and those persons who receive the highest number of
votes shall be deemed to have been elected.
Section 3. Cumulative Voting: Each shareholder entitled to vote at an
election of directors shall not have the right of cumulative
voting except to the extent and in the manner provided by law in
effect at the time of such election.
Section 4. General Powers, Executive Committee:
(a) The Board of Directors shall have the management and
control of the business of the Corporation.
(b) The Board of Directors shall have the power, in their
discretion, to appoint from their number an Executive Committee
consisting of not less than three members, which shall be vested
with the powers of the Board of Directors when it is not in
session, unless the Board of Directors shall restrict the powers
of such Committee, in which event the powers of said Committee
shall be those delegated to it by the Board of Directors. Members
of the Executive Committee shall serve at the pleasure of the
Board of Directors, and the Board of Directors shall have full
power and authority to create said Committee, to discontinue it,
to recreate it, and to reduce and increase the number of its
members at any time and from time to time. The Executive Committee
shall have the power to
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<PAGE>
elect its own Chairman and Secretary, and a majority of the
members of the Committee shall constitute a quorum. No notice of a
meeting need be given if a majority of the Committee is present,
but whenever notice is given, a notice of one day given by mail,
by telephone, or by telegraph shall be sufficient. Minutes of
meetings of the Executive Committee shall be kept in the same
manner as minutes of meetings of the Board of Directors
Section 5. Removal: Directors may be removed from office with or without
cause by a vote of shareholders holding a majority of the shares
entitled to vote at an election of directors. However, unless the
entire Board is removed, an individual director may not be removed
if the number of shares voting against the removal would be
sufficient to elect a director if such shares were voted
cumulatively at an annual election. If any directors are so
removed, new directors may be elected at the same meeting.
Section 6. Vacancies: A vacancy occurring in the Board of Directors may be
filled by a majority of the remaining directors, though less than
a quorum or by the sole remaining director if there shall be only
one. If a vacancy in the Board of Directors shall occur, and the
number of directors remaining shall not be less than three, the
vacancy need not be filled until either directors or the
shareholders shall decide to fill such vacancy. The provisions of
this Section are subject to all of the requirements of Section
55-27 of the Business Corporation Act.
Section 7. Compensation: The Board of Directors may compensate directors for
their services as such and may provide for the payment of all
expenses incurred by directors in attending regular and special
meetings of the board.
ARTICLE IV
MEETINGS OF DIRECTORS:
Section 1. Regular Meetings: A regular meeting of the Board of Directors
shall be held immediately
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<PAGE>
after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by
resolution, the time and place, either within or without the State
of North Carolina, for the holding of additional regular meetings.
Section 2. Special Meetings: Special meetings of the Board Directors may be
called by or at the request of the President or any two directors.
Such meetings may be held either within or without the State of
North Carolina.
Section 3. Notice of Meetings:
(a) Regular meetings of the Board of Directors may be held
without notice.
(b) The person or persons calling a special meeting of the
Board of Directors shall, at least two days before the meeting,
give notice thereof by any usual means of communication. Such
notice need not specify the purpose for with the meeting is
called.
(c) Attendance by a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends
a meeting for the express purpose of objecting to the transaction
of any business because the meeting is not lawfully called.
Section 4. Quorum: A majority of the number of directors fixed by these
bylaws shall constitute a quorum for the transaction of business
at any meeting of the Board of Directors.
Section 5. Manner of Action:
(a) Except as otherwise provided in this Section, the act of
the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
(b) The vote of a majority of the number of directors fixed
by these bylaws shall be required to adopt a resolution
constituting an Executive Committee. The vote of a majority of
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<PAGE>
the directors then holding office shall be required to adopt,
amend or repeal a bylaw. Vacancies in the Board of Directors may
be filled as provided in Article III, Section 5, of these bylaws.
Section 6. Action by Directors or Committees pursuant to Section 55-29 of the
North Carolina Business Corporation Act: Action taken by a
majority of the directors or by a majority of the members of a
committee without a meeting shall nevertheless be Board or
committee action if written consent to the action in question is
signed by all the directors or members of the committee, as the
case may be, and filed with the minutes of the proceedings of the
Board or committee, whether done before or after the action so
taken.
ARTICLE V
OFFICERS:
Section 1. Number: The officers of the Corporation shall consist of a
President, one or more Vice Presidents, a Secretary, a Treasurer,
and such Assistant Secretaries, Assistant Treasurers and other
officers as the Board of Directors may from time to time elect.
Any two or more offices may be held by the same person, except the
office of President and Secretary.
Section 2. Election and Term: The officers of the Corporation shall be
elected by the Board of Directors. Such elections may be hold at
any regular or special meeting of the Board. Each officer shall
hold office until his death, resignation, retirement, removal,
disqualification, or his successor is elected and qualifies.
Section 3. Removal: Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board with or without cause; but
such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
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<PAGE>
Section 4. President:
(a) The President shall be the principal executive officer of
the Corporation and, subject to the control of the Board of
Directors, shall supervise and control the management of the
Corporation in accordance with these bylaws.
(b) He shall, when present, preside at all meetings of
shareholders. He shall sign, with any other proper officer, any
deeds, mortgages, bonds, contracts, or other instruments which may
be lawfully executed on behalf of the Corporation, except where
required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be
delegated by the Board of Directors to some other officer or
agent; and, in general, he shall perform all duties as may be
prescribed by the Board of Directors from time to time.
Section 5. Vice Presidents: The Vice Presidents in the order of their
election, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the President, perform the
duties and exercise the powers of that office. In addition, they
shall perform such other duties and have such other powers as the
Board of Directors shall prescribe.
Section 6. Secretary: The Secretary shall keep accurate records of the acts
and proceedings of all meetings of shareholders and directors. He
shall give all notices required by law and by these bylaws. He
shall have general charge of the corporate books and records and
of the corporate seal, and he shall have authority to affix the
corporate seal to any lawfully executed instrument requiring it.
He shall sign such instruments as may require his signature and in
general shall perform all duties incident to the office of
Secretary and such other duties as may be assigned him from time
to time by the President or by the Board of Directors.
Section 7. Treasurer: The Treasurer shall have charge of all the moneys and
securities belonging to the Corporation. He shall deposit said
property with such bank or banks as the Board of Directors may
designate and in the name of the
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<PAGE>
Corporation. He shall keep a record of all receipts and
disbursements, and shall have charge of all the records of the
Corporation relating to its finances. He shall perform such other
duties as are incident to the office of Treasurer, and shall have
such other powers and duties as may be conferred upon him by the
Board of Directors.
Section 8. Assistant Secretaries and Assistant Treasurers: The Assistant
Secretaries and Assistant Treasurers shall in the absence or
disability of the Secretary or the Treasurer, respectively,
perform the duties and exercise the powers of those offices, and
they shall, in general, perform such other duties as shall be
assigned to them by the Secretary or the Treasurer, respectively,
or by the President or the Board of Directors.
Section 9. Other Officers: The duties and powers of officers other than those
named in this Article V. shall be prescribed by the Board of
Directors from time to time and recorded in the minutes of the
meetings of the Board.
Section 10. Bonds: The Board of Directors may by resolution require any or all
officers, agents and employees of the Corporation to give bond to
the Corporation, with sufficient sureties, conditioned on the
faithful performance of the duties of their respective offices of
positions, and to comply with such other conditions as may from
time to time be required by the Board of Directors.
ARTICLE VI.
CONTRACTS, LOANS AND DEPOSITS:
Section 1. Contracts: The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute
and deliver any instrument on behalf of the Corporation, and such
authority may be general or confined to specific instances
Section 2. Loans: No loans shall be contracted on behalf of the Corporation
and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors.
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<PAGE>
Such authority may be general or confined to specific instances
Section 3. Checks and Drafts: All checks, drafts or other orders for the
payment of money issued in the name of the Corporation shall be
signed by such officer of officers, agent or agents of the
Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits: All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the
Corporation in such depositories as the Board of Directors shall
direct.
ARTICLE VII.
CERTIFICATES FOR SHARES AND THEIR TRANSFER:
Section 1. Certificates for Shares: Each shareholder shall be entitled to a
certificate or certificates for the fully paid shares owned by
him, in such form as may be approved from time to time by the
Board of Directors. Each certificate shall be signed by the
President or a Vice president and by the Treasurer or the
Secretary or an Assistant Secretary or an Assistant Treasurer.
Each certificate shall have the seal of the Corporation affixed
thereto, which may be facsimile, engraved, or printed if the
certificate is countersigned by a transfer agent or registered by
a registrar. In case any officer who has signed or whose facsimile
or other signature has been place upon any certificate shall have
ceased to be such officer before such certificate is issued, such
certificate may be issued with the same effect as if he were such
officer at the date of its issue.
Section 2. Transfer of Shares: Transfer of shares shall be made on the stock
transfer books of the Corporation only upon surrender of the
certificates for the shares sought to be transferred by the record
holder thereof or by his duly authorized agent, transferee or
legal representative. All certificates surrendered for transfer
shall be
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<PAGE>
cancelled before new certificates for the transferred shares shall
be issued.
Section 3. Closing Transfer Books and Fixing Record Date: For the purpose of
determining shareholders entitled to notice of or vote at any
meeting of shareholders or any adjournment thereof, or entitled
to receive payment of any dividend or to make a determination of
shareholders for any other proper purpose, the Board of Directors
may provide that the stock transfer books may be closed for a
stated period fixed by the Board not to exceed fifty days. If the
stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such books shall be closed for at least
ten full days immediately preceding the date of such meeting. In
lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for the determination
of shareholders, such date to be not more than fifty days and, in
case of a meeting of shareholders not less than ten days
immediately preceding the date on which the particular action
requiring such determination of shareholders is to be taken. If
the stock transfer books are not closed and no record date is
fixed for the determination of shareholder entitled to notice of
or to vote at a meeting or to received payment of a dividend, the
date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be1 shall be the record date for such
determination of shareholders.
Section 4. Lost Certificates: The Board of Directors may authorize the
issuance of a new share certificate in place of a certificate
claimed to have been lost or destroyed upon such conditions as the
Board of Directors shall fix including, but not limited to, the
receipt of an affidavit of such loss or destruction and a bond
indemnifying the Corporation against loss, but the Board may, by
resolution, authorize the issuance of the new
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<PAGE>
certificate without requiring a bond. If any law applicable to
certificates claimed to have been lost or destroyed shall have
other or additional requirements for the issue of a new
certificate, the provisions of such law shall be followed.
ARTICLE VIII.
GENERAL PROVISIONS:
Section 1. Dividends: The Board of Directors may from time to time declare,
and the Corporation may pay, dividends on its outstanding shares
in the manner and upon the terms and conditions provided by law
and by its charter.
Section 2. Seal: The corporate seal of the Corporation shall be circular in
form and have inscribed thereon the name of the Corporation and
such other appropriate legend as may be approved from time to time
by the Board of Directors.
Section 3. Waiver of Notice: Whenever any notice is required to be given to
any shareholder or director under the provisions of any law or
under the provisions of the charter or bylaws of the Corporation,
a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated
therein, shall be equivalent to the giving of such notice.
Section 4. Fiscal Year. Unless otherwise ordered by the Board of Directors by
action recorded on the minutes, the fiscal year of the Corporation
shall end on the Saturday nearest to the last day of each calendar
year and the new fiscal year shall begin on the first day
following the last day of the preceding fiscal year. [10/28/83]
Section 5. Amendments: Except as otherwise provided by law or as otherwise
provided herein, these bylaws may be amendrepealed and
amended or new bylaws may be adopted by the affirmative vote of a
majority of the members of the Board of Directors then holding
office at any regular or special meeting of the Board of Directors
or by the affirmative vote of a majority of the shares issued and
outstanding having the right to vote.
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<PAGE>
Section 2. Annual Meetings: The annual meeting of shareholders shall be held
at 10:00 o'clock a.m. on the second Friday in July of each year,
if not a legal holiday, but if a legal holiday, then on the next
day following not a legal holiday, for the purpose of electing
directors of the Corporation and for the transaction of such other
business as may be properly brought before the meeting.
ARTICLE III, Section 1 of the bylaws amended by Directors June 9,
1966 to read as follows:
Section 1. Number, Term and Qualifications: The number of the Board of
Directors of the Corporation shall be seven. Each director shall
hold office until his death, resignation, retirement, removal,
disqualification, or the election and qualification of his
successor. Directors need not be residents of the State of North
Carolina or shareholders of the Corporation.
Adopted May 25, 1965
xv
B Y L A W S
OF
HENREDON TRANSPORTATION COMPANY
ARTICLE I.
OFFICES
Section 1. Registered Office: The registered office of the corporation shall
be at Henredon Road, Morganton, North Carolina 28655.
Section 2. Principal Office: The principal office of the corporation shall be
located at the same address as the registered office or such other
place as may be designated by the Board of Directors.
Section 3. Other Offices: The corporation may have offices at such other
places, either within or without the State of North Carolina, as
the Board of Directors may from time to time determine, or as the
affairs of the corporation may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings: All meetings of shareholders shall be held at
the registered office of the corporation, or at such other place
either within or without the State of North Carolina, as shall be
designated in the notice of the meeting or agreed on by a majority
of the shareholders entitled to vote thereat.
Section 2. Annual Meetings: The annual meeting of shareholders shall be held
at an hour to be fixed by the President on the first Tuesday in
the fourth month after the end of the fiscal year of this
corporation, if not a legal holiday, but if a legal holiday, then
on the next secular day following which is not a legal holiday,
for the purpose of electing directors of the corporation and for
the transaction of such other business as may be properly brought
before the meeting.
Section 3. Substitute Annual Meeting. If the annual meeting shall not be held
on the day designated by these bylaws, a substitute meeting may be
called in accordance with the provisions of Section 4 of this
Article. A meeting so called shall be designated and treated for
all purposes as the annual meeting.
<PAGE>
Section 4. Special Meetings: Special meetings of the shareholders may be
called at any time by the President, Secretary, Board of Directors
of the corporation, or by any shareholder pursuant to the written
request of the holders of not less than one-tenth of all the
shares entitled to vote at the meeting.
Section 5. Notice of Meetings: Written or printed notice stating the time and
place of the meeting shall be delivered not less than ten nor more
than fifty days before the date thereof, either personally or by
mail, by or at the direction of the President, the Secretary, or
other person calling the meeting, to each shareholder of record
entitled to vote at such meeting.
In the case of an annual or substitute annual meeting, the notice
of meeting need not specifically state the business to be
transacted thereat unless it is a matter, other than election of
Directors, on which the vote of shareholders is expressly required
by the provisions of the North Carolina Business Corporation Act.
In the case of a special meeting, the notice of meeting shall
specifically state the purpose or purposes for which the meeting
is called.
When a meeting is adjourned for thirty days or more, notice of the
adjourned meeting shall be given as in the case of an original
meeting. When a meeting is adjourned for less than thirty days in
any one adjournment, it is not necessary to give any notice of the
adjourned meeting other than by announcement at the meeting at
which the adjournment is taken.
Section 6. Voting Lists: At least ten days before each meeting of
shareholders the Secretary of the corporation shall prepare an
alphabetical list of the shareholders entitled to vote at such
meeting, with the address of and number of shares held by each,
which list shall be kept on file at the registered office of the
corporation for a period of then days prior to such meeting, and
shall be subject to inspection by any shareholder at any time
during the usual business hours. This list shall also be produced
and kept open at the time and place of the of meeting and shall be
subject to inspection by any shareholder during the whole time of
the meeting.
Section 7. Quorum: The holders of a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at
meetings of shareholders. If there is no quorum at the opening of
a meeting of shareholders, such meeting may be adjourned from time
to time by the vote of a majority of the shares voting on the
motion to adjourn; and, at any adjourned meeting at which a quorum
is present, any business may be transacted which might
2
<PAGE>
have been transacted at the original meeting. The shareholders at
a meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 8. Voting of Shares. Each outstanding share having voting rights
shall be entitled to one vote on each matter submitted to a vote
at a meeting of shareholders.
Except in the election of Directors the vote of a majority of the
shares voted on any matter at a meeting of shareholders at which a
quorum is a present shall be the act of the shareholders on that
matter, unless the vote of a greater number is required by law. In
the election of Directors those receiving the greatest number of
votes shall be deemed elected even though not receiving a
majority.
Voting on all matters except the election of Directors shall be by
voice vote or by a show of hands unless the holders of one-tenth
of the shares represented at the meeting shall, prior to the
voting on any matter, demand a ballot vote on that particular
matter.
Section 9. Informal Action by Shareholders: Any action which may be taken at
a meeting of the shareholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be
signed by all of the persons who would be entitled to vote upon
such action at a meeting, and filed with the Secretary of the
corporation to be kept in the Corporate Minute Book.
Section 10. Proxies: At all meetings of shareholders, shares may be voted
either in person or by one or more agents authorized by a written
proxy executed by the shareholder or his duly authorized
attorney-in-fact. A telegram, cablegram, wireless message or
photogram appearing to have been transmitted by a shareholder, or
a photographic, photostatic or equivalent reproduction of a
writing appointing one or more agents shall be deemed a written
proxy within the meaning of this section.
ARTICLE III.
DIRECTORS
Section 1. General Powers: The business and affairs of the Corporation shall
be managed by the Board of Directors.
Section 2. Number, Term and Qualifications: The number of Directors
constituting the whole Board shall be not more than seven nor less
than three except that if and so long as all of the shares of the
corporation are owned of record by either one
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<PAGE>
or two shareholders the number of directors may be fewer than
three but not fewer than the number of such shareholders. The
initial Board of Directors shall consist of three persons. The
authorized number of Directors, within the limits above specified,
shall be determined by the affirmative vote of a majority of the
whole Board given at a regular or special meeting of the Board of
Directors; provided that, if the number so determined is to be
increased, or decreased, notice of the proposed increase or
decrease shall be included in the notice of such meeting, or all
of the Directors at the time in office be present at such meeting,
or those not present at any time waive or have waived notice
thereof in writing; and provided, further, that the number of
Directors which shall constitute the whole Board shall not be less
than three nor shall it be reduced to a number less than the
number of Directors then in office unless such reduction shall
become effective only at and after the next ensuing meeting of
shareholders for the election of Directors. Each Director shall
hold office for a period of one year or until his death,
resignation, retirement, removal, disqualification, and until such
successor is elected and qualifies. Directors need not be
residents of the State of North Carolina or shareholders of the
corporation.
Section 3. Election of Directors: Except as provided in Section 5 of this
Article, the Directors shall be elected at the annual meeting of
shareholders. Election of Directors shall be by written ballot.
Section 4. Removal: Directors may be removed from office with or without
cause by a vote of shareholders holding a majority of the shares
entitled to vote at an election of Directors. However, unless the
entire Board is removed, an individual Director may not be removed
if the number of shares voting against the removal would be
sufficient to elect a Director if such shares were voted
cumulatively at an annual election. If any Directors are so
removed, new Directors may be elected at the same meeting.
Section 5. Vacancies: A vacancy occurring in the Board of Directors may be
filled by a majority of the remaining Directors though less than a
quorum, or by the sole remaining Director; but a vacancy created
by an increase in the authorized number of Directors shall be
filled by election at an annual meeting or at a special meeting of
shareholders called for that purpose. The shareholders may elect a
Director at any time to fill any vacancy not filled by the
Directors.
Section 6. Executive Committee. The Board of Directors shall have the power,
in their discretion, to appoint from their number an Executive
Committee which shall be vested with the
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powers of the Board of Directors when it is in session, unless the
Board of Directors shall restrict the powers of such Committee, in
which event the powers of said Committee shall be those delegated
to it by the Board of Directors. Members of the Executive
Committee shall serve as the pleasure of the Board of Directors,
and the Board of Directors shall have the full power and authority
to create said Committee, to discontinue it, to recreate it, and
to reduce and increase the number of its members at any time and
from time to time. The Executive Committee shall have the power to
elect its own Chairman and Secretary and a majority of the members
of the Committee shall constitute a quorum. No notice of a meeting
need be given ifa majority of the Committee is present, but
whenever notice is given, a notice of one day given mail, by
telephone, or by telegraph shall be sufficient. Minutes of the
meetings of the Executive Committee shall be kept in the same
manner as minutes of meetings of the Board of Directors.
Section 6. Compensation: The Board of Directors may compensate Directors for
their services as such and may provide for the payment of all
expenses incurred by the Directors in attending regular and
special meetings of the Board.
ARTICLE IV.
MEETINGS OF DIRECTORS
Section 1. Regular Meetings: A regular meeting of the Board of Directors
shall be held immediately after, and at the same place as, the
annual meeting of the shareholders. In addition, Board of
Directors may provide, by resolution, the time and place, either
within or without the State of North Carolina, for the holding of
additional regular meetings.
Section 2. Special Meetings: Special meetings of the Board of Directors may
be called by or at the request of the Chairman, President or any
two Directors. Such meetings may be held within or without the
State of North Carolina.
Section 3. Notice of Meetings: Regular meetings of the Board of Directors may
be held without notice.
The person or persons calling a special meeting of the Board of
Directors shall, at least two days before the meeting, give notice
thereof by any usual means of communication. Such notice need not
specify the purpose for which the meeting is called.
Attendance by a Director at a meeting shall not constitute a
waiver of notice of such meeting, except where a Director
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attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully
called.
Section 4. Quorum: A majority of the Directors fixed by these bylaws shall
constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 5. Manner of Acting: Except as otherwise provided in this section,
the act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of
Directors.
Section 6. Informal Action by Directors: Action taken by a majority of the
Directors without a meeting is nevertheless Board action if
written consent to the action in question is signed by all the
Directors and filed with the minutes of the proceedings of the
Board, whether done before or after the action so taken.
Section 7. Meeting by Telephone: Any one or more members of any such
committee may participate in a meeting of the committee by means
of a conference telephone or similar communications device which
allows all persons participating in the meeting to hear each other
and such participation in a meeting shall be deemed presence in
person at such meeting.
ARTICLE V.
OFFICERS
Section 1. Number: The officers of the corporation shall consist of a
President, a Secretary, a Treasurer, and such Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers as
the Board of Directors may from time to time elect. Any two or
more offices may be held by the same person, except the offices of
President and Secretary may not be held by the same person.
Section 2. Election and Term: The officers of the corporation shall be
selected by the Board of Directors. Such elections may be held at
any regular or special meeting of the Board. Each officer shall
hold office for a period of one year or until his death,
resignation, retirement, removal, disqualification, or his
successor is elected and qualifies.
Section 3. Removal: Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board with or without cause; but
such removal shall be without prejudice to the contract rights, if
any, of the person so removed.
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Section 4. President: The President, subject to the control of the Board of
Directors, shall supervise and control the management of the
corporation in accordance with these bylaws. He shall preside at
all meetings of shareholders and directors. He shall sign, with
any other proper officer, certificates for shares of the
corporation and any deeds, mortgages, bonds, contracts, or other
instruments which may be lawfully executed on behalf of the
corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be delegated by the Board of Directors to
some other officer or agent; and, in general, the shall perform
such other duties as may be prescribed by the Board of Directors
from time to time.
Section 5. Vice Presidents: The Vice Presidents in the order of their
election, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the President, perform the
duties and exercise the powers of that office. In addition, they
shall perform such other duties and have such other powers as the
Board of Directors shall prescribe.
Section 6. Secretary: The Secretary shall keep a correct record of all the
proceedings of the meetings of the shareholders and Directors. He
shall attend to the giving of notices, have custody of the
corporate seal, and affix it to all instruments required to be
executed under seal as authorized by the Board of Directors. He
shall perform such other duties as are incident to the office of
Secretary, and shall have such other powers and duties as may be
conferred upon him by the Board of Directors.
Section 7. Treasurer: The Treasurer shall have charge of all the moneys and
securities belonging to the corporation. He shall keep a record of
all receipts and disbursements, and shall have charge of all
records of the corporation relating to its finances. He shall
perform such other duties as are incident to the office of
Treasurer, and shall have such other powers and duties as may be
conferred upon him by the Board of Directors.
Section 8. Assistant Secretaries and Treasurers: The Assistant Secretaries
and Assistant Treasurers shall, in the absence or disability of
the Secretary or Treasurer, respectively, perform the duties and
exercise the powers of those offices, and they shall, in general,
perform such other duties as shall be assigned to them by the
Secretary of the Treasurer, respectively, or by the President or
the Board of Directors.
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Section 9. Bonds: The Board of Directors may be resolution require any or all
officers, agents and employees of the corporation to give bond to
the corporation, with sufficient sureties, conditioned on the
faithful performance of the duties of their respective offices or
positions, and to comply with such other conditions as may from
time to time be required by the Board of Directors.
ARTICLE VI.
INDEMNIFICATION
Section 1. Expenses and Liabilities: The corporation shall have the power to
indemnify any present or former Director, officer, employee, or
agent or any person who has served or is serving in such capacity
at the request of the corporation in any other corporation,
partnership, joint venture, trust or enterprise with respect to
any liability or litigation expenses incurred by any such person
to the extent and upon the terms and conditions provided by law.
Section 2. Advance Payment of Expenses: Expenses incurred by a Director,
officer, employee, or agent in defending a civil or criminal
action, suit, or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific
case upon receipt of an undertaking by or on behalf of the
Director, officer, employee, or agent to repay such amount unless
it shall ultimately be determined that he is entitled to be
indemnified by the corporation as provided by law.
Section 3. Insurance: The corporation shall have the power to purchase and
maintain insurance on the behalf of any person who is or was a
Director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation as a Director,
officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability.
ARTICLE VII.
CONTRACTS, CHECKS AND DEPOSITS
Section 1. Contracts: The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute
and deliver any instrument on behalf of the corporation and such
authority may be general or confined to specific instances.
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Section 2. Checks and Drafts: All checks, drafts or other orders for the
payment of money issued in the name of the corporation shall be
signed by such officer or officers, agent or agents, of the
corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 3. Deposits: All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the
corporation in such depositories as the Board of Directors shall
direct.
ARTICLE VIII.
CERTIFICATES FOR SHARES AND TRANSFER THEREOF
Section 1. Certificates Shares: Certificates representing shares of the
corporation shall be issued, in such form as the Board of
Directors shall determine, to every shareholder for the fully paid
shares owned by him. These certificates shall be signed by the
President or any Vice President, and the Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer. They shall be
consecutively numbered or otherwise identified; and the name and
address of the persons to whom they are issued, with the number of
shares and date of issue, shall be entered on the stock transfer
books of the corporation.
Section 2. Transfer of Shares: Transfer of shares shall be made on the stock
transfer books of the corporation only upon surrender of the
certificates for the shares sought to be transferred by the record
holder thereof or by his duly authorized agent, transferee or
legal representative. All certificates surrendered for transfer
shall be canceled before new certificates for the transferred
shares shall be issued.
Section 3. Closing Transfer Books and Fixing Record Date: For the purpose of
determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a
determination of shareholders for nay other proper purpose, the
Board of Directors may provide that the stock transfer books shall
be closed for a stated period but not to exceed, in any case,
fifty days. If the stock transfer books shall be closed for the
purpose of determining shareholders entitled to notice or to vote
at a meeting of shareholders, such books shall be closed for at
least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any
such determination of shareholders, such record date in
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any case to be not more than fifty days and, in case of a meeting
of shareholders, hot less than ten days immediately preceding the
date on which the particular action, requiring such determination
of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled
to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may
be, shall be the record date for such determination of
shareholders.
Section 4. Lost Certificates: The Board of Directors may authorize the
issuance of a new certificate in place of a certificate claimed to
have been lost or destroyed, upon receipt of an affidavit of such
fact from the person claiming the loss or destruction. When
authorizing such issuance of a new certificate, the Board may
require the claimant to give the corporation a bond in said sum as
it may direct to indemnify the corporation against loss from any
claim with respect to the certificate claimed to have been lost or
destroyed; or the Board may, by resolution reciting that the
circumstances justify such action, authorize the issuance of a new
certificate without requiring such a bond.
ARTICLE IX.
GENERAL PROVISIONS
Section 1. Dividends: The Board of Directors may from time to time declare,
and the corporation may pay, dividends on its outstanding shares
in the manner and upon the terms and conditions provided by law
and by its charter.
Section 2. Seal: The seal shall be in the form of a circle with the name of
the corporation and N. C. on the circumference and the word "SEAL"
in the center as shown by the impress of the corporate seal on the
margin of this section of the bylaws.
Section 3. Waiver of Notice: Whenever any notice is required to be given to
any shareholder or Director under the provisions of the North
Carolina Business Corporation Act or under the provisions of the
charter or bylaws of this corporation a waiver thereof in writing
signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be equivalent to
the giving of such notice.
Section 4. Fiscal Year: Unless otherwise ordered by the Board of Directors by
action recorded in the minutes, the fiscal year
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of the corporation shall be the 52 or 53 week year ending Saturday
closest to March 31.
Section 5. Amendments: Except as otherwise provided herein, these bylaws may
be amended or repealed and new bylaws may be adopted by the
affirmative vote of a majority of the Directors then holding
office at any regular or meeting of the Board of Directors.
The Board of Directors shall have no power to adopt a bylaw: (1)
requiring more than a majority of the voting shares for a quorum
at a meeting of shareholders or more than a majority of the votes
cast to constitute action of the shareholders, except where higher
percentages are required by law; or (2) providing for the
management of the corporation other than by the Board of Directors
or a committee thereof.
No bylaw adopted or amended by the shareholders shall be altered
or repealed by the Board of Directors.
No alteration, amendment or rescission of a bylaw shall be voted
upon unless notice thereof has been given in the notice of the
meeting or unless all of the Directors of the corporation execute
a written waiver of notice stating that action upon the bylaws is
to be taken at the meeting, and the original of such waiver shall
be recorded in the Minute Book.
Section 6. Reimbursement of Excess Compensation: Any payments made to an
officer of the corporation such as salary, commission, bonus,
interest or rent or entertainment expense incurred by him which
shall be disallowed in whole or in part as a deductible expense
for the Internal Revenue Service shall be reimbursed by such
officer to the corporation to the full extent of such
disallowance. It shall be the duty of the Board of Directors as a
Board to enforce payment of such amount disallowed. In lieu of
payment of the officer, subject to the determination of the Board
of Directors, proportionate amounts may be withheld from his
future compensation payments until the amount owed to the
corporation has been recovered.
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BYLAWS
OF
INTERIOR FABRIC DESIGN, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of New York
or may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of New York as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days nor more than fifty (50) days before the meeting; provided,
that no notice of adjourned meetings need be given. If mailed, the notice shall
be directed to each stockholder entitled to notice at his address as it appears
on the stock books of the corporation unless he shall have filed with the
Secretary a written request that notices intended for him be mailed to some
other address, in which case it shall be mailed to the address designated in
such request. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote there
at are present in person or by proxy or if notice of the time, place and purpose
of such meeting is waived by telegram, radiogram, cablegram or other writing,
either before or after the holding thereof, by all stockholders not present and
entitled to vote at such meeting.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as
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otherwise provided by law or by the Articles of Incorporation of the corporation
as from time to time amended, constitute a quorum at all meetings of the
stockholders; if there be no such quorum, the holders of a majority of such
shares so present or represented may adjourn the meeting from time to time to a
further date without further notice other than the announcement at such meeting,
and when a quorum shall be present upon such later day, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, all of whom shall be of full age. The
directors shall be elected at the annual meeting of the stockholders in each
year and shall hold office until the next succeeding annual meeting of the
stockholders and thereafter until their successors shall be elected and
qualified in their stead. A majority of the directors shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors; provided, that if the directors shall severally and/or
collectively consent in writing to any action to be taken by the corporation,
such action shall be as valid corporate action as though it had been authorized
at a meeting of the directors. If at any meeting of the Board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum shall have been obtained.
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Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the state of New York as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. If the number of members of the
Board of Directors is increased to consist of more than three members, it, may,
by resolution passed by a majority of the whole Board, designate three or more
of their number to constitute an executive or any other committee, which, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors the management of the business of the corporation between the
meetings of the Board; but subject to the limitations set forth in the Articles
of Incorporation of the corporation, provided expressly however, that any
executive committee so designated shall have the power and authority to declare
dividends.
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ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as may
be after the annual election of the directors in each year shall elect a
President of the corporation, a Secretary and a Treasurer; and may from time to
time select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices
except those of President and Secretary. No officer shall execute, acknowledge
or verify any instrument in more than one capacity. The Board of Directors may
also appoint such other officers and agents as they may deem necessary for the
transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of New York. Shares of stock of the
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corporation may be transferred on the books of the corporation in the manner
prescribed by the laws of the State of New York by the holder thereof in person
or by his duly authorized attorney upon surrender for cancellation of
certificates for the same number of shares of the same class with an assignment
and power of attorney duly endorsed thereon or attached thereto, duly executed
and such proof of the authenticity of the signature as the corporation or its
agents may reasonably require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the state of New York as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of New York for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and holding in the aggregate at least two
percent (2%) of the outstanding capital stock of the corporation; and shall be
produced and kept at the time and place of election during the whole time
thereof, and shall be subject to the inspection of any registered stockholder or
his proxy who may be present. The original or duplicate stock ledger or a list
shall be the
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only evidence as to who are stockholders entitled to examine such
list or the books of such corporation, or to vote in person or by proxy at such
election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not more than fifty (50) days nor
less than ten (10) days preceding the date of any meeting of stockholders, or
the date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, during which time no stock of the corporation shall be
transferred upon the books of the corporation; provided, that in lieu of closing
the stock transfer books as aforesaid, the Board of Directors may fix in advance
a date, not more than fifty (50) days nor less than ten (10) days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, as a record
date for the determination of the stockholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, and in such case, only such
stockholder as shall be stockholders of record on the date so fixed, shall be
entitled to such notice of, and to vote, at such meeting, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights as the case may be, notwithstanding any transfer of any stock on the
books of the corporation or otherwise after any such record date fixed as
aforesaid.
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ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the New York
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
-7-
BY - LAWS
OF
INTRO EUROPE, INC.
ARTICLE I.
OFFICES
Section 1. Principal Office. The principal office of the corporation shall
be located at 101 W. Green Drive, High Point, North Carolina 27261.
Section 2. Registered Office. The registered office of the corporation
required by law to be maintained in the State of North Carolina may be, but need
not be, identical with the principal office.
Section 3. Other Offices. The corporation may have offices at such other
places, either within or without the State of North Carolina, as the Board of
Directors may from time to time determine, or as the affairs of the Corporation
may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall be held at
the principal office of the corporation, or at such other place, either within
or without the State of North Carolina, as shall be designated in the notice of
the meeting or agreed upon by a majority of the shareholders entitled to vote
thereat.
Section 2. Annual Meetings. The annual meeting of shareholders shall be
held on the first Monday of June of each year for the purpose of electing
directors of the corporation and for the transaction of such other business as
may be properly brought before the meeting. If the day fixed for the annual
meeting shall be a legal holiday, such meeting shall be held on the next
succeeding business day.
Section 3. Substitute Annual Meeting. If the annual meeting shall not be
held on the day designated by these By-Laws, a substitute annual meeting may be
called in accordance with the provisions of Section 4 of this ARTICLE II. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.
Section 4. Special Meetings. Special meetings of the shareholders may be
called at any time by the President,
<PAGE>
Secretary or Board of Directors of the corporation, or by any shareholder
pursuant to the written request of the holders of not less than one-tenth of all
the shares entitled to vote at the meeting.
Section 5. Notice of Meetings. Written or printed notice stating the time
and place of the meeting shall be delivered not less than ten nor more than
fifty days before the date of any shareholders' meeting, either personally or by
mail, by or at the direction of the President, the Secretary, or other person
calling the meeting, to each shareholder of record entitled to vote at such
meeting; provided that such notice must be given not less than twenty days
before the date of any meeting at which a merger or consolidation is to be
considered. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his address
as it appears on the record of shareholders of the corporation with postage
thereon prepaid.
In the case of an annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
such a statement is expressly required by the provisions of the North Carolina
Business Corporation Act.
In the case of a special meeting, the notice of meeting shall specifically
state the purpose or purposes for which the meeting is called.
When a meeting is adjourned for thirty days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. When a
meeting is adjourned for less than thirty days in any one adjournment, it is not
necessary to give any notice of the adjourned meeting other than by announcement
at the meeting at which the adjournment is taken.
Section 6. Voting Lists. At least ten days before each meeting of
shareholders the Secretary of the corporation shall prepare an alphabetical list
of the shareholders entitled to vote at such meeting or any adjournment thereof
with the address of and number of shares held by each, which list shall be kept
on file at the registered office of the corporation for a period of ten days
prior to such meeting, and shall be subject to inspection by any shareholder at
any time during usual business hours. This list shall also be produced and kept
open at the time and place of the meeting and shall be subject to inspection by
any shareholder during the whole time of the meeting.
Section 7. Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders, except that at a substitute annual meeting of
shareholders the number of shares there represented either in person or by
proxy, even though less than a majority, shall
<PAGE>
constitute a quorum for the purpose of such meeting.
The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
In the absence of a quorum at the opening of a meeting of shareholders,
such meeting may be adjourned from time to time by a vote of the majority of the
shares voting on the motion to adjourn; and at any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the original meeting.
Section 8. Proxies. Shares may be voted either in person or by one or more
agents authorized by a written proxy executed by the shareholder or by his duly
authorized attorney in fact. A proxy is not valid after the expiration of eleven
months from the date of its execution, unless the person executing it specifies
therein the length of time for which it is to continue in force, or limits its
use to a particular meeting, but no proxy shall be valid after ten years from
the date of its execution.
Section 9. Voting of Shares. Subject to the provisions of Section 4 of
ARTICLE III, each outstanding share entitled to vote shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders.
Except in the election of directors as governed by the provisions of
Section 3 of ARTICLE III, the vote of a majority of the shares voted on any
matter at a meeting of shareholders at which a quorum was initially present
shall be the act of the shareholders on that matter, unless the vote of a
greater number is required by law or by the Charter or By-Laws of this
corporation.
Shares of its own stock owned by the corporation, directly or indirectly,
through a subsidiary corporation or otherwise, or held directly or indirectly in
a fiduciary capacity by it or by a subsidiary corporation, shall not be voted at
any meeting and shall not be counted in determining the total number of
outstanding shares at a given time.
Section 10. Informal Action by Shareholders. Any action which may be taken
at a meeting of the shareholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
persons who would be entitled to vote upon such action at a meeting, and filed
with the Secretary of the corporation to be kept in the corporate minute book.
ARTICLE III.
DIRECTORS
<PAGE>
Section 1. General Powers. The business and affairs of the corporation
shall be managed by the Board of Directors or by such Execute committee as the
Board may establish pursuant to these By-Laws.
Section 2. Number, Term and Qualifications. The number of directors of the
corporation shall be one (1). Each director shall hold office until his death,
resignation, retirement, removal, disqualification, or his successor shall have
been elected and qualified. Directors need not be residents of the State of
North Carolina or shareholders of the corporation.
Section 3. Election of Directors. Except as provided in Section 6 of this
ARTICLE III, the directors shall be elected at the annual meeting of
shareholders; and those persons who receive the highest number of votes shall be
deemed to have been elected. If any shareholder so demands, election of
directors shall be by ballot.
Section 4. Cumulative Voting. Every shareholder entitled to vote at an
election of directors shall have the right to vote the number of shares standing
of record in his name for as many persons as there are directors to be elected
and for whose election he has a right to vote, or to cumulate his vote by giving
one candidate as many votes as the number of such directors multiplied by the
number of his shares shall equal, or by distributing such votes on the same
principle among any number of such candidates. This right of cumulative voting
shall not be exercised unless some shareholder or proxy holder announces in open
meeting, before the voting for the directors starts, his intention so to vote
cumulatively and if such announcement is made, the chair shall declare that all
shares entitled to vote have the right to vote cumulatively and shall thereupon
grant a recess of not less than one nor more than four hours, as he shall
determine, or of such other period of time as is then unanimously agreed upon by
the shareholders entitled to vote who are present or represented at the meeting.
Section 5. Removal. Any director may be removed at any time with or without
cause by a vote of shareholders holding a majority of the shares entitled to
vote at an election of directors. However, unless the entire Board is removed,
an individual director may not be removed if the number of shares voting against
the removal would be sufficient to elect a director if such shares could be
voted cumulatively at an annual election. If any directors are so removed, new
directors may be elected at the same meeting.
Section 6. Vacancies. Any vacancy occurring in the Board of Directors may
be filled by a majority of the remaining directors, though less than a quorum,
or by the sole remaining director. A director elected to fill a vacancy shall be
elected
<PAGE>
for the unexpired term of his predecessor in office. Any directorship to be
filled by reason of an increase in the authorized number of directors shall be
filled only by election at an annual meeting or at a special meeting of
shareholders called for that purpose. The shareholders may elect a director at
any time to fill any vacancy not filled by the directors.
Section 7. Chairman of Board. There may be a Chairman of the Board of
Directors elected by the directors from their number at any meeting of the
Board. The Chairman shall preside at all meetings of the shareholders and of the
board of Directors and perform such other duties as may be directed by the
Board.
Section 8. Compensation. The Board of Directors may compensate directors
for their services as such and may provide for the payment of any or all
expenses incurred by directors in attending regular and special meetings of the
Board.
ARTICLE IV.
MEETINGS OF DIRECTORS
Section 1. Regular Meetings. A regular meeting of the Board of Directors
shall be held immediately after, and at the same place as, the annual meeting of
shareholders. In addition, the Board of Directors may provide, by resolution,
the time and place, either within or without the State of North Carolina, for
the holding of additional regular meetings.
Section 2. Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the President or any one director. Such
meetings may be held either within or without the State of North Carolina as
fixed by the person or persons calling any such meeting.
Section 3. Notice of Meetings. Regular meetings of the Board of Directors
may be held without notice.
The person or persons calling a special meeting of the Board of Directors
shall, at least two days before the meeting, give notice thereof by any usual
means of communication. Such notice need not specify the purpose for which the
meeting is called.
Section 4. Waiver of Notice. Any director may waive notice of any meeting.
Attendance by a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
Section 5. Quorum. A majority of the number of directors fixed by these
By-Laws shall constitute a quorum for the transaction of business at any meeting
of the Board of
<PAGE>
Directors.
Section 6. Manner of Acting. Except as otherwise provided in these By-Laws,
the act of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
Section 7. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his contrary vote is recorded or his dissent is otherwise entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the Secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
Section 8. Informal Action by Directors. Action taken by a majority of the
directors without a meeting is nevertheless Board action if written consent to
the action is signed by all the directors and filed with the minutes of the
proceedings of the Board, whether done before or after the action so taken.
ARTICLE V.
EXECUTIVE COMMITTEE
Section 1. Creation. The Board of Directors by resolution adopted by a
majority of the number of directors fixed by these By-Laws, may designate three
or more directors to constitute an Executive Committee, which Committee, to the
extent provided in such resolution, shall have and may exercise all of the
authority of the Board of Directors in the management of the corporation, except
that the Executive Committee shall not have any authority to alter or amend the
By-Laws.
Section 2. Vacancy. Any vacancy occurring in an Executive Committee shall
be filled by a majority of the number of directors fixed by these By-Laws at a
regular or special meeting of the Board of Directors.
Section 3. Removal. Any member of an Executive Committee may be removed at
any time with or without cause by a majority of the number of directors fixed by
these By-Laws.
Section 4. Minutes. The Executive Committee shall keep regular minutes of
its proceedings and report the same to the Board when required.
Section 5. Responsibility of Directors. The designation of an Executive
Committee and the delegation thereto
<PAGE>
of authority shall not operate to relieve the Board of Directors, or any member
thereof, of any responsibility or liability imposed upon it or him by law.
If action taken by an Executive Committee is not thereafter formally
considered by the Board, a director may dissent from such action by filing his
written objection with the Secretary with reasonable promptness after learning
of such action.
ARTICLE VI.
OFFICERS
Section 1. Officers of the Corporation. The officers of the corporation
shall consist of a President, a Secretary, a Treasurer, and such Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers as
the Board of Directors may from time to time elect. Any two or more offices may
beheld by the same person, except the offices of President and Secretary, but no
officer may act in more than one capacity where action of two or more officers
is required.
Section 2. Election and Term. The officers of the corporation shall be
elected by the Board of Directors. Such election may be held at any regular or
special meeting of the Board. Each officer shall hold office until his death,
resignation, retirement, removal, disqualification, or his successor is elected
and qualified.
Section 3. Removal. Any officer or agent elected or appointed by the Board
of Directors may be removed by the Board whenever in its judgment the best
interests of the corporation will be served thereby; but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4. Compensation. The compensation of all officers for serving as
officers of the corporation shall be fixed by the Board of Directors.
Section 5. Bonds. The Board of Directors may by resolution require any
officer, agent, or employee of the corporation to give bond to the corporation,
with sufficient sureties, conditioned on the faithful performance of the duties
of his respective office or position, and to comply with such other conditions
as may from time to time be required by the Board of Directors.
Section 6. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall supervise and control all of the business and affairs of the
corporation. He shall, when present, preside at all meetings of shareholders. He
<PAGE>
shall sign, with the Secretary, an Assistant Secretary, or with any other proper
officer authorized by the Board of Directors, certificates for shares of the
corporation and any deeds, mortgages, bonds, contracts, or other instruments
which may be lawfully executed on behalf of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors or these By-Laws to some other officer or agent of the corporation;
and, in general, he shall perform all duties incident to the office of President
and such other duties as may be prescribed by the Board of Directors from time
to time.
Section 7. Vice Presidents. In the absence of the President or in the event
of his death, inability or refusal to act, the Vice Presidents in the order of
their length of service as Vice Presidents, unless otherwise determined by the
Board of Directors, shall perform the duties of the President, and when so
acting shall have all the powers of and be subject to all the restrictions upon
the President. Any Vice President may sign, with the Secretary or an Assistant
Secretary, certificates for shares of the corporation; and shall perform such
other duties as from time to time may be assigned to him by the President or
Board of Directors.
Section 8. Secretary. The Secretary shall: (a) keep the minutes of the
meetings of shareholders, of the Board of Directors and of all Executive
Committees in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these By-Laws or as
required by law; (c) be custodian of the corporate records and of the seal of
the corporation and see that the seal of the corporation is affixed to all
documents the execution of which on behalf of the corporation under its seal is
duly authorized; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the corporation; (g) keep or cause to be kept in the State of North Carolina at
the corporation's registered office or principal place of business a record of
the corporation's shareholders, giving the names and addresses of all
shareholders and the number and class of shares held by each, and prepare or
cause to be prepared voting lists prior to each meeting of shareholders as
required by law; and (h) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
Section 9. Assistant Secretaries. In the absence of the Secretary of in the
event of his death, inability or refusal to act, the Assistant Secretaries in
the order of their length of service as Assistant Secretary, unless otherwise
determined by
<PAGE>
the Board of Directors, shall perform the duties of the Secretary, and when so
acting shall have all the powers of and be subject to all the restrictions upon
the Secretary. They shall perform such other duties as may be assigned to them
by the Secretary, by the President, or by the Board of Directors. Any Assistant
Secretary may sign, with the President or a Vice President, certificates for
shares of the corporation.
Section 10. Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; receive and
give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
depositories as shall be selected in accordance with the provisions of Section 4
of ARTICLE VII of these By-Laws; (b) prepare, or cause to be prepared, a true
statement of the corporation's assets and liabilities as of the close of each
fiscal year, all in reasonable detail, which statement shall be made and filed
at the corporation's registered office or principal place of business in the
State of North Carolina within four months after the end of such fiscal year and
thereat kept available for a period of at least ten years; and (c) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the President or by the
Board of Directors, or by these By-Laws.
Section 11. Assistant Treasurers. In the absence of the Treasurer or in the
event of his death, inability or refusal to act, the Assistant Treasurers in the
order of their length of service as Assistant Treasurer, unless otherwise
determined by the Board of Directors, shall perform the duties of the Treasurer,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the Treasurer. They shall perform such other duties as may be
assigned to them by the Treasurer, by the President, or by the Board of
Directors.
ARTICLE VII.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instruments in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
Section 3. Checks and Drafts. All checks, drafts or
<PAGE>
other orders for the payment of money issued in the name of the corporation
shall be signed by such officer or officers, agent or agents of the corporation
and in such manner as shall from time to time be determined by resolution of the
Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
depositories as the Board of Directors shall direct.
ARTICLE VIII.
CERTIFICATES FOR SHARES AND TRANSFER OF SHARES
Section 1. Certificates for Shares. Certificates representing shares of the
corporation shall be issued, in such form as the Board of Directors shall
determine, to every shareholder for the fully paid shares owned by him.
Certificates shall be signed by the President or a Vice President and the
Secretary, an Assistant Secretary, Treasurer or an Assistant Treasurer. All
certificates shall be consecutively numbered or otherwise identified. The name
and address of the person to whom the shares represented thereby are issued,
with the number and class of shares and date of issue, shall be entered on the
stock transfer books of the corporation.
Section 2. Transfer of Shares. Transfer of shares shall be made only on the
stock transfer books of the corporation only upon surrender of the certificates
for the shares sought to be transferred by the record holder thereof or by his
duly authorized agent, transferee or legal representative. All certificates
surrendered for transfer shall be cancelled before new certificates for the
transferred shares shall be issued.
Section 3. Lost Certificates. The Board of Directors may authorize the
issuance of a new share certificate in place of a certificate claimed to have
been lost or destroyed, upon receipt of an affidavit of such fact from the
person claiming the loss or destruction. When authorizing such issuance of a new
certificate, the Board may require the claimant to give the corporation a bond
in such sum as it may direct to indemnify the corporation against loss from any
claim that may be made with respect to the certificate claimed to have been lost
or destroyed; or the Board may, by resolution, reciting that the circumstances
justify such action, authorize the issuance of the new certificate without
requiring such a bond.
Section 4. Closing Transfer Books and Fixing Record Date. For the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the stock transfer books
shall be closed for a stated period but
<PAGE>
not to exceed, in any case, fifty days. If the stock transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may fix
in advance a date as the record date for any such determination of shareholders,
such record date in any case to be not more than fifty days and, in case of a
meeting of shareholders, not less than ten days immediately preceding the date
on which the particular action, requiring such determination of shareholders, is
to be taken.
If the stock transfer books are not closed and no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof except where the determination has been made
through the closing of the stock transfer books and the stated period of closing
has expired.
Section 5. Holder of Record. The corporation may treat as absolute owner of
shares the person in whose name the shares stand of record on its books just as
if that person had full competency, capacity and authority to exercise all
rights of ownership irrespective of any knowledge or notice to the contrary or
any description indicating a representative, pledge or other fiduciary relation
or any reference to any other instrument or to the rights of any other person
appearing upon its record or upon the share certificate except that any person
furnishing to the corporation proof of his appointment as a fiduciary shall be
treated as if he were a holder of record of its shares.
Section 6. Treasury Shares. Treasury shares of the corporation shall
consist of such shares as have been issued and thereafter acquired but not
cancelled by the corporation. Treasury shares shall not carry voting or dividend
rights.
ARTICLE IX.
GENERAL PROVISIONS
Section 1. Dividends. The Board of Directors may from time to time declare,
and the corporation may pay, dividends on its outstanding shares in cash,
property, or its own shares,
<PAGE>
pursuant to law and subject to the provisions of its Charter.
Section 2. Seal. The corporate seal of the corporation shall consist of two
concentric circles between which is the name of the corporation and in the
center of which is inscribed SEAL; and such seal, as impressed on the margin
hereof, is hereby adopted as the corporate seal of the corporation.
Section 3. Waiver of Notice. Whenever any notice is required to be given to
any shareholder or director by law or by the Charter or By-Laws of the
corporation, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after time stated therein, shall be
equivalent to the giving of such notice.
Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed
by the Board of Directors.
Section 5. Amendments. Except as otherwise provided herein, these By-Laws
may be amended or repealed and new By-Laws may be adopted by the affirmative
vote of a majority of the Directors then holding office at any regular or
special meeting of the Board of Directors.
The Board of Directors shall have no power to adopt a By-Law: (1) requiring
more than a majority of the voting shares for a quorum at a meeting of
shareholders or more than a majority of the votes cast to constitute action by
the shareholders, except where higher percentages are required by law; (2)
providing for the management of the corporation otherwise than by the Board of
Directors or its Executive Committee; (3) increasing or decreasing the number of
directors; (4) classifying and staggering the election of directors.
Any By-Law adopted or amended by the shareholders shall not be altered or
repealed by the Board of Directors or Executive Committee.
Adopted
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Secretary
BYLAWS
OF
LA BARGE, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the state of Michigan
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Michigan as may be stated in the
notice thereof, and at such tine and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than three (3) days before the meeting; provided, that no notice of adjourned
meetings need be given. If mailed, the notice shall be directed to each
stockholder entitled to notice at his address as it appears on the stock books
of the corporation unless he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. such further
notice shall be given as may be required by law. Meetings may be held without
notice if all stockholders entitled to vote thereat are present in person or by
proxy or if notice of the time, place and purpose of such meeting is waived by
telegram, radiogram, cablegram or other writing, either before or after the
holding thereof, by all stockholders not present and entitled to vote at such
meeting.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by
<PAGE>
law or by the Articles of Incorporation of the corporation as from time to time
amended, constitute a quorum at all meetings of the stockholders; if there be no
such quorum, the holders of a majority of such shares so present or represented
may adjourn the meeting from time to time to a further date without further
notice other than the announcement at such meeting, and when a quorum shall be
present upon such later day, any business may be transacted which might have
been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, all of whom shall be of full age. The
directors shall be elected at the annual meeting of the stockholders in each
year and shall hold office until the next succeeding annual meeting of the
stockholders and thereafter until their successors shall be elected and
qualified in their stead. A majority of the directors shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors; provided, that if the directors shall severally and/or
collectively consent in writing to any action to be taken by the corporation,
such action shall be as valid corporate action as though it had been authorized
at a meeting of the directors. If at any meeting of the Board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum shall have been obtained.
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<PAGE>
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Michigan as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors the management of the business of the corporation between the
meetings of the Board; but subject to the limitations set forth in the Articles
of Incorporation of the corporation, provided expressly however, that any
executive committee so designated shall have the power and authority to declare
dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as may
be after the annual election of the directors in each year shall elect a
President of the corporation, a Secretary and a Treasurer; and may from time to
time select
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<PAGE>
a Chairman of the Board, one or more Vice Presidents, Assistant Secretaries and
Assistant Treasurers. The same person may hold any two offices except those of
President and Secretary. No officer shall execute, acknowledge or verify any
instrument in more than one capacity. The Board of Directors may also appoint
such other officers and agents as they may deem necessary for the transaction of
business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Michigan. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of Michigan by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the same
number of shares of the same class with an assignment and power of attorney duly
endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
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<PAGE>
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Michigan as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the state of Michigan for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and holding in the aggregate at least two
percent (2%) of the outstanding capital stock of the corporation; and shall be
produced and kept at the time and place of election during the whole time
thereof, and shall be subject to the inspection of any registered stockholder or
his proxy who may be present. The original or duplicate stock ledger or a list
shall be the only evidence as to who are stockholders entitled to examine such
list or the books of such corporation, or to vote in person or by proxy at such
election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such
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<PAGE>
original certificate notifies the corporation in writing of such loss,
destruction or wrongful taking before the corporation receives notice that such
certificate has been acquired by a purchaser for value and without notice, files
with the corporation a bond indemnifying the corporation, its officers and
directors, and its transfer agents and registrars, if any, to the satisfaction
of the Board of Directors, and satisfies any other reasonable requirements
imposed by the Board of Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding sixty (60) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty
(60) days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
as a record date for the determination of the stockholders entitled to notice
of, and to vote at, any such meeting, or entitled to receive payment of any
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, only such stockholder as shall be stockholders of record on the date so
fixed, shall be entitled to such notice of, and to vote, at such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights as the case may be, notwithstanding any transfer of any
stock on the books of the corporation or otherwise after any such record date
fixed as aforesaid.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Michigan
Business corporation Act indemnify any person
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<PAGE>
whom it shall have power to indemnify under such Act from and against any and
all of the expenses, liabilities or other matters referred to in or covered by
such Act.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
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BYLAWS
OF
LEXINGTON FURNITURE INDUSTRIES, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place outside of the State of North Carolina
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place outside of the State of North Carolina as may be stated in the notice
thereof, and at such time and for such purpose as may be stated in the notice.
It shall be the duty of the President or the Secretary or of the Board of
Directors to call a special meeting of the stockholders whenever requested in
writing to do so by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the meeting; provided, that
no notice of adjourned meetings need be given. If mailed, the notice shall be
directed to each stockholder entitled to notice at his address as it appears on
the stock books of the corporation unless he shall have filed with the Secretary
a written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request. Such
further notice shall be given as maybe required by law. Meetings may be held
without notice if all stockholders entitled to vote thereat are present in
person or by proxy or if notice of the time, place and purpose of such meeting
is waived by telegram, facsimile, radiogram, cablegram or other writing, either
before or after the holding thereof, by all stockholders not present and
entitled to vote at such meeting.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time to amended, constitute a quorum at all meetings of the
stockholders; if there be no such quorum, the holders of a majority of such
shares so present or represented by adjourn the meeting from time to time to a
further date without further notice other than the announcement at such meeting,
and when a quorum shall be present upon such
<PAGE>
later day, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certification of any vote shall be prima
face evidence thereof.
ARTICLE II Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three(3) members, or such other number as may be
established from time to time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; provided, that if the directors
shall severally and/or collectively consent in writing to any action to be taken
by the corporation, such action shall be a valid corporate action as though it
had been authorized at a meeting of the directors. If at any meeting of the
Board there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places outside of the State of North Carolina as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as
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<PAGE>
shall from time to time be determined by resolution of the Board of Directors.
Special meetings may be held at any time upon the call of the President or Vice
President or of not less than a majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed, telegraphed or faxed to each director not
less than three (3) days before the meeting, except that a regular meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place as such meeting was held, for the purpose of
electing or appointing officers for the ensuing year and the transaction of
other business, provided, that no notice of adjourned meetings need be given.
Meetings may be held at any time without notice if all the directors are present
or if those not present waive notice of the time, place and purpose of such
meeting by telegram, facsimile, radiogram, cablegram or other writing, either
before or after the holding thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Articles of Incorporation of the corporation, provided
expressly however, that any executive committee so designated shall have the
power and authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, Chief Executive Officer, one or more
Vice Presidents, Assistant Secretaries and Assistant Treasurers. The same person
may hold any two offices. No officer shall execute, acknowledge or verify any
instrument in more than one capacity. The Board of Directors may also appoint
such other officers and agents as it may deem necessary for the transaction of
business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices,
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<PAGE>
as well as such additional powers and duties as may from time to time be
conferred by the Board of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers and or agent or agents who shall,
from time to time, be authorized to make, sign or endorse the same on behalf of
the corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of North Carolina. Shares of stock of the corporation may
be transferred on the books of the corporation in the manner prescribed by the
laws of the State of North Carolina by the holder thereof in person or by his
duly authorized attorney upon surrender for cancellation of certificates for the
same number of shares of the same class with an assignment and power of attorney
duly endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may be resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of North Carolina as may
seem expedient to it; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election
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of directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order. Such list shall be open at the place
where said election is to be held or at the principal office of the corporation
in the State of North Carolina for at least ten (10) days before such election,
for examination by any registered stockholder entitled to vote at such election
and shall be produced and kept at the time and place of election during the
whole time thereof, and shall be subject to the inspection of any registered
stockholder or his proxy who may be present. The original or duplicate stock
ledger or a list shall be the only evidence as to who are stockholders entitled
to examine such list or the books of such corporation, or to vote in person or
by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or nay
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
advance, a date as the record date of any such determination of stockholders.
Such date shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors, Officers and Employees
The corporation shall, to the fullest extent permitted by the North
Carolina Business Corporation Act, indemnify any person whom it shall have power
to indemnify under such Act from and against any and all of the expenses,
liabilities or other matters referred to in or covered
5
<PAGE>
by such law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
ADOPTED JUNE 17, 1996
BY-LAWS
OF
LIFESTYLE HOLDINGS LTD.
ARTICLE I - Stockholders
1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on such date, at such time and at such place within or
without the State of Delaware as may be designated by the Board of Directors,
for the purpose of electing Directors and for the transaction of such other
business as may be properly brought before the meeting.
2. Special Meetings. Except as otherwise provided in the Certificate of
Incorporation, a special meeting of the stockholders of the Corporation may be
called at any time by the Board of Directors and shall be called by the
Chairman, the President or the Secretary at the request in writing of
stockholders holding together at least twenty-five percent of the total number
of shares of the Corporation's Common Stock, par value $.01 per share (the
"Common Stock"). Any special meeting of the stockholders shall be held on such
date, at such time and at such place within or without the State of Delaware as
the Board of Directors or the officer calling the meeting may designate. At a
special meeting of the stockholders, no business shall be transacted and no
corporate action shall be taken other than that stated in the notice of the
meeting unless all of the stockholders entitled to notice are present in person
or by proxy and consent thereto, in which case any and all business may be
transacted at the meeting even though the meeting is held without notice.
3. Notice of Meetings. Except as otherwise provided in these By-Laws or
by law, a written notice of each meeting of the stockholders shall be given not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each holder of shares of Common Stock at his address as it appears on the
records of the Corporation. The notice shall state the place, date and hour of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
4. Quorum. At any meeting of the stockholders, the holders of a
majority in number of the total outstanding shares of stock of the Corporation
entitled to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum of the stockholders for all purposes, unless the
representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these By-Laws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or represented by proxy, shall constitute a quorum
for purposes of such class vote unless the
<PAGE>
representation of a larger number of shares of such class shall be required by
law, by the Certificate of Incorporation or by these By-Laws.
5. Adjourned Meetings. Whether or not a quorum shall be present in
person or represented at any meeting of the stockholders, the holders of a
majority in number of the shares of stock of the Corporation present in person
or represented by proxy and entitled to vote at such meeting may adjourn from
time to time; provided, however, that if the holders of any class of stock of
the Corporation are entitled to vote separately as a class upon any matter at
such meeting, any adjournment of the meeting in respect of action by such class
upon such matter shall be determined by the holders of a majority of the shares
of such class present in person or represented by proxy and entitled to vote at
such meeting. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the stockholders, or the holders of any class of stock entitled to vote
separately as a class, as the case may be, may transact any business which might
have been transacted by them at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the adjourned meeting.
6. Organization. The Chairman or, in his absence, the President or any
Vice President shall call all regular meetings of the stockholders to order, and
shall act as Chairman of such meetings. In the absence of the Chairman, the
President and all Vice Presidents or in the case of any special meeting, the
holders of a majority in number of the votes of all voting securities of the
Corporation present in person or represented by proxy and entitled to vote at
such meeting shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all regular
meetings of the stockholders; but in the absence of the Secretary or in the case
of any special meeting, the Chairman may appoint any person to act as Secretary
of the meeting. It shall be the duty of the Secretary to prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of
stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting or, if not so specified, at the place where the
meeting is to be held, for the ten (10) days next preceding the meeting, to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, and shall be produced and kept at the time and place of
the meeting during the whole time thereof and subject to the inspection of any
stockholder who may be present.
7. Voting. Except as otherwise provided in the Certificate of
Incorporation or by law, each stockholder shall be entitled to one (1) vote for
each share of the capital stock of the Corporation registered in the name of
such stockholder upon the books of the Corporation. Each stockholder entitled to
vote at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. When
directed by the presiding officer or upon the demand of any stockholder, the
vote upon any matter before a meeting of stockholders shall be by ballot. Except
as otherwise
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provided by law or by the Certificate of Incorporation, Directors shall be
elected by a plurality of the votes cast at a meeting of stockholders by the
stockholders entitled to vote in the election and, whenever any corporate
action, other than the election of Directors is to be taken, it shall be
authorized by a majority of the votes cast at a meeting of stockholders by the
stockholders entitled to vote thereon.
Shares of the capital stock of the Corporation belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes.
8. Inspectors. When required by law or directed by the presiding
officer or upon the demand of any stockholder entitled to vote, but not
otherwise, the polls shall be opened and closed, the proxies and ballots shall
be received and taken in charge, and all questions touching the qualification of
voters, the validity of proxies and the acceptance or rejection of votes shall
be decided at any meeting of the stockholders by two (2) or more Inspectors who
may be appointed by the Board of Directors before the meeting, or if not so
appointed, shall be appointed by the presiding officer at the meeting. If any
person so appointed fails to appear or act, the vacancy may be filled by
appointment in like manner.
ARTICLE II - Board of Directors
1. Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of a Board of Directors,
the members of which need not be stockholders of the Corporation. The number of
Directors constituting the Board of Directors shall be fixed from time to time
by resolution passed by a majority of the Board of Directors. The Directors
shall, except as hereinafter otherwise provided for filling vacancies, be
elected at the annual meeting of stockholders, and shall hold office until their
respective successors are elected and qualified or until their earlier
resignation or removal.
2. Removal, Vacancies and Additional Directors. The stockholders may,
at any special meeting the notice of which shall state that it is called for
that purpose, remove, with or without cause, any Director and fill the vacancy;
provided that whenever any Director shall have been elected by the holders of
any class of stock of the Corporation voting separately as a class under the
provisions of the Certificate of Incorporation, such Director may be removed and
the vacancy filled only by the holders of that class of stock voting separately
as a class. Vacancies caused by any such removal and not filled by the
stockholders at the meeting at which such removal shall have been made, or any
vacancy caused by the death or resignation of any Director or for any other
reason, and any newly created directorship resulting from any increase in the
authorized number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office, although less than a quorum, and any
Director so elected to fill any such vacancy or newly created directorship shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
When one (1) or more Directors shall resign effective at a future date,
a majority of the Directors then in office, including those who have so
resigned, shall have power to fill such vacancy
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or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office as herein provided in connection with the filling of other vacancies.
3. Place of Meeting. The Board of Directors may hold its meetings in
such place or places in the State of Delaware or outside the state of Delaware
as the Board from time to time shall determine.
4. Regular Meetings. Regular meetings of the Board of Directors shall
be held at such times and places as the Board from time to time by resolution
shall determine. No notice shall be required for any regular meeting of the
Board of Directors; but a copy of every resolution fixing or changing the time
or place of regular meetings shall be mailed to every Director at least five (5)
days before the first meeting held in pursuance thereof.
5. Special Meetings. Special meetings of the Board of Directors shall
be held whenever called by direction of the Chairman and President or by any two
(2) of the Directors then in office.
Notice of the day, hour and place of holding of each special meeting
shall be given by mailing the same at least five (5) days before the meeting or
by causing the same to be transmitted by telegraph, cable or wireless at least
one (1) day before the meeting to each Director. Unless otherwise indicated in
the notice thereof, any and all business other than an amendment of these
By-Laws may be transacted at any special meeting, and an amendment of these
By-Laws may be acted upon if the notice of the meeting shall have stated that
the amendment of these By-Laws is one of the purposes of the meeting. At any
meeting at which every Director shall be present, even though without any
notice, any business may be transacted, including the amendment of these
By-Laws.
6. Quorum. Subject to the provisions of Section 2 of this Article II, a
majority of the members of the Board of Directors in office (but, unless the
Board shall consist solely of one (1) Director, in no case less than one-third
of the total number of Directors nor less than two (2) Directors) shall
constitute a quorum for the transaction of business and the vote of the majority
of the Directors present at any meeting of the Board of Directors at which a
quorum is present shall be the act of the Board of Directors. If at any meeting
of the Board there is less than a quorum present, a majority of those present
may adjourn the meeting from time to time.
7. Organization. The Chairman shall preside at all meetings of the
Board of Directors. In the absence of the Chairman, a Chairman shall be elected
from the Directors present. Unless otherwise determined by a majority of the
members of the Board of Directors present at a meeting at which a quorum is
present, the Secretary of the Corporation shall act as Secretary of all meetings
of the Directors; and in the absence of the Secretary, the Chairman may appoint
any person to act as Secretary of the meeting.
8. Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one (1) or more committees, each
committee to consist of one (1) or more of the Directors of the Corporation. The
Board may designate one (1) or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members
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thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided by resolution
passed by a majority of the whole Board, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and the affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending these By-Laws; and unless such resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
9. Conference Telephone Meetings. Unless otherwise restricted by the
Certificate of Incorporation or by these By-Laws, the members of the Board of
Directors or any committee designated by the Board, may participate in a meeting
of the Board or such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
10. Consent of Directors or Committee in Lieu of Meeting. Unless
otherwise restricted by the Certificate of Incorporation or by these By-Laws,
any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee, as the case may be.
ARTICLE III - Officers
1. Officers. The officers of the Corporation shall be a Chairman, a
President, one (1) or more Vice Presidents, a Secretary and a Treasurer, and
such additional officers, if any, as shall be elected by the Board of Directors
pursuant to the provisions of Section 7 of this Article III. The Chairman,
President, one (1) or more Vice Presidents, the Secretary and the Treasurer
shall be elected by the Board of Directors at its first meeting after each
annual meeting of the stockholders. The failure to hold such election shall not
of itself terminate the term of office of any officer. All officers shall hold
office at the pleasure of the Board of Directors. Any officer may resign at any
time upon written notice to the Corporation. Officers may, but need not, be
Directors. Any number of offices may be held by the same person.
All officers, agents and employees shall be subject to removal, with or
without cause, at any time by the Board of Directors. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights. All agents and employees other than officers elected by the Board of
Directors shall also be subject to removal, with or without cause, at any time
by the officers appointing them.
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Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the Corporation
as set forth in these By-Laws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
2. Powers and Duties of the Chairman of the Board. The Chairman of the
Board shall have the responsibility of guiding the Board of Directors in
effectively discharging its responsibilities, including, but not limited to,
providing for the execution of the Corporation's objectives; safeguarding and
furthering shareholders' interests; and appraising the adequacy of overall
results as reported by the President or the Chief Operating Officer. He shall
see that all orders and resolutions of the Board of Directors are carried into
effect and shall from time to time report to the Board of Directors on matters
within his knowledge which the interests of the Corporation may require to be
brought to the attention of the Board of Directors. The Chairman of the Board
shall preside at all meetings of the Board of Directors and the stockholders at
which he is present.
3. Powers and Duties of the President. The President shall be the Chief
Executive Officer of the Corporation. The President shall be responsible for the
management of the business, affairs and operations of the Corporation. He may
execute and deliver in the name of the Corporation, powers of attorney,
contracts, bonds, and other obligations and instruments. The President shall
also perform all duties incident to the office of President and such other
duties as may from time to time be assigned to him by the Board of Directors.
4. Powers and Duties of the Vice Presidents. Each Vice President shall
have all powers and shall perform all duties incident to the office of Vice
President and shall have such other powers and perform such other duties as may
from time to time be assigned to him by these By-Laws or by the Board of
Directors, the Chairman or the President. A Vice President may be designated by
the Board of Directors as the Chief Operating Officer of the Corporation.
5. Powers and Duties of the Secretary. The Secretary shall keep the
minutes of all meetings of the Board of Directors and the minutes of all
meetings of the stockholders in books provided for that purpose; he shall attend
to the giving or serving of all notices of the Corporation; he shall have
custody of the corporate seal of the Corporation and shall affix the same to
such documents and other papers as the Board of Directors, the Chairman of the
Board or the President shall authorize and direct; he shall have charge of the
stock certificate books, transfer books and stock ledgers and such other books
and papers as the Board of Directors, the Chairman or the President shall
direct, all of which shall at all reasonable times be open to the examination of
any Director, upon application, at the office of the Corporation during business
hours; and whenever required by the Board of Directors, the Chairman or the
President shall render statements of such accounts; and he shall have all powers
and shall perform all duties incident to the office of Secretary and shall also
have such other powers and shall perform such other duties as may from time to
time be assigned to him by these By-Laws or by the Board of Directors, the
Chairman or the President.
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6. Powers and Duties of the Treasurer. The Treasurer shall have custody
of, and when proper shall pay out, disburse or otherwise dispose of, all funds
and securities of the Corporation which may have come into his hands; he may
endorse on behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in such
bank or banks or depositary or depositaries as the Board of Directors may
designate; he shall sign all receipts and vouchers for payments made to the
Corporation; he shall enter or cause to be entered regularly in the books of the
Corporation kept for the purpose full and accurate accounts of all moneys
received or paid or otherwise disposed of by him and whenever required by the
Board of Directors, the Chairman, the President or the Chief Operating Officer
shall render statements of such accounts; he shall, at all reasonable times,
exhibit his books and accounts to any Director of the Corporation upon
application at the office of the Corporation during business hours; and he shall
have all powers and he shall perform all duties incident to the office of
Treasurer and shall also have such other powers and shall perform such other
duties as may from time to time be assigned to him by these By-Laws or by the
Board of Directors, the Chairman, the President or the Chief Operating Officer.
The Board of Directors may designate the Treasurer to be the Chief Financial
Officer of the Corporation.
7. Additional Officers. The Board of Directors may from time to time
elect such other officers (who may but need not be Directors), including one or
more Controllers, Assistant Treasurers, Assistant Secretaries and Assistant
Controllers, as the Board may deem advisable and such officers shall have such
authority and shall perform such duties as may from time to time be assigned to
them by the Board of Directors, the Chairman or the President.
The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.
8. Powers with respect to Ownership of Stock. Unless otherwise ordered
by the Board of Directors, the Chairman or the President shall have full power
and authority on behalf of the Corporation to attend and to act and to vote, or
in the name of the Corporation to execute proxies to vote, at any meeting of
stockholders of any corporation in which the Corporation may hold stock, or to
execute any consent in lieu of such a meeting, and at any such meeting or by any
such consent shall possess and may exercise, in person or by proxy, any and all
rights, powers and privileges incident to the ownership of such stock. The Board
of Directors may from time to time, by resolution, confer like powers upon any
other person or persons.
9. Compensation of Officers. The officers of the Corporation shall be
entitled to receive such compensation for their services as shall from time to
time be determined by the Board of Directors.
ARTICLE IV - Indemnification of Directors and Officers
1. Nature of Indemnity. 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, by reason of the fact that he is or was or has
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agreed to become a Director or officer of the Corporation, or is or was serving
or has agreed to serve at the request of the Corporation as a Director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity, and may indemnify any person who was or is a party or is
threatened to be made a party to such an action, suit or proceeding by reason of
the fact that he is or was or has agreed to become an employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as an 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 or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, 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; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) 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
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
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.
2. Successful Defense. To the extent that a Director, officer, employee
or agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 1 of this
Article IV or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
3. Determination that Indemnification is Proper. Any indemnification of
a Director or officer of the Corporation under Section 1 of this Article IV
(unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the Director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 1. Any indemnification of an employee or agent of
the Corporation under Section 1 (unless ordered by a court) may be made by the
Corporation upon a determination that indemnification of the employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 1. Any such determination shall be made (1) 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 (2) 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 (3) by the
stockholders.
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4. Advance Payment of Expenses. Unless the Board of Directors otherwise
determines in a specific case, expenses incurred by a Director or officer 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 Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article IV.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's legal counsel to represent
such Director, officer, employee or agent in any action, suit or proceeding,
whether or not the Corporation is a party to such action, suit or proceeding.
5. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a contract right may not be
modified retroactively without the consent of such Director, officer, employee
or agent.
The indemnification provided by this Article IV shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any 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, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
Corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses,
including attorneys' fees, that may change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article IV.
6. Severability. If this Article IV or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article IV that shall not have been invalidated and to the
fullest extent permitted by applicable law.
7. Subrogation. In the event of payment of indemnification to a person
described in Section 1 of this Article IV, the Corporation shall be subrogated
to the extent of such payment to any right of recovery such person may have and
such person, as a condition of receiving indemnification from the Corporation,
shall execute all documents and do all things that the Corporation may deem
necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
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8. No Duplication of Payments. The Corporation shall not be liable
under this Article IV to make any payment in connection with any claim made
against a person described in Section 1 of this Article IV to the extent such
person has otherwise received payment (under any insurance policy, by-law or
otherwise) of the amounts otherwise payable as indemnity hereunder.
ARTICLE V - Stock-Seal-Fiscal Year
1. Certificates For Shares of Stock. The certificates for shares of
stock of the Corporation shall be in such form, not inconsistent with the
Certificate of Incorporation, as shall be approved by the Board of Directors.
All certificates shall be signed by the Chairman or the President or a Vice
President and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall not be valid unless so signed.
In case any officer or officers who shall have signed any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates had not ceased
to be such officer or officers of the Corporation.
All certificates for shares of stock shall be consecutively numbered as
the same are issued. The name of the person owning the shares represented
thereby with the number of such shares and the date of issue thereof shall be
entered on the books of the Corporation.
Except as hereinafter provided, all certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until former certificates for the same number of shares have been
surrendered and cancelled.
2. Lost, Stolen or Destroyed Certificates. Whenever a person owning a
certificate for shares of stock of the Corporation alleges that it has been
lost, stolen or destroyed, he shall file in the office of the Corporation an
affidavit setting forth, to the best of his knowledge and belief, the time,
place and circumstances of the loss, theft or destruction, and, if required by
the Board of Directors, a bond of indemnity or other indemnification sufficient
in the opinion of the Board of Directors to indemnify the Corporation and its
agents against any claim that may be made against it or them on account of the
alleged loss, theft or destruction of any such certificate or the issuance of a
new certificate in replacement therefor. Thereupon the Corporation may cause to
be issued to such person a new certificate in replacement for the certificate
alleged to have been lost, stolen or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number, date
and the name of the registered owner of the lost, stolen or destroyed
certificate in lieu of which the new certificate is issued.
3. Transfer of Shares. Shares of stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof, in person or
by his attorney duly authorized in writing, upon surrender and cancellation of
certificates for the number of shares of stock to be transferred, except as
provided in Section 2 of this Article IV.
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4. Regulations. The Board of Directors shall have power and authority
to make such rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of stock of the
Corporation.
5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
as the case may be, the Board of Directors may fix, in advance, a record date,
which shall not be (i) more than sixty (60) nor less than ten (10) days before
the date of such meeting, or (ii) in the case of corporate action to be taken by
consent in writing without a meeting, prior to, or more than ten (10) days
after, the date upon which the resolution fixing the record date is adopted by
the Board of Directors, or (iii) more than sixty (60) days prior to any other
action.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is delivered to the Corporation; and
the record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
6. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors shall have power to declare and pay
dividends upon shares of stock of the Corporation, but only out of funds
available for the payment of dividends as provided by law. Subject to the
provisions of the Certificate of Incorporation, any dividends declared upon the
stock of the Corporation shall be payable on such date or dates as the Board of
Directors shall determine. If the date fixed for the payment of any dividend
shall in any year fall upon a legal holiday, then the dividend payable on such
date shall be paid on the next day not a legal holiday.
7. Corporate Seal. The Board of Directors shall provide a suitable
seal, containing the name of the Corporation, which seal shall be kept in the
custody of the Secretary. A duplicate of the seal may be kept and be used by any
officer of the Corporation designated by the Board of Directors, the Chairman or
the President.
8. Fiscal Year. The fiscal year of the Corporation shall be such fiscal
year as the Board of Directors from time to time by resolution shall determine.
ARTICLE VI - Miscellaneous Provisions
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1. Checks, Notes, Etc. All checks, drafts, bills of exchange,
acceptances, notes or other obligations or orders for the payment of money shall
be signed and, if so required by the Board of Directors, countersigned by such
officers of the Corporation and/or other persons as the Board of Directors from
time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and
orders for the payment of money made payable to the Corporation may be endorsed
for deposit to the credit of the Corporation with a duly authorized depository
by the Treasurer and/or such other officers or persons as the Board of Directors
from time to time may designate.
2. Loans. No loans and no renewals of any loans shall be contracted on
behalf of the Corporation except as authorized by the Board of Directors. When
authorized so to do, any officer or agent of the Corporation may effect loans
and advances for the Corporation from any bank, trust company or other
institution or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the Corporation. When authorized so to do, any
officer or agent of the Corporation may pledge, hypothecate or transfer, as
security for the payment of any and all loans, advances, indebtedness and
liabilities of the Corporation, any and all stocks, securities and other
personal property at any time held by the Corporation, and to that end may
endorse, assign and deliver the same. Such authority may be general or confined
to specific instances.
3. Contracts. Except as otherwise provided in these By-Laws or by law
or as otherwise directed by the Board of Directors, the Chairman and the
President shall be authorized to execute and deliver, in the name and on behalf
of the Corporation, all agreements, bonds, contracts, deeds, mortgages, and
other instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and the seal of the Corporation, if appropriate, shall be
affixed thereto by any of such officers or the Secretary or an Assistant
Secretary. The Board of Directors or the Chairman or the President may authorize
any other officer, employee or agent to execute and deliver, in the name and on
behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, and
other instruments, either for the Corporation's own account or in a fiduciary or
other capacity, and, if appropriate, to affix the seal of the Corporation
thereto. The grant of such authority by the Board or any such officer may be
general or confined to specific instances.
4. Waivers of Notice. Whenever any notice whatever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws to any
person or persons, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
5. Offices Outside of Delaware. Except as otherwise required by the
laws of the State of Delaware, the Corporation may have an office or offices and
keep its books, documents and papers outside of the State of Delaware at such
place or places as from time to time may be determined by the Board of Directors
or the Chairman.
ARTICLE VII - Amendments
- 12 -
<PAGE>
These By-Laws and any amendment thereof may be altered, amended or
repealed, or new By-Laws may be adopted, by the Board of Directors at any
regular or special meeting by the affirmative vote of a majority of all of the
members of the Board provided in the case of any special meeting at which all of
the members of the Board are not present, that the notice of such meeting shall
have stated that the amendment of these By-Laws was one of the purposes of the
meeting; but these By-Laws and any amendment thereof, may be altered, amended or
repealed or new By-Laws may be adopted by the holders of a majority of the total
outstanding stock of the Corporation entitled to vote at any annual meeting or
at any special meeting, provided, in the case of any special meeting, that
notice of such proposed alteration, amendment, repeal or adoption is included in
the notice of the meeting.
[End of By-Laws]
- 13 -
BYLAWS
OF
MAITLAND-SMITH, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of North
Carolina as may from time to time be designated by the Board of Directors, on
the 15th day of December in each year (or if said day be a legal holiday, then
on the next succeeding business day), at 9:00 o'clock in the forenoon, for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of North Carolina as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of not less than one-tenth of all shares
entitled to vote at such meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days, nor more than fifty (50) days, before the meeting; provided,
that no notice of adjourned meetings need be given. If mailed, the notice shall
be directed to each stockholder entitled to notice at his address as it appears
on the stock books of the corporation unless he shall have filed with the
Secretary a written request that notices intended for him be mailed to some
other address, in which case it shall be mailed to the address designated in
such request. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote thereat
are present in person or by proxy or if notice of the time, place and purpose of
such meeting is waived by telegram, radiogram, cablegram or other writing,
either before or after the holding thereof, by all stockholders not present and
entitled to vote at such meeting.
<PAGE>
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice other than the announcement at such meeting, and when a
quorum shall be present upon such later day, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice president, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, all of whom shall be of full age. The
directors shall be elected at the annual meeting of the stockholders in each
year and shall hold office until the next succeeding annual meeting of the
stockholders and thereafter until their successors shall be elected and
qualified in their stead. A majority of the directors shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors; provided, that if the directors shall severally and/or
collectively consent in
-2-
<PAGE>
writing to any action to be taken by the corporation, such action shall be as
valid corporate action as though it had been authorized at a meeting of the
directors. If at any meeting of the Board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of North Carolina as may
from time to time be determined by a majority of the Board. Regular meetings of
the Board shall be held at such time and place as shall from time to time be
determined by resolution of the Board of Directors. Special meetings may be held
at any time upon the call of the President or Vice President or of not less than
a majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors the management of the business of the corporation between the
meetings of the Board; but subject to the limitations set forth in the Articles
of Incorporation of the corporation, provided expressly however, that any
-3-
<PAGE>
executive committee so designated shall have the power and authority to declare
dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as may
be after the annual election of the directors in each year shall elect a
President of the corporation, a Secretary and a Treasurer; and may from time to
time select a Chairman of the Board, one or more Vice presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices
except those of President and Secretary. No officer shall execute, acknowledge
or verify any instrument in more than one capacity. The Board of Directors may
also appoint such other officers and agents as they may deem necessary for the
transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
-4-
<PAGE>
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of North Carolina. Shares of stock of the corporation may
be transferred on the books of the corporation in the manner prescribed by the
laws of the State of North Carolina by the holder thereof in person or by his
duly authorized attorney upon surrender for cancellation of certificates for the
same number of shares of the same class with an assignment and power of attorney
duly endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of North Carolina as to it
may seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers who shall have signed, or whose facsimile signature
or signatures shall have been used on any certificate or certificates, shall
cease to be such officer or officers, whether because of death, resignation, or
otherwise, before such certificate or certificates shall have been delivered by
the corporation, such certificate or certificates may nevertheless be adopted by
the corporation and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical
-5-
<PAGE>
order. Such list shall be kept on file at the registered office of the
corporation in the State of North Carolina for at least ten (10) days before
such election, for examination by any registered stockholder entitled to vote at
such election and shall be produced and kept at the time and place of election
during the whole time thereof, and shall be subject to the inspection of any
registered stockholder or his proxy who may be present. The original or
duplicate stock ledger or a list shall be the only evidence as to who are
stockholders entitled to examine such list or the books of such corporation, or
to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding fifty (50) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding fifty
(50) days preceding the date for the payment of any dividend, or the date for
the allotment of rights, or the date when any change or conversion or exchange
of capital stock shall go into effect, and in the case of any meeting of the
stockholders, not less than ten (10) full days immediately preceding the date of
any meeting of stockholders, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any dividend, or to any such allotment of rights,
or to exercise the rights in respect of any such change, conversion or exchange
of capital stock, and in such case, only such stockholder as shall be
stockholders of record on the date so fixed, shall be entitled to such notice
of, and
-6-
<PAGE>
to vote, at such meeting, or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights as the case
may be, notwithstanding any transfer of any stock on the books of the
corporation or otherwise after any such record date fixed as aforesaid.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the North
Carolina Corporation Law indemnify any person whom it shall have power to
indemnify under such Act from and against any and all of the expenses,
liabilities or other matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
-7-
BYLAWS
OF
MARBRO LAMP COMPANY
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place outside of the State of California as
may from time to time be designated by the Board of Directors, on the 15th day
of December in each year (or if said day be a legal holiday, then on the next
succeeding business day), at 9:00 o'clock in the forenoon, for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place outside of the State of California as may be stated in the notice
thereof, and at such time and for such purpose as may be stated in the notice.
It shall be the duty of the President or the Secretary or of the Board of
Directors to call a special meeting of the stockholders whenever requested in
writing to do so by the holders of at least one-third in amount of the stock,
regardless of class, then outstanding and entitled to vote at such meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days nor more than sixty (60) days before the meeting; provided,
that no notice of adjourned meetings need be given. If mailed, the notice shall
be directed to each stockholder entitled to notice at his address as it appears
on the stock books of the corporation unless he shall have filed with the
Secretary a written request that notices intended for him be mailed to some
other address, in which case it shall be mailed to the address designated in
such request. Such further notice shall be given as may be required by law.
Meetings may be held without notice if all stockholders entitled to vote thereat
are present in person or by proxy or if notice of the time, place and purpose of
such meeting is waived by telegram, facsimile, radiogram, cablegram or other
writing, either before or after the holding thereof, by all stockholders not
present and entitled to vote at such mee4ng.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or
1
<PAGE>
represented may adjourn the meeting from time to time to a further date without
further notice other than the announcement at such meeting, and when a quorum
shall be present upon such later day, any business may be transacted which might
have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certification of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number Qualification Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of two (2) members, or such other number as may be
established from time to time by resolution of the Stockholders. All directors
shall be of full age. The directors shall be elected at the annual meeting of
the stockholders in each year and shall hold office until the next succeeding
annual meeting of the stockholders and thereafter until their successors shall
be elected and qualified in their stead. A majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors; provided, that if the directors shall severally
and/or collectively consent in writing to any action to be taken by the
corporation, such action shall be as valid corporate action as though it had
been authorized at a meeting of the directors. If at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
2
<PAGE>
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places outside of the State of California as may from time to
time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed or faxed to each director not
less than three (3) days before the meeting, except that a regular meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place as such meeting was held, for the purpose of
electing or appointing officers for the ensuing year and the transaction of
other business, provided, that no notice of adjourned meetings need be given.
Meetings may be held at any time without notice if all the directors are present
or if those not present waive notice of the time, place and purpose of such
meeting by telegram, facsimile, radiogram, cablegram or other writing, either
before or after the holding thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate two or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board, but subject to the California
Corporation Law (the "Act") and any limitations set forth in the Articles of
Incorporation of the corporation.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices.
No officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board of Directors may also appoint such other officers and agents
as it may deem necessary for the transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
3
<PAGE>
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers and or agent or agents who shall,
from time to time, be authorized to make, sign or endorse the same on behalf of
the corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of California. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of California by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the same
number of shares of the same class with an assignment and power of attorney duly
endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature Countersignature and Registration. The certificates of
stock of the corporation shall be signed by or in the name of the corporation by
the President or a Vice President, and the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer, and may be sealed with the seal of
the corporation and countersigned and registered in such manner, if any, as the
Board of Directors may by resolution prescribe; and to this end the Board of
Directors may, from time to time, appoint such Transfer Agents and Registrars of
stock of any class within or outside of the State of California as may seem
expedient to it; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
4
<PAGE>
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of California for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and shall be produced and kept at the time and
place of election during the whole time thereof, and shall be subject to the
inspection of any registered stockholder or his proxy who may be present. The
original or duplicate stock ledger or a list shall be the only evidence as to
who are stockholders entitled to examine such list or the books of such
corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other action, the
Board may fix, in advance, a date as the record date of any such determination
of stockholders. Such date shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action.
ARTICLE V
Fiscal Year: Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
5
<PAGE>
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Act,
indemnify any director, officer or employee of the corporation whom it shall
have power to indemnify under such Act from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such Act and
may indemnify any agent of the corporation to the such extent and to such effect
as the Board of Directors shall determine to be appropriate and permitted by
applicable law, as the same exists or may hereafter be amended.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation. A Bylaw changing the number of the Board of Directors must be
approved by the stockholders.
6
BYLAWS
OF
RAMM, SON & CROCKER, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place outside of the State of New York as may
from time to time be designated by the Board of Directors, on the 15th day of
December in each year (or if said day be a legal holiday, then on the next
succeeding business day), at 9:00 o'clock in the forenoon, for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place outside of the State of New York as may be stated in the notice
thereof, and at such time and for such purpose as may be stated in the notice.
It shall be the duty of the President or the Secretary or of the Board of
Directors to call a special meeting of the stockholders whenever requested in
writing to do so by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) days nor more than fifty (50) days before the meeting (a copy of
such notice may be given by third class mail not fewer than twenty-four (24) nor
more than fifty (50) days before the date of the meeting); provided, that no
notice of adjourned meetings need be given. If mailed, the notice shall be
directed to each stockholder entitled to notice at his address as it appears on
the stock books of the corporation unless he shall have filed with the Secretary
a written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request. Such
further notice shall be given as may be required by law. Meetings may be held
without notice if all stockholders entitled to vote thereat are present in
person or by proxy or if notice of the time, place and purpose of such meeting
is waived by telegram, facsimile, radiogram, cablegram or other writing, either
before or after the holding thereof, by all stockholders not present and
entitled to vote at such meeting.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice
<PAGE>
other than the announcement at such meeting, and when a quorum shall be present
upon such later day, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certification of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time to time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; provided, that if the directors
shall severally and/or collectively consent in writing to any action to be taken
by the corporation, such action shall be a valid corporate action as though it
had been authorized at a meeting of the directors. If at any meeting of the
Board there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancy shall have occurred in the Board
of Directors by reason of death, resignation, or otherwise, it shall be filled
by the votes of a majority of the directors then in office at any meeting and
the person so elected shall be a director until his successor is elected by the
stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places outside of the State of New York as may from time to
time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as
2
<PAGE>
shall from time to time be determined by resolution of the Board of Directors.
Special meetings may be held at any time upon the call of the President or Vice
President or of not less than a majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed, telegraphed or faxed to each director not
less than three (3) days before the meeting, except that a regular meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place as such meeting was held, for the purpose of
electing or appointing officers for the ensuing year and the transaction of
other business; provided, that no notice of adjourned meetings need be given.
Meetings may be held at any time without notice if all the directors are present
or if those not present waive notice of the time, place and purpose of such
meeting by telegram, facsimile, radiogram, cablegram or other writing, either
before or after the holding thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate at least three (3)
of their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Articles of Incorporation of the corporation; provided
expressly however, that any executive committee so designated shall have the
power and authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors shall elect a President
of the corporation, a Secretary and a Treasurer; and may from time to time
select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices.
No officer shall execute, acknowledge or verify any instrument in more than one
capacity. The Board of Directors may also appoint such other officers and agents
as it may deem necessary for the transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
3
<PAGE>
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the Board of
Directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers and or agent or agents who shall,
from time to time, be authorized to make, sign or endorse the same on behalf of
the corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of New York. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of New York by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the same
number of shares of the same class with an assignment and power of attorney duly
endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of New York as may seem
expedient to it; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
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<PAGE>
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of New York for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and shall be produced and kept at the time and
place of election during the whole time thereof, and shall be subject to the
inspection of any registered stockholder or his proxy who may be present. The
original or duplicate stock ledger or a list shall be the only evidence as to
who are stockholders entitled to examine such list or the books of such
corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof; provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other action, the
Board may fix, in advance, a date as the record date of any such determination
of stockholders. Such date shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
5
<PAGE>
ARTICLE VI
Indemnification of Directors, Officers and Employees
Section 1. Indemnification. The corporation shall, to the fullest extent
permitted by the New York Corporation Law, indemnify any person whom it shall
have power to indemnify under such Act from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such Act.
ARTICLE VII
Amendments
Section 1. Amendments. The Bylaws of the corporation may be amended, added
to, or repealed, or other or new Bylaws may be adopted in lieu thereof, by the
Board of Directors of the corporation.
6
BYLAWS
OF
ROBERT ALLEN FABRICS, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of Delaware
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Delaware as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than three (3) days before the meeting; provided, that no notice of adjourned
meetings need be given. If mailed, the notice shall be directed to each
stockholder entitled to notice at his address as it appears on the stock books
of the corporation unless he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. Such further
notice shall be given as may be required by law. Meetings may be held without
notice if all stockholders entitled to vote thereat are present in person or by
proxy or if notice of the time, place and purpose of such meeting is waived by
telegram, radiogram, cablegram or other writing, either before or after the
holding thereof, by all stockholders not present and entitled to vote at such
meeting.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as
<PAGE>
otherwise provided by law or by the Articles of Incorporation of the corporation
as from time to time amended, constitute a quorum at all meetings of the
stockholders; if there be no such quorum, the holders of a majority of such
shares so present or represented may adjourn the meeting from time to time to a
further date without further notice other than the announcement at such meeting,
and when a quorum shall be present upon such later day, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, all of whom shall be of full age. The
directors shall be elected at the annual meeting of the stockholders in each
year and shall hold office until the next succeeding annual meeting of the
stockholders and thereafter until their successors shall be elected and
qualified in their stead. A majority of the directors shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors; provided, that if the directors shall severally and/or
collectively consent in writing to any action to be taken by the corporation,
such action shall be as valid corporate action as though it had been authorized
at a meeting of the directors. If at any meeting of the Board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum shall have been obtained.
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<PAGE>
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Delaware as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors the management of the business of the corporation between the
meetings of the Board; but subject to the limitations set forth in the Articles
of Incorporation of the corporation, provided expressly however, that any
executive committee so designated shall have the power and authority to declare
dividends.
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<PAGE>
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as may
be after the annual election of the directors in each year shall elect a
President of the corporation, a Secretary and a Treasurer; and may from time to
time select a Chairman of the Board, one or more Vice Presidents, Assistant
secretaries and Assistant Treasurers. The same person may hold any two offices
except those of President and Secretary. No officer shall execute, acknowledge
or verify any instrument in more than one capacity. The Board of Directors may
also appoint such other officers and agents as they may deem necessary for the
transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Delaware. Shares of stock of the
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<PAGE>
corporation may be transferred on the books of the corporation in the manner
prescribed by the laws of the State of Delaware by the holder thereof in person
or by his duly authorized attorney upon surrender for cancellation of
certificates for the same number of shares of the same class with an assignment
and power of attorney duly endorsed thereon or attached thereto, duly executed
and such proof of the authenticity of the signature as the corporation or its
agents may reasonably require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Delaware as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of Delaware for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and holding in the aggregate at least two
percent (2%) of the outstanding capital stock of the corporation; and shall be
produced and kept at the time and place of election during the whole time
thereof, and shall be subject to the inspection of any registered stockholder or
his proxy who may be present. The original or duplicate stock ledger or a list
shall be the
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<PAGE>
only evidence as to who are stockholders entitled to examine such list or the
books of such corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding sixty (60) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty
(60) days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
as a record date for the determination of the stockholders entitled to notice
of, and to vote at, any such meeting, or entitled to receive payment of any
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, only such stockholder as shall be stockholders of record on the date so
fixed, shall be entitled to such notice of, and to vote, at such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights as the case may be, notwithstanding any transfer of any
stock on the books of the corporation or otherwise after any such record date
fixed as aforesaid.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
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<PAGE>
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
-7-
BYLAWS
OF
ROBERT ALLEN FABRICS OF N.Y., INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of Delaware
as may from time to time be designated by the Board of Directors, on the 15th
day of December in each year (or if said day be a legal holiday, then on the
next succeeding business day), at 9:00 o'clock in the forenoon, for the purpose
of electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Delaware as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than three (3) days before the meeting; provided, that no notice of adjourned
meetings need be given. If mailed, the notice shall be directed to each
stockholder entitled to notice at his address as it appears on the stock books
of the corporation unless he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. Such further
notice shall be given as may be required by law. Meetings may be held without
notice if all stockholders entitled to vote thereat are present in person or by
proxy or if notice of the time, place and purpose of such meeting is waived by
telegram, radiogram, cablegram or other writing, either before or after the
holding thereof, by all stockholders not present and entitled to vote at such
meeting.
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as
<PAGE>
otherwise provided by law or by the Articles of Incorporation of the corporation
as from time to time amended, constitute a quorum at all meetings of the
stockholders; if there be no such quorum, the holders of a majority of such
shares so present or represented may adjourn the meeting from time to time to a
further date without further notice other than the announcement at such meeting,
and when a quorum shall be present upon such later day, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, all of whom shall be of full age. The
directors shall be elected at the annual meeting of the stockholders in each
year and shall hold office until the next succeeding annual meeting of the
stockholders and thereafter until their successors shall be elected and
qualified in their stead. A majority of the directors shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors; provided, that if the directors shall severally and/or
collectively consent in writing to any action to be taken by the corporation,
such action shall be as valid corporate action as though it had been authorized
at a meeting of the directors. If at any meeting of the Board there shall be
less than a quorum present, a majority of those present may adjourn the meeting
from time to time until a quorum shall have been obtained.
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<PAGE>
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Delaware as may from time
to time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors the management of the business of the corporation between the
meetings of the Board; but subject to the limitations set forth in the Articles
of Incorporation of the corporation, provided expressly however, that any
executive committee so designated shall have the power and authority to declare
dividends.
-3-
<PAGE>
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as may
be after the annual election of the directors in each year shall elect a
President of the corporation, a Secretary and a Treasurer; and may from time to
time select a Chairman of the Board, one or more Vice Presidents, Assistant
secretaries and Assistant Treasurers. The same person may hold any two offices
except those of President and Secretary. No officer shall execute, acknowledge
or verify any instrument in more than one capacity. The Board of Directors may
also appoint such other officers and agents as they may deem necessary for the
transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Delaware. Shares of stock of the
-4-
<PAGE>
corporation may be transferred on the books of the corporation in the manner
prescribed by the laws of the State of Delaware by the holder thereof in person
or by his duly authorized attorney upon surrender for cancellation of
certificates for the same number of shares of the same class with an assignment
and power of attorney duly endorsed thereon or attached thereto, duly executed
and such proof of the authenticity of the signature as the corporation or its
agents may reasonably require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Delaware as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of Delaware for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and holding in the aggregate at least two
percent (2%) of the outstanding capital stock of the corporation; and shall be
produced and kept at the time and place of election during the whole time
thereof, and shall be subject to the inspection of any registered stockholder or
his proxy who may be present. The original or duplicate stock ledger or a list
shall be the
-5-
<PAGE>
only evidence as to who are stockholders entitled to examine such list or the
books of such corporation, or to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding sixty (60) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty
(60) days preceding the date of any meeting of stockholders, or the date for the
payment of any dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
as a record date for the determination of the stockholders entitled to notice
of, and to vote at, any such meeting, or entitled to receive payment of any
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, only such stockholder as shall be stockholders of record on the date so
fixed, shall be entitled to such notice of, and to vote, at such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights as the case may be, notwithstanding any transfer of any
stock on the books of the corporation or otherwise after any such record date
fixed as aforesaid.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
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<PAGE>
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
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BYLAWS
OF
SUNBURY TEXTILE MILLS, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place outside of the State of Delaware as may
from time to time be designated by the Board of Directors, on the 15th day of
December in each year (or if said day be a legal holiday, then on the next
succeeding business day), at 9:00 o'clock in the forenoon, for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place outside of the State of Delaware as may be stated in the notice
thereof and at such time and for such purpose as may be stated in the notice. It
shall be the duty of the President or the Secretary or of the Board of Directors
to call a special meeting of the stockholders whenever requested in writing to
do so by the holders of at least twenty-five percent (25%) in amount of the
stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the meeting; provided, that
no notice of adjourned meetings need be given. If mailed, the notice shall be
directed to each stockholder entitled to notice at his address as it appears on
the stock books of the corporation unless he shall have filed with the Secretary
a written request that notices intended for him be mailed to some other address,
in which case it shall be mailed to the address designated in such request. Such
further notice shall be given as may be required by law. Meetings may be held
without notice if all stockholders entitled to vote thereat are present in
person or by proxy or if notice of the time, place and purpose of such meeting
is waived by telegram, facsimile, radiograrn, cablegram or other writing, either
before or after the holding thereof; by all stockholders not present and
entitled to vote at such
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice other than the announcement at such meeting, and when a
quorum shall be present upon such later day, any business may be transacted
which might have been transacted at the meeting as
<PAGE>
originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certification of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time to time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; provided, that if the directors
shall severally and/or collectively consent in writing to any action to be taken
by the corporation, such action shall be a valid corporate action as though it
had been authorized at a meeting of the directors. If at any meeting of the
Board there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places outside of the State of Delaware as may from time to
time be determined by a majority of the Board. Regular meetings of the Board
shall be held at such time and place as shall from time to time be determined by
resolution of the Board of Directors. Special meetings may be held at any time
upon the call of the President or Vice President or of not less than a majority
2
<PAGE>
of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed, telegraphed or faxed to each director not
less than three (3) days before the meeting, except that a regular meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place as such meeting was held, for the purpose of
electing or appointing officers for the ensuing year and the transaction of
other business, provided, that no notice of adjourned meetings need be given.
Meetings may be held at any time without notice if all the directors are present
or if those not present waive notice of the time, place and purpose of such
meeting by telegram, facsimile, radiogram, cablegram or other writing, either
before or after the holding thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Articles of Incorporation of the corporation, provided
expressly however, that any executive committee so designated shall have the
power and authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, Chief Executive Officer, one or more
Vice Presidents, Assistant Secretaries and Assistant Treasurers. The same person
may hold any two offices. No officer shall execute, acknowledge or verify any
instrument in more than one capacity. The Board of Directors may also appoint
such other officers and agents as it may deem necessary for the transaction of
business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
3
<PAGE>
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers and or agent or agents who shall,
from time to time, be authorized to make, sign or endorse the same on behalf of
the corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Delaware. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of Delaware by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the same
number of shares of the same class with an assignment and power of attorney duly
endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Delaware as may seem
expedient to it; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in
4
<PAGE>
alphabetical order. Such list shall be open at the place where said election is
to be held or at the principal office of the corporation in the State of
Delaware for at least ten (10) days before such election, for examination by any
registered stockholder entitled to vote at such election and shall be produced
and kept at the time and place of election during the whole time thereof, and
shall be subject to the inspection of any registered stockholder or his proxy
who may be present. The original or duplicate stock ledger or a list shall be
the only evidence as to who are stockholders entitled to examine such list or
the books of such corporation, or to vote in person or by proxy at such
election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Record Dates. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other action, the
Board may fix, in advance, a date as the record date of any such determination
of stockholders. Such date shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty days prior to any
other action.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors Officers and Employees
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law, indemnify any person whom it shall have power to indemnify
under such Act from and against any and all of the expenses, liabilities or
other matters referred to in or covered by such Law.
5
<PAGE>
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof by the Board of Directors of
the corporation.
6
BYLAWS
OF
UNIVERSAL FURNITURE INDUSTRIES, INC.
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of
Delaware as may from time to time be designated by the Board of Directors, on
the 15th day of December in each year (or if said day be a legal holiday, then
on the next succeeding business day), at 9:00 o'clock in the forenoon, for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Delaware as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than three (3) days before the meeting; provided, that no notice of adjourned
meetings need be given. If mailed, the notice shall be directed to each
stockholder entitled to notice at his address as it appears on the stock books
of the corporation unless he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. Such further
notice shall be given as may be required by law. Meetings may be held without
notice if all stockholders entitled to vote thereat are present in person or by
proxy or if notice of the time, place and purpose of such meeting is waived by
telegram, radiogram, cablegram or other writing, either before or after the
holding thereof, by all stockholders not present and entitled to vote at such
meeting.
<PAGE>
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice other than the announcement at such meeting, and when a
quorum shall be present upon such later day, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors;
-2-
<PAGE>
provided, that if the directors shall severally and/or collectively consent in
writing to any action to be taken by the corporation, such action shall be as
valid corporate action as though it had been authorized at a meeting of the
directors. If at any meeting of the Board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Delaware as may from
time to time be determined by a majority of the Board. Regular meetings of the
Board shall be held at such time and place as shall from time to time be
determined by resolution of the Board of Directors. Special meetings may be held
at any time upon the call of the President or Vice President or of not less than
a majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate two or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set
-3-
<PAGE>
forth in the Articles of Incorporation of the corporation, provided expressly
however, that any executive committee so designated shall have the power and
authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices
except those of President and Secretary. No officer shall execute, acknowledge
or verify any instrument in more than one capacity. The Board of Directors may
also appoint such other officers and agents as they may deem necessary for the
transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
-4-
<PAGE>
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may, from time to time, prescribe in accordance with
the laws of the State of Delaware. Shares of stock of the corporation may be
transferred on the books of the corporation in the manner prescribed by the laws
of the State of Delaware by the holder thereof in person or by his duly
authorized attorney upon surrender for cancellation of certificates for the same
number of shares of the same class with an assignment and power of attorney duly
endorsed thereon or attached thereto, duly executed and such proof of the
authenticity of the signature as the corporation or its agents may reasonably
require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Delaware as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical
-5-
<PAGE>
order. Such list shall be open at the place where said election is to be held or
at the principal office of the corporation in the State of Delaware for at least
ten (10) days before such election, for examination by any registered
stockholder entitled to vote at such election and holding in the aggregate at
least two percent (2%) of the outstanding capital stock of the corporation; and
shall be produced and kept at the time and place of election during the whole
time thereof, and shall be subject to the inspection of any registered
stockholder or his proxy who may be present. The original or duplicate stock
ledger or a list shall be the only evidence as to who are stockholders entitled
to examine such list or the books of such corporation, or to vote in person or
by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding seventy (70) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding
sixty (60) days preceding the date of any meeting of stockholders, or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, or entitled to receive payment of
any dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, only such stockholder as shall be stockholders of record on the date so
fixed, shall be entitled to such
-6-
<PAGE>
notice of, and to vote, at such meeting, or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights as the case
may be, notwithstanding any transfer of any stock on the books of the
corporation or otherwise after any such record date fixed as aforesaid.
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
-7-
BYLAWS
OF
UNIVERSAL FURNITURE LIMITED
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of the stockholders of the
corporation shall be held at such place within or without the State of
Delaware as may from time to time be designated by the Board of Directors, on
the 15th day of December in each year (or if said day be a legal holiday, then
on the next succeeding business day), at 9:00 o'clock in the forenoon, for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders may be
held upon the call of the President or Secretary or of the Board of Directors at
such place within or without the State of Delaware as may be stated in the
notice thereof, and at such time and for such purpose as may be stated in the
notice. It shall be the duty of the President or the Secretary or of the Board
of Directors to call a special meeting of the stockholders whenever requested in
writing so to do by the holders of at least twenty-five percent (25%) in amount
of the stock, regardless of class, then outstanding and entitled to vote at such
meeting.
Section 3. Notice of Meetings. Notice of the time, place and the purpose of
each meeting of the stockholders, signed by the President or a Vice President or
the Secretary or an Assistant Secretary shall be served either personally or by
mail upon each stockholder of record entitled to vote at such meeting not less
than three (3) days before the meeting; provided, that no notice of adjourned
meetings need be given. If mailed, the notice shall be directed to each
stockholder entitled to notice at his address as it appears on the stock books
of the corporation unless he shall have filed with the Secretary a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. Such further
notice shall be given as may be required by law. Meetings may be held without
notice if all stockholders entitled to vote thereat are present in person or by
proxy or if notice of the time, place and purpose of such meeting is waived by
telegram, radiogram, cablegram or other writing, either before or after the
holding thereof, by all stockholders not present and entitled to vote at such
meeting.
<PAGE>
Section 4. Quorum. The holders of record of a majority of the shares of
stock of the corporation issued and outstanding regardless of class and entitled
to vote thereat, present in person or by proxy, shall, except as otherwise
provided by law or by the Articles of Incorporation of the corporation as from
time to time amended, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time to a further date
without further notice other than the announcement at such meeting, and when a
quorum shall be present upon such later day, any business may be transacted
which might have been transacted at the meeting as originally called.
Section 5. Conduct of Meetings. Meetings of the stockholders shall be
presided over by the President, or if he is not present by a Vice President, or
if none of the Vice Presidents are present by a Chairman to be chosen at the
meeting. The Secretary or an Assistant Secretary of the corporation, or in their
absence, a person chosen at the meeting shall act as Secretary of the meeting.
Section 6. Inspectors of Election. Whenever any stockholder present at a
meeting of the stockholders shall request the appointment of inspectors, the
Chairman of the meeting shall appoint inspectors who need not be stockholders.
If the right of any person to vote at such meeting shall be challenged, the
inspectors of election shall determine such right. The inspectors shall receive
and count the votes either upon an election or for the decision of any question,
and shall determine the result. Their certificate of any vote shall be prima
facie evidence thereof.
ARTICLE II
Directors
Section 1. Number, Qualification, Term of Office and Quorum. The property,
business and affairs of the corporation shall be managed by its Board of
Directors to consist of three (3) members, or such other number as may be
established from time-to-time by resolution of the Board of Directors. All
directors shall be of full age. The directors shall be elected at the annual
meeting of the stockholders in each year and shall hold office until the next
succeeding annual meeting of the stockholders and thereafter until their
successors shall be elected and qualified in their stead. A majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors; provided, that if the directors
shall severally and/or col-
-2-
<PAGE>
lectively consent in writing to any action to be taken by the corporation, such
action shall be as valid corporate action as though it had been authorized at a
meeting of the directors. If at any meeting of the Board there shall be less
than a quorum present, a majority of those present may adjourn the meeting from
time to time until a quorum shall have been obtained.
Section 2. Vacancies. Whenever any vacancies shall have occurred in the
Board of Directors by reason of death, resignation, or otherwise, it shall be
filled by the votes of a majority of the directors then in office at any meeting
and the person so elected shall be a director until his successor is elected by
the stockholders, who may make such election at the next annual meeting of the
stockholders, or at any special meeting duly called for that purpose and held
prior thereto.
Section 3. Meetings. The meetings of the Board of Directors shall be held
at such place or places within or without the State of Delaware as may from
time to time be determined by a majority of the Board. Regular meetings of the
Board shall be held at such time and place as shall from time to time be
determined by resolution of the Board of Directors. Special meetings may be held
at any time upon the call of the President or Vice President or of not less than
a majority of the directors then in office.
Section 4. Notice of Meetings. Written notice of the time and place, and in
the case of special meetings, the purpose, of every meeting of the Board shall
be duly served on or sent, mailed or telegraphed to each director not less than
three (3) days before the meeting, except that a regular meeting of the Board
may be held without notice immediately after the annual meeting of stockholders
at the same place as such meeting was held, for the purpose of electing or
appointing officers for the ensuing year and the transaction of other business,
provided, that no notice of adjourned meetings need be given. Meetings may be
held at any time without notice if all the directors are present or if those not
present waive notice of the time, place and purpose of such meeting by telegram,
radiogram, cablegram or other writing, either before or after the holding
thereof.
Section 5. Executive and Other Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate two or more of
their number to constitute an executive or any other committee, who, to the
extent provided in said resolution, shall have and exercise the authority of the
Board of Directors with regard to the management of the business of the
corporation between the meetings of the Board; but subject to the limitations
set forth in the Articles of Incorporation of the corporation, provided
expressly
-3-
<PAGE>
however, that any executive committee so designated shall have the power and
authority to declare dividends.
ARTICLE III
Officers
Section 1. Election or Appointment. The Board of Directors as soon as
practicable after the annual election of the directors in each year shall elect
a President of the corporation, a Secretary and a Treasurer; and may from time
to time select a Chairman of the Board, one or more Vice Presidents, Assistant
Secretaries and Assistant Treasurers. The same person may hold any two offices
except those of President and Secretary. No officer shall execute, acknowledge
or verify any instrument in more than one capacity. The Board of Directors may
also appoint such other officers and agents as they may deem necessary for the
transaction of business of the corporation.
Section 2. Term of Offices. The term of office of all officers shall be one
year or until their respective successors are chosen but any officer may be
removed from office at any meeting of the Board of Directors by the affirmative
vote of a majority of the directors then in office, whenever in their judgment
the business interests of the corporation will be served thereby. The Board of
Directors shall have power to fill any vacancies in any offices occurring from
whatever reason.
Section 3. Powers and Duties. The officers of the corporation shall
respectively have such powers and perform such duties in the management of the
property and affairs of the corporation, subject to the control of the
directors, as generally pertain to their respective offices, as well as such
additional powers and duties as may from time to time be conferred by the Board
of Directors.
Section 4. General Powers as to Negotiable Paper. The Board of Directors
may, from time to time, prescribe the manner of the making, signature or
endorsement of bills of exchange, notes, drafts, checks, acceptances,
obligations and other negotiable paper or other instruments for the payment of
money and designate the officer or officers, agent or agents who shall, from
time to time, be authorized to make, sign or endorse the same on behalf of the
corporation.
ARTICLE IV
Certificates of Stock
Section 1. Form and Transfer. The interest of each stockholder in the
corporation shall be evidenced by
-4-
<PAGE>
certificates for shares of stock in such form as the Board of Directors may,
from time to time, prescribe in accordance with the laws of the State of
Delaware. Shares of stock of the corporation may be transferred on the books of
the corporation in the manner prescribed by the laws of the State of Delaware by
the holder thereof in person or by his duly authorized attorney upon surrender
for cancellation of certificates for the same number of shares of the same class
with an assignment and power of attorney duly endorsed thereon or attached
thereto, duly executed and such proof of the authenticity of the signature as
the corporation or its agents may reasonably require.
Section 2. Signature, Countersignature and Registration. The certificates
of stock of the corporation shall be signed by or in the name of the corporation
by the President or a Vice President, and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation and countersigned and registered in such manner, if any,
as the Board of Directors may by resolution prescribe; and to this end the Board
of Directors may, from time to time, appoint such Transfer Agents and Registrars
of stock of any class within or outside of the State of Delaware as to it may
seem expedient; provided, that where such certificate is signed (1) by a
Transfer Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting
on behalf of such corporation and a Registrar, the signature of any such
President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer and/or the seal of the corporation may be a facsimile. In
case any officer or officers, who shall have signed, or whose facsimile
signature or signatures shall have been used on any certificate or certificates,
shall cease to be such officer or officers, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
Section 3. Stock Ledger. It shall be the duty of the Secretary of the
corporation to prepare and make or cause to be prepared and made, at least ten
(10) days before every election of directors, a complete list of the
stockholders entitled to vote at said election, arranged in alphabetical order.
Such list shall be open at the place where said election is to be held or at the
principal office of the corporation in the State of Delaware for at least ten
(10) days before such election, for examination by any registered stockholder
entitled to vote at such election and holding in
-5-
<PAGE>
the aggregate at least two percent (2%) of the outstanding capital stock of the
corporation; and shall be produced and kept at the time and place of election
during the whole time thereof, and shall be subject to the inspection of any
registered stockholder or his proxy who may be present. The original or
duplicate stock ledger or a list shall be the only evidence as to who are
stockholders entitled to examine such list or the books of such corporation, or
to vote in person or by proxy at such election.
Section 4. Lost, Destroyed or Stolen Certificates. If the owner of a
certificate of shares of the capital stock of the corporation claims that such
certificate has been lost, destroyed or wrongfully taken, the corporation shall
issue a new certificate for the same number of shares of the same class in lieu
thereof, provided that the owner of such original certificate notifies the
corporation in writing of such loss, destruction or wrongful taking before the
corporation receives notice that such certificate has been acquired by a
purchaser for value and without notice, files with the corporation a bond
indemnifying the corporation, its officers and directors, and its transfer
agents and registrars, if any, to the satisfaction of the Board of Directors,
and satisfies any other reasonable requirements imposed by the Board of
Directors.
Section 5. Closing of Stock Transfer Books. The Board of Directors may
close the stock transfer books for a period not exceeding seventy (70) days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, during
which time no stock of the corporation shall be transferred upon the books of
the corporation; provided, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding
sixty (60) days preceding the date of any meeting of stockholders, or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting, or entitled to receive payment of
any dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case, only such stockholder as shall be stockholders of record on the date so
fixed, shall be entitled to such notice of, and to vote, at such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights as the case may be, notwithstanding any transfer of any
stock on the books of the corporation or otherwise after any such record date
fixed as aforesaid.
-6-
<PAGE>
ARTICLE V
Fiscal Year; Seal
Section 1. Fiscal Year. The fiscal year of the corporation shall begin on
the 1st day of January of each year and shall end on the 31st day of December
following.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
corporate seal for use by the corporation.
ARTICLE VI
Indemnification of Directors and Officers
The corporation shall, to the fullest extent permitted by the Delaware
Corporation Law indemnify any person whom it shall have power to indemnify under
such Act from and against any and all of the expenses, liabilities or other
matters referred to in or covered by such Law.
ARTICLE VII
Amendments
The Bylaws of the corporation may be amended, added to, or repealed, or
other or new Bylaws may be adopted in lieu thereof, by the Board of Directors of
the corporation.
-7-
================================================================================
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
10-7/8% Senior Subordinated Notes due 2006
------------------------------------------
INDENTURE
Dated as of August 5, 1996
------------------------------------------
IBJ SCHRODER BANK & TRUST COMPANY
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Other Definitions........................................ 30
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act........................................... 32
SECTION 1.04. Rules of Construction.................................... 32
ARTICLE II
The Securities
SECTION 2.01. Form and Dating.......................................... 33
SECTION 2.02. Execution and Authentication............................. 35
SECTION 2.03. Registrar and Paying Agent............................... 36
SECTION 2.04. Paying Agent To Hold Money in Trust...................... 37
SECTION 2.05. Securityholder Lists..................................... 38
SECTION 2.06. Transfer and Exchange.................................... 38
SECTION 2.07. Replacement Securities................................... 47
SECTION 2.08. Outstanding Securities................................... 48
SECTION 2.09. Temporary Securities..................................... 48
SECTION 2.10. Cancellation............................................. 48
SECTION 2.11. Defaulted Interest....................................... 49
SECTION 2.12. Numbers.................................................. 49
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee....................................... 49
<PAGE>
2
SECTION 3.02. Selection of Securities to be Redeemed................... 50
SECTION 3.03. Notice of Redemption..................................... 50
SECTION 3.04. Effect of Notice of Redemption........................... 51
SECTION 3.05. Deposit of Redemption Price.............................. 51
SECTION 3.06. Securities Redeemed in Part.............................. 52
SECTION 3.07. Optional Redemption...................................... 52
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities.................................... 53
SECTION 4.02. SEC Reports.............................................. 53
SECTION 4.03. Limitation on Indebtedness............................... 54
SECTION 4.04. Limitation on Restricted Payments........................ 57
SECTION 4.05. Limitation on Restrictions on Distributions from
Subsidiaries............................................ 64
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock....... 65
SECTION 4.07. Limitation on Transactions with Affiliates............... 70
SECTION 4.08. Change of Control........................................ 71
SECTION 4.09. Compliance Certificate................................... 72
SECTION 4.10. Further Instruments and Acts............................. 73
SECTION 4.11. Limitation on the Sale or Issuance of
Capital Stock of Domestic Subsidiaries.................. 73
SECTION 4.12. Limitation on Liens...................................... 73
SECTION 4.13. Limitation on Sale/Leaseback Transactions................ 73
SECTION 4.14. Limitation on Lines of Business.......................... 74
SECTION 4.15. Future Guarantor Subsidiaries............................ 74
ARTICLE V
Successor Company
<PAGE>
3
SECTION 5.01. When Company May Merge or Transfer Assets................ 75
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default........................................ 76
SECTION 6.02. Acceleration............................................. 78
SECTION 6.03. Other Remedies........................................... 79
SECTION 6.04. Waiver of Past Defaults.................................. 79
SECTION 6.05. Control by Majority...................................... 79
SECTION 6.06. Limitation on Suits...................................... 80
SECTION 6.07. Rights of Holders to Receive Payment..................... 80
SECTION 6.08. Collection Suit by Trustee............................... 81
SECTION 6.09. Trustee May File Proofs of Claim......................... 81
SECTION 6.10. Priorities............................................... 81
SECTION 6.11. Undertaking for Costs.................................... 82
SECTION 6.12. Waiver of Stay or Extension Laws......................... 82
SECTION 6.13. Restoration of Rights and Remedies....................... 82
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee........................................ 83
SECTION 7.02. Rights of Trustee........................................ 84
SECTION 7.03. Individual Rights of Trustee............................. 85
SECTION 7.04. Trustee's Disclaimer..................................... 85
SECTION 7.05. Notice of Defaults....................................... 85
SECTION 7.06. Reports by Trustee to Holders............................ 86
SECTION 7.07. Compensation and Indemnity............................... 86
SECTION 7.08. Replacement of Trustee................................... 87
SECTION 7.09. Successor Trustee by Merger.............................. 88
SECTION 7.10. Eligibility; Disqualification............................ 89
SECTION 7.11. Preferential Collection of Claims Against Company ....... 89
<PAGE>
4
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities; Defeasance......... 89
SECTION 8.02. Conditions to Defeasance................................. 90
SECTION 8.03. Application of Trust Money............................... 92
SECTION 8.04. Repayment to Company..................................... 92
SECTION 8.05. Indemnity for Government Obligations..................... 92
SECTION 8.06. Reinstatement............................................ 92
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders............................... 93
SECTION 9.02. With Consent of Holders.................................. 94
SECTION 9.03. Compliance with Trust Indenture Act...................... 95
SECTION 9.04. Revocation and Effect of Consents and Waivers............ 95
SECTION 9.05. Notation on or Exchange of Securities.................... 96
SECTION 9.06. Trustee to Sign Amendments............................... 96
SECTION 9.07. Payment for Consent...................................... 97
ARTICLE X
Subordination of the Securities
SECTION 10.01. Agreement to Subordinate................................. 97
SECTION 10.02. Liquidation, Dissolution, Bankruptcy..................... 97
SECTION 10.03. Default on Senior Indebtedness of the Company............ 98
SECTION 10.04. Acceleration of Payment of Securities.................... 99
SECTION 10.05. When Distribution Must Be Paid Over...................... 99
<PAGE>
5
SECTION 10.06. Subrogation.............................................. 99
SECTION 10.07. Relative Rights.......................................... 100
SECTION 10.08. Subordination May Not Be Impaired by Company............. 100
SECTION 10.09. Rights of Trustee and Paying Agent....................... 100
SECTION 10.10. Distribution or Notice to Representative................. 101
SECTION 10.11. Article X Not To Prevent Events of Default or
Limit Right To Accelerate............................... 101
SECTION 10.12. Trust Moneys Not Subordinated............................ 101
SECTION 10.13. Trustee Entitled to Rely................................. 101
SECTION 10.14. Trustee to Effectuate Subordination...................... 102
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Company............................. 102
SECTION 10.16. Reliance by Holders of Senior Indebtedness of the
Company on Subordination Provisions..................... 102
SECTION 10.17. Trustee's Compensation Not Prejudiced.................... 103
ARTICLE XI
Subsidiary Guarantees
SECTION 11.01. Subsidiary Guarantees.................................... 103
SECTION 11.02. Limitation on Liability.................................. 105
SECTION 11.03. Successors and Assigns................................... 106
SECTION 11.04. No Waiver................................................ 106
SECTION 11.05. Modification............................................. 106
SECTION 11.06. Execution of Supplemental Indenture
for Future Guarantor Subsidiaries....................... 107
ARTICLE XII
Subordination of the Subsidiary Guaranties
SECTION 12.01. Agreement to Subordinate................................. 107
SECTION 12.02. Liquidation, Dissolution, Bankruptcy..................... 108
<PAGE>
6
SECTION 12.03. Default on Senior Indebtedness of a
Guarantor Subsidiary.................................... 108
SECTION 12.04. Demand for Payment....................................... 109
SECTION 12.05. When Distribution Must Be Paid Over...................... 110
SECTION 12.06. Subrogation.............................................. 110
SECTION 12.07. Relative Rights.......................................... 110
SECTION 12.08. Subordination May Not Be Impaired by a
Guarantor Subsidiary.................................... 110
SECTION 12.09. Rights of Trustee and Paying Agent....................... 111
SECTION 12.10. Distribution or Notice to Representative................. 111
SECTION 12.11. Article XII Not To Prevent Events of Default or Limit
Right To Accelerate..................................... 111
SECTION 12.12. Trustee Entitled to Rely................................. 112
SECTION 12.13. Trustee to Effectuate Subordination...................... 112
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of a Guarantor Subsidiary.................. 113
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor Subsidiary on Subordination Provisions........ 113
ARTICLE XIII
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls............................. 113
SECTION 13.02. Notices.................................................. 114
SECTION 13.03. Communication by Holders with Other Holders.............. 114
SECTION 13.04. Certificate of Opinion as to Conditions Precedent........ 115
SECTION 13.05. Statements Required in Certificate or Opinion............ 115
SECTION 13.06. When Securities Disregarded.............................. 115
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar............. 116
SECTION 13.08. Legal Holidays........................................... 116
<PAGE>
7
SECTION 13.09. Governing Law............................................ 116
SECTION 13.10. No Recourse Against Others............................... 116
SECTION 13.11. Successors............................................... 116
SECTION 13.12. Multiple Originals....................................... 117
SECTION 13.13. Table of Contents; Headings.............................. 117
Exhibit A - Form of Face of Initial Security
Exhibit B - Form of Face of Exchange Security
Exhibit C - Form of Transferee Letter of Representation
Exhibit D - Form of Supplemental Indenture
Schedule 4.04 - Certain Investments
Schedule 4.07 - Certain Agreements with Affiliates
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1) ............................................... 7.10
(a)(2) ............................................... 7.10
(a)(3) ............................................... N.A.
(a)(4) ............................................... N.A.
(b) .................................................. 7.08; 7.10
(c) .................................................. N.A.
311(a) .................................................. 7.11
(b) .................................................. 7.11
(c) .................................................. N.A.
312(a) .................................................. 2.05
(b) .................................................. 13.03
(c) .................................................. 13.03
313(a) .................................................. 7.06
(b)(1) ............................................... N.A.
(b)(2) ............................................... 7.06
(c) .................................................. 13.02
(d) .................................................. 7.06
314(a) .................................................. 4.02; 4.09; 13.02
(b) .................................................. N.A.
(c)(1) ............................................... 13.04
(c)(2) ............................................... 13.04
(c)(3) ............................................... N.A.
(d) .................................................. N.A.
(e) .................................................. 13.05
(f) .................................................. 4.12
315(a) .................................................. 7.01
(b) .................................................. 7.05; 13.02
(c) .................................................. 7.01
(d) .................................................. 7.01
(e) .................................................. 6.11
316(a)(last
sentence) ............................................... 13.06
(a)(1)(A) ............................................ 6.05
(a)(1)(B) ............................................ 6.04
(a)(2) ............................................... N.A.
(b) .................................................. 6.07
317(a)(1) ............................................... 6.08
(a)(2) ............................................... 6.09
(b) .................................................. 2.04
318(a) .................................................. 13.01
N.A. means Not Applicable.
- ---------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
CONFORMED COPY
<PAGE>
INDENTURE dated as of August 5, 1996, among LIFESTYLE
FURNISHINGS INTERNATIONAL LTD., a Delaware corporation (the
"Company"); certain of the Company's subsidiaries signatory
hereto (each, a "Guarantor Subsidiary" and, collectively, the
"Guarantor Subsidiaries"); and IBJ SCHRODER BANK & TRUST
COMPANY, a New York banking corporation (the "Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Company's 10-7/8%
Senior Subordinated Notes due 2006 (the "Initial Securities") and, when and if
issued pursuant to a registered exchange for Initial Securities, the Company's
10-7/8% Senior Subordinated Notes due 2006.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Acquisition Agreement" means the Acquisition Agreement dated as of
March 29, 1996, between Holdings and Masco as amended and as in effect on the
Issue Date.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock), including improvements to existing assets, to
be used by the Company or a Restricted Subsidiary in a Related Business; (ii)
the Capital Stock of a Person that becomes a Restricted Subsidiary as a result
of the acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary; provided, however, that, in
the case of clauses (ii) and
<PAGE>
2
(iii), such Restricted Subsidiary is primarily engaged in a Related Business.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of shares representing 5% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Applicable Premium" means, with respect to a Security, the greater
of (i) 1.0% of the then outstanding principal amount of such Security and (ii)
the excess of (A) the present value of all remaining required interest and
principal payments due on such Security, computed using a discount rate equal to
the Treasury Rate plus 75 basis points, over (B) the then outstanding principal
amount of such Security.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares and, in the case of Foreign Subsidiaries, to the
extent required by local ownership laws in foreign countries, shares owned by
foreign shareholders), property or assets (each referred to for the purposes of
this definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than: (i) a disposition by a Restricted Subsidiary to
the
<PAGE>
3
Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary; (ii) a disposition of property or assets, including inventory, in
the ordinary course of business consistent with past practices of the Home
Furnishings Group; (iii) a Financing Disposition; (iv) any sale of a Receivable,
or interest therein, pursuant to the Sunbury Factoring Arrangement; and (v) for
purposes of Section 4.06 only, a disposition subject to Section 4.04.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate assumed in making calculations in accordance with FAS 13) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or scheduled redemption or similar payment with respect to such Preferred Stock
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Credit Agreement or any refinancing or replacements thereof
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for postfiling interest is allowed in such
proceeding), fees, charges, expenses, reimbursement obligations, guarantees and
all other amounts payable thereunder or in respect thereof.
<PAGE>
4
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Bridge Receivables Financing" means (a) the sale by Holdings and
the Subsidiaries of the Company of Receivables to the Receivables Subsidiary
pursuant to the Receivables Sale Agreement, (b) the sale of such Receivables (or
participation interests therein) by the Receivables Subsidiary pursuant to the
Receivables Pooling Agreement and (c) the servicing of such Receivables pursuant
to the Receivables Servicing Agreement.
"Business Day" means a day other than a Saturday, Sunday or other
day on which banking institutions in New York State are authorized or required
by law to close.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP. The amount of Indebtedness
represented by a Capitalized Lease Obligation shall be the capitalized amount of
such obligation determined in accordance with GAAP, and the Stated Maturity
thereof shall be the date of the last scheduled payment of rent or any other
amount due under the relevant lease prior to the first date upon which such
lease may be terminated by the lessee without payment of a penalty.
"Change of Control" means the occurrence of any of
the following events:
(a) prior to the earlier to occur of the first public offering of
Voting Stock of the Company or
<PAGE>
5
Holdings, the Permitted Investors cease to be entitled (by "beneficial
ownership" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of
Voting Stock, contract or otherwise) to elect or cause the election of
directors of Holdings having a majority of the total voting power of the
board of directors of Holdings, whether as a result of issuance of
securities of Holdings, any merger, consolidation, liquidation or
dissolution of Holdings, any direct or indirect transfer of securities by
any Permitted Investor or otherwise (for purposes of this clause (a), the
Permitted Investors shall be deemed to beneficially own any Voting Stock
of a corporation (the "specified corporation") held by any other
corporation (the "parent corporation") so long as one or more of the
Permitted Investors beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the voting power of the Voting
Stock of the parent corporation);
(b) prior to the first public offering of Voting Stock of the
Company, Holdings shall cease to own 100% of the issued and outstanding
Voting Stock of the Company, whether as a result of issuance of securities
of the Company, any merger, consolidation, liquidation or dissolution of
the Company, any direct or indirect transfer of securities by Holdings or
otherwise;
(c) after the first public offering of Voting Stock of the Company
or Holdings, any person or group (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more of the Permitted
Holders, is or becomes the beneficial owner (as defined in clause (a)
above), directly or indirectly, of Voting Stock that represents more than
30% of the aggregate ordinary voting power of all classes of the Voting
Stock of the Company or Holdings, voting together as a single class, and
either (x) the Permitted Holders beneficially own (as defined in clause
(a) above), directly or indirectly, in the aggregate Voting Stock that
represents a lesser
<PAGE>
6
percentage of the aggregate ordinary voting power of all classes of the
Voting Stock of the Company or Holdings, as the case may be, voting
together as a single class, than such other person or group and are not
entitled (by voting power, contract or otherwise) to elect directors of
the Company or Holdings having a majority of the total voting power of the
Board of Directors or the board of directors of Holdings, as the case may
be, or (y) such other person or group is entitled to elect directors of
the Company or Holdings having a majority of the total voting power of the
Board of Directors or the board of directors of Holdings, as the case may
be; or
(d) after the first public offering of Voting Stock of Holdings or
the Company, during any period of not greater than two consecutive years
beginning after the Issue Date, individuals who at the beginning of such
period constituted the Board of Directors or the board of directors of
Holdings, as the case may be (together with any new directors whose
election by such Board of Directors or such board of directors of
Holdings, as the case may be, or whose nomination for election by the
shareholders of the Company or Holdings, as the case may be, was approved
by a vote of a majority of the directors of the Company or Holdings, as
the case may be, then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason to have a majority of the
total voting power of the Board of Directors or the board of directors of
Holdings, as the case may be.
"Citicorp" means Citicorp, a Delaware corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the
<PAGE>
7
applicable provisions of this Indenture and, thereafter, means the successor
and, for purposes of any provision contained herein and required by the TIA,
each other obligor on the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination (determined, for the four fiscal quarters ending
prior to the Issue Date, or any thereof, on a pro forma basis to give effect to
the acquisition of the Home Furnishings Group by the Company as if it occurred
at the beginning of such period) to (ii) Consolidated Interest Expense for such
four fiscal quarters (determined, for the four fiscal quarters ending prior to
the Issue Date, or any thereof, on a pro forma basis to give effect to the
acquisition of the Home Furnishings Group by the Company as if it had occurred
at the beginning of such period); provided, however, that (1) if the Company or
any Restricted Subsidiary has Incurred any Indebtedness since the beginning of
such period that remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio
is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period (except that in the case
of Indebtedness to finance seasonal fluctuations in working capital needs
Incurred under a revolving credit or similar arrangement, the amount thereof
shall be deemed to be the average daily balance of such Indebtedness during such
four- quarter period); (2) if since the beginning of such period the Company or
any Restricted Subsidiary shall have made any Asset Disposition, (x) the EBITDA
for such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the
<PAGE>
8
subject of such Asset Disposition for such period or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such period
and (y) Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale); (3) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of the assets of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness in connection therewith) as if such Investment or acquisition
occurred on the first day of such period and (4) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(2) or (3) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to
<PAGE>
9
an acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries for
such period, plus, to the extent Incurred by the Company and its Restricted
Subsidiaries in such period but not included in such interest expense: (i)
interest expense attributable to Capitalized Lease Obligations; (ii)
amortization of debt discount; (iii) capitalized interest; (iv) noncash interest
expense; (v) commissions, discounts and other fees and charges with respect to
letters of credit and bankers' acceptance financing; (vi) net costs associated
with Hedging Obligations; (vii) the interest portion of any deferred payment
obligation; (viii) interest actually paid on any Indebtedness of any other
Person that is Guaranteed by the Company or any Restricted Subsidiary; (ix) the
cash contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company or a Wholly Owned Subsidiary) in
connection with Indebtedness Incurred by such plan or trust; and (x) the earned
discount or yield with respect to the sale of receivables (without duplication
of amounts included in Consolidated Net Income); but in no event shall include
(i) amortization of debt issuance costs; (ii) Preferred Stock dividends in
respect of all Preferred Stock of Subsidiaries of the Company and Disqualified
Stock of the
<PAGE>
10
Company held by Persons other than the Company or a Wholly Owned Subsidiary; or
(iii) interest Incurred in connection with Investments in discontinued
operations.
"Consolidated Net Income" means, for any period, the consolidated
net income (loss) of the Company and its Subsidiaries for such period; provided,
however, that there shall not be included in such Consolidated Net Income:
(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations
contained in clause (iv) below, the Company's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or
other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (B) the Company's equity in a net
loss of any such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net Income;
(ii) for purposes of Section 4.04(a)(3)(A) only, any net income
(loss) of any person acquired by the Company or a Subsidiary in a pooling
of interests transaction for any period prior to the date of such
acquisition;
(iii) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the limitations contained in (iv) below, the Company's equity
in the net income of any such Restricted Subsidiary for such period shall
be included in such Consolidated Net Income up to the aggregate amount of
cash that could
<PAGE>
11
have been distributed by such Restricted Subsidiary during such period to
the Company or another Restricted Subsidiary as a dividend (subject, in
the case of a dividend that could have been made to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income;
(iv) any gain (or loss) realized upon the sale or other disposition
of any asset of the Company or its consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise
disposed of in the ordinary course of business and any gain (or loss)
realized upon the sale or other disposition of any Capital Stock of any
Person;
(v) any extraordinary gain or loss; and
(vi) the cumulative effect of a change in accounting principles
after the Issue Date.
Notwithstanding the foregoing, for the purpose of Section 4.04 only,
there shall be excluded from Consolidated Net Income any dividends, repayments
of loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under Section 4.04(a)(3)(D). Notwithstanding anything to the contrary in Section
4.04, all amounts paid, advanced or loaned to Holdings pursuant to Sections
4.04(b)(ix) or 4.04(b)(x) shall be deducted in computing Consolidated Net Income
and all repayments by Holdings of advances or loans made pursuant to Section
4.04(b)(x) shall be included in calculating Consolidated Net Income. For
purposes of determining Consolidated Net Income for a period, tax expense with
respect to taxes covered by the Tax Sharing Agreement shall equal the amount of
payments
<PAGE>
12
required to be made by the Company and its Subsidiaries under the Tax Sharing
Agreement for such period.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Consolidated Non-Cash Charges" of any Person means, for any period,
the aggregate depreciation, amortization (including the amortization of the cost
of the fabric sample books) and other non-cash charges of such Person and its
Consolidated Subsidiaries for such period, on a consolidated basis, as
determined in accordance with GAAP (excluding any such other non-cash charge
which requires an accrual or reserve for cash charges for any future period).
"Consolidation" means the consolidation of the accounts of each of
the Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the Credit Agreement dated as of the Issue
Date, as amended, waived or otherwise modified from time to time, among
Holdings, the Company, the other borrowers party thereto from time to time, the
lenders party thereto from time to time, Chemical Bank, a New York banking
corporation, as administrative agent, and Chemical
<PAGE>
13
Bank Delaware, as issuing bank (except to the extent that any such amendment,
waiver or other modification thereto would be prohibited by the terms of this
Indenture).
"Currency Agreement" means with respect to any Person any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement as to which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Definitive Securities" means Securities that are in the form of
Exhibit A or Exhibit B attached hereto that do not include the information
called for by footnote 1 thereof.
"Depository" means, with respect to the Securities issuable or
issued in whole or in part in global form, the person specified in Section 2.03
as the Depository with respect to the Securities, until a successor shall have
been appointed and becomes such pursuant to the applicable provisions of this
Indenture, and thereafter, "Depository" shall mean or include such successor.
"Designated Senior Indebtedness" of the Company means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness of the Company which, at the
date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are committed to
lend at least $10.0 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of this Indenture. "Designated Senior
Indebtedness" of any Guarantor Subsidiary has a correlative meaning.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for
<PAGE>
14
which it is exchangeable or exercisable) or upon the happening of any event (i)
matures or is mandatorily redeemable pursuant to a sinking fund obligation or
otherwise; (ii) is convertible or exchangeable for Indebtedness or Disqualified
Stock; or (iii) is redeemable at the option of the holder thereof, in whole or
in part, in each case on or prior to 91 days after the Stated Maturity of the
Securities. Disqualified Stock shall not include any Capital Stock that is not
otherwise Disqualified Stock if by its terms the holders have the right to
require the issuer to repurchase such stock upon a Change of Control (or upon
events substantially similar to a Change of Control).
"Domestic Subsidiary" means any Restricted Subsidiary of the Company
other than a Foreign Subsidiary.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense; (ii) Consolidated Interest
Expense; and (iii) Consolidated Non-Cash Charges, in each case for such period.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization of, a Subsidiary of the
Company shall be added to Consolidated Net Income to compute EBITDA only to the
extent (and in the same proportion) that the net income (loss) of such
Subsidiary was included in calculating Consolidated Net Income. For purposes of
determining EBITDA for a period, tax expense with respect to taxes covered by
the Tax Sharing Agreement shall equal the amount of payments required to be made
by the Company and its Subsidiaries under the Tax Sharing Agreement for such
period.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement dated as of the Issue Date by and among the
Initial Purchasers and the Company, as such agreement may be amended, modified,
or
<PAGE>
15
supplemented from time to time in accordance with the terms thereof.
"Exchange Offer" shall have the meaning set forth in the Exchange
and Registration Rights Agreement.
"Exchange Offer Registration Statement" shall have the meaning set
forth in the Exchange and Registration Rights Agreement.
"Exchange Securities" means the 10-7/8% Senior Subordinated Notes
due 2006 to be issued pursuant to this Indenture in connection with the offer to
exchange Securities for the Initial Securities that may be made by the Company
pursuant to the Exchange and Registration Rights Agreement.
"Financing Disposition" means any sale of a Receivable, or interest
therein, by the Company or any Subsidiary to the Receivables Subsidiary, or by
the Receivables Subsidiary, pursuant to the Permitted
Receivables Financing.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company
which is not organized under the laws of the United States of America or any
State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, in statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP.
<PAGE>
16
"Global Security" means a Security that is in the form of Exhibit A
or Exhibit B hereto that includes the information called for by footnote 1
thereof.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreement
to keep well, to purchase assets, goods, securities or services, to take or pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor Subsidiary" means any Person that has issued a Subsidiary
Guaranty.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Holdings" means Furnishings International Inc., a Delaware
corporation.
"Holdings Business" means the business conducted by Holdings (i) as
successor to Lineage Home Furnishings, Inc. ("Lineage") and Masco Home
Furnishings, Inc. ("MHF") and (ii) that is substantially consistent with the
business
<PAGE>
17
of Lineage and MHF as conducted immediately prior to the Issue Date.
"Home Furnishings Group" means the corporations comprising the home
furnishings group of Masco as constituted immediately prior to the Issue Date.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such person at the time it becomes a Restricted Subsidiary; provided
further, however, that in the case of a discount security, the accretion of
original issue discount on such security shall not be considered an Incurrence
of Indebtedness but the whole face amount of such security shall be deemed
Incurred upon issuance of such security.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money;
(ii) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto) other than letters of credit or similar instruments
supporting trade payables entered into in the ordinary course of business
of such person to the extent that such letters of credit are not drawn
upon or, if and to the extent drawn upon, such drawing is reimbursed not
later than the third business day following such drawing;
<PAGE>
18
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion
of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(vi) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock
or, with respect to any Subsidiary of the Company, any Preferred Stock
(but excluding, in each case, any accrued dividends);
(vii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person
shall be the lesser of (A) the fair market value of such asset at such
date of determination and (B) the amount of such Indebtedness of such
other Persons;
(viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person; and
(ix) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented from
time to time.
<PAGE>
19
"Initial Securities" means the 10-7/8% Senior Subordinated Notes due
2006, issued under this Indenture on or about the date hereof.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances or loans to customers or suppliers in the ordinary
course of business that are recorded as accounts receivable on the balance sheet
of the Person making such loan or advance) or other extension of credit
(including by way of Guarantee or similar arrangement) or capital contribution
to (by means of any transfer of cash or other property to others or any payment
for property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.04, (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the
<PAGE>
20
time of such transfer, in each case as determined in good faith by the Board of
Directors.
"Issue Date" means the date on which the Initial Securities are
originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Management Agreement" means the Management Agreement dated as of
the Issue Date, between Holdings and the Company as in effect on the Issue Date.
"Management Investors" means the officers and employees of Holdings,
the Company or a Subsidiary of the Company who acquire Voting Stock of Holdings
on or after the Issue Date and any of their Permitted Transferees.
"Masco" means Masco Corporation, a Delaware corporation.
"Masco Investors" means Masco and its Permitted Transferees.
"Masco Notes" means the senior pay-in-kind notes of Holdings issued
to Masco on the Issue Date in an aggregate amount of $285.0 million.
"Master Servicer" means any entity formed for purposes of acting as
a master servicer under a Permitted Receivables Financing, in each case, a
special purpose Wholly Owned Subsidiary.
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to
<PAGE>
21
a note or installment receivable, or from an escrow account or otherwise, in
each case only as and when received, but excluding any other consideration
received in the form of assumption by the acquiring person of Indebtedness or
other obligations relating to the properties or assets that are the subject of
such Asset Disposition or received in any other non-cash form) therefrom, in
each case net of: (i) all legal, title and recording expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial, foreign
and local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition; (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law, be repaid out of the proceeds from such Asset Disposition;
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition; and (iv) appropriate amounts to be provided by the party or parties
making such Asset Disposition as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, filing and registration fees, trustee's fees,
consultant and other fees actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of the Company.
<PAGE>
22
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Permitted Holders" means the 399 Investors, the Masco Investors and
the Management Investors; provided that any Management Investor and any 399
Investor (other than 399 Venture Partners, Citicorp or any direct or indirect
wholly-owned Subsidiary of Citicorp) shall not be a "Permitted Holder" if such
Person is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of Voting Stock that represents at least
30% of the aggregate ordinary voting power of all classes of the Voting Stock of
the Company or Holdings, voting together as a single class (without giving
effect to the attribution of beneficial ownership as a result of any
stockholders agreement as in effect on the Issue Date, and any amendment to such
agreement that does not materially change the allocation of voting power
provided for in such agreement).
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in: (i) the Company; (ii) a Restricted Subsidiary or a
Person which shall, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such Restricted
Subsidiary is a Related Business; (iii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that such Person's primary business is
a Related Business; (iv) Temporary Cash Investments; (v) receivables owing to
the Company or any Restricted Subsidiary, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; provided, however, that such trade terms may include such
concessionary trade terms as the Company or any such
<PAGE>
23
Restricted Subsidiary deems reasonable under the circumstances; (vi) payroll,
travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business; (vii) loans or advances to
employees made in the ordinary course of business and not exceeding $5.0 million
in the aggregate outstanding at any one time; and (viii) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments; (ix) Investments in property or assets to be used in
(or in Restricted Subsidiaries and any entity that, as a result of such
Investment, is a Restricted Subsidiary engaged in) a Related Business; (x)
securities received as consideration in sales of assets made in compliance with
Section 4.06; (xi) Guarantees relating to Indebtedness which is permitted to be
Incurred under Section 4.03; or (xii) other Investments, of any type, provided
that the amount of such Investments made after the Issue Date in reliance on
this clause (xii) and outstanding at any time does not exceed the amount of the
Investments set forth on Schedule 4.04 hereto plus $25.0 million.
"Permitted Investors" means (i) the Masco Investors: (ii) 399
Venture Partners, Citicorp and any direct or indirect wholly owned Subsidiary of
Citicorp; and (iii) any voting trust for shares held by Management Investors,
the voting trustees of which trust are (and must be) Management Investors and
which voting trust does not have the power (taking into account any voting
agreement) to elect or cause the election of directors having more than 30% of
the total voting power of directors on the board of directors of Holdings.
"Permitted Receivables Financing" means (a) the Bridge Receivables
Financing and (b) any subsequent financing secured substantially by Receivables
(and related assets) originated by Holdings and any Restricted Subsidiary in any
amount; provided that (i) such subsequent receivables financing has a later or
equal final maturity and a longer
<PAGE>
24
or equal weighted average life than the Bridge Receivables Financing; (ii) all
sales of Receivables to or by the Receivables Subsidiary are made at fair market
value (as determined in good faith by the Board of Directors); (iii) the
interest rate applicable to such subsequent receivables financing shall be a
market interest rate (as determined in good faith by the Board of Directors) as
of the time such financing is entered into; (iv) such financing is non-recourse
to the Company and its Subsidiaries (other than the Receivables Subsidiary)
except to a limited extent customary for such financings; and (v) the covenants,
events of default and other provisions thereof, collectively, shall be market
terms (as determined in good faith by the Board of Directors).
"Permitted Transferee" means (a) with respect to 399 Venture
Partners: (i) Citicorp, any direct or indirect wholly owned subsidiary of
Citicorp, and any officer, director or employee of 399 Venture Partners,
Citicorp or any wholly owned subsidiary of Citicorp; (ii) any spouse or lineal
descendant (including by adoption and stepchildren) of the officers, directors
and employees referred to in clause (a)(i) above; and (iii) any trust,
corporation or partnership 100% in interest of the beneficiaries, stockholders
or partners of which consists of one or more of the persons described in clause
(a)(i) or (ii) above; (b) with respect to Masco, any direct or indirect
Subsidiary of Masco; and (c) with respect to any officer or employee of
Holdings, the Company or a Subsidiary of the Company, (i) any spouse or lineal
descendant (including by adoption and stepchildren) of such officer or employee
and (ii) any trust, corporation or partnership 100% in interest of the
beneficiaries, stockholders or partners of which consists of such officer or
employee, any of the persons described in clause (c)(i) above or any combination
thereof.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
<PAGE>
25
"Preferred Stock," as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
that is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus
the premium, if any, payable on the Security that is due or overdue or is to
become due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company or Holdings (or, for purposes of Section
4.11(d), the Domestic Subsidiary referred to therein) pursuant to an effective
registration statement (other than a registration statement on Form S-4, S-8 or
any successor or similar forms) under the Securities Act (whether alone or in
conjunction with any secondary public offering).
"Public Market" means any time after (x) a Public Equity Offering
has been consummated and (y) at least 15% of the total issued and outstanding
common stock of the Company or Holdings (or, for purposes of Section 4.11(d),
the Domestic Subsidiary referred to therein) has been distributed by means of an
effective registration statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of
the deferred purchase price of an asset, any conditional sale obligation, any
obligation under any title retention agreement or any other purchase money
obligation, in each case where the maturity of such Indebtedness does not exceed
the anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by the Company or a Restricted Subsidiary of such asset,
including additions and improvements; provided that such Indebtedness is
incurred within 180 days after the acquisition by the Company or Restricted
Subsidiary of such
<PAGE>
26
asset, or is in existence with respect to any asset or other property at the
time such asset or property is acquired.
"Receivable" means a right to receive payment arising from a sale or
lease of goods or services by a Person pursuant to an arrangement with another
Person pursuant to which such other Person is obligated to pay for goods or
services under terms that permit the purchase of such goods and services on
credit, as determined in accordance with GAAP.
"Receivables Pooling Agreement" means the Pooling Agreement relating
to a Permitted Receivables Financing, among the Receivables Subsidiary, the
Master Servicer and the Receivables Trustee.
"Receivables Sale Agreement" means the Receivables Sale Agreement
relating to a Permitted Receivables Financing, among the Receivables Subsidiary,
Holdings, the Company and the Subsidiaries of the Company party thereto.
"Receivables Servicing Agreement" means the Servicing Agreement
relating to a Permitted Receivables Financing, among the Receivables Subsidiary,
the Master Servicer, the Subsidiaries of the Company party thereto and the
Receivables Trustee.
"Receivables Subsidiary" means LFI Receivables Corporation or any
successor thereto or other entity formed for purposes of a Permitted Receivables
Financing, in each case a bankruptcy-remote, special-purpose Wholly Owned
Subsidiary.
"Receivables Trustee" means the trustee on behalf of the holders of
participation interests in the receivables sold pursuant to a Permitted
Receivables Financing.
"Redemption Date" means the date on which the Securities are
optionally redeemed pursuant to Section 3.07.
<PAGE>
27
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances" and "refinanced"
shall have a correlative meaning) any Indebtedness existing on the Issue Date or
Incurred in compliance with this Indenture (including Indebtedness of the
Company that refinances Indebtedness of any Restricted Subsidiary (other than
the Receivables Subsidiary) (to the extent permitted in this Indenture) and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of that
or another Restricted Subsidiary (other than the Receivables Subsidiary) or of
the Company), including Indebtedness that refinances Refinancing Indebtedness;
provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being refinanced; (ii)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced; (iii) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or, if issued with original issue
discount, an aggregate issue price) that is equal to or less than the aggregate
principal amount (or, if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced plus the
amount of any premium reasonably determined by the Company or such Restricted
Subsidiary, as applicable, as necessary at the time of such refinancing to
accomplish such refinancing or required pursuant to the terms thereof, plus the
amount of expenses the Company or such Restricted Subsidiary, as applicable,
Incurred in connection with such refinancing; and (iv) if the Indebtedness being
refinanced is subordinated in right of payment to the Securities, such
Refinancing Indebtedness is subordinated in right of payment to the Securities
to the extent of the Indebtedness being refinanced; provided further, however,
that Refinancing Indebtedness shall not include (x) Indebtedness of the
Receivables Subsidiary that refinances Indebtedness of the Company or (y)
Indebtedness of the Company or a Restricted
<PAGE>
28
Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary.
"Registered Exchange Offer" shall have the meaning set forth in the
Exchange and Registration Rights Agreement.
"Related Business" means any business of the Company and the
Restricted Subsidiaries as conducted on the Issue Date and any business related,
ancillary or complementary thereto.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness.
"Restricted Securities Legend" means the legend set forth in Section
2.06 hereof.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or such Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" of the Company means any Indebtedness of the
Company secured by a Lien. "Secured Indebtedness" of any Guarantor Subsidiary
has a correlative meaning.
<PAGE>
29
"Securities" means, collectively, the Initial Securities and, when
and if issued as provided in the Exchange and Registration Rights Agreement, the
Exchange
Securities.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to the
Global Security (as appointed by the Depository), or any successor entity
thereto and shall initially be the Trustee.
"Senior Indebtedness" of the Company means all principal of, premium
(if any), accrued interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company
whether or not a claim for post filing interest is allowed in such proceedings),
fees, charges, expenses, reimbursement obligations, guarantees and other amounts
owing with respect to all Indebtedness of the Company, and including all Bank
Indebtedness, whether outstanding on the Issue Date or thereafter Incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such obligations are not superior in
right of payment to the Securities; provided, however, that Senior Indebtedness
shall not include (1) any obligation of the Company to any Subsidiary; (2) any
liability for Federal, foreign, state, local or other taxes owed or owing by the
Company; (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities); (4) any Indebtedness or obligation of the Company
which is subordinate or junior in any respect (other than as a result of the
Indebtedness being unsecured) to any other Indebtedness or obligation of the
Company, including any Senior Subordinated Indebtedness and any Subordinated
Obligations; (5) any obligations with respect to any Capital Stock; or (6) any
Indebtedness Incurred in violation of this
<PAGE>
30
Indenture. "Senior Indebtedness" of any Guarantor Subsidiary has a correlative
meaning.
"Senior Subordinated Indebtedness" of the Company means the
Securities and any other Indebtedness of the Company that specifically provides
that such Indebtedness is to rank pari passu with the Securities and is not
subordinated by its terms to any Indebtedness or other obligation of the Company
which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of any
Guarantor Subsidiary has a correlative meaning (and for purposes of such
definition "Securities" shall mean "Subsidiary Guaranty").
"Shelf Registration Statement" shall have the meaning set forth in
the Exchange and Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of clause (w)(1)
or (2) of Rule 1-02 under Regulation S-X promulgated by the SEC.
"Simmons" means Simmons Upholstered Furniture Corporation, a
Delaware corporation.
"Specified Loss of the Holdings Business" means, for any period, the
amount, if any, by which the Cash Flow of the Holdings Business for such period
is less than zero. For such purpose, "Cash Flow of the Holdings Business" for
any period shall be calculated in accordance with the formula set forth in the
next sentence, for which purpose each item specified therein shall be determined
on an unconsolidated basis in accordance with GAAP on the basis of the
unconsolidated financial statements of Holdings for such period and in
accordance with such pro forma adjustments as are necessary (as determined in
the reasonable judgment of the Company) so as to take into account, with respect
to each item in such calculation, only the business and operations of Holdings
as they pertain to the Holdings Business in the form in which it is conducted on
the Issue
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31
Date and not to any other business, operation, investment or subsidiary of
Holdings (including the Company and including any other business or investment
undertaken by the entities comprising the Holdings Business), whether in
existence on the Issue Date or thereafter made, developed or acquired. Cash Flow
of the Holdings Business shall equal (a) the sum of: (i) net income for such
period; (ii) the provision for income taxes to the extent such provision reduces
net income for such period; (iii) the amount of depreciation, amortization and
other non-cash expenses (including non-cash interest expense), losses or other
charges that were deducted in determining net income for such period; and (iv)
all Impermissible Expenses to the extent deducted in calculating net income;
minus (b) the sum of: (i) any non-cash gains included in net income and not
otherwise excluded from clause (a) above; (ii) capital expenditures paid for by
Holdings with cash from operations during such period for the sole purpose of
the operations of the Holdings Business; and (iii) payments in respect of income
taxes during such period, but only to the extent attributable to the taxable
income, if any, of Holdings attributable to the Holdings Business. For purposes
of the foregoing, non-cash interest expense shall be deemed to include any
interest expense (whether or not actually paid in cash) on the Masco Notes prior
to the eighth anniversary of the original issuance of the Masco Notes.
"Impermissible Expenses" shall mean all payments of any kind to, and expenses or
costs incurred by Holdings on behalf or for the benefit of, any holder of any
security of Holdings, any subsidiary of Holdings or any other Affiliate of
Holdings, except for payments for goods or services provided by such Person but
only to the extent of the fair market value of such goods and services provided
to or for the benefit of the Holdings Business.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond
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32
the control of the issuer unless such contingency has occurred).
"Subordinated Obligation" of the Company means any Indebtedness of
the Company (whether outstanding on the Issue Date or thereafter Incurred) which
is subordinate or junior in right of payment to the Securities pursuant to a
written agreement. "Subordinated Obligation" of any Guarantor Subsidiary has a
correlative meaning.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, trustees or members of any other
governing body thereof is at the time owned or controlled, directly or
indirectly, by (i) such Person or (ii) one or more Subsidiaries of such Person.
"Subsidiary Guaranty" means any Guarantee of the Securities which
may from time to time be executed and delivered pursuant to the terms of this
Indenture. Each such Subsidiary Guaranty shall be in the form prescribed in this
Indenture.
"Sunbury" means Sunbury Textile Mills, Inc., a New York corporation.
"Sunbury Factoring Arrangement" means factoring arrangements entered
into in the ordinary course of business by Sunbury in an aggregate amount not to
exceed $20,000,000 at any time outstanding.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
the Issue Date among Holdings, the Company, Simmons and the Receivables
Subsidiary as in effect on the Issue Date.
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33
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations (x) of the United States of America or any
agency thereof or obligations Guaranteed by the United States of America or any
agency thereof or (y) of any foreign country recognized by the United States of
America rated at least "A" by S&P or "A-1" by Moody's; (ii) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 365 days of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States of America
having capital and surplus in excess of $250.0 million (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act); (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i) above entered into with a bank
meeting the qualifications described in clause (ii) above; (iv) investments in
commercial paper, maturing not more than 270 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America or any foreign
country recognized by the United States of America with a rating at the time as
of which any investment therein is made of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P; (v) investments in securities
with maturities of six months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's; (vi) any money market deposit accounts
issued or offered by a domestic commercial bank or a commercial bank organized
and located in a country recognized by the United States of America, in each
case, having capital and surplus in excess of $250 million (or the foreign
currency equivalent thereof), or investments in money market funds complying
with the risk limiting
<PAGE>
34
conditions of Rule 2a-7 (or any successor rule) of the Commission under the
Investment Company Act of 1940, as amended; and (vii) similar investments
approved by the Board of Directors in the ordinary course of business.
"Term Loans" means the Tranche A Term Loans and the Tranche B Term
Loans available pursuant to the Credit Agreement.
"399 Investors" means 399 Venture Partners and its Permitted
Transferees.
"399 Venture Partners" means 399 Venture Partners, Inc., a Delaware
corporation.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled by, and published in, the most recent Federal Reserve Statistical
Release H.15(519) which has become publicly available at least two business days
prior to the date fixed for redemption of the Securities following a Change of
Control (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the then
remaining Average Life to Stated Maturity of the Securities; provided, however,
that if the Average Life to Stated Maturity of the Securities is not equal to
the
<PAGE>
35
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the Average Life to Stated Maturity of the Securities 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.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President, or
any other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated assets of $1,000 or less or (B) if such
Subsidiary has consolidated assets greater than $1,000, then such designation
would be permitted under the Section 4.04. The Board of Directors may designate
any Unrestricted Subsidiary to be a Restricted
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36
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1 of additional Indebtedness under
paragraph (a) of Section 4.03 and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock
of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares and, to the
extent required by local ownership laws in foreign countries, shares owned by
foreign shareholders) is owned by the Company or another Wholly Owned Subsidiary
(including shares held of record by a nominee for the benefit of the Company or
another Wholly Owned Subsidiary).
SECTION 1.02. Other Definitions.
Term Defined in
---- Section
-------
"Affiliate Transaction"................................ 4.07
"Agent Members"........................................ 2.01(b)
"Bankruptcy Law"....................................... 6.01
"Blockage Notice"...................................... 10.03
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"covenant defeasance option"........................... 8.01(b)
"Custodian"............................................ 6.01
"Event of Default"..................................... 6.01
"Guarantor Subsidiary Blockage Notice"................. 12.03
"Guarantor Subsidiary Payment Blockage
Period"............................................... 12.03
"Initial Purchasers"................................... 2.01(a)
"legal defeasance option".............................. 8.01(b)
"Legal Holiday"........................................ 13.08
"Non-Global Purchasers"................................ 2.01(c)
"Obligations".......................................... 11.01
"Offer"................................................ 4.06(b)
"Offer Amount"......................................... 4.06(c)
"Offer Period"......................................... 4.06(c)
"QIBs"................................................. 2.01(a)
"pay its Guaranty"..................................... 12.03
"pay the Securities"................................... 10.03
"Paying Agent"......................................... 2.03
"Payment Blockage Period".............................. 10.03
"Purchase Agreement"................................... 2.01(a)
"Purchase Date"........................................ 4.06(c)
"Registrar"............................................ 2.03
"Restricted Certificated Securities"................... 2.01(c)
"Restricted Global Security"........................... 2.01
"Restricted Payment"................................... 4.04
"Rule 144A"............................................ 2.01(a)
"Successor Company".................................... 5.01
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38
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limita tion;
(5) words in the singular include the plural and words in the plural
include the singular;
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39
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness of the Company or a Guarantor Subsidiary,
as the case may be, merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP and accretion of principal on such security shall
be deemed to be the Incurrence of Indebtedness; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemp tion or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE II
The Securities
SECTION 2.01. Form and Dating. The Initial Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. Any Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B, which is
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company or any Guarantor Subsidiary is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in Exhibit A and B are
part of the terms of this Indenture.
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40
(a) Global Securities. The Initial Securities are being offered and
sold by the Company pursuant to a Purchase Agreement (the "Purchase Agreement"),
dated July 31, 1996, among the Company, the Guarantor Subsidiaries, Chase
Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Initial Purchasers").
Initial Securities offered and sold to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) ("QIBs"), in
accordance with Rule 144A under the Securities Act ("Rule 144A") as provided in
the Purchase Agreement, shall be issued initially in the form of a single,
permanent Global Security in definitive, fully registered form without interest
coupons with the Restricted Securities Legend and the legend set forth in
footnote 1 to Exhibit A hereto (the "Restricted Global Security"), which shall
be deposited on behalf of the Initial Purchasers of the Initial Securities
represented thereby with the Trustee, as Securities Custodian for the
Depository, and registered in the name of the Depository or a nominee of the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Restricted Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee, as Securities Custodian, and the Depository or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to
Global Securities deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b), authenticate and deliver initially one or more Global
Securities that (i) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and (ii)
shall be held by the Trustee as custodian for the Depository.
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41
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices of such Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as otherwise provided herein,
owners of beneficial interests in Global Securities shall not be entitled to
receive physical delivery of certificated Securities. Purchasers of Initial
Securities who are not QIBs (referred to herein as the "Non-Global Purchasers")
will receive certificated Initial Securities bearing the Restricted Securities
Legend set forth in Exhibit A hereto ("Restricted Certificated Securities");
provided, however, that upon transfer of such Restricted Certificated Securities
to a QIB or in accordance with Regulation S under the Securities Act, such
Restricted Certificated Securities will, unless the relevant Global Security has
previously been exchanged, be exchanged for an interest in a Global Security
pursuant to the provisions of Section 2.06 hereof. Restricted Certificated
Securities will include the Restricted Securities Legend set forth in Exhibit A
unless removed in accordance with this Section 2.01(c) or Section 2.06(g)
hereof.
After a transfer of any Initial Securities during the period of the
effectiveness of, and pursuant to, a Shelf Registration Statement with respect
to the Initial Securities, all requirements pertaining to legends on such
Initial Securities will cease to apply, the requirements
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42
requiring that any such Initial Securities issued to certain Holders be issued
in global form will cease to apply, and certificated Initial Securities without
legends will be made available to the Holders of such Initial Securities. Upon
the consummation of a Registered Exchange Offer with respect to the Initial
Securities pursuant to which Holders of Initial Securities are offered Exchange
Securities in exchange for their Initial Securities, all requirements pertaining
to such Initial Securities that Initial Securities issued to certain Holders be
issued in global form will cease to apply and certificated Initial Securities
with the Restricted Securities Legend set forth in Exhibit A hereto will be
available to Holders of such Initial Securities that do not exchange their
Initial Securities, and Exchange Securities in certificated form will be
available to Holders that exchange such Initial Securities in such Registered
Exchange Offer.
Securities in certificated form shall be issuable only in registered
form without coupons and only in denominations of $1,000 in principal amount and
any integral multiple of $1,000.
SECTION 2.02. Execution and Authentication. Two Officers shall sign
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Secu rities and
may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenti cates the Security, the Security shall
be valid neverthe less.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be con clusive evidence that the Security has been authenticated
under this Indenture.
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43
The Trustee shall authenticate and deliver (1) Initial Securities
for original issue in an aggregate principal amount of $200,000,000 and (2)
Exchange Securities for issue only in a Registered Exchange Offer, pursuant to
the Exchange and Registration Rights Agreement, for Initial Securities for a
like principal amount of Initial Securities exchanged pursuant thereto, in each
case upon a written order of the Company signed by two Officers or by an Officer
and either an Assistant Treasurer or an Assistant Secretary of the Company. Such
order shall specify the amount of the Securities to be authenticated, the date
on which the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities or Exchange Securities. The aggregate
principal amount of Securities outstanding at any time may not exceed
$200,000,000 except as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Any such appointment
shall be evidenced by an instrument signed by an authorized officer of the
Trustee, a copy of which shall be furnished to the Company. Unless limited by
the terms of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Secur ities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any addi tional paying agent.
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44
The Company shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the provi
sions of this Indenture that relate to such agent. The Company shall notify the
Trustee of the name and address of any such agent. If the Company fails to
maintain a Regis trar or Paying Agent, the Trustee shall act as such and shall
be entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
The Company initially appoints The Depository Trust Company to act
as Depository with respect to the Global Securities.
The Company may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided that no
such removal shall become effective until (1) acceptance of an appointment by a
successor as evidenced by an appropriate agreement entered into by the Company
and such successor Registrar or Paying Agent, as the case may be, and delivered
to the Trustee or (2) notification to the Trustee that the Trustee shall serve
as Registrar or Paying Agent until the appointment of a successor in accordance
with clause (1) above. The Registrar or Paying Agent may resign at any time upon
written notice; provided, however, that the Trustee may resign as Paying Agent
or Registrar only if the Trustee also resigns as Trustee in accordance with
Section 7.08.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent (or if the Company or a Subsidiary is acting as Paying
Agent, segregate and hold in trust for the benefit of the
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45
Persons entitled thereto) a sum sufficient to pay such principal and interest
when so becoming due. The Company shall require each Paying Agent (other than
the Trustee) to agree in writing that the Paying Agent shall hold in trust for
the benefit of Securityholders or the Trustee all money held by the Paying Agent
for the payment of principal of or interest on the Securities and shall notify
the Trustee of any default by the Company in making any such payment. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
to account for any funds disbursed by the Paying Agent. Upon complying with this
Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
Any money deposited with any Paying Agent, or then held by the
Company or a Subsidiary in trust for the payment of principal or interest on any
Security and remaining unclaimed for two years after such principal and interest
has become due and payable shall be paid to the Company at its request, or, if
then held by the Company or a Subsidiary, shall be discharged from such trust;
and the Securityholders shall thereafter, as unsecured general creditors, look
only to the Company for payment thereof, and all liability of the Paying Agent
with respect to such money, and all liability of the Company or such Subsidiary
as trustee thereof, shall thereupon cease.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably prac ticable the most recent list available to
it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each interest payment
date and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the names
and addresses of Securityholders.
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46
SECTION 2.06. Transfer and Exchange. (a) Transfer and Exchange of
Definitive Securities. When Definitive Securities are presented to the Registrar
or a co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar
or co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) in the case of Transfer Restricted Securities that are
Definitive Securities, are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant to
clause (A), (B) or (C) below, and are accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Securities are being delivered
to the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the
Security); or
(B) if such Transfer Restricted Securities are being
transferred to the Company or to a
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47
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act, a certification to that effect (in substantially the form set
forth on the reverse of the Security); or
(C) if such Transfer Restricted Securities are being
transferred (w) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities Act;
or (x) to an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
acquiring the security for its own account, or for the account of
such an institutional accredited investor, in each case in a minimum
principal amount of the Securities of $250,000 for investment
purposes and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act; or (y) in
reliance on another exemption from the registration requirements of
the Securities Act: (i) a certification to that effect (in
substantially the form set forth on the reverse of the Security),
(ii) if the Company or Registrar so requests, an Opinion of Counsel
reasonably acceptable to the Company and to the Registrar to the
effect that such transfer is in compliance with the Securities Act
and (iii) in the case of clause (x), a signed letter substantially
in the form of Exhibit C hereto.
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or
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48
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted Security,
certification, substantially in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to make,
or to direct the Securities Custodian to make, an adjustment on its books
and records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the Global
Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depository therefor.
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49
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security.
(i) Any person having a beneficial interest in a Global Security
that is being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause
(A),(B) or (C) below may upon request, and if accompanied by the
information specified below, exchange such beneficial interest for a
Definitive Security of the same aggregate principal amount. Upon receipt
by the Trustee of written instructions or such other form of instructions
as is customary for the Depository from the Depository or its nominee on
behalf of any Person having a beneficial interest in a Global Security and
upon receipt by the Trustee of a written order or such other form of
instructions as is customary for the Depository or the Person designated
by the Depository as having such a beneficial interest in a Transfer
Restricted Security only, the following additional information and
documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the owner of a
beneficial interest in a Global Security, a certification from such
Person to that effect (in substantially the form set forth on the
reverse of the Security); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act, a certification to that effect (in substantially the form set
forth on the reverse of the Security); or
(C) if such beneficial interest is being transferred (w)
pursuant to an exemption from
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50
registration in accordance with Rule 144 or Regulation S under the
Securities Act; or (x) to an institutional "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is acquiring the security for its own account,
or for the account of such an institutional accredited investor, in
each case in a minimum principal amount of the Securities of
$250,000 for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of
the Securities; or (y) in reliance on another exemption from the
registration requirements of the Securities Act: (i) a certification
to that effect from the transferee or transferor (in substantially
the form set forth on the reverse of the Security), (ii) if the
Company or Registrar so requests, an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the Company and to
the Registrar to the effect that such transfer is in compliance with
the Securities Act, and (iii) in the case of clause (x), a signed
letter substantially in the form of Exhibit C hereto,
then the Trustee or the Securities Custodian, at the direction of the
Trustee, will cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian,
the aggregate principal amount of the Global Security to be reduced on its
books and records and, following such reduction, the Company will execute
and the Trustee will authenticate or cause authentication and deliver to
the transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee.
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51
The Trustee shall deliver such Definitive Securities to the persons in
whose names such Securities are so registered in accordance with the
instructions of the Depository.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global Security
may not be transferred as a whole except (i) by the Depository to a nominee of
the Depository or (ii) by a nominee of the Depository to the Depository or
another nominee of the Depository or (iii) by the Depository or any such nominee
to a successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Securities in Absence of
Depository. If at any time:
(i) the Depository for the Securities notifies the Company that the
Depository is unwilling or unable to continue as Depository for the Global
Securities and a successor Depository for the Global Securities is not
appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Securities
under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities
to the Persons designated by the Company, will authenticate or cause
authentication and deliver Definitive Securities, in an aggregate principal
amount equal to the principal amount of Global Securities, in exchange for such
Global Securities.
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52
(g) Legend.
(i) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the Definitive
Securities (and all Securities issued in exchange therefor or substitution
thereof) shall bear a legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO
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53
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000 FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT
TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND IN THE CASE OF ANY OF THE FOREGOING CLAUSES (A)-(F), A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof
to exchange such Transfer Restricted Security for a Definitive
Security that does not bear the legend set forth above and rescind
any restriction on the transfer of such Transfer Restricted
Security; and
(B) any such Transfer Restricted Security represented by a
Global Security shall not be subject to the provisions set forth in
clause (i)
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54
of this Section 2.06(g) (such sales or transfers being subject only
to the provisions of Section 2.06(e) hereof); provided, however,
that with respect to any request for an exchange of a Transfer
Restricted Security that is represented by a Global Security for a
Definitive Security that does not bear a legend, which request is
made in reliance upon Rule 144, the Holder thereof shall certify in
writing to the Registrar that such request is being made pursuant to
Rule 144 (such certification to be substantially in the form set
forth on the reverse of the Security).
(h) Cancellation and/or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depository for cancellation unless it is being held by
the Trustee in which case such Global Security shall be retained and cancelled
by the Trustee. At any time prior to such cancellation, if any beneficial
interest in a Global Security is exchanged for Definitive Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by such
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Trustee (if it is then the Securities Custodian for such
Global Security) with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Securities and
Global Securities at the Registrar's or co-registrar's
request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company
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55
may require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in connection
therewith.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any Definitive Security
selected for redemption in whole or in part pursuant to Article III,
except the unredeemed portion of any Definitive Security being redeemed in
part, or (b) any Security for a period beginning 15 Business Days before
the mailing of a notice of an offer to repurchase or redeem Securities or
15 Business Days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for
all other purposes whatsoever, whether or not such Security is overdue,
and none of the Company, the Trustee, the Paying Agent, the Registrar or
any co-registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(j) No Obligation of the Trustee. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depository or other Person with respect to
any ownership interest in the Securities, with respect to the accuracy of the
records of the Depository or its nominee or of any participant or member thereof
or with respect to the delivery to any participant, member, beneficial owner or
other Person (other than the Depository) of any notice
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56
(including any notice of redemption) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to the
Holders and all payments to be made to Holders under the Securities shall be
given or made only to the registered Holders (which shall be the Depository or
its nominee in the case of a Global Security). The rights of beneficial owners
in any Global Security in global form shall be exercised only through the
Depository subject to the applicable rules and procedures of the Depository. The
Trustee may rely and shall be fully protected and indemnified pursuant to
Section 7.07 in relying upon information furnished by the Depository with
respect to any beneficial owners, its members and participants.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including without limitation any transfers between or
among Depository participants, members or beneficial owners in any Global
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Company or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (ii) makes such
request to the Company or the Trustee prior to the Security being acquired by a
bona fide
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57
purchaser and (iii) satisfies any other reasonable requirements of the Trustee.
If required by the Trustee or the Company, such Holder shall furnish an
indemnity bond sufficient in the judgment of the Trustee to protect the Company,
the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss
that any of them may suffer if a Security is replaced. The Company and the
Trustee may charge the Holder for their expenses in replacing a Secur ity. In
the event any such mutilated, lost, destroyed or wrongfully taken Security has
become or is about to become due and payable, the Company in its discretion may
pay such Security instead of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Sec tion 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the
Securities (or portions thereof) to be redeemed or maturing, as the case may be,
and the Paying Agent is not prohibited from
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58
paying such money to the Securityholders on that date pursuant to the terms of
this Indenture, then on and after that date such Securities (or portions
thereof) cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
Definitive Securities but may have variations that the Company considers
appropriate for temporary Secur ities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Definitive Securities and
deliver them in exchange for temporary Securities.
SECTION 2.10. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record reten tion requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation unless the Company directs the Trustee to deliver canceled
Securities to the Company. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
The Trustee shall not authenticate Securities in place of canceled Securities
other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date. The Company shall fix or
cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail or cause
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59
to be mailed to each Securityholder a notice that states the special record
date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE III
Redemption
SECTION 3.01. Notices to Trustee. If the Company elects to redeem
Securities pursuant to Section 3.07, it shall notify the Trustee in writing of
the redemption date and the principal amount of Securities to be redeemed.
The Company shall give each notice to the Trustee provided for in
this Section at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the condi tions herein; provided, however, that an
Opinion of Counsel shall not be required in connection with a redemption
pursuant to Section 3.07. If fewer than all the Securities are to be redeemed,
the record date relating to such redemption shall be selected by the Company and
given to the Trustee, which record date shall be not less than 15 days after the
date of notice to the Trustee. Any such notice may be canceled at any time prior
to notice of such
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redemption being mailed to any Holder and shall thereby be void and of no
effect.
SECTION 3.02. Selection of Securities to be Redeemed. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee shall
make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Secur ities that have denominations larger than $1,000. Secur ities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemp tion of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemp tion price;
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61
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is pro hibited from making such payment
pursuant to the terms of this Indenture, interest on Securities (or
portion thereof) called for redemption ceases to accrue on and after the
redemption date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request (which may be revoked at any time prior to
the time at which the Trustee shall have given such notice to the Holders), the
Trustee shall give the notice of redemption in the Company's name and at the
Company's expense. In such event, the Company shall provide the Trustee with the
information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date; provided that if the redemption date is after a regular record date and on
or prior to the interest payment date, the accrued interest shall be payable to
the Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
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SECTION 3.05. Deposit of Redemption Price. At least one Business Day
prior to the redemption date, the Company shall deposit with the Paying Agent
(or, if the Company or a Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date other than Securities or
portions of Securities called for redemption which have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Secur ity
surrendered.
SECTION 3.07. Optional Redemption. (a) Except as set forth in the
next two paragraphs, the Securities may not be redeemed prior to August 1, 2001.
On and after that date, the Company may redeem the Securities in whole at any
time or in part from time to time at the following redemption prices (expressed
in percentages of principal amount), plus accrued and unpaid interest, if any,
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption), if redeemed during the
12-month period beginning on or after August 1 of the years set forth below:
Redemption
Period Price
- ------ ----------
2001........................................................... 105.438%
2002........................................................... 103.625%
2003........................................................... 101.813%
2004 and thereafter............................................ 100.000%
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63
(b) Notwithstanding the foregoing, at any time on or prior to August
1, 1999, the Company may redeem in the aggregate up to 33 1/3% of the original
aggregate principal amount of Securities ($66,666,666.67) with the proceeds of
one or more Public Equity Offerings following which there is a Public Market, at
a redemption price (expressed as a percentage of principal amount thereof) of
110.875% plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of redemption); provided, however, that at least 66 2/3% of the
original aggregate principal amount of the Securities ($133,333,333.33) must
remain outstanding after each such redemption.
(c) At any time prior to August 1, 2001, the Securities may be
redeemed, in whole or in part, at the option of the Company within 180 days
after a Change of Control, at a redemption price equal to the sum of (i) the
principal amount thereof plus (ii) accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date that
is on or prior to the date of redemption) plus (iii) the Applicable Premium.
ARTICLE IV
Covenants
SECTION 4.01. Payment of Securities. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the
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64
Securityholders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue princi pal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company may not
be required to be or remain subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, the Company shall file with the SEC, and provide
the Trustee and Securityholders and prospective Securityholders (upon request)
with copies of its annual report and the information, documents and other
reports which are specified in Section 13 or 15(d) of the Exchange Act. In
addition, following a Public Equity Offering by the Company, the Company shall
furnish to the Trustee and the Securityholders, promptly upon their becoming
available, copies of the annual report to shareholders and any other information
generally provided by the Company to its public shareholders. The Company also
shall comply with the other provisions of TIA ss. 314(a).
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, Incur any Indebtedness unless
on the date of such Incurrence the Consolidated Coverage Ratio exceeds 2.25:1,
if such Indebtedness is Incurred on or prior to December 31, 1998, and 2.50:1 if
such Indebtedness is Incurred thereafter.
(b) Notwithstanding Section 4.03(a), the Company and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness consisting of the Term Loans in an aggregate
principal amount outstanding of up to $300.0 million less the amount of
any principal payments thereon;
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65
(ii) Indebtedness consisting of revolving credit, working capital or
letters of credit financing in an aggregate principal amount at any time
outstanding not in excess of $150.0 million (less the aggregate amount of
all repayments of principal actually made thereunder since the Issue Date
with Net Available Cash from Asset Dispositions pursuant to Section
4.06(a)(iii)(A));
(iii) Indebtedness of the Receivables Subsidiary pursuant to a
Permitted Receivables Financing;
(iv) Indebtedness of the Company owing to and held by any Wholly
Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and
held by the Company or any Wholly Owned Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of any such
Indebtedness (except to the Company or a Wholly Owned Subsidiary) will be
deemed, in each case, to constitute the Incurrence of such Indebtedness by
the issuer thereof;
(v) Indebtedness of the Company represented by the Securities;
(vi) any Indebtedness of the Company and its Restricted Subsidiaries
(other than (x) the Indebtedness described in clauses (i), (ii), (iii) or
(iv) above and (y) Indebtedness of any Foreign Subsidiary) outstanding on
the Issue Date;
(vii) Indebtedness of the Company and its Restricted Subsidiaries
(A) in respect of performance bonds, bankers' acceptances, letters of
credit and surety or appeal bonds provided by the Company and its
Restricted Subsidiaries in the ordinary course of their business and which
do not secure other Indebtedness and (B) under Currency Agreements and
Interest Rate Agreements that are designed to protect the Company and its
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66
Restricted Subsidiaries against fluctuations in interest rates or currency
exchange rates and not for the purposes of speculation;
(viii) Indebtedness represented by Guarantees by the Company of
Indebtedness of a Restricted Subsidiary (other than Indebtedness of the
Receivables Subsidiary), or in respect of letters of credit provided by
the Company to support such Indebtedness, or Guarantees by a Restricted
Subsidiary (other than the Receivables Subsidiary) of Indebtedness of the
Company or a Restricted Subsidiary (other than Indebtedness of the
Receivables Subsidiary), or in respect of letters of credit provided by a
Restricted Subsidiary (other than the Receivables Subsidiary) to support
such Indebtedness; provided, however, that only Indebtedness that is
Incurred in compliance with this covenant may be guaranteed pursuant to
this clause (viii);
(ix) Purchase Money Indebtedness, industrial revenue bond or similar
indebtedness and Capitalized Lease Obligations of the Company and its
Restricted Subsidiaries in an aggregate principal amount at any time
outstanding not in excess of $30.0 million;
(x) Indebtedness of the Company and its Restricted Subsidiaries, to
the extent the proceeds thereof are immediately used after the Incurrence
thereof to purchase Securities tendered in an offer to purchase made as a
result of a Change of Control;
(xi) Indebtedness of the Company and its Restricted Subsidiaries
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, in any case Incurred in connection
with the disposition of any business, assets or Subsidiary of the Company
(other than Guarantees of Indebtedness Incurred by any Person acquiring
all or any portion of such business, assets or Subsidiary for the purpose
of financing such acquisition), in a
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principal amount not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary of the Company in connection with
such disposition;
(xii) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount at any time outstanding not in excess of $50 million;
(xiii) Indebtedness of the Company or a Restricted Subsidiary owed
to (including obligations in respect of letters of credit for the benefit
of) any Person in connection with worker's compensation, health,
disability or other employee benefits or property, casualty or liability
insurance provided by such Person to the Company or such Restricted
Subsidiary, pursuant to reimbursement or indemnification obligations to
such Person, in each case Incurred in the ordinary course of business;
(xiv) Indebtedness to Masco in an aggregate principal amount not to
exceed $15.0 million in respect of reimbursement obligations for letters
of credit or credit support provided by Masco under the terms of the
Acquisition Agreement;
(xv) any Refinancing Indebtedness Incurred in respect of any
Indebtedness Incurred pursuant to paragraph (a) or pursuant to clauses
(i), (ii), (vi), (x), (xiv) or (xv) of this paragraph (b); and
(xvi) Indebtedness of the Company or any Restricted Subsidiary in an
aggregate principal amount at any time outstanding not in excess of $50.0
million.
(c) Notwithstanding any other provision of this Section 4.03, the
Company shall not Incur any Indebtedness if such Indebtedness is subordinate or
junior in ranking in any respect to any Senior Indebtedness of the Company
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior
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68
Subordinated Indebtedness of the Company. In addition, the Company may not Incur
any Secured Indebtedness which is not Senior Indebtedness of the Company unless
contemporaneously therewith effective provision is made to secure the Securities
equally and ratably with (or on a senior basis to, in the case of Indebtedness
subordinated in right of payment to the Securities) such Secured Indebtedness
for so long as such Secured Indebtedness is secured by a Lien. A Guarantor
Subsidiary may not Incur any Indebtedness if such Indebtedness is subordinate or
junior in ranking in any respect to any Senior Indebtedness of the Subsidiary
Guarantor unless such Indebtedness is Senior Subordinated Indebtedness of such
Subsidiary Guarantor or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness of such Subsidiary Guarantor. In addition, a Guarantor
Subsidiary may not Incur any Secured Indebtedness which is not Senior
Indebtedness of such Guarantor Subsidiary unless contemporaneously therewith
effective provision is made to secure the Subsidiary Guaranty equally and
ratably with (or on a senior basis to, in the case of Indebtedness subordinated
in right of payment to such Subsidiary Guaranty) such Secured Indebtedness for
so long as such Secured Indebtedness is secured by a Lien.
(d) For purposes of determining the outstanding principal amount of
any particular Indebtedness Incurred pursuant to this section 4.03, (i)
Indebtedness permitted by this section need not be permitted solely by reference
to one provision permitting such Indebtedness but may be permitted in part by
one such provision and in part by one or more other provisions of this provision
permitting such Indebtedness and (ii) in the event that Indebtedness or any
portion thereof meets the criteria of more than one of the types of Indebtedness
described in this section, the Company, in its sole discretion, shall classify
such Indebtedness and only be required to include the amount of such
Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i)
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declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company) except dividends or distributions payable
solely in its Capital Stock (other than Disqualified Stock) and except dividends
or distributions payable to the Company or another Restricted Subsidiary (and,
if such Restricted Subsidiary has shareholders other than the Company or other
Restricted Subsidiaries, to its other shareholders on a pro rata basis or on a
basis that results in the receipt by the Company or a Restricted Subsidiary of
dividends or distributions of equal or greater value); (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company or any
Restricted Subsidiary held by Persons other than the Company or another
Restricted Subsidiary; (iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of acquisition);
(iv) make any Investment (other than a Permitted Investment) in any Person or
(v) make any payment pursuant to the Management Agreement or any similar
agreement entered into with Holdings or extension or renewal thereof (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement, Investment or payment being herein referred to as a
"Restricted Payment") if at the time the Company or such Restricted Subsidiary
makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount
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so expended, if other than in cash, to be determined in good faith by the
Board of Directors, whose determination shall be conclusive and evidenced
by a resolution of the Board of Directors) declared or made subsequent to
the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the Issue Date to the
end of the most recent fiscal quarter ending at least 45 days prior
to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by the Company as
a capital contribution or from the issue or sale of its Capital
Stock (other than Disqualified Stock) subsequent to the Issue Date
(other than an issuance or sale to a Subsidiary of the Company or an
employee stock ownership plan or other trust established by the
Company or any of its Subsidiaries to the extent the purchase by
such plan or trust is financed by Indebtedness of such plan or trust
and for which the Company or a Subsidiary is liable, directly or
indirectly, as a guarantor or otherwise (including by the making of
cash contributions to such plan or trust which are used to pay
interest or principal on such Indebtedness));
(C) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet
upon the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date of any Indebtedness of the Company or
its Restricted Subsidiaries convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company (less the
amount of any cash or other property (other than such Capital Stock)
distributed by the
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71
Company or any Restricted Subsidiary upon such conversion or
exchange) and
(D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal of loans, return of capital or advances
or other transfers of assets to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries or (ii) the redesignation
of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in
each case as provided in the definition of "Investment") or the
receipt of proceeds from the sale or other disposition of any
portion of any Investment in an Unrestricted Subsidiary not to
exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary, which amount was
included in the calculation of the amount of Restricted Payments.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Capital Stock of the Company (other
than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan or other trust established
by the Company or any of its Subsidiaries to the extent the purchase by
such plan or trust is financed by Indebtedness of such plan or trust and
for which the Company or a Subsidiary is liable, directly or indirectly,
as a guarantor or otherwise (including by the making of cash contributions
to such plan or trust which are used to pay interest or principal on such
Indebtedness)); provided, however, that (A) such purchase or redemption
shall be excluded in the
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calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale to the extent so used shall be excluded from
Section 4.04(a)(3)(B);
(ii) any purchase or redemption of (A) Subordinated Obligations of
the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Indebtedness of the Company which is
permitted to be Incurred pursuant to Section 4.03(b) or (B) Subordinated
Obligations of a Restricted Subsidiary made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness of any
Restricted Subsidiary or the Company which is permitted to be Incurred
pursuant to Section 4.03(b); provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) any purchase or redemption of Disqualified Stock made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Disqualified Stock; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments;
(iv) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by Section 4.06; provided, however,
that such purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments;
(v) upon the occurrence of a Change of Control and within 60 days
after the completion of the offer to repurchase the Securities pursuant to
Section 4.08 (including the purchase of all Securities tendered), any
purchase or redemption of Subordinated Obligations required pursuant to
the terms thereof as a result of such Change of Control; provided,
however, that such purchase or redemption shall be included in the
calculation of the amount of Restricted Payments;
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(vi) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(vii) the repurchase, for cash or notes, of shares of, or options or
warrants to purchase shares of, or payments to Holdings to enable Holdings
to repurchase shares of, or options or warrants to purchase shares of,
Capital Stock of Holdings, the Company or any of the Subsidiaries of the
Company from employees, former employees, officers, former officers,
directors or former directors of Holdings, the Company or any of the
Subsidiaries of the Company (or permitted transferees of such employees,
former employees, directors or former directors) (or repayments of, or
payments to Holdings to permit Holdings to repay, notes previously issued
to so purchase such shares, options or warrants), pursuant to the terms of
the agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors or the board of directors of
Holdings, as applicable, under which such individuals purchase or sell or
are granted the option to purchase or sell, shares of such capital stock;
provided, however, that the aggregate amount of such repurchases
(including the amount of any such notes issued by the Company or any of
its Restricted Subsidiaries, and cash payments to pay principal and
interest with respect to any such notes issued by Holdings, but excluding
the amount of any such notes issued by Holdings until so paid) shall not
exceed as of any date the product of (x) $5.0 million and (y) the number
of years (or fractions thereof) elapsed since the Issue Date; provided
further, however, that (x) the first $5.0 million in aggregate amount of
such purchases shall be excluded in the calculation of the amount of
Restricted Payments and (y) any amount of such purchases greater than $5.0
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74
million in the aggregate shall be included in the calculation of the
amount of Restricted Payments;
(viii) to the extent otherwise deemed Restricted Payments, payments
to Holdings made pursuant to the Tax Sharing Agreement; provided however,
that such payments shall be excluded in the calculation of the amount of
Restricted Payments;
(ix) payments to Holdings pursuant to the Management Agreement for
operating costs of Holdings but only to the extent such costs (w)
constitute or are directly related to the corporate, general and
administrative expenses of the Company and its Restricted Subsidiaries and
not to any other business, subsidiary or investment of Holdings, (x) are
not otherwise paid for by the Company or its Restricted Subsidiaries and
(y) do not constitute payments in respect of the Masco Notes or otherwise
in respect of any Capital Stock of Holdings or in respect of Indebtedness
held by an Affiliate of Holdings; provided, however, that:
(A) the Company shall provide within 30 days of the end of
each fiscal quarter in which such payments are made a certificate to
the Trustee signed by the chief financial officer of the Company
certifying that such payments comply with the provisions hereof
(which shall include a report with respect to such certificate
prepared by the independent accountants to the Company in accordance
with attestation standards established by the American Institute of
Certified Public Accountants if the payments in such quarter exceed
1% of the consolidated revenues of the Company);
(B) if the Company provides such certificate, such payments
shall be excluded from the calculation of the amount of Restricted
Payments;
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75
(C) if the Company fails to provide such certificate or if all
or any portion of such payments are not certified to be in
compliance with the provisions hereof, such payments (or portions
thereof) shall be included in the amount of Restricted Payments as
of such 30th day (or, if earlier, the date on which such certificate
is provided) and
(D) if as a result of the inclusion of such payments as set
forth in clause (C) the aggregate amount of Restricted Payments
declared or made subsequent to the Issue Date would exceed the
amount permitted to be so expended, the Company shall be deemed to
be in default of its obligations hereunder unless and until such
payments (or portions thereof) are repaid by Holdings;
(x) advances or loans to Holdings evidenced by a note in an amount
for any year not in excess of the amount which management estimates shall
be the Specified Loss of the Holdings Business for such year but in no
event in excess of $2.5 million in any year; provided, however, that:
(A) the Company shall provide within 90 days of the end of
each fiscal year in which such payments are made a certificate to
the Trustee signed by the chief financial officer of the Company
certifying that such payments comply with the provisions hereof;
(B) if the Company provides such certificate, such payments
shall be excluded from the calculation of the amount of Restricted
Payments;
(C) if the Company fails to provide such certificate or if all
or any portion of such payments are not certified to be in
compliance with the provisions hereof, such payments (or
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76
portions thereof) shall be included in the amount of Restricted
Payments as of such 90th day (or, if earlier, the date on which such
certificate is provided) and
(D) if as a result of the inclusion of such payments as set
forth in clause (C) the aggregate amount of Restricted Payments
declared or made subsequent to the Issue Date would exceed the
amount permitted to be so expended, the Company shall be deemed to
be in default of its obligations hereunder unless and until such
payments (or portions thereof) are repaid by Holdings; and
(xi) payments to Holdings to enable Holdings to make payments to
Masco consisting of indemnification obligations, reimbursement of amounts
expended by Masco for the benefit of the Company and its Restricted
Subsidiaries required to be made pursuant to the Acquisition Agreement and
payments required by Section 12(r) of the Acquisition Agreement; provided,
however that such payments shall be excluded in the calculation of the
amount of Restricted Payments; provided further, however, that, at the
time any such payment is to be made, the Company shall have received all
indemnification or similar payments made by Masco to or for the benefit of
Holdings or the Company pursuant to the Acquisition Agreement.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness owed to the Company, (ii) make any
loans or
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advances to the Company or (iii) transfer any of its property or assets to the
Company, except:
(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement entered into prior to the date on
which such Restricted Subsidiary was acquired or designated as a
Restricted Subsidiary by the Company (other than as consideration in, in
contemplation of, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was otherwise acquired by the Company);
(3) any encumbrance or restriction pursuant to an agreement
constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to
an agreement referred to in clause (1) or (2) of this Section or this
clause (3) or contained in any amendment to an agreement referred to in
clause (1) or (2) of this Section or this clause (3); provided, however,
that the encumbrances and restrictions contained in any such refinancing
agreement or amendment are, collectively, no more restrictive in any
material respect, than the encumbrances and restrictions contained in such
agreements;
(4) in the case of clause (iii) of this Section 4.05, any
encumbrance or restriction contained in security agreements securing
Indebtedness of a Restricted Subsidiary which are not prohibited by
Section 4.12 to the extent such encumbrances or restrictions restrict the
transfer of the property subject to such security agreements;
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(5) any encumbrance or restriction existing under or by reason of
applicable law;
(6) any encumbrance or restriction with respect to the Receivables
Subsidiary pursuant to an agreement relating to Indebtedness of the
Receivables Subsidiary which is permitted under Section 4.03 or pursuant
to an agreement relating to a Financing Disposition to or by the
Receivables Subsidiary;
(7) customary non-assignment provisions of any licensing agreement
or of any lease;
(8) any encumbrance or restriction contained in contracts for sales
of assets otherwise permitted by this Indenture;
(9) with respect to a Restricted Subsidiary, any encumbrance or
restriction imposed pursuant to an agreement that has been entered into
for the sale of all or substantially all of the Capital Stock of such
Restricted Subsidiary; and
(10) any encumbrance or restriction with respect to a Foreign
Subsidiary pursuant to an agreement relating to Indebtedness Incurred by
such Foreign Subsidiary which is permitted under Section 4.03.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Asset Disposition unless (i) the Company or such Restricted Subsidiary
receives consideration (including by way of relief from, or by any other Person
assuming sole responsibility for, any liabilities, contingent or otherwise) at
the time of such Asset Disposition at least equal to the fair market value, as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a resolution of the Board of Directors (including as
to the value of all noncash consideration), of the shares and assets subject to
such
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Asset Disposition, (ii) at least 80% (or 100% in the case of lease payments) of
the consideration thereof received by the Company or such Restricted Subsidiary
is in the form of cash or cash equivalents and (iii) an amount equal to 100% of
the Net Available Cash from such Asset Disposition is applied by the Company (or
such Restricted Subsidiary, as the case may be) (A) first, to the extent the
Company or such Restricted Subsidiary elects (or is required by the terms of any
Senior Indebtedness), to prepay, repay or purchase Senior Indebtedness of the
Company or a Wholly Owned Subsidiary or, in the case of a sale by a Restricted
Subsidiary which is not a Wholly Owned Subsidiary, to prepay, repay or purchase
Senior Indebtedness of such Restricted Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within 360 days
after the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of Net Available Cash
after application in accordance with clause (A), to the extent the Company or
such Restricted Subsidiary elects, to reinvest (or enter into a binding contract
to do so) in Additional Assets (including by means of an Investment in
Additional Assets by a Restricted Subsidiary with Net Available Cash received by
the Company or another Restricted Subsidiary) or to repay amounts borrowed under
a revolving credit facility or line of credit to the extent such funds were
invested in Additional Assets within 360 days prior to such Asset Disposition,
within 360 days from the later of such Asset Disposition or the receipt of such
Net Available Cash; (C) third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A) and (B), to make
an Offer (as defined below) to purchase Securities pursuant to and subject to
the conditions of Section 4.06(b) and (D) fourth, to the extent of the balance
of such Net Available Cash after application in accordance with clauses (A), (B)
and (C), to fund (to the extent consistent with any other applicable provision
of this Indenture) any corporate purpose; provided, however, that in connection
with any prepayment, repayment or purchase of Indebtedness pursuant to clause
(A) above, the Company or such Restricted Subsidiary shall retire such
Indebtedness and shall cause
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the related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased. Notwithstanding
the foregoing provisions of this covenant, the Company and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
with this covenant except to the extent that the aggregate Net Available Cash
from all Asset Dispositions in any year which are not applied in accordance with
this covenant exceed $3.0 million in such year.
For the purposes of Section 4.06(a)(ii), the following are deemed to be
cash: (x) the assumption of Indebtedness of the Company (other than Disqualified
Stock of the Company) or any Restricted Subsidiary and the release of the
Company or such Restricted Subsidiary from all liability on such Indebtedness in
connection with such Asset Disposition and (y) securities received by the
Company or any Restricted Subsidiary from the transferee that are promptly
converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to Section 4.06(a)(iii)(C), the Company shall be required
to purchase Securities tendered pursuant to an offer, commenced within 30 days
following the expiration of the 360 day period referred to in Section
4.06(a)(iii)(B) (or, if the Company so elects, at any time within such 360 day
period), by the Company for the Securities (the "Offer") at a purchase price of
100% of their principal amount plus accrued and unpaid interest, if any, to the
date of purchase in accordance with the procedures (including prorationing in
the event of oversubscription) set forth in Section 4.06(c). If the aggregate
purchase price of Securities tendered pursuant to the Offer is less than the Net
Available Cash allotted to the purchase of the Securities, the Company shall
apply the remaining Net Available Cash in accordance with Section
4.06(a)(iii)(D). The Company shall not be required to make an Offer for
Securities pursuant to this Section if the Net Available Cash available therefor
(after application of the proceeds as provided in clauses (A) and (B) of Section
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4.06(a)(iii)) is less than $10 million (which lesser amount shall be carried
forward for purposes of determining whether an Offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
(c)(1) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall deliver to the Trustee and
send, by first-class mail to each Holder, a written notice stating that the
Holder may elect to have his Securities purchased by the Company either in whole
or in part (subject to prorationing as hereinafter described in the event the
Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at
the applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "Purchase
Date") and shall contain such information concerning the business of the Company
which the Company in good faith believes will enable such Holders to make an
informed decision (which at a minimum will include (i) the most recently filed
Annual Report on Form 10-K (including audited consolidated financial statements)
of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q
and any Current Report on Form 8-K of the Company filed subsequent to such
Quarterly Report, other than Current Reports describing Asset Dispositions
otherwise described in the offering materials (or corresponding successor
reports), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such Reports, and (iii) if material,
appropriate pro forma financial information) and all instructions and materials
necessary to tender Securities pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the
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provisions of Section 4.06(a). On such date, the Company shall also irrevocably
deposit with the Trustee or with a paying agent (or, if the Company is acting as
its own paying agent, segregate and hold in trust) in Temporary Cash Investments
an amount equal to the Offer Amount to be held for payment in accordance with
the provisions of this Section. Upon the expiration of the period for which the
Offer remains open (the "Offer Period"), the Company shall deliver to the
Trustee for cancellation the Securities or portions thereof which have been
properly tendered to and are to be accepted by the Company. The Trustee (or
paying agent) shall, on the Purchase Date, mail or deliver payment to each
tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities delivered by the Company to the
Trustee is less than the Offer Amount, the Trustee (or paying agent) shall
deliver the excess to the Company (or if the Company is acting as paying agent,
the Company may release such amount from trust) promptly after the expiration of
the Offer Period for application in accordance with this Section.
(3) Holders electing to have a Security purchased will be required
to surrender the Security, with an appro priate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased. If at the expiration
of the Offer Period the aggregate principal amount of Securities surrendered by
Holders exceeds the Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part will be
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issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company will also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, mails or delivers payment therefor to the surrendering
Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
(e) (1) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Financing Disposition unless the Board of Directors
shall have determined in good faith, which determination shall be conclusive and
evidenced by a resolution of the Board of Directors, that such Financing
Disposition is economically fair and reasonable to the Company or such
Subsidiary.
(2) The Company shall not permit Sunbury to make any sale of a
Receivable, or interest therein, pursuant to the Sunbury Factoring Arrangement
unless the Board of Directors shall have determined in good faith, which
determination shall be conclusive and evidenced by a resolution of the Board of
Directors, that such sale is economically fair and reasonable to Sunbury.
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SECTION 4.07. Limitation on Transactions with Affiliates. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, enter into or conduct any transaction (including the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that are
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate and (ii) that,
in the event such Affiliate Transaction involves an aggregate amount in excess
of $2.5 million, are not in writing and have not been approved by a majority of
the members of the Board of Directors having no personal stake in such Affiliate
Transaction. In addition, if such Affiliate Transaction involves an amount in
excess of $15.0 million, a fairness opinion must be obtained from a nationally
recognized appraisal or investment banking firm; provided no such opinion shall
be required with respect to (i) any series of transactions that comply with the
requirements of clauses (i) and (ii) of the preceding sentence (it being
understood that annual approval by the Board of Directors of such transaction
shall be sufficient) and that consist of the sale by the Company or any
Restricted Subsidiary of goods and inventory in the ordinary course of business
to a Person to whom the Home Furnishings Group sold more than $15.0 million of
goods and inventory in 1995; and (ii) the sale by Holdings of Receivables to the
Receivables Subsidiary pursuant to a Permitted Receivables Financing.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment or Permitted Investment permitted to be made pursuant to
Section 4.04, (ii) fees, compensation or employee benefit arrangements paid to
and any indemnity provided for the benefit of directors, officers or employees
of the Company or any Subsidiary of the Company in the ordinary course of
business, (iii) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock
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ownership plans approved by the Board of Directors, (iv) transactions pursuant
to agreements entered into or in effect on the Issue Date, including amendments
thereto entered into after the Issue Date, provided that the terms of any such
amendment are not, in the aggregate, less favorable to the Company or such
Restricted Subsidiary than the terms of such agreement prior to such amendment
and provided further that such agreements are set forth on Schedule 4.07 hereto,
(v) loans or advances to employees that are Affiliates of the Company in the
ordinary course of business, but in any event not to exceed $2.5 million in the
aggregate outstanding at any one time, (vi) any transaction between the Company
and a Restricted Subsidiary or between Restricted Subsidiaries (so long as the
other stockholders of any participating Restricted Subsidiaries which are not
Wholly Owned Subsidiaries are not themselves Affiliates of the Company) or (vii)
payments with respect to Indebtedness Incurred pursuant to Section 4.03(b)(xiv).
SECTION 4.08. Change of Control. (a) Upon a Change of Control, each
Holder shall have the right to require that the Company repurchase all or any
part of such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date that
is on or prior to the date of purchase), in accordance with the terms
contemplated in Section 4.08(b); provided, however, that notwithstanding the
occurrence of a Change of Control, the Company shall not be obligated to
purchase the Securities pursuant to this Section 4.08 in the event that it has
mailed notice of its election to redeem all the Securities under Section 3.07.
(b) Subject to the proviso to Section 4.08(a), within 30 days
following any Change of Control, the Company
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shall mail a notice to each Holder with a copy to the Trustee stating, among
other things:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase all or any portion of such
Holder's Securities at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on a record
date to receive interest due on the relevant interest payment date that is
on or prior to the date of purchase);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
Section, that a Holder must follow in order to have its Securities or any
portion thereof purchased.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appro priate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Holder is
withdrawing his election to have such Security purchased.
(d) On the purchase date, all Securities pur chased by the Company
under this Section shall be delivered to the Trustee for cancellation, and the
Company shall pay
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the purchase price plus accrued and unpaid interest, if any, to the Holders
entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.09. Compliance Certificate. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate complying with Section 314(a)(4) of the TIA and stating
that in the course of the performance by the signers of their duties as Officers
of the Company they would normally have knowledge of any Default or Event of
Default and, if such signer does know of such a Default or Event of Default, the
certificate shall describe such Default or Event of Default with particularity
and describe what actions, if any, the Company proposes to take with respect to
such Default or Event of Default.
SECTION 4.10. Further Instruments and Acts. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of
Domestic Subsidiaries. The Company will not sell any shares of Capital Stock of
a Domestic Subsidiary, and will not permit any Domestic Subsidiary, directly or
indirectly, to issue or sell any shares of its Capital Stock, except (a) to the
Company or a Wholly Owned Subsidiary, (b) directors' qualifying shares (c) if,
immediately after giving effect to such issuance or sale,
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such Domestic Subsidiary would no longer constitute a Restricted Subsidiary or
(d) in a Public Equity Offering as a result of or after which a Public Market
exists. The proceeds of any sale of such Capital Stock permitted by clauses (c)
and (d) will be treated as Net Available Cash from an Asset Disposition and must
be applied in accordance with the terms of Section 4.06.
SECTION 4.12. Limitation on Liens. The Company shall not, and shall
not permit any Guarantor Subsidiary to, directly or indirectly, create or permit
to exist any Lien on any of its property or assets (including Capital Stock),
whether owned on the Issue Date or thereafter acquired, securing any
Indebtedness other than Senior Indebtedness of the Company, in the case of the
Company, or Senior Indebtedness of a Guarantor Subsidiary, in the case of a
Guarantor Subsidiary, unless contemporaneously therewith effective provision is
made to secure the Securities and, in respect of Liens on any Guarantor
Subsidiary's property or assets, the Subsidiary Guaranty of such Guarantor
Subsidiary equally and ratably with (or on a senior basis to, in the case of
Indebtedness subordinated in right of payment to the Securities and such
Subsidiary Guaranty) such obligation for so long as such obligation is so
secured.
SECTION 4.13. Limitation on Sale/Leaseback Transactions. The Company
will not, and will not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) the Company
or such Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an
amount equal to the Attributable Debt with respect to such Sale/Leaseback
Transaction pursuant to Section 4.03 and (B) create a Lien on such property
securing such Attributable Debt without equally and ratably securing the Notes
pursuant to Section 4.12, (ii) the net cash proceeds received by the Company or
any Restricted Subsidiary in connection with such Sale/Leaseback Transaction are
at least equal to the fair market value (as determined in good faith by the
Board of Directors, whose determination will be conclusive and evidenced by a
resolution of the Board of Directors) of such
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property and (iii) the transfer of such property is permitted by, and the
Company applies the proceeds of such transaction in compliance with, Section
4.06.
SECTION 4.14. Limitation on Lines of Business. (a) The Company shall
not, and shall not permit any Restricted Subsidiary (other than the Receivables
Subsidiary) to, engage in any business other than (i) a Related Business and
(ii) the making of Permitted Investments.
(b) The Company shall not permit the Receivables Subsidiary to
engage in any business or transaction other than the purchase and sale of
Receivables (or participation interests therein) of Holdings and the
Subsidiaries of the Company and activities incidental thereto.
SECTION 4.15. Future Guarantor Subsidiaries. The Company shall cause
each Domestic Subsidiary (other than the Receivables Subsidiary and any Master
Servicer) which Incurs Indebtedness to execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit D hereto pursuant to which such
Subsidiary shall Guarantee payment of the Securities as provided in Section
11.06; provided, however, that such Subsidiary shall not be required to execute
and deliver a supplemental indenture pursuant to this Section in the event that
such Subsidiary is a party hereto at the time of such Incurrence of
Indebtedness.
ARTICLE V
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substan tially all its assets to any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation
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organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor Company (if
not the Company) shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Securities and this
Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transac tion), no Default shall have
occurred and be continuing;
(iii) except in the case of a merger the sole purpose of which is to
change the Company's jurisdiction of incorporation, immediately after
giving effect to such transaction, the Successor Company would be able to
Incur an additional $1.00 of Indebtedness under Section 4.03(a);
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company.
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The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets shall not be released from the obligation to pay
the principal of and interest on the Securities.
ARTICLE VI
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall
be prohibited by Article X, and such default continues for a period of 30
days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon required repurchase, upon declaration or
otherwise, whether or not such payment shall be prohibited by Article X;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14 or 4.15 (other than a failure to
purchase Securities when required under Section 4.06 or 4.08) and such
failure continues for 30 days after the notice specified in the
penultimate paragraph of this Section 6.01;
(5) the Company or any Guarantor Subsidiary fails to comply with any
of its agreements in the Securities
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or this Indenture (other than those referred to in (1), (2), (3) or (4)
above) and such failure continues for 60 days after the notice specified
in the penultimate paragraph of this Section 6.01;
(6) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or the
acceleration of any such Indebtedness by the holders of such Indebtedness
because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $10,000,000 or its foreign currency equivalent at the
time;
(7) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custo dian of it or for
any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
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(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(9) any judgment or decree not covered by insurance for the payment
of money in excess of $10,000,000 or its foreign currency equivalent at
the time is entered against the Company or any Significant Subsidiary and
is not discharged, waived or stayed and either (A) an enforcement
proceeding is commenced with respect to such judgment or decree or (B)
there is a period of 60 days following the entry of such judgment or
decree during which such judgment or decree is not discharged, waived or
the execution thereof stayed; or
(10) any Subsidiary Guaranty ceases to be in full force and effect
(except as contemplated by the terms thereof) or any Guarantor Subsidiary
shall deny or disaffirm its obligations under this Indenture or any
Subsidiary Guaranty and such Default continues for 10 days.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4) or (5) is not an Event of Default until
the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the
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Company of the Default and the Company does not cure such Default within the
time specified in clauses (4) or (5) hereof after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (3), (6), (7) or (10) and any event which with
the giving of notice or the lapse of time would become an Event of Default under
clause (4), (5), (8) or (9), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or 6.01(8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.01(7) or 6.01(8) with respect to
the Company occurs and is continuing, the principal of and interest on all the
Securities shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholders.
The Holders of a majority in principal amount of the Securities by notice to the
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpay ment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
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SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquies cence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to
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it in its sole discretion against all losses and expenses caused by taking or
not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
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SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(1) or 6.01(2) occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company for the whole amount then due and owing (together with interest on
any unpaid interest to the extent lawful) and the amounts provided for in
Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents and take such other actions,
including participating as a member, voting or otherwise, of any committee of
creditors appointed in the matter, as may be necessary or advisable in order to
have the claims of the Trustee and the Securityholders allowed in any judicial
proceedings relative to the Company, any Subsidiary, their respective creditors
or their property and, unless prohibited by law or applicable regulations, may
vote on behalf of the Holders in any election of a trustee in bankruptcy or
other Person performing similar functions, and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to make payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel, and any other amounts due the Trustee under
Section 7.07.
Nothing herein shall be deemed to empower the Trustee to authorize
or consent to, or accept or adopt on behalf of any Securityholder, any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Securityholder, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceeding.
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SECTION 6.10. Priorities. If the Trustee col lects any money or
property from the Company pursuant to this Article VI, it shall pay out the
money or property in the following order:
FIRST: to the Trustee for amounts due under Sec tion 7.07;
SECOND: to holders of Senior Indebtedness of the Company to the
extent required by Article X;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment
to Securityholders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Securityholder and the Company a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Inden ture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including rea sonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Company, a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a
suit by Holders of more than 10% in principal amount of the Securities.
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SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatso ever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 6.13. Restoration of Rights and Remedies. If the Trustee or
any Securityholder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such
Securityholder, then, and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Securityholders shall be
restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Company, Trustee and Securityholders
shall continue as though no such proceeding had been instituted.
ARTICLE VII
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in its
exercise as a prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs.
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(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the require ments of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabil ity for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
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(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers;
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provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it here under
in good faith and in accordance with the advice or opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Secur ities, it shall not be accountable for the Company's
use of the proceeds from the Securities, it will not be responsible for the use
or application of any monies received by a Paying Agent other than the Trustee,
and it shall not be responsible for any statement of the Company in this
Indenture or in any document issued in connection with the sale of the
Securities or in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to a Trust Officer of the Trustee, the Trustee
shall mail to each Securityholder notice of the Default within the earlier of 90
days after it occurs or 30 days after it is known to a Trust Officer or written
notice of it is received by the Trustee. Except in the case of a Default in
payment of principal of, premium (if any) or interest on any Security (including
payments pursuant to the mandatory redemption
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provisions of such Security, if any), the Trustee may withhold the notice if and
so long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of [May 15] that
complies with TIA ss. 313(a). The Trustee will also comply with TIA ss. 313(b)
and TIA ss. 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Trustee, Paying Agent and Registrar from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and other professionals. Any costs and expenses associated
with the Exchange Securities shall be paid by the Company. The Company shall
indemnify the Trustee, Paying Agent, Registrar, and each of their officers,
directors and employees (each in their respective capacities), for and hold each
of them harmless against any and all loss, liability or expense (including
attorneys' fees) incurred by them without negligence or bad faith on their part
in connection with the administration of this trust and the performance of their
duties hereunder. The Trustee, Paying
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Agent and Registrar shall notify the Company of any claim for which they may
seek indemnity promptly upon obtaining actual knowledge thereof; provided that
any failure so to notify the Company shall not relieve the Company of its
indemnity obligations hereunder except to the extent the Company shall have been
adversely affected thereby. The Company shall defend the claim and the
indemnified party shall provide reasonable cooperation at the Company's expense
in the defense. Such indemnified parties may have separate counsel and the
Company shall pay the fees and expenses of such counsel; provided that the
Company shall not be required to pay such fees and expenses if it assumes such
indemnified parties' defense and, in such indemnified parties' reasonable
judgment, there is no conflict of interest between the Company and such parties
in connection with such defense. The Company need not pay for any settlement
made without its written consent. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by an indemnified
party through such party's own wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee, Paying Agent or
Registrar incurs expenses after the occurrence of a Default specified in Section
6.01(7) or 6.01(8) with respect to the Company, the expenses are intended to
constitute expenses of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
time by so notifying the Company in writing. The Holders of a majority in
principal amount of the Securities may remove the Trustee by so notifying the
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Company and the Trustee and may appoint a successor Trustee with the consent of
the Company, which shall not be unreasonably withheld. The Company shall remove
the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); provided, however, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or
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participation in other securities of the Company are out standing if the
requirements for such exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securi ties; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III hereof
and the Company irrevocably deposits with the Trustee funds or U.S. Government
Obligations on which payment of principal and interest when due will be
sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon to maturity or such redemption date (other than
Securities replaced pursuant to Section 2.07), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Section 8.01(c), cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel and at
the cost and expense of the Company.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company at any
time may terminate (i) all its obliga tions under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11,
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4.12, 4.13, 4.14, 4.15, 5.01(iii) and 5.01(iv) and the operation of Sections
6.01(4), 6.01(6), 6.01(7) (with respect to Significant Subsidiaries only),
6.01(8) (with respect to Significant Subsidiaries only), 6.01(9) and 6.01(10)
("covenant defeasance option"). The Company may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in Sections 6.01(4),
6.01(6), 6.01(7) (with respect to Significant Subsidiaries only), 6.01(8) (with
respect to Significant Subsidiaries only), 6.01(9) and 6.01(10) or because of
the failure of the Company to comply with Sections 5.01(iii) and 5.01(iv).
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and
8.06 shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to maturity or redemption, as the case
may be;
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(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or 6.01(8) with respect to
the Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default
under any other agreement binding on the Company and is
not prohibited by Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or
is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Securityholders will not recognize income, gain or loss
for federal income tax purposes as a result of such 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 defeasance had not
occurred;
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(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders 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; and
(8) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent to
the defeasance and discharge of the Securities as contemplated by this
Article VIII have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities. Money
and securities so held in trust are not subject to Article X.
SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Company upon request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
and, thereafter, Securityholders entitled to the money must look to the Company
for payment as general creditors.
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SECTION 8.05. Indemnity for Government Obligations. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations other than
any tax, fee or other charge which by law is for the account of the
Securityholders.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Secur ities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
Amendments
SECTION 9.01. Without Consent of Holders. The Company, the Guarantor
Subsidiaries and the Trustee may amend this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article V;
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(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Sec tion 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article X or Article XII that would limit
or terminate the benefits available to any holder of Senior Indebtedness
of the Company or Senior Indebtedness of a Guarantor Subsidiary,
respectively, (or Representatives therefor) under Article X or Article
XII, respectively;
(5) to add further Guarantees with respect to the Securities or to
release Guarantor Subsidiaries when permitted by the terms hereof, or to
secure the Securities;
(6) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(7) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(8) to make any change that does not adversely affect the rights of
any Securityholder; or
(9) to provide for the issuance and authorization of the Exchange
Securities.
An amendment under this Section may not make any change that
adversely affects the rights under Article X or Article XII of any holder of
Senior Indebtedness of the Company or Senior Indebtedness of a Guarantor
Subsidiary, respectively, then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
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After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company, the Guarantor
Subsidiaries and the Trustee may amend this Indenture or the Securities without
notice to any Securityholder but with the written consent of the Holders of at
least a majority in principal amount of the Securities. The Holders of at least
a majority in principal amount of the Securities may waive compliance by the
Company or any Guarantor Subsidiary with any provision or covenant of this
Indenture or the Securities. However, without the consent of each Securityholder
affected, an amendment or waiver may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security
or change the time at which any Security may be redeemed in accordance
with Article III;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Article X or Article XII that adversely
affects the rights of any Securityholder under Article X or Article XII,
respectively;
(7) impair the right of any Holder to receive payment of principal
of and interest on such Holder's
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Securities on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Securities.
(8) modify the Subsidiary Guarantees (except as contemplated by the
terms thereof or of this Indenture) in any manner adverse to the Holders;
or
(9) make any change in Section 6.04, Section 6.07 or the third
sentence of this Section.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent approves the substance thereof.
An amendment under this Section may not make any change that
adversely affects the rights under Article X or Article XII of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness of the Company or Senior Indebtedness of a Guarantor Subsidiary,
respectively (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's
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Security, even if notation of the consent or waiver is not made on the Security.
However, any such Holder or subsequent Holder may revoke the consent or waiver
as to such Holder's Security or portion of the Security if the Trustee receives
the notice of revocation before the date the amendment or waiver becomes
effective. After an amendment or waiver becomes effective, it shall bind every
Securityholder. An amendment or waiver becomes effective once the consents from
the Holders of the requisite percentage in principal amount of outstanding
Securities are received by the Company or the Trustee.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and only
those Persons, shall be entitled to give such consent or to revoke any consent
previously given or to take any such action, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the
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116
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may but need not sign it. In signing such amendment the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it and to receive,
and (subject to Section 7.01) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such amendment is
authorized or permitted by this Indenture and complies with the provisions
hereof (including Section 9.03).
SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE X
Subordination of the Securities
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article X, to the prior payment in full of
all Senior Indebtedness of the Company and that the subordination is for the
benefit of and enforceable by the holders of Senior Indebtedness of the Company.
The Securities shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company, and only Indebtedness of the Company
that is Senior Indebtedness of the Company shall rank senior to the Securities
in accordance with the provisions set forth herein. For purposes of these
subordination provisions, the Indebtedness evidenced by the Securities is deemed
to
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include the liquidated damages payable pursuant to the provisions set forth in
the Securities and the Exchange and Registration Rights Agreement. All
provisions of this Article X shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company and its properties:
(1) holders of Senior Indebtedness of the Company shall be entitled
to receive payment in full of such Senior Indebtedness before
Securityholders shall be entitled to receive any payment of principal of
or interest on the Securities; and
(2) until the Senior Indebtedness of the Company is paid in full,
any payment or distribution to which Securityholders would be entitled but
for this Article X shall be made to holders of such Senior Indebtedness as
their respective interests may appear.
SECTION 10.03. Default on Senior Indebtedness of the Company. The
Company may not pay the principal of, premium (if any) or interest on the
Securities or make any deposit pursuant to Section 8.01 and may not otherwise
purchase, redeem or otherwise retire any Securities (collectively, "pay the
Securities") if (i) any Senior Indebtedness of the Company is not paid when due
or (ii) any other default on Senior Indebtedness of the Company occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded or (y) such Senior Indebtedness has been paid in
full; provided, however, that the Company may pay the Securities without regard
to the foregoing if the Company and the Trustee receive written notice approving
such payment from the Representative of the holders of such
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Senior Indebtedness with respect to which either of the events in clause (i) or
(ii) of this sentence has occurred and is continuing. During the continuance of
any default (other than a default described in clause (i) or (ii) of the
preceding sentence) with respect to any Designated Senior Indebtedness of the
Company pursuant to which the maturity thereof may be accelerated immediately
without further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company may
not pay the Securities for a period (a "Payment Blockage Period") commencing
upon the receipt by the Trustee (with a copy to the Company) of written notice
(a "Blockage Notice") of such default from the Represen tative of the holders of
the Designated Senior Indebtedness of the Company specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
(with a copy to the Company) from the Person or Persons who gave such Blockage
Notice, (ii) because such Designated Senior Indebtedness has been repaid in full
or (iii) because the default giving rise to such Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Securities after such Payment Blockage Period, including any missed
payments. Not more than one Blockage Notice may be given in any consecutive
360-day period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness of the Company during such period; provided,
however, that if any Blockage Notice within such 360-day period is given by or
on behalf of any holders of Designated Senior Indebtedness of the Company (other
than the Bank Indebtedness), the Representative of the Bank Indebtedness may
give another Blockage Notice within such period; provided further, however, that
in no event may the total number of days during which any Payment
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Blockage Period or Periods is in effect exceed 179 days in the aggregate during
any 360 consecutive day period.
SECTION 10.04. Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
of the Company (or the Representative of such holders) of the acceleration. If
any Designated Senior Indebtedness of the Company is outstanding, the Company
may not pay the Securities until five Business Days after such holders or the
Representative of the holders of the Designated Senior Indebtedness of the
Company receive notice of such acceleration and, thereafter, may pay the
Securities only if this Article X otherwise permits payment at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If a payment or
distribution is made to Securityholders that because of this Article X should
not have been made to them, the Securityholders who receive the payment or
distribution shall hold such payment or distribution in trust for holders of the
Senior Indebtedness of the Company and pay it over to them as their respective
interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
Company is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of Senior
Indebtedness of the Company to receive distributions applicable to Senior
Indebtedness of the Company. A distribution made under this Article X to holders
of Senior Indebtedness of the Company which otherwise would have been made to
Securityholders is not, as between the Company and Securityholders, a payment by
the Company on Senior Indebtedness of the Company.
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SECTION 10.07. Relative Rights. This Article X defines the relative
rights of Securityholders and holders of Senior Indebtedness of the Company.
Nothing in this Indenture shall:
(1) impair, as between the Company and Secu rityholders, the
obligation of the Company which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of the Company to receive distributions otherwise
payable to Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article X. The Company, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness of the Company may give the
notice; provided, however, that, if an issue of Senior Indebtedness of the
Company has a Representative, only the Representative may give the notice. The
Trustee shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself or itself to be a holder of any Senior Indebtedness
of the Company (or a Representative of such
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holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article X with respect to any Senior Indebtedness of the Company which may
at any time be held by it, to the same extent as any other holder of Senior
Indebtedness of the Company; and nothing in Article VII shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article X shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article X Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article X shall not be construed as preventing
the occurrence of a Default. Nothing in this Article X shall have any effect on
the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness of the Company or
subject to the restrictions set forth in this Article X, and none of the
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Securityholders shall be obligated to pay over any such amount to the Company or
any holder of Senior Indebtedness of the Company or any other creditor of the
Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of the Company for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of the Senior
Indebtedness of the Company and other Indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article X. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of the Company to
participate in any payment or distribution pursuant to this Article X, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness of the
Company held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article X, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.01 and 7.02 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordina tion. Each
Securityholder by accepting a Security author izes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to acknowledge
or
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effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of the Company as provided in this Article X and appoints
the Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness of the Company. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of the Company and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the Company or any other Person, money or assets to which
any holders of Senior Indebtedness of the Company shall be entitled by virtue of
this Article X or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness of the
Company on Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of the Company, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Securities, to acquire and continue
to hold, or to continue to hold, such Senior Indebtedness and such holder of
such Senior Indebtedness of the Company shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior Indebtedness.
SECTION 10.17. Trustee's Compensation Not Prejudiced. Nothing in
this Article shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE XI
Subsidiary Guarantees
SECTION 11.01. Subsidiary Guarantees. Each Guarantor Subsidiary
hereby jointly and severally
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unconditionally and irrevocably guarantees, as a primary obligor and not merely
as a surety, on an unsecured senior subordinated basis to each Holder and to the
Trustee and its successors and assigns (a) the full and punctual payment of
principal of and interest on the Securities when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Company under this Indenture (including obligations to the Trustee) and the
Securities and (b) the full and punctual performance within applicable grace
periods of all other obligations of the Company whether for expenses,
indemnification or otherwise under this Indenture and the Securities (all the
foregoing being hereinafter collectively called the "Obligations"). Each
Guarantor Subsidiary further agrees that the Obligations may be extended or
renewed, in whole or in part, without notice or further assent from each such
Guarantor Subsidiary, and that each such Guarantor Subsidiary shall remain bound
under this Article XI notwithstanding any extension or renewal of any
Obligation.
Each Guarantor Subsidiary waives presentation to, demand of, payment
from and protest to the Company of any of the Obligations and also waives notice
of protest for nonpayment. Each Guarantor Subsidiary waives notice of any
default under the Securities or the Obligations. The obligations of each
Guarantor Subsidiary hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Company or any other Person under this Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Indenture, the Securities or any other agreement;
(d) the release of any security held by any Holder or the Trustee for the
Obligations or any of them; (e) the failure of any Holder or Trustee to exercise
any right or remedy against any other guarantor of the Obligations; or (f) any
change in the ownership of such Guarantor Subsidiary, except as provided in
Section 11.02(b).
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Each Guarantor Subsidiary further agrees that its Subsidiary
Guaranty herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
The Subsidiary Guaranty of each Guarantor Subsidiary is, to the
extent and in the manner set forth in Article XII, subordinated and subject in
right of payment to the prior payment in full of the principal of and premium,
if any, and interest on all Senior Indebtedness of the relevant Guarantor
Subsidiary and is made subject to such provisions of this Indenture.
The obligations of each Guarantor Subsidiary hereunder shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to any defense of setoff, counterclaim, recoupment or
termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor Subsidiary herein
shall not be discharged or impaired or otherwise affected by the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any remedy
under this Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of any Guarantor Subsidiary or would
otherwise operate as a discharge of any Guarantor Subsidiary as a matter of law
or equity.
Each Guarantor Subsidiary further agrees that its Subsidiary
Guaranty herein shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, of principal of or interest on
any
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Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor Subsidiary by virtue hereof, upon the failure of the Company to pay
the principal of or interest on any Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Obligation, each Guarantor Subsidiary hereby
promises to and shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid principal amount of such Obligations, (ii) accrued
and unpaid interest on such Obligations (but only to the extent not prohibited
by law) and (iii) all other monetary Obligations of the Company to the Holders
and the Trustee.
Each Guarantor Subsidiary agrees that it shall not be entitled to
any right of subrogation in relation to the Holders in respect of any
Obligations guaranteed hereby until payment in full of all Obligations. Each
Guarantor Subsidiary further agrees that, as between it, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article VI for
the purposes of any Subsidiary Guaranty herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Guarantor Subsidiary for the purposes of this Section.
Each Guarantor Subsidiary also agrees to pay any and all costs and
expenses (including reasonable attorneys'
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fees and expenses) incurred by the Trustee or any Holder in enforcing any rights
under this Section.
SECTION 11.02. Limitation on Liability. (a) Any term or provision of
this Indenture to the contrary notwithstanding, the maximum, aggregate amount of
the obligations guaranteed hereunder by any Guarantor Subsidiary shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to any Guarantor Subsidiary, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
(b) This Subsidiary Guaranty as to any Guarantor Subsidiary shall
terminate and be of no further force or effect upon the sale or other transfer
(i) by such Guarantor Subsidiary of all or substantially all of its assets or
(ii) by the Company of all of its stock or other equity interests in such
Guarantor Subsidiary, to a Person that is not an Affiliate of the Company;
provided, however, that such sale or transfer shall be deemed to constitute an
Asset Disposition and the Company shall comply with its obligations under
Section 4.06.
SECTION 11.03. Successors and Assigns. This Article XI shall be
binding upon each Guarantor Subsidiary and its successors and assigns and shall
enure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any Holder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article XI shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The
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rights, remedies and benefits of the Trustee and the Holders herein expressly
specified are cumulative and not exclusive of any other rights, remedies or
benefits which either may have under this Article XI at law, in equity, by
statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or waiver of
any provision of this Article XI, nor the consent to any departure by any
Guarantor Subsidiary therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Guarantor Subsidiary in any case shall
entitle such Guarantor Subsidiary to any other or further notice or demand in
the same, similar or other circumstances.
SECTION 11.06. Execution of Supplemental Indenture for Future
Guarantor Subsidiaries. Each Subsidiary which is required to become a Guarantor
Subsidiary pursuant to Section 4.15 shall promptly execute and deliver to the
Trustee a supplemental indenture in the form of Exhibit D hereto pursuant to
which such Subsidiary shall become a Guarantor Subsidiary under this Article XI
and shall guarantee the Obligations. Concurrently with the execution and
delivery of such supplemental indenture, the Company shall deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate to the effect that
such supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principles of equity, whether considered
in a proceeding at law or in equity, the Subsidiary Guaranty of such Guarantor
Subsidiary is a legal, valid and binding obligation of such Guarantor
Subsidiary, enforceable against such Guarantor Subsidiary in accordance with its
terms.
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ARTICLE XII
Subordination of the Subsidiary Guaranties
SECTION 12.01. Agreement To Subordinate. Each Guarantor Subsidiary
agrees, and each Securityholder by accepting a Security agrees, that the
Obligations of a Guarantor Subsidiary are subordinated in right of payment, to
the extent and in the manner provided in this Article XII, to the prior payment
in full of all Senior Indebtedness of such Guarantor Subsidiary and that the
subordination is for the benefit of and enforceable by the holders of Senior
Indebtedness of such Guarantor Subsidiary. The Obligations with respect to a
Guarantor Subsidiary shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of such Guarantor Subsidiary, and only Indebtedness of
such Guarantor Subsidiary that is Senior Indebtedness of such Guarantor
Subsidiary shall rank senior to the Obligations of such Guarantor Subsidiary in
accordance with the provisions set forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of a Guarantor Subsidiary to creditors
upon a total or partial liquidation or a total or partial dissolution of such
Guarantor Subsidiary or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Guarantor Subsidiary and its
properties:
(1) holders of Senior Indebtedness of such Guarantor Subsidiary
shall be entitled to receive payment in full of such Senior Indebtedness
before Securityholders shall be entitled to receive any payment of any
Obligations from such Guarantor Subsidiary; and
(2) until the Senior Indebtedness of such Guarantor Subsidiary is
paid in full, any payment or distribution to which Securityholders would
be entitled but for this Article XII shall be made to holders of
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such Senior Indebtedness as their respective interests may appear.
SECTION 12.03. Default on Senior Indebtedness of a Guarantor
Subsidiary. A Guarantor Subsidiary may not make any payment pursuant to any of
the Obligations or repurchase, redeem or otherwise retire any Securities
(collectively, "pay its Guaranty") if (i) any Senior Indebtedness of such
Guarantor Subsidiary is not paid when due or (ii) any other default on Senior
Indebtedness of such Guarantor Subsidiary occurs and the maturity of such Senior
Indebtedness is accelerated in accordance with its terms unless, in either case,
(x) the default has been cured or waived and any such acceleration has been
rescinded or (y) such Senior Indebtedness has been paid in full; provided,
however, that such Guarantor Subsidiary may pay its Guaranty without regard to
the foregoing if such Guarantor Subsidiary and the Trustee receive written
notice approving such payment from the Representative of the holders of such
Senior Indebtedness with respect to which either of the events in clause (i) or
(ii) of this sentence has occurred and is continuing. During the continuance of
any default (other than a default described in clause (i) or (ii) of the
preceding sentence) with respect to any Designated Senior Indebtedness of a
Guarantor Subsidiary pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
such Subsidiary Guarantor may not pay its Guaranty for a period (a "Guarantor
Subsidiary Payment Blockage Period") commencing upon the receipt by the Trustee
(with a copy to such Guarantor Subsidiary and the Company) of written notice (a
"Guarantor Subsidiary Blockage Notice") of such default from the Representative
of the holders of the Designated Senior Indebtedness of such Guarantor
Subsidiary specifying an election to effect a Guarantor Subsidiary Payment
Blockage Period and ending 179 days thereafter (or earlier if such Guarantor
Subsidiary Payment Blockage Period is terminated (i) by written notice to the
Trustee (with a copy to such Guarantor Subsidiary and the Company) from the
Person or
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Persons who gave such Guarantor Subsidiary Blockage Notice, (ii) because such
Designated Senior Indebtedness has been repaid in full or (iii) because the
default giving rise to such Guarantor Subsidiary Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this Section), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders shall have accelerated the
maturity of such Designated Senior Indebtedness, such Guarantor Subsidiary may
resume to pay its Guaranty after such Guarantor Subsidiary Payment Blockage
Period, including any missed payments. Not more than one Guarantor Subsidiary
Blockage Notice may be given with respect to a Guarantor Subsidiary in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness of such Guarantor Subsidiary during such
period; provided, however, that if any Guarantor Subsidiary Blockage Notice
within such 360-day period is given by or on behalf of any holders of Designated
Senior Indebtedness of such Guarantor Subsidiary (other than the Bank
Indebtedness), the Representative of the Bank Indebtedness may give another
Guarantor Subsidiary Blockage Notice within such period; provided further,
however, that in no event may the total number of days during which any
Guarantor Subsidiary Payment Blockage Period or Periods is in effect exceed 179
days in the aggregate during any 360 consecutive day period.
SECTION 12.04. Demand for Payment. If payment of the Securities is
accelerated because of an Event of Default and a demand for payment is made on a
Guarantor Subsidiary pursuant to Article XI the Trustee shall promptly notify
the holders of the Designated Senior Indebtedness of such Guarantor Subsidiary
(or the Representative of such holders) of such demand. If any Designated Senior
Indebtedness of such Guarantor Subsidiary is outstanding, such Guarantor
Subsidiary may not pay its Guaranty until five Business Days after such holders
or the Representative of the holders of the Designated Senior Indebtedness of
such Guarantor Subsidiary receive notice of such demand and, thereafter,
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may pay its Guaranty only if this Article XII otherwise permits payment at that
time.
SECTION 12.05. When Distribution Must Be Paid Over. If a payment or
distribution is made to Securityholders that because of this Article XII should
not have been made to them, the Securityholders who receive the payment or
distribution shall hold such payment or distribution in trust for holders of the
Senior Indebtedness of the relevant Guarantor Subsidiary and pay it over to them
as their respective interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of a
Guarantor Subsidiary is paid in full and until the Securities are paid in full,
Securityholders shall be subrogated to the rights of holders of Senior
Indebtedness of such Guarantor Subsidiary to receive distributions applicable to
Senior Indebtedness of such Guarantor Subsidiary. A distribution made under this
Article XII to holders of Senior Indebtedness of such Guarantor Subsidiary which
otherwise would have been made to Securityholders is not, as between such
Guarantor Subsidiary and Securityholders, a payment by such Guarantor Subsidiary
on Senior Indebtedness of such Guarantor Subsidiary.
SECTION 12.07. Relative Rights. This Article XII defines the
relative rights of Securityholders and holders of Senior Indebtedness of a
Guarantor Subsidiary. Nothing in this Indenture shall:
(1) impair, as between a Guarantor Subsidiary and Securityholders,
the obligation of a Guarantor Subsidiary which is absolute and
unconditional, to pay its Obligations to the extent set forth in Article
XI; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a default by a Guarantor Subsidiary under its
Obligations, subject to the rights of holders of Senior Indebtedness of
such
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Guarantor Subsidiary to receive distributions otherwise payable to
Securityholders.
SECTION 12.08. Subordination May Not Be Impaired by a Guarantor
Subsidiary. No right of any holder of Senior Indebtedness of a Guarantor
Subsidiary to enforce the subordination of the Obligations of such Guarantor
Subsidiary shall be impaired by any act or failure to act by such Guarantor
Subsidiary or by its failure to comply with this Indenture.
SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 12.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article XII. A Guarantor Subsidiary, the Registrar or co-registrar, the Paying
Agent, a Representative or a holder of Senior Indebtedness of a Guarantor
Subsidiary may give the notice; provided, however, that, if an issue of Senior
Indebtedness of a Guarantor Subsidiary has a Representative, only the
Representative may give the notice. The Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a holder of any Senior Indebtedness of a Guarantor Subsidiary (or a
Representative of such holder) to establish that such notice has been given by a
holder of such Senior Indebtedness or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of a Guarantor Subsidiary with the same rights it would have if it
were not Trustee. The Registrar and co-registrar and the Paying Agent may do the
same with like rights. The Trustee shall be entitled to all the rights set forth
in this Article XII with respect to any Senior Indebtedness of a Guarantor
Subsidiary which may at any time be held by it, to the same extent as any other
holder of Senior Indebtedness of such Guarantor Subsidiary;
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and nothing in Article VII shall deprive the Trustee of any of its rights as
such holder. Nothing in this Article XII shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of a Guarantor Subsidiary, the distribution may be made and the notice given to
their Representative (if any).
SECTION 12.11. Article XII Not To Prevent Events of Default or Limit
Right To Accelerate. The failure of a Guarantor Subsidiary to make a payment on
any of its Obligations by reason of any provision in this Article XII shall not
be construed as preventing the occurrence of a default by such Guarantor
Subsidiary under its Obligations. Nothing in this Article XII shall have any
effect on the right of the Securityholders or the Trustee to make a demand for
payment on a Guarantor Subsidiary pursuant to Article XI.
SECTION 12.12. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article XII, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of a Guarantor Subsidiary for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
the Senior Indebtedness of a Guarantor Subsidiary and other Indebtedness of a
Guarantor Subsidiary, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article XII. In the event that the Trustee determines, in good faith, that
evidence is required with respect to the right of any Person as a holder of
Senior
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Indebtedness of a Guarantor Subsidiary to participate in any payment or
distribution pursuant to this Article XII, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness of such Guarantor Subsidiary held by such Person,
the extent to which such Person is entitled to participate in such payment or
distribution and other facts pertinent to the rights of such Person under this
Article XII, and, if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall
be applicable to all actions or omissions of actions by the Trustee pursuant to
this Article XII.
SECTION 12.13. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to acknowledge
or effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness of each of the Guarantor Subsidiaries as provided in this
Article XII and appoints the Trustee as attorney-in-fact for any and all such
purposes.
SECTION 12.14. Trustee Not Fiduciary for Holders of Senior
Indebtedness of a Guarantor Subsidiary. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness of a Guarantor
Subsidiary and shall not be liable to any such holders if it shall mistakenly
pay over or distribute to Securityholders or the relevant Guarantor Subsidiary
or any other Person, money or assets to which any holders of Senior Indebtedness
of such Guarantor Subsidiary shall be entitled by virtue of this Article XII or
otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness of a
Guarantor Subsidiary on Subordination Provisions. Each Securityholder by
accepting a Security acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a
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consideration to each holder of any Senior Indebtedness of a Guarantor
Subsidiary, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE XIII
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail or by national
overnight courier service addressed as follows:
if to the Company or any Guarantor Subsidiary:
Lifestyle Furnishings International Ltd.
1300 National Highway
Thomasville, NC 27360
Attention of:
Chief Financial Officer
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137
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention of:
Corporate Trust Agencies & Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be
mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice.
SECTION 13.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by
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138
the Company to the Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee and complying with Section 13.05 stating that,
in the opinion of the signers, all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee and complying with Section 13.05 stating that,
in the opinion of such counsel, all such conditions precedent have been
complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
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139
SECTION 13.06. When Securities Disregarded. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which commercial banking institutions (including, without
limitation, the Federal Reserve System) are authorized or required by law to
close in New York City. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 13.09. Governing Law. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 13.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company of any Guarantor Subsidiary
shall not have any liability for any obligations of the Company or any Guarantor
Subsidiary under the Securities or this Indenture
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140
or for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Securityholder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
SECTION 13.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
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141
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
LIFESTYLE FURNISHINGS
INTERNATIONAL LTD.,
by_____________________________
Name:
Title:
AMETEX FABRICS, INC.
by_____________________________
Name:
Title:
THE BERKLINE CORPORATION,
by_____________________________
Name:
Title:
BLUE MOUNTAIN TRUCKING
CORPORATION,
by_____________________________
Name:
Title:
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142
CUSTOM TRUCK TIRES, INC.,
by_____________________________
Name:
Title:
D-H RETAIL SPACE, INC.,
by_____________________________
Name:
Title:
DREXEL HERITAGE ADVERTISING,
INC.,
by_____________________________
Name:
Title:
DREXEL HERITAGE FURNISHINGS
INC.,
by_____________________________
Name:
Title:
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143
DREXEL HERITAGE HOME
INSPIRATIONS, INC.,
by_____________________________
Name:
Title:
HENREDON FURNITURE INDUSTRIES,
INC.,
by_____________________________
Name:
Title:
HENREDON TRANSPORTATION
COMPANY,
by_____________________________
Name:
Title:
INTERIOR FABRIC DESIGN, INC.,
by_____________________________
Name:
Title:
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144
INTRO EUROPE, INC.,
by_____________________________
Name:
Title:
LA BARGE, INC.,
by_____________________________
Name:
Title:
LEXINGTON FURNITURE
INDUSTRIES, INC.,
by_____________________________
Name:
Title:
MAITLAND-SMITH, INC.,
by_____________________________
Name:
Title:
MARBRO LAMP COMPANY,
by_____________________________
Name:
Title:
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145
RAMM, SON & CROCKER, INC.,
by_____________________________
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
by_____________________________
Name:
Title:
ROBERT ALLEN FABRICS OF N.Y.,
INC.,
by_____________________________
Name:
Title:
SUNBURY TEXTILE MILLS, INC.,
by_____________________________
Name:
Title:
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
by_____________________________
Name:
Title:
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146
UNIVERSAL FURNITURE LIMITED,
by_____________________________
Name:
Title:
IBJ SCHRODER BANK AND TRUST
COMPANY,
by_____________________________
Name:
Title:
Exhibit 10.1
ACQUISITION AGREEMENT
BETWEEN
FURNISHINGS INTERNATIONAL INC.
AND
MASCO CORPORATION
March 29, 1996
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TABLE OF CONTENTS
Preface .................................................................... 1
Section 1. Definitions................................................ 1
Section 2. Acquisition of Shares...................................... 1
(a) Basic Transaction.......................................... 1
(b) Purchase Price............................................. 1
(c) The Closing................................................ 2
(d) Deliveries at the Closing.................................. 2
(e) Preparation of Closing Date Balance Sheet.................. 3
(f) Adjustment to Preliminary Purchase Price................... 6
Section 3. Representations and Warranties Concerning the
Transaction.............................................. 7
(a) Representations and Warranties of Masco.................... 7
(b) Representations and Warranties of the Buyer................ 8
Section 4. Representations and Warranties Concerning the HFG
Companies.................................................. 16
(a) Organization, Qualification, and Corporate Power........... 16
(b) Capitalization............................................. 16
(c) Noncontravention........................................... 17
(d) Brokers' Fees.............................................. 18
(e) Investments................................................ 18
(f) Financial Statements....................................... 18
(g) Events Subsequent to December 31, 1995..................... 19
(h) Litigation................................................. 20
(i) Legal Compliance........................................... 20
(j) Tax Matters................................................ 20
(k) Real Property.............................................. 22
(l) Intellectual Property...................................... 24
(m) Personal Property.......................................... 26
(n) Contracts.................................................. 26
(o) Employees.................................................. 27
(p) Employee Benefits.......................................... 28
(q) Environmental Laws and Liabilities......................... 31
(r) Insurance.................................................. 31
Section 5. Pre-Closing Covenants...................................... 31
(a) General.................................................... 32
(b) Notices and Consents....................................... 32
(c) Operation of Business...................................... 32
(d) Reasonable Access.......................................... 33
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(e) Notice of Developments..................................... 33
(f) Exclusivity................................................ 35
(g) Financing.................................................. 35
(h) Certain Resignations....................................... 36
(i) FIRPTA Certificates........................................ 36
(j) Clear Title................................................ 36
(k) Transitional Services...................................... 36
Section 6. Employees and Employee Benefits............................ 37
(a) Continuation of Benefits................................... 37
(b) Certain Statutory Requirements............................. 37
(c) Employee Pension Benefit Plans............................. 37
(d) Employee Welfare Benefit Plans............................. 40
(e) Employee Benefit Arrangements.............................. 40
(f) Plan Contributions......................................... 41
(g) Transitional Services...................................... 41
(h) Conflict................................................... 42
Section 7. Conditions to Obligation to Close.......................... 42
(a) Conditions to Obligation of the Buyer...................... 42
(b) Conditions to Obligation of Masco.......................... 43
Section 8. Indemnification............................................ 45
(a) Survival of Representations and Warranties................. 45
(b) Indemnification Provisions for Benefit of the Buyer........ 46
(c) Indemnification Provisions for Benefit of Masco............ 48
(d) Matters Involving Third Parties............................ 49
(e) Miscellaneous.............................................. 50
Section 9. Tax Matters................................................ 51
(a) Tax Sharing Agreements..................................... 51
(b) Allocation of Tax Liability................................ 51
(c) Consolidated and Similar Taxes and Tax Returns for Periods
Through the Closing Date................................... 52
(d) Tax Contests............................................... 53
(e) Cooperation................................................ 54
(f) Payments of Transfer Taxes and Fees........................ 54
(g) Carrybacks................................................. 54
(h) Retention of Carryovers.................................... 55
(i) Post-Closing Elections..................................... 55
(j) Allocation of Purchase Price............................... 55
(k) Certain Transactions on the Closing Date................... 56
(l) Separate Returns, Straddle Period Returns and Allocation of
Certain Taxes............................................ 56
ii
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(m) Refunds and Related Matters............................... 57
(n) Requested Transactions.................................... 59
(o) Miscellaneous............................................. 59
(p) Conflict.................................................. 59
(q) Survival.................................................. 59
Section 10. Environmental Matters..................................... 60
(a) General................................................... 60
(b) Reporting, Remediation, and Compliance.................... 60
(c) Certain Responsibilities of the Buyer..................... 61
(d) Third Party Actions....................................... 62
(e) Resolution of Certain Disputes............................ 62
(f) Certain Recoveries........................................ 63
Section 11. Termination............................................... 63
(a) Termination of Agreement.................................. 63
(b) Effect of Termination..................................... 64
Section 12. Miscellaneous............................................. 64
(a) Press Releases and Public Announcements................... 64
(b) No Third Party Beneficiaries.............................. 64
(c) Specific Performance...................................... 65
(d) Entire Agreement.......................................... 65
(e) Non-Competition, Non-Interference and Non-Solicitation.... 65
(f) Confidentiality........................................... 66
(g) Succession and Assignment................................. 67
(h) Counterparts.............................................. 67
(i) Headings.................................................. 67
(j) Notices................................................... 67
(k) Governing Law............................................. 68
(l) Amendments and Waivers.................................... 68
(m) Severability.............................................. 68
(n) Expenses.................................................. 68
(o) Further Assurances........................................ 68
(p) Risk Management and Litigation Support.................... 69
(q) Certain Intercompany Relationships........................ 69
(r) Certain Releases, Assignments, and Assumptions............ 70
(s) Construction.............................................. 71
(t) Incorporation of Exhibits and Schedules................... 72
(u) Limited Recourse.......................................... 72
(v) Waiver of Jury Trial...................................... 72
(w) No Offset................................................. 72
iii
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Schedule of HFG Companies
Schedule of Defined Terms
Schedule of Disclosures Regarding Masco's Representations and Warranties
Schedule of Disclosures Regarding the Buyer's Representations and Warranties
Schedule of Tax Allocations
Schedule 2(b) - PIK Payments Schedule
Schedule 2(b)(ii) - Sample Adjustment Schedule
Schedule 8(b) - Environmental Sites
Exhibit A - Terms of PIK Note
Exhibit B - Summary of Terms of Capital Stock of the Buyer
Exhibit C - Terms of Stockholders' Agreement
Exhibit D - Form of Opinion of Counsel to Masco
Exhibit E - Form of Opinion of Counsel to the Buyer
iv
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ACQUISITION AGREEMENT
This Agreement is entered into as of March 29, 1996, by and between
FURNISHINGS INTERNATIONAL INC., a Delaware corporation (the "Buyer"), and Masco
Corporation, a Delaware corporation ("Masco"). The Buyer and Masco are referred
to collectively herein as the "Parties."
Masco (or, in certain cases, its indirect Subsidiary Masco Corporation
Limited) owns all of the outstanding capital stock of each of the corporations
listed on the attached Schedule of HFG Companies (collectively, the "HFG
Companies").
This Agreement contemplates a transaction in which the Buyer will purchase
from Masco (or, as appropriate, Masco Corporation Limited), and Masco will sell
(or, as appropriate, will cause Masco Corporation Limited to sell) to the Buyer,
all of the outstanding capital stock of each of the HFG Companies in return for
the consideration specified below. The Parties contemplate that prior to the
Closing Date they will agree that, in lieu of or in addition to the sale of the
capital stock of one or more of the HFG Companies, such HFG Company or one or
more of its Subsidiaries will merge into the Buyer or one or more wholly owned
Subsidiaries of the Buyer.
Now, therefore, in consideration of the premises and the representations,
warranties, and covenants herein contained, the Parties agree as follows.
Section 1. Definitions. Defined terms used in this Agreement are set forth
in the attached Schedule of Defined Terms.
Section 2. Acquisition of Shares.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from Masco (or, as appropriate, Masco
Corporation Limited), and Masco agrees to sell (or, as appropriate, cause Masco
Corporation Limited to sell) to the Buyer, all of the outstanding capital stock
in each of the HFG Companies for the consideration specified below in this ss.2.
The Parties contemplate that prior to the Closing Date they will agree that, in
lieu of or in addition to the sale of the capital stock of one or more of the
HFG Companies, such HFG Company or one or more of its Subsidiaries will merge
into the Buyer or one or more wholly owned Subsidiaries of the Buyer. Any such
merger will be effected pursuant to mutually agreeable merger documentation and
on a basis that is economically equivalent for both Parties.
(b) Purchase Price. The "Preliminary Purchase Price" shall consist of (i)
$757,808,900 in cash, (ii) a promissory note (the "PIK Note") of the Buyer
having a principal amount equal to $235,000,000 and an interest rate equal to
12% per annum and having the terms (including the maturity and amortization
schedule) set forth in the attached Exhibit A; provided that (x) the principal
amount of the PIK Note will be further adjusted as provided in ss.2(f) and (y)
if on the Closing Date the Maximum Permitted Rate is less than 12%, the interest
rate on the
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PIK Note will be reduced to the Maximum Permitted Rate and the principal amount
of the PIK Note will be increased consistent with the sample calculation
provided in Schedule 2(b) in an amount such that the discounted present value of
all scheduled cash payments (assuming interest will be paid in cash commencing
on the eighth anniversary of the Closing Date) under the PIK Note following such
adjustment (calculated using 12% as the discount factor) will be equal to the
discounted present value of all such payments under the PIK Note prior to such
adjustment (calculated using the same discount factor), (iii) 548,571 shares of
Series A Preferred Stock (the "Series A Preferred Stock") of the Buyer having
the terms set forth in the attached Exhibit B under the caption "Series A
Preferred Stock", (iv) 347,917 shares of Series B Preferred Stock (the "Series B
Preferred Stock") of the Buyer having the terms set forth in the attached
Exhibit B under the caption "Series B Preferred Stock" and (v) 15,000 shares of
Class A Common Stock (the "Class A Common Stock") and 37,083 shares of Class B
Common Stock (the "Class B Common Stock") of the Buyer (in each case to be
allocated evenly among the three series thereof). The Preliminary Purchase Price
will be applied as follows: first, to the repayment by the HFG Companies and
their Subsidiaries (as set forth in the Schedule of Tax Allocations) of the Net
Intercompany Balance and, second, to the payment in full for the outstanding
capital stock of the HFG Companies. All cash transfers on the Closing Date
pursuant to this ss.2(b) will be made by wire transfer of immediately available
funds to Masco (for Masco's own account or, as appropriate, for the account of
Masco Corporation Limited). The Preliminary Purchase Price will be subject to
certain adjustments as described below in arriving at the Purchase Price. The
Parties agree that the Purchase Price shall be allocated for all purposes among
the capital stock and assets of the HFG Companies and their Subsidiaries in
accordance with ss.9(j) below.
(c) The Closing. Subject to the satisfaction or waiver of the conditions
set forth in ss.7 below, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Davis Polk &
Wardwell in New York, N.Y., commencing at 9:00 a.m. local time on the second
business day following the expiration or termination of all applicable waiting
periods (and any extensions thereof) under the Hart-Scott-Rodino Act or such
other date as the Buyer and Masco may mutually determine (the "Closing Date").
(d) Deliveries at the Closing. At the Closing, (i) Masco will deliver (or,
as appropriate, will cause Masco Corporation Limited to deliver) to the Buyer
(A) the various certificates, instruments, and other documents referred to in
ss.5(h) and (i) below and in ss.7(a) below and (B) stock certificates
representing all of the outstanding capital stock of each of the HFG Companies,
endorsed in blank or accompanied by duly executed assignment documents, with
requisite stock transfer tax stamps, if any, attached, in each case free and
clear of any Security Interests, equities, claims and demands (other than those
created by the Buyer and its Affiliates (determined assuming that Masco, the HFG
Companies and their respective Subsidiaries are not Affiliates of the Buyer)),
and (ii) the Buyer will deliver or cause to be delivered to Masco (for Masco's
own account or, as appropriate, for the account of Masco Corporation Limited)
(A) the various certificates, instruments, and other documents referred to in
ss.7(b) below and (B) the consideration specified in the first sentence of
ss.2(b) above, which shall be applied as specified in the second sentence of
such ss.2(b). If the Parties agree that the Buyer will acquire one or more of
the HFG Companies or their Subsidiaries through one or more mergers, as
contemplated by ss.2(a), then each of the Parties will deliver (or, in the case
of Masco, as
2
<PAGE>
appropriate, will cause Masco Corporation Limited to deliver) such additional
documents and instruments as may be required to accomplish each such merger.
(e) Preparation of Closing Date Balance Sheet.
(i) Within 60 days after the Closing Date, Masco will prepare and
deliver to the Buyer an audited combined balance sheet (the "Proposed
Closing Date Balance Sheet") for the HFG Companies and their Subsidiaries
as of the close of business on the Closing Date (determined as though the
Parties had not consummated the transactions contemplated by this
Agreement), together with a written report thereon of Coopers & Lybrand
L.L.P., including their unqualified opinion, stating that the Proposed
Closing Date Balance Sheet (x) has been audited by them using the same
audit scope (including methods, principles, practices and location visits)
as was used in the audit of the Financial Statements as of and for the
period ended December 31, 1995 (except that the location visits will be
expanded to include Bench Craft and The Berkline Corporation) and (y)
fairly presents the combined financial position of the HFG Companies and
their Subsidiaries as of the Closing Date in conformity with GAAP. The
Buyer shall be responsible for all of the fees and expenses payable to
Coopers & Lybrand L.L.P. in connection with the preparation of such report.
The Proposed Closing Date Balance Sheet (and the Closing Date Balance Sheet
referred to below) will be prepared in accordance with GAAP applied on a
basis consistent with the methods, principles, practices and policies
(including the same procedures and scope with respect to any taking of a
physical inventory and any physical inspection of assets) employed in the
preparation of the Financial Statements; provided, however, that the
physical inventories in connection with the Proposed Closing Date Balance
Sheet shall be taken no earlier than 92 days prior to the Closing Date.
(ii) Concurrently with the delivery of the Proposed Closing Date
Balance Sheet, Masco will prepare and deliver to the Buyer a report (the
"Adjusted NIA Report") setting forth Masco's calculation of the Adjusted
Net Investment and Advances as of the Closing Date. "Adjusted Net
Investment and Advances" means "Masco Corporation Net Investment and
Advances," as set forth on the Proposed Closing Date Balance Sheet or on
the Closing Date Balance Sheet, adjusted consistently with the sample
reconciliation calculation (which assumes a Closing Date of May 31, 1996)
provided for in Schedule 2(e) (ii) (the "Adjustment Schedule") to reflect
the following: (A) (w) any contingent liability (it being understood that,
for purposes of this clause (w) and clause (C) below, the phrase
"contingent liability" will not include loss contingencies related to the
collectibility of receivables, the quantity or quality of inventory or
product returns) of the HFG Companies and their Subsidiaries that neither
reduced the Year-end Net Investment and Advances nor will be the
responsibility of any of the Buyer, the HFG Companies and their
Subsidiaries after the Closing (after giving effect to Masco's obligations
under this Agreement, but without regard to any limitations on such
obligations under ss.8(b) below), provided that such contingent liability
does not arise from facts and circumstances existing and in the Knowledge
of Masco as of the Closing Date, (x) any asset, deferred credit or
liability of the HFG Companies and their Subsidiaries for current and
deferred income
3
<PAGE>
taxes, (y) any liability of the HFG Companies and their Subsidiaries for
ERISA funding obligations with respect to defined benefit and defined
contribution employee pension benefit plans administered by Masco (and any
asset or liability of the HFG Companies and their Subsidiaries with respect
to defined benefit and defined contribution employee pension benefit plans
that would be required under FAS 87 but that did not increase or decrease
Year-end Net Investments and Advances) and (z) any liabilities, accruals or
reserves for general/product liability, automobile liability and domestic
workers' compensation of the HFG Companies and their Subsidiaries (whether
or not administered by Masco) and any liabilities, accruals or reserves for
health, medical, dental, disability or life insurance benefits, to the
extent administered by Masco through a welfare benefit trust fund
maintained by Masco (or, in the case of life insurance benefits, to the
extent covered by third party insurance maintained by Masco), will, in each
case, be excluded in determining the "Adjusted Net Investment and
Advances"; (B) neither the assets included in "Property and equipment, net"
and "Excess of cost over acquired net assets," nor the Robert Allen sample
books included in "Other Assets," will be written up or down from their
historic depreciated or amortized carrying cost to reflect any higher or
lower market value (other than (i) decreases for depreciation and
amortization required by GAAP, consistently applied, (ii) increases as a
result of the capitalization of interest under GAAP, consistently applied,
and (iii) decreases as a result of damage to or destruction of property,
plant, or equipment), and any such adjustment that is not reflected in the
combined balance sheet as of December 31, 1995 included in the Financial
Statements, but is reflected in the Proposed Closing Date Balance Sheet or
the Closing Date Balance Sheet, will be reversed; (C) no reserves will be
established (or, if reserves were already established as of December 31,
1995, will be increased or decreased) with respect to any contingent
liability reflected in the Disclosure Schedule or in any written notice
pursuant to ss.5(e)(i) below (other than with respect to (x) the Specified
Masco Representations and (y) facts and circumstances existing and in the
Knowledge of Masco as of the date of this Agreement); and (D) no
adjustments will be made in order to reflect the occurrence of any event or
development subsequent to the Closing (regardless of whether any such event
or development relates back in any manner to the period ending on the
Closing Date); provided, however, that adjustments will be made to correct
any arithmetical and similar errors. The calculation of the Adjusted Net
Investment and Advances set forth in the Adjusted NIA Report shall be
prepared on a basis consistent with the methods, principles, practices and
policies employed in the calculation of the Year-end Net Investment and
Advances set forth in the Adjustment Schedule; provided, however, that
while a portion of the cash and cash investments of the HFG Companies and
their Subsidiaries was excluded in determining Year-end Net Investment and
Advances, all of the cash and cash investments of the HFG Companies and
their Subsidiaries reflected on the Closing Date Balance Sheet will be
included in determining the Adjusted Net Investment and Advances. The
Adjusted NIA Report shall be accompanied by a written report of Coopers &
Lybrand L.L.P. confirming the accuracy of the adjustments set forth
therein. The Buyer shall be responsible for all of the fees and expenses of
Coopers & Lybrand L.L.P. in connection with the preparation of such report.
4
<PAGE>
(iii) If the Buyer has any objections that Masco has not prepared the
Proposed Closing Date Balance Sheet (including the cash and cash
investments reflected thereon) or the Adjusted NIA Report in accordance
with the provisions of this Agreement, then the Buyer may deliver a
statement describing its objections in reasonable detail to Masco within 60
days after receiving the Proposed Closing Date Balance Sheet and the
Adjusted NIA Report. Masco and the Buyer will use reasonable efforts to
resolve any disputes themselves through the exchange of written proposals
setting forth their respective determinations of the Adjusted Net
Investment and Advances and of the cash and cash investments of the HFG
Companies and their Subsidiaries as of the Closing Date (the "Closing Date
Cash"). During this period (not to exceed 30 days after Masco has received
the statement of objections) in which the Parties are attempting to resolve
any such disputes themselves, neither Party shall be constrained by any
position it has previously taken with respect to the determination of the
Adjusted Net Investment and Advances and the Closing Date Cash (nor shall
Masco be constrained by any position it has taken in the preparation of the
Proposed Closing Date Balance Sheet or the Adjusted NIA Report); provided,
however, that neither Party may take any position that is inconsistent with
the provisions of this Agreement. If the Parties do not obtain a final
resolution within 30 days after Masco has received the statement of
objections, the Parties shall submit the items remaining in dispute for
resolution to a nationally recognized accounting firm (other than Coopers &
Lybrand L.L.P. or Ernst & Young L.L.P.) reasonably acceptable to each of
the Parties (the "Independent Accounting Firm"). Within 10 days after the
selection of the Independent Accounting Firm, each Party shall submit to
the Independent Accounting Firm a written statement describing each item
subject to dispute in reasonable detail. The Independent Accounting Firm
shall, within 60 days after such submission, resolve any remaining
disputes. Any such resolution by the Independent Accounting Firm will be
set forth in writing and will be conclusive and binding upon the Parties;
provided, however, that (A) the Adjusted Net Investment and Advances or the
Closing Date Cash, as the case may be, shall be deemed to equal the amount
set forth in the final written proposal of the Buyer prior to the
involvement of the Independent Accounting Firm (the "Low Value") if the
Independent Accounting Firm determines that such Adjusted Net Investment
and Advances or Closing Date Cash is less than or equal to the Low Value
and (B) such Adjusted Net Investment and Advances or Closing Date Cash, as
the case may be, shall be deemed to equal the amount set forth in the final
written proposal of Masco prior to the involvement of the Independent
Accounting Firm (the "High Value") if the Independent Accounting Firm
determines that such Adjusted Net Investment and Advances or Closing Date
Cash is greater than or equal to the High Value. In any event, if the
Proposed Closing Date Balance Sheet or the Adjusted NIA Report (taking into
account any change in Closing Date Cash) is to be revised in any respect,
the Parties (or the Independent Accounting Firm) shall also make any
appropriate corresponding offsets and adjustments elsewhere in the Proposed
Closing Date Balance Sheet and the Adjusted NIA Report. Masco (or the
Independent Accounting Firm) will revise the Proposed Closing Date Balance
Sheet and the Adjusted NIA Report as appropriate to reflect the final
resolution of any disputes referred to in thisss.2(e)(iii). The "Closing
Date Balance Sheet" shall mean the Proposed Closing Date Balance Sheet
together with any revisions thereto pursuant to thisss.2(e)(iii). The
"Revised Adjusted NIA
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Report" shall mean the Adjusted NIA Report together with any revisions
thereto pursuant to this ss.2(e)(iii).
(iv) In the event the Parties submit any unresolved disputes to the
Independent Accounting Firm as provided in ss.2(e)(iii) above, the Buyer
will be responsible for all of the fees and expenses of the Independent
Accounting Firm in resolving such disputes.
(v) The Buyer will make the books, records and personnel of the HFG
Companies and their Subsidiaries available to Masco and its accountants and
other representatives, and Masco will make its, and will cause Coopers &
Lybrand L.L.P. to make its, work papers, back-up materials and personnel
used in preparing the Proposed Closing Date Balance Sheet and the Adjusted
NIA Report available to the Buyer and its accountants and other
representatives, at reasonable times and upon reasonable notice at any time
during (A) the preparation by Masco of the Proposed Closing Date Balance
Sheet and the Adjusted NIA Report (including the taking of any physical
inventory), (B) the review by the Buyer of the Proposed Closing Date
Balance Sheet and the Adjusted NIA Report, and (C) the resolution by the
Parties and, if necessary, the Independent Accounting Firm of any disputes
involving the Proposed Closing Date Balance Sheet or the Adjusted NIA
Report.
(f) Adjustment to Preliminary Purchase Price. The Preliminary Purchase
Price will be adjusted as follows:
(i) if the Closing Date Cash is less than $14,000,000 (the amount of
such shortfall being referred to as the "Masco Cash Payment"), Masco will
pay to the Buyer an amount equal to the Masco Cash Payment, together with
interest thereon at the Applicable Rate from the Closing Date, by wire
transfer of immediately available funds within three business days after
the date on which Adjusted Net Investment and Advances finally is
determined pursuant to ss.2(e).
(ii) following any payment contemplated by clause (i) above, the
Adjusted Net Investment and Advances (as set forth in the Revised Adjusted
NIA Report) will be increased by the amount of any Masco Cash Payment (as
contemplated by the Adjustment Schedule). If the Adjusted Net Investment
and Advances (as so adjusted) exceeds $1,691,400,000 (such amount being
referred to as "Year-end Net Investment and Advances"), the principal
amount of the PIK Note will be increased, effective as of the Closing Date,
by the amount of such excess; provided, however, that the principal amount
of the PIK Note shall be appropriately modified in the same manner as the
adjustment to the original principal amount of the PIK Note in accordance
with clause (y) of the proviso to ss.2(b)(ii).
(iii) If the Adjusted Net Investment and Advances as of the Closing
Date (as so adjusted) is less than the Year-end Net Investment and
Advances, Masco (for its own account or, as appropriate, for the account of
Masco Corporation Limited) will pay
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to the Buyer an amount equal to such deficiency, together with interest
thereon at the Applicable Rate from the Closing Date, by wire transfer of
immediately available funds within three business days after the date on
which such Adjusted Net Investment and Advances finally is determined
pursuant to ss.2(e).
The Preliminary Purchase Price as so adjusted is referred to herein as the
"Purchase Price."
Section 3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of Masco. Masco represents and warrants
to the Buyer that the statements contained in this ss.3(a) are correct as of the
date of this Agreement, and will be correct as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this ss.3(a)), except for the matters reflected in the
accompanying Schedule of Disclosures Regarding Masco's Representations and
Warranties (the "Disclosure Schedule"), which Disclosure Schedule shall be
construed in accordance with ss.12(s).
(i) Organization. Each of Masco and Masco Corporation Limited is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware.
(ii) Authorization of Transaction. Masco has full corporate power and
authority, including all necessary approvals of its directors and
shareholders, to execute and deliver this Agreement and the other
Transaction Documents to which Masco is a party and to perform Masco's
obligations hereunder and thereunder (including by causing Masco
Corporation Limited to take all actions contemplated to be taken by it
under this Agreement). This Agreement has been duly and validly executed
and delivered by Masco and constitutes the valid and legally binding
obligation of Masco, enforceable against it in accordance with its terms,
and each of the other Transaction Documents to which Masco or Masco
Corporation Limited is a party, upon its execution and delivery, will
constitute the valid and legally binding obligation of Masco or Masco
Corporation Limited (as the case may be), enforceable against Masco or
Masco Corporation Limited (as the case may be) in accordance with its
terms. As of the Closing Date, Masco Corporation Limited will have full
corporate power and authority, including all necessary approvals of its
directors and shareholders, to take all actions contemplated to be taken by
it under this Agreement (including the execution, delivery and performance
of each Transaction Document to which it is a party and the sale to the
Buyer of all the outstanding capital stock in certain HFG Companies).
(iii) Noncontravention. Neither the execution and the delivery by
Masco of this Agreement and the other Transaction Documents to which Masco
is a party, nor the execution and delivery by Masco Corporation Limited of
the Transaction Documents to which it is a party, nor the consummation by
Masco and Masco Corporation Limited of the transactions contemplated hereby
and thereby, will (A) violate any constitution, statute, law, regulation,
rule, injunction, judgment, order, decree, ruling, charge or other
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restriction of any foreign, federal, state or local government,
governmental agency or court to which Masco or Masco Corporation Limited is
subject or any provision of their respective charters or bylaws or (B)
conflict with, result in a breach of, constitute a default (or an event
which with the giving of notice or lapse of time, or both, would become a
default) under, result in the acceleration, termination, modification or
cancellation of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under, any agreement, contract,
lease, license, instrument, permit or other arrangement to which Masco or
Masco Corporation Limited is a party or by which either of them is bound or
to which any of Masco's remaining Subsidiaries or assets is subject (or
result in the imposition of any Security Interest upon any of the capital
stock of the HFG Companies and their Subsidiaries), except for such
violations, conflicts, breaches, defaults, accelerations, terminations,
modifications, cancellations, rights, and failures to give notice which,
individually and in the aggregate, would not have a material adverse effect
on the ability of any Party to consummate the transactions contemplated by
this Agreement and the other Transaction Documents. Neither Masco nor Masco
Corporation Limited will be required to give any notice to, make any filing
with, or obtain any authorization, consent or approval of any government,
governmental agency or court in order to consummate the transactions
contemplated by this Agreement and the other Transaction Documents to which
Masco or Masco Corporation Limited is a party, except where failures to
give any such notice, to make any such filing or to obtain any such
authorization, consent or approval would not, individually and in the
aggregate, have a material adverse effect on the ability of any Party to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents.
(iv) Brokers' Fees. Neither Masco nor Masco Corporation Limited has
any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement and the other Transaction Documents for which any of the Buyer
and its Affiliates (including the HFG Companies and their Subsidiaries, but
excluding Masco and its remaining Subsidiaries) could become liable or
obligated.
(v) HFG Company Shares. Masco (or, as indicated, Masco Corporation
Limited) holds of record and owns beneficially the number of shares of each
class of capital stock of each HFG Company as set forth in ss.4(b) of the
Disclosure Schedule, free and clear of any Security Interests, equities,
claims and demands and, except with respect to wholly owned Subsidiaries of
the HFG Companies, free of all preemptive rights.
(vi) Acquisition for Investment. Neither Masco nor Masco Corporation
Limited is acquiring any of the PIK Note, the Series A Preferred Stock, the
Series B Preferred Stock or the Common Stock with a view to or for sale in
connection with any distribution thereof within the meaning of the
Securities Act; provided, however, that the disposition of Masco's or Masco
Corporation Limited's property (including any of the PIK Note, the Series A
Preferred Stock, the Series B Preferred Stock or the Common Stock) will at
all times remain within its control.
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(b) Representations and Warranties of the Buyer. The Buyer represents and
warrants to Masco that the statements contained in this ss.3(b) are correct as
of the date of this Agreement, and will be correct as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this ss.3(b)), except for the matters reflected in the
accompanying Schedule of Disclosures Regarding the Buyer's Representations and
Warranties (the "Buyer Disclosure Schedule"), which Buyer Disclosure Schedule
shall be construed in accordance with ss.12(s), and any matters reflected in any
written notice delivered in accordance with ss.5(e)(ii) below (other than with
respect to (x) the Specified Buyer Representations and (y) facts and
circumstances existing and in the knowledge of the Buyer as of the date of this
Agreement).
(i) Organization, Qualification, and Corporate Power. Each of the
Buyer and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite
power and authority and all necessary governmental approvals to own, lease,
and operate its properties and to carry on its business as it is now being
conducted, except for such failures to be so organized, existing, or in
good standing or to have such power, authority, and governmental approvals
that, individually and in the aggregate, would not have a Buyer Material
Adverse Effect or a material adverse effect on the ability of the Parties
to consummate the transactions contemplated by this Agreement and the other
Transaction Documents. Each of the Buyer and its Subsidiaries is duly
qualified or licensed to do business, and is in good standing (to the
extent applicable), in each jurisdiction where the character of the
properties owned, leased, or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures
to be so qualified or licensed and in good standing that, individually and
in the aggregate, would not have a Buyer Material Adverse Effect or a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents. The Buyer has heretofore delivered to Masco true and complete
copies of the charter and bylaws of each of the Buyer and its Subsidiaries
as currently in effect and will deliver to Masco true and complete copies
of all corporate documents of any Person (other than the HFG Companies and
their Subsidiaries) that is a Subsidiary of the Buyer on the Closing Date
but is not in existence as of the date of this Agreement.
(ii) Authorization of Transaction. The Buyer has full corporate power
and authority, including all necessary approvals of its directors and
shareholders, to execute and deliver this Agreement and the other
Transaction Documents to which it is a party and to perform its obligations
hereunder and thereunder. This Agreement has been duly and validly executed
and delivered by the Buyer and constitutes the valid and legally binding
obligation of the Buyer, enforceable against the Buyer in accordance with
its terms, and each of the other Transaction Documents to which the Buyer
or any of the Affiliates of the Buyer (determined assuming that Masco is
not an Affiliate of the Buyer) is a party, upon its execution and delivery,
will constitute the valid and legally binding obligation of the Buyer or
such Affiliate (as the case may be), enforceable against the Buyer or such
Affiliate (as the case may be) in accordance with its terms. As of the
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Closing Date, each of the Affiliates of the Buyer (determined assuming that
Masco is not an Affiliate of the Buyer) will have all corporate or other
requisite power and authority, including all necessary approvals of its
directors, shareholders, partners or other governing bodies of such person,
as applicable, to take all actions contemplated to be taken by it under
this Agreement (including the execution, delivery and performance of each
Transaction Document to which it is a party).
(iii) Noncontravention. Neither the execution and the delivery by the
Buyer or any of the Affiliates of the Buyer (determined assuming that Masco
is not an Affiliate of the Buyer) of this Agreement and the other
Transaction Documents to which such Person is a party, nor the consummation
by the Buyer and such Affiliates of the transactions contemplated hereby
and thereby, will (i) violate any constitution, statute, law, regulation,
rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any foreign, federal, state or local government,
governmental agency or court to which any such Person is subject, or
violate any provision of the charter or bylaws (or similar organizational
documents) of any such Person or (ii) conflict with, result in a breach of,
constitute a default (or an event which with the giving of notice or lapse
of time, or both, would become a default) under, result in the
acceleration, termination, modification or cancellation of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under, any agreement, contract, lease, license, instrument, permit
or other arrangement to which any such Person is a party or by which it is
bound or to which any of its assets is subject (or, other than Security
Interests required to be granted in connection with the Financing, result
in the imposition of any Security Interest upon any of the capital stock of
any such Person or such Person's assets), except for such violations,
conflicts, breaches, defaults, accelerations, terminations, modifications,
cancellations, rights, failures to give notice and Security Interests that,
individually and in the aggregate, would not have a Buyer Material Adverse
Effect or a material adverse effect on the ability of any Party to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents. None of the Buyer or any of the Affiliates of the
Buyer (determined assuming that Masco is not an Affiliate of the Buyer)
will be required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of, any government, governmental agency
or court in order for the Buyer to consummate the transactions contemplated
by this Agreement and the other Transaction Documents to which any of the
Buyer or such Affiliates is a party, except where failures to give any such
notice, to make any such filing or to obtain any such authorization,
consent or approval would not, individually and in the aggregate, have a
Buyer Material Adverse Effect or a material adverse effect on the ability
of any Party to consummate the transactions contemplated by this Agreement
and the other Transaction Documents.
(iv) Brokers' Fees. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement and the other Transaction
Documents for which any of Masco and its Affiliates (determined assuming
that the Buyer is not an Affiliate of Masco) could become liable or
obligated.
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(v) Investment. The Buyer is not acquiring the capital stock of any of
the HFG Companies with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act; provided,
however, that the disposition of the Buyer's property (including the
capital stock of the HFG Companies) shall at all times remain within the
Buyer's control.
(vi) Financing. The Buyer has delivered to Masco true and complete
copies of the following letters received in connection with the financing
of the transactions contemplated by this Agreement and payment of the
related fees and expenses (the "Financing"):
(A) FURNISHINGS INTERNATIONAL INC. Senior Secured Credit
Facilities and Receivables Purchase Facility Commitment Letter dated
as of March 29, 1996 from Chemical Bank addressed to the Buyer (and
accompanying Fee Letter);
(B) FURNISHINGS INTERNATIONAL INC. Engagement Letter dated as of
March 29, 1996 from Chemical Securities Inc. addressed to the Buyer;
(C) Senior Subordinated Notes Engagement Letter and the related
"highly confident" letter, each dated as of March 29, 1996 from
Chemical Securities Inc. addressed to the Buyer; and
(D) Commitment Letter dated as of March 29, 1996 from 399 Venture
Partners, Inc. addressed to the Buyer;
in each case as in effect on the date of this Agreement, and the Buyer will
deliver to Masco, promptly following the execution and delivery thereof,
true and complete copies of all final agreements and instruments
implementing the Financing that are executed after the date of this
Agreement. Assuming the satisfaction or waiver of the conditions contained
in the letters, the aggregate net proceeds of the capital contributions,
credit facilities and debt described in such letters will be sufficient for
Buyer to consummate the transactions contemplated hereby and to pay all
related fees and expenses. As of the date hereof, the Buyer has no reason
to believe that the conditions contained in such letters will not be
satisfied.
(vii) Capitalization. Except in the case of any wholly-owned
Subsidiary of the Buyer that is formed after the date hereof in connection
with the Financing or the transactions contemplated by the Transaction
Documents, the Buyer Disclosure Schedule sets forth the authorized, issued
and outstanding shares of each class of capital stock of each of the Buyer
and its Subsidiaries, the names of the record holders of each class of its
capital stock, and the number of shares of each class held of record by
each such holder, in each case as of the date hereof. All of the issued and
outstanding shares of capital stock of each of the Buyer and its
Subsidiaries have been duly authorized, and are validly issued, fully paid
and nonassessable. Except as contemplated by this Agreement
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and the other Transaction Documents, there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights or other contractual commitments (or, to the knowledge of
the Buyer, non-contractual commitments) that could require any of the Buyer
or its Subsidiaries to issue, sell, redeem, repurchase or otherwise acquire
any of its capital stock or any securities convertible into or exercisable
or exchangeable for any of its capital stock. None of the issued and
outstanding shares of capital stock of any of the Buyer or its Subsidiaries
was issued in violation of any preemptive rights. The shares set forth in
the Buyer Disclosure Schedule constitute all the issued and outstanding
capital stock of the Buyer. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other commitments that could require any of the Buyer and its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock
of any of their Subsidiaries. Except in the case of any wholly-owned
Subsidiary of the Buyer that is formed after the date hereof in connection
with the Financing or the transactions contemplated by the Transaction
Documents, the shares set forth in the Buyer Disclosure Schedule constitute
all the issued and outstanding capital stock of each of the Subsidiaries of
the Buyer and (other than directors' qualifying shares) are owned of record
and beneficially solely by the Buyer or a Subsidiary of the Buyer free and
clear of all Security Interests, equities, claims and demands (other than
Security Interests required to be granted in connection with the
Financing). Except for the Transaction Documents, as of the Closing Date
there will be no voting trusts, proxies, or other agreements or
understandings with respect to the voting or disposition of any capital
stock of (or any other voting interest in) the Buyer. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting or disposition of any capital stock of (or any other voting interest
in) any Subsidiary of the Buyer.
(viii) Investments. None of the Buyer and its Subsidiaries has any
direct or indirect equity participation in any corporation, partnership,
trust, or other business association other than their respective
Subsidiaries.
(ix) Financial Statements. The Buyer Disclosure Schedule contains
copies of the following financial statements (collectively, the "Buyer
Financial Statements"): (i) an unaudited consolidated balance sheet as of
December 31, 1995 and (ii) unaudited consolidated statements of operations
and cash flow for the fiscal period ended December 31, 1995, in each case
for the Buyer and its Subsidiaries. The Buyer Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the period covered thereby and
present fairly the consolidated financial position of the Buyer and its
Subsidiaries as of such date and the consolidated results of operations of
the Buyer and its Subsidiaries for such period. Except (x) as reflected or
reserved against in the audited consolidated balance sheet as of December
31, 1995 (including the notes thereto) or (y) as reflected in any
subsection of the Buyer Disclosure Schedule (including any amendment or
supplement to the Buyer Disclosure Schedule resulting from a notice
delivered pursuant to ss.5(e)(ii) below), as of the Closing Date there will
be no contingent liabilities of the Buyer and its Subsidiaries, other than
(i) liabilities which arise in the Ordinary Course of Business of the Buyer
and its
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Subsidiaries and (ii) other liabilities which, individually and in the
aggregate, would not have a Buyer Material Adverse Effect.
(x) Subsequent Events. Since December 31, 1995, there has not been any
Buyer Material Adverse Effect.
(xi) Litigation. The Buyer Disclosure Schedule sets forth each
instance in which any of the Buyer and its Subsidiaries (i) is subject to
any outstanding injunction or judgment or any final order, decree or ruling
or (ii) is a party or, to the knowledge of the Buyer, is threatened to be
made a party to any action, suit, proceeding, hearing or investigation of,
in, or before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or before any arbitrator,
except for such injunctions, judgments, orders, decrees, rulings, threats,
actions, suits, proceedings, hearings and investigations that, individually
and in the aggregate, would not reasonably be expected to have a Buyer
Material Adverse Effect or a material adverse effect on the ability of any
Party to consummate the transactions contemplated by this Agreement and the
other Transaction Documents.
(xii) Legal Compliance. Each of the Buyer and its Subsidiaries has
complied with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings and charges
thereunder) of foreign, federal, state and local governments (and all
agencies thereof) and, to the knowledge of the Buyer, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure
so to comply, except in each such case for failures to comply that,
individually and in the aggregate, would not have a Buyer Material Adverse
Effect or a material adverse effect on the ability of any Party to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents.
(xiii) Investment Company. The Buyer is not an "investment company" or
an entity "controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
(xiv) Environmental Laws and Liabilities.
(A) Each of the Buyer and its Subsidiaries (i) complies with the
Environmental Laws in all applicable respects, (ii) has obtained and
complies in all applicable respects with all of the terms and
conditions of all Environmental Permits and (iii) complies in all
applicable respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables which are contained in the Environmental Laws
except in each case for such failures to comply or to obtain any
Environmental Permit that, individually and in the aggregate, would
not have a Buyer Material Adverse Effect.
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(B) None of the Buyer and its Subsidiaries has any liability, and
none of the Buyer and its Subsidiaries has handled, transported,
treated, stored or disposed of any substance or arranged for the
handling, transportation, treatment, storage or disposal of any
substance so as to give rise to any liability, for damage to any site,
location or body of water (surface or subsurface), for investigation,
removal or cleanup of Releases or threatened Releases of Hazardous
Materials, or for damage or injury to any Person or property under any
applicable Environmental Law, except in each case for such liabilities
that, individually and in the aggregate, would not have a Buyer
Material Adverse Effect.
(xv) Employee Benefits.
(A) The Buyer Disclosure Schedule lists each Employee Benefit
Plan covered by or subject to ERISA and each significant Employee
Benefit Arrangement that any of the Buyer or its Subsidiaries
maintains or administers, or to which any of them contributes. Each
such Employee Benefit Plan and Employee Benefit Arrangement (and each
related trust, VEBA trust, insurance contract, or fund) has complied
in form and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable laws and has
been administered in accordance with its terms, in each case since
September 11, 1995.
(B) Each such Employee Benefit Plan which is an employee pension
benefit plan and which is intended to meet the requirements of a
qualified plan under Code Sec. 401(a) is, and at all times since
September 11, 1995 has been, so qualified and has either (1) received
a favorable determination letter from the Internal Revenue Service
covering such Employee Benefit Plan for the Tax Reform Act of 1986, as
amended, the Unemployment Compensation Act of 1992, and the Omnibus
Budget Reconciliation Act of 1993 or (2) timely applied to the
Internal Revenue Service for a favorable determination letter so
covering such plan.
(C) As of the date hereof, the estimated market value of assets
under such Employee Benefit Plans which are employee pension benefit
plans subject to the minimum funding requirements of Code Sec. 412
equals or exceeds in the aggregate the present value of all currently
accrued benefits thereunder determined on an on-going basis in
accordance with the actuarial methods, factors and assumptions used by
such plans' actuaries for the purpose of meeting the minimum funding
requirements.
(D) With respect to each such Employee Benefit Plan which is an
employee pension benefit plan subject to Title IV of ERISA or Section
412 of the Code, in each such case since September 11, 1995, no such
employee pension benefit plan has been completely or partially
terminated or been the subject of a Reportable Event as to which
notices are required to be filed with the PBGC, and
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no proceeding by the PBGC to terminate any such employee pension
benefit plan has been instituted or, to the knowledge of the Buyer,
threatened, subject to such exceptions which, taken together, would
not result in a material liability for the Buyer and its Subsidiaries,
considered as a single combined business.
(E) No significant liability (other than for PBGC premiums) has
been incurred or, to the knowledge of the Buyer, would reasonably be
expected to be incurred by the Buyer with respect to the period prior
to the Closing Date under Title IV of ERISA (including withdrawal
liability) or under Sections 4971 through 4980B of the Code with
respect to any Employee Benefit Plan (including a Multiemployer Plan)
presently, or since January 1, 1988, maintained or contributed to by
any of the Buyer, its Subsidiaries or any predecessor of the Buyer or
by any other entity that is, or at any time since January 1, 1988 was,
an ERISA Affiliate of such entities.
(F) No other liability has been incurred or, to the knowledge of
the Buyer, would reasonably be expected to be incurred by any of the
Buyer or its Subsidiaries with respect to any Employee Benefit Plan or
Employee Benefit Arrangement which any ERISA Affiliate of the Buyer
and its Subsidiaries (other than the Buyer and its Subsidiaries)
maintains or administers or to which any such ERISA Affiliate
contributes.
(xvi) Taxes.
(A) Each of the Buyer and its Subsidiaries has filed with the
relevant Taxing Authority all federal income tax and other material
Returns that it has been required to file. All such Returns were
correct and complete in all material respects. All Taxes due and owing
by any of the Buyer or its Subsidiaries (whether or not shown on any
Return) have been paid.
(B) There is no pending dispute or claim raised by any Taxing
Authority concerning any Tax liability of any of the Buyer or its
Subsidiaries. Neither the Buyer nor any of its Subsidiaries has
received any Tax examination reports or statements of deficiencies.
(C) No claim by any Taxing Authority in a jurisdiction in which
any of the Buyer or its Subsidiaries do not file Returns is currently
pending or, to the knowledge of the Buyer, threatened to the effect
that any of them is or may be subject to Tax by that jurisdiction.
(D) None of the Buyer or its Subsidiaries is a party to any Tax
allocation or sharing agreement.
(E) None of the Buyer or its Subsidiaries has received any
written ruling of a Taxing Authority related to Taxes, or entered into
any written and
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legally binding agreement with a Taxing Authority relating to Taxes,
which in either case would have a Buyer Material Adverse Effect for
any Post-Closing Period.
(F) None of the Buyer or its Subsidiaries has agreed or is
required to make any adjustments pursuant to Section 481(a) of the
Code or any similar provision of state, local, or foreign law, and
none of such entities has any application pending with any Taxing
Authority requesting permission for any changes in accounting methods
that relate to the business of the Buyer or any of its Subsidiaries.
Section 4. Representations and Warranties Concerning the HFG Companies.
Masco represents and warrants to the Buyer that the statements contained in this
ss.4 are correct as of the date of this Agreement, and will be correct as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ss.4), except for the
matters reflected in the Disclosure Schedule, which Disclosure Schedule shall be
construed in accordance with ss.12(s), and any matters reflected in any written
notice delivered pursuant to ss.5(e)(i) below (other than with respect to (x)
the Specified Masco Representations and (y) facts and circumstances existing and
in the Knowledge of Masco as of the date of this Agreement).
(a) Organization, Qualification, and Corporate Power. Each of the HFG
Companies and their Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite power
and authority and all necessary governmental approvals to own, lease, and
operate its properties and to carry on its business as it is now being
conducted, except for such failures to be so organized, existing, or in good
standing or to have such power, authority, and governmental approvals that,
individually and in the aggregate, would not have a Material Adverse Effect.
ss.4(b) of the Disclosure Schedule sets forth the jurisdiction of incorporation
or organization (as the case may be) of each of the HFG Companies and their
Subsidiaries. Each of the HFG Companies and their Subsidiaries is duly qualified
or licensed to do business, and is in good standing (to the extent applicable),
in each jurisdiction where the character of the properties owned, leased, or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that, individually and in the aggregate, would not have a
Material Adverse Effect.
(b) Capitalization. ss.4(b) of the Disclosure Schedule sets forth the
authorized, issued, and outstanding shares of each class of capital stock of
each of the HFG Companies. All of the issued and outstanding shares of capital
stock of each of the HFG Companies have been duly authorized, and are validly
issued, fully paid, and nonassessable. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights or other contractual commitments (or, to the Knowledge of Masco,
non-contractual commitments) that could require (i) any of the HFG Companies to
issue, sell, redeem, repurchase or otherwise acquire any of its capital stock or
any securities convertible into or exercisable or
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exchangeable for any of its capital stock or (ii) Masco or Masco Corporation
Limited to sell, pledge, encumber or otherwise dispose of any capital stock of
any HFG Company or any securities convertible into or exercisable or
exchangeable for any such capital stock. None of the issued and outstanding
shares of capital stock of any of the HFG Companies was issued in violation of
any preemptive rights. The shares set forth in ss.4(b) of the Disclosure
Schedule constitute all the issued and outstanding capital stock of each of the
HFG Companies and are owned of record and beneficially solely by Masco (or to
the extent indicated in ss.4(b) of the Disclosure Schedule, solely by Masco
Corporation Limited) free and clear of all Security Interests, equities, claims
and demands. Upon consummation of the transactions contemplated by this
Agreement and registration of the shares of capital stock of each of the HFG
Companies in the name of the Buyer in the stock records of each of the HFG
Companies, the Buyer, assuming it shall have purchased such shares in good faith
and without notice of any adverse claim, will own all the issued and outstanding
capital stock of each of the respective HFG Companies free and clear of all
Security Interests (other than those created by the Buyer or its Subsidiaries
(other than the HFG Companies and their Subsidiaries)). There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock or any other voting interest of any of the HFG
Companies, other than by nominees or directors holding shares of capital stock
for the benefit of Masco. ss.4(b) of the Disclosure Schedule also sets forth for
each Subsidiary of the HFG Companies the number of authorized, issued, and
outstanding shares of each class of its capital stock, the names of the record
holders of each class of its capital stock, and the number of shares of each
class held of record by each such holder. All of the issued and outstanding
shares of capital stock of each such Subsidiary have been duly authorized and
are validly issued, fully paid and nonassessable. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contractual commitments (or, to the Knowledge
of Masco, non-contractual commitments) that could require any of the HFG
Companies and their Subsidiaries to sell, transfer, or otherwise dispose of any
capital stock of any of their Subsidiaries or that could require any of the
Subsidiaries of the HFG Companies to issue, sell, redeem, repurchase or
otherwise acquire any of its own capital stock or any securities convertible
into or exercisable or exchangeable for any of its capital stock. None of the
issued and outstanding shares of capital stock of any of the Subsidiaries of the
HFG Companies was issued in violation of any preemptive rights. The shares set
forth in ss.4(b) of the Disclosure Schedule constitute all the issued and
outstanding capital stock of each of the Subsidiaries of the HFG Companies and
(other than directors' qualifying shares) are owned of record and beneficially
solely by the listed HFG Company or Subsidiary of an HFG Company free and clear
of all Security Interests, equities, claims and demands. Except for the
Transaction Documents, there are no voting trusts, proxies or other agreements
or understandings with respect to the voting or disposition of any capital stock
of (or any other voting interest in) any Subsidiary of the HFG Companies, other
than with respect to voting by nominees or directors holding shares of capital
stock for the benefit of such HFG Companies.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement and the other Transaction Documents, nor the consummation of the
transactions contemplated hereby and thereby, will (i) violate any constitution,
statute, law, regulation, rule, injunction, judgment, order, decree, ruling,
charge or other restriction of any federal, state or local
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government, governmental agency or court (or, to the Knowledge of Masco, any
foreign government, governmental agency or court) to which any of the HFG
Companies and their Subsidiaries is subject, or violate any provision of the
charter or bylaws (or similar organizational documents) of any of the HFG
Companies and their Subsidiaries, or (ii) conflict with, result in a breach of,
constitute a default (or an event which with the giving of notice or lapse of
time, or both, would become a default) under, result in the acceleration,
termination, modification or cancellation of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under, any
agreement, contract, lease, license, instrument, permit or other arrangement to
which any of the HFG Companies and their Subsidiaries is a party or by which any
of them is bound or to which any of their respective assets is subject (or
result in the imposition of any Security Interest (other than Security Interests
required to be granted in connection with the Financing) upon any of the capital
stock of any of the HFG Companies and their Subsidiaries or any of their
respective assets), except for such violations, conflicts, breaches, defaults,
accelerations, terminations, modifications, cancellations, rights, failures to
give notice and Security Interests upon assets (other than capital stock) that,
individually and in the aggregate, would not have a Material Adverse Effect.
None of the HFG Companies and their Subsidiaries will be required to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of, any government, governmental agency or court in order for the
Parties to consummate the transactions contemplated by this Agreement and the
other Transaction Documents, except for where failures to give any such notice,
to make any such filing, or to obtain any such authorization, consent, or
approval would not, individually and in the aggregate, have a Material Adverse
Effect.
(d) Brokers' Fees. None of the HFG Companies and their Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement and the
other Transaction Documents.
(e) Investments. None of the HFG Companies and their Subsidiaries has any
direct or indirect equity participation in any corporation, partnership, trust,
or other business association other than their respective Subsidiaries
identified in ss.4(b) of the Disclosure Schedule.
(f) Financial Statements. ss.4(f) of the Disclosure Schedule contains
copies of the audited combined balance sheets as of December 31, 1994 and
December 31, 1995, and audited combined statements of operations and cash flow
for the fiscal years ended December 31, 1993, December 31, 1994 and December 31,
1995, for the HFG Companies and their Subsidiaries (collectively, the "Financial
Statements"), in each case together with the report thereon of Coopers & Lybrand
L.L.P., including their unqualified opinion thereon. The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby and present fairly
the combined financial position of the HFG Companies and their Subsidiaries as
of such dates and the combined results of operations of the HFG Companies and
their Subsidiaries for such periods. Except (x) as reflected or reserved against
in the audited combined balance sheet as of December 31, 1995 included within
the Financial Statements (including the notes thereto) or (y) as reflected or
reserved against in the Closing Date Balance Sheet or (z) as reflected in any
subsection of the Disclosure Schedule (including any amendment or supplement to
the Disclosure Schedule
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resulting from a written notice delivered pursuant to ss.5(e)(i) below), as of
the Closing Date, there will be no contingent liabilities of the HFG Companies
and their Subsidiaries which are required by GAAP (applied on a consistent basis
with the methods, principles, practices and policies used in preparing the
Financial Statements) to be reflected or reserved against in a combined balance
sheet of the HFG Companies and their Subsidiaries as of that date, other than
(i) liabilities which arise in the Ordinary Course of Business of the HFG
Companies and their Subsidiaries and (ii) other liabilities which, individually
and in the aggregate, would not have a Material Adverse Effect.
(g) Events Subsequent to December 31, 1995. No events or circumstances have
occurred or arisen since December 31, 1995 which, taken together, would have a
Material Adverse Effect. Without limiting the generality of the foregoing, since
that date:
(i) none of the HFG Companies and their Subsidiaries has sold, leased,
transferred, encumbered, assigned or otherwise disposed of any material
assets, tangible or intangible, outside of the Ordinary Course of Business;
(ii) none of the HFG Companies and their Subsidiaries has entered
into, amended, modified, or terminated any material agreement, contract,
lease, permit or license outside of the Ordinary Course of Business;
(iii) no third party has accelerated, terminated, modified or canceled
(or, to the Knowledge of Masco, notified any of the HFG Companies and their
Subsidiaries of its intention to accelerate, terminate, modify or cancel)
any material agreement, contract, lease, permit or license to which any of
the HFG Companies and their Subsidiaries is a party, or by which any of
them is bound, outside of the Ordinary Course of Business;
(iv) none of the HFG Companies and their Subsidiaries has made any
material capital expenditures outside of the Ordinary Course of Business
or, to the Knowledge of Masco, experienced any material damage, destruction
or loss (whether or not covered by insurance) to its property;
(v) none of the HFG Companies and their Subsidiaries has adopted,
entered into, amended, modified, or terminated any collective bargaining
agreement, Employee Benefit Plan or material Employee Benefit Arrangement,
granted any material increase in compensation, or made any other material
change in employment terms for any of its directors, officers and
employees, in each case outside of the Ordinary Course of Business;
(vi) none of the HFG Companies and their Subsidiaries has (x) been a
party to any merger, consolidation or similar business combination or (y)
other than in the Ordinary Course of Business, acquired all or
substantially all of the assets of any other Person; and
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(vii) none of the HFG Companies and their Subsidiaries has committed
to any of the foregoing.
(h) Litigation. ss.4(h) of the Disclosure Schedule sets forth each instance
in which any of the HFG Companies and their Subsidiaries (or Masco to the extent
relating to this Agreement or any other Transaction Document) (i) is subject to
any outstanding injunction or judgment or any final order, decree, or ruling or
(ii) is a party or, to the Knowledge of Masco, is threatened to be made a party
to any action, suit, proceeding, hearing or investigation of, in, or before any
court or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator, except for such injunctions,
judgments, orders, decrees, rulings, threats, actions, suits, proceedings,
hearings and investigations that would not reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement and the
other Transaction Documents, and, in the case of (ii) above, except for claims
arising in the Ordinary Course of Business and administered under Masco's risk
management program for general liability, product liability, automobile
liability, workers' compensation, and health, medical, dental, disability and
life insurance benefits.
(i) Legal Compliance. Each of the HFG Companies and their Subsidiaries has
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder) of
federal, state, local, and, to the Knowledge of Masco, foreign governments (and
all agencies thereof), and, to the Knowledge of Masco, no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply, except in each such case for failures to comply that would not have a
Material Adverse Effect or a material adverse effect on the ability of any Party
to consummate the transactions contemplated by this Agreement and the other
Transaction Documents.
(j) Tax Matters.
(i) Each Affiliated Group headed by Masco or any other Seller Party
has filed with the relevant Taxing Authority all federal income tax and
other material Returns that it has been required to file for each taxable
period during which any of the HFG Companies and their Subsidiaries was a
member of such Affiliated Group. All such Returns were correct and complete
in all material respects to the extent they relate to any of the HFG
Companies and their Subsidiaries. Each of the HFG Companies and their
Subsidiaries has filed with the relevant Taxing Authority all Returns that
it has been required to file other than as part of such Affiliated Group,
and all such Returns were correct and complete in all respects, except in
each such case where the failure to file a Return or of such Return to be
correct or complete in all respects, individually or together with other
such failures, would not have a Material Adverse Effect. All Taxes due and
owing by any of the HFG Companies and their Subsidiaries (whether or not
shown on any Return) have been paid.
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(ii) No Affiliated Group headed by Masco or any other Seller Party has
waived any statute of limitations in respect of Taxes, or agreed to any
extension of time with respect to a Tax assessment or deficiency, in either
case to the extent relating to any of the HFG Companies and their
Subsidiaries. None of the HFG Companies and their Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(iii) ss.4(j)(iii) of the Disclosure Schedule lists all federal,
state, local, and foreign Income Tax Returns and sales and use tax Returns
filed by or with respect to any of the HFG Companies and their Subsidiaries
for taxable periods ended on or after December 31, 1991, and indicates
those Income Tax Returns and sales and use tax Returns filed by or with
respect to any of the HFG Companies and their Subsidiaries that currently
are the subject of audit.
(iv) Neither any of the HFG Companies or their Subsidiaries nor the
common parent of any Affiliated Group of which any of the HFG Companies or
their Subsidiaries is a member has agreed or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar provision
of state, local, or foreign law, and none of such entities has any
application pending with any Taxing Authority requesting permission for any
changes in accounting methods that relate to the business of any of the HFG
Companies or their Subsidiaries.
(v) No claim by any Taxing Authority in a jurisdiction in which any of
the HFG Companies and their Subsidiaries do not file Returns is currently
pending or, to the Knowledge of Masco, threatened to the effect that any of
them is or may be subject to Tax by that jurisdiction.
(vi) There is no pending dispute or claim raised by any Taxing
Authority concerning any Tax liability of any of the HFG Companies or their
Subsidiaries. Masco has delivered to Buyer complete and correct copies of
all Income Tax Returns filed by, and summaries of all Tax examination
reports and statements of deficiencies assessed against or agreed to by,
the HFG Companies and their Subsidiaries since December 31, 1991.
(vii) None of the HFG Companies or their Subsidiaries is obligated to
make any payments or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(viii) Other than an agreement or arrangement described in, and to be
terminated pursuant to, ss. 9(a) below, none of the HFG Companies or their
Subsidiaries is a party to any Tax allocation or sharing agreement.
(ix) None of the HFG Companies or their Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code or
comparable provisions of any state statutes, and none of the assets of any
of the HFG Companies or
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their Subsidiaries is subject to an election under Section 341(f) of the
Code or comparable provisions of any state statutes.
(x) None of the HFG Companies or their Subsidiaries has received any
written ruling of a Taxing Authority or entered into any written and
legally binding agreement with a Taxing Authority, in each case related to
Income Taxes which would have an adverse effect on, or related to Taxes
which would have a Material Adverse Effect on, the HFG Companies and their
Subsidiaries for any Post-Closing Period.
(xi) Neither any foreign HFG Company nor any foreign Subsidiary of a
HFG Company is, or at any time has been, a passive foreign investment
company within the meaning of Section 1296 of the Code, and none of the HFG
Companies or their Subsidiaries is a shareholder, directly or indirectly,
in a passive foreign investment company.
(xii) None of the HFG Companies or their Subsidiaries is, or at any
time has been, subject to (x) the dual consolidated loss provisions of
Section 1503(d) of the Code or (y) the overall foreign loss provisions of
Section 904 (f) of the Code (other than with respect to overall foreign
losses which may arise with respect to any tax year beginning on or after
January 1, 1995).
(k) Real Property.
(i) ss.4(k)(i) of the Disclosure Schedule lists and briefly describes
all real property owned by any of the HFG Companies and their Subsidiaries,
including a description of (A) the street address of each parcel of owned
real property, (B) the current record owner of each such parcel of owned
real property, and (C) the principal current use of each such parcel of
owned real property. Each such description is correct in all material
respects. With respect to each such parcel of owned real property which
contains a manufacturing, warehouse, assembly or distribution facility or a
showroom or which has a market value in excess of $250,000:
(A) the identified owner has good and marketable title to the
parcel of real property, free and clear of any lien, mortgage,
encumbrance, security interest, easement, covenant, or other
restriction or title matter, except for (w) any mechanic's,
materialmen's, and similar liens, (x) any liens for real estate taxes
or assessments not yet due and payable or for real estate taxes or
assessments that the taxpayer is contesting in good faith through
appropriate proceedings (provided the applicable real property is not
subject to imminent threat of loss), (y) any recorded and unrecorded
easements, covenants, and other similar restrictions and (z) any
utility easements, building and use restrictions, zoning restrictions
and other easements and restrictions existing generally with respect
to properties of a similar character, in each case that, individually
and in the aggregate, do not materially interfere with, restrict or
limit the current use of the property or impose any
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material financial or performance obligation on the owner or user of
such property;
(B) there are no pending condemnation proceedings, lawsuits, or
administrative actions relating to the parcel of real property (and,
to the Knowledge of Masco, there are no threatened condemnation
proceedings, lawsuits or administrative actions relating to the
property) that would reasonably be expected to materially and
adversely affect the current use, occupancy or value thereof;
(C) the legal description for the parcel contained in the deed,
survey, title commitment, or title opinion relating thereto and
included in ss. 4(k)(i) of the Disclosure Schedule describes such
parcel fully and adequately, and the buildings and improvements are
located within the boundary lines of the described parcels of land in
all material respects, are not in violation of applicable setback
requirements, zoning laws and ordinances in any material respect and
do not encroach in any material respect on any easement or
right-of-way which may burden the land;
(D) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or
interest therein;
(E) there are no leases or grants of occupancy rights to others
affecting the parcel of real property, in each case of any
significance; and
(F) there are no material casualty events affecting the parcel of
real property not fully covered by insurance (except for customary
deductibles).
Masco has made available to the Buyer true and complete copies, to the
extent available to Masco, of (x) property surveys, title commitments
(including copies of recorded agreements and matters) and deeds for each
parcel of owned real estate located in the United States, and (y) property
surveys, title opinion letters and deeds, certificates of title and similar
documents, as applicable in the relevant jurisdiction, for each parcel of
owned real estate located outside of the United States.
(ii) ss.4(k)(ii) of the Disclosure Schedule lists and briefly
describes all real property leased or subleased to or by any of the HFG
Companies and their Subsidiaries. Each such description is correct in all
material respects. Masco has delivered to the Buyer correct and complete
copies of the leases and subleases listed in ss.4(k)(ii) of the Disclosure
Schedule (except as indicated). There are no amendments, consents for
alterations, or other documents recording variations to such leases which
materially and adversely affect the rental payments, the term, or the
current use of the properties subject thereto. With respect to each lease
and sublease listed in ss.4(k)(ii) of the Disclosure Schedule, (A) the
lease or sublease is legal, valid, binding, enforceable, and in full force
and effect, except as (x) the enforceability may be subject to bankruptcy,
insolvency, fraudulent conveyance,
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reorganization, moratorium, or other laws relating to creditors' rights
generally, and (y) such property may be subject to prior or superior
leases, mortgages, deeds of trust, or other liens against the lessor's
interest in such property, (B) none of the HFG Companies and their
Subsidiaries is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or default by any of the
HFG Companies and their Subsidiaries or permit termination, modification or
acceleration by any third party thereunder, and (C) to the Knowledge of
Masco, no third party has repudiated or has the right to terminate or
repudiate (except for the normal exercise of remedies in connection with a
default thereunder or any termination rights set forth in the lease or
sublease) any provision thereof, except in each case for such illegality,
invalidity, failures to be binding, unenforceability, ineffectiveness,
breaches, defaults, terminations, modifications, accelerations and
repudiations that, individually and in the aggregate, would not have a
Material Adverse Effect. The representations set forth in this Section
4(k)(ii) shall apply only to those leases and subleases for which the base
rent is more than $50,000 per annum or which are material to the HFG
Company or the Subsidiary of the HFG Company named as the tenant,
subtenant, lessor or sublessor therein.
(iii) Each representation and warranty in this ss.4(k) is deemed made
to the Knowledge of Masco to the extent that such representation and
warranty relates to any real property located outside of the United States.
(l) Intellectual Property.
(i) None of the HFG Companies and their Subsidiaries has interfered
with, infringed upon, misappropriated or violated any Intellectual Property
rights of third parties and, to the Knowledge of Masco, no third party has
interfered with, infringed upon, misappropriated or violated any
Intellectual Property rights of any of the HFG Companies and their
Subsidiaries, except in each case for such interferences, infringements,
misappropriations and violations that, individually and in the aggregate,
would not have a Material Adverse Effect.
(ii) ss.4(l)(ii) of the Disclosure Schedule identifies each material
unexpired patent or trademark or copyright registration which has been
issued to any of the HFG Companies and their Subsidiaries with respect to
any of its Intellectual Property, identifies each material pending patent
application or application for trademark or copyright registration which
any of the HFG Companies and their Subsidiaries has made with respect to
any of its Intellectual Property, and identifies each material unexpired
license, agreement or other permission which any of the HFG Companies and
their Subsidiaries has granted to any third party with respect to any of
its Intellectual Property; provided, however, that no copyright for a
fabric design will be deemed material for this purpose unless the Combined
Company receives more than $200,000 per year from sales of fabric
incorporating the particular design. ss.4(l)(ii) of the Disclosure Schedule
also identifies each material trade name or unregistered trademark used by
any of the HFG Companies and their Subsidiaries in connection with any of
their businesses. Except as set forth in ss.4(l)(i) of the Disclosure
Schedule, with respect to each item of Intellectual Property
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identified in ss.4(l)(ii) of the Disclosure Schedule, (A) the HFG Companies
and their Subsidiaries possess all right, title and interest in and to the
item, free and clear of any Security Interest, license or other
restriction, (B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge, and (C) no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of Masco, threatened, which challenges the
legality, validity, enforceability, use, or ownership of such item, except
in each case for such lack of any right, title or interest in and to such
item, and such Security Interests, licenses, restrictions, injunctions,
judgments, orders, decrees, rulings, charges, actions, suits, proceedings,
hearings, investigations, complaints, claims and demands that, individually
and in the aggregate, would not reasonably be expected to have a Material
Adverse Effect.
(iii) ss.4(l)(iii) of the Disclosure Schedule identifies each material
item of Intellectual Property that any third party owns and that any of the
HFG Companies and their Subsidiaries uses pursuant to any license,
sublicense, agreement, or permission (other than licenses to use standard
software applications and other broadly distributed use rights). Masco has
delivered to the Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (except as indicated). Except as
set forth in ss.4(l)(i) of the Disclosure Schedule, with respect to each
item of Intellectual Property identified in ss.4(l)(iii) of the Disclosure
Schedule, assuming that each licensor of such item had and continues to
have all requisite rights with respect to the relevant Intellectual
Property required under applicable law to grant a legal, valid, binding,
and enforceable license in respect of such Intellectual Property, (A) the
license, sublicense, agreement or permission covering such item is legal,
valid, binding, enforceable, and in full force and effect, except as the
enforceability may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other laws relating to
creditors' rights generally, (B) none of the HFG Companies and their
Subsidiaries is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or default by any of the
HFG Companies and their Subsidiaries or permit termination, modification or
acceleration by any third party thereunder, and (C) to the Knowledge of
Masco, no third party to the license, sublicense, agreement, or permission
has repudiated any provision thereof, except in each case for such
illegality, invalidity, failures to be binding, unenforceability,
ineffectiveness, breaches, defaults, terminations, modifications,
accelerations and repudiations that, individually and in the aggregate,
would not have a Material Adverse Effect. Except as indicated in
ss.4(l)(iii) of the Disclosure Schedule, neither Masco nor, to the
Knowledge of Masco, any of the HFG Companies and their Subsidiaries has
received written notice of any claim to the effect that the licensor of an
item of Intellectual Property identified in ss.4(l)(iii) of the Disclosure
Schedule does not have all relevant rights to such Intellectual Property
required under applicable law to grant a legal, valid, binding and
enforceable license in respect of such Intellectual Property.
(iv) Each representation and warranty in this ss.4(l) is deemed made
to the Knowledge of Masco to the extent that such representation and
warranty relates to any
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Intellectual Property governed by the laws of any jurisdiction, or relates
to any operations, outside of the United States.
(m) Personal Property. The HFG Companies and their Subsidiaries will have
good and marketable title to the personal property that will be shown on the
Closing Date Balance Sheet, free and clear of all Security Interests. The owned
and leased buildings, machinery, equipment, and other tangible assets that the
HFG Companies and their Subsidiaries use in their business have been maintained
in accordance with normal industry practice, and are in good operating condition
and repair (subject to normal wear and tear), in each such case considered in
the aggregate.
(n) Contracts. ss.4(n)(1) of the Disclosure Schedule lists the following
instruments, contracts and other agreements currently in effect to which any of
the HFG Companies and their Subsidiaries is a party (or, to the extent involving
any of the HFG Companies and their Subsidiaries, to which any of Masco and its
remaining Subsidiaries is a party):
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $100,000 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will involve consideration in excess of $100,000;
(iii) any agreement related to any branded design product the sales of
which during 1993 or 1994 exceeded $5,000,000;
(iv) any partnership agreement, joint venture agreement, shareholders'
agreement or similar arrangement;
(v) any instrument or agreement (or group of related instruments and
agreements) under which it has created, incurred, assumed, collateralized
or guaranteed any indebtedness for borrowed money, any indebtedness
evidenced by notes, bonds, debentures or similar instruments, or any
capitalized lease obligation, in excess of $100,000;
(vi) any agreement of any significance that limits or purports to
limit the ability of any of the HFG Companies and their Subsidiaries to
compete in any line of business or with any Person or in any geographic
area or during any period of time;
(vii) any collective bargaining agreement or other similar contract
with any labor organization;
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(viii) any written agreement for the employment (or engagement as a
consultant) of any Person on a full-time, part-time, or other basis
providing annual compensation (or other cash consideration) in excess of
$50,000 or providing severance benefits in excess of $50,000; and
(ix) any other instrument or agreement (or group of related
instruments and agreements) the performance of which involves consideration
in excess of $250,000.
ss.4(n)(1) of the Disclosure Schedule also lists each other instrument and
agreement (or group of related instruments and agreements) currently in effect
between any of the HFG Companies and their Subsidiaries, on the one hand, and
any of Masco, its Affiliates (provided that the HFG Companies and their
Subsidiaries shall not be deemed Affiliates of Masco for the purposes of this
sentence), its remaining Subsidiaries, and its and such Subsidiaries' officers
and directors, on the other hand, which instrument or agreement (or group of
related instruments and agreements) is material to the relevant HFG Company or
Subsidiary of an HFG Company. Masco has delivered to the Buyer a correct and
complete copy of each instrument and agreement listed in ss.4(n)(1) of the
Disclosure Schedule (except as indicated). Except as set forth in ss.4(n)(2) of
the Disclosure Schedule with respect to each such instrument and agreement, (A)
the instrument or agreement is legal, valid, binding, enforceable, and in full
force and effect, except as the enforceability may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or other laws
relating to creditors' rights generally, (B) none of the HFG Companies and their
Subsidiaries is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default by any of the HFG
Companies and their Subsidiaries or permit termination, modification or
acceleration by any third party thereunder, and (C) to the Knowledge of Masco,
no third party to the instrument or agreement has repudiated any provision
thereof, except in each case for such illegality, invalidity, failures to be
binding, unenforceability, ineffectiveness, breaches, defaults, terminations,
modifications, accelerations and repudiations that, individually and in the
aggregate, would not have a Material Adverse Effect.
(o) Employees. To the Knowledge of Masco, none of the HFG Companies and
their Subsidiaries has experienced any labor strike, lock-out or picketing or
any material grievance, claim of unfair labor practices, or other collective
bargaining dispute since December 31, 1992, none of the HFG Companies and their
Subsidiaries has committed any material unfair labor practice, and there are no
significant organizational efforts or demands for recognition or collective
bargaining presently being made or threatened by or on behalf of any labor union
with respect to employees of any of the HFG Companies and their Subsidiaries. No
domestic employees of any of the HFG Companies and their Subsidiaries are
represented by a labor union, no labor union has been certified or recognized as
a representative of any such domestic employees, and none of the HFG Companies
or their Subsidiaries is a party to or has any obligation in respect of any
domestic collective bargaining agreement or other domestic labor union contract.
(p) Employee Benefits.
(i) ss.4(p)(i) of the Disclosure Schedule lists each Employee Benefit
Plan covered by or subject to ERISA that any of Masco, the HFG Companies,
and their
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respective Subsidiaries maintains or administers, or to which any of them
contributes, in each such case covering any employee or former employee of
any of the HFG Companies and their Subsidiaries. No such Employee Benefit
Plan is a Multiemployer Plan.
(A) Each such Employee Benefit Plan (and each related trust, VEBA
trust, insurance contract, or fund) has complied in form and in
operation in all material respects with the applicable requirements of
ERISA, the Code, and other applicable laws and has been administered
in accordance with its terms, in each case since January 1, 1988.
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, Forms PBGC-1, and Summary Plan
Descriptions) have, where required, been filed or distributed with
respect to each such Employee Benefit Plan and each Employee Benefit
Arrangement listed in ss.4(p)(vi) of the Disclosure Schedule. The
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code
Sec. 4980B have been met in all material respects with respect to each
such Employee Benefit Plan that is a group health plan (within the
meaning of ERISA Sec. 601 and Code Sec. 4980B).
(C) All contributions (including all employer contributions and
employee salary reduction contributions) which are due and payable to
any such Employee Benefit Plan which is an employee pension benefit
plan (as defined in ERISA) on or prior to the date hereof have been
paid to such employee pension benefit plan. All premiums and other
payments due on or before the date hereof have been paid with respect
to each such Employee Benefit Plan which is an employee welfare
benefit plan (as defined in ERISA).
(D) Each such Employee Benefit Plan which is an employee pension
benefit plan and which is intended to meet the requirements of a
qualified plan under Code Sec. 401(a) is, and at all times since
January 1, 1988 has been, so qualified and has either (1) received a
favorable determination letter from the Internal Revenue Service
covering such Employee Benefit Plan for the Tax Reform Act of 1986, as
amended, the Unemployment Compensation Act of 1992, and the Omnibus
Budget Reconciliation Act of 1993 or (2) timely applied to the
Internal Revenue Service for a favorable determination letter so
covering such plan.
(E) As of the date hereof, the estimated market value of assets
under such Employee Benefit Plans which are employee pension benefit
plans subject to the minimum funding requirements of Code Sec. 412
equals or exceeds in the aggregate the present value of all currently
accrued benefits thereunder determined on an on-going basis in
accordance with the actuarial methods, factors and assumptions used by
the plans' actuaries for the purpose of meeting the minimum funding
requirements.
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(F) Masco has delivered to the Buyer correct and complete copies
of the current plan document and summary plan description, the most
recent favorable determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report filed with
the Internal Revenue Service, and all related trust agreements,
insurance contracts and other funding agreements which implement each
such Employee Benefit Plan, in each case as applicable to such
Employee Benefit Plan.
(G) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan and, to the Knowledge of Masco, no plan
fiduciary has any liability for material breach of fiduciary duty or
any other material failure to act or comply in connection with the
administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing or investigation
with respect to the administration or the investment of the assets of
any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of Masco, threatened.
(ii) ss.4(p)(ii) of the Disclosure Schedule lists each employee
welfare benefit plan providing medical, health or life insurance and any
other welfare benefit plan providing significant welfare-type benefits for
currently (or future) retired or terminated United States employees of any
of the HFG Companies and their Subsidiaries, their spouses, or their
dependents (other than in accordance with Code Sec. 4980B).
(iii) With respect to each such Employee Benefit Plan which is an
employee pension benefit plan subject to Title IV of ERISA or Section 412
of the Code, in each such case since January 1, 1988, no such employee
pension benefit plan has been completely or partially terminated or been
the subject of a Reportable Event as to which notices are required to be
filed with the PBGC, and no proceeding by the PBGC to terminate any such
employee pension benefit plan has been instituted or, to the Knowledge of
Masco, threatened, subject to such exceptions which, taken together, would
not result in a material liability for the Combined Company.
(iv) No significant liability (other than for PBGC premiums) has been
incurred or, to the Knowledge of Masco, would reasonably be expected to be
incurred with respect to the period prior to the Closing Date under Title
IV of ERISA (including withdrawal liability) or under Sections 4971 through
4980B of the Code with respect to any Employee Benefit Plan (including a
Multiemployer Plan) presently, or since January 1, 1988, maintained or
contributed to by Masco, any of the HFG Companies, any of their respective
Subsidiaries or any entity that is, or at any time since January 1, 1988
was, an ERISA Affiliate.
(v) No benefit under any Employee Benefit Plan listed in ss.4(p)(i) of
the Disclosure Schedule or under any Employee Benefit Arrangement listed in
ss.4(p)(vi) of the Disclosure Schedule, including any retention agreement
or severance or parachute payment plan or agreement, will be established or
become accelerated, vested or payable
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by reason of any transaction contemplated by this Agreement or any other
Transaction Document.
(vi) ss.4(p)(vi) of the Disclosure Schedule lists each significant
Employee Benefit Arrangement, other than any Foreign Benefit Plan, that has
been entered into, maintained, or administered, as the case may be, by any
of Masco, the HFG Companies and their respective Subsidiaries and that
currently covers any employee or former employee of any of the HFG
Companies and their Subsidiaries. Each such Employee Benefit Arrangement
complies in all material respects with its terms and with the requirements
of applicable statutes, laws, orders, rules and regulations.
(vii) To the Knowledge of Masco, ss.4(p)(vii) of the Disclosure
Schedule lists all significant Foreign Benefit Plans that any of Masco, the
HFG Companies and their respective Subsidiaries maintains or administers,
or to which any of them contributes, in each such case covering any
employee or former employee of any of the HFG Companies and their
Subsidiaries (other than plans, programs, arrangements and agreements
required to be sponsored, maintained or contributed to by applicable laws).
Further, and in each case to the Knowledge of Masco:
(A) Any employer and employee contributions required by law or
required by the terms of any such Foreign Benefit Plan to be made to
or provided for such Foreign Benefit Plan on or before the date hereof
have been made, or provided for in accordance with the past practices
of Masco, the HFG Companies and their respective Subsidiaries.
(B) The fair market value of the assets of each such funded
Foreign Benefit Plan equals or exceeds the present value of the
benefits accrued to the Closing Date payable to all current and former
participants, determined on an ongoing basis according to the
actuarial assumptions and valuations most recently used to determine
employer contributions to such Foreign Benefit Plan, and the
transactions contemplated by this Agreement and the other Transaction
Documents shall not cause the funded status of any such Foreign
Benefit Plan to be insufficient to procure or provide for the benefits
accrued to the Closing Date on an ongoing basis.
(C) Each such Foreign Benefit Plan has been maintained and
administered in all material respects in compliance with the
requirements of applicable laws, and if required to be registered with
applicable regulatory authorities, such Foreign Benefit Plan has been
so registered and has been maintained in good standing with applicable
regulatory authorities and is operated in substantial compliance with
such applicable authority.
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(q) Environmental Laws and Liabilities.
(i) Each of the HFG Companies and their Subsidiaries (A) complies with
the Environmental Laws in all applicable respects, (B) has obtained and
complies in all applicable respects with all of the terms and conditions of
all Environmental Permits and (C) complies in all applicable respects with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables which are contained in
the Environmental Laws, except in each case for such failures to comply or
to obtain any Environmental Permit that, individually and in the aggregate,
would not have a Material Adverse Effect.
(ii) None of the HFG Companies and their Subsidiaries has any
liability, and none of the HFG Companies and their Subsidiaries has
handled, transported, treated, stored or disposed of any substance or
arranged for the handling, transportation, treatment, storage or disposal
of any substance so as to give rise to any liability, for damage to any
site, location or body of water (surface or subsurface), for investigation,
removal or cleanup of Releases or threatened Releases of Hazardous
Materials, or for damage or injury to any Person or property under any
applicable Environmental Law, except in each case for such liabilities
that, individually and in the aggregate, would not have a Material Adverse
Effect.
(iii) To the Knowledge of Masco, ss.4(q)(iii) of the Disclosure
Schedule lists all underground storage tanks either in use or which have
not been closed in compliance with the Environmental Laws in all applicable
respects and which are present on any of the Properties.
(iv) To the Knowledge of Masco, ss.4(q)(iv) of the Disclosure Schedule
lists all potentially applicable insurance policies of the HFG Companies
and their Subsidiaries for any environmental matters; provided, however,
that Masco is not representing or warranting the actual availability or
extent of coverage under any such policies listed in ss.4(q)(iv) of the
Disclosure Schedule.
(v) Each representation and warranty in ss.4(q)(i) and (ii) above is
deemed made to the Knowledge of Masco to the extent that such
representation and warranty relates to any Properties and operations
outside of the United States and Western Europe (including the United
Kingdom, Sweden and Germany).
(r) Insurance. To the Knowledge of Masco, ss.4(r) of the Disclosure
Schedule lists and describes in reasonable detail the current insurance policies
of Masco under which any of the HFG Companies or their Subsidiaries may make
claims after the Closing Date pursuant to ss.8(e); provided that Masco is not
representing or warranting the actual availability or extent of coverage under
any such policies listed on ss.4(r) of the Disclosure Schedule.
Section 5. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing.
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(a) General. Each of the Parties will (and in the case of Masco, will cause
Masco Corporation Limited to) take all reasonable action and do all things
reasonably necessary, proper or advisable in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in ss.7
below). Without limiting the generality of the preceding sentence, each of the
Parties will (and in the case of Masco, will cause Masco Corporation Limited to)
use its best efforts and will instruct its officers, directors, employees,
representatives, investment bankers, financial advisors, and other agents and
Affiliates to use their respective best efforts to achieve a Closing on or
before June 15, 1996; provided, however, that such obligation shall be subject
to the limitations set forth in ss.5(g) below and shall not require any
Affiliate of the Buyer to provide financing for the transactions contemplated by
this Agreement. In addition, to the extent necessary or appropriate, Masco shall
cause Masco Corporation Limited to take all actions required to be taken by
Masco Corporation Limited under this Agreement as if Masco Corporation Limited
were a party to this Agreement. If the Buyer or any of its Affiliates becomes
aware of any event or development that the Buyer, in its good faith judgment,
believes may reasonably be expected to delay or prevent the Closing hereunder,
including any such event or development relating to the Financing, the Buyer
shall inform Masco as promptly as possible of such event or development and the
Parties shall consult with each other in good faith about alternative actions
that may be taken by the Parties in connection with such event or development.
(b) Notices and Consents. Masco will, and will cause each of the HFG
Companies and their Subsidiaries to, give any notices to third parties, and use
all commercially reasonable efforts to obtain any third party consents, that the
Buyer may request in connection with the matters described in ss.3(a)(iii) or
4(c) of the Disclosure Schedule or that the Buyer may otherwise reasonably
request. Each of the Parties will (and Masco will cause each of the HFG
Companies and their Subsidiaries to) give any notices to, make any filings with,
and use commercially reasonable efforts to obtain any authorizations, consents
and approvals of governments and governmental agencies, in each case to the
extent the same are required to be given, made or obtained by it (or by any of
the HFG Companies and their Subsidiaries, as the case may be) in order to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents. Without limiting the generality of the foregoing, each of
the Parties will file, if required, any Notification and Report Forms and
related material that it may be required to file with the United States Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice under the Hart-Scott-Rodino Act, will use commercially reasonable
efforts to obtain early termination of the applicable waiting period, and will
make any further filings and provide any additional information that the
government may request or require in connection therewith.
(c) Operation of Business. Except as set forth on ss.4(g)(2) of the
Disclosure Schedule, and except for cash infusions or withdrawals by Masco,
Masco will cause the HFG Companies and their Subsidiaries to conduct their
respective businesses and operations (including the management of their working
capital consistent with past practices) in all material respects only in the
Ordinary Course of Business; provided, however, that Masco will take all
necessary steps to cause the Net Intercompany Balance to be no greater than
$757,808,900 as of the Closing Date and to allocate the Net Intercompany Balance
appropriately among the HFG Companies and
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their Subsidiaries as the Buyer may reasonably request. Without limiting the
generality of the foregoing, Masco will not, and will not cause or permit any of
the HFG Companies and their Subsidiaries to, (i) take any action that would
result in a breach of any representation or warranty contained in ss.3(a)(v) or
ss.4(b) of this Agreement or clauses (i), (ii), (v), (vi) and (vii) and the
first part of clause (iv) of the second sentence of ss.4(g) of this Agreement or
(ii) engage in any practice, take any action, or enter into any transaction
outside of the Ordinary Course of Business that would have a material adverse
effect on the ability of Masco to consummate the transactions contemplated by
this Agreement and the other Transaction Documents or that would have a Material
Adverse Effect. Masco agrees that, promptly after the date of this Agreement, it
shall notify the divisional heads of the HFG Companies and their Subsidiaries
regarding the restrictions set forth in this ss.5(c). The Parties understand and
agree that Masco's indemnification obligation for Adverse Consequences resulting
from any breach of this ss.5(c) shall be governed by ss.8(b) of this Agreement.
In addition, Masco will cause (x) the aggregate amount of Third Party
Indebtedness to be no greater than $30,000,000 and (y) the aggregate amount of
outstanding letters of credit in respect of which any of the HFG Companies or
their Subsidiaries has reimbursement obligations to be no greater than
$30,000,000, in each case as of the Closing Date.
(d) Reasonable Access. Masco will permit representatives of the Buyer
(including representatives of any Person that the Buyer identifies to Masco as a
prospective provider of financing for the transactions contemplated by this
Agreement) to have reasonable access at reasonable times and upon reasonable
notice to all premises, properties, personnel, books, records, contracts and
other documents of or pertaining to the HFG Companies and their Subsidiaries;
provided, however, that such access shall not interfere with normal business
operations. Such access shall be subject in all respects to the terms and
conditions of the Confidentiality Agreement.
(e) Notice of Developments. (i) If at any time after the date of this
Agreement, Masco becomes aware of any inaccuracy or omission in its
representations and warranties in ss.4 of this Agreement (other than a Specified
Masco Representation) as a result of the discovery of facts or circumstances
existing as of the date of this Agreement or the occurrence of any events or
developments after the date of this Agreement, and such inaccuracy or omission
did not result from a breach of any covenant of Masco (other than the covenant
set forth in ss. 5(c) to the extent related to breaches of ss.4(g)), Masco may,
and, if the particular matter (taken together with all other inaccuracies and
omissions not previously disclosed to the Buyer in a mandatory notice pursuant
to this ss.5(e)(i)) would have a material adverse effect on the ability of any
Party to consummate the transactions contemplated by this Agreement and the
other Transaction Documents or would have a Material Adverse Effect, shall,
notify the Buyer in a written notice describing the inaccuracy or omission in
reasonable detail. Any such notice shall specify whether, in Masco's good faith
judgment, such notice is optional or mandatory under this ss.5(e)(i); provided
that Masco's determination that any notice delivered under this ss.5(e)(i) is an
optional notice shall not be binding on the Buyer for purposes of ss.7(a) or
ss.11(a)(ii)(B) of this Agreement, so long as (A) the Buyer notifies Masco
within 15 days of receipt of such notice that the Buyer disagrees with Masco's
determination and (B) the Buyer immediately proceeds to exercise any rights the
Buyer claims to have pursuant to ss.11(a)(ii). If the Buyer receives a notice
designated by Masco as a mandatory notice under this ss.5(e)(i) (other than with
respect to facts
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and circumstances existing and in the Knowledge of Masco as of the date of this
Agreement) and thereafter fails to exercise its right to terminate this
Agreement within the period specified in ss.11(a)(ii) below, or receives a
notice designated by Masco as an optional notice under this ss.5(e)(i) (other
than with respect to facts and circumstances existing and in the Knowledge of
Masco as of the date of this Agreement), such written notice pursuant to this
ss.5(e)(i) will be deemed to have amended and supplemented the Disclosure
Schedule (except as the Disclosure Schedule relates to Specified Masco
Representations), to have qualified such representations and warranties of
Masco, and to have cured such inaccuracy or omission in all respects (except as
it relates to the Specified Masco Representations). All materiality
qualifications in ss.4 above and all qualifications in ss.4 above requiring a
Material Adverse Effect in order for a particular representation and warranty to
have been breached shall be disregarded in determining whether there is an
inaccuracy or omission in such representation and warranty for purposes of this
ss.5(e)(i).
(ii) If at any time after the date of this Agreement, the Buyer becomes
aware of any inaccuracy or omission in its representations and warranties in
this Agreement (other than any of the Specified Buyer Representations) as a
result of the discovery of facts or circumstances existing as of the date of
this Agreement or the occurrence of any events or developments after the date of
this Agreement, and such inaccuracy or omission did not result from a breach of
any covenant of the Buyer, the Buyer may, and, if the particular matter (taken
together with all other inaccuracies and omissions not previously disclosed to
Masco in a mandatory notice pursuant to this ss.5(e)(ii)) would have a material
adverse effect on the ability of any Party to consummate the transactions
contemplated by this Agreement and the other Transaction Documents or would have
a Buyer Material Adverse Effect, shall, notify Masco in a written notice
describing the inaccuracy or omission in reasonable detail. Any such notice
shall specify whether, in the Buyer's good faith judgment, such notice is
optional or mandatory under this ss.5(e)(ii); provided that the Buyer's
determination that any notice delivered under this ss.5(e)(ii) is an optional
notice shall not be binding on Masco for purposes of ss.7(b) or ss.
11(a)(iii)(B) of this Agreement, so long as (A) Masco notifies the Buyer within
15 days of receipt of such notice that Masco disagrees with the Buyer's
determination and (B) Masco immediately proceeds to exercise any rights Masco
claims to have pursuant to ss.11(a)(iii). If Masco receives a notice designated
by the Buyer as a mandatory notice under this ss.5(e)(ii) (other than with
respect to facts and circumstances existing and in the knowledge of the Buyer as
of the date of this Agreement) and thereafter fails to exercise its right to
terminate this Agreement within the period specified in ss.11(a)(iii) below, or
receives a notice designated by the Buyer as an optional notice under this
ss.5(e)(ii) (other than with respect to facts and circumstances existing and in
the knowledge of the Buyer as of the date of this Agreement), such written
notice pursuant to this ss.5(e)(ii) will be deemed to have amended and
supplemented the Buyer Disclosure Schedule (except as the Buyer Disclosure
Schedule relates to Specified Buyer Representations), to have qualified such
representations and warranties of the Buyer, and to have cured such inaccuracy
or omission in all respects (except as it relates to the Specified Buyer
Representations). All materiality qualifications in ss.3(b) above and all
qualifications in ss.3(b) above requiring a Buyer Material Adverse Effect in
order for a particular representation and warranty to have been breached shall
be disregarded in determining whether there is an inaccuracy or omission in such
representation and warranty for purposes of this ss.5(e)(ii).
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(f) Exclusivity. Masco will not (nor will Masco authorize or permit any of
the HFG Companies, their Subsidiaries, and its or their respective officers,
directors, employees, representatives, investment bankers, financial advisors
and other agents and Affiliates to) directly or indirectly (i) take any action
to solicit, initiate or encourage the submission of any proposal or offer from
any Person, or the entering into of any agreement with any Person, relating to
the acquisition of any of the capital stock or all, or substantially all, of the
assets of any of the HFG Companies and their Subsidiaries (including any such
acquisition structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations with, or furnish any non-public
information to, any Person in connection with any such actual or possible
proposal, offer or agreement.
(g) Financing. The Buyer will use its best efforts to obtain the Financing;
provided, however, that nothing in this ss.5(g) shall require the Buyer (x) to
agree to any terms (including with respect to interest rates and amortization)
or conditions that, in the aggregate, are more onerous in any material respect
than those contemplated by, or to pay any fees or other amounts not within the
range of fees and other amounts contemplated by, the letters referred to in
ss.3(b)(vi) above or (y) to use such best efforts if a portion of the Financing
has become unavailable because of the occurrence of one or more events or the
existence of one or more conditions that make it impossible to satisfy the
conditions contained in ss.7(a) (other than ss.7(a)(vii)) below. The Buyer
agrees that it (x) will exercise all of its rights to enforce performance of the
letters described in ss.3(b)(vi) and (y) will not waive, modify or amend any of
its rights under such letters in any material respect. In the event that any
portion of the Financing becomes unavailable, regardless of the reason therefor,
the Buyer will use its best efforts to obtain alternative financing from other
sources (other than its Affiliates) on and subject to substantially the same
terms and conditions as the portion of the Financing that has become
unavailable; provided, however, that nothing in this ss.5(g) shall require the
Buyer, in attempting to obtain alternative financing, to agree to any terms
(including with respect to interest rates and amortization) or conditions that,
in the aggregate, are more onerous in any material respect than those applicable
to, or to pay any fees or other amounts in excess of the range of the fees and
other amounts that would have been payable in connection with, the portion of
the Financing that has become unavailable. The Buyer shall use its best efforts
(x) to satisfy at or prior to the Closing Date all requirements of the
agreements related to the Financing which are conditions to closing under such
agreements and to drawing down the proceeds of the Financing; (y) to defend all
lawsuits or other legal proceedings challenging such agreements related to the
Financing or the consummation of the transactions contemplated thereby; and (z)
to lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
thereby. The Buyer agrees that it will undertake all necessary actions so that
as of the Closing Date and upon completion of the Closing, the issued and
outstanding capital stock of the Buyer and the ownership of the capital stock of
the Buyer will be as set forth in Annex I to Exhibit B. Masco will (and will
cause Masco Corporation Limited and each of the HFG Companies and their
Subsidiaries to) cooperate with the Buyer and take all reasonable actions
necessary in order to assist the Buyer in obtaining the Financing (or any
alternative financing in the event that any portion of the Financing becomes
unavailable); provided, however, that under no circumstances shall Masco be
required to expend any funds for any purposes related to the Financing. Masco
shall prepare and deliver to the Buyer, as soon as
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reasonably practicable after March 31, 1996, an unaudited combined balance sheet
for the HFG Companies and their Subsidiaries as of March 31, 1996, and the
related unaudited combined statements of operations and cash flow for the three
months ending March 31, 1996. Masco represents that such financial statements
shall be prepared in accordance with GAAP applied on a consistent basis with the
Financial Statements and present fairly the combined financial position and
combined results of operations of the HFG Companies and their Subsidiaries as of
and for such date and period (except for the absence of footnotes and subject to
changes resulting from normal year-end adjustments).
(h) Certain Resignations. Concurrently with the Closing, Masco will deliver
to the Buyer duly signed resignations, effective as of the Closing, from such
members of the boards of directors (or similar governing bodies) of the HFG
Companies and their Subsidiaries as are designated in a written notice delivered
by the Buyer to Masco at least ten business days prior to the Closing Date.
(i) FIRPTA Certificates. Concurrently with the Closing, Masco will (and, if
requested by the Buyer, will cause Masco Corporation Limited to) deliver to the
Buyer a duly executed FIRPTA certificate in a form that satisfies the
requirements set forth in Section 1.1445- 2(b)(2) of the Treasury regulations.
(j) Clear Title. Promptly after the execution of this Agreement, and in
order to assist the Buyer in obtaining the Financing, Masco and the Buyer shall
cooperate with each other and the respective title insurance companies and
surveyors, and shall use their commercially reasonable efforts (including
providing copies of the relevant surveys to the appropriate title insurance
companies), to obtain and agree upon insurable legal descriptions reasonably
acceptable to the Parties for each parcel of owned real property located in the
United States and identified in ss.4(k)(i) of the Disclosure Schedule. The
failure to obtain or agree upon such legal descriptions shall not constitute a
breach of this Agreement by either Masco or the Buyer.
(k) Transitional Services. Prior to or at the Closing, the Parties will
enter into a transitional services agreement pursuant to which Masco will agree
to perform transitional services for the HFG Companies and their Subsidiaries
through March 31, 1997 and the Buyer will agree to make payments for such
services as provided in the next sentence. The services to be provided by Masco
will be consistent with the services provided by Masco to the HFG Companies and
their Subsidiaries in the Ordinary Course of Business prior to the Closing Date
(other than legal and litigation support services) and the payments by the Buyer
to Masco shall be made monthly and at an annualized rate of $6,000,000 (which
amount shall be reduced for personnel (other than the chief executive officer of
the HFG Companies and their Subsidiaries) transferred to the HFG Companies and
their Subsidiaries from Masco and its remaining Subsidiaries after the Closing
Date). If requested by the Buyer, the Parties will negotiate in good faith as to
the provision by Masco of transitional services after March 31, 1997; provided
that the fees for any such services provided by Masco after March 31, 1997 shall
be based on Masco's costs (including overhead and other allocated costs). Any
transitional services to be provided by Masco (whether before or after March 31,
1997) shall be provided subject to exculpation, indemnification and other
provisions customary for transitional services agreements.
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Section 6. Employees and Employee Benefits.
(a) Continuation of Benefits. For the period from the Closing Date through
December 31, 1996, the Buyer will cause the HFG Companies and their Subsidiaries
to use their best efforts to maintain Employee Benefit Plans, Employee Benefit
Arrangements, and levels of employee compensation that, in the Buyer's
reasonable judgment, are substantially comparable in the aggregate to what is in
effect for employees of the HFG Companies and their Subsidiaries as of the
Closing Date. With respect to any individuals who after the Closing Date
continue to be employees of the HFG Companies and their Subsidiaries and who
were covered by an employee welfare benefit plan maintained by Masco, the Buyer
will establish a similar plan providing comparable benefits as well as
comparable pre-existing condition, waiting period, co-insurance and deductible
provisions (collectively "eligibility provisions"), to be effective as of the
Closing Date for such employees, or extend coverage to such employees as of the
Closing Date under any similar plan (or plans) maintained by the Buyer providing
comparable benefits and eligibility provisions. For purposes of satisfying any
eligibility provisions under such plans, the Buyer will credit such employees
with all past service with (and, where applicable, amounts paid to) Masco, the
HFG Companies, and their respective Subsidiaries and ERISA Affiliates.
(b) Certain Statutory Requirements. From and after the Closing, the Buyer
will indemnify and hold harmless Masco from and against any Adverse Consequences
resulting from any violation after the Closing Date by the Buyer or by any of
the HFG Companies and their Subsidiaries of any provision of the Worker
Adjustment and Retraining Notification Act of 1988, as amended (the "WARN Act");
provided, however, that in order for such indemnification to be effective, Masco
shall deliver a certificate to the Buyer at the Closing representing that,
during the 180 days prior to the Closing Date, none of Masco or its Affiliates
has taken any action in respect of the HFG Companies and their Subsidiaries
that, as of the Closing Date, creates WARN Act liability.
(c) Employee Pension Benefit Plans. As soon as practicable after the
Closing Date, and after giving and receiving appropriate governmental
notifications and approvals, the Parties shall take the following actions with
regard to those employee pension benefit plans listed on ss.4(p)(i) of the
Disclosure Schedule (or shall cause the following actions to be taken by the
trustees, custodians, and, where appropriate, actuaries and other professionals
retained by such plans) in which any participant is, as of the Closing Date, an
employee of or, prior to the Closing Date, was terminated with a deferred vested
benefit from or was a retiree from, any of the HFG Companies and their
Subsidiaries (or their respective predecessors) (such participants, together
with their beneficiaries, are referred to collectively herein as "HFG
Participants"):
(i) with respect to each such plan (indicated by an "A" in parentheses
alongside its listing on ss.4(p)(i) of the Disclosure Schedule) which is a
defined contribution plan and which covers HFG Participants as well as
other participants ("Non-HFG Participants"), Masco shall direct to the
Buyer's successor plan and trustee a transfer in cash or, if acceptable to
the Buyer, securities, other property, or any combination thereof (or in
particular investments if such plan permitted participant-directed
investments and both such plan and the Buyer's successor plan and trustee
will permit such transfer
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of particular investments) of that portion of such plan's assets (including
all outstanding HFG Participant loans, if any, and including allocable
earnings and losses of such plan or, in the case of participant-directed
investments, including earnings and losses of the individual HFG
Participant accounts), valued as of the date of such transfer, for those
HFG Participants with an account (whether or not vested) under such plan
(other than accounts which have been distributed in the normal course as of
the date of such transfer), and thereafter the Buyer shall assume (or the
applicable HFG Company or Subsidiary of an HFG Company shall retain) all
liabilities and responsibilities relating to such HFG Participant accounts
and the assets so transferred;
(ii) with respect to each such plan (indicated by a "B" in parentheses
alongside its listing on ss.4(p)(i) of the Disclosure Schedule) which is a
defined benefit plan and which covers HFG Participants as well as Non-HFG
Participants, other than the Masco Corporation Home Furnishings and
Building Products Pension Plan (the "HFG Plan") and the Masco Benefits
Restoration Plan, Masco shall direct to the Buyer's successor plan and
trustee a transfer in cash (or, if acceptable to the Buyer, in kind) of the
proportion of such plan's assets allocable to liabilities accrued to the
Closing Date to all HFG Participants (including earnings and losses to the
date of such transfer allocable to such assets), which proportion shall be
deemed to equal the quotient of (x) the present value of benefits accrued
on the Closing Date for all HFG Participants in such plan calculated on a
termination basis pursuant to Code Sec. 414(l) divided by (y) the present
value of benefits accrued on the Closing Date for all HFG Participants and
Non-HFG Participants in such plan calculated on a termination basis
pursuant to Code Sec. 414(l), all as mutually determined by Masco's and
Buyer's actuaries, and thereupon the Buyer shall assume all such
liabilities and responsibilities relating to all HFG Participants under
such plan and the assets so transferred;
(iii) with respect to the HFG Plan, as of the Closing Date, Non-HFG
Participants in the HFG Plan shall be removed from the HFG Plan and its
assets allocable to liabilities accrued to the Closing Date to such Non-HFG
Participants shall be determined by the same methodology as set forth in
subsection (ii) above (except that "Non-HFG Participants" shall be
substituted for "HFG Participants" in clause (x) of such subsection (ii))
and Masco shall direct to Masco's successor plan and trustee the transfer
of the proportion of the HFG Plan's assets so determined to be allocable to
such liability to such Non-HFG Participants, and thereupon Masco shall
assume all such liabilities and responsibilities relating to all Non-HFG
Participants under the HFG Plan and the assets so transferred;
(iv) with respect to the Berkline Associates Pension Plan listed on
ss.4(p)(i) of the Disclosure Schedule and the HFG Plan, after giving effect
to the provisions of the foregoing ss.6(c)(iii), Masco shall direct the
resignation of such plans' trustees, and shall direct to the Buyer's
successor trustee a transfer in cash of all such plans' assets (including
all outstanding participant loans if any), and thereafter the Buyer shall
assume (or, in the case of the Berkline Associates Pension Plan, the
Berkline Corporation shall retain) the sponsorship of such plans together
with all liabilities and responsibilities
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relating to such plans and the assets so transferred (except as provided in
clause (iii) above and clause (viii) below);
(v) with respect to the Masco Benefits Restoration Plan, the Buyer
shall assume the liabilities incurred thereunder through the Closing Date
by Masco, the HFG Companies, and their Subsidiaries for HFG Participants in
such plan, and in connection therewith shall establish and maintain plans
or other contractual arrangements in order to provide to such eligible HFG
Participants the supplemental pension benefits accrued to the Closing Date
for such HFG Participants under the terms of such plan, but no assets shall
be transferred by Masco with respect to any such liabilities or benefits;
(vi) with respect to all such directions for transfer, each Party
represents that each and every successor plan and trust to which transfer
is requested by such Party will be tax-qualified under applicable
provisions of Code Secs. 401(a) and 501(a), and each Party will comply in
all applicable respects with Code Sec. 414(l);
(vii) from and after each such transfer of assets with respect to each
such plan (and, with respect to the liabilities assumed by the Buyer for
HFG Participants in the Masco Benefits Restoration Plan, from and after the
Closing Date), Masco shall cease to have any liability or responsibility
for, and the Buyer shall indemnify and hold harmless Masco from and
against, any Adverse Consequences resulting from such liabilities and
responsibilities that the Buyer has assumed (or that any of the HFG
Companies and their Subsidiaries has retained) with respect to each such
plan, its assets, and the HFG Participants under such plan; provided,
however, that neither the Buyer nor the HFG Companies and their
Subsidiaries shall indemnify Masco for, and Masco shall continue to be
liable to the extent provided in ss.8 below in respect of, Adverse
Consequences (including any fiduciary breach liability) resulting from
violations of laws or breaches of fiduciary duties (if any) of Masco, its
trustees, or any other plan fiduciaries in administering any such plan
prior to the Closing Date or breach by Masco of any representation
contained in this Agreement; and
(viii) from and after each such transfer of assets with respect to
each such plan (and, with respect to the liabilities and responsibilities
retained by Masco for Non-HFG Participants in the Masco Benefits
Restoration Plan, from and after the Closing Date), the Buyer shall cease
to have any liability or responsibility for, and Masco shall indemnify and
hold harmless the Buyer from and against, any Adverse Consequences
resulting from such liabilities and responsibilities that Masco has assumed
or retained with respect to each such plan, its assets, and the Non-HFG
Participants.
(d) Employee Welfare Benefit Plans. Effective as of the Closing, Masco
shall cease to have any liability or responsibility for (including liabilities
and responsibilities for COBRA, for incurred but not paid claims outstanding as
of the Closing Date, for disabilities or periods of sickness commencing prior to
the Closing Date, and for accidents and deaths occurring prior to the Closing
Date), and the Buyer shall assume (as necessary where none of the HFG Companies
and their Subsidiaries will retain), be solely responsible for, and indemnify
and hold
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harmless Masco from and against, any Adverse Consequences resulting from
liabilities and responsibilities arising under the employee welfare benefit
plans and Foreign Benefit Plans listed in ss.4(p)(i), (ii) and (vii) of the
Disclosure Schedule covering individuals who, as of the Closing Date, are
employees of or, prior to the Closing Date, were terminated or retired from, the
HFG Companies and their Subsidiaries, regardless of whether such individuals
continue in the employ of the HFG Companies and their Subsidiaries after the
Closing Date (collectively, the "HFG Employees"); provided, however, that
neither the Buyer nor the HFG Companies and their Subsidiaries shall indemnify
Masco for, and Masco shall continue to be liable to the extent provided in ss.8
below in respect of, Adverse Consequences (including any fiduciary breach
liability) resulting from violations of laws or breaches of fiduciary duties (if
any) of Masco, its trustees, or any other plan fiduciaries in administering any
such plan prior to the Closing Date or breach by Masco of any representation
contained in this Agreement. In connection therewith, at or promptly following
the Closing Date, Masco will cause (or, as appropriate, assist with) the
transfer to the Buyer's successor plans and trustees of any assets attributable
to any welfare benefit plan covering HFG Employees that are held in any welfare
benefit trust fund currently maintained by Masco, the HFG Companies, and their
respective Subsidiaries. With respect to the welfare benefit trust funds
maintained by Masco for certain HFG Companies and their Subsidiaries, the assets
attributable to HFG employees are deemed to be those equal to 35.55% of medical
claims paid by such welfare benefit trust for the year ending December 31, 1995
for each such HFG Company or Subsidiary, but in no event shall the amount of the
assets attributable to the HFG Employees be less than $4.3 million.
(e) Employee Benefit Arrangements. Effective as of the Closing, Masco shall
cease to have any liability or responsibility for, and the Buyer shall assume
(as necessary where none of the HFG Companies and their Subsidiaries will
retain), be solely responsible for, and indemnify and hold harmless Masco from
and against, any Adverse Consequences resulting from liabilities and
responsibilities arising under the Employee Benefit Arrangements (other than
workers' compensation programs) listed in ss.4(p)(vi) of the Disclosure Schedule
covering HFG Employees; provided, however, that neither the Buyer nor the HFG
Companies and their Subsidiaries shall indemnify Masco for, and Masco shall
continue to be liable to the extent provided in ss.8 below in respect of,
Adverse Consequences (including any fiduciary breach liability) resulting from
violations of laws or breaches of fiduciary duties (if any) of Masco, its
trustees, or any other plan fiduciaries in administering any such arrangement
prior to the Closing Date or breach by Masco of any representation contained in
this Agreement. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, the Buyer shall not have any liability or
responsibility for, and Masco shall be solely responsible for, and indemnify and
hold harmless Buyer from and against, all Adverse Consequences resulting from
(i) the Special Incentive Arrangements in connection with the HFG divestiture
listed on ss.4(n)(1) and ss.4(p)(vi) of the Disclosure Schedule, and (ii)
effective as of the Closing Date, any claim for workers' compensation benefits
arising from any sickness or accident of any domestic employee of the HFG
Companies and their Subsidiaries occurring prior to the Closing Date (whether
known or unknown at the Closing Date). After the Closing Date, the Buyer and the
HFG Companies and their Subsidiaries will cooperate as reasonably requested by
Masco in administering such claims for domestic workers' compensation benefits,
and Masco will administer such claims, in a manner consistent with the past
practices of Masco and Universal (as the case may be). Such cooperation
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will include (x) assigning to Masco any pertinent contracts and insurance
policies (together with all claims made as of the Closing Date, and the right to
make any additional claims concerning the obligations assumed by Masco
hereunder, against such contracts and insurance policies or the companies
issuing such policies), providing claim files, employee, financial, underwriting
and other information, assisting Masco in contesting such claims and returning
employees to work, all as reasonably requested by Masco, and (y) providing the
other support contemplated by ss. 12(p) hereof.
(f) Plan Contributions. With respect to each employee pension benefit plan
listed on ss.4(p)(i) of the Disclosure Schedule that is intended to be a
tax-qualified plan, prior to the Closing Date, Masco shall (i) contribute
thereto the full amount attributable to the HFG Participants for the plan year
ended immediately prior to the Closing Date, and (ii) with respect to the period
from the beginning of the plan year in which the Closing Date occurs to the
Closing Date, contribute an amount attributable to the HFG Participants for such
period, subject, in the case of clause (ii), to the discretion of the Masco
Board of Directors (which will be exercised consistent with past practices) to
determine the amount attributable to such period with respect to discretionary
contributions under profit-sharing plans; provided that to the extent
contributions made pursuant to clauses (i) and (ii) above are made earlier than
such contributions would have been made in accordance with Masco's past
practices, each such contribution shall be discounted to the date on which it is
made, using a present value factor of 9% per annum, in each case from the date
such early contribution would otherwise have been made consistent with past
practices and in compliance with applicable law; and provided further that with
respect to clause (ii), in the case of a defined contribution plan, such amount
shall be based on services performed during such period, and, in the case of a
defined benefit plan, such amount shall be the pro rata portion of the
contribution attributable to the entire plan year determined in a manner
consistent with past practices.
(g) Transitional Services. The Parties shall cooperate as needed to ensure
the smooth transfer of assets, liabilities and plan administration contemplated
in this ss.6, including continued plan administration by Masco as reasonably
requested by the Buyer and the exchange of pertinent employee information and
records. Any continued administration of plans by Masco for the convenience of
the Buyer shall be the subject of good faith negotiations and shall be
accompanied by appropriate indemnifications of Masco by the Buyer.
(h) Conflict. In the event of a conflict between the provisions of this
ss.6 and any other provision of this Agreement, the provisions of this ss.6
shall control. Without limiting the generality of the foregoing, the
indemnification obligations of the Parties under this ss.6 shall not be subject
to the limitations (including time and amount limitations) set forth in ss.8(a),
8(b) and 8(c) below.
Section 7. Conditions to Obligation to Close.
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(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3(a) above
shall be correct in all material respects at and as of the Closing Date;
(ii) the representations and warranties set forth in ss.4 above shall
be correct in all respects at and as of the Closing Date, disregarding for
this purpose (A) any materiality qualification in ss.4 above, and (B) any
qualification in ss.4 above requiring a Material Adverse Effect in order
for a particular representation and warranty to have been breached, except,
in the case of both (A) and (B), where all such failures of the
representations and warranties to be correct in all respects at and as of
the Closing Date would not have a Material Adverse Effect;
(iii) Masco shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iv) Masco shall have delivered to the Buyer a certificate dated as of
the Closing Date to the effect that each of the conditions specified above
in ss.7(a)(i)-(iii) above is satisfied in all respects;
(v) there shall not be any pending action, suit, or other judicial
proceeding brought by the United States Federal Trade Commission, by the
Antitrust Division of the United States Department of Justice or (if such
pending action, suit, or other judicial proceeding is reasonably likely to
have a material adverse effect on the ability of any Party to consummate
the transactions contemplated by this Agreement and other Transaction
Documents) by any other governmental agency against any of the Parties with
respect to any of the transactions contemplated by this Agreement and the
other Transaction Documents, and there shall not be in effect any law or
any judgment, injunction, order or decree of any governmental agency or
court preventing any of the Parties from consummating in any material
respect the transactions contemplated by this Agreement and the other
Transaction Documents where, under the circumstances of the transactions
contemplated hereby and thereby, such law, judgment, injunction, order or
decree would materially diminish the benefits of such transactions to the
Buyer or is reasonably likely to involve the imposition of felony or
significant misdemeanor penalties on the Buyer;
(vi) all applicable waiting periods (and any extensions thereof) under
the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;
the Buyer or Masco, as applicable, shall have received any required
governmental authorizations or approvals that have been specifically
identified (by cross-reference to this ss.7(a)(vi)) as closing conditions
for the Buyer on the Disclosure Schedule or the Buyer Disclosure Schedule;
and Masco shall have received any required consent under its credit
agreement with Morgan Guaranty Trust Company of New York;
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(vii) the Buyer shall have entered into definitive agreements
providing for the Financing, and shall have received, in immediately
available funds, proceeds of the Financing in an aggregate amount at least
sufficient to consummate the transactions contemplated by this Agreement
and to pay all related fees and expenses;
(viii) Masco and Masco Corporation Limited shall have executed and
delivered to the Buyer one or more agreements pursuant to which each of
Masco and Masco Corporation Limited, effective as of the Closing,
permanently waives and releases any claims relating to the period ending on
the Closing Date which it has or may have against any of the current or
former officers and directors of any of the HFG Companies and their
Subsidiaries, but in each case only to the extent such HFG Company or such
Subsidiary has an indemnity obligation to such current or former officers
and directors with respect to the claims so released;
(ix) each of the Transaction Documents to which Masco or Masco
Corporation Limited is a party shall have been duly executed and delivered
by Masco or Masco Corporation Limited, as the case may be; and
(x) the Buyer shall have received from the Vice President and General
Counsel of Masco an opinion in form and substance substantially as set
forth in Exhibit D attached hereto, addressed to the Buyer, and dated as of
the Closing Date.
The Buyer may waive any condition specified in this ss.7(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Masco. The obligation of Masco to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3(b) above
shall be correct in all respects at and as of the Closing Date,
disregarding for this purpose (A) any materiality qualification in ss.3(b)
above and (B) any qualification in ss.3(b) above requiring a Buyer Material
Adverse Effect in order for a particular representation and warranty to
have been breached, except, in the case of both (A) and (B), where all such
failures of the representations and warranties to be correct in all
respects at and as of the Closing Date would not have a Material Adverse
Effect (determined for this purpose as if the Buyer and its Subsidiaries
were included in the Combined Company with the HFG Companies and their
Subsidiaries);
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) neither the Buyer nor any of its Subsidiaries shall have filed
for relief under any provision of the U.S. Bankruptcy Code or any similar
state law or have taken any affirmative steps in contemplation of the
foregoing;
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(iv) the Buyer shall have delivered to Masco a certificate dated as of
the Closing Date to the effect that each of the conditions specified above
in ss.7(b)(i)-(iii) is satisfied in all respects;
(v) there shall not be any pending action, suit or other judicial
proceeding brought by the United States Federal Trade Commission, by the
Antitrust Division of the United States Department of Justice or (if such
pending action, suit, or other judicial proceeding is reasonably likely to
have a material adverse effect on the ability of any Party to consummate
the transactions contemplated by this Agreement and the other Transaction
Documents) by any other governmental agency against any of the Parties with
respect to any of the transactions contemplated by this Agreement and the
other Transaction Documents, and there shall not be in effect any law or
any judgment, injunction, order or decree of any governmental agency or
court preventing any of the Parties from consummating in any material
respect the transactions contemplated by this Agreement and the other
Transaction Documents where, under the circumstances of the transactions
contemplated hereby and thereby, such law, judgment, injunction, order or
decree would materially diminish the benefits of such transactions to Masco
or is reasonably likely to involve the imposition of felony or significant
misdemeanor penalties on Masco or the Buyer;
(vi) all applicable waiting periods (and any extensions thereof) under
the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;
Masco or the Buyer, as applicable, shall have received any required
governmental authorizations or approvals that have been specifically
identified (by cross-reference to this ss.7(b)(vi)) as closing conditions
for Masco on the Disclosure Schedule; and Masco shall have received any
required consent under its credit agreement with Morgan Guaranty Trust
Company of New York;
(vii) each of the Transaction Documents to which the Buyer or any of
its Affiliates is a party shall have been duly executed and delivered by
the Buyer or such Affiliate, as the case may be; and
(viii) Masco shall have received from counsel to the Buyer an opinion
in form and substance substantially as set forth in Exhibit E attached
hereto, addressed to Masco, and dated as of the Closing Date.
Masco may waive any condition specified in this ss.7(b) if it executes a writing
so stating at or prior to the Closing.
Section 8. Indemnification.
(a) Survival of Representations and Warranties. All of the representations
and warranties of Masco contained in ss.ss.3, 4(b) and 4(d) and the
representations and warranties contained in ss.4(p) (but only to the extent that
they relate to liabilities due to the PBGC, the U.S. Internal Revenue Service or
the U.S. Department of Labor) and ss.6(c)(vi) shall survive the
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Closing and continue in full force and effect forever thereafter (subject to any
applicable statutes of limitations). The representations and warranties of Masco
contained in ss.4(j) (but only to the extent that such representations and
warranties in ss.4(j) relate to Specified Non-Income Taxes), ss.4(p) (except to
the extent that the survival of such representations and warranties in ss.4(p)
is governed by the first sentence of this ss.8(a)) and ss.4(q) shall survive the
Closing and continue in full force and effect until June 30, 1999; provided that
the representations and warranties of Masco contained in ss.4(q), to the extent
that such representations and warranties relate to the operations of HFG
Companies and their Subsidiaries located in the Western Europe, shall survive
only until June 30, 1997, except with respect to any matters related thereto as
to which the Buyer establishes that Masco had Knowledge as of the Closing Date.
Except as otherwise expressly provided in ss.9, the representations and
warranties of Masco contained in ss.4(j), to the extent that such
representations and warranties relate to Income Taxes, shall not survive the
Closing and, from and after the Closing, shall be of no further force or effect.
All of the other representations and warranties of Masco contained in ss.4, and
the representations and warranties of Masco contained in the last sentence of
ss.5(g), shall survive the Closing and continue in full force and effect only
until June 30, 1997. Notwithstanding the foregoing, if the Buyer sells a
majority of the capital stock of any of the HFG Companies or any of their
Subsidiaries, or any of the HFG Companies or any of their Subsidiaries sells
substantially all of its assets (or any of its real property), during any
applicable survival period to any third party (other than any Affiliate of the
Buyer), regardless of how such sale is structured (including any such sale
structured as a merger, consolidation, reorganization, exchange, or issuance of
capital stock), then all of the representations and warranties of Masco
contained in ss.4, insofar as such representations and warranties relate to the
entity or assets sold, shall expire on the earlier of (i) the date such
representations and warranties would otherwise expire in accordance with the
preceding sentences of this ss.8(a) or (ii) June 30, 1998, it being understood
that if such sale or transaction takes place after June 30, 1998, such
representations and warranties which have not theretofore expired shall expire
immediately prior to the consummation of such sale or other transaction;
provided that this sentence shall not apply to any claim (x) resulting from a
breach of the representations and warranties of Masco contained in ss.ss.4(b),
4(d) or 4(p) (but, in the case of the representations and warranties contained
in ss.4(p), only to the extent that they relate to liabilities due to the PBGC,
the U.S. Internal Revenue Service or the U.S. Department of Labor) or (y) by a
third party (other than a third party purchasing all or a portion of such stock
or assets or any Affiliate of such third party) against any of the Indemnified
Buyer Parties, except to the extent such claim relates to or arises from the
offering or sale of such stock or assets.
All of the representations and warranties of the Buyer contained in
ss.3(b)(i) - (v), ss.3(b)(vii), ss.3(b)(xiii), ss.3(b)(xv) (but only to the
extent that such representations and warranties relate to liabilities due to the
PBGC, the U.S. Internal Revenue Service or the U.S. Department of Labor),
ss.3(b)(xvi) (but only to the extent that such representations and warranties
relate to Income Taxes) and ss.6(c)(vi) shall survive the Closing and continue
in full force and effect forever thereafter (subject to any applicable statutes
of limitations). The representations and warranties of the Buyer set forth in
the preceding sentence (subject to the limitations set forth in such sentence)
are referred to herein as the "Specified Buyer Representations." The
representations and warranties contained in ss.3(b)(vi) shall not survive the
Closing and, from and after the Closing, shall be of no further force or effect.
All of the other representations and
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warranties of the Buyer contained in ss.3(b) shall survive the Closing and
continue in full force and effect until June 30, 1997 (or June 30, 1999, in the
case of the representations and warranties of the Buyer contained in (A)
ss.3(b)(xiv), (B) ss.3(b)(xv) (except to the extent that the survival of such
representations and warranties in ss.3(b)(xv) is governed by the first sentence
of this paragraph) and (C) ss.3(b)(xvi) (but only to the extent that such
representations and warranties relate to Specified Non-Income Taxes)).
Notwithstanding the foregoing, any such representation or warranty shall
survive the time at which it would otherwise expire in accordance with this
ss.8(a) to the extent that the Buyer or Masco, as the case may be, makes a
written claim for indemnification for breach of that representation or warranty
(setting forth in reasonable detail the factual and contractual bases upon which
such Party is entitled to indemnification under this Agreement) prior to the
time at which that representation or warranty would otherwise expire.
Except as set forth in this ss.8(a) or in ss.ss.9(q) or 11, the provisions
of this Agreement shall survive the Closing and shall continue indefinitely.
(b) Indemnification Provisions for Benefit of the Buyer. If Masco breaches
any of its representations, warranties or covenants contained herein, other than
any representations and warranties contained in ss.4(j) to the extent related to
Income Taxes (which are governed by ss.9) or to the extent any breach thereof
results in any liability related to any other Tax arising in the Post-Closing
Period, Masco agrees to indemnify the Buyer, on a Grossed-up Basis, from and
against any Adverse Consequences that any of the Buyer and its Affiliates
(determined assuming that Masco is not an Affiliate of the Buyer following the
Closing, but including the HFG Companies and their Subsidiaries) and their
respective officers, employees, directors, agents and representatives
(collectively, the "Indemnified Buyer Parties") shall have suffered to the
extent resulting from the breach; provided, however, that, with respect to
breaches of such representations and warranties contained in ss.4, the
representation and warranty contained in the last sentence of ss.5(g) and (to
the extent related to breaches of ss.4(g)) the covenant contained in ss.5(c):
(i) Masco shall not be obligated to make payments to the Buyer for the
first $15,000,000 of Adverse Consequences resulting from such breaches, it
being understood that the $15,000,000 limitation will not apply to (A)
breaches of the representations and warranties in ss.ss.4(b), 4(d) and 4(p)
(but, with respect to ss.4(p), only to the extent that such breaches relate
to liabilities due to the PBGC, the U.S. Internal Revenue Service or the
U.S. Department of Labor) (the representations and warranties of Masco set
forth in this clause (A) (subject to the limitations set forth in this
clause (A)) being referred to herein as the "Specified Masco
Representations") and (B) breaches of the covenant contained in ss.5(c) (to
the extent related to breaches of ss.4(g)), except that such $15,000,000
limitation will apply to any such breach of the covenant contained in
ss.5(c) which is not caused by Masco so long as Masco has satisfied its
obligation in ss.5(c) to notify the divisional heads of HFG Companies
regarding the restrictions contained in ss.5(c); provided that for purposes
of this subparagraph (i): (x) any Adverse Consequences resulting from any
matter disclosed by Masco prior to the Closing by delivery of a notice
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designated as an optional notice pursuant to ss.5(e)(i) above that relates
to facts or circumstances existing but not in the Knowledge of Masco as of
the date of this Agreement, or that relates to the occurrence of any events
or developments after the date of this Agreement to the extent that such
events or developments have resulted in the accrual of a reserve or
liability on the Closing Date Balance Sheet and, but for the exclusion
specified in clause (C) of ss.2(e)(ii) above, would have resulted in a
reduction of the Adjusted Net Investment and Advances, shall be taken into
account (notwithstanding the fact that Masco has no indemnity obligations
in respect of such facts or circumstances) in determining whether the
$15,000,000 amount is exceeded and (y) except for matters referred to in
the immediately preceding clause (x), only individual claims (or groups of
related claims or claims of the same Person having substantially similar
factual and legal bases) resulting in Adverse Consequences in excess of
$100,000 will be considered in determining whether the $15,000,000 amount
is exceeded;
(ii) Masco shall not be obligated to make payments to the Buyer of
more than $100,000,000 (such number, as reduced to reflect the application
of clause (y) of the final proviso of this ss.8(b) being referred to as the
"Cap") in respect of Adverse Consequences resulting from all such breaches,
it being understood, however, that (1) the Cap shall not apply to any
Adverse Consequences resulting from (A) breaches of the representations and
warranties contained in ss.ss.4(b), 4(d), 4(j) (but, with respect to ss.
4(j), only to the extent that such breaches relate to Specified Non-Income
Taxes) and ss.4(p) or (B) breaches of the covenant contained in ss.5(c),
except that the Cap will apply to any breach of the covenant contained in
ss.5(c) (to the extent related to breaches of ss.4(g)) which is not caused
by Masco so long as Masco has satisfied its obligation in ss.5(c) to notify
the divisional heads of the HFG Companies regarding the restrictions
contained in ss.5(c), and (2) any payments made by Masco in respect of
Adverse Consequences for breaches of the representations and warranties
referred to in clause (1) above (other than the first $25,000,000 in
payments made by Masco in respect of Adverse Consequences resulting from
breaches of the representations and warranties contained in ss. 4(j) that
relate to Specified Non-Income Taxes and other than any payments made by
Masco in respect of Adverse Consequences resulting from breaches of
representations and warranties contained in ss.ss.4(b), 4(d) and 4(p) (but
in the case of ss.4(p), only to the extent that such breaches relate to
liabilities due to the PBGC, the U.S. Internal Revenue Service or the U.S.
Department of Labor)) shall nonetheless be taken into account in
determining whether the Cap is exceeded;
(iii) Masco shall not be obligated to indemnify the Buyer with respect
to any Adverse Consequences resulting from such breaches except to the
extent that the Buyer makes a written claim for such indemnification
against Masco within the applicable survival period referred to in ss.8(a)
above setting forth in reasonable detail the factual and contractual bases
upon which the Buyer is entitled to indemnification hereunder;
(iv) Masco shall not be obligated to indemnify the Buyer with respect
to any Adverse Consequences resulting from any matter disclosed in
accordance with ss.5(e)(i) prior to the Closing (other than with respect to
(x) the Specified Masco Representations
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and (y) facts and circumstances existing and in the Knowledge of Masco as
of the date of this Agreement); and
(v) In determining Masco's indemnification obligations under this
ss.8(b), the "Knowledge of Masco" qualification contained in ss.4(p)(vii)
shall be disregarded.
To the extent necessary in order to avoid double counting, all qualifications in
ss.4 above (other than the first sentence of ss.4(g) and the last sentence of
ss.4(f)) requiring a Material Adverse Effect in order for a particular
representation or warranty to have been breached shall be disregarded for
purposes of this ss.8. Notwithstanding anything in ss.8(a) or this ss.8(b) to
the contrary, Masco also agrees to indemnify the Buyer from and against any and
all Adverse Consequences that any Indemnified Buyer Party shall have suffered to
the extent relating to (i) the Caldwell Environmental Matter or the Norfolk
Veneer Environmental Matter, (ii) any Multiemployer Plan covering employees of
Masco and its Subsidiaries other than employees of the HFG Companies and their
Subsidiaries, (iii) the New York State use and sales Tax matters disclosed in
Item No. 6 of ss.4(j)(i) and ss.4(j)(vi) of the Disclosure Schedule, (iv) any
matter listed on Schedule 8(b) to this Agreement, provided that (x) with respect
to clause (iv) above Masco shall not be obligated to make payments to the Buyer
for the first $3,000,000 of Adverse Consequences relating to the matters
described in such clause (iv) and (y) if as of the fifth anniversary of the
Closing Date the Buyer has suffered an aggregate of less than $3,000,000 in
Adverse Consequences relating to the matters described in such clause (iv), the
Cap shall be reduced by an amount equal to the difference between $3,000,000 and
the actual amount of the Adverse Consequences suffered by the Buyer relating to
the matters described in such clause (iv), and (v) the matter entitled Cal-Style
Furniture & Universal Furniture v. Kemper and any related appeals,
counter-claims and successor claims.
(c) Indemnification Provisions for Benefit of Masco. In the event (A) the
Buyer breaches any of its representations, warranties or covenants contained
herein, or (B) any of the Buyer, the HFG Companies, and the Subsidiaries of the
HFG Companies (collectively, the "Covered Companies") is, or is asserted by any
third party to be, jointly (or jointly and severally) liable with any of the
other Subsidiaries of the Buyer with respect to any matter for which the Covered
Companies would not have any liability but for the fact of their affiliation
with the other Subsidiaries of the Buyer, the Buyer agrees to indemnify Masco
from and against any Adverse Consequences that any of Masco and its Affiliates
(determined assuming that the Buyer, the HFG Companies and their respective
Subsidiaries are not Affiliates of Masco) and its and their respective officers,
employees, directors, agents and representatives (collectively, the "Indemnified
Seller Parties") shall have suffered resulting from such breach or relating to
such matter except, in each case, to the extent that such Adverse Consequence is
merely a diminution in the value of the equity interests of the Buyer in its
Subsidiaries (other than any of the HFG Companies and their Subsidiaries);
provided that the Buyer shall not be obligated to indemnify Masco with respect
to any Adverse Consequences resulting from any breach of a representation or
warranty except to the extent that Masco makes a written claim for such
indemnification against the Buyer within the applicable survival period referred
to in ss.8(a) above setting forth in reasonable detail the factual and
contractual bases upon which Masco is entitled to indemnification hereunder. The
Buyer also agrees to indemnify Masco following the Closing from and against any
Adverse
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Consequences that any Indemnified Seller Party shall have suffered with respect
to any actual or asserted obligation or liability of or relating to the
businesses or properties of any of the HFG Companies and their Subsidiaries with
respect to the period prior to the Closing Date as to which such Indemnified
Seller Party is, or is asserted by any third party to be, jointly (or jointly
and severally) liable with any of the HFG Companies and their Subsidiaries,
except in each such case to the extent that Masco is obligated to make payments
to the Buyer in respect of such Adverse Consequences pursuant to the provisions
of ss.ss.6 or 8(b) above or ss.9 or 12(p)(i) below. Any payment by the Buyer
pursuant to the immediately preceding sentence shall be included in the first
$15,000,000 of Adverse Consequences described in clause (i) of the proviso to
ss.8(b) above. In addition, the Buyer agrees to indemnify Masco following the
Closing from and against any Adverse Consequences that any Indemnified Seller
Party shall have suffered to the extent relating to the matter entitled Wyett
Consulting Group v. Masco Corporation.
(d) Matters Involving Third Parties.
(i) If any third party (including any governmental agency or
authority) shall notify any Indemnified Buyer Party or Indemnified Seller
Party (the Buyer in the first instance or Masco in the second instance
being referred to herein as the "Indemnified Party" on behalf of the
applicable Indemnified Buyer Party or Indemnified Seller Party) with
respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification (ignoring, for this purpose, the limitations on
such indemnification in the proviso to ss.8(b) above) against the Party
providing such indemnification (the "Indemnifying Party") under this
Agreement, then the Indemnified Party shall promptly notify the
Indemnifying Party thereof in writing and give the Indemnifying Party such
information with respect thereto as the Indemnifying Party may reasonably
request, but failure to give such notice or information shall not relieve
the Indemnifying Party of any liability hereunder (except to the extent the
Indemnifying Party has suffered actual prejudice thereby).
(ii) The Indemnifying Party will have the right at any time to assume
and thereafter conduct the defense of the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party; provided,
however, that in each such case the Indemnifying Party will defend the
Third Party Claim in a manner it reasonably deems to be appropriate and
will not consent to the entry of any judgment or enter into any settlement
or compromise with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably)
unless the judgment or proposed settlement or compromise (A) involves only
the payment of money damages by the Indemnifying Party (without any payment
by the Indemnified Buyer Parties (where the Buyer is the Indemnified Party)
or the Indemnified Seller Parties (where Masco is the Indemnified Party)),
(B) does not impose an injunction or any other equitable relief upon the
Indemnified Buyer Parties (where the Buyer is the Indemnified Party) or the
Indemnified Seller Parties (where Masco is the Indemnified Party) and (C)
in the case of a settlement or compromise, constitutes a complete and
unconditional release of the Indemnified Buyer Parties (where the Buyer is
the Indemnified Party) or the Indemnified Seller Parties (where Masco is
the Indemnified Party). The Indemnified
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Buyer Parties (where the Buyer is the Indemnified Party) or the Indemnified
Seller Parties (where Masco is the Indemnified Party) may, at their own
expense, participate in, but not control, the defense, settlement or
compromise of any Third Party Claim controlled by the Indemnifying Party
pursuant to this paragraph (ii); provided that if any Third Party Claim
involves allegations of criminal conduct by any Indemnified Buyer Party or
Indemnified Seller Party, such Person will have the right at its expense to
control jointly that portion of the Third Party Claim.
(iii) Unless and until the Indemnifying Party assumes the defense of
the Third Party Claim as provided in ss.8(d)(ii) above, the Indemnified
Buyer Parties (where the Buyer is the Indemnified Party) or the Indemnified
Seller Parties (where Masco is the Indemnified Party) may defend against
the Third Party Claim in any manner they reasonably may deem appropriate;
provided, however, that the Indemnified Buyer Parties (where the Buyer is
the Indemnified Party) or the Seller Indemnified Parties (where Masco is
the Indemnified Party) will not consent to the entry of any judgment or
enter into any settlement or compromise with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not to
be withheld unreasonably).
(iv) Whether or not the Indemnifying Party assumes the defense of any
Third Party Claim, the Parties shall cooperate in the defense thereof. Such
cooperation shall include (upon the defending party's request) the
retention and the provision to counsel of non-privileged records and
information which are reasonably relevant to such Third Party Claim, and
making employees reasonably available on a mutually convenient basis to
provide additional information and explanation of any material so provided.
(v) The specific provisions of ss.ss.6, 9 and 10 will govern in the
event of any conflict with the general provisions of this ss.8(d).
(e) Miscellaneous. The Buyer acknowledges and agrees that Masco is not
making any representation or warranty whatsoever with respect to deferred taxes
of the HFG Companies and their Subsidiaries or with respect to the quantity,
quality or collectibility of the accounts receivable or inventory of the HFG
Companies and their Subsidiaries, except to the extent that presentation of such
accounts receivable or inventory (including any reserves related thereto) may
affect the past results of operations of the HFG Companies and their
Subsidiaries. All post-Closing indemnification payments under this Agreement
shall be deemed adjustments to the Purchase Price, and the Parties agree that
such adjustments shall be allocated for all purposes in accordance with ss.9(j)
and, to the extent relevant, ss.9(i)(B) below. The indemnification provisions in
this Agreement, and the remedy of specific performance contemplated by ss.12(c)
below, shall be the exclusive remedies for any breach of the representations,
warranties, and covenants contained in this Agreement. Without limiting the
generality of the foregoing, the Buyer explicitly waives any rights and remedies
under the common law, and any statutory rights and remedies, that it otherwise
might have against Masco or any of its remaining Subsidiaries after the Closing
with respect to any actual or asserted obligation or liability of or relating to
the business or properties of any of the HFG Companies and their Subsidiaries
with respect to the period prior to the Closing Date as to which Masco may be
jointly (or jointly and severally)
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liable with any of the HFG Companies and their Subsidiaries; provided, however,
that no party waives its rights to commence judicial proceedings to enforce its
rights under this ss.8, ss.6 above or ss.ss.9 or 11(b) or 12(p)(i) below. After
the Closing, the HFG Companies and their Subsidiaries will have the right to
make any claim (and Masco shall cooperate in connection with such claim) for
occurrences prior to the Closing Date against any insurance policy that provides
coverage on an occurrence basis under which any of the HFG Companies and their
Subsidiaries is insured as of the Closing Date and under which coverage may be
afforded for occurrences prior to the Closing Date and which may be collectible
after the Closing Date by any of the HFG Companies and their Subsidiaries;
provided, however, that Masco does not represent or warrant the actual
availability or extent of coverage under any such policies. However, the HFG
Companies and their Subsidiaries will not have the right to (and the Buyer will
not cause or permit any of them to) make (x) any claim against any other
insurance policy maintained by Masco or its Affiliates (determined assuming that
the Buyer, the HFG Companies and their respective Subsidiaries are not
Affiliates of Masco), (y) any claim against any policy which is retrospectively
rated or is otherwise the economic equivalent of self-insurance maintained by
Masco or its Affiliates (determined assuming that the Buyer, the HFG Companies
and their respective Subsidiaries are not Affiliates of Masco) or (z) any claim
against any of Masco and its remaining Subsidiaries on any theory of continuing
intercompany "insurance" coverage. The Buyer shall cause the HFG Companies and
their Subsidiaries to use commercially reasonable efforts to collect any
insurance proceeds and indemnification payments available under the policies and
acquisition agreements, respectively, referred to in the definition of "Adverse
Consequences."
Section 9. Tax Matters.
(a) Tax Sharing Agreements. Any Tax allocation or sharing agreement, and
each other agreement or arrangement relating to Tax matters, between any of the
HFG Companies and their Subsidiaries on the one hand and any Seller Party on the
other hand shall be terminated as of the Closing (with no further payment
thereunder, whether or not accrued, to be made after the Closing) and will have
no further effect for any taxable year (whether the current year, a future year,
or a past year).
(b) Allocation of Tax Liability. (A) Masco shall pay or cause to be paid,
and indemnifies the Buyer and agrees to protect, save and hold harmless the
Buyer from and against, on a Grossed-Up Basis, the following liabilities
suffered by any of the Tax Indemnitees:
(i) any liability of the HFG Companies and their Subsidiaries for any
Tax imposed upon (1) any Seller Party for any period or (2) any Third Party
for any Pre-Closing Period, in each case for which any of the HFG Companies
or their Subsidiaries may be liable (W) under Section 1.1502-6 of the
Treasury regulations (or any similar provision of state, local or foreign
law), (X) as a transferee or successor or (Y) by contract;
(ii) any Income Tax (other than those Taxes described in paragraph (i)
above) imposed upon any of the HFG Companies and their Subsidiaries for any
Pre-Closing Period;
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(iii) any Section 338 Tax; and
(iv) any Income Tax of Buyer, the HFG Companies or the Subsidiaries of
the HFG Companies arising from a breach of a representation or warranty in
ss. 4(j)(vii), (ix), (x), (xi) or (xii), regardless of whether a notice
disclosing such breach was delivered pursuant to ss. 5(e)(i).
Notwithstanding the foregoing, Masco shall not be obligated to indemnify
for any Tax imposed on any Third Party unless the HFG Companies and their
Subsidiaries are liable for such Tax as a result of their entering into an
arrangement or agreement with the Third Party during any Pre-Closing Period.
(B) Except as otherwise provided in ss. 9(d) below, payment in full of any
amount due from Masco under this ss. 9(b) shall be made by Masco to Buyer in
immediately available funds at the later of (x) five business days before the
date payment of the Taxes to which such payment relates is due or (y) fifteen
business days after the date on which demand for payment from Buyer has been
delivered to Masco.
(c) Consolidated and Similar Taxes and Tax Returns for Periods Through the
Closing Date. Subject to ss.9(k) below, and to the extent permitted by law,
Masco will include the income of the HFG Companies and their Subsidiaries
(including any deferred income triggered into income by Treas. Reg. ss.1.1502-13
and Treas. Reg. ss.1.1502-14 and any excess loss accounts taken into income
under Treas. Reg. ss.1.1502-19) on its consolidated federal income tax Returns
and on any applicable combined or consolidated state or local income or
franchise tax Returns to the extent consistent with the past practice of Masco
for all periods through the Closing Date. The Buyer will cause the HFG Companies
and their Subsidiaries to furnish information to Masco for inclusion in Masco's
consolidated federal income tax Return (and any applicable combined or
consolidated state or local income or franchise tax Return) for the period which
includes the Closing Date in accordance with Masco's past custom and practice.
Masco will allow the Buyer an opportunity to review and comment upon such income
or franchise tax Returns (including any amended Returns) to the extent that they
relate to the HFG Companies and their Subsidiaries. Masco will take no position
on any Return for the Pre-Closing Period that relates to any of the HFG
Companies and their Subsidiaries (or in any amended Return, audit adjustment or
other filing or proceeding having similar effect) that would adversely affect
any of the HFG Companies and their Subsidiaries after the Closing Date without
the prior written consent of the Buyer (which consent shall not be unreasonably
withheld) unless such position is consistent with positions previously taken by
such HFG Company or such Subsidiary. Subject to ss.9(k) below, the income of the
HFG Companies and their Subsidiaries will be apportioned between the Pre-Closing
Period and the Post-Closing Period by closing the books of the HFG Companies and
their Subsidiaries as of the end of the Closing Date.
(d) Tax Contests.
(i) If any Taxing Authority asserts a Tax Claim relating to any
Pre-Closing Period, then the Party (including any Subsidiary of such Party)
receiving any
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notice related to such Tax Claim shall promptly provide written notice
thereof to the other Party.
(ii) Masco shall have the sole right to diligently defend or
prosecute, at its sole expense, such Tax Claim; provided that (A) Masco is
obligated (either by Masco's written acknowledgment or by determination as
described below) to indemnify the Buyer for such Tax Claim under this ss.9;
(B) Masco shall not, without the prior written consent of the Buyer (which
consent shall not be unreasonably withheld), enter into any compromise or
settlement of such Tax Claim that would result in any Tax detriment to any
Tax Indemnitee for any Post-Closing Period unless such position is
consistent with positions previously taken by the HFG Companies or their
Subsidiaries, and (C) if a Tax Indemnitee is requested by Masco to pay or
cause to be paid the Tax claimed and to sue for a refund, then Masco shall
advance to the Tax Indemnitee, on an interest-free basis and a Grossed-Up
Basis, the amount of the Tax claimed. Masco shall keep the Buyer informed
of any developments and events relating to such Tax Claim (including
providing the Buyer with copies of all written materials relating to such
Tax Claim), and the Buyer shall be entitled, at its own expense, to attend,
but not participate in or control, all conferences, meetings and
proceedings relating to such Tax Claim. Buyer agrees that it will cooperate
with Masco and its counsel in the defense or prosecution of any such Tax
Claim to the extent reasonably requested by Masco in writing. If Masco
contests its indemnification obligations with respect to any Tax Claim
under this ss.9, Masco and Buyer shall undertake in good faith to resolve
this issue. If Masco and Buyer are unable to resolve the issue within 10
days, Masco and Buyer shall engage jointly an independent nationally
recognized law firm to determine whether Masco's indemnification
obligations under this ss.9 encompass such Tax Claim. The determination of
such law firm shall be final and binding on the Parties solely for purposes
of determining whether Masco shall have the right to defend or prosecute a
Tax Claim; provided, however, that if the Party against whom the
determination is made does not offer the other Party the opportunity to
control the defense or prosecution of such Tax Claim, the determination
shall be final and binding on such Party. The fees and other costs charged
by such law firm in making such determination shall be paid by the Party
against whom the determination is made.
(iii) Masco and Buyer jointly shall defend or prosecute any Tax Claim
relating to any taxable period which includes (but does not end on) the
Closing Date, with control of the defense or prosecution being undertaken
by the Party with the greatest amount in interest based upon the amount of
Taxes asserted in such Tax Claim. All costs, fees and expenses paid to
Third Parties in the course of the defense or prosecution of such Tax Claim
shall be borne by Masco and Buyer in the same ratio as the ratio in which,
pursuant to the terms of this Agreement, Masco and Buyer would share the
responsibility for payment of such Taxes.
(e) Cooperation. Each Party hereto shall, and shall cause its Subsidiaries
and Affiliates (determined assuming that Masco is not an Affiliate of the Buyer
following the Closing) to, provide to each of the other Parties such cooperation
and information as any such Party reasonably may request in filing any Return,
amended Return or claim for refund,
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determining a liability for Taxes or a right to refund of Taxes or conducting
any audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of relevant
Returns (together with relevant accompanying schedules and relevant workpapers,
relevant documents relating to rulings or other determinations by Taxing
Authorities and relevant records concerning the ownership and Tax basis of
property, in each case which any such Party, Subsidiary or Affiliate may
possess). Each Party shall, and shall cause its Subsidiaries and Affiliates
(determined as provided above) to, make its employees reasonably available on a
mutually convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each Party required
to file (or cause the filing of) Returns pursuant to this ss. 9 shall bear all
costs of filing such Returns.
(f) Payments of Transfer Taxes and Fees. Masco shall pay all Transfer Taxes
arising out of or payable in connection with the transactions contemplated by
this Agreement, and shall file all necessary documentation and Returns with
respect to such Transfer Taxes. The Buyer shall promptly, upon receipt of
written request therefor, reimburse Masco for 50% of all amounts paid pursuant
to the preceding sentence.
(g) Carrybacks. The Buyer shall not cause or permit any of the HFG
Companies or their Subsidiaries to carry any Post-Closing Period Tax attribute
back into Masco's consolidated federal income tax Return, or consolidated or
combined state or local income or franchise tax Return, without the consent of
Masco (not to be unreasonably withheld). If Masco does consent to any such
carryback, Masco will (i) cooperate with the Buyer (at the Buyer's expense) in
obtaining any refund (or reduction in Tax liability) resulting from the
carryback of such Post-Closing Period Tax attribute of any of the HFG Companies
and their Subsidiaries into Masco's consolidated federal income tax Return or
consolidated or combined state or local income or franchise tax Return,
including through the filing of amended Returns or refund claims, and (ii)
promptly pay to the Buyer any incremental Tax refund (or reduction in Tax
liability) resulting from such carryback when such refund or reduction is
realized by Masco. In any event, the Buyer agrees to indemnify Masco from and
against any Adverse Consequences resulting from the disallowance of such
Post-Closing Period Tax attribute on audit or otherwise and from any Tax
liability incurred by Masco as a result of any such carryback.
(h) Retention of Carryovers. Masco will not elect to retain any net
operating loss carryovers or capital loss carryovers of any of the HFG Companies
and their Subsidiaries under Treas. Reg. ss.1.1502-20(g). At the request of
Masco, the Buyer will cause any of the HFG Companies and their Subsidiaries to
join with Masco in filing any necessary elections under Treas. Reg.
ss.1.1502-20(g).
(i) Post-Closing Elections. (A) After the Closing, the Buyer will join with
Masco in making a timely, effective and irrevocable election under Code Sec.
338(h)(10), and any corresponding elections under state, local, or foreign tax
law (collectively, a "Section 338(h)(10) Election"), with respect to the
purchase and sale of the capital stock of those HFG Companies and their
Subsidiaries indicated on the attached Schedule of Tax Allocations. Masco will
pay any Section 338 Tax (as specified in ss.9(b)(iii) above) and retain any Tax
benefits derived therefrom. Provided there are no adverse Tax consequences to
Masco, the Buyer may make (or cause or
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permit any of its Affiliates (determined assuming that Masco is not an Affiliate
of the Buyer following the Closing) to make) any election under Code Section 338
or any similar election under state, local, or foreign tax law with respect to
the purchase and sale of the capital stock of any of the HFG Companies and their
Subsidiaries.
(B) With respect to each Section 338(h)(10) Election, as soon as
practicable after the date hereof and in any event within 120 days following the
Closing, Buyer and Masco shall agree on (i) MADSP, (ii) AGUB and (iii) the
allocation of MADSP and AGUB among the assets of each Affected Corporation
(collectively, the "Initial Allocation"). The Initial Allocation shall be
determined in accordance with Section 338 of the Code and the applicable
Treasury regulations thereunder. The Initial Allocation shall be set forth on a
statement (the "Initial Allocation Statement") dated within 120 days following
the Closing Date and signed by the president or any vice president of each of
the Buyer and Masco. If any increase or decrease in MADSP or AGUB occurs as a
result of an adjustment to the Purchase Price pursuant to a purchase price
adjustment provision or otherwise, then Masco and Buyer shall agree on the
amount of such increase or decrease and the allocation thereof among the assets
of each Affected Corporation (collectively, the "Adjustment Allocation"). Masco
and each Seller Party will, to the maximum extent permitted under applicable
law, (i) file or cause to be filed all Returns in a manner consistent with the
Initial Allocation and any Adjustment Allocation and (ii) not take any action
inconsistent therewith.
(j) Allocation of Purchase Price. The Parties agree that the Purchase Price
and any adjustments thereto will be allocated among the capital stock of the HFG
Companies and their Subsidiaries for Tax purposes in accordance with the
provisions of the attached Schedule of Tax Allocations, subject to applicable
law. Because the allocation in the Schedule of Tax Allocations was based upon
information as of December 31, 1995 and the Preliminary Purchase Price available
as of the date hereof, the Parties agree to modify the allocation promptly
following the Closing to reflect modifications in that information. Amounts so
allocated to the stock of an Affected Corporation then shall serve as the basis
for the further allocation described in ss. 9(i)(B). The Parties will file all
Returns (including amended Returns and claims for refund) and information
reports in a manner consistent with such allocation.
(k) Certain Transactions on the Closing Date. Except as provided in ss.9(i)
above with respect to Section 338(h)(10) Elections, (i) the Buyer and Masco
agree to report all transactions undertaken by Buyer, or any of the HFG
Companies or their Subsidiaries, not in the Ordinary Course of Business
occurring on the Closing Date but after the Closing on the Buyer's consolidated
federal income tax Return to the extent permitted by Treas. Reg. ss.1.1502-
76(b)(1)(ii)(B) and (ii) the Buyer agrees to indemnify Masco in this regard, on
a Grossed-Up Basis, from and against any Adverse Consequences resulting from any
transaction undertaken by Buyer, or any of the HFG Companies or their
Subsidiaries, not in the Ordinary Course of Business occurring on the Closing
Date but after the Closing.
(l) Separate Returns, Straddle Period Returns and Allocation of Certain
Taxes. (A) Masco shall file all separate Returns of the HFG Companies and their
Subsidiaries for Tax periods which end on or before the Closing Date. The Buyer
shall file all separate Returns of
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the HFG Companies and their Subsidiaries for Tax periods which begin prior to
the Closing Date and end after the Closing Date (each such period, a "Straddle
Period") and for all Tax periods beginning and ending after the Closing Date. If
any Return is filed in respect of a Straddle Period by the Buyer, Masco shall be
liable for Taxes in such Return arising on or before the Closing Date.
(B) With respect to any Return of any of the HFG Companies or their
Subsidiaries for a Straddle Period (a "Straddle Period Return"), Buyer shall
deliver a copy of such Return to Masco at least 45 calendar days prior to the
due date (giving effect to any extension thereof) for filing such Return,
accompanied by an allocation between the Pre-Closing Period and the Post-Closing
Period of the Taxes shown to be due on such Return. Such Return and allocation
shall be final and binding on Masco, unless, within 20 calendar days after the
date of receipt by Masco of such Return and allocation, Masco delivers to the
Buyer a written request for changes to such Return or allocation. If Masco
delivers such a request, then Masco and the Buyer shall undertake in good faith
to resolve the issues raised in such request prior to the due date (giving
effect to any extension thereof) for filing such Return. If Masco and the Buyer
are unable to resolve any issue prior to the earlier of (i) the tenth calendar
day after the date of receipt by the Buyer of the request for changes, or (ii)
the tenth calendar day prior to the due date (giving effect to any extension
thereof) for filing of such Return, then Masco and the Buyer shall engage
jointly the Independent Accounting Firm to determine the correct treatment of
the item or items in dispute. The Buyer shall pay all of the fees and other
costs charged by the Independent Accounting Firm in making such determination.
The determination of the Independent Accounting Firm shall be final and binding
on the Parties. If the Independent Accounting Firm is unable to make its
determination with respect to any disputed item prior to the due date (giving
effect to any extension thereof) for filing the Return in question, then the
Buyer may treat the item, for purposes of filing the Return, as it determines in
its sole discretion, and may cause the Return to be filed. However, in such a
case, the Independent Accounting Firm shall make its determination with respect
to the disputed items and the determination of the Independent Accounting Firm
shall control the rights of the Parties under this ss.9.
(C) In the case of each Straddle Period Return, not later than (i) five
business days before the due date (giving effect to any extension thereof) for
payment of Taxes with respect to such Return or (ii) in the event of a dispute,
five business days after the resolution thereof either by mutual agreement of
the Parties or by a determination of the Independent Accounting Firm, Masco
shall pay to the Buyer the portion of the Taxes set forth on such Return that
are allocable to the Pre-Closing Period, net of any payments made prior to the
Closing Date in respect of such Taxes, whether as estimated Taxes or otherwise,
after giving effect to any agreement of the Parties or any determination by the
Independent Accounting Firm. For purposes of this ss.9(l), and except as
provided for below with respect to franchise and ad valorem Taxes, Taxes of the
HFG Companies and their Subsidiaries will be apportioned between the Pre-Closing
Period and the Post-Closing Period by closing the books of the HFG Companies and
their Subsidiaries as of the end of the Closing Date.
(D) For the avoidance of doubt, it is here specified that for purposes of
this ss.9, any Tax resulting from the departure of any of the HFG Companies and
their Subsidiaries from
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the Seller Group or any other Affiliated Group of which a Seller Party is a
member (to the extent that such Tax results from the triggering into income of
Pre-Closing Period deferred intercompany transactions or excess loss accounts)
is attributable to the Pre-Closing Period.
(E) In the case of (i) franchise Taxes based on capitalization, debt or
shares of stock authorized, issued or outstanding and (ii) ad valorem Taxes, in
either case attributable to any taxable period that includes but does not end on
the Closing Date, the portion of such Taxes attributable to the Pre-Closing
Period shall be the amount of such Taxes for the entire taxable period,
multiplied by a fraction the numerator of which is the number of days in such
taxable period ending on and including the Closing Date and the denominator of
which is the entire number of days in such taxable period; provided, however,
that if any property, asset or other right of any of the HFG Companies or their
Subsidiaries is sold or otherwise disposed of prior to the Closing Date, then ad
valorem Taxes pertaining to such property, asset or other right shall be
attributable entirely to the Pre-Closing Period; provided, further, that if any
property, asset or other right is acquired by any of the HFG Companies or their
Subsidiaries after the Closing, then ad valorem Taxes pertaining to such
property, asset or other right shall be attributable entirely to the
Post-Closing Period.
(m) Refunds and Related Matters.
(i) Any refund of Taxes (including any interest thereon) that relate
to any of the HFG Companies or their Subsidiaries and that are attributable
to a Post-Closing Period and that were paid by the Buyer or any of the HFG
Companies or their Subsidiaries in a Post-Closing Period shall be the
property of the applicable HFG Company or Subsidiary and shall be retained
by such HFG Company or Subsidiary (or, if any such refund is received by
Masco or any of its Affiliates, promptly paid by Masco, net of any Taxes
imposed on any Seller Party with respect thereto, to such HFG Company or
Subsidiary).
(ii) If (A) after the Closing Date, any of the HFG Companies or their
Subsidiaries receives a refund of any Tax that relates to, and that was
previously paid by or on behalf of, any of the HFG Companies or their
Subsidiaries and that is attributable to a Pre-Closing Period, (B) the Tax
was paid by (a) a Seller Party in a Post-Closing Period or (b) a Seller
Party or any of the HFG Companies and their Subsidiaries in a Pre-Closing
Period and (C) ss.9(g) above does not apply with respect to such refund,
then the applicable HFG Company or Subsidiary promptly shall pay or cause
to be paid to Masco the amount of such refund together with any interest
thereon, but net of any Taxes imposed on the Buyer or any of the HFG
Companies or their Subsidiaries with respect thereto.
(iii) In applying paragraphs (i) and (ii) above, any refund of Taxes
(including any interest thereon) for a taxable period that includes but
does not end on the Closing Date shall be allocated between the Pre-Closing
Period and the Post-Closing Period in accordance with paragraph (l) of this
Section.
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(iv) If any adjustment to the Preliminary Purchase Price under ss. 2
in favor of the Buyer, or any payment by Masco pursuant to its
indemnification obligations under this Agreement, is made in respect of an
item that results in a reduction in any Tax liability of the Buyer, any
Affiliate of the Buyer (determined assuming that Masco is not an Affiliate
of the Buyer following the Closing), or any of the HFG Companies or their
Subsidiaries, then the Buyer shall promptly pay Masco the amount of such
reduction, but only to the extent such reduction is attributable to the
portion of such item which results in such adjustment or payment; provided,
however, that if such reduction is reasonably expected to occur within one
year from the date of the adjustment or the date on which Masco's
indemnification payment is due, then the amount of such reduction shall be
taken into account in determining such adjustment or Masco's
indemnification obligation; provided, further, that if the amount of such
reduction is subsequently determined to be less, Masco shall pay to the
Buyer the amount of such difference.
(v) If any adjustment to the Preliminary Purchase Price under ss. 2 in
favor of Masco is made in respect of an item that results in an increase in
any Tax liability of the HFG Companies or their Subsidiaries, then Masco
shall promptly pay the Buyer the amount of such increase, but only to the
extent such increase is attributable to the portion of such item which
results in such adjustment; provided, however, that if the increase is
reasonably expected to occur within one year from the date of the
adjustment, then the amount of such increase shall be taken into account in
determining such adjustment; provided, further, that if the amount of such
increase is subsequently determined to be less, the Buyer shall pay to
Masco the amount of such difference.
(vi) If any payment by the Buyer pursuant to its indemnification
obligations under this Agreement is made in respect of an item that results
in a reduction in any Tax liability of Masco or any Affiliate of Masco
(determined assuming that none of the Buyer, the HFG Companies, and their
respective Subsidiaries is an Affiliate of Masco following the Closing),
then Masco shall promptly pay the Buyer the amount of such reduction, but
only to the extent such reduction is attributable to the portion of such
item which is attributable to such payment; provided, however, that if such
reduction is reasonably expected to occur within one year from the date on
which the Buyer's indemnification payment is due, then the amount of such
reduction shall be taken into account in determining the Buyer's
indemnification obligation; provided, further, that if the amount of such
reduction is subsequently determined to be less, the Buyer shall pay to
Masco the amount of such difference.
(n) Requested Transactions. At the request of the Buyer, on or prior to the
Closing Date, Masco shall cause all of the capital stock of one or more of the
HFG Companies (other than any Affected Corporation) to be contributed to any
other HFG Company (other than any Affected Corporation); provided that such
contribution does not have an adverse Tax effect on any Seller Party or, with
respect to any Pre-Closing Period, on any of the HFG Companies or their
Subsidiaries.
(o) Miscellaneous.
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(i) Any provision of this Agreement to the contrary notwithstanding, the
Buyer will be responsible for any Taxes for the period through and including the
Closing Date to the extent of any Tax liability that has been specifically
reserved for on the Closing Date Balance Sheet and that is treated as a
reduction in calculating the Adjusted Net Investment and Advances and will
promptly reimburse Masco therefor to the extent Masco pays any such Taxes.
(ii) If a Party to this Agreement takes any action which constitutes a
breach of this ss. 9, such Party shall indemnify the other Party, on a
Grossed-Up Basis, for any incremental liability for Tax suffered by such other
Party (which (A) in the case of Masco, shall include its Affiliates (determined
assuming that none of the Buyer, the HFG Companies and their respective
Subsidiaries is an Affiliate of Masco following the Closing) and (B) in the case
of the Buyer, shall include Tax Indemnitees) arising from such action.
(p) Conflict. In the event of a conflict between the provisions of this
ss.9 and any other provision of this Agreement, the provisions of this ss.9
shall control. Without limiting the generality of the foregoing, the
indemnification obligations of the Parties under this ss.9 shall not be subject
to (i) the limitations (including time and amount limitations) set forth in
ss.8(a), 8(b) and 8(c) above or (ii) the procedures relating to Third Party
Claims set forth in ss.8(d) above.
(q) Survival. All rights, obligations and covenants under this ss.9, and
the representations and warranties contained in ss.4(j)(vii), (ix), (x), (xi)
and (xii) (but in each case only to the extent such representations and
warranties relate to Income Tax), shall survive the Closing and continue
indefinitely (subject to any applicable statutes of limitations, but without
regard to any extension or waiver of the applicable statutory period of
limitations granted without the consent of Masco, which consent shall not be
unreasonably withheld, by the Buyer or any of the HFG Companies or their
Subsidiaries after the Closing; provided that Masco's consent shall not be
required for a valid extension or waiver if Masco had an opportunity to contest
but did not contest).
Section 10. Environmental Matters.
(a) General. In no event will the provisions of this ss.10, or any exercise
by Masco of its rights under this ss.10, increase the obligations and
liabilities of Masco with respect to environmental matters involving the HFG
Companies and their Subsidiaries beyond what is provided in ss.8 above.
(b) Reporting, Remediation, and Compliance. After the Closing, and with
respect to those environmental matters involving any of the HFG Companies and
their Subsidiaries for which Masco is responsible under ss.8 above (ignoring,
for this purpose, the limitations in the proviso to ss.8(b) above), Masco shall
have the exclusive right (provided that Masco exercises such right in a timely
and diligent manner) to undertake the following activities with the prior
written consent of the Buyer, such consent not to be unreasonably withheld: (i)
obtain any tests, reports, and surveys necessary to define and delineate the
extent of any contamination or noncompliance, (ii) contact governmental
authorities, make any reports to such authorities, submit any remediation or
compliance plans to such authorities, negotiate with such authorities, and
otherwise deal with
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such authorities, (iii) prepare the work plan for any remediation or correction
of noncompliance, and (iv) conduct or direct any such remediation or correction
of noncompliance. Notwithstanding the foregoing, Masco agrees to provide the
Buyer with (i) copies of all workplans for, and test results, surveys and other
data generated by, the investigations performed by Masco or its consultants
promptly upon the availability thereof, (ii) final and any prior drafts of all
reports, plans and other documents to be filed with any governmental authority
upon the availability thereof and in any event prior to any such filing being
made, (iii) an opportunity to meet with Masco and its representatives prior to
and following any substantive communications with governmental authorities, and
(iv) an opportunity to timely discuss and comment upon the foregoing and any
other proposed determinations or actions relating to the investigation, testing
and remediation of any sites (including the Properties) and the reporting
thereon with governmental authorities. In order to carry out its obligations
under this Agreement, Masco shall have continuing reasonable access to the
affected Properties; provided, however, that Masco shall provide the relevant
HFG Company or Subsidiary thereof with reasonable notice prior to Masco or any
of its agents, representatives, employees, consultants or contractors entering
the relevant Property. Masco shall have the right to perform any remediation or
actions necessary to achieve compliance by any commonly accepted or reasonable
means with the prior written consent of the Buyer (such consent not to be
unreasonably withheld) (including the right to construct and maintain wells,
dikes, "caps", covers and other impoundments, barriers, pump and treat systems,
soil vapor extraction systems, other testing and treatment equipment and
systems, related buildings and structures, and supporting utility services on
such Properties, the right to perform excavations and exhumations of soils and
subsurface materials and withdrawals and reinjections of groundwater on such
Properties, and the right to impose deed and land use restrictions and
institutional controls on such Properties); provided, however, that Masco will
not unreasonably interfere with the normal business operations of any of the HFG
Companies and their Subsidiaries. Any investigation, remediation, correction of
noncompliance or other activities to be conducted, directed or performed by
Masco pursuant to this ss. 10 shall be performed by an independent third party
environmental professional mutually agreed (or other Person mutually agreed)
upon by Buyer and Masco (subject to the dispute resolution proceedings set forth
in ss. 10(e) below). Any such remediation or actions necessary to achieve
compliance shall be deemed sufficient to satisfy Masco's corresponding
obligations under this Agreement so long as the result (x) meets or exceeds the
least stringent standards (including any lesser standards resulting from any
site-specific risk assessments) acceptable under (A) all applicable
Environmental Laws as in effect on the Closing Date based on the use of the
property on the Closing Date and (B) all applicable Environmental Permits and
(y) is consistent with any third-party settlements entered into with the prior
written consent of Masco. Notwithstanding anything to the contrary in the
immediately preceding sentence, the Buyer may direct Masco, at the Buyer's sole
discretion, to undertake remedial action or such other action that (1) exceeds
the requirements set forth in clauses (x) and (y) of such sentence, or (2) meets
but does not exceed such requirements; provided, however, that in the event the
Buyer so directs Masco to undertake any action that exceeds such requirements,
the Buyer shall bear the incremental costs, if any, incurred in implementing the
more stringent remedy. To the extent Masco fails to exercise its rights or
perform its obligations under this ss.10(b) in a diligent and timely manner, the
Buyer, upon written notice to Masco, shall have the right to control, direct and
perform the relevant investigation or remediation or correct the relevant
noncompliance, provided that the procedures
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in this ss.10(b) and in ss.10(e) below shall be complied with, substituting in
each case the Buyer for Masco and vice versa.
(c) Certain Responsibilities of the Buyer. The Buyer will cooperate with
Masco (including by making relevant personnel and records available to Masco at
all reasonable times without charge for any internal costs) in connection with
this ss. 10. Until the Buyer has suffered $15,000,000 in Adverse Consequences
pursuant to clause (i) of the proviso in ss.8(b) with respect to all matters
referred to in such clause (i), the Buyer agrees to reimburse Masco, within 30
days of receipt of an invoice, for any reasonable out-of-pocket costs, expenses,
fees or other amounts incurred by Masco relating to services provided or
activities performed with respect to the matters referred to in this ss.10
(other than the matters referred to in clauses (i) and (iv) of the last sentence
of ss.8(b)); and, with respect to matters referred to in such clause (iv), the
Buyer agrees to reimburse Masco, within 30 days of receipt of an invoice, for
any reasonable out-of-pocket costs, expenses, fees or other amounts incurred by
Masco relating to services provided or activities performed with respect to such
matters until the Buyer has suffered $3,000,000 in Adverse Consequences with
respect to such matters). Once Buyer has suffered the applicable amount of
Adverse Consequences specified in the immediately preceding sentence, then,
subject to ss.8, Masco shall reimburse any Indemnified Buyer Party for any
reasonable out-of-pocket costs, expenses, fees or other amounts incurred by such
Indemnified Buyer Party pursuant to this ss.10. Each of the Buyer and Masco
shall use its reasonable efforts to minimize the costs associated with Adverse
Consequences relating to environmental matters for which Masco is responsible
under ss.8 above (ignoring, for this purpose, the limitations in the proviso to
ss.8(b) above). In order to better delineate the respective obligations of Masco
and the Buyer with respect to environmental matters involving the HFG Companies
and their Subsidiaries, the Buyer will take reasonable steps to cause the HFG
Companies and their Subsidiaries to conduct their operations so as not to take
affirmative action that unreasonably compounds or aggravates any environmental
condition or noncompliance for which Masco is responsible (ignoring, for this
purpose, the limitations in the proviso to ss.8(b) above) under this Agreement.
(d) Third Party Actions. Neither the Buyer nor Masco will initiate or
encourage any action by any third party, including any governmental agency or
authority, which could reasonably be expected to lead to a claim by such third
party with respect to any environmental matter of Masco, the HFG Companies and
their respective Subsidiaries for which Masco is responsible under ss.8 above
(ignoring, for this purpose, the limitations in the proviso in ss.8(b) above),
except in each case to the extent required (i) by Environmental Law, (ii) by any
Environmental Permit, (iii) by any settlement agreement, or (iv) in the relevant
Party's good faith judgment, in order to protect human health or safety;
provided, however, that nothing in this Agreement shall be construed to limit
Buyer's right (or the right of any of the HFG Companies or their Subsidiaries)
to investigate any suspected environmental condition or noncompliance. If the
Buyer or Masco determines that it is so required to initiate or encourage any
such action, such Party will promptly notify the other party of such
requirement.
(e) Resolution of Certain Disputes. (i) With respect to any matter which
requires action by Masco and the consent of the Buyer or the agreement of Masco
and the Buyer pursuant to this ss.10, Masco shall notify the Buyer in writing of
the action it proposes to take, setting forth
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with particularity the nature of such action, the identity of the individual or
firm proposed to perform such action (if applicable), the proposed time frame
for commencing and completing such action, and the estimated cost associated
with such action (each such action, a "Recommended Action"). Masco shall provide
the Buyer with copies of all sampling data, environmental reports, proposals and
correspondence (drafts and final) relating to the subject matter of the
Recommended Action. In the event the Buyer disagrees with the Recommended
Action, in whole or in part, the Buyer shall notify Masco in writing of its
specific disagreement regarding such Recommended Action (a "Dispute
Notification") within 15 days of its receipt of notice of the Recommended Action
in accordance with this paragraph (e)(i) (the "Dispute Notification Period").
The Buyer and Masco shall thereafter negotiate in good faith in an attempt to
reach agreement as to the disputed Recommended Action. In the event that the
Buyer and Masco are unable to resolve the dispute within 10 days after Masco's
receipt of a Dispute Notification, either the Buyer or Masco may provide written
notice to the other of its intent to submit the matter to arbitration, and such
dispute shall be resolved by arbitration.
(ii) In the event the Recommended Action (or portion thereof subject to
dispute) is submitted to arbitration, each of the Buyer and Masco shall select
an arbitrator, and a third arbitrator shall be chosen by the other two
arbitrators, provided that if the two arbitrators fail to agree upon the third
arbitrator within 30 days of receipt of notice to submit the matter to
arbitration, the additional arbitrator shall be appointed by the American
Arbitration Association, in the State in which the relevant site is located;
provided, however, that if the relevant site is not in the United States, the
"State" for this purpose shall be deemed to be North Carolina. The provisions of
the Federal Arbitration Act (9 U.S.C. ss.ss. 1-14) and commercial arbitration
rules of the American Arbitration Association shall be followed in any
arbitration, unless modified pursuant to mutual agreement of the Buyer and Masco
with the concurrence of the arbitration panel.
(iii) Any arbitration conducted pursuant to this ss.10(e) shall be limited
to resolution of the dispute set forth in the Dispute Notification, and the
arbitrators shall have no jurisdiction or authority to resolve any claims not
related to such dispute, whether arising by way of asserted rights, offsets or
otherwise. The arbitrators' decision shall be final and binding on the Buyer and
Masco. Any arbitration award shall be enforceable in any court of competent
jurisdiction. The Parties hereby consent to such jurisdiction and to entry of
judgment thereon. The costs of arbitration shall be borne by the Buyer.
(f) Certain Recoveries. Masco and the Buyer shall cooperate with each other
with respect to making claims under any occurrence-based policies written by
third party insurance companies, to the extent such policies were owned by any
of the HFG Companies and their Subsidiaries prior to the Closing Date, under any
acquisition agreements with third parties, to the extent such agreements are in
effect as of the Closing Date and afford indemnification rights for the benefit
of the HFG Companies and their Subsidiaries, and under any underground storage
tank or similar environmental reimbursement program, to the extent such programs
are available to the HFG Companies and their Subsidiaries at any time after the
Closing Date, for reimbursement or contribution in connection with environmental
matters for which Masco may be responsible pursuant to ss.8 (ignoring, for this
purpose, the limitations in the proviso in ss.8(b)
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above). Such cooperation shall include making all reasonable claims and demands
against such third parties with respect to such environmental matters and
pursuing such claims and demands in a commercially reasonable manner.
Section 11. Termination.
(a) Termination of Agreement. One or both of the Parties may terminate this
Agreement under certain circumstances as provided below:
(i) the Buyer and Masco may terminate this Agreement by mutual written
agreement at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written notice
to Masco at any time prior to the Closing in the event (A) Masco has within
the then previous 15 days given the Buyer any notice designated by Masco as
a mandatory notice pursuant to ss.5(e)(i) above or (B) Masco has breached
any representation, warranty or covenant contained in this Agreement (other
than any such breach that has previously been disclosed to the Buyer in a
notice designated by Masco as a mandatory notice pursuant to ss.5(e)(i)
above), and such breach, together with all other such breaches by Masco
that have not been the subject of notices designated by Masco as mandatory
notices pursuant to ss.5(e)(i) above, has had a Material Adverse Effect or
a material adverse effect on the ability of the Buyer to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents (it being understood that any notice of termination given
pursuant to this clause (B) shall identify the breaches which are believed
by the Buyer to constitute adequate grounds for the termination of this
Agreement); provided, however, that Masco may elect to defer the
effectiveness of any such notice of termination for a period of up to 30
additional days within which Masco would attempt to cure the applicable
breach or breaches;
(iii) Masco may terminate this Agreement by giving written notice to
the Buyer at any time prior to the Closing in the event (A) the Buyer has
within the then previous 15 days given Masco any notice designated by the
Buyer as a mandatory notice pursuant to ss.5(e)(ii) above or (B) the Buyer
has breached any representation, warranty, or covenant contained in this
Agreement (other than any such breach that has previously been disclosed to
Masco in a notice designated by the Buyer as a mandatory notice pursuant to
ss.5(e)(ii) above), and such breach, together with all other such breaches
by the Buyer that have not been the subject of notices designated by the
Buyer as mandatory notices pursuant to ss.5(e)(ii) above, has had a
Material Adverse Effect (determined for this purpose as if the Buyer and
its Subsidiaries were included in the Combined Company with the HFG
Companies and their Subsidiaries) or a material adverse effect on the
ability of Masco to consummate the Transactions contemplated by this
Agreement and the other Transaction Documents (it being understood that any
notice of termination given pursuant to this clause (B) shall identify the
breaches which are believed by Masco to constitute adequate grounds for the
termination of this Agreement); provided, however, that the Buyer may elect
to defer the effectiveness of any such notice of termination for a period
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of up to 30 additional days within which the Buyer would attempt to cure
the applicable breach or breaches; and
(iv) either the Buyer or Masco may terminate this Agreement by giving
written notice to the other Party at any time prior to the Closing if the
Closing shall not have occurred on or before July 31, 1996.
(b) Effect of Termination. If either Party terminates this Agreement
pursuant to ss.11(a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to the other Party under or
with respect to this Agreement (except for any liability of any Party which has
theretofore intentionally breached any provision of this Agreement); provided,
however, that the provisions of the Buyer Confidentiality Agreement, the
Confidentiality Agreement and ss.12(b), (d), (j), (k), (n), (s), (u) and (v)
shall survive any termination of this Agreement.
Section 12. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of the other
Party; provided, however, that Masco may make any public disclosure it believes
in good faith based on advice of counsel is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities or that
it believes in good faith is appropriate in order to preserve the business and
value of the HFG Companies and their Subsidiaries (it being understood that in
each such case Masco will use reasonable efforts to advise the Buyer prior to
making the disclosure and consult with the Buyer regarding the timing and
content of such disclosure).
(b) No Third Party Beneficiaries. With the exception of certain procedural
rights arising under ss.8 (d) (ii) and ss.8 (d) (iii) relating to participation
in the defense of Third Party Claims, this Agreement shall not confer any rights
or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Specific Performance. The Parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the Parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or equity; provided, however, that each of the Parties agrees to provide the
other with written notice at least two business days prior to filing any motion
or other pleading seeking a temporary restraining order, a temporary or
permanent injunction, specific performance, or any other equitable remedy and to
give the other and its counsel a reasonable opportunity to attend and
participate in any judicial or administrative hearing or other proceeding held
to adjudicate or rule upon any such motion or pleading.
(d) Entire Agreement. This Agreement (together with the other Transaction
Documents) constitutes the entire agreement among the Parties with respect to
the subject matter hereof and thereof and supersedes any prior understandings,
agreements or representations by or
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among the Parties, written or oral, to the extent they related in any way to the
subject matter hereof or thereof; provided, however, that the Confidentiality
Agreement and the Buyer Confidentiality Agreement shall remain in full force and
effect.
(e) Non-Competition, Non-Interference and Non-Solicitation. (A) Masco
agrees that it will not, during the period commencing on the Closing Date and
ending on the date that is five years after the Closing Date, directly or
indirectly, through its present or future Subsidiaries, engage anywhere in the
world in the design or manufacture of (i) wood, wicker, metal or upholstered
furniture for the living room, family room, bedroom or dining room, for porch,
deck or outdoor use or for the contract furniture market, or (ii) decorative
fabrics for such upholstered furniture (the "Restricted Activities"); provided,
however, that nothing in this Agreement shall be construed to prevent or
restrict Masco, directly or indirectly through its present or future
Subsidiaries, from (a) engaging in any of the businesses, operations and
activities currently conducted by Masco and its Subsidiaries (as its
Subsidiaries will exist after the Closing) and the expansion of such businesses,
operations and activities, including the design, manufacture, and distribution
of cabinets and countertops, home theaters and other home entertainment centers,
shelving units and bookcases, office and computer furniture, ready-to-assemble
furniture, fireplace mantels, and various closets and closet organizers, or (b)
acquiring any business or equity interest in any Person that engages, directly
or indirectly, in any Restricted Activities, so long as the annual revenues of
Masco from Restricted Activities for its most recent fiscal year prior to such
acquisition (including the annual revenues of any previously acquired business
or Person), when combined with the annual revenues from Restricted Activities of
the business or Person to be acquired for its most recent fiscal year, do not
exceed $150,000,000, and either (x) the annual revenue of such business or
Person from such Restricted Activities in the most recent fiscal year prior to
the acquisition does not exceed $25,000,000 (or, if greater, 10% of the total
annual revenue of such business or Person in such fiscal year) or (y) if the
annual revenue of such business or Person from such Restricted Activities in the
most recent fiscal year exceeds $25,000,000 (or, if greater, 10% of the total
annual revenue of such businesses or Person in such fiscal year) but are less
than 33 1/3% of the total annual revenues of such businesses or Person, Masco
divests sufficient operations within 18 months after such acquisition (even if
beyond the five year non-compete period) so that clause (x) would have been
satisfied on a pro forma basis as of the date of such acquisition, or (c) owning
less than 10% of the outstanding equity interests in any Person that engages
directly or indirectly in any Restricted Activities.
In the event that any of the restrictions set forth in this subsection
shall be determined by a court of competent jurisdiction to be invalid or
unenforceable by reason of its extending over too great a period of time or over
too great a geographical area or by reason of its being too extensive in any
other respect, such restriction shall be interpreted to extend only over the
maximum period of time for which it may be enforceable and/or over the maximum
geographical area as to which it may be enforceable and/or to the maximum extent
in all other respects as to which it may be enforceable, all as determined by
such court in such action; provided, however, that in each case such invalidity
or unenforceability shall be deemed to apply only with respect to the operation
of such restriction in the particular jurisdiction in which such determination
is made and not with respect to any other restriction or jurisdiction.
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(B) Masco agrees that it will not, during the period commencing on the
Closing Date and ending on the date that is two years after the Closing Date,
directly or indirectly, through its present or future Subsidiaries, cause or
attempt to cause any customer or supplier of any of the HFG Companies and their
Subsidiaries to terminate or materially reduce its business with such HFG
Company or Subsidiary.
(C) Masco agrees that it will not, during the period commencing on the
Closing Date and ending on the date that is two years after the Closing Date,
directly or indirectly, through its present or future Subsidiaries, initiate
contact (other than through general solicitation to the public for employment)
with any person who is then an officer of any of the HFG Companies or their
Subsidiaries for the purpose of said person being employed or being offered
employment by Masco or any of its Subsidiaries.
(f) Confidentiality. For a period of three years following the Closing
Date, Masco agrees to, and shall cause each of its Subsidiaries, officers,
directors, employees, attorneys, accountants, consultants and other agents and
advisors to, maintain in confidence all confidential and proprietary information
and data of the HFG Companies and their respective Subsidiaries known to Masco
as a result of its ownership of the HFG Companies and their Subsidiaries prior
to the Closing Date except any information currently used by Masco and its
remaining Subsidiaries in their remaining businesses (the "Confidential
Information") and agrees not to disclose the Confidential Information to any
Person other than its Subsidiaries, officers, directors, employees, attorneys,
accountants, consultants and other agents and advisors that need to know such
Confidential Information. Masco further agrees that it shall not use the
Confidential Information for any purpose other than monitoring and evaluating
its investment in the Buyer and determining and performing its obligations and
exercising its rights under this Agreement and the other Transaction Documents.
The obligation to hold information in confidence shall be satisfied if Masco
exercises the same care with respect to such information as if would take to
preserve the confidentiality of its own similar information. Nothing herein
shall prevent Masco or its Subsidiaries, officers, directors, employees,
attorneys, accountants, consultants and other agents and advisors from using,
disclosing or authorizing the disclosure of Confidential Information such Person
receives which (i) has been published or is in the public domain through no
fault of Masco or any such other Person; (ii) is lawfully received from a third
party having rights therein without notice of any restriction against its
further disclosure or its disclosure to such Person; (iii) is independently
developed by Masco through parties who have not had, either directly or
indirectly, access to or knowledge of such Confidential Information; (iv) is
required to be produced under order of a court of competent jurisdiction or
other similar requirements of a governmental agency; provided that such
Confidential Information to the extent covered by a protective order or its
equivalent shall otherwise continue to be Confidential Information; or (v) is
required to be disclosed by applicable law or a stock exchange or a securities
trading association on which such Person's securities (or those of its
Affiliate) are listed.
(g) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder
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without the prior written consent of the other Party, such consent to be within
the sole discretion of such other Party.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(i) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if and when it is
sent by registered or certified mail, return receipt requested, postage prepaid,
and addressed as set forth below:
If to Masco: Copy to:
------------ --------
Masco Corporation Masco Corporation
21001 Van Born Road 21001 Van Born Road
Taylor, MI 48180 Taylor, MI 48180
Attn: President Attn: General Counsel
If to the Buyer: Copy to:
---------------- --------
FURNISHINGS INTERNATIONAL INC. Morgan, Lewis & Bockius LLP
1314 Hanley Industrial Court 101 Park Avenue
St. Louis, MO 63144 New York, NY 10178
Attn: President Attn: Philip H. Werner
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy or ordinary mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received. Any Party may change its address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Party notice in the manner herein set forth.
(k) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice 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.
(l) Amendments and Waivers. No amendment or waiver of any provision of this
Agreement shall be valid unless the same shall be in writing and signed (i) in
the case of an
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amendment, by the Buyer and Masco or (ii) in the case of a waiver, by the Party
against whom the waiver is to be effective. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(m) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(n) Expenses. Except as otherwise provided herein, each of the Parties will
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(o) Further Assurances. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as the other Party reasonably may
request, all at the sole cost and expense of the requesting Party (except to the
extent that the requesting Party is entitled to indemnification therefor under
ss.ss.6, 8 or 9 above).
(p) Risk Management and Litigation Support. (i) Notwithstanding any other
provision of this Agreement to the contrary, the Buyer shall not have any
liability or responsibility for, and Masco shall be solely responsible for, and
indemnify and hold harmless the Buyer from and against, all Adverse Consequences
resulting from any claim for general, product and automobile "insurance-type"
liabilities covered (whether collectible or not) under Masco's comprehensive
general, product and automobile liability policies (including retrospectively
rated insurance policies and insurance programs that are an economic equivalent
of self-insurance), in each case as in effect as of the date hereof, arising
from any occurrence prior to the Closing Date involving any of the HFG Companies
and their Subsidiaries (whether known or unknown at the Closing Date). After the
Closing Date, the Buyer and the HFG Companies and their Subsidiaries will
cooperate as reasonably requested by Masco in administering such claims, and
Masco will administer such claims, in a manner consistent with the past
practices of Masco. Such cooperation will include (x) assigning to Masco any
pertinent contracts and insurance policies, providing claim files, financial,
underwriting and other information and assisting Masco in contesting such
claims, all as reasonably requested by Masco, and (y) providing the other
support contemplated by clause (ii) below.
(ii) In the event and for so long as either Party is actively contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand brought by any third party in connection with any
transaction contemplated under this Agreement or any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving any of the HFG Companies and their Subsidiaries, the other Party shall
(i) cooperate with the contesting or
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defending Party and its counsel in the contest or defense, (ii) make available
its personnel, and (iii) provide such testimony and access to its books and
records, in each case as the contesting or defending Party may reasonably
request, but all at the sole cost and expense of the contesting or defending
Party (except to the extent that the contesting or defending Party is entitled
to indemnification therefor under ss.ss.6, 8, 9 or 12(p)(i) above).
(q) Certain Intercompany Relationships. (i) Except as provided in ss.2(b)
or as set forth on the attached ss.12(q) of the Disclosure Schedule, all leases,
licenses, contracts, and other agreements, undertakings, representations,
obligations and transactions between any of the HFG Companies and their
Subsidiaries on the one hand and any of Masco and its remaining Subsidiaries on
the other hand shall be deemed terminated as of the Closing, will have no
further force or effect and will result in no further obligations or
liabilities. The Buyer will cause the HFG Companies and their respective
Subsidiaries, and Masco will cause its remaining Subsidiaries, to act in all
respects in accordance with the next preceding sentence. The Buyer will cause
the HFG Companies and their Subsidiaries to cease using the name "Masco" and its
derivatives (the "Masco Tradenames") in their respective businesses promptly
following the Closing and, in any event, agrees to indemnify Masco and its
remaining Subsidiaries following the Closing from and against any Adverse
Consequences resulting from any such use; provided that the Buyer will have the
right to use existing stocks of stationery, supplies, catalogs and similar
materials which bear the Masco Tradenames until the earlier of (A) 6 months
after the Closing Date or (B) in the case of any particular product bearing a
Masco Tradename, the date existing stocks of such product are exhausted.
(ii) After the Closing, Masco shall deliver to the Buyer (or its designated
representatives) from time to time, as requested by the Buyer, all books,
records, contracts and other documents in its possession that relate solely to
one or more of the HFG Companies and their Subsidiaries and will cooperate with
the Buyer in providing copies of (or excerpts from) the books, records,
contracts and other documents, as requested in reasonable detail by the Buyer,
that have a material relationship to the business or activities of any of the
HFG Companies or their Subsidiaries after the Closing and that remain in Masco's
possession.
(r) Certain Releases, Assignments, and Assumptions. As soon as practicable
following the Closing, the Buyer will use its commercially reasonable efforts to
obtain the release of Masco and its remaining Subsidiaries from all obligations
and liabilities under all leases, licenses, contracts, letters of credit, and
other agreements between any of Masco and its remaining Subsidiaries on the one
hand and any third parties on the other hand, including all guaranties by any of
Masco and its remaining Subsidiaries, in each such case to the extent relating
to any of the HFG Companies and their Subsidiaries. To the extent that the Buyer
is unable to obtain the release of Masco and its remaining Subsidiaries within
180 days following the Closing from any obligation or liability under any such
lease, license, contract, letter of credit, or other agreement, the Buyer will
pay to Masco a fee of $50,000 per annum, payable quarterly, provided that the
Buyer shall have no obligation to pay such fee to Masco for any quarter if the
discounted present value (using a 7.5% discount rate), measured as of the
Closing Date (the "Guaranteed Amount"), of the aggregate amount of obligations
or liabilities (including reimbursement obligations for letters of credit) that
remain guaranteed from time to time by Masco and its remaining
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Subsidiaries as of the first day of such quarter was less than 40% of the
Guaranteed Amount of such obligations and liabilities (including reimbursement
obligations under letters of credit) that are guaranteed by Masco and its
remaining Subsidiaries as of the Closing Date. In no event, however, will the
Buyer or any of the HFG Companies and their Subsidiaries expand upon or prolong
any of Masco's obligations and liabilities by extending, renewing, or failing to
exercise early termination rights which are unilaterally exercisable without the
payment of significant penalties, with respect to any such lease, license,
contract, letter of credit, or other agreement. In addition, and regardless of
whether any such release is obtained, the Buyer agrees to indemnify Masco and
its remaining Subsidiaries following the Closing from and against any Adverse
Consequences resulting from any obligation or liability referred to in the first
sentence, except in each such case to the extent that Masco is obligated to
indemnify the Buyer against such Adverse Consequences pursuant to the provisions
of ss.ss.6, 8, 9 or 12(p)(i) above. At or prior to the Closing, and without
limiting the generality of the foregoing, Masco and its remaining Subsidiaries
shall assign, and the Buyer, the HFG Companies, and the Subsidiaries of the HFG
Companies (as indicated) shall assume, all of the rights, obligations, and
liabilities of Masco and its remaining Subsidiaries under those leases,
licenses, contracts, and other agreements with third parties listed on the
ss.12(r) of the Disclosure Schedule, in each such case to the extent relating to
any of the HFG Companies and their Subsidiaries.
Masco agrees that, from and after the Closing Date, it will guarantee or
otherwise provide up to $15,000,000 in standby letters of credit or comparable
credit enhancement arrangements (collectively, "Guaranteed LCs") in support of
any obligation as to which any of the HFG Companies and their Subsidiaries is a
primary obligor or an account party (or an equivalent). The obligation of Masco
to guarantee or otherwise provide the Guaranteed LCs shall be irrevocably
terminated upon the earlier of (i) the date on which the PIK Note becomes due
and payable and (ii) any business day if on each business day of the preceding
18-month period the aggregate amount of unused availability for borrowings under
credit lines available to the Buyer and its Subsidiaries equals at least
$75,000,000. The Buyer agrees to indemnify Masco and its remaining Subsidiaries
following the Closing from and against any Adverse Consequences resulting from
any failure or delay in making a payment under (or any other breach of its or
its Subsidiaries' obligations under) the Guaranteed LCs or any agreement or
instrument evidencing obligations or liabilities supported by the Guaranteed
LCs, as the case may be; provided that any such indemnification shall be
effected through the issuance to Masco of a promissory note of the Buyer having
a principal amount equal to the indemnification amount (provided that such
principal amount shall be appropriately modified in the same manner used to
modify the original principal amount of the PIK Note in accordance with clause
(y) of the proviso to ss.2(b)(ii)) and having terms equivalent to the terms of
the PIK Note, it being understood that the amount of the Guaranteed LCs that
Masco is obligated to provide will be reduced by the amount of any such Adverse
Consequences paid by Masco. Immediately upon termination of Masco's obligations
in respect of the Guaranteed LCs, the Buyer shall obtain the release of all
Guaranteed LCs from the beneficiaries thereof, including, if necessary, through
cash collateralization of the underlying obligation or liability of the relevant
HFG Company or its Subsidiary.
(s) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation
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arises, this Agreement shall be construed as if drafted jointly by the Parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
The word "including" shall mean "including without limitation". Except where the
context clearly and convincingly requires otherwise, the word "material," when
used to qualify any of Masco's representations, warranties, and covenants
contained herein, shall mean material in the context of the Combined Company
(rather than with reference to any single corporation or business included
within the Combined Company) or the transactions contemplated hereby, as
applicable. Any reference to any federal, state, local, or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The fact that a Party has
disclosed any particular matter in the Disclosure Schedule or the Buyer
Disclosure Schedule, in a written notice pursuant to ss.5(e) above (other than a
notice designated by such Party as a mandatory notice), or in the certificate
referred to in ss.7(a)(iv) or ss. 7(b)(iv) above shall have no bearing on the
issue of whether the disclosed matter is "material" for any purpose under this
Agreement. The Buyer understands and acknowledges that a disclosure of any
matter in the Disclosure Schedule does not indicate such matter's materiality in
the context of the Combined Company or the transactions contemplated hereby, as
applicable. Any matter that Masco discloses in any section or subsection of the
Disclosure Schedule shall be deemed to have been disclosed by Masco only for
purposes of the corresponding section or subsection of this Agreement unless
this Agreement or the Disclosure Schedule expressly states otherwise. Any matter
that the Buyer discloses in any section or subsection of the Buyer Disclosure
Schedule shall be deemed to have been disclosed by the Buyer only for purposes
of the corresponding section or subsection of this Agreement unless this
Agreement or the Buyer Disclosure Schedule expressly states otherwise.
(t) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(u) Limited Recourse. Notwithstanding anything in this Agreement or any
other Transaction Document to the contrary, (i) the obligations and liabilities
of the Parties hereunder and thereunder shall be without recourse to any
stockholder of such Party or any of such stockholder's Affiliates, directors,
employees, officers or agents and shall be limited to the assets of such Party
and (ii) the stockholders of the Buyer (other than Masco) have made no (and
shall not be deemed to have made any) representations, warranties or covenants
(express or implied) under or in connection with this Agreement or any other
Transaction Document.
(v) Waiver of Jury Trial. EACH OF MASCO AND THE BUYER HEREBY WAIVES ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR THE TRANSACTIONS BETWEEN MASCO AND THE BUYER CONTEMPLATED
HEREBY OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER HEREOF. THIS
WAIVER IS IRREVOCABLE AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT. IN THE EVENT
OF LITIGATION, THIS AGREEMENT MAY BE FILED WITH THE COURT AS A WRITTEN CONSENT
TO A TRIAL WITHOUT A JURY.
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(w) No Offset. Notwithstanding anything to the contrary in this Agreement,
Masco shall not be entitled to satisfy any of its payment obligations under this
Agreement by means of an offset against the Buyer's obligations under the PIK
Note or any security evidencing indebtedness of the Buyer issued in exchange for
shares of the Buyer's Series A Preferred Stock.
* * * * *
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
FURNISHINGS INTERNATIONAL INC.
By:____________________________
Title:_________________________
MASCO CORPORATION
By:____________________________
Title:_________________________
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SCHEDULE OF HFG COMPANIES
Ametex Fabrics, Inc. [DE]
Ametex U.K. Limited [United Kingdom] (1)
The Berkline Corporation [DE]
Dixie Furniture Company, Incorporated [DE]
Drexel Heritage Furnishings Inc. [NY]
Hanhill (Great Britain) Limited [England] (1)
Henredon Furniture Industries, Inc. [NC]
Henry Link Corporation [DE]
Interior Fabric Design, Inc. [NY]
Intro Europe, Inc. [NC]
La Barge, Inc. [MI]
Lexington Furniture Industries, Inc. [NC]
Lineage Home Furnishings, Inc. [DE]
Link-Taylor Corporation [DE]
Maitland-Smith, Inc. [NC]
Marbro Lamp Company [CA]
Masco Home Furnishings, Inc. [NC]
Ramm, Son & Crocker, Inc. [NY]
Ramm, Son & Crocker Limited [England] (1)
Robert Allen Fabrics, Inc. [DE]
Robert Allen Fabrics (Canada) Ltd. [Canada]
Robert Allen Fabrics of N.Y., Inc. [DE]
Sunbury Textile Mills, Inc. [DE]
Universal Furniture Limited [DE]
Young-Hinkle Corporation [DE]
- ----------
(1) Ametex U.K. Limited, Hanhill (Great Britain) Limited, and Ramm, Son &
Crocker Limited are wholly-owned subsidiaries of Masco Corporation Limited,
which is a wholly-owned subsidiary of Masco Corporation of Indiana, which
is a wholly-owned subsidiary of Masco Corporation. All of the other HFG
Companies are wholly-owned subsidiaries of Masco Corporation.
<PAGE>
SCHEDULE OF DEFINED TERMS
"Acquisition Agreement" means the Acquisition Agreement dated as of March
29, 1996, among the Parties, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"Adjusted Net Investment and Advances" has the meaning set forth in ss.2(e)
of the Acquisition Agreement.
"Adjusted NIA Report" has the meaning set forth in ss.2(e) of the
Acquisition Agreement.
"Adjustment Schedule" has the meaning set forth in ss.2(e) of the
Acquisition Agreement.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, Taxes (other than Income Taxes),
penalties, fines, costs, reasonable amounts paid in settlement, liabilities,
obligations, liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses; provided, however, that: (i) Adverse
Consequences shall not include any lost profits or any exemplary, punitive,
consequential or other similar damages (other than exemplary, punitive,
consequential or other similar damages awarded to any third party); (ii) Adverse
Consequences shall not be determined through any multiple of earnings approach
or variant thereof (except with respect to any breach of the representations or
warranties contained in ss.4(f) and the first sentence of ss.4(g), in each case
to the extent that such breach relates to any matter that has resulted in a
recurring loss of earnings, and then only to the extent that at the time of
assessing the Adverse Consequences caused by that breach, there are no
developments or areas of earnings growth (whether or not related to the matters
giving rise to the breach) not specifically included in the Buyer's business
plan as of the date hereof for the segment exhibiting such growth which are then
reasonably anticipated to offset or compensate, in whole or in part, for the
Adverse Consequences caused by such breach); (iii) the Indemnified Buyer Parties
shall not be deemed to have suffered any Adverse Consequences with respect to
any matter for which a specific reserve or accrual of liabilities was
established in the determination of the Adjusted Net Investment and Advances as
of the Closing Date (including any such reserve or accrual of liabilities
established on or reflected in the Closing Date Balance Sheet) to the extent of
such reserve or accrual of liabilities, (iv) in determining Adverse
Consequences, the Parties shall make appropriate adjustments for (A) insurance
and indemnity recoveries actually received by the relevant Indemnified Party
(net of any out-of-pocket expenses, including court costs and reasonable
attorneys' fees and expenses, incurred in pursuing such insurance and indemnity
recoveries) under any occurrence-based policies written by third party insurance
companies, to the extent such policies are owned by any of the HFG Companies and
their Subsidiaries prior to the Closing Date, under any acquisition agreements
with third parties, to the extent such agreements are in effect as of the
Closing Date and afford indemnification rights for the benefit of the HFG
Companies and their Subsidiaries, and under any underground storage tank or
similar environmental reimbursement program, to the extent such programs are
<PAGE>
available to the HFG Companies and their Subsidiaries at any time after the
Closing Date and (B) the time value of money and (v) the Indemnified Buyer
Parties shall not be deemed to have suffered any Adverse Consequences which
result from their continuation after the Closing Date of any of the practices,
policies and procedures of the HFG Companies and their Subsidiaries, or which
result from their institution of new such practices, policies and procedures, in
either case in detrimental reliance upon the representations and warranties of
Masco under the Acquisition Agreement; and provided further that Adverse
Consequences shall not include (i) the loss of any Tax attribute or (ii) any Tax
liability resulting from the receipt of any indemnification payment made under
this Agreement.
"Affected Corporation" means any of the HFG Companies and their
Subsidiaries that is subject to a Section 338(g) Election or a Section
338(h)(10) Election.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group (within the meaning of Code
Section 1504 or any similar group defined under a similar provision of state,
local, or foreign law) filing a consolidated, combined or unitary Return.
"AGUB" means the adjusted grossed-up basis at which an Affected Corporation
is deemed to have purchased its assets for Tax purposes as a result of a Section
338(h)(10) Election.
"Applicable Rate" means simple interest at the rate of 6% per annum based
on a year of 360 days and actual days elapsed.
"Buyer" has the meaning set forth in the preface to the Acquisition
Agreement.
"Buyer Confidentiality Agreement" means the Confidentiality Agreement
between the Buyer and Masco dated as of February 26, 1996, as the same may be
amended, supplemented or otherwise modified from time to time.
"Buyer Disclosure Schedule" has the meaning set forth in ss.3(b) of the
Acquisition Agreement.
"Buyer Financial Statements" has the meaning set forth in ss.3(b) of the
Acquisition Agreement.
"Buyer Material Adverse Effect" means any circumstance relating to, change
in, or effect on any of the Buyer and its Subsidiaries that, individually or in
the aggregate with any other circumstances relating to, changes in, or effects
on, any of the Buyer and its Subsidiaries, is materially adverse to the business
(based on continuing operations consistent with past practice), assets,
financial condition or results of operations of the Buyer and its Subsidiaries,
Definitions Page 2
<PAGE>
considered as a single combined business; provided that the HFG Companies and
their Subsidiaries shall not be considered Subsidiaries of the Buyer for this
purpose.
"Caldwell Environmental Matter" means any and all Adverse Consequences
relating to the site located in the town of Lenoir in Caldwell County, North
Carolina known as the Caldwell Superfund Site or to the treatment, storage,
disposal, presence, Release or threatened Release of Hazardous Materials at, to
or from such site, but only to the extent such Adverse Consequences relate to
personal injuries allegedly incurred by any individual as a result of activities
occurring or circumstances existing at the site on or prior to the Closing Date;
provided, however, that "Caldwell Environmental Matter" shall not include any
Adverse Consequences relating to a claim made against any Indemnified Buyer
Party (other than the HFG Companies and their Subsidiaries) which does not
relate to any of the HFG Companies or their Subsidiaries.
"Cap" has the meaning set forth in ss.8(b) of the Acquisition Agreement.
"Class A Common Stock" has the meaning set forth in ss.2(b) of the
Acquisition Agreement.
"Class B Common Stock" has the meaning set forth in ss.2(b) of the
Acquisition Agreement.
"Closing" has the meaning set forth in ss.2(c) of the Acquisition
Agreement.
"Closing Date" has the meaning set forth in ss.2(c) of the Acquisition
Agreement.
"Closing Date Balance Sheet" has the meaning set forth in ss.2(e) of the
Acquisition Agreement.
"Closing Date Cash" has the meaning set forth in ss.2(e) of the Acquisition
Agreement.
"COBRA" means ERISA Sec. 162 and Code Sec. 4980B.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Company" means all of the HFG Companies and their Subsidiaries
considered as a single combined business.
"Confidential Information" has the meaning set forth in ss.12(f) of the
Acquisition Agreement.
"Confidentiality Agreement" means the Confidentiality Agreement between
Citicorp Venture Capital, Ltd. and Masco dated as of June 22, 1995, as the same
may be amended, supplemented or otherwise modified from time to time.
Definitions Page 3
<PAGE>
"Disclosure Schedule" has the meaning set forth in ss.3(a) of the
Acquisition Agreement.
"Dispute Notification" has the meaning set forth in ss.10(e) of the
Acquisition Agreement.
"Dispute Notification Period" has the meaning set forth in ss.10(e) of the
Acquisition Agreement.
"Employee Benefit Arrangement" means, with respect to any Person, any
employment, severance or similar contract, arrangement or policy (exclusive of
any such contract which is terminable within 30 days without liability), or any
plan or arrangement providing for severance benefits, insurance coverage
(including pursuant to any self-insured plan or arrangement), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation, or benefits, in each
case for the benefit of any current or former employee of such Person; provided,
however, that the term "Employee Benefit Arrangement" shall not include any
Employee Benefit Plan covered by or subject to ERISA or any other contract,
arrangement, policy, plan or arrangement required to be sponsored, maintained or
contributed to by applicable law (other than any domestic workers' compensation
statute).
"Employee Benefit Plan" has the meaning set forth in ERISA Sec. 3(3).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the Resource
Conservation and Recovery Act of 1976, as amended, together with all applicable
common laws and other applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, consent decrees, rulings,
binding agreements and charges thereunder) of federal, state, local and foreign
governments (and all agencies thereof) concerning pollution or protection of
health and the environment, in each case whether now existing or subsequently
enacted, amended or superseded (except to the extent that any additional
requirements, financial or other obligations or liabilities of any kind or
character are more burdensome than those that would have been imposed under
Environmental Laws in effect as of the Closing Date), including laws relating to
Releases or threatened Releases of Hazardous Materials into ambient air, surface
water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of Hazardous Materials; provided, however, that Environmental Laws
shall not include the Occupational Health and Safety Act of 1970, as amended,
nor any other law (including any rule, regulation, code, plan, injunction,
judgment, order, decree, ruling or charge thereunder) of any federal, state,
local or foreign government (or any agency thereof) to the extent concerning the
health and safety of employees, except to the extent such laws relate to the
presence, Release, exposure or abatement of asbestos or asbestos-containing
materials.
Definitions Page 4
<PAGE>
"Environmental Permit" means any applicable federal, state, local or
foreign permits, licenses, approvals, consents, authorizations, registrations
and certificates of authority required, granted or issued by any governmental
agency under or in connection with any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any Person which would be treated as a single
employer together with any of the HFG Companies and their Subsidiaries under
Code Sec. 414.
"Financial Statements" has the meaning set forth in ss.4(f) of the
Acquisition Agreement.
"Financing" has the meaning set forth in ss.3(b)(vi) of the Acquisition
Agreement.
"Foreign Benefit Plan" means each employee benefit plan, program,
arrangement or agreement sponsored, maintained, or contributed to by any of
Masco, the HFG Companies and their respective Subsidiaries, that is subject to
laws of a country, state, or sovereignty other than the United States or a
state, territory, or district of the United States.
"GAAP" means United States generally accepted accounting principles as in
effect on the date of the Acquisition Agreement.
"Grossed-Up Basis" means, when used to describe the basis on which the
payment of a specified sum is to be made, a basis such that the amount of such
payment, after being reduced by the actual amount of all Taxes imposed on and
paid by the recipient of such payment as a result of the receipt or accrual of
such payment, will equal the specified sum.
"Guaranteed Amount" has the meaning set forth in ss.12(r) of the
Acquisition Agreement.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Materials" means petroleum, petroleum hydrocarbons, petroleum
products, petroleum by-products, asbestos or asbestos-containing materials,
gasoline, diesel fuel, pesticides, urea formaldehyde, lead or lead-containing
materials, polychorinated biphenyls or any other chemicals, materials,
substances or wastes in any amount or concentration which, in each case, are
regulated under any Environmental Law or defined as or included in the
definition of "hazardous substances," "hazardous materials," "hazardous wastes,"
"extremely hazardous wastes," "restricted wastes," "toxic substances," "toxic
pollutants," "pollutants," "regulated substances," "solid wastes,"
"contaminants" or "industrial waste," or words of similar import, under any
Environmental Law.
Definitions Page 5
<PAGE>
"HFG Companies" has the meaning set forth in the preface to the Acquisition
Agreement.
"HFG Employee" has the meaning set forth in ss.6(d) of the Acquisition
Agreement.
"HFG Participant" has the meaning set forth in ss.6(c) of the Acquisition
Agreement.
"High Value" has the meaning set forth in ss.2(e) of the Acquisition
Agreement.
"Income Tax" of a Person means any tax imposed on such Person (other than
tax imposed as a result of such Person's being a withholding agent under the
laws) by Subtitle A of the Code or any similar tax imposed by any state, local
or foreign jurisdiction, together with any interest, penalties, additions to tax
or additional amounts imposed by the applicable Taxing Authorities with respect
thereto.
"Indemnified Buyer Party" has the meaning set forth in ss.8(b) of the
Acquisition Agreement.
"Indemnified Party" has the meaning set forth in ss.8(d) of the Acquisition
Agreement.
"Indemnified Seller Party" has the meaning set forth in ss.8(c) of the
Acquisition Agreement.
"Indemnifying Party" has the meaning set forth in ss.8(d) of the
Acquisition Agreement.
"Independent Accounting Firm" has the meaning set forth in ss.2(e) of the
Acquisition Agreement.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all mask works and all
applications, registrations and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments of any of the foregoing (in whatever form or medium).
Definitions Page 6
<PAGE>
"Knowledge of Masco" (and any other phrase to substantially similar effect)
means the actual knowledge of any of Gerard W. Boylan, John R. Leekley, Wayne B.
Lyon, Richard A. Manoogian, Richard G. Mosteller and Robert B. Rosowski and, (i)
with respect to Tax matters, David Doran, (ii) with respect to Universal
Furniture Limited and its Subsidiaries, Paul Tu, (iii) with respect to Lexington
Furniture Industries, Inc. and its Subsidiaries, Jeff Young, (iv) with respect
to Drexel Heritage Furnishings Inc. and its Subsidiaries, Dan Grow and (v) with
respect to The Berkline Corporation and its Subsidiaries, Alan Cole, in each
case without the necessity of any independent investigation; provided, however,
that each such named individual who has an employee reporting directly to him
who is principally responsible for the subject matter of any representation or
warranty given to the Knowledge of Masco shall review such representation or
warranty with such responsible employee.
"Low Value" has the meaning set forth in ss.2(e) of the Acquisition
Agreement.
"MADSP" means the modified aggregate deemed sales price at which an
Affected Corporation is deemed to have sold its assets for Tax purposes as a
result of a Section 338(h)(10) Election.
"Masco" has the meaning set forth in the preface to the Acquisition
Agreement.
"Masco Cash Payment" has the meaning set forth in ss.2(f) of the
Acquisition Agreement.
"Masco Tradenames" has the meaning set forth in ss.12(q) of the Acquisition
Agreement.
"Material Adverse Effect" means any circumstance relating to, change in, or
effect on any of the HFG Companies and their Subsidiaries that, individually or
in the aggregate with any other circumstances relating to, changes in, or
effects on, any of the HFG Companies or their Subsidiaries, is materially
adverse to the business (based on continuing operations consistent with past
practice), assets, financial condition, or results of operations of the Combined
Company.
"Maximum Permitted Rate" means the maximum rate permitted as of the Closing
Date pursuant to Section 163(i)(1) of the Code so as not to cause the PIK Note
to be an "applicable high yield debt obligation".
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37) or ERISA
Sec. 4001(a)(3).
"Net Intercompany Balance" means the amount by which (x) all intercompany
amounts owing as of the Closing by any of the HFG Companies and their
Subsidiaries to any of Masco and Masco's remaining Subsidiaries exceed (y) all
intercompany amounts owing as of the Closing by any of Masco and Masco's
remaining Subsidiaries to any of the HFG Companies and the Subsidiaries of the
HFG Companies, all as set forth on the Closing Date Balance Sheet.
Definitions Page 7
<PAGE>
"Non-HFG Participant" has the meaning set forth in ss.6(c) of the
Acquisition Agreement.
"Norfolk Veneer Environmental Matter" means any and all Adverse
Consequences arising out of the existence of Hazardous Materials on, under or
migrating to or from the Norfolk Veneer property on or prior to the Closing
Date.
"Ordinary Course of Business" means, with respect to any Person, the
regular transaction of such Person's business consistent with past practice
(including with respect to quantity and frequency), including entry into
contracts, leases and other obligations.
"Party" has the meaning set forth in the preface to the Acquisition
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
agency.
"Person" means an individual, a partnership, a corporation, an association,
a limited liability company, a trust, a joint venture, an unincorporated
organization, a governmental entity (or any department, agency, or political
subdivision thereof), or any other entity.
"PIK Note" has the meaning set forth in ss.2(b) of the Acquisition
Agreement.
"Post-Closing Period" means any taxable period or portion thereof beginning
after the Closing Date. If a taxable period begins on or before the Closing Date
and ends after the Closing Date, then the portion of the taxable period that
begins on the day following the Closing Date shall constitute a Post-Closing
Period.
"Pre-Closing Period" means any taxable period or portion thereof ending on
or before the Closing Date. If a taxable period begins on or before the Closing
Date and ends after the Closing Date, then the portion of the taxable period to
the end of the Closing Date shall constitute a Pre-Closing Period.
"Preliminary Purchase Price" has the meaning set forth in ss.2(b) of the
Acquisition Agreement.
"Prohibited Transaction" has the meaning set forth in ERISA Sec. 406 and
Code Sec. 4975.
"Properties" means the real properties currently owned, operated or leased
by any of the HFG Companies or their Subsidiaries, including all soil, subsoil,
surface waters and groundwater thereat.
"Proposed Closing Date Balance Sheet" has the meaning set forth in ss.2(e)
of the Acquisition Agreement.
Definitions Page 8
<PAGE>
"Purchase Price" has the meaning set forth in ss.2(f) of the Acquisition
Agreement.
"Recommended Action" has the meaning set forth in ss.10(e) of the
Acquisition Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement to
be entered into as of the Closing Date among the Parties and certain other
Persons and having the terms set forth in Exhibit C to the Acquisition Agreement
and such other terms as the Parties and such other Persons shall mutually agree,
as the same may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the environment prior to the Closing Date.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Restricted Activities" has the meaning set forth in ss.12(e) of the
Acquisition Agreement.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed with a Taxing Authority for purposes
of a particular Tax.
"Revised Adjusted NIA Report" has the meaning set forth in ss.2(e) of the
Acquisition Agreement.
"Section 338(h)(10) Election" has the meaning set forth in ss.9(i) of the
Acquisition Agreement.
"Section 338 Tax" means a Tax imposed on any of the HFG Companies or their
Subsidiaries that results from (a) an election made pursuant to this Agreement
with respect to any of the HFG Companies or their Subsidiaries under Section
338(g) of the Code or any corresponding election under state, local or foreign
Tax law (each such election, a "Section 338(g) Election") or (b) a Section
338(h)(10) Election made pursuant to this Agreement with respect to any of the
HFG Companies or their Subsidiaries, in each case irrespective of whether such
Tax arises in a Pre-Closing Period or a Post-Closing Period, and including (i)
any Tax resulting from a Section 338(g) Election with respect to any of the HFG
Companies or their Subsidiaries, but not an accompanying Section 338(h)(10)
Election, being given effect for purposes of a particular Tax and (ii) any Tax
imposed on or as a result of the deemed sale of assets resulting from a Section
338(g) Election or a Section 338(h)(10) Election with respect to any of the HFG
Companies or their Subsidiaries or both; provided, however, that the term
"Section 338 Tax" shall not include any Tax imposed because the Tax attributes
(including tax basis of assets and amounts of earnings and profits) of any of
the HFG Companies or their Subsidiaries are changed as a result of a Section
338(g) Election or a Section 338(h)(10) Election.
Definitions Page 9
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance or other
security interest, other than (a) mechanic's, materialmen's, and similar liens,
(b) liens for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings (provided that the
property subject to such lien is not subject to imminent threat of loss), (c)
purchase money liens and liens securing rental payments under capital lease
arrangements (but only to the extent that such liens cover the property so
purchased or leased), and (d) other items arising in the Ordinary Course of
Business and not incurred in connection with the borrowing of money; provided,
however, that for purposes of ss.ss.2(d), 3(a)(iii), 3(a)(v), 3(b)(iii),
3(b)(vii) and 4(b) of the Acquisition Agreement, the items described in clauses
(a), (b), (c) and (d) above shall not be excluded from the definition of
"Security Interests".
"Seller Group" means the affiliated group of corporations (excluding the
HFG Companies and their Subsidiaries) within the meaning of Section 1504(a) of
the Code, of which Masco is the common parent.
"Seller Party" means Masco and any Subsidiary or Affiliate of Masco, other
than the Buyer, the HFG Companies and their respective Subsidiaries.
"Series A Preferred Stock" has the meaning set forth in ss. 2(b) of the
Acquisition Agreement.
"Series B Preferred Stock" has the meaning set forth in ss. 2(b) of the
Acquisition Agreement.
"Specified Buyer Representations" has the meaning set forth in ss.8(a) of
the Acquisition Agreement.
"Specified Masco Representations" has the meaning specified in ss.8(b) of
the Acquisition Agreement.
"Specified Non-Income Tax" means (i) any sales or use Tax or (ii) any
payroll Tax (including Taxes of any kind required to be withheld from payments
to providers of services).
"Stockholders' Agreement" means the Stockholders' Agreement to be entered
into as of the Closing Date among the Parties and certain other Persons and
having the terms set forth in Exhibit C to the Acquisition Agreement and such
other terms as the Parties and such other Persons shall mutually agree, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Straddle Period" has the meaning set forth in ss.9(l) of the Acquisition
Agreement.
Definitions Page 10
<PAGE>
"Subsidiary" means any Person with respect to which a specified Person
(together with one or more Subsidiaries of such Person) owns a majority of the
common stock (or equivalent voting securities or, if no such voting securities
exist, equivalent equity interests) or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors (or similar
officials) on the board (or similar governing body) of such Person.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, sales, use,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts imposed by any Taxing Authority
responsible for the imposition of any such Tax with respect thereto.
"Tax Claim" means any claim with respect to Taxes made by any Taxing
Authority or other Person that, if pursued successfully, could serve as the
basis for a claim for indemnification under ss.9 of the Acquisition Agreement.
"Tax Indemnitees" means Buyer and its Subsidiaries and Affiliates
(including the HFG Companies and their Subsidiaries and Affiliates after the
Closing, but otherwise determined assuming that Masco is not an Affiliate of the
Buyer and its Subsidiaries following the Closing).
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any federal, state or local jurisdiction or any
foreign jurisdiction, having or purporting to exercise jurisdiction with respect
to any Tax.
"Third Party" means any Person other than (i) a Seller Party, (ii) the
Buyer and its Subsidiaries and Affiliates as of the date of the Acquisition
Agreement and (iii) the HFG Companies and their Subsidiaries.
"Third Party Claim" has the meaning set forth in ss.8(d) of the Acquisition
Agreement.
"Third Party Indebtedness" means, without duplication and disregarding any
obligations of any of the HFG Companies and their Subsidiaries to any other HFG
Company or Subsidiary thereof, (i) all obligations of any of the HFG Companies
and their Subsidiaries for borrowed money, (ii) all obligations of any of the
HFG Companies and their Subsidiaries in respect of bankers' acceptances or other
similar instruments (other than letters of credit) or reimbursement obligations
with respect thereto, (iii) all obligations of any of the HFG Companies and
their Subsidiaries to pay the deferred purchase price of property and services
(excluding any trade payables in the Ordinary Course of Business), (iv) all
obligations of any of the HFG Companies and their Subsidiaries under capitalized
leases and (v) all obligations of other Persons of the types described in
clauses (i) through (iv) above guaranteed by any of the HFG Companies and their
Subsidiaries, in each case to any Person (other than Masco and its remaining
Subsidiaries).
Definitions Page 11
<PAGE>
"Transaction Documents" means the Acquisition Agreement, the Stockholders'
Agreement, the Registration Rights Agreement and the PIK Note.
"Transfer Taxes" means sales, use, transfer, real property transfer,
recording, gain, stock transfer and other similar taxes and fees.
"WARN Act" has the meaning set forth in ss.6(b) of the Acquisition
Agreement.
"Year-end Net Investment and Advances" has the meaning set forth in ss.2(f)
of the Acquisition Agreement.
Definitions Page 12
<PAGE>
CONFIDENTIAL
SCHEDULE OF TAX ALLOCATIONS (IN 000's)
338(H)(10) PURCHASE
SUBSIDIARY ELECTION PRICE CONSIDERATION
SUBSIDIARY
DEBT OWED TO CLASS A CLASS B
MASCO PAID COMMON COMMON
AT CLOSING PIK NOTE STOCK STOCK
SERIES A SERIES B
PREFERRED PREFERRED
STOCK STOCK TOTAL
The Berkline Corporation No $ 56,500
Drexel Heritage Furnishings, Inc. No 125,000
Henredon Furniture Industries, Inc. No 70,000
Intro Europe, Inc. No 4,700
LaBarge, Inc. No 5,100
Lexington Furniture Industries, Inc. No 162,000
Lineage Home Furnishings, Inc. Yes** 25,700
Maitland-Smith, Inc. No 55,000
Masco Home Furnishings, Inc. Yes 40,000
Robert Allen Fabrics, Inc. Yes 74,570
Ametex Fabric, Inc. Yes 49,900
Interior Fabric Design, Inc. Yes 1,830
Robert Allen Fabrics of New York, No
Inc. 5,000
Robert Allen Fabrics (Canada) Ltd. No 1,000
Ramm, Son & Crocker, Inc. No 2,100
Sunbury Textile Mills, Inc. No 20,000
Universal Furniture Industries, Inc. No $195,000
Universal Foreign Subsidiaries No
171,600
---------
Universal Furniture Limited Yes 366,600
Ametex UK Limited No 1,000
Ramm Son & Crocker Limited No 4,000
$ 1,070,000 $757,809 $255,000* $75 $185
$54,857 $2,074 $1,070,000
* Estimated Amount At Closing.
** To be made only if favorable North Carolina ruling is obtained
AMENDMENT NO. 1 TO ACQUISITION AGREEMENT
AMENDMENT NO. 1 (the "Amendment") dated as of June 21, 1996 by and between
FURNISHINGS INTERNATIONAL INC., a Delaware corporation (the "Buyer"), and Masco
Corporation, a Delaware corporation ("Masco").
W I T N E S S E T H :
WHEREAS, the Buyer and Masco have heretofore entered into an Acquisition
Agreement dated as of March 29, 1996 (the "Acquisition Agreement"); and
WHEREAS, the Parties hereto desire to amend the Acquisition Agreement to
provide for a change to Section 11 thereof.
NOW, THEREFORE, in consideration of the premises and of the respective
agreements contained herein, the Parties agree to amend the Acquisition
Agreement as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Acquisition Agreement
shall have the meaning assigned to such term in the Acquisition Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Acquisition Agreement shall from and after the date
hereof refer to the Acquisition Agreement as amended hereby.
SECTION 2. Amendment of Section 11. Section 11 of the Acquisition Agreement
is amended by replacing the date "July 31, 1996" in ss.11(a)(iv) with the date
"August 15, 1996".
SECTION 3. Counterparts, Effectiveness. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. This Amendment shall
become effective as of the date hereof.
SECTION 4. Rights Otherwise Unaffected. This Amendment is limited to the
matters expressly set forth herein. Except to the extent specifically amended
hereby,
<PAGE>
all terms of the Acquisition Agreement shall remain in full force and effect.
SECTION 5. Governing Law. This Amendment shall be governed by and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice 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.
[Remainder of Page Intentionally Left Blank]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
FURNISHINGS INTERNATIONAL INC.
By_____________________
Name:
Title:
MASCO CORPORATION
By_____________________
Name:
Title:
[Signature page to Amendment No. 1]
3
AMENDMENT NO. 2 TO ACQUISITION AGREEMENT
AMENDMENT NO.2 (the "Amendment") dated as of August 5, 1996 by and between
FURNISHINGS INTERNATIONAL INC., a Delaware corporation (the "Buyer"), and Masco
Corporation, a Delaware corporation ("Masco").
W I T N E S S E T H :
WHEREAS, the Buyer and Masco have heretofore entered into an Acquisition
Agreement dated as of March 29, 1996, as amended by Amendment No. 1 thereto
dated June 21, 1996 (as amended, the "Acquisition Agreement"); and
WHEREAS, the Parties hereto desire to amend the Acquisition Agreement to
provide for certain changes in consideration and other amendments as described
herein.
NOW, THEREFORE, in consideration of the premises and of the respective
agreements contained herein, the Parties agree to amend the Acquisition
Agreement as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Acquisition Agreement
shall have the meaning assigned to such term in the Acquisition Agreement. Each
reference to "hereof", "hereunder", "herein" and "hereby" and each other similar
reference and each reference to "this Agreement" and each other similar
reference contained in the Acquisition Agreement shall from and after the date
hereof refer to the Acquisition Agreement as amended hereby.
SECTION 2. Amendment of Section 2. Section 2 of the Acquisition Agreement
is amended by:
(i) deleting ss.2(b) and replacing it in its entirety with the following:
(b) Purchase Price. The "Preliminary Purchase Price" shall
consist of (i) $705,348,913 in cash, (ii) a promissory note (the "PIK
Note") of the
<PAGE>
Buyer having a principal amount equal to $285,000,000 and an interest
rate equal to 12% per annum and having the terms (including the
maturity and amortization schedule) set forth in the attached Exhibit
A; provided that (x) the principal amount of the PIK Note will be
further adjusted as provided in ss.2(f) and (y) if on the Closing Date
the Maximum Permitted Rate is less than 12%, the interest rate on the
PIK Note will be reduced to the Maximum Permitted Rate and the
principal amount of the PIK Note will be increased consistent with the
sample calculation provided in Schedule 2(b) in an amount such that
the discounted present value of all scheduled cash payments (assuming
interest will be paid in cash as scheduled commencing on the eighth
anniversary of the Closing Date) under the PIK Note following such
adjustment (calculated using 12% as the discount factor) will be equal
to the discounted present value of all such payments under the PIK
Note prior to such adjustment (calculated using the same discount
factor), (iii) 550,090 shares of Series A-1 Preferred Stock (the
"Series A-1 Preferred Stock") of the Buyer having the terms set forth
in the Amended and Restated Certificate of Incorporation of the Buyer
attached as Exhibit B hereto, (iv) 21,930 shares of Series A-2
Preferred Stock (the "Series A-2 Preferred Stock") of the Buyer having
the terms set forth in the Amended and Restated Certificate of
Incorporation of the Buyer attached as Exhibit B hereto, (v) 303,503
shares of Series B Preferred Stock (the "Series B Preferred Stock") of
the Buyer having the terms set forth in the Amended and Restated
Certificate of Incorporation of the Buyer attached as Exhibit B
hereto, (vi) 5,000 shares of Series A-1 Common Stock, 5,000 shares of
Series A-2 Common Stock and 5,000 shares of Series A-3 Common Stock
(collectively, the "Class A Common Stock") of the Buyer and (vii)
29,161 shares of Series B-1 Common Stock, 29,161 shares of Series B-2
Common Stock and 29,161 shares of Series B-3 Common Stock
(collectively, the "Class B Common Stock") of the Buyer. The
Preliminary Purchase Price will be applied as follows: first, to the
repayment by the HFG Companies and their Subsidiaries (as set forth in
the Schedule of Tax Allocations) of the Net Intercompany Balance and,
second, to the payment in full for the outstanding capital stock of
the HFG Companies. All cash transfers on the Closing Date pursuant to
this ss.2(b) will be made
2
<PAGE>
by wire transfer of immediately available funds to Masco (for Masco's
own account or, as appropriate, for the account of Masco Corporation
Limited). The Preliminary Purchase Price will be subject to certain
adjustments as described below in arriving at the Purchase Price. The
Parties agree that the Purchase Price shall be allocated for all
purposes among the capital stock and assets of the HFG Companies and
their Subsidiaries in accordance with ss.9(j) below.
(ii) inserting the following as the final sentence of ss.2(e)(i):
Notwithstanding anything in this Agreement to the contrary, (i) all
amounts transferred to Masco or any Subsidiary thereof (other than the
HFG Companies and their Subsidiaries) on the Closing Date from the
lockbox and other deposit accounts maintained by any of the HFG
Companies and their Subsidiaries, to the extent that such amounts
constitute "Collections" (as defined in the Pooling Agreement)
received in any such lockbox or other deposit account on the Closing
Date, shall be held by Masco (or such Subsidiary) for the benefit of
the Trustee and the Investor Certificateholders (each as defined in
the Pooling Agreement) and transferred to the Collection Account (as
defined in the Pooling Agreement) by wire transfer of immediately
available funds on the first Business Day after the Closing Date and
(ii) for purposes of the calculation of the Adjusted Net Investment
and Advances and Closing Date Cash, all such Collections shall be
included as Closing Date Cash in the assets of the HFG Companies and
their Subsidiaries as of the Closing Date.
SECTION 3. Amendment of Section 3. Section 3 of the Acquisition Agreement
is amended by:
(i) deleting ss.3(a)(vi) and replacing it in its entirety with the
following:
(vi) Acquisition for Investment. Except for the securities of the
Buyer which are to be sold to members of the Management Group pursuant
to the Masco Stock Purchase Agreements, neither Masco nor Masco
Corporation Limited is acquiring any of the PIK Note, the Series A
Preferred Stock, the Series B Preferred Stock or the Common Stock with
a view
3
<PAGE>
to or for sale in connection with any distribution thereof within the
meaning of the Securities Act; provided, however, that the disposition
of Masco's or Masco Corporation Limited's property (including any of
the PIK Note, the Series A Preferred Stock, the Series B Preferred
Stock or the Common Stock) will at all times remain within its
control, subject only to the obligations of Masco to resell the Series
A Preferred Stock and the Common Stock under the Masco Stock Purchase
Agreements.
(ii) adding a new ss.3(b)(xvii) to read as follows:
(xvii) No Additional Issuances.
(A) The Buyer has no present plan or intention to issue any
Series A-2 Preferred Stock to any Person except (i) (w) to Masco,
pursuant to the terms of this Agreement, (x) to Mr. Wayne B. Lyon, an
individual member of the Management Group, pursuant to the Lyon Stock
Purchase Agreement, (y) up to 800 shares of Series A-2 Preferred to
certain members of management of the Buyer's Subsidiaries and (z) to
399, pursuant to the 399 Stock Purchase Agreement, in each case at the
Closing, and (ii) in connection with any employee stock purchase or
option plan which may be adopted by the Buyer in the future; provided
that such plan will not permit the issuance thereunder of shares of
Series A-2 Preferred Stock in excess of 14,000 shares.
(B) The Buyer has no present plan or intention to issue the Class
C Common Stock (i) to (x) Masco, (y) any member of the Institutional
Stockholder Group or (z) Wayne B. Lyon or (ii) to any other Person,
except in consideration for services performed by such other Person
for the Buyer.
(C) The Buyer has no present plan or intention to issue any
Preferred Stock or any Common Stock or any interest, direct or
indirect, in such Preferred Stock or such Common Stock, for cash or
property, to any holder of the Class C Common Stock, except in
connection with an employee stock purchase or option plan which may be
adopted by the Buyer in the future.
SECTION 4. Amendment of Section 4. Section 4(p)(i)(D) of the Acquisition
Agreement is amended by replacing the
4
<PAGE>
word "or" between "1993" and "(2)" with a comma, and by deleting the period at
the end of the sentence and adding a final clause to read in its entirety as
follows:
or (3) with respect to the New Plans (as hereinafter defined), become
so qualified in the opinion of counsel to Masco.
SECTION 5. Amendment of Section 5. Section 5 of the Acquisition Agreement
is amended by adding a new ss.5(l) to read in its entirety as follows:
(l) Notwithstanding any other provision of this Agreement, Masco
shall have the right prior to the Closing Date to cause (i) the
transfer by Intro Europe B.V. of all of its assets and liabilities to
Intro Europe Inc. and (ii) the dividend of all of the capital stock of
Intro Europe B.V. to Masco or one of its Subsidiaries (other than the
HFG Companies or their Subsidiaries). Masco agrees to indemnify and
hold harmless the Buyer from and against any Adverse Consequences
arising out of or resulting from the transfers and the dividend
described in the immediately preceding sentence or any contribution of
such assets and liabilities to a new Dutch corporation, including any
costs of consummating such transfers, dividend and contribution and
any additional Taxes resulting from such transfers, dividend and
contribution, and the Buyer (i) agrees that such transfers and
dividend shall not be deemed to violate any provision of this
Agreement, including, without limitation, ss.ss.4(b), 4(f), 4(g), 4(j)
and 5(c) of this Agreement, (ii) acknowledges that, after the date of
such dividend, Intro Europe B.V. shall not constitute a Subsidiary of
the HFG Companies for any purpose whatsoever, (iii) acknowledges that
such transfers and dividend have occurred prior to the Closing Date
and (iv) hereby consents to such transfers and dividend.
SECTION 6. Amendment of Section 6. Section 6 of the Acquisition Agreement
is amended by:
(i) Deleting ss.6(c)(ii) and replacing it in its entirety with the
following:
(ii) with respect to the Masco Corporation Master Pension Plan
and the Masco Corporation Pension Plan (the "Masco Plans"), as of the
Closing Date, Masco shall remove the HFG
5
<PAGE>
Participants in the Masco Plans from the Masco Plans, and thereupon
Masco shall cause such HFG Participants to become participants in
newly established tax-qualified plans, the terms of which are
substantially identical to the terms of the Masco Plans (the "New
Plans") and, as soon as practicable thereafter, shall transfer to each
New Plan the proportion of each of the Masco Plan's assets allocable
to liabilities accrued to the Closing Date to all HFG Participants
(including earnings and losses to the date of such transfer allocable
to such assets), which proportion shall be deemed to equal the
quotient of (x) the present value of benefits accrued on the Closing
Date for all HFG Participants in such Masco Plan calculated on a
termination basis pursuant to Code Sec. 414(l) divided by (y) the
present value of benefits accrued on the Closing Date for all HFG
Participants and Non-HFG Participants in such Masco Plan, in each case
calculated on a termination basis pursuant to Code Sec. 414(l), all as
mutually determined by Masco's and Buyer's actuaries, and thereupon
Masco shall retain all liabilities and responsibilities relating to
all Non-HFG Participants under the Masco Plans and all assets so
retained;
(ii) Deleting ss.6(c)(iii) and replacing it in its entirety with the
following:
(iii) with respect to the Masco Corporation Home Furnishings and
Building Products Pension Plan (the "HFG Plan"), as of the Closing
Date, Non-HFG Participants in the HFG Plan shall be removed from the
HFG Plan and its assets allocable to liabilities accrued to the
Closing Date to such Non-HFG Participants shall be determined by the
same methodology as set forth in subsection (ii) above (except that
"Non-HFG Participants" shall be substituted for "HFG Participants" in
clause (x) of such subsection (ii)) and, as soon as practicable
thereafter, Masco shall direct to Masco's successor plan and trustee
the transfer of the proportion of the HFG Plan's assets so determined
to be allocable to such liability to such Non-HFG Participants, and
thereupon Masco shall assume all such liabilities and responsibilities
relating to all such Non-HFG Participants and the assets so
transferred;
6
<PAGE>
(iii) Deleting ss.6(c)(iv) and replacing it in its entirety with the
following:
(iv) with respect to the Berkline Associates Pension Plan listed
on ss.4(p)(i) of the Disclosure Schedule, the New Plans (after giving
effect to the provisions of the foregoing ss.6(c)(ii)), and the HFG
Plan (after giving effect to the provisions of the foregoing
ss.6(c)(iii)), Masco shall direct the resignation of such plans'
trustees, and shall direct to the Buyer's successor trustee a transfer
in cash of all such plans' assets (including all outstanding
participant loans if any), and thereafter the Buyer shall assume (or,
in the case of the Berkline Associates Pension Plan, the Berkline
Corporation shall retain) the sponsorship of such plans together with
all liabilities and responsibilities relating to such plans and the
assets so transferred (except as provided in clauses (ii) and (iii)
above and clause (viii) below);
(iv) Inserting in the second line of ss.6(f) between the words "plan" and
"prior" the following clause: "(other than the Masco Plans, for which
the New Plans shall be substituted for the purposes of this ss.6(f))".
SECTION 7. Amendment of Section 12. Section 12 of the Acquisition Agreement
is amended by deleting the second paragraph of ss.12(r) and replacing it in its
entirety with the following:
Masco agrees that, from and after the Closing Date, it will guarantee
or otherwise provide up to (A) $15,000,000 in letters of credit (whether or
not standby letters of credit) or comparable credit enhancement
arrangements in support of any obligation as to which any of the HFG
Companies and their Subsidiaries is a primary obligor or an account party
(or an equivalent) and (B) up to an additional $6,500,000 in letters of
credit or other arrangements described in (A) above that are outstanding as
of the Closing Date (such letters of credit and other arrangements
described in clauses (A) and (B) above being referred to collectively as
the "Guaranteed LCs"); provided that after the Closing Date (x) no
Guaranteed LCs shall be extended (other than a one-time extension for a
period of ten days or less) or renewed,
7
<PAGE>
including automatic or evergreen extensions or renewals, and (y) no
additional Guaranteed LC shall be provided by Masco, in each case unless
the aggregate amount of the Guaranteed LCs outstanding immediately after
giving effect to such extension, renewal or provision is less than or equal
to $15,000,000. The respective obligations of Masco and the Buyer under
this paragraph shall be subject to the following additional terms and
conditions:
(i) The obligation of Masco to guarantee or otherwise provide the
Guaranteed LCs and its obligations in respect of any then outstanding
Guaranteed LCs shall be irrevocably terminated (in each case in
accordance with clause (iii) of this paragraph) upon the earliest of
(w) the date on which any PIK Note becomes due and payable (whether
upon maturity, by acceleration or otherwise (other than as a result of
redemption)), (x) the date of any redemption, in whole or in part, of
any PIK Note (other than a redemption that is funded solely through
the substantially concurrent issuance by the Buyer or any of its
Subsidiaries of debt securities having a maturity of at least one year
from the date of issuance), (y) the date of occurrence of a Change of
Control (as defined in the PIK Note) or (z) any business day if on
each business day of the preceding 18-month period the aggregate
amount of unused availability (exclusive of any such availability
supported by a Guaranteed LC (in an amount not to exceed the lesser of
(i) $15,000,000 and (ii) the amount of the Guaranteed LC) which
availability, by the express terms of any underlying agreement or
instrument, would be subject to termination by reason of the
termination of the related Guaranteed LC) for (A) borrowings under
credit lines and receivables facilities or (B) issuances of letters of
credit, in each case available to be borrowed by or issued for the
benefit of the Buyer or its Subsidiaries, as the case may be, equals
at least $75,000,000.
(ii) The Buyer agrees to indemnify and hold harmless Masco and
its remaining Subsidiaries following the Closing from and against any
Adverse Consequences resulting from any failure or delay in making a
payment under (or any
8
<PAGE>
other breach of its or its Subsidiaries' obligations under) the
Guaranteed LCs or any agreement or instrument evidencing obligations
or liabilities supported by the Guaranteed LCs, as the case may be;
provided that any such indemnification shall be effected through the
issuance to Masco (at the time and pursuant to the procedures set
forth in the PIK Note) of a promissory note of the Buyer having a
principal amount equal to the indemnification amount (provided that
such principal amount shall be appropriately modified in the same
manner used to modify the original principal amount of the PIK Note in
accordance with clause (y) of the proviso to ss.2(b)(ii)) and having
terms equivalent to the terms of the PIK Note, it being understood
that the amount of the Guaranteed LCs that Masco is obligated to
provide will be reduced by the amount of any such Adverse Consequences
paid by Masco.
(iii) Immediately upon termination of Masco's obligations in
respect of the Guaranteed LCs (or if outstanding Guaranteed LCs exceed
those that Masco is obligated to guarantee or provide pursuant to this
ss.12(r)), the Buyer shall obtain the release of all Guaranteed LCs
(or all such excess Guaranteed LCs) from the beneficiaries thereof,
including, if necessary, through cash collateralization of the
underlying obligation or liability of the relevant HFG Company or its
Subsidiary.
(iv) The Buyer agrees to furnish to Masco (A) within 30 days
after the end of each fiscal quarter, or more frequently as reasonably
requested by Masco, a summary report of the Guaranteed LCs outstanding
as of the end of such fiscal quarter (or other period specified by
Masco in its request) for the HFG Companies and their Subsidiaries and
(B) from time to time, as requested by Masco (but not more than once
in any calendar month), reasonably detailed information concerning the
availability of credit lines, receivables facilities and letters of
credit described in clause (i)(z) above.
SECTION 8. Amendment of Schedule of Defined Terms. The Schedule of Defined
Terms is hereby amended by:
9
<PAGE>
(i) adding the following defined terms to be inserted in alphabetical
order within the Schedule of Defined Terms:
"Class C Common Stock" means the Class C Common Stock of the
Buyer having the terms set forth in the Amended and Restated
Certificate of Incorporation of the Buyer attached as Exhibit B
hereto.
"Class D Common Stock" means the Class D Common Stock having the
terms set forth in the Amended and Restated Certificate of
Incorporation of the Buyer attached as Exhibit B hereto.
"Common Stock" means the Class A Common Stock, the Class B Common
Stock, the Class C Common Stock and the Class D Common Stock, any
securities into which such Class A Common Stock, Class B Common Stock,
Class C Common Stock or Class D Common Stock shall have been changed,
any securities resulting from any reclassification or recapitalization
of such Class A Common Stock, Class B Common Stock, Class C Common
Stock or Class D Common Stock, and all other securities of any class
or classes (however designated) of the Buyer, the holders of which
have the right, without limitation as to amount, after payment on any
securities entitled to a preference on dividends or other
distributions upon any dissolution, liquidation or winding-up, either
to all or to a share of the balance of payments upon such dissolution,
liquidation or winding-up.
"Guaranteed LCs" has the meaning set forth in ss.12(r) of the
Acquisition Agreement.
"HFG Plan" has the meaning set forth in ss.6(c)(iii) of the
Acquisition Agreement.
"Institutional Stockholder Group" means 399 Venture Partners,
Inc., Associated Madison Companies, Inc., TRV Employees Fund, L.P.,
Greenwich Street Capital, L.P., GSCP Offshore Fund Ltd., The Travelers
Insurance Company, and The Travelers Life and Annuity Company (each
individually, an "Institutional Stockholder Group Member").
10
<PAGE>
"Lyon Stock Purchase Agreement" means the Lyon Stock Purchase
Agreement to be entered into as of the Closing Date between the Buyer
and Wayne B. Lyon, which shall provide for the purchase of certain
securities of the Buyer by Wayne B. Lyon.
"Management Group" means each of the individuals whose name
appears under the heading "Management Group" on the signature pages to
the Stockholders' Agreement.
"Masco Plans" has the meaning set forth in ss.6(c)(ii) of the
Acquisition Agreement.
"Masco Stock Purchase Agreements" means all of the Stock Purchase
Agreements to be entered into as of the Closing Date between Masco and
certain members of the Management Group for the purchase of certain
securities of the Buyer by such members of the Management Group from
Masco.
"New Plans" has the meaning set forth in ss.6(c)(ii) of the
Acquisition Agreement.
"Pooling Agreement" means the Pooling Agreement dated as of the
Closing Date among LFI Receivables Corporation, LFI Servicing
Corporation, as master servicer, and The Chase Manhattan Bank, as
trustee, as in effect on the Closing Date.
"Preferred Stock" means the Series A Preferred Stock, the Series
B Preferred Stock and the Series C Preferred Stock, any securities
into which such Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock shall have been changed, any securities
resulting from any reclassification or recapitalization of such Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, and all other securities of any class or classes (however
designated) of the Buyer, the holders of which have the right to a
preference on dividends or other distributions upon dissolution,
liquidation or winding-up; provided that the Class D Common Stock
shall not be deemed to be Preferred Stock.
11
<PAGE>
"Series A-1 Preferred Stock" has the meaning set forth in ss.2(b)
of the Acquisition Agreement.
"Series A-2 Preferred Stock" has the meaning set forth in ss.2(b)
of the Acquisition Agreement.
"Series C Preferred Stock" means the Series C Preferred Stock
having the terms set forth in the Amended and Restated Certificate of
Incorporation of the Buyer attached as Exhibit B to the Acquisition
Agreement.
(ii) deleting the definition of "Series A Preferred Stock" and replacing it
in its entirety with the following:
"Series A Preferred Stock" means the Series A-1 Preferred Stock
and the Series A-2 Preferred Stock.
SECTION 9. Amendment of Exhibit A. Exhibit A to the Acquisition Agreement
is hereby replaced in its entirety by Exhibit A to this Amendment.
SECTION 10. Amendment of Exhibit B. Exhibit B to the Acquisition Agreement
is hereby replaced in its entirety by Exhibit B to this Amendment.
SECTION 11. Governing Law. This Amendment shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice 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.
SECTION 12. Counterparts; Amendments; Effectiveness. This Amendment may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument. No
amendment of any provision of this Amendment shall be valid unless the same
shall be in writing and signed by the Buyer and Masco. This Amendment shall
become effective as of the date hereof.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
FURNISHINGS INTERNATIONAL INC.
By_____________________
Title:
MASCO CORPORATION
By_____________________
Title:
13
CONFORMED COPY
================================================================================
CREDIT AGREEMENT
dated as of August 5, 1996
Among
FURNISHINGS INTERNATIONAL INC.,
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.,
THE SUBSIDIARY BORROWERS NAMED HEREIN,
THE LENDERS NAMED HEREIN
and
THE CHASE MANHATTAN BANK,
as Swingline Lender, Administrative Agent and
Collateral Agent,
and
CHASE MANHATTAN BANK DELAWARE,
as Issuing Bank
================================================================================
[CS&M Reference No. 6700-402]
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Defined Terms ................................. 2
SECTION 1.02. Terms Generally ............................... 27
ARTICLE II
The Credits
SECTION 2.01. Commitments ................................... 28
SECTION 2.02. Loans ......................................... 28
SECTION 2.03. Borrowing Procedure ........................... 30
SECTION 2.04. Evidence of Debt; Repayment of Loans 30
SECTION 2.05. Fees .......................................... 31
SECTION 2.06. Interest on Loans ............................. 32
SECTION 2.07. Default Interest .............................. 32
SECTION 2.08. Alternate Rate of Interest .................... 33
SECTION 2.09. Termination and Reduction of Commitments 33
SECTION 2.10. Conversion and Continuation of Borrowings 33
SECTION 2.11. Repayment of Term Borrowings .................. 35
SECTION 2.12. Optional Prepayment ........................... 37
SECTION 2.13. Mandatory Prepayments ......................... 38
SECTION 2.14. Reserve Requirements; Change in Circumstances 40
SECTION 2.15. Change in Legality ............................ 41
SECTION 2.16. Indemnity ..................................... 42
SECTION 2.17. Pro Rata Treatment ............................ 43
SECTION 2.18. Sharing of Setoffs ............................ 43
SECTION 2.19. Payments ...................................... 43
SECTION 2.20. Taxes ......................................... 44
SECTION 2.21. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate .............. 46
SECTION 2.22. Swingline Loans ............................... 47
SECTION 2.23. Letters of Credit ............................. 49
<PAGE>
Contents, p. 2
Page
----
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers .......................... 53
SECTION 3.02. Authorization ................................. 53
SECTION 3.03. Enforceability ................................ 53
SECTION 3.04. Governmental Approvals ........................ 54
SECTION 3.05. Financial Statements .......................... 54
SECTION 3.06. No Material Adverse Change .................... 54
SECTION 3.07. Title to Properties; Possession Under Leases 54
SECTION 3.08. Subsidiaries .................................. 55
SECTION 3.09. Litigation; Compliance with Laws .............. 55
SECTION 3.10. Agreements .................................... 56
SECTION 3.11. Federal Reserve Regulations ................... 56
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act .................................. 56
SECTION 3.13. Use of Proceeds ............................... 56
SECTION 3.14. Tax Returns ................................... 57
SECTION 3.15. No Material Misstatements ..................... 57
SECTION 3.16. Employee Benefit Plans ........................ 57
SECTION 3.17. Environmental Matters ......................... 57
SECTION 3.18. Insurance ..................................... 58
SECTION 3.19. Security Documents ............................ 58
SECTION 3.20. Location of Real Property and Leased Premises 59
SECTION 3.21. Labor Matters ................................. 59
SECTION 3.22. Solvency ...................................... 60
ARTICLE IV
Conditions of Lending
SECTION 4.01. All Credit Events ............................. 60
SECTION 4.02. First Credit Event ............................ 61
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties;
Compliance with Laws ......................... 65
SECTION 5.02. Insurance ..................................... 66
SECTION 5.03. Obligations and Taxes ......................... 67
SECTION 5.04. Financial Statements, Reports, etc. ........... 68
SECTION 5.05. Litigation and Other Notices .................. 69
<PAGE>
Contents, p. 3
Page
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SECTION 5.06. Employee Benefits ............................. 70
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections .................................. 70
SECTION 5.08. Use of Proceeds ............................... 70
SECTION 5.09. Compliance with Environmental Laws ............ 70
SECTION 5.10. Preparation of Environmental Reports .......... 70
SECTION 5.11. Further Assurances ............................ 71
SECTION 5.12. Interest Rate Protection ...................... 71
SECTION 5.13. Assets of Holdings ............................ 71
SECTION 5.14. Certificates of Occupancy, Permits and Zoning . 72
SECTION 5.15. Subsidiaries.................................. 72
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness .................................. 73
SECTION 6.02. Liens ......................................... 75
SECTION 6.03. Sale and Lease-Back Transactions .............. 77
SECTION 6.04. Investments, Loans and Advances ............... 77
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions ................................. 79
SECTION 6.06. Dividends and Distributions; Restrictions on
Ability of Subsidiaries to Pay Dividends ..... 81
SECTION 6.07. Transactions with Affiliates .................. 83
SECTION 6.08. Other Indebtedness and Agreements ............. 84
SECTION 6.09. Interest Coverage Ratio ....................... 85
SECTION 6.10. Total Debt Ratio .............................. 85
SECTION 6.11. Net Worth...................................... 86
SECTION 6.12. Capital Expenditures .......................... 86
SECTION 6.13. Bank Accounts ................................. 86
SECTION 6.14. Business of Holdings, Borrowers and
Subsidiaries ................................. 86
SECTION 6.15. Fiscal Year ................................... 87
ARTICLE VII
Events of Default
<PAGE>
Contents, p. 4
Page
----
ARTICLE VIII
The Administrative Agent and the Collateral Agent ... 89
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices ....................................... 92
SECTION 9.02. Survival of Agreement ......................... 93
SECTION 9.03. Binding Effect ................................ 93
SECTION 9.04. Successors and Assigns ........................ 93
SECTION 9.05. Expenses; Indemnity ........................... 96
SECTION 9.06. Right of Setoff ............................... 97
SECTION 9.07. Applicable Law ................................ 97
SECTION 9.08. Waivers; Amendment ............................ 97
SECTION 9.09. Interest Rate Limitation ...................... 98
SECTION 9.10. Entire Agreement .............................. 99
SECTION 9.11. WAIVER OF JURY TRIAL .......................... 99
SECTION 9.12. Severability .................................. 99
SECTION 9.13. Counterparts .................................. 99
SECTION 9.14. Headings ...................................... 99
SECTION 9.15. Jurisdiction; Consent to Service of Process ... 100
SECTION 9.16. Confidentiality................................ 100
SECTION 9.17. Obligations Joint and Several ................. 101
Exhibits and Schedules
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D Form of Indemnity, Subrogation and Contribution
Agreement
Exhibit E Form of Deed of Trust
Exhibit F Form of Holdings Guarantee Agreement
Exhibit G Form of Pledge Agreement
Exhibit H Form of Security Agreement
Exhibit I Form of Subsidiary Guarantee Agreement
Exhibit J-1 Form of Opinion of Morgan Lewis & Bockius
Exhibit J-2 Form of Opinion of John R. Leekley, Esq., Vice President
and General Counsel of Masco Corporation
Exhibit J-3 Form of Opinion of Local Counsel
Exhibit K Terms of Masco Notes
Exhibit L Form of Confidentiality Agreement
Exhibit M Form of Subordination, Nondisturbance and Attornment
Agreement
Exhibit N Form of Note
<PAGE>
Contents, p. 5
Schedule 1 Subsidiary Borrowers
Schedule 1.01(b) Mortgaged Properties
Schedule 1.01(c) Specified HFG Assets
Schedule 1.01(d) Specified HFG Companies
Schedule 2.01 Commitments
Schedule 3.07(b) Possession under Leases
Schedule 3.07(c) Condemnation Proceedings
Schedule 3.07(d) Rights of First Refusal, Options and Other Rights
Regarding Interests in Mortgaged Properties
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
Schedule 3.17 Environmental Matters
Schedule 3.18 Insurance
Schedule 3.19(d) Mortgage Filing Offices
Schedule 3.20(a) Owned Real Property
Schedule 3.20(b) Leased Real Property
Schedule 3.21 Labor Matters
Schedule 4.02(a) Local Counsel
Schedule 4.02(z) Sources and Uses of Funds
Schedule 6.01 Indebtedness
Schedule 6.02(a) Liens
Schedule 6.04(l) Current Investments, Loans and Advances
Schedule 6.04(m) Customer Investments, Loans and Advances
Schedule 6.04(n) Supplier Loans and Advances
Schedule 6.07 Transactions with Affiliates
<PAGE>
CREDIT AGREEMENT dated as of August 5, 1996, among
LIFESTYLE FURNISHINGS INTERNATIONAL LTD., a Delaware
corporation (the "Parent Borrower"); each subsidiary of the
Parent Borrower listed on Schedule 1 hereto (each, a
"Subsidiary Borrower" and collectively, the "Subsidiary
Borrowers"; the Parent Borrower and the Subsidiary Borrowers
are collectively referred to herein as the "Borrowers");
FURNISHINGS INTERNATIONAL INC., a Delaware corporation
("Holdings"); the Lenders (as defined in Article I); THE CHASE
MANHATTAN BANK, a New York banking corporation, as swingline
lender (in such capacity, the "Swingline Lender"), as
administrative agent (in such capacity, the "Administrative
Agent") and as collateral agent (in such capacity, the
"Collateral Agent") for the Lenders; and CHASE MANHATTAN BANK
DELAWARE, as issuing bank (in such capacity, the "Issuing
Bank").
Pursuant to the Acquisition Agreement dated as of March 29, 1996, as
amended (the "Acquisition Agreement"), between Holdings and Masco Corporation, a
Delaware corporation ("Masco"), (a) Holdings will acquire from Masco all the
capital stock of each of the Subsidiary Borrowers, (b) Holdings will acquire,
through one or more mergers, the Specified HFG Companies (such term and each
other capitalized term used but not defined herein having the meaning given it
in Article I), with Holdings as the surviving corporation in such mergers, and
(c) all outstanding intercompany Indebtedness of the Subsidiary Borrowers, the
Specified HFG Companies and their respective subsidiaries owed to Masco will be
repaid in full (collectively, the "Acquisition"), all for aggregate
consideration of approximately $1,080,000,000, consisting of (i) approximately
$705,300,000 in cash (including the repayment of intercompany Indebtedness owed
to Masco), (ii) the issuance by Holdings to Masco of $285,000,000 (subject to
increase in accordance with the terms of the Acquisition Agreement) of Masco
Notes, (iii) the issuance to Masco of capital stock of Holdings having an
aggregate value of approximately $59,700,000 and (iv) the assumption by the
Parent Borrower and the Subsidiaries of not more than $30,000,000 of
Indebtedness.
In connection with the Acquisition, (a) 399 Venture Partners Inc., a
Delaware corporation ("399 Venture Partners"), together with certain
institutional investors and members of management, will make a cash capital
contribution to Holdings in an aggregate amount of approximately $65,300,000
(the "Equity Contribution"), (b) Holdings will contribute to the Parent Borrower
(which, in turn, will contribute to LHL) all the capital stock of each of the
Subsidiary Borrowers (other than LHL), all the capital stock of the companies
referred to in Section 5.15 and the Specified HFG Assets, (c) the Parent
Borrower will issue the Subordinated Notes in a public offering or Rule 144A
offering and (d) Holdings, the Receivables Subsidiary and certain other
Subsidiaries will enter into the Bridge Receivables Financing.
The Borrowers have requested the Lenders to extend credit in the form of
(a) Tranche A Term Loans on the Closing Date, in an aggregate principal amount
of $125,000,000, (b) Tranche B Term Loans on the Closing Date, in an aggregate
principal amount of $175,000,000, and (c) Revolving Loans at any time and from
time to time prior to the Revolving Credit Maturity Date, in an aggregate
principal amount at any time outstanding not in excess of $150,000,000. The
Borrowers have requested the Swingline Lender to extend credit, at any time and
from time to time prior to the
<PAGE>
2
Revolving Credit Maturity Date, in the form of Swingline Loans, in an aggregate
principal amount at any time outstanding not in excess of $25,000,000. The
Borrowers have requested the Issuing Bank to issue letters of credit, in an
aggregate face amount at any time outstanding not in excess of $50,000,000, to
support payment obligations incurred in the ordinary course of business by the
Borrowers and the Subsidiaries.
The proceeds of the Term Loans are to be used, together with a portion of
the proceeds of Revolving Loans and the proceeds of the initial sale of
receivables under the Bridge Receivables Financing to be made on the Closing
Date, solely (a) to pay the cash consideration to be paid in connection with the
Acquisition (including the repayment of intercompany Indebtedness owed to Masco)
and (b) to pay related fees and expenses. The proceeds of the Revolving Loans
(other than the Revolving Loans used for the purposes specified in the
immediately preceding sentence) and the Swingline Loans are to be used for
general corporate purposes of the Borrowers and the Subsidiaries.
The Lenders and the Swingline Lender are willing to extend such credit to
the Borrowers and the Issuing Bank is willing to issue letters of credit for the
account of the Borrowers, in each case on the terms and subject to the
conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"ABR Term Borrowing" shall mean a Borrowing comprised of ABR Term Loans.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in
effect for such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to such term
in Section 2.05(b).
<PAGE>
3
"Administrative Questionnaire" shall mean an Administrative Questionnaire
in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of
the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. If for any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any
reason, including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms of the definition thereof,
the Alternate Base Rate shall be determined without regard to clause (b) or (c),
or both, of the immediately preceding sentence, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the
Federal Funds Effective Rate shall be effective on the effective date of such
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively. The term "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as its prime
rate in effect at its principal office in New York City; each change in the
Prime Rate shall be effective on the date such change is publicly announced as
being effective. The term "Base CD Rate" shall mean the sum of (a) the product
of (i) the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate. The term "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day,
the average of the quotations for the day for such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Applicable Percentage" shall mean, for any day, with respect to (a) any
Eurodollar Loan, or (b) any ABR Loan, as the case may be, the applicable
percentage set forth below under the caption (i) "Eurodollar Spread" or (ii)
"ABR Spread", respectively, based upon the Total Debt Ratio as of the last day
of the Parent Borrower's most recently ended fiscal quarter:
<PAGE>
4
Eurodollar ABR
Total Debt Ratio Spread Spread
- ---------------- ------ ------
Category 1
Greater than 2.50% 1.50%
3.75 to 1.00
Category 2
Less than or equal to 2.25% 1.25%
3.75 to 1.00
Category 3
Less than or equal to 2.00% 1.00%
3.25 to 1.00
Category 4
Less than or equal to 2.75 1.75% .75%
to 1.00
Category 5
Less than or equal to 1.50% .50%
2.25 to 1.00
Each change in the Applicable Percentage resulting from a change in the
Total Debt Ratio shall be effective with respect to all Tranche A Term Loans,
all Revolving Loans and all Letters of Credit outstanding on and after the date
of delivery to the Administrative Agent of the certificate required by Section
5.04(d) (which shall include attached thereto the financial statements and
certificates required by Section 5.04(a) or (b)) indicating such change until
the date immediately preceding the next date of delivery of such certificate
indicating another such change. Notwithstanding the foregoing, (a) at any time
during which the Parent Borrower has failed to deliver such certificate required
by Section 5.04(d) and the financial statements and certificates required by
Section 5.04(a) or (b), as applicable, or (b) at any time after the occurrence
and during the continuance of an Event of Default, the Total Debt Ratio shall be
deemed to be in Category 1 for purposes of determining the Applicable
Percentage.
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the
Administrative Agent as the then current net annual assessment rate that will be
employed in determining amounts payable by the Administrative Agent to the
Federal Deposit Insurance Corporation (or any successor thereto) for insurance
by such Corporation (or such successor) of time deposits made in dollars at the
Administrative Agent's domestic offices.
"Asset Sale" shall mean the sale, transfer or other disposition (by way of
merger or otherwise) by any Loan Party or any of the Subsidiaries to any person
other than any Loan Party of (a) any Capital Stock of any of the Subsidiaries or
(b) any other assets of any Loan Party or any of the Subsidiaries, provided that
none of (i) any asset sale or series of related asset sales described in clause
(b) above for consideration, at fair market value, of less than $100,000, (ii)
any sale of accounts receivable (or any related assets) under any Permitted
Receivables Financing, (iii) any Equity Issuance
<PAGE>
5
or (iv) any sale, transfer or other disposition of assets pursuant to Section
6.05(a), (b), (c), (d), (e), (f), (h) or (l) shall be deemed an "Asset Sale" for
purposes of this Agreement.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrowers in accordance
with the terms of Section 2.03 and substantially in the form of Exhibit C.
"Bridge Receivables Financing" shall mean (a) the sale by Holdings and
certain of the Subsidiaries of accounts receivable to the Receivables Subsidiary
pursuant to the Receivables Sale Agreement and the capitalization of the
Receivables Subsidiary with a demand note of LHL not to exceed $5,000,000, (b)
the sale of such accounts receivable (or participation interests therein) by the
Receivables Subsidiary pursuant to the Receivables Pooling Agreement and (c) the
servicing of such accounts receivable pursuant to the Receivables Servicing
Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or day on
which banks in New York City are authorized or required by law to close;
provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean, for any period, without duplication,
the sum of (a) the aggregate of all expenditures (whether paid in cash or other
consideration) by Holdings, the Parent Borrower and the Subsidiaries during such
period that, in accordance with GAAP, are or should be included in "additions to
property, plant or equipment" or similar items reflected in the consolidated
statement of cash flows of Holdings, the Parent Borrower and the Subsidiaries
for such period and (b) to the extent not covered by clause (a) above, the
aggregate of all expenditures by Holdings, the Parent Borrower and its
Subsidiaries to acquire by purchase or otherwise the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any person (it
being understood that this clause (b) does not include any investment in a
person that is not a subsidiary at the time of such investment and that will not
become a subsidiary as a result of such investment); provided, however, that
Capital Expenditures shall not include (i) expenditures relating to the
development, purchase or acquisition of sample fabric books, (ii) in the case of
clause (b) above, the portion of such expenditures allocable in accordance with
GAAP to net current assets, (iii) expenditures of proceeds of insurance
settlements, condemnation awards and other settlements in respect of lost,
destroyed, damaged or condemned assets, equipment or other property to the
extent such expenditures are made to replace or repair such lost, destroyed,
damaged or condemned assets, equipment or other property or otherwise to acquire
assets or properties useful in the business of the Loan Parties and the
Subsidiaries within 12 months of receipt of such proceeds or (iv) with respect
to any person, expenditures that are
<PAGE>
6
accounted for as capital expenditures of such person and that actually are paid
for by a third party and for which neither such person nor any subsidiary of
such person has provided or is required to provide or incur, directly or
indirectly, any consideration or obligation to such third party.
"Capital Lease Obligations" of any person shall mean an obligation of such
person that is required to be classified and accounted for as a capital lease
for financial reporting purposes in accordance with GAAP, and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
GAAP.
"Capital Stock" shall mean, with respect to any person, any and all
shares, interests, rights to purchase, warrants, options, participation or other
equivalents of or interests in (however designated) equity of such person,
including any preferred stock, any limited or general partnership interest and
any limited liability company membership interest, but excluding any debt
securities convertible into such equity. For purposes of clauses (a)(i) and
(a)(ii) of the definition of the term "Change in Control" and the definition of
the term "Equity Issuance", Capital Stock of Holdings shall be deemed to exclude
the Class D Common Stock of Holdings.
"Casualty" shall have the meaning assigned to such term in the Mortgages.
A "Change in Control" shall be deemed to have occurred if:
(a) prior to an Initial Public Offering:
(i) immediately after giving effect to any transfer by any 399
Investor of any shares of Capital Stock or Debentures of Holdings or
any issuance of additional shares of Capital Stock of Holdings, the
399 Investors shall cease to own shares of Capital Stock and
Debentures of Holdings, beneficially and of record, having an
aggregate value (determined as used herein by reference to (A) in
the case of common stock and convertible preferred stock, the
greater of the fair market value thereof and the original purchase
price thereof (it being understood that the original purchase price
for all the common stock and convertible preferred stock of Holdings
as of the Closing Date is $5,000,000), (B) in the case of any other
preferred stock, the stated value thereof plus any accrued but
unpaid dividends thereon, and (C) in the case of Debentures, the
aggregate principal amount thereof plus any accrued but unpaid
interest thereon) at least equal to the lesser of (x) $35 million
and (y) 24% of the aggregate value of all outstanding Capital Stock
and Debentures of Holdings (excluding any such outstanding Capital
Stock or Debentures then owned by the Management Investors);
(ii) immediately after giving effect to any transfer by any
Masco Investor of any shares of Capital Stock or Debentures of
Holdings or any issuance of additional shares of Capital Stock of
Holdings, the Masco Investors shall cease to own shares of Capital
Stock and Debentures of Holdings, beneficially and of record, having
an aggregate value (determined as provided in clause (i) above) at
least equal to the lesser of (x) $30 million and (y) 21% of the
aggregate value of all outstanding Capital Stock and Debentures of
Holdings (excluding any such outstanding Capital Stock or Debentures
then owned by the Management Investors);
<PAGE>
7
(iii) except in the case of any vacancy for 30 days or less
resulting from the death or resignation of any director of Holdings,
seats on the Board of Directors of Holdings having more than 36% of
the total voting power of the Board of Directors of Holdings shall
at any time be occupied by persons who were neither (A) nominated by
399 Venture Partners, acting on behalf of the Institutional
Investors as authorized by the Stockholders' Agreement, or by the
Nominating Committee of Holdings nor (B) appointed by directors so
nominated;
(iv) except in the case of any vacancy for 30 days or less
resulting from the death or resignation of any director of Holdings,
seats on the Nominating Committee of Holdings having more than
one-third of the total voting power of such Nominating Committee
shall at any time be occupied by persons who were neither (A)
directors nominated by 399 Venture Partners, acting on behalf of the
Institutional Investors as authorize by the Stockholders' Agreement,
or by such Nominating Committee nor (B) appointed by directors so
nominated; or
(v) 399 Venture Partners shall at any time cease to have the
right, through the ownership of voting securities, by contract or
otherwise (which may be a contractual right, exercisable upon 399
Venture Partners's determination on behalf of the Institutional
Investors, that the Institutional Investors may do so in compliance
with applicable law or regulation), to elect directors of Holdings
having a majority of the total voting power of the Board of
Directors of Holdings;
(b) following an Initial Public Offering:
(i) the 399 Investors shall cease to own at any time,
beneficially and of record, (A) at least 13% of the outstanding
common stock of Holdings and (B) at least 13% of the combined voting
power of all classes of Capital Stock of Holdings;
(ii) the Masco Investors shall cease to own at any time,
beneficially and of record, (A) at least 12% of the outstanding
common stock of Holdings and (B) at least 12% of the combined voting
power of all classes of Capital Stock of Holdings;
(iii) during any period of two consecutive years beginning
after the Closing Date, individuals who at the beginning of such
period constituted the Board of Directors of Holdings (together with
any new directors whose election was approved by a majority of the
directors then in office who were either directors at the beginning
of such period or whose election was previously so approved) cease
for any reason to have a majority of the total voting power of the
Board of Directors of Holdings; or
(iv) any person or group (within the meaning of Rule 13d-5 of
the Securities Exchange Act of 1934 as in effect on the date hereof)
(other than the 399 Investors, the Masco Investors and the
Management Investors) shall own directly or indirectly, beneficially
or of record, at any time a percentage of the outstanding shares of
common stock of Holdings or of the combined voting power of all
classes of Capital Stock of Holdings, in either case in excess of
the percentage then owned, beneficially
<PAGE>
8
and of record, by the 399 Investors, the Masco Investors and the
Management Investors collectively;
(c) any change in control (or similar event, however denominated)
with respect to Holdings or the Parent Borrower shall occur under and as
defined in (i) the Masco Notes, (ii) the Subordinated Notes, (iii) the
Debentures, (iv) any class of preferred stock of Holdings or (v) any other
agreement or instrument evidencing Indebtedness of Holdings, the Parent
Borrower or any of the Subsidiaries having, in the case of clause (v), an
aggregate principal amount in excess of $30,000,000;
(d) Holdings shall cease to own and control, directly, beneficially
and of record, 100% of the outstanding Capital Stock of the Parent
Borrower, free and clear of all Liens (other than Liens under the Loan
Documents); or
(e) the Parent Borrower shall cease to own and control, directly or
indirectly through one or more wholly owned Subsidiaries, beneficially and
of record, 100% of the outstanding Capital Stock of each Subsidiary
Borrower, free and clear of all Liens (other than Liens under the Loan
Documents), other than any Subsidiary Borrower all the Capital Stock of
which has been sold in a transaction permitted by Section 6.05.
"Citicorp" shall mean Citicorp, a Delaware corporation.
"Class D Common Stock" shall mean the Class D Common Stock of Holdings the
dividends, voting and other rights of which are designed to track the
performance of Simmons.
"Closing Date" shall mean the date of the first Credit Event.
"Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, as amended from time to time.
"Collateral" shall mean all the "Collateral" as defined in any Security
Document and shall also include the Mortgaged Properties.
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment and/or Term Loan Commitment and with respect to the
Swingline Lender, the Swingline Commitment.
"Commitment Fee" shall have the meaning assigned to such term in Section
2.05(a).
"Commitment Letter" shall mean the Commitment Letter dated March 29, 1996,
as amended, between Holdings on the one hand and The Chase Manhattan Bank (as
successor in interest to Chemical Bank) and Chase Securities Inc. (as successor
in interest to Chemical Securities Inc.) on the other hand.
"Condemnation" shall have the meaning assigned to such term in the
Mortgages.
<PAGE>
9
"Condemnation Proceeds" shall have the meaning assigned to such term in
the Mortgages.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Parent Borrower dated May 1996, as supplemented by
a supplement to such Confidential Information Memorandum dated July 19, 1996.
"Consolidated Current Assets" shall mean, at any date of determination,
all assets (other than cash and cash-equivalents) that would, in accordance with
GAAP, be classified on a consolidated balance sheet of Holdings, the Parent
Borrower and the Subsidiaries as current assets at such date of determination.
"Consolidated Current Liabilities" shall mean, at any date of
determination, all liabilities (other than the current portion of long-term
Indebtedness) that would, in accordance with GAAP, be classified on a
consolidated balance sheet of Holdings, the Parent Borrower and the Subsidiaries
as current liabilities at such date of determination.
"Consolidated EBITDA" shall mean, for any period, the Consolidated Net
Income for such period, plus, without duplication, to the extent deducted in
computing Consolidated Net Income, the sum of (a) income tax expense, (b)
interest expense (including interest-equivalent costs associated with any
Permitted Receivables Financing, whether accounted for as interest expense or
loss on the sale of receivables), (c) depreciation and amortization expense,
including amortization of sample fabric books, (d) any extraordinary losses, (e)
any non-cash charges or non-cash losses and (f) cash restructuring charges
minus, without duplication, to the extent added in computing such Consolidated
Net Income, (i) any interest income, (ii) any extraordinary gains and (iii) any
non-cash income or any non-cash gains, all as determined on a consolidated basis
with respect to Holdings, the Parent Borrower and the Subsidiaries in accordance
with GAAP. Notwithstanding anything herein to the contrary, the aggregate amount
of cash restructuring charges added back to Consolidated Net Income in the
determination of Consolidated EBITDA for any period shall not exceed $3,500,000.
"Consolidated Interest Expense" shall mean, for any period, the gross
interest expense accrued or paid by the Parent Borrower and the Subsidiaries
during such period, as determined on a consolidated basis in accordance with
GAAP, plus interest-equivalent costs associated with any Permitted Receivables
Financing, whether accounted for as interest expense or loss on the sale of
receivables, provided that for purposes of this Agreement, "Consolidated
Interest Expense" shall not include (i) the Fees payable hereunder, (ii)
expenses relating to the Transactions or amortization thereof and (iii)
penalties and premiums associated with any prepayment of Indebtedness.
"Consolidated Net Income" shall mean, for any period, net income or loss
of Holdings, the Parent Borrower and the Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP, provided that there shall be
excluded (a) the net income (or loss) of any person in which any other person
(other than Holdings, the Parent Borrower, any wholly owned Subsidiary or any
director holding qualifying shares or any nominee holding shares for the benefit
of the Parent Borrower in compliance with applicable law) has an equity
interest, except that (i) Holdings's, the Parent Borrower's or such Subsidiary's
equity in the net income of any such person shall be included in determining
Consolidated Net Income to the extent of the amount of dividends, other
distributions or payments in respect of loans actually paid to Holdings, the
Parent Borrower or any of the Subsidiaries,
<PAGE>
10
as the case may be, by such person during such period, provided that if the
ownership of such equity interest by such other person is required by local
ownership laws in any foreign country, Holdings's, the Parent Borrower's or such
Subsidiary's equity in the net income of any such person shall be included in
determining Consolidated Net Income to the extent that cash could have been
distributed by such person during such period to Holdings, the Parent Borrower
or such Subsidiary, as the case may be, as a dividend and (ii) Holdings's or the
Parent Borrower's equity in a net loss of any such person for such period shall
be included in determining Consolidated Net Income; (b) the net income (or loss)
of any person for any period prior to the date it becomes a Subsidiary or is
merged into or consolidated with Holdings, the Parent Borrower or any of the
Subsidiaries or the date that person's assets are acquired by Holdings, the
Parent Borrower or any of the Subsidiaries, (c) any after tax gains or losses
attributable to sales of assets out of the ordinary course of business and (d)
any interest expense of Holdings in respect of the Masco Notes.
"Consolidated Net Worth" shall mean, as at any date of determination, the
consolidated stockholders' equity of the Parent Borrower and the Subsidiaries,
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" shall mean, at any date of determination,
Consolidated Current Assets at such date of determination minus Consolidated
Current Liabilities at such date of determination.
"Control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Credit Event" shall have the meaning assigned to such term in Section
4.01.
"Debentures" shall mean any junior subordinated debentures issued by
Holdings in exchange for shares of Series A Preferred Stock of Holdings on the
terms and subject to the conditions set forth in the articles of incorporation
of Holdings.
"Default" shall mean any event or condition that upon notice, lapse of
time or both would constitute an Event of Default.
"Disqualified Stock" shall mean, with respect to any person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to ninety-one days
after the Tranche A Maturity Date. Disqualified Stock shall not include any
Capital Stock that is not otherwise Disqualified Stock if by its terms the
holders thereof have the right to require the issuer to repurchase such stock
upon a change of control.
"dollars" or "$" shall mean lawful money of the United States of America.
<PAGE>
11
"Domestic Subsidiary" shall mean any Subsidiary incorporated or organized
under the laws of the United States of America, any State thereof or the
District of Columbia.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery action or
other cause of action by, or on behalf of, any Governmental Authority or any
person for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, property damage, natural
resource damages, nuisance, pollution, any adverse effect on the environment
caused by any Hazardous Material, or for fines, penalties or restrictions,
resulting from or based upon (a) the existence, or the continuation of the
existence, of a Release (including sudden or non-sudden, accidental or
nonaccidental Releases), (b) exposure to any Hazardous Material, (c) the
presence, use, handling, transportation, storage, treatment or disposal of any
Hazardous Material or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
Release or threatened Release of any Hazardous Material or to health and safety
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. ss.ss. 6901 et seq., the Federal Water Pollution Control Act, as amended
by the Clean Water Act of 1977, 33 U.S.C. ss.ss. 1251 et seq., the Clean Air Act
of 1970, as amended 42 U.S.C. ss.ss. 7401 et seq., the Toxic Substances Control
Act of 1976, 15 U.S.C. ss.ss. 2601 et seq., the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. ss.ss. 651 et seq., the Emergency Planning
and Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 et seq., the
Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss.ss. 300(f) et seq.,
the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss. 5101 et seq., and
any similar or implementing state or local law, and all amendments or
regulations promulgated under any of the foregoing.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance or filing required by or from any Governmental
Authority pursuant to any Environmental Law.
"Equity Issuance" shall mean any issuance or sale by Holdings of any
shares of Capital Stock of Holdings, except for (a) any issuance or sale to the
Parent Borrower or any Subsidiary, (b) sales or issuances of Capital Stock to
management or key employees of Holdings, the Parent Borrower or any Subsidiary
under any employee stock option, stock purchase, stock grant or other similar
incentive or employee benefit plan in existence from time to time or (c)
issuances of Capital Stock by Holdings upon the conversion, exercise or exchange
of any class or series of Holdings' Capital Stock pursuant to
<PAGE>
12
the terms thereof as set forth in the Certificate of Incorporation of Holdings
as the same may be in effect at such time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 and
the rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with any Loan Party, is treated as a single
employer under Section 414(b) or (c) of the Code, or solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan; (b)
the adoption of any amendment to a Plan that would require the provision of
security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the incurrence of any liability under Title IV of ERISA
with respect to the termination of any Plan or the withdrawal or partial
withdrawal of any Loan Party or any of its ERISA Affiliates from any Plan or
Multiemployer Plan; (f) the receipt by any Loan Party or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (g)
the receipt by any Loan Party or any ERISA Affiliate of any notice concerning
the imposition of Withdrawal Liability or a determination that a Multiemployer
Plan is, or is expected to be, insolvent or in reorganization, within the
meaning of Title IV of ERISA; (h) the occurrence of a "prohibited transaction"
with respect to which any Loan Party or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which any Loan Party or any such Subsidiary could otherwise be
liable; and (i) any other event or condition with respect to a Plan or
Multiemployer Plan or any plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of any Loan Party.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or Eurodollar
Term Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
"Eurodollar Term Borrowing" shall mean a Borrowing comprised of Eurodollar
Term Loans.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
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13
"Excess Cash Flow" shall mean, for any fiscal year, Consolidated EBITDA of
Holdings, the Parent Borrower and the Subsidiaries on a consolidated basis for
such fiscal year, minus, without duplication, (a) cash interest paid during such
fiscal year (including interest-equivalent costs that are associated with any
Permitted Receivables Financing, whether accounted for as interest expense or
loss on the sale of receivables), (b) scheduled principal repayments of Total
Debt made during such year, (c) voluntary prepayments of Term Loans during such
fiscal year, (d) permitted Capital Expenditures by Holdings, the Parent Borrower
and the Subsidiaries on a consolidated basis during such fiscal year that are
paid in cash (provided that this clause (d) shall not include Capital
Expenditures made during such fiscal year from any prior fiscal year's Excess
Cash Flow pursuant to Section 6.12(B)), (e) taxes paid in cash by Holdings, the
Parent Borrower and the Subsidiaries on a consolidated basis during such fiscal
year, (f) cash payments made by Holdings to Simmons pursuant to the Tax Sharing
Agreement during such fiscal year, (g) an amount equal to any increase in
Consolidated Working Capital during such fiscal year, (h) capital expenditures
in cash relating to the development, purchase or acquisition of sample fabric
books during such fiscal year, (i) restructuring charges paid in cash during
such fiscal year to the extent included in determining Consolidated EBITDA, (j)
any increase in investments, loans and advances to customers, suppliers and
Joint Ventures permitted pursuant to Section 6.04(m), (n) or (o) during such
fiscal year and (k) to the extent included in Consolidated EBITDA, all non-cash
payments received by Holdings, the Parent Borrower and the Subsidiaries on a
consolidated basis during such fiscal year, plus, without duplication, (i) an
amount equal to any decrease in Consolidated Working Capital during such fiscal
year, (ii) interest income received in cash during such fiscal year, (iii) any
decrease in investments, loans and advances to customers, suppliers and Joint
Ventures permitted pursuant to Section 6.04(m), (n) or (o) during such fiscal
year, (iv) the proceeds of any Capital Lease Obligations, purchase money
Indebtedness and other Indebtedness permitted by Section 6.01 to the extent used
to finance permitted cash Capital Expenditures made during such fiscal year and
(v) to the extent deducted in determining Consolidated EBITDA, all non-cash
payments made by Holdings, the Parent Borrower and the Subsidiaries on a
consolidated basis during such fiscal year.
"Exchange Rate Protection Agreement" shall mean any currency hedging
agreement or arrangement designed to protect the Borrowers against fluctuations
in currency exchange rates and not for speculation.
"Excluded Taxes" shall have the meaning assigned to such term in Section
2.20.
"Fee Letter" shall mean the Fee Letter dated March 29, 1996, as amended,
between Holdings on the one hand and The Chase Manhattan Bank (as successor in
interest to Chemical Bank) and Chase Securities Inc. (as successor in interest
to Chemical Securities Inc.) on the other hand.
"Fees" shall mean the Commitment Fees, the Administrative Agent Fees, the
L/C Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, treasurer or controller of such
corporation.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
<PAGE>
14
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis. All accounting terms shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Section 1.02.
"Governmental Authority" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Guarantee of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
is made and (b) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Guarantee, unless
such primary obligation and the maximum amount for which such guaranteeing
person may be liable are not stated or determinable, in which case the amount of
such Guarantee shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Parent Borrower in
good faith.
"Guarantee Agreements" shall mean the Holdings Guarantee Agreement and the
Subsidiary Guarantee Agreement.
"Guarantors" shall mean Holdings and the Subsidiary Guarantors.
"Hazardous Materials" shall mean all explosive or radioactive substances
or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid or
gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.
"HFG Companies" shall mean the Subsidiary Borrowers and the Specified HFG
Companies.
"Holdings Guarantee Agreement" shall mean the Holdings Guarantee
Agreement, substantially in the form of Exhibit F, made by Holdings in favor of
the Collateral Agent for the benefit of the Secured Parties.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person upon which interest charges are customarily
<PAGE>
15
paid (excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (d) all obligations of such person under
conditional sale or other title retention agreements relating to property or
assets purchased by such person, (e) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable and accrued obligations incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed; provided, however, that the
amount of Indebtedness of such person shall be the lesser of (i) the fair market
value of such asset at such date of determination and (ii) the amount of such
Indebtedness, (g) all Guarantees by such person of Indebtedness of others, (h)
all Capital Lease Obligations of such person, (i) all obligations of such person
in respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements and (j) all
obligations of such person as an account party in respect of letters of credit
and bankers' acceptances. The Indebtedness of any person shall include the
Indebtedness of any partnership in which such person is a general partner, other
than to the extent that the instrument or agreement evidencing such Indebtedness
expressly limits the liability of such person in respect thereof.
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among the Borrowers, the Subsidiary Guarantors and the Collateral
Agent.
"Initial Public Offering" shall mean a fully distributed initial public
offering of common stock of Holdings pursuant to an effective registration
statement under the Securities Act of 1933.
"Institutional Investors" shall mean 399 Venture Partners and certain
other institutional investors.
"Insurance Proceeds" shall have the meaning assigned to such term in the
Mortgages.
"Intercompany Indebtedness" shall mean any Indebtedness of (a) any Loan
Party or (b) any of the Subsidiaries, that, in any such case, is owing to any
Loan Party.
"Interest Coverage Ratio" shall have the meaning assigned to such term in
Section 6.09.
"Interest Rate Protection Agreement" shall mean any interest rate hedging
agreement or arrangement designed to protect the Borrowers against fluctuations
in interest rates and not for speculation.
"Interest Payment Date" shall mean, with respect to any Loan, the last day
of the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurodollar Borrowing with an Interest Period of more than
three months' duration, each day that would have been an Interest Payment Date
had successive Interest Periods of three months' duration been applicable to
such Borrowing, and, in addition, the date of any prepayment of a Eurodollar
Borrowing or conversion of such Borrowing to a Borrowing of a different Type.
<PAGE>
16
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter (or 9 or 12
months if such 9- or 12- month period is consented to by each Lender), as the
applicable Borrower may elect and (b) as to any ABR Borrowing, the period
commencing on the date of such Borrowing and ending on the earliest of (i) the
next succeeding March 31, June 30, September 30 or December 31 and (ii) the
Revolving Credit Maturity Date, the Tranche A Maturity Date or the Tranche B
Maturity Date, as applicable; provided, however, that if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the first day
of an Interest Period to but excluding the last day of such Interest Period.
"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05(c).
"Joint Venture" shall mean any person of which securities or other
ownership interests representing at least 20% but no greater than 50% of the
equity or ordinary voting power are owned, controlled or held by Holdings, the
Parent Borrower or any Subsidiary, provided that neither Chang Chun Universal
Flooring Co. Ltd. nor Chang Chun Wood Product Co. Ltd. shall be deemed a "Joint
Venture" for purposes of this Agreement.
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.23.
"L/C Disbursement" shall mean a payment or disbursement made by the
Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Revolving Credit Lender at any time shall
mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(c).
"Lenders" shall mean (a) the financial institutions listed on Schedule
2.01 (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance. Unless the context clearly indicates otherwise, the term "Lenders"
shall include the Swingline Lender.
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.23.
"LHL" shall mean LIFESTYLE HOLDINGS LTD., a Delaware corporation and a
wholly-owned subsidiary of the Parent Borrower.
<PAGE>
17
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such service, or any successor to or
substitute for such service, providing rate quotations comparable to those
currently provided on such page of the Telerate Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
so available at such time for any reason, then the "LIBO Rate" with respect to
such Eurodollar Borrowing for such Interest Period shall be the rate at which
dollar deposits approximately equal in principal amount to the Administrative
Agent's portion of such Eurodollar Borrowing and for a maturity comparable to
such Interest Period are offered to the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loan Documents" shall mean this Agreement, the Letters of Credit, the
Guarantee Agreements, the Security Documents and the Indemnity, Subrogation and
Contribution Agreement.
"Loan Parties" shall mean the Borrowers and the Guarantors.
"Loans" shall mean the Revolving Loans, the Term Loans and the Swingline
Loans.
"Management Agreement" shall mean the Management Agreement dated as of the
Closing Date, between Holdings and the Parent Borrower, as the same may be
amended, supplemented or otherwise renewed or replaced from time to time in
accordance with the terms thereof and hereof.
"Management Investors" shall mean any officers or employees of Holdings,
the Parent Borrower or the Subsidiaries who acquire Capital Stock of Holdings on
or after the Closing Date and any of their Permitted Transferees.
"Margin Stock" shall have the meaning assigned to such term in Regulation
U.
"Masco" shall mean Masco Corporation, a Delaware corporation.
"Masco Investors" shall mean Masco and its Permitted Transferees.
"Masco Notes" shall mean the senior pay-in-kind notes of Holdings issued
to Masco on the Closing Date in an aggregate principal amount of $285,000,000
(subject to increase in accordance with the Acquisition Agreement).
<PAGE>
18
"Master Servicer" shall mean any entity formed for purposes of acting as a
master servicer under any Permitted Receivables Financing, in each case, a
special purpose wholly owned Subsidiary.
"Material Adverse Effect" shall mean (a) a materially adverse effect on
the business, assets, operations, properties or financial condition of Holdings,
the Parent Borrower and the Subsidiaries, taken as a whole, (b) material
impairment of the ability of the Loan Parties to perform their obligations under
the Loan Documents or (c) material impairment of the rights of or remedies
available to the Lenders under any Loan Document.
"Moody's" shall mean Moody's Investors Service, Inc. and its successors.
"Mortgaged Properties" shall mean the owned real properties of the Loan
Parties specified on Schedule 1.01(b).
"Mortgages" shall mean the mortgages, deeds of trust, assignments of
leases and rents, modifications and other security documents delivered pursuant
to clause (i) of Section 4.02(j) or pursuant to Section 5.11, each substantially
in the form of Exhibit E.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which any Loan Party is obligated to contribute.
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the
cash proceeds thereof (including cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring person of Indebtedness or other
obligations relating to the properties or assets that are subject to the Asset
Sale or received in any other non-cash form (collectively, "Deferred Cash")) net
of (i) costs of sale (including payment of legal, title and recording tax
expenses, commissions and other fees directly incurred in connection therewith
and the outstanding principal amount of, premium or penalty, if any, interest
and other amounts on any Indebtedness (other than Loans) required to be repaid
under the terms thereof or by applicable law as a result of such Asset Sale),
(ii) taxes paid or payable in the year such Asset Sale occurs or in the
following year as a result thereof, (iii) amounts (A) provided as a reserve, in
accordance with GAAP, against any liabilities under any indemnification
obligations associated with such Asset Sale or (B) held in escrow pursuant to an
agreement relating to such Asset Sale (provided that, to the extent and at the
time any such amounts are released from such reserve or escrow, such amounts
shall constitute Net Cash Proceeds (net of any taxes paid or payable)) and (iv)
payments to holders of minority interests in the asset subject to such Asset
Sale or in the entity selling the asset and (b) with respect to any Equity
Issuance or any issuance or other disposition of Indebtedness for borrowed
money, the cash proceeds thereof (including Deferred Cash) net of underwriting
discounts and commissions or placement fees, attorneys' fees, accountants' fees,
filing and registration fees, trustee fees and other fees and expenses directly
incurred in connection therewith net of any taxes paid or payable as a result
thereof.
"90%-Owned Foreign Subsidiary" shall mean a Foreign Subsidiary of which
securities (except for directors' qualifying shares) or other ownership
interests representing at least 90% of the equity or at least 90% of the
ordinary voting power are, at the time any determination is being made, owned,
controlled or held by the Parent Borrower or any wholly owned Subsidiary.
<PAGE>
19
"Obligations" shall mean (a) the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by any Borrower under this Agreement in respect of any Letter of Credit,
when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral and
(iii) all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Loan Parties to the Secured
Parties under this Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Borrowers under or pursuant to this Agreement or the other Loan Documents
and (c) all obligations of the Borrowers, monetary or otherwise, under each
Exchange Rate Protection Agreement and each Interest Rate Protection Agreement
entered into with a counterparty that was a Lender (or any Affiliate of a
Lender) at the time such Exchange Rate Protection Agreement and such Interest
Rate Protection Agreement was entered into.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"Perfection Certificate" shall mean the Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.
"Permitted Encumbrances" shall have the meaning assigned to such term in
the Mortgages.
"Permitted Foreign Indebtedness" shall mean Indebtedness under each loan
facility permitting borrowings by or letters of credit issued on behalf of a
Foreign Subsidiary, which may be supported by an unsecured Guarantee of any Loan
Party, a letter of credit issued for the account of any Loan Party or a pledge
of or a security interest in any assets of such Foreign Subsidiary.
"Permitted Foreign Investments" shall mean (a) any investments in, or
loans or advances to, any Foreign Subsidiary by the Parent Borrower or any
Domestic Subsidiary or (b) any letters of credit or Guarantees to support
Permitted Foreign Indebtedness issued by or for the account of the Parent
Borrower or any Domestic Subsidiary. For purposes of determining the amount of
any Permitted Foreign Investment outstanding at any time, (i) the amount of any
investment, loan or advance made pursuant to clause (a) above shall equal the
aggregate amount of the consideration (whether in cash or property, valued at
the time each such investment, loan or advance is made) paid for such
investment, loan or advance (net of any return of capital or principal of (but
not dividends or interest on) such investment, loan or advance) and (ii) the
amount of any Permitted Foreign Investment pursuant to clause (b) above shall be
the face amount of any such letter of credit or Guarantee.
<PAGE>
20
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
(c) investments in (i) certificates of deposit, banker's acceptances
and time deposits maturing within one year from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus profits of not less than
$250,000,000 or (ii) Eurocurrency time deposits maturing within 360 days
from the date of acquisition thereof with any branch or office of (A) any
commercial bank organized under the laws of a country that is a member of
the Organization for Economic Cooperation and Development, and comparable
in credit quality to the investments permitted under the preceding clause
(i), or (B) any Lender;
(d) repurchase obligations with a term of not more than 30 days for,
and secured by, underlying securities of the types described in clause (a)
above entered into with a bank meeting the qualifications described in
clause (c) above;
(e) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by S&P or "A-1" by Moody's;
(f) investments in money market funds complying with the risk
limiting conditions of Rule 2a-7 (or any successor rule) of the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended;
(g) in the case of any Foreign Subsidiary, investments comparable in
credit quality and tenor to those referred to above and customarily used
by corporations for cash management purposes in any jurisdiction outside
the United States of America; and
(h) other investment instruments approved in writing by the Required
Lenders.
"Permitted Receivables Financing" shall mean (a) the Bridge Receivables
Financing and (b) any subsequent financing secured substantially by receivables
(and related assets) originated by Holdings and any Subsidiary in any amount,
provided that (i) any such subsequent receivables financing has a later or equal
final maturity and a longer or equal weighted average life than the Bridge
Receivables Financing, (ii) sales of receivables to any Receivables Subsidiary
are made at fair market
<PAGE>
21
value, (iii) the interest rate applicable to such subsequent receivables
financing shall be a market interest rate (as determined in good faith by the
Board of Directors of the Parent Borrower) as of the time such financing is
entered into, (iv) such financing is non-recourse to the Parent Borrower and its
Subsidiaries (other than any Receivables Subsidiary) except to a limited extent
customary for such financings and (v) the covenants, events of default and other
provisions thereof, collectively, shall be market terms (as determined in good
faith by the board of directors of the Parent Borrower).
"Permitted Transferee" shall mean (a) with respect to 399 Venture
Partners, (i) Citicorp or any direct or indirect wholly owned subsidiary of
Citicorp, and (ii) any officer, director or employee of 399 Venture Partners,
Citicorp or any wholly owned subsidiary of Citicorp; (b) with respect to Masco,
any direct or indirect majority owned subsidiary of Masco (provided Masco
Controls such subsidiary); and (c) with respect to any officer, director or
employee of Holdings, the Parent Borrower, any of the Subsidiaries, 399 Venture
Partners or Citicorp or any wholly owned subsidiary of Citicorp, (i) any spouse
or lineal descendant (including by adoption and stepchildren) of such officer,
director or employee and (ii) any trust, corporation or partnership a majority
in interest of the beneficiaries, stockholders or partners of which consists of
such employees, officers or directors or one or more of the persons described in
clause (c)(i).
"person" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which any Loan Party
is (or, if such plan were terminated, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in the
form of Exhibit G, among Holdings, the Borrowers, the Subsidiaries party thereto
and the Collateral Agent for the benefit of the Secured Parties.
"Properties" shall have the meaning given such term in Section 3.17.
"Pro Rata Percentage" of any Revolving Credit Lender at any time shall
mean the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment.
"Receivables Pooling Agreement" shall mean the Pooling Agreement relating
to a Permitted Receivables Financing, among the Receivables Subsidiary, the
Master Servicer and the Receivables Trustee.
"Receivables Sale Agreement" shall mean the Receivables Sale Agreement
relating to a Permitted Receivables Financing, among the Receivables Subsidiary,
Holdings and the Subsidiaries party thereto.
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22
"Receivables Servicing Agreement" shall mean the Master Servicing
Agreement dated as of the date hereof, among the Receivables Subsidiary, the
Master Servicer, Holdings, the Subsidiaries party thereto and the Receivables
Trustee.
"Receivables Subsidiary" shall mean LFI Receivables Corporation or any
successor thereto or other entity formed for purposes of a Permitted Receivables
Financing, in each case a bankruptcyremote, special-purpose wholly owned
Subsidiary.
"Receivables Trustee" shall mean the trustee on behalf of the holders of
participation interests in the receivables sold pursuant to the Permitted
Receivables Financing.
"Refinancing Indebtedness" shall have the meaning given such term is
Section 6.01(q).
"Register" shall have the meaning given such term in Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions required by any
Governmental Authority or voluntarily undertaken to: (i) cleanup, remove, treat,
abate or in any other way address any Hazardous Material in the environment;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.
"Required Lenders" shall mean, at any time, Lenders having Loans
(excluding Swingline Loans), L/C Exposures, Swingline Exposures and unused
Revolving Credit Commitments representing more than 50% of the sum of all Loans
outstanding (excluding Swingline Loans), the L/C Exposure, the Swingline
Exposure and unused Total Revolving Credit at such time.
"Responsible Officer" of any corporation shall mean any executive officer
or Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving
Loans.
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23
"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans hereunder and participate in
Letters of Credit and Swingline Loans in an aggregate amount at any time
outstanding not in excess of the amount opposite the name of such Lender in the
column entitled "Revolving Credit Commitment" in the table appearing in Schedule
2.01, or the amount in the Assignment and Acceptance pursuant to which such
Lender assumed its Revolving Credit Commitment, as applicable, as such amount
may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any Revolving
Credit Lender at any time, the aggregate principal amount at such time of all
outstanding Revolving Loans made by such Lender, plus the aggregate amount at
such time of such Lender's L/C Exposure, plus the aggregate amount at such time
of such Lender's Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Credit Maturity Date" shall mean August 5, 2002.
"Revolving Loans" shall mean the loans made by the Lenders to the
Borrowers pursuant to clause (c) of Section 2.01. Each Revolving Loan shall be a
Eurodollar Revolving Loan or an ABR Revolving Loan.
"S&P" shall mean Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
"Secured Parties" shall have the meaning assigned to such term in the
Security Agreement.
"Security Agreement" shall mean the Security Agreement, substantially in
the form of Exhibit H, among Holdings, the Borrowers, the Subsidiaries party
thereto and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Mortgages, the Security Agreement, the
Pledge Agreement and each of the security agreements, mortgages and other
instruments and documents executed and delivered pursuant to any of the
foregoing or pursuant to Section 5.11.
"Significant Foreign Subsidiary" shall mean, at any date of determination,
a Foreign Subsidiary with respect to which the sum of (x) such Foreign
Subsidiary's net worth, as determined in accordance with GAAP plus (y) the
aggregate amount of outstanding advances to such Foreign Subsidiary from
Holdings, the Parent Borrower or any Subsidiary as of the last day of the most
recent fiscal period for which financial statements have been delivered pursuant
to Section 5.04(a) or (b) (or June 30, 1996 in the event that the applicable
date of determination occurs prior to the first delivery date of the financial
statements described above) is equal to or greater than $4,000,000.
"Simmons" shall mean Simmons Upholstered Furniture Corporation, a Delaware
corporation and a wholly owned subsidiary of Holdings.
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24
"Specified HFG Assets" shall mean the assets of the Specified HFG
Companies set forth on Schedule 1.01(c).
"Specified HFG Companies" shall mean the corporations set forth on
Schedule 1.01(d).
"Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board or successor banking authority to which the
Administrative Agent is subject (a) with respect to the Base CD Rate, for new
negotiable nonpersonal time deposits in dollars of over $100,000 with maturities
approximately equal to three months, and (b) with respect to the Adjusted LIBO
Rate, for Eurocurrency Liabilities (as defined in Regulation D of the Board).
Such reserve percentages shall include those imposed pursuant to such Regulation
D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities and
to be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to any
Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Stockholders' Agreement" shall mean the Stockholders' Agreement dated as
of the date hereof, among Holdings, Masco, the Institutional Investors and the
Management Investors, as the same may be amended, supplemented or otherwise
renewed or replaced from time to time in accordance with the terms thereof and
hereof.
"Subordinated Notes" shall mean the 10-7/8% Senior Subordinated Notes due
2006 issued on the Closing Date in an aggregate principal amount of not less
than $200,000,000 and shall include any substantially identical notes issued in
the exchange therefor after the Closing Date, pursuant to the indenture
governing such notes.
"subsidiary" shall mean, with respect to any person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any determination
is being made, owned, controlled or held, or (b) that is, at the time any
determination is made, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent, provided that the term "subsidiary", when used in respect of Holdings,
the Parent Borrower or any of its subsidiaries, shall not include any foreign
joint venture in which Holdings, the Parent Borrower or any such subsidiary owns
less than or equal to 50% of the equity interest in such joint venture.
"Subsidiary" shall mean any subsidiary of the Parent Borrower.
"Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee
Agreement, substantially in the form of Exhibit I, made by the Subsidiary
Guarantors in favor of the Collateral Agent for the benefit of the Secured
Parties.
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25
"Subsidiary Guarantor" shall mean each Subsidiary that is or becomes a
party to a Subsidiary Guarantee Agreement.
"Sunbury" shall mean Sunbury Textile Mills, Inc., a Delaware corporation.
"Swingline Commitment" shall mean the commitment of the Swingline Lender
to make loans pursuant to Section 2.22, as the same may be reduced from time to
time pursuant to Section 2.09 .
"Swingline Exposure" shall mean at any time the aggregate principal amount
at such time of all outstanding Swingline Loans. The Swingline Exposure of any
Revolving Credit Lender at any time shall equal its Pro Rata Percentage of the
aggregate Swingline Exposure at such time.
"Swingline Loan" shall mean any loan made by the Swingline Lender pursuant
to Section 2.22(a).
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement dated as of
the Closing Date, among Holdings, the Parent Borrower, the Receivables
Subsidiary and Simmons, as the same may be amended, supplemented or otherwise
renewed or replaced from time to time in accordance with the terms thereof and
hereof.
"Term Borrowing" shall mean a Borrowing comprised of Tranche A Term Loans
or Tranche B Term Loans.
"Term Loan Commitments" shall mean the Tranche A Commitments and the
Tranche B Commitments.
"Term Loan Repayment Amounts" shall mean, for any period, the Tranche A
Term Loan Repayment Amounts and the Tranche B Term Loan Repayment Amounts
payable during such period.
"Term Loan Repayment Dates" shall mean the Tranche A Term Loan Repayment
Dates and the Tranche B Term Loan Repayment Dates.
"Term Loans" shall mean the Tranche A Term Loans and the Tranche B Term
Loans.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 a.m., New York City time,
on such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it.
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26
"399 Investors" shall mean, 399 Venture Partners and its Permitted
Transferees.
"Total Debt" shall mean, at any time, all Indebtedness of the Parent
Borrower and its Subsidiaries of the type referred to in clauses (a), (b), (c),
(e), (h) and (j) (provided that obligations in respect of letters of credit
shall not be included in Total Debt except to the extent of any unreimbursed
drawings thereunder) of the definition of the term "Indebtedness".
"Total Debt Ratio" shall have the meaning assigned to such term in Section
6.10.
"Total Revolving Credit Commitment" shall mean, at any time, the aggregate
amount of the Revolving Credit Lenders' Revolving Credit Commitments, as in
effect at such time.
"Tranche A Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche A Term Loans hereunder in an aggregate
amount at any time outstanding not in excess of the amount opposite the name of
such Lender in the column entitled "Tranche A Commitment" in the table appearing
in Schedule 2.01 or the amount in the Assignment and Acceptance pursuant to
which such Lender assumed its Term Loan Commitment, as applicable.
"Tranche A Maturity Date" shall mean August 5, 2002.
"Tranche A Term Borrowing" shall mean a Borrowing comprised of Tranche A
Term Loans.
"Tranche A Term Loan Repayment Amount" shall have the meaning assigned to
such term in Section 2.11(a)(i).
"Tranche A Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11(a)(i).
"Tranche A Term Loans" shall mean the loans made by the Lenders to the
Borrowers pursuant to Section 2.01(a). Each Tranche A Term Loan shall be either
a Eurodollar Term Loan or an ABR Term Loan.
"Tranche B Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche B Term Loans hereunder in an aggregate
amount at any time outstanding not in excess of the amount opposite the name of
such Lender in the column entitled "Tranche B Commitment" in the table appearing
in Schedule 2.01 or the amount in the Assignment and Acceptance pursuant to
which such Lender assumed its Term Loan Commitment, as applicable.
"Tranche B Maturity Date" shall mean August 5, 2004.
"Tranche B Term Borrowing" shall mean a Borrowing comprised of Tranche B
Term Loans.
"Tranche B Term Loan Repayment Amount" shall have the meaning assigned to
such term in Section 2.11(a)(ii).
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27
"Tranche B Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11(a)(ii).
"Tranche B Term Loans" shall mean the loans made by the Lenders to the
Borrowers pursuant to Section 2.01(b). Each Tranche B Term Loan shall be either
a Eurodollar Term Loan or an ABR Term Loan.
"Transactions" shall have the meaning assigned to such term in Section
3.02.
"Transition Services Agreement" shall mean the Transition Services
Agreement dated as of the Closing Date, between Holdings and Masco, as the same
may be amended, supplemented or otherwise renewed or replaced from time to time
in accordance with the terms thereof and hereof.
"Type", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, the term "Rate" shall include the
Adjusted LIBO Rate and the Alternate Base Rate.
"Upstream Payment" shall have the meaning assigned to such term in Section
6.06(b).
"wholly owned subsidiary" of any person shall mean a subsidiary of such
person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the equity or 100% of the ordinary
voting power or 100% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held by such person or one or
more wholly owned subsidiaries of such person or by such person and one or more
wholly owned subsidiaries of such person. The term "wholly owned", when used to
modify the term "Subsidiary" or "Domestic Subsidiary", shall have a correlative
meaning.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed references
to Articles and Sections of, and Exhibits and Schedules to, this Agreement
unless the context shall otherwise require. Except as otherwise expressly
provided herein, (a) any reference in this Agreement to any Loan Document shall
mean such document as amended, restated, supplemented or otherwise modified from
time to time, (b) all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided,
however, that for purposes of determining compliance with the covenants
contained in Article VI or Section 2.13(d), all accounting terms herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP as in effect on the date of this Agreement and applied on a
basis consistent with the application used in the financial statements referred
to in Section 3.05(a) and (c) (i) all references herein to Holdings on an
unconsolidated basis shall be deemed to exclude any investment by Holdings in
any of
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28
its subsidiaries and (ii) all financial terms and all financial statements with
respect to Holdings, the Parent Borrower and the Subsidiaries on a consolidated
basis shall exclude Simmons.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, each Lender agrees,
severally and not jointly, (a) to make a Tranche A Term Loan to the Borrowers on
the Closing Date in a principal amount not to exceed its Tranche A Commitment,
(b) to make a Tranche B Term Loan to the Borrowers on the Closing Date in a
principal amount not to exceed its Tranche B Commitment and (c) to make
Revolving Loans to the Borrowers, at any time and from time to time on or after
the date hereof, and until the earlier of the Revolving Credit Maturity Date and
the termination of the Revolving Credit Commitment of such Lender in accordance
with the terms hereof, in an aggregate principal amount at any time outstanding
that will not result in (i) such Lender's Revolving Credit Exposure exceeding
(ii) such Lender's Revolving Credit Commitment. Within the limits set forth in
clause (c) of the immediately preceding sentence and subject to the terms,
conditions and limitations set forth herein, the Borrowers may borrow, pay or
prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of Term
Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan (other than Swingline Loans) shall be
made as part of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Tranche A Commitments, Tranche B Commitments or
Revolving Credit Commitments, as applicable; provided, however, that the failure
of any Lender to make any Loan shall not in itself relieve any other Lender of
its obligation to lend hereunder (it being understood, however, that no Lender
shall be responsible for the failure of any other Lender to make any Loan
required to be made by such other Lender). Except for Loans deemed made pursuant
to Section 2.02(f) and Swingline Loans, the Loans comprising any Borrowing shall
be in an aggregate principal amount that is (i) not less than $5,000,000 (in the
case of Eurodollar Borrowings) and $1,000,000 (in the case of ABR Borrowings)
and, in each case, in an integral multiple of $1,000,000 or (ii) equal to the
remaining available balance of the applicable Commitment.
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the applicable Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan, provided that any exercise of such option shall not affect the
obligation of the Borrowers to repay such Loan in accordance with the terms of
this Agreement. Borrowings of more than one Type may be outstanding at the same
time; provided, however, that the Borrowers shall not be entitled to request any
Borrowing that, if made, would result in more than twelve Eurodollar Borrowings
outstanding hereunder at any time. For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.
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29
(c) Except with respect to Loans made pursuant to Section 2.02(f), each
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately available funds to such account in New
York City as the Administrative Agent may designate not later than 12:00 (noon),
New York City time, and the Administrative Agent shall by 1:00 p.m., New York
City time, credit the amounts so received to an account in the name of the
Parent Borrower (acting as agent for and on behalf of itself and the Subsidiary
Borrowers), maintained with the Administrative Agent and designated in the
applicable Borrowing Request or, if a Borrowing shall not occur on such date
because any condition precedent herein specified shall not have been met, return
the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the applicable Borrower on such
date a corresponding amount. If the Administrative Agent shall have so made
funds available then, to the extent that such Lender shall not have made such
portion available to the Administrative Agent, such Lender and the Borrowers
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrowers until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrowers, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, a rate determined by the Administrative Agent
to represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the Borrowers
shall not be entitled to request any Revolving Credit Borrowing, Tranche A Term
Borrowing or Tranche B Term Borrowing if the Interest Period requested with
respect thereto would end after the Revolving Credit Maturity Date, the Tranche
A Maturity Date or the Tranche B Maturity Date, respectively.
(f) If the Issuing Bank shall not have received from the Borrowers the
payment required to be made by Section 2.23(e) within the time specified in such
Section, the Issuing Bank will promptly notify the Administrative Agent of the
L/C Disbursement and the Administrative Agent will promptly notify each
Revolving Credit Lender of such L/C Disbursement and its Pro Rata Percentage
thereof. Each Revolving Credit Lender shall pay by wire transfer of immediately
available funds to the Administrative Agent not later than 2:00 p.m., New York
City time, on such date (or, if such Revolving Credit Lender shall have received
such notice later than 12:00 (noon), New York City time, on any day, not later
than 10:00 a.m., New York City time, on the immediately following Business Day),
an amount equal to such Lender's Pro Rata Percentage of such L/C Disbursement
(it being understood that such amount shall be deemed to constitute an ABR
Revolving Loan of such Lender and such payment shall be deemed to have reduced
the L/C Exposure), and the Administrative Agent will promptly pay to the Issuing
Bank amounts so received by it from the Revolving Credit Lenders. The
Administrative Agent will promptly pay to the Issuing Bank any amounts received
by it from the Borrowers pursuant to Section 2.23(e) prior to the time that any
Revolving Credit Lender makes any
<PAGE>
30
payment pursuant to this paragraph (f); any such amounts received by the
Administrative Agent thereafter will be promptly remitted by the Administrative
Agent to the Revolving Credit Lenders that shall have made such payments and to
the Issuing Bank, as their interests may appear. If any Revolving Credit Lender
shall not have made its Pro Rata Percentage of such L/C Disbursement available
to the Administrative Agent as provided above, such Lender and the Borrowers
severally agree to pay interest on such amount, for each day from and including
the date such amount is required to be paid in accordance with this paragraph to
but excluding the date such amount is paid, to the Administrative Agent for the
account of the Issuing Bank at (i) in the case of the Borrowers, a rate per
annum equal to the interest rate applicable to Revolving Loans pursuant to
Section 2.06(a), and (ii) in the case of such Lender, for the first such day,
the Federal Funds Effective Rate, and for each day thereafter, the Alternate
Base Rate.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other
than a Swingline Loan or a deemed Borrowing pursuant to Section 2.02(f), as to
which this Section 2.03 shall not apply), the applicable Borrower shall notify
the Administrative Agent by telephone of its intent to request a Borrowing and
shall hand deliver or telecopy to the Administrative Agent a duly completed
Borrowing Request (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, three Business Days before a proposed Borrowing,
and (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York
City time, one Business Day before a proposed Borrowing. Each Borrowing Request
shall be irrevocable, shall be signed by or on behalf of the applicable Borrower
and shall specify the following information: (i) whether the Borrowing then
being requested is to be a Term Borrowing or a Revolving Credit Borrowing, and
whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing; (ii)
the date of such Borrowing (which shall be a Business Day), (iii) the number and
location of the account to which funds are to be disbursed (which shall be an
account that complies with the requirements of Section 2.02(c)); (iv) the amount
of such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing,
the Interest Period with respect thereto; provided, however, that,
notwithstanding any contrary specification in any Borrowing Request, each
requested Borrowing shall comply with the requirements set forth in Section
2.02. If no election as to the Type of Borrowing is specified in any such
notice, then the requested Borrowing shall be an ABR Borrowing. If no Interest
Period with respect to any Eurodollar Borrowing is specified in any such notice,
then the applicable Borrower shall be deemed to have selected an Interest Period
of one month's duration. The Administrative Agent shall promptly advise the
applicable Lenders of any notice given pursuant to this Section 2.03 (and the
contents thereof), and of each Lender's portion of the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrowers,
jointly and severally, unconditionally promise to pay to the Administrative
Agent for the account of each Lender (i) the then unpaid principal amount of
each Swingline Loan, on the last day of the Interest Period applicable to such
Loan or, if earlier, on the Revolving Credit Maturity Date, (ii) the principal
amount of each Term Loan of such Lender as provided in Section 2.11 and (iii)
the then unpaid principal amount of each Revolving Loan on the Revolving Credit
Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the Indebtedness of the Borrowers to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.
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(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrowers to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrowers or any Guarantor and each Lender's share thereof.
Notwithstanding any other provision of this Agreement, it is understood and
agreed that each Loan made hereunder shall be deemed made for the account of all
the Borrowers, jointly and severally, and the Administrative Agent and the
Lenders shall not have any obligation to maintain any accounts with respect to
any Borrowing (or any portion thereof) made by any individual Borrower.
(d) The entries made in the accounts maintained pursuant to paragraphs (b)
and (c) above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided, however, that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrowers to repay the Loans in
accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a promissory note payable to such Lender
and its registered assigns, the interests represented by such note shall at all
times (including after any assignment of all or part of such interests pursuant
to Section 9.04) be represented by one or more promissory notes payable to the
payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrowers agree to pay to the Administrative
Agent (for the benefit of each Revolving Credit Lender), on the last day of
March, June, September and December in each year, on each date on which the
Revolving Credit Commitment of such Lender shall expire or be terminated as
provided herein and on the Revolving Credit Maturity Date, a commitment fee (a
"Commitment Fee") on the average daily unused amount of the Revolving Credit
Commitment of such Lender (other than the Swingline Commitment) during the
preceding quarter (or applicable shorter period) at a rate per annum equal to
0.50%. All Commitment Fees shall be computed on the basis of the actual number
of days elapsed in a year of 360 days. The Commitment Fee due to each Lender
shall commence to accrue on the Closing Date and shall cease to accrue on the
date on which the Revolving Credit Commitment of such Lender shall expire or be
terminated as provided herein or on the Revolving Credit Maturity Date. For
purposes of calculating Commitment Fees only, no portion of the Revolving Credit
Commitments shall be deemed utilized under Section 2.17 as a result of
outstanding Swingline Loans.
(b) The Borrowers agree to pay to the Administrative Agent, for its own
account, the administration fee set forth in the Fee Letter at the times and in
the amounts specified therein (the "Administrative Agent Fees").
(c) The Borrowers agree to pay (i) to the Administrative Agent (for the
benefit of each Revolving Credit Lender), on the last day of March, June,
September and December of each year, on the date on which the Revolving Credit
Commitment of such Lender shall be terminated as provided herein and on the
Revolving Credit Maturity Date, a fee (an "L/C Participation Fee") calculated on
such Lender's Pro Rata Percentage of the average daily aggregate L/C Exposure
(excluding the portion thereof attributable to unreimbursed L/C Disbursements)
during the preceding quarter (or applicable
<PAGE>
32
shorter period) at a rate equal to the Applicable Percentage from time to time
used to determine the interest rate on Revolving Credit Borrowings comprised of
Eurodollar Loans pursuant to Section 2.06, and (ii) to the Issuing Bank with
respect to each Letter of Credit the fronting fees, payable on the last day of
March, June, September and December of each year, the date on which the
Revolving Credit Commitment shall be terminated as provided herein and on the
Revolving Credit Maturity Date, set forth in the Commitment Letter plus, in
connection with the issuance, amendment or transfer of any Letter of Credit or
any L/C Disbursement, the Issuing Bank's customary documentary and processing
charges (collectively, the "Issuing Bank Fees"). All L/C Participation Fees and
Issuing Bank Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days.
(d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Revolving Credit Lenders, except that the Issuing Bank Fees shall be
paid directly to the Issuing Bank. Once paid, none of the Fees shall be
refundable under any circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section
2.07, the Loans comprising each ABR Borrowing, including each Swingline Loan,
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate
is determined by reference to the Prime Rate and over a year of 360 days at all
other times) at a rate per annum equal to (i) in the case of Revolving Credit
Borrowings and Tranche A Term Borrowings, the Alternate Base Rate plus the
Applicable Percentage with respect to ABR Loans in effect from time to time and
(ii) in the case of Tranche B Term Borrowings, the Alternate Base Rate plus
2.00%.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to (i)
in the case of Revolving Credit Borrowings and Tranche A Term Borrowings, the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage with respect to Eurodollar Loans in effect from time to
time and (ii) in the case of Tranche B Term Borrowings, the Adjusted LIBO Rate
for the Interest Period in effect for such Borrowing plus 3.00%.
(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
SECTION 2.07. Default Interest. If the Borrowers shall default in the
payment of the principal of, or interest on, any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, or under any other Loan
Document, the Borrowers agree to pay on demand from time to time interest, to
the extent permitted by law, on such defaulted amount to but excluding the date
of actual payment (after as well as before judgment) (a) in the case of overdue
principal, at the rate otherwise applicable to such Loan pursuant to Section
2.06 plus 2.00% per annum and (b) in all other cases, at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be, when the Alternate Base Rate determined by
reference to the
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33
Prime Rate and over a year of 360 days at all other times) equal to the sum of
the Alternate Base Rate plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on or before the day two Business Days prior to the commencement
of any Interest Period for a Eurodollar Borrowing the Administrative Agent shall
have determined, or shall have been advised by the Required Lenders or the
applicable Lender required to make a Eurodollar Loan, that dollar deposits in
the principal amounts of the Loans comprising such Borrowing are not generally
available in the London interbank market, or that the rates at which such dollar
deposits are being offered will not adequately and fairly reflect the cost to
any Lender of making or maintaining its Eurodollar Loan during such Interest
Period, or that reasonable means do not exist for ascertaining the Adjusted LIBO
Rate, the Administrative Agent shall, as soon as practicable thereafter, give
written or telecopy notice of such determination to the Borrowers and the
Lenders. In the event of any such determination, until the Administrative Agent
shall have advised the Borrowers and the Lenders that the circumstances giving
rise to such notice no longer exist, any request by the Borrowers for a
Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a
request for an ABR Borrowing, provided that if the circumstances giving rise to
such determination do not affect all the Lenders, then requests by the Borrowers
for Eurodollar Borrowings may be made to Lenders that are not affected thereby
and such unaffected Lender shall remain obligated to make the Eurodollar Loan
contained in such request on the terms and subject to the conditions set forth
in this Agreement. Each determination by the Administrative Agent hereunder
shall be conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The Term Loan
Commitments shall automatically terminate at 5:00 p.m., New York City time, on
the Closing Date. The Revolving Credit Commitments, the Swingline Commitment and
the L/C Commitment shall automatically terminate on the Revolving Credit
Maturity Date. Notwithstanding the foregoing, all the Commitments shall
automatically terminate at 5:00 p.m., New York City time, on August 15, 1996, if
the initial Credit Event shall not have occurred by such time.
(b) Upon at least three Business Days' prior irrevocable notice to the
Administrative Agent given by telephone (promptly confirmed by written or
telecopy notice), the Borrowers may at any time in whole permanently terminate,
or from time to time in part permanently reduce the Revolving Credit
Commitments; provided, however, that (i) each partial reduction of the Revolving
Credit Commitments shall be in an integral multiple of $1,000,000 and in a
minimum amount of $5,000,000 and (ii) the Total Revolving Credit Commitment
shall not be reduced to an amount that is less than the Aggregate Revolving
Credit Exposure at the time.
(c) Each reduction in the Total Revolving Credit Commitment hereunder
shall be made ratably among the Revolving Credit Lenders in accordance with
their respective Revolving Credit Commitment. The Borrowers shall pay to the
Administrative Agent for the account of the applicable Lenders, on the date of
each termination or reduction, the Commitment Fees on the amount of the
Revolving Credit Commitments so terminated or reduced accrued to but excluding
the date of such termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The applicable
Borrower shall have the right at any time upon prior irrevocable notice to the
Administrative Agent given by telephone
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34
(promptly confirmed by written or telecopy notice) (a) not later than 12:00
(noon), New York City time, one Business Day prior to conversion, to convert any
Eurodollar Borrowing into an ABR Borrowing, (b) not later than 11:00 a.m., New
York City time, three Business Days prior to conversion or continuation, to
convert any ABR Borrowing into a Eurodollar Borrowing or to continue any
Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest
Period, and (c) not later than 11:00 a.m., New York City time, three Business
Days prior to conversion, to convert the Interest Period with respect to any
Eurodollar Borrowing to another permissible Interest Period, subject in each
case to the following:
(i) each conversion or continuation shall be made pro rata among
the Lenders in accordance with the respective principal amounts of the
Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b)
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the new
Loan of such Lender resulting from such conversion and reducing the Loan
(or portion thereof) of such Lender being converted by an equivalent
principal amount; accrued interest on any Eurodollar Loan (or portion
thereof) being converted shall be paid by the Borrowers at the time of
conversion;
(iv) if any Eurodollar Borrowing is converted at a time other than
the end of the Interest Period applicable thereto, the Borrowers shall
pay, upon demand, any amounts due to the Lenders pursuant to Section 2.16;
(v) any portion of a Borrowing maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar
Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be converted
into or continued as a Eurodollar Borrowing by reason of the immediately
preceding clause shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into an ABR Borrowing;
(vii) no Interest Period may be selected for any Eurodollar Term
Borrowing that would end later than a Term Loan Repayment Date occurring
on or after the first day of such Interest Period if, after giving effect
to such selection, the aggregate outstanding amount of (A) the Eurodollar
Term Borrowings with Interest Periods ending on or prior to such Term Loan
Repayment Date and (B) the ABR Term Borrowings would not be at least equal
to the principal amount of Term Borrowings to be paid on such Term Loan
Repayment Date; and
(viii) upon notice to the Borrowers from the Administrative Agent
given at the request of the Required Lenders, after the occurrence and
during the continuance of a Default or Event of Default, no outstanding
Loan may be converted into, or continued as, a Eurodollar Loan.
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35
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity and amount of the Borrowing
that the applicable Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurodollar Borrowing or
an ABR Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
applicable Borrower shall be deemed to have selected an Interest Period of one
month's duration. The Administrative Agent shall advise the Lenders of any
notice given pursuant to this Section 2.10 and of each Lender's portion of any
converted or continued Borrowing. If the applicable Borrower shall not have
given notice in accordance with this Section 2.10 to continue any Eurodollar
Borrowing into a subsequent Interest Period (and shall not otherwise have given
notice in accordance with this Section 2.10 to convert such Borrowing), such
Borrowing shall, at the end of the Interest Period applicable thereto (unless
repaid pursuant to the terms hereof), automatically be converted into an ABR
Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) (i) The Borrowers shall
pay to the Administrative Agent, for the account of the Lenders, on the dates
set forth below, or if any such date is not a Business Day, on the next
succeeding Business Day (each such date being a "Tranche A Term Loan Repayment
Date"), a principal amount of the Tranche A Term Loans equal to the amount set
forth below for such date, as such amount may be adjusted from time to time
pursuant to Sections 2.11(b), 2.12 and 2.13 (such amount, as adjusted, being
called the "Tranche A Term Loan Repayment Amount"), together in each case with
accrued and unpaid interest on the principal amount to be paid to but excluding
the date of such payment:
Date Amount
---- ------
January 31, 1997 $5,000,000
April 30, 1997 5,000,000
July 31, 1997 5,000,000
October 31, 1997 5,000,000
January 31, 1998 5,000,000
April 30, 1998 5,000,000
July 31, 1998 5,000,000
October 31, 1998 5,000,000
January 31, 1999 5,000,000
April 30, 1999 5,000,000
July 31, 1999 5,000,000
October 31, 1999 5,000,000
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36
January 31, 2000 5,000,000
April 30, 2000 5,000,000
July 31, 2000 5,000,000
October 31, 2000 6,250,000
January 31, 2001 6,250,000
April 30, 2001 6,250,000
July 31, 2001 6,250,000
October 31, 2001 6,250,000
January 31, 2002 6,250,000
April 30, 2002 6,250,000
Tranche A Maturity Date 6,250,000
(ii) The Borrowers shall pay to the Administrative Agent, for the account
of the Lenders, on the dates set forth below or, if any such date is not a
Business Day, on the next succeeding Business Day (each such date being a
"Tranche B Term Loan Repayment Date"), a principal amount of the Tranche B Term
Loans equal to the amount set forth below for such date, as such amount may be
adjusted from time to time pursuant to Sections 2.11(b), 2.12 and 2.13 (such
amount, as adjusted, being called the "Tranche B Term Loan Repayment Amount"),
together in each case with accrued and unpaid interest on the principal amount
to be paid to but excluding the date of such payment:
Date Amount
---- ------
January 31, 1997 $333,333
April 30, 1997 333,333
July 31, 1997 333,334
October 31, 1997 250,000
January 31, 1998 250,000
April 30, 1998 250,000
July 31, 1998 250,000
October 31, 1998 250,000
January 31, 1999 250,000
April 30, 1999 250,000
July 31, 1999 250,000
October 31, 1999 250,000
January 31, 2000 250,000
April 30, 2000 250,000
July 31, 2000 250,000
October 31, 2000 250,000
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37
January 31, 2001 250,000
April 30, 2001 250,000
July 31, 2001 250,000
October 31, 2001 8,750,000
January 31, 2002 8,750,000
April 30, 2002 8,750,000
July 31, 2002 8,750,000
October 31, 2002 15,000,000
January 31, 2003 15,000,000
April 30, 2003 15,000,000
July 31, 2003 15,000,000
October 31, 2003 18,750,000
January 31, 2004 18,750,000
April 30, 2004 18,750,000
Tranche B Maturity Date 18,750,000
(b) In the event and on each occasion that any Term Loan Commitments
shall be reduced or shall expire or terminate other than as a result of the
making of a Term Loan, the installments payable on each Term Loan Repayment Date
shall be reduced pro rata by an aggregate amount equal to the amount of such
reduction, expiration or termination.
(c) To the extent not previously paid, all Tranche A Term Loans and
Tranche B Term Loans shall be due and payable on the Tranche A Maturity Date and
Tranche B Maturity Date, respectively, together with accrued and unpaid interest
on the principal amount to be paid to but excluding the date of payment.
(d) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.
SECTION 2.12. Optional Prepayment. (a) The Borrowers shall have the right
at any time and from time to time to prepay any Borrowing, in whole or in part,
upon at least one Business Day's prior notice (in the case of an ABR Borrowing)
and three Business Days' prior notice (in the case of a Eurodollar Borrowing) to
the Administrative Agent given by telephone (promptly confirmed by written or
telecopy notice) before 11:00 a.m., New York City time; provided, however, that
each partial prepayment shall be in an amount that is an integral multiple of
$1,000,000 and not less than $5,000,000 (in the case of repayments of Eurodollar
Borrowings) and $1,000,000 (in the case of repayments of ABR Borrowings).
(b) Optional prepayments of Term Loans shall be allocated pro rata between
the then-outstanding Tranche A Term Loans and Tranche B Term Loans and applied
pro rata against the
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38
remaining scheduled installments of principal due in respect of the Tranche A
Term Loans and Tranche B Term Loans under Sections 2.11(a)(i) and (ii),
respectively.
(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrowers to prepay such Borrowing by the
amount stated therein on the date stated therein. All prepayments under this
Section 2.12 shall be subject to Section 2.16 but otherwise without premium or
penalty. All prepayments of Eurodollar Borrowings under this Section 2.12 shall
be accompanied by accrued interest on the principal amount being prepaid to the
date of payment.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any termination
of all the Revolving Credit Commitments, the Borrowers shall repay or prepay all
its outstanding Revolving Credit Borrowings and all outstanding Swingline Loans
on the date of such termination. In the event of any partial reduction of the
Revolving Credit Commitments, then (i) at or prior to the effective date of such
reduction, the Administrative Agent shall notify the Borrowers and the Revolving
Credit Lenders of the Aggregate Revolving Credit Exposure after giving effect
thereto and (ii) if the Aggregate Revolving Credit Exposure would exceed the
Total Revolving Credit Commitment after giving effect to such reduction or
termination, then the Borrowers shall, on the date of such reduction or
termination, repay or prepay Revolving Credit Borrowings or Swingline Loans (or
a combination thereof) in an amount sufficient to eliminate such excess.
(b) Not later than the third Business Day following the receipt of any Net
Cash Proceeds from any Asset Sale, the Borrowers shall apply 100% of the Net
Cash Proceeds received with respect thereto to prepay outstanding Term Loans in
accordance with Section 2.13(g).
(c) In the event and on each occasion that an Equity Issuance occurs, the
Borrowers shall, substantially simultaneously with (and in any event not later
than the third Business Day next following) the occurrence of such Equity
Issuance, apply 40% of the Net Cash Proceeds therefrom to prepay outstanding
Term Loans in accordance with Section 2.13(g).
(d) No later than the earlier of (i) 90 days after the end of each fiscal
year of the Parent Borrower, commencing with the fiscal year ending on December
31, 1997, and (ii) the date on which the financial statements with respect to
such fiscal year are delivered pursuant to Section 5.04(a), the Borrowers shall
prepay outstanding Term Loans in accordance with Section 2.13(g) in an aggregate
principal amount equal to 75% of the Excess Cash Flow for such fiscal year,
provided that in the event that (A) the Interest Coverage Ratio for such fiscal
year is greater than or equal to 3.25 to 1.00 and (B) the Borrowers have repaid
at least $135,000,000 aggregate principal amount of the Term Loans, the
mandatory prepayments in this clause (d) shall be equal to 50% of the Excess
Cash Flow for such fiscal year.
(e) In the event that Holdings, the Parent Borrower or any Subsidiary
shall receive Net Cash Proceeds from the issuance of Indebtedness for money
borrowed of Holdings, the Parent Borrower or any Subsidiary (other than
Indebtedness for money borrowed permitted pursuant to Section 6.01), the
Borrowers shall, substantially simultaneously with (and in any event not later
than the third Business Day next following) the receipt of such Net Cash
Proceeds by such Loan Party or such Subsidiary,
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39
apply an amount equal to 100% of such Net Cash Proceeds to prepay outstanding
Term Loans in accordance with Section 2.13(g).
(f) In the event that there shall occur any Casualty or Condemnation and,
pursuant to the Mortgages, the Insurance Proceeds or Condemnation Proceeds, as
the case may be, are required to be used to prepay the Term Loans, then the
Borrowers shall apply an amount equal to 100% of such Insurance Proceeds or
Condemnation Proceeds, as the case may be, less any amounts deducted for the
Collateral Agent's or other expenses pursuant to the Mortgages, to prepay
outstanding Term Loans in accordance with Section 2.13(g).
(g) Subject to paragraph (j) below, mandatory prepayments of outstanding
Term Loans under this Agreement shall be allocated pro rata between the
then-outstanding Tranche A Term Loans and Tranche B Term Loans, and applied pro
rata against the remaining scheduled installments of principal due in respect of
Tranche A Term Loans and Tranche B Term Loans under Sections 2.11(a)(i) and
(ii), respectively.
(h) The Borrowers shall deliver to the Administrative Agent, at the time
of each prepayment required under this Section 2.13, (i) a certificate signed by
a Financial Officer of the Parent Borrower setting forth in reasonable detail
the calculation of the amount of such prepayment and (ii) to the extent
reasonably practicable, at least three days prior written notice of such
prepayment. Each notice of pre-payment shall specify the prepayment date, the
Type of each Loan being prepaid, the principal amount of each Loan (or portion
thereof) to be prepaid and the amount, if any, to be deposited in the Prepayment
Account. All prepayments of Borrowings under this Section 2.13 shall be subject
to Section 2.13(i) and Section 2.16, but shall otherwise be without premium or
penalty. All prepayments of Eurodollar Borrowings under this Section 2.13 shall
be accompanied by accrued interest on the principal amount being prepaid to the
date of payment.
(i) Amounts to be applied pursuant to this Section 2.13 to the prepayment
of Term Loans and Revolving Loans shall be applied, as applicable, first to
reduce outstanding ABR Term Loans and ABR Revolving Loans. Any amounts remaining
after each such application shall, at the option of the Parent Borrower, be
applied to prepay Eurodollar Term Loans or Eurodollar Revolving Loans, as the
case may be, immediately and/or shall be deposited in the Prepayment Account (as
defined below). The Administrative Agent shall apply any cash deposited in the
Prepayment Account (i) allocable to Term Loans to prepay Eurodollar Term Loans
and (ii) allocable to Revolving Loans to prepay Eurodollar Revolving Loans, in
each case on the last day of their respective Interest Periods (or, at the
direction of the Parent Borrower, on any earlier date) until all outstanding
Term Loans or Revolving Loans, as the case may be, have been prepaid or until
all the allocable cash on deposit with respect to such Loans has been exhausted.
For purposes of this Agreement, the term "Prepayment Account" shall mean an
account established by the Parent Borrower with the Administrative Agent and
over which the Administrative Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal for application in accordance with
this paragraph (i). The Administrative Agent will, at the request of the Parent
Borrower, invest amounts on deposit in the Prepayment Account in Permitted
Investments that mature prior to the last day of the applicable Interest Periods
of the Eurodollar Term Borrowings or Eurodollar Revolving Borrowings to be
prepaid, as the case may be; provided, however, that (i) the Administrative
Agent shall not be required to make any investment that, in its sole judgment,
would require or cause the Administrative Agent to be in, or would result in
any, violation
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40
of any law, statute, rule or regulation and (ii) the Administrative Agent shall
have no obligation to invest amounts on deposit in the Prepayment Account if a
Default or Event of Default shall have occurred and be continuing. The
Administrative Agent shall provide to the Parent Borrower statements with regard
to the Prepayment Account in accordance with the Administrative Agent's
customary practice. The Borrowers shall indemnify the Administrative Agent for
any losses relating to the investments so that the amount available to prepay
Eurodollar Borrowings on the last day of the applicable Interest Period is not
less than the amount that would have been available had no investments been made
pursuant hereto. Other than any interest earned on such investments, the
Prepayment Account shall not bear interest. Interest or profits, if any, on such
investments shall be deposited in the Prepayment Account and reinvested and
disbursed as specified above. If the maturity of the Loans has been accelerated
pursuant to Article VII, the Administrative Agent may, in its sole discretion,
apply all amounts on deposit in the Prepayment Account to satisfy any of the
Obligations. The Borrowers hereby grant to the Administrative Agent, for its
benefit and the benefit of the Issuing Bank, the Swingline Lender and the
Lenders, a security interest in the Prepayment Account to secure the
Obligations.
(j) Any Lender with a Tranche B Commitment may elect, by notice to the
Administrative Agent and the Borrowers given by telephone (promptly confirmed by
written or telecopy notice) at least one Business Day prior to any prepayment of
Tranche B Term Loans required to be made by the Borrowers for the account of
such Lender pursuant to this Section 2.13, to cause all or a portion of such
prepayment to be applied instead to prepay Tranche A Term Loans, in which case
such prepayment shall be applied pro rata against the remaining scheduled
installments in respect of Tranche A Loans under Section 2.11(a)(i).
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or the Issuing
Bank of the principal of or interest on any Eurodollar Loan made by such Lender
or any Fees or other amounts payable hereunder (other than changes in respect of
Excluded Taxes and taxes described in Section 2.20), or shall impose, modify or
deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of or credit extended by any Lender
or the Issuing Bank (except any such reserve requirement which is reflected in
the Adjusted LIBO Rate) or shall impose on such Lender or the Issuing Bank or
the London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or participation
therein, and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any Eurodollar Loan or increase the cost to
any Lender or the Issuing Bank of issuing or maintaining any Letter of Credit or
purchasing or maintaining a participation therein or to reduce the amount of any
sum received or receivable by such Lender or the Issuing Bank hereunder (whether
of principal, interest or otherwise), in each case by an amount deemed by such
Lender or the Issuing Bank, as the case may be, to be material, then the
Borrowers agree to pay to such Lender or the Issuing Bank, as the case may be,
upon demand such additional amount or amounts as will compensate such Lender or
the Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation or guideline
regarding capital adequacy, or any change after the
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41
date hereof in any such law, rule, regulation or guideline (whether such law,
rule, regulation or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing Bank's holding company with any request or directive regarding capital
adequacy issued or adopted after the date hereof (whether or not having the
force of law) of any Governmental Authority has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Bank's capital or on
the capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made or participations in Letters of
Credit purchased by such Lender pursuant hereto or the Letters of Credit issued
by the Issuing Bank pursuant hereto to a level below that which such Lender or
the Issuing Bank or such Lender's or the Issuing Bank's holding company could
have achieved but for such applicability, adoption, change or compliance (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's holding company with respect to capital
adequacy) by an amount deemed by such Lender or the Issuing Bank to be material,
then from time to time the Borrowers agree to pay to such Lender or the Issuing
Bank, as the case may be, such additional amount or amounts as will compensate
such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth (i) the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as applicable, as specified in paragraph (a) or (b) above and
(ii) a reasonably detailed explanation of the calculation of such amount or
amounts shall be delivered to the Borrowers and shall be conclusive absent
manifest error. The Borrowers shall pay such Lender or the Issuing Bank the
amount shown as due on any such certificate delivered by it within 10 days after
its receipt of the same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation. The
protection of this Section shall be available to each Lender and the Issuing
Bank regardless of any possible contention of the invalidity or inapplicability
of the law, rule, regulation, guideline or other change or condition that shall
have occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision
of this Agreement, if, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrowers and to the Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not
thereafter (for the duration of such unlawfulness) be made by such Lender
hereunder (or be continued for additional Interest Periods and ABR Loans
will not thereafter (for such duration) be converted into Eurodollar
Loans), whereupon any request for a Eurodollar Borrowing (or to convert an
ABR Borrowing to a Eurodollar Borrowing or to continue a Eurodollar
Borrowing for an additional Interest Period) shall, as to such Lender
only, be deemed a request for an ABR Loan (or to
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42
convert a Eurodollar Loan into an ABR Loan, as the case may be), unless
such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans
made by it be converted to ABR Loans, in which event all such Eurodollar
Loans shall be automatically converted to ABR Loans as of the effective
date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.15, a notice to the Borrowers by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrowers.
SECTION 2.16. Indemnity. The Borrowers jointly and severally shall
indemnify each Lender against any loss or expense that such Lender may sustain
or incur as a consequence of (a) any event, other than a default by such Lender
in the performance of its obligations hereunder or a suspension or limitation
under Section 2.08 of the right to select a Eurodollar Loan, which results in
(i) such Lender receiving or being deemed to receive any amount on account of
the principal of any Eurodollar Loan prior to the end of the Interest Period in
effect therefor, (ii) the conversion of any Eurodollar Loan to an ABR Loan, or
the conversion of the Interest Period with respect to any Eurodollar Loan, in
each case other than on the last day of the Interest Period in effect therefor,
or (iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar
Loan to be made pursuant to a conversion or continuation under Section 2.10) not
being made after notice of such Loan shall have been given by the applicable
Borrower hereunder (any of the events referred to in this clause (a) being
called a "Breakage Event") or (b) any default in the making of any payment or
prepayment required to be made hereunder. In the case of any Breakage Event,
such loss shall include an amount equal to the excess, as reasonably determined
by such Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that
is the subject of such Breakage Event for the period from the date of such
Breakage Event to the last day of the Interest Period in effect (or that would
have been in effect) for such Loan over (ii) the amount of interest likely to be
realized by such Lender in redeploying the funds released or not utilized by
reason of such Breakage Event for such period. A certificate of any Lender (i)
setting forth any amount or amounts which such Lender is entitled to receive
pursuant to this Section 2.16 and (ii) a reasonably detailed explanation of the
calculation of such amount or amounts shall be delivered to the Borrowers and
shall be conclusive absent manifest error.
SECTION 2.17. Pro Rata Treatment. Except as provided below in this Section
2.17 with respect to Swingline Loans and as required under Sections 2.13(j) and
2.15, each Borrowing, each payment or prepayment of principal of any Borrowing,
each payment of interest on the Loans, each payment of the Commitment Fees, each
reduction of the Revolving Credit Commitments and each conversion of any
Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall
be allocated pro rata among the Lenders, in the case of principal and interest
payments, in accordance
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43
with their respective applicable outstanding Loans and, in the case of all other
payments, the Commitments (or, if such Commitments shall have expired or been
terminated, in accordance with the respective principal amounts of their
outstanding Loans). For purposes of determining the available Revolving Credit
Commitments of the Lenders at any time, each outstanding Swingline Loan shall be
deemed to have utilized the Revolving Credit Commitments of the Lenders
(including those Lenders which shall not have made Swingline Loans) pro rata in
accordance with such Lender's respective Revolving Credit Commitment. Each
Lender agrees that in computing such Lender's portion of any Borrowing to be
made hereunder, the Administrative Agent may, in its discretion, round each
Lender's percentage of such Borrowing to the next higher or lower whole dollar
amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrowers or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in respect of any
Loan or Loans or L/C Disbursement as a result of which the unpaid principal
portion of its Tranche A Term Loans, Tranche B Term Loans and Revolving Loans
and participations or other interests of a type permitted to be held by such
Lender in L/C Disbursements shall be proportionately less than the unpaid
principal portion of the Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans and participations or interests in L/C Disbursements of any
other Lender, it shall be deemed simultaneously to have purchased from such
other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, a participation or interest in the Tranche A Term Loans,
Tranche B Term Loans and Revolving Loans and participations or interests in L/C
Disbursements, as the case may be of such other Lender, so that the aggregate
unpaid principal amount of the Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans and participations or interests in L/C Disbursements and
participations or interests in Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans and participations or interests in L/C Disbursements held by
each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Tranche A Term Loans, Tranche B Term Loans and Revolving Loans and
participations or interests in L/C Disbursements then outstanding as the
principal amount of its Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans and participations or interests in L/C Disbursements prior to such
exercise of banker's lien, setoff or counterclaim or other event was to the
principal amount of all Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans and participations or interests in L/C Disbursements outstanding prior to
such exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that if any such purchase or purchases or adjustments shall be made
pursuant to this Section 2.18 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrowers and Holdings expressly
consent to the foregoing arrangements and agree that any Lender holding a
participation or interest in a Term Loan or Revolving Loan or L/C Disbursement
deemed to have been so purchased may exercise any and all rights of banker's
lien, setoff or counterclaim with respect to any and all moneys owing by the
Borrowers and Holdings to such Lender by reason thereof as fully as if such
Lender had made a Loan directly to the Borrowers in the amount of such
participation.
SECTION 2.19. Payments. (a) The Borrowers shall make each payment
(including principal of or interest on any Borrowing or any L/C Disbursement or
any Fees or other amounts) hereunder and
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under any other Loan Document not later than 12:00 (noon), New York City time,
on the date when due in immediately available dollars, without setoff or
counterclaim. Each such payment (other than (i) Issuing Bank Fees, which shall
be paid directly to the Issuing Bank, (ii) principal of and interest on
Swingline Loans, which shall be paid directly to the Swingline Lender except as
otherwise provided in Section 2.22(e) and (iii) other payments that are
specifically required to be paid directly to a Lender) shall be made to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments by or on behalf of the
Borrowers or any Loan Party hereunder and under any other Loan Document shall be
made, in accordance with Section 2.19, free and clear of and without deduction
for any and all current or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding (i) taxes
imposed on the net income of the Administrative Agent, any Lender or the Issuing
Bank (or any transferee or assignee thereof, including a participation holder
(any such entity a "Transferee")), however denominated, and (ii) franchise taxes
imposed on the net income or in lieu of net income of the Administrative Agent,
any Lender or the Issuing Bank (or Transferee) (the taxes referred to in the
foregoing clauses (i) and (ii) individually or collectively being called
"Excluded Taxes"), in each case imposed (a) by the U.S. or any political
subdivision or taxing authority thereof or therein; (b) by any jurisdiction
under the laws of which the Administrative Agent, such Lender or the Issuing
Bank (or Transferee) or its lending office or office through which it is issuing
any Letter of Credit is organized or in which its lending office or office
through which it is issuing any Letter of Credit is located, managed or
controlled or in which its principal office is located or any political
subdivision or taxing authority thereof or therein; or (c) by reason of any
connection between the jurisdiction imposing such tax and the Administrative
Agent, such Lender, the Issuing Bank, such Transferee, such lending office or
office through which it is issuing any Letter of Credit, other than a connection
arising solely from this Agreement or any transaction hereunder (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities, collectively or individually, being called "Taxes"). If the
Borrowers or any Loan Party shall be required to deduct any Taxes from or in
respect of any sum payable hereunder or under any other Loan Document to the
Administrative Agent, any Lender or the Issuing Bank (or any Transferee), (i)
the sum payable shall be increased by the amount (an "additional amount")
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.20) the
Administrative Agent, such Lender or the Issuing Bank (or Transferee), as the
case may be, shall receive an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrowers or such Loan Party shall make
such deductions and (iii) the Borrowers or such Loan Party shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrowers agree to pay to the relevant Governmental
Authority in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies (including mortgage recording taxes and similar fees) that arise from any
payment made hereunder or under any other Loan Document or from the execution,
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45
delivery or registration of, or otherwise solely with respect to, this Agreement
or any other Loan Document ("Other Taxes").
(c) The Borrowers shall indemnify the Administrative Agent, each Lender
and the Issuing Bank (or Transferee) for the full amount of Taxes and Other
Taxes paid by the Administrative Agent, such Lender or the Issuing Bank (or
Transferee), as the case may be, and any liability (including penalties,
interest and expenses (including reasonable attorney's fees and expenses) other
than those resulting solely from a failure by the Administrative Agent, such
Lender or the Issuing Bank (or Transferee), as the case may be, to pay any Taxes
or Other Taxes which it is required to pay and for which it received an
indemnity payment) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability prepared by the Administrative Agent, a Lender or the Issuing Bank (or
Transferee), or the Administrative Agent on its behalf, absent manifest error,
shall be final, conclusive and binding for all purposes. Such indemnification
shall be made within 30 days after the date the Administrative Agent, any Lender
or the Issuing Bank (or Transferee), as the case may be, makes written demand
therefor. If the Administrative Agent, any Lender or the Issuing Bank (or any
Transferee) shall become aware that it is entitled to receive a refund or other
tax credit or benefit in respect of any Taxes or Other Taxes, it shall promptly
notify the Borrowers thereof and, in the case of a refund, shall within 30 days
after receipt of a request by the Borrowers, apply for such refund at the
Borrowers' expense. If the Administrative Agent, any Lender or the Issuing Bank
(or any Transferee) receives a refund or other tax credit or benefit in respect
of any Taxes or Other Taxes for which the Administrative Agent, such Lender or
the Issuing Bank (or such Transferee) has received payment from the Borrowers
hereunder, it shall promptly notify the Borrowers thereof and shall promptly
repay such refund or, in the case of a tax credit or other benefit shall repay
the amount of the tax credit or benefit received promptly following the date on
which such tax credit or other benefit is offset against such party's tax
liability, in each case to the Borrowers without interest and net of any
expenses incurred, except to the extent interest shall have explicitly
accompanied such refund or other tax credit or benefit, provided that the
Borrowers, upon the request of such Lender, the Issuing Bank or the
Administrative Agent, agrees to return the amount of such refund or other tax
benefit or credit (plus any penalties, interest or other charges required to be
paid) to such Lender, the Issuing Bank or the Administrative Agent in the event
such Lender, the Issuing Bank or the Administrative Agent is required to repay
such amount to the relevant taxing authority.
(d) As soon as practicable after the date of any payment of Taxes or Other
Taxes by the Borrowers or any other Loan Party to the relevant Governmental
Authority, the Borrowers or such other Loan Party will deliver to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of any receipt issued by such Governmental Authority or
other proof reasonably acceptable to the indemnified party evidencing payment
thereof.
(e) Each Lender (or Transferee) or successor Issuing Bank that is
organized under the laws of a jurisdiction other than the United States, any
State thereof or the District of Columbia (a "Non-U.S. Lender") shall deliver to
the Borrowers and the Administrative Agent two copies of either United States
Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S.
Lender claiming exemption from U.S. Federal withholding tax under Section 871(h)
or 881(c) of the Code with respect to payments of "portfolio interest", a Form
W-8, or any subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers a Form W-8, a certificate representing that such
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Non-U.S. Lender is not a bank for purposes of Section 881(c) of the Code), is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Borrowers and is not a controlled foreign corporation related to
the Borrowers (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete exemption
from, or reduced rate of, U.S. Federal withholding tax on payments of interest
by the Borrowers under this Agreement and the other Loan Documents, provided,
that if such Non-U.S. Lender is a bank for purposes of Section 881(c) of the
Code, such Non-U.S. Lender shall make whole the Borrowers for reliance on such
certificate. Such forms shall be delivered by each Non-U.S. Lender on or before
the date it becomes a party to this Agreement (or, in the case of a Transferee
that is a participation holder, on or before the date such participation holder
becomes a Transferee hereunder) and on or before the date, if any, such Non-U.S.
Lender changes its applicable lending office by designating a different lending
office (a "New Lending Office"). In addition, each Non-U.S. Lender shall deliver
such forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. Notwithstanding any other provision of this
Section 2.20(e), a Non-U.S. Lender shall not be required to deliver any form
pursuant to this Section 2.20(e) that such Non-U.S. Lender is not legally able
to deliver.
(f) The Borrowers shall not be required to indemnify any Non-U.S. Lender
or to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this paragraph (f) shall not apply (x) to any Transferee or New Lending
Office that becomes a Transferee or New Lending Office as a result of an
assignment, participation, transfer or designation made at the request of the
Borrowers and (y) to the extent the indemnity payment or additional amounts any
Transferee, or any Lender (or Transferee), acting through a New Lending Office,
would be entitled to receive (without regard to this paragraph (f)) do not
exceed the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (e) above.
(g) Nothing contained in this Section 2.20 shall require any Lender or the
Issuing Bank (or any Transferee) or the Administrative Agent to make available
any of its tax returns (or any other information that it deems to be
confidential or proprietary).
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty
to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.15 or the
Administrative Agent delivers a notice described in Section 2.08 or (iii) the
Borrowers are required to pay any additional amount or indemnification payment
to any Lender or the Issuing Bank or any Governmental Authority on account of
any Lender or the Issuing Bank pursuant to Section 2.20, the Borrowers may, at
their sole expense and effort (including with respect to the
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processing and recordation fee referred to in Section 9.04(b)), upon notice to
such Lender or the Issuing Bank and the Administrative Agent, require such
Lender or the Issuing Bank to transfer and assign, without recourse (in
accordance with and subject to the restrictions contained in Section 9.04), all
of its interests, rights and obligations under this Agreement to an assignee
that shall assume such assigned obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that (A) such assignment
shall not conflict with any law, rule or regulation or order of any court or
other Governmental Authority having jurisdiction, (B) the Borrowers shall have
received the prior written consent of the Administrative Agent (and, if a
Revolving Credit Commitment is being assigned, of the Issuing Bank and the
Swingline Lender), which consent shall not unreasonably be withheld, and (C) the
Borrowers or such assignee shall have paid to the affected Lender or the Issuing
Bank in immediately available funds an amount equal to the sum of the principal
of, and interest accrued to the date of such payment on, the outstanding Loans
or L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all
Fees and other amounts accrued for the account of such Lender or the Issuing
Bank hereunder (including any amounts under Section 2.14 and Section 2.16), and
provided further that, if prior to any such transfer and assignment the
circumstances or event that resulted in such Lender's or the Issuing Bank's
claim for compensation under Section 2.14 or notice under Section 2.08 or 2.15
or the amounts paid pursuant to Section 2.20, as the case may be, cease to cause
such Lender or the Issuing Bank to suffer increased costs or reductions in
amounts received or receivable or reduction in return on capital, or cease to
have the consequences specified in Section 2.08 or 2.15, or cease to result in
amounts being payable under Section 2.20, as the case may be (including as a
result of any action taken by such Lender or the Issuing Bank pursuant to
paragraph (b) below), or if such Lender or the Issuing Bank shall waive its
right to claim further compensation under Section 2.14 in respect of such
circumstances or event or shall withdraw its notice under Section 2.08 or 2.15
or shall waive its right to further payments under Section 2.20 in respect of
such circumstances or event, as the case may be, then such Lender or the Issuing
Bank shall not thereafter be required to make any such transfer and assignment
hereunder.
(b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in
Section 2.15 or the Administrative Agent delivers a notice described in Section
2.08 or (iii) the Borrowers are required to pay any additional amount or an
indemnification payment to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank, pursuant to Section
2.20, then such Lender or the Issuing Bank upon the request of the Borrowers
shall use reasonable efforts (which shall not require such Lender or the Issuing
Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise
take any action inconsistent with its internal policies or legal or regulatory
restrictions or suffer any disadvantage or burden deemed by it to be
significant) (A) to file any certificate or document reasonably requested in
writing by the Borrowers or (B) to assign its rights and delegate and transfer
its obligations hereunder to another of its offices, branches or affiliates, if
such filing or assignment would reduce its claims for compensation under Section
2.14 or enable it to withdraw its notice pursuant to Section 2.15 or Section
2.08 or would reduce amounts payable pursuant to Section 2.20, as the case may
be, in the future. The Borrowers hereby agree to pay all reasonable costs and
expenses incurred by any Lender or the Issuing Bank in connection with any such
filing or assignment, delegation and transfer.
SECTION 2.22. Swingline Loans. (a) Swingline Commitment. Subject to the
terms and conditions and relying upon the representations and warranties herein
set forth, the Swingline Lender
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agrees to make loans to any Borrower at any time and from time to time on and
after the Closing Date and until the earlier of the Revolving Credit Maturity
Date and the termination of the Revolving Credit Commitments in accordance with
the terms hereof, in an aggregate principal amount at any time outstanding that
will not result in (i) the aggregate principal amount of all Swingline Loans
exceeding $25,000,000 in the aggregate or (ii) the Aggregate Revolving Credit
Exposure, after giving effect to any Swingline Loan, exceeding the Total
Revolving Credit Commitment. Each Swingline Loan shall be in a principal amount
that is an integral multiple of $500,000 or such lesser amount necessary to
reimburse a Letter of Credit pursuant to Section 2.23(e). The Swingline
Commitment may be terminated or reduced from time to time as provided herein.
Within the foregoing limits, the Borrowers may borrow, pay or prepay and
reborrow Swingline Loans hereunder, subject to the terms, conditions and
limitations set forth herein.
(b) Swingline Loans. The applicable Borrower shall notify the
Administrative Agent by telecopy, or by telephone (confirmed by telecopy), not
later than 2:00 p.m., New York City time, on the day of a proposed Swingline
Loan. Such notice shall be delivered on a Business Day, shall be irrevocable and
shall refer to this Agreement and shall specify the requested date (which shall
be a Business Day) and amount of such Swingline Loan. The Administrative Agent
will promptly advise the Swingline Lender of any notice received from any
Borrower pursuant to this paragraph (b). The Swingline Lender shall make each
Swingline Loan available to the applicable Borrower by means of a credit to the
general deposit account of the Parent Borrower (acting as agent for and on
behalf of itself and the Subsidiary Borrowers) with the Swingline Lender by 3:00
p.m. on the date such Swingline Loan is so requested.
(c) Prepayment. The Borrowers shall have the right at any time and from
time to time to prepay any Swingline Loan, in whole or in part, upon giving
notice to the Swingline Lender and the Administrative Agent by telephone
(promptly confirmed by written or telecopy notice) before 12:00 (noon), New York
City time on the date of prepayment.
(d) Interest. Each Swingline Loan shall be an ABR Loan and, subject to the
provisions of Section 2.07, shall bear interest as provided in Section 2.06(a)
and (c).
(e) Participations. The Swingline Lender may by written notice given to
the Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Revolving Credit Lenders to acquire participations on
such Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Credit Lenders will participate. The Administrative Agent will, promptly upon
receipt of such notice, give notice to each Revolving Credit Lender, specifying
in such notice such Lender's Pro Rata Percentage of such Swingline Loan or
Loans. In furtherance of the foregoing, each Revolving Credit Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Revolving Credit Lender's Pro Rata Percentage of such Swingline Loan or
Loans. Each Lender acknowledges and agrees that its obligation to acquire
participations in Swingline Loans pursuant to this paragraph is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Lender shall comply with its
obligation under this paragraph by wire transfer of immediately available funds,
in the same
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manner as provided in Section 2.02(c) with respect to Loans made by such Lender
(and Section 2.02(c) shall apply, mutatis mutandis, to the payment obligations
of the Lenders) and the Administrative Agent shall promptly pay to the Swingline
Lender the amounts so received by it from the Lenders. The Administrative Agent
shall notify the Parent Borrower of any participations in any Swingline Loan
acquired pursuant to this paragraph and thereafter payments in respect of such
Swingline Loan shall be made to the Administrative Agent and not to the
Swingline Lender. Any amounts received by the Swingline Lender from any Borrower
(or other party on behalf of any Borrower) in respect of a Swingline Loan after
receipt by the Swingline Lender of the proceeds of a sale of participations
therein shall be promptly remitted to the Administrative Agent; any such amounts
received by the Administrative Agent shall be promptly remitted by the
Administrative Agent to the Lenders that shall have made their payments pursuant
to this paragraph and to the Swingline Lender, as their interests may appear.
The purchase of participations in a Swingline Loan pursuant to this paragraph
shall not relieve the Borrowers (or other party liable for obligations of the
Borrowers) of any default in the payment thereof.
SECTION 2.23. Letters of Credit. (a) General. Any Borrower may request the
issuance of a Letter of Credit for its own account or the account of any
Subsidiary (provided that a Borrower shall be a co-applicant with respect to
each Letter of Credit issued for the account of or in favor of any such
Subsidiary), in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from time to time while the Revolving Credit
Commitments remain in effect. This Section shall not be construed to impose an
obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement. Any Letter of
Credit may, in the absolute discretion of the Issuing Bank and The Chase
Manhattan Bank, be issued by The Chase Manhattan Bank (or any Affiliate or
branch thereof), and, in the event of any such issuance, all references herein
and in the other Loan Documents to the term "Issuing Bank" shall, with respect
to any such Letter of Credit, be deemed to refer to The Chase Manhattan Bank (or
such Affiliate) in such capacity, as the context shall require.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), a Borrower shall hand deliver or telecopy
to the Issuing Bank and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, the date of issuance, amendment, renewal or
extension, the date on which such Letter of Credit is to expire (which shall
comply with paragraph (c) below), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare such Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if, and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrowers shall be deemed to represent
and warrant that, after giving effect to such issuance, amendment, renewal or
extension (i) the L/C Exposure shall not exceed $50,000,000 and (ii) the
Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit
Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the close of
business on the earlier of the date one year after the date of the issuance of
such Letter of Credit and the date that is five Business Days prior to the
Revolving Credit Maturity Date, unless such Letter of Credit expires by its
terms on an earlier date. Each Letter of Credit may, upon the request of the
applicable Borrower,
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50
include a provision whereby such Letter of Credit shall be renewed automatically
for additional consecutive periods of 12 months or less (but not beyond the date
that is five Business Days prior to the Revolving Credit Maturity Date) unless
the Issuing Bank notifies the beneficiary thereof at least 30 days prior to the
then-applicable expiration date that such Letter of Credit will not be renewed.
(d) Participations. By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Credit Lender, and each such Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Pro Rata Percentage of the aggregate amount available to be
drawn under such Letter of Credit, effective upon the issuance of such Letter of
Credit. In consideration and in furtherance of the foregoing, each Revolving
Credit Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the Issuing Bank, such Lender's Pro
Rata Percentage of each L/C Disbursement made by the Issuing Bank and not
reimbursed by the Borrowers (or, if applicable, another party pursuant to its
obligations under any other Loan Document) forthwith on the date due as provided
in Section 2.02(f). Each Revolving Credit Lender acknowledges and agrees that
its obligation to acquire participations pursuant to this paragraph in respect
of Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including the occurrence and continuance of a
Default or an Event of Default, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrowers shall pay to the Administrative
Agent an amount equal to such L/C Disbursement not later than 3:00 p.m. on the
day that the Borrowers shall have received notice from the Issuing Bank that
payment of such draft will be made (it being understood that such L/C
Disbursement will be made prior to or promptly after the delivery of such
notice), or, if the Borrowers shall have received such notice later than 3:00
p.m., New York City time, on any Business Day, not later than 1:00 p.m., New
York City time, on the immediately following Business Day.
(f) Obligations Absolute. The Borrowers' obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit
or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or other right
that the Borrowers, any other party guaranteeing, or otherwise obligated
with, the Borrowers, any Subsidiary or other Affiliate thereof or any
other person may at any time have against the beneficiary under any Letter
of Credit, the Issuing Bank, the Administrative Agent or any Lender or any
other person, whether in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;
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(iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the
Issuing Bank, the Lenders, the Administrative Agent or any other person or
any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of the Borrowers' obligations
hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Borrowers hereunder to reimburse L/C Disbursements will not be excused by the
gross negligence or wilful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Borrowers to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrowers to the
extent permitted by applicable law) suffered by the Borrowers that are caused by
the Issuing Bank's gross negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof; it is understood that the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (i) the Issuing Bank's exclusive
reliance on the documents presented to it under such Letter of Credit as to any
and all matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and whether
or not any other statement or any other document presented pursuant to such
Letter of Credit proves to be forged or invalid or any statement therein proves
to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance
in any immaterial respect of the documents presented under such Letter of Credit
with the terms thereof shall, in each case, be deemed not to constitute wilful
misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as possible
give telephonic notification, confirmed by telecopy, to the Administrative Agent
and the Borrowers of such demand for payment and whether and when the Issuing
Bank has made or will make an L/C Disbursement thereunder, provided that any
failure to give or delay in giving such notice shall not relieve the Borrowers
of their obligation to reimburse the Issuing Bank and the Revolving Credit
Lenders with respect to any such L/C Disbursement. The Administrative Agent
shall promptly give each Revolving Credit Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrowers shall reimburse
such L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Issuing Bank, for each day
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52
from and including the date of such L/C Disbursement, to but excluding the
earlier of the date of payment by the Borrowers or the date on which interest
shall commence to accrue thereon as provided in Section 2.02(f), at the rate per
annum that would apply to such amount if such amount were an ABR Revolving Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may
resign at any time by giving 60 days' prior written notice to the Administrative
Agent, the Lenders and the Borrowers, and may be removed at any time by the
Borrowers by notice to the Issuing Bank, the Administrative Agent and the
Lenders. Subject to the last sentence of this clause (i), upon the acceptance of
any appointment as the Issuing Bank hereunder by a Lender that shall agree to
serve as successor Issuing Bank, such successor shall succeed to and become
vested with all the interests, rights and obligations of the retiring Issuing
Bank and the retiring Issuing Bank shall be discharged from its obligations to
issue additional Letters of Credit hereunder. At the time such removal or
resignation shall become effective, the Borrowers shall pay all accrued and
unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any appointment
as the Issuing Bank hereunder by a successor Lender shall be evidenced by an
agreement entered into by such successor, in a form satisfactory to the
Borrowers and the Administrative Agent, and, from and after the effective date
of such agreement, (i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and the other Loan
Documents and (ii) references herein and in the other Loan Documents to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the resignation or removal of the Issuing Bank
hereunder, the retiring Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, the Borrowers shall, on the Business Day they receive notice from
the Administrative Agent or the Required Lenders (or, if the maturity of the
Loans has been accelerated, Revolving Credit Lenders holding participations in
outstanding Letters of Credit representing greater than 50% of the aggregate
undrawn amount of all outstanding Letters of Credit) thereof and of the amount
of the L/C Exposure at such time, deposit in an account with the Collateral
Agent, for the benefit of the Revolving Credit Lenders, an amount in cash equal
to the L/C Exposure as of such date. Such deposit shall be held by the
Collateral Agent as collateral for the payment and performance of the
Obligations. The Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits in Permitted Investments,
which investments shall be made at the option and sole discretion of the
Collateral Agent, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall (i) be applied by the Administrative Agent to reimburse the
Issuing Bank for L/C Disbursements for which it has not been reimbursed, (ii) be
held for the satisfaction of the reimbursement obligations of the Borrowers for
the L/C Exposure at such time and (iii) if the maturity of the Loans has been
accelerated (but subject to the consent of Revolving Credit Lenders holding
participations in outstanding Letters of Credit representing greater than 50% of
the aggregate undrawn amount of all outstanding Letters of Credit), be applied
to satisfy the Obligations. If the Borrowers are required to provide an amount
of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be
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returned to the Borrowers within three Business Days after all Events of Default
have been cured or waived.
ARTICLE III
Representations and Warranties
Each of Holdings and the Borrowers represents and warrants to the
Administrative Agent, the Collateral Agent, the Issuing Bank and each of the
Lenders that:
SECTION 3.01. Organization; Powers. Each of Holdings, the Borrowers and
the Subsidiaries (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (b) has
all requisite power and authority to own its property and assets and to carry on
its business as now conducted and as proposed to be conducted, (c) is qualified
to do business in, and is in good standing in, every jurisdiction where the
nature of its business so requires and (d) has the corporate power and authority
to execute, deliver and perform its obligations under each of the Loan Documents
and each other agreement or instrument contemplated hereby to which it is or
will be a party and, in the case of the Borrowers, to borrow hereunder, except
in each case where the failure to satisfy any of the above could not reasonably
be expected to result in a Material Adverse Effect.
SECTION 3.02. Authorization. The execution, delivery and performance by
each Loan Party of each of the Loan Documents to which such Loan Party is a
party, and in the case of Borrowers, the borrowings hereunder, and, in the case
of Holdings, the Acquisition and the other transactions contemplated hereby and
by the Acquisition Agreement (collectively, the "Transactions") (a) have been
duly authorized by all requisite corporate and, if required, stockholder action
on the part of such Loan Party and (b) will not (i) violate (A) any provision of
law, statute, rule or regulation, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of Holdings, any
Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C)
any provision of any indenture, agreement or other instrument to which Holdings,
any Borrower or any Subsidiary is a party or by which any of them or any of
their property is or may be bound, (ii) be in conflict with, result in a breach
of or constitute (alone or with notice or lapse of time or both) a default
under, or give rise to any right to accelerate or to require the prepayment,
repurchase or redemption of any obligation under any such indenture, agreement
or other instrument, except where any such conflict, violation, breach, default
or right referred to in clause (i) or (ii), individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect, or (iii)
result in the creation or imposition of any Lien upon or with respect to any
property or assets now owned or hereafter acquired by Holdings, any Borrower or
any Subsidiary (other than any Lien created hereunder or under the Security
Documents).
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by Holdings and each Borrower and constitutes, and each other Loan
Document when executed and delivered by each Loan Party party thereto will
constitute, a legal, valid and binding obligation of such Loan Party enforceable
against such Loan Party in accordance with its respective terms, subject (a) as
to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally, from time to time in effect
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and (b) to general principles of equity (whether enforcement is sought by a
proceeding in equity or at law) .
SECTION 3.04. Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions or the other
transactions contemplated hereby, except for (a) the filing of appropriate
Uniform Commercial Code financing statements and filings with the United States
Patent and Trademark Office and the United States Copyright Office, (b)
recordation of the Mortgages and related Uniform Commercial Code financing
statements, (c) such as have been made or obtained and are in full force and
effect, (d) filings required pursuant to the Securities Act of 1933 or any state
"blue sky" laws in connection with the registration of securities to be
exchanged for the Subordinated Notes or the Masco Notes, (e) filings by Holdings
pursuant to the Small Business Investment Act of 1958, as amended, and (f) such
actions, consents, approvals and filings the failure of which to obtain or make
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.05. Financial Statements. (a) The Parent Borrower has heretofore
furnished to the Lenders the consolidated balance sheets and statements of
income, stockholders' equity and cash flows of the HFG Companies and their
respective subsidiaries on a consolidated basis (i) as of and for the fiscal
year ended December 31, 1995, audited by and accompanied by the opinion of
Coopers & Lybrand LLP, independent public accountants, and (ii) as of and for
the two fiscal quarter period ended June 30, 1996, certified by its chief
financial officer. Such financial statements present fairly the financial
condition and results of operations and cash flows of the Parent Borrower and
its consolidated Subsidiaries as of such dates and for such periods. Such
financial statements were prepared in accordance with GAAP (except for the
absence of footnote disclosure and subject to year-end audit adjustments in the
case of the financial statements referred to in clause (ii)).
(b) Each of Holdings and the Parent Borrower has heretofore delivered to
the Lenders its unaudited pro forma consolidated balance sheet as of June 30,
1996, prepared giving effect to the Transactions as if they had occurred on such
date. Such pro forma balance sheet has been prepared in good faith by Holdings
or the Parent Borrower, as applicable, based on the assumptions used to prepare
the pro forma financial information contained in the Confidential Information
Memorandum (which assumptions are believed by Holdings or the Parent Borrower,
as applicable, on the date hereof and on June 30, 1996, to be reasonable), is
based on the best information known (after due inquiry) to Holdings or the
Parent Borrower, as applicable, as of the date of delivery thereof, accurately
reflects all adjustments required to be made to give effect to the Transactions
and presents fairly on a pro forma basis the estimated consolidated financial
position of Holdings or the Parent Borrower, as applicable, as of June 30, 1996,
assuming that the Transactions had actually occurred on June 30, 1996.
SECTION 3.06. No Material Adverse Change. There has been no material
adverse change in the business, assets, operations, properties, financial
condition, contingent liabilities or material agreements of Holdings, the Parent
Borrower and the Subsidiaries, taken as a whole, since December 31, 1995.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of
Holdings, the Borrowers and the Subsidiaries has good title to (and with respect
to real property good and marketable
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title to), or valid leasehold interests in, all its material properties and
assets (including all Mortgaged Property and all properties listed on Schedules
3.20(a) and 3.20(b)), except where lack of such title or valid leasehold
interest does not materially interfere with its ability to conduct its business
as currently conducted. All interests of such persons in such material
properties and assets are free and clear of Liens, other than Liens expressly
permitted by Section 6.02 and, in addition, with respect to the Mortgaged
Properties, Permitted Encumbrances.
(b) Except as set forth on Schedule 3.07(b), each of Holdings, the
Borrowers and the Subsidiaries has complied with all material obligations under
all material leases to which it is a party and all such leases are in full force
and effect. Each of Holdings, the Borrowers and the Subsidiaries enjoys peaceful
and undisturbed possession under all such material leases, except where failure
to enjoy such possession does not materially interfere with its ability to
conduct its business as currently conducted.
(c) Except as set forth on Schedule 3.07(c), neither Holdings nor any
Borrower has received any notice of, nor has any knowledge of, any pending or
contemplated condemnation proceeding affecting the Mortgaged Properties or any
sale or disposition thereof in lieu of condemnation.
(d) Except as set forth on Schedule 3.07(d), none of Holdings, the
Borrowers or any of the Subsidiaries is obligated under any right of first
refusal, option or other contractual right to sell, assign or otherwise dispose
of any Mortgaged Property or any interest therein.
SECTION 3.08. Subsidiaries. (a) Schedule 3.08 sets forth as of the Closing
Date (after giving effect to the Transactions) a list of all Subsidiaries of the
Parent Borrower and the percentage ownership interest of Holdings, the Parent
Borrower and any other person therein. The shares of Capital Stock or other
ownership interests so indicated on Schedule 3.08 are fully paid and
non-assessable and are owned, as of the Closing Date, by Holdings, the Parent
Borrower or a subsidiary of Holdings or the Parent Borrower, as applicable,
directly or indirectly, free and clear of all Liens (other than Liens permitted
under the Loan Documents). Holdings owns 100% of the issued and outstanding
shares of Capital Stock of the Parent Borrower and the Parent Borrower owns
directly or indirectly 100% of the issued and outstanding shares of Capital
Stock of each Subsidiary Borrower. As of the Closing Date, the only direct or
indirect subsidiary of Holdings other than the Parent Borrower and the
Subsidiaries is Simmons.
(b) As of the Closing Date, none of the Subsidiaries is subject to a
consensual encumbrance or restriction that limits such Subsidiary's ability to
make an Upstream Payment.
(c) Each of Dixie Furniture Company, Incorporated, Henry Link Corporation,
Link-Taylor Corporation and Young-Hinkle Corporation does not have assets (other
than the rights associated with each such company's name) in excess of $5,000,
does not have any employees and does not conduct any business.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth on
Schedule 3.09, there are no actions, suits or proceedings at law or in equity or
by or before any Governmental Authority now pending or, to the knowledge of
Holdings or any Borrower, threatened against or affecting Holdings or any
Borrower or any Subsidiary or any business, property or rights of any such
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person (i) that involve any Loan Document or the Transactions or (ii) as to
which there is a reasonable likelihood of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(b) None of Holdings, the Borrowers or any of the Subsidiaries or any of
their respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting the Mortgaged Property, or is in
default with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
(c) None of Holdings, the Borrowers or any of the Subsidiaries is in
violation of any zoning or building law, ordinance, rule, regulation or
restriction affecting a Mortgaged Property or any building permit, including
certificates of occupancy, where such violation could reasonably be expected to
result in a material adverse effect on the business, assets, operations or
financial condition of the company that has title to such Mortgaged Property.
SECTION 3.10. Agreements. (a) None of Holdings, the Borrowers or any of
the Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) None of Holdings, the Borrowers or any of the Subsidiaries is in
default in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are bound, where such default could reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) None of Holdings, the
Borrowers or any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulation G, U
or X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company Act.
None of Holdings, the Borrowers or any Subsidiary is (a) an "investment company"
as defined in, or subject to regulation under, the Investment Company Act of
1940 or (b) a "holding company" as defined in, or subject to regulation under,
the Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrowers will use the proceeds of the
Loans and will request the issuance of Letters of Credit only for the purposes
specified in the preamble to this Agreement.
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SECTION 3.14. Tax Returns. Each of Holdings, the Borrowers and the
Subsidiaries has filed or caused to be filed all Federal, state or other
material tax returns required to have been filed by it and has paid or caused to
be paid all taxes due and payable by it and all assessments received by it to
the extent that such failure to file or nonpayment could reasonably be expected
to result in a Material Adverse Effect.
SECTION 3.15. No Material Misstatements. None of (a) the Confidential
Information Memorandum as of the date supplemented and the Closing Date or (b)
any other information, reports, financial statements, exhibits or schedules,
taken as a whole, furnished by or on behalf of Holdings or any Borrower to the
Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto contained,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not materially misleading, provided that to the extent any such information,
report, financial statement, exhibit or schedule was based upon or constitutes a
forecast or projection, each of Holdings and the Borrowers represents only that
it acted in good faith and utilized reasonable assumptions and due care in the
preparation of such information, report, financial statement, exhibit or
schedule.
SECTION 3.16. Employee Benefit Plans. Except to the extent failure to
comply could not reasonably be expected to result in a Material Adverse Effect,
each of Holdings and the Borrowers is in compliance with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder. Neither Holdings nor any Borrower is aware of any
circumstances or event with respect to any employee benefit plan maintained or
contributed to by an ERISA Affiliate that could result in a liability that could
reasonably be expected to have a Material Adverse Effect. No ERISA Event has
occurred or is reasonably expected to occur that, when taken together with all
other such ERISA Events, could reasonably be expected to result in a Material
Adverse Effect. The present value of all benefit liabilities being transferred
to each Plan from the predecessor plans of Masco (the "Predecessor Plans")
(based on those assumptions used to fund such Predecessor Plans) will not exceed
by more than $7,500,000 the fair market value of the assets being transferred to
such Plan from the Predecessor Plans, and the present value of all benefit
liabilities being transferred to all underfunded Plans from the Predecessor
Plans (based on those assumptions used to fund such Predecessor Plans) will not
exceed by more than $7,500,000 the fair market value of the assets being
transferred to all such underfunded Plans.
SECTION 3.17. Environmental Matters. Except as set forth on Schedule 3.17:
(a) The properties owned or operated by Holdings, the Borrowers and the
Subsidiaries (the "Properties") do not contain any Hazardous Materials in
amounts or concentrations that (i) constitute, or constituted a violation of,
(ii) require Remedial Action under, or (iii) could reasonably be expected to
give rise to liability under, Environmental Laws, which violations, Remedial
Actions and liabilities, in the aggregate, could reasonably be expected to
result in a Material Adverse Effect;
(b) The Properties and all operations of the Borrowers and the
Subsidiaries are in compliance, and in the last three years have been in
compliance, with all Environmental Laws and all necessary Environmental Permits
have been obtained and are in effect, except to the extent that such non-
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compliance or failure to obtain any necessary permits, in the aggregate, could
not be reasonably expected to result in a Material Adverse Effect;
(c) There have been no Releases or threatened Releases at, from, under or
proximate to the Properties or otherwise in connection with the operations of
the Borrowers or the Subsidiaries, which Releases or threatened Releases, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect;
(d) None of Holdings, the Borrowers or any of the Subsidiaries has
received any notice of an Environmental Claim in connection with the Properties
or the operations of the Borrowers or the Subsidiaries or with regard to any
person whose liabilities for environmental matters Holdings, the Borrowers or
the Subsidiaries has retained or assumed, in whole or in part, contractually, by
operation of law or otherwise, which, in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, nor do Holdings, the Borrowers
or the Subsidiaries have reason to believe that any such notice will be received
or is being threatened; and
(e) Hazardous Materials have not been transported from the Properties, nor
have Hazardous Materials been generated, treated, stored or disposed of at, on
or under any of the Properties in a manner that could reasonably be expected to
give rise to liability under any Environmental Law, nor have the Borrowers or
the Subsidiaries retained or assumed any liability, contractually, by operation
of law or otherwise, with respect to the generation, treatment, storage or
disposal of Hazardous Materials, in each case, which transportation, generation,
treatment, storage or disposal, or retained or assumed liabilities, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by or for Holdings, any Borrower
or any Domestic Subsidiary as of the date hereof and the Closing Date. As of
each such date, such insurance is in full force and effect and all premiums that
have become due and payable have been duly paid. Holdings, the Borrowers and the
Subsidiaries have insurance in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice.
SECTION 3.19. Security Documents. (a) The Pledge Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Pledge Agreement) and, when such Collateral is delivered to the
Collateral Agent, the Pledge Agreement shall constitute a fully perfected first
priority Lien on, and security interest in, all right, title and interest of the
pledgors thereunder in such Collateral, in each case prior and superior in right
to any other person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the Security
Agreement) and, when financing statements in appropriate form are filed in the
offices specified on Schedule 6 to the Perfection Certificate, the Security
Agreement shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the grantors thereunder in such Collateral
(other than the Intellectual Property, as defined in the Security Agreement)
that may be perfected by filing, recording or registering a financing statement
under the Uniform Commercial Code as in effect in the United States (or any
political subdivision thereof) and its territories and
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possessions, in each case prior and superior in right to any other Lien on any
Collateral other than Liens expressly permitted by Section 6.02.
(c) When the Security Agreement is filed in the United States Patent and
Trademark Office and the United States Copyright Office, the Security Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the grantors thereunder in the Patents, Trademarks (other
than "intent to use" Trademark applications) and all Copyrights material to the
Borrowers' or Guarantors' business (each, as defined in the Security Agreement)
in which a security interest may be perfected by filing, recording or
registration of the Security Agreement in the United States Patent and Trademark
Office and the United States Copyright Office, in each case prior and superior
in right to any other person other than Liens permitted by Section 6.02 (it
being understood that subsequent recordings in the United States Patent and
Trademark Office and the United States Copyright Office may be necessary to
perfect a lien on registered trademarks, trademark applications and copyrights
acquired or developed by the grantors after the date hereof).
(d) The Mortgages are effective to create in favor of the Collateral
Agent, for the ratable benefit of the Secured Parties, a legal, valid and
enforceable Lien on all of the Loan Parties' right, title and interest in and to
the Mortgaged Property thereunder and the proceeds thereof, and when the
Mortgages are filed in the offices specified on Schedule 3.19(d) and the proper
amount of mortgage recording or similar taxes (if any) are paid and when the
financing statements are duly filed in the appropriate public records, the
Mortgages shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the Loan Parties in such Mortgaged Property and
the proceeds thereof, in each case prior and superior in right to any other
person other than Permitted Encumbrances.
SECTION 3.20. Location of Real Property and Leased Premises. (a) Schedule
3.20(a) lists completely and correctly in all material respects as of the
Closing Date the address of all real property owned by Holdings, the Borrowers
and the Subsidiaries.
(b) Schedule 3.20(b) lists completely and correctly in all material
respects as of the Closing Date the address of all real property leased by
Holdings, the Borrowers and the Subsidiaries.
SECTION 3.21. Labor Matters. As of the date hereof and the Closing Date,
there are no strikes or lockouts against Holdings, any Borrower or any
Subsidiary pending or, to the knowledge of Holdings or any Borrower, threatened.
The hours worked by and payments made to employees of Holdings, the Borrowers
and the Subsidiaries have not been in violation of the Fair Labor Standards Act
or any other applicable Federal, state, local or foreign law dealing with such
matters in any case where a Material Adverse Effect could reasonably be expected
to occur as a result of such violation. Except as set forth on Schedule 3.21,
all payments due from Holdings, any Borrower or any Subsidiary, or for which any
claim may be made against Holdings, any Borrower or any Subsidiary, on account
of wages and employee health and welfare insurance and other benefits, have been
paid or accrued as a liability on the books of Holdings, such Borrower or such
Subsidiary. The consummation of the Transactions will not give rise to any right
of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which Holdings, any Borrower or any
Subsidiary is bound.
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SECTION 3.22. Solvency. (a) Immediately after the consummation of the
Transactions to occur on the Closing Date and immediately following the making
of each Loan made on the Closing Date and after giving effect to the application
of the proceeds of such Loans, (i) the fair value of the assets of each Loan
Party will exceed its debts and liabilities, subordinated, contingent or
otherwise; (ii) the present fair saleable value of the property of each Loan
Party will be greater than the amount that will be required to pay the probable
liability of its debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured;
(iii) each Loan Party will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) each Loan Party will not have unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder are subject to the satisfaction of the
following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing (other than
(i) any Revolving Credit Borrowing made pursuant to Section 2.02(f), (ii) any
continuation or conversion of a Revolving Credit Borrowing pursuant to Section
2.10 into a Revolving Credit Borrowing that does not increase the aggregate
principal amount of Revolving Loans outstanding and (iii) any continuation or
conversion of a Term Loan pursuant to Section 2.10), including each Borrowing of
a Swingline Loan and on the date of each issuance of a Letter of Credit (each
such event being called a "Credit Event"):
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been
deemed given in accordance with Section 2.03) or, in the case of the
issuance of a Letter of Credit, the Issuing Bank and the Administrative
Agent shall have received a notice requesting the issuance of such Letter
of Credit as required by Section 2.23(b) or, in the case of the Borrowing
of a Swingline Loan, the Swingline Lender and the Administrative Agent
shall have received a notice requesting such Swingline Loan as required by
Section 2.22(b).
(b) The representations and warranties set forth in Article III
hereof shall be true and correct in all material respects on and as of the
date of such Credit Event with the same effect as though made on and as of
such date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations
and warranties shall have been true and correct in all material respects
on such earlier date).
(c) Each Borrower and each other Loan Party shall be in compliance
with all the terms and provisions set forth herein and in each other Loan
Document on its part to be observed or performed, and at the time of and
immediately after such Credit Event, no Event of Default or Default shall
have occurred and be continuing.
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Each Credit Event shall be deemed to constitute a representation and warranty by
each Borrower and Holdings on the date of such Credit Event as to the matters
specified in paragraphs (b) (except as aforesaid) and (c) of this Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of
itself, the Lenders and the Issuing Bank, a favorable written opinion of
(i) Morgan, Lewis & Bockius LLP, counsel for Holdings and the Borrowers,
substantially to the effect set forth in Exhibit J-1, (ii) John R.
Leekley, Esq., Vice President and General Counsel of Masco, substantially
to the effect set forth in Exhibit J-2 and (iii) each local counsel listed
on Schedule 4.02(a), substantially to the effect set forth in Exhibit J-3,
in each case (A) dated the Closing Date, (B) addressed to the Issuing
Bank, the Administrative Agent and the Lenders, and (C) covering such
other matters relating to the Loan Documents and the Transactions as the
Administrative Agent shall reasonably request, and Holdings and the
Borrowers hereby request such counsel to deliver such opinions.
(b) All legal matters incident to this Agreement, the Borrowings and
extensions of credit hereunder and the other Loan Documents shall be
satisfactory to the Lenders, to the Issuing Bank and to Cravath, Swaine &
Moore, counsel for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of each Loan Party, certified as of a recent date by the
Secretary of State of the state of its organization, and a certificate as
to the good standing of each Loan Party as of a recent date, from such
Secretary of State; (ii) a certificate of the Secretary or Assistant
Secretary of each Loan Party dated the Closing Date and certifying (A)
that attached thereto is a true and complete copy of the by-laws of such
Loan Party as in effect on the Closing Date and at all times since a date
prior to the date of the resolutions described in clause (B) below, (B)
that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the
execution, delivery and performance of the Loan Documents to which such
Loan Party is a party and, in the case of the Borrowers, the borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the certificate or
articles of incorporation of such Loan Party have not been amended since
the date of the last amendment thereto shown on the certificate of good
standing furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer executing any Loan
Document or any other document delivered in connection therewith on behalf
of such Loan Party; (iii) a certificate of another officer as to the
incumbency and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to (ii) above; and (iv) such other
documents as the Lenders, the Issuing Bank or Cravath, Swaine & Moore,
counsel for the Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received a certificate,
dated the Closing Date and signed by a Financial Officer of Holdings and
the Parent Borrower, confirming compliance with the conditions precedent
set forth in paragraphs (b) and (c) of Section 4.01.
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(e) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrowers hereunder or under any
other Loan Document.
(f) The Pledge Agreement shall have been duly executed by the Loan
Parties party thereto and delivered to the Collateral Agent, and all the
outstanding Capital Stock of the Borrowers and the Subsidiaries shall have
been duly and validly pledged thereunder to the Collateral Agent for the
ratable benefit of the Secured Parties and certificates representing such
shares, accompanied by instruments of transfer or stock powers endorsed in
blank, shall be in the actual possession of the Collateral Agent, provided
that (i) neither the Parent Borrower nor any Domestic Subsidiary shall be
required to pledge more than 65% of the Capital Stock of any Foreign
Subsidiary if, and to the extent that, the pledge of a greater percentage
would have adverse tax consequences for the Parent Borrower or any of the
Subsidiaries and (ii) no Foreign Subsidiary shall be required to pledge
the Capital Stock of any of its Foreign Subsidiaries.
(g) The Security Agreement shall have been duly executed by the Loan
Parties party thereto and shall have been delivered to the Collateral
Agent and each document (including each Uniform Commercial Code financing
statement) required by law or reasonably requested by the Administrative
Agent to be filed, registered or recorded in order to create in favor of
the Collateral Agent for the benefit of the Secured Parties a valid, legal
and perfected firstpriority security interest in and lien on the
Collateral described in such agreement, subject to Liens permitted by
Section 6.02, shall have been delivered to the Collateral Agent.
(h) The Collateral Agent shall have received the results of a search
of the Uniform Commercial Code (or equivalent filings) filings made with
respect to the Loan Parties in the states (or other jurisdictions) in
which the chief executive office of each such person is located, any
offices of such persons in which records have been kept relating to
Accounts (as defined in the Security Agreement) and the other
jurisdictions in which Uniform Commercial Code filings (or equivalent
filings) are to be made pursuant to the preceding paragraph, together with
copies of the financing statements (or similar documents) disclosed by
such search, and accompanied by evidence satisfactory to the Collateral
Agent that the Liens indicated in any such financing statement (or similar
document) would be permitted under Section 6.02 or have been released.
(i) The Collateral Agent shall have received a Perfection
Certificate with respect to the Loan Parties dated the Closing Date and
duly executed by a Responsible Officer of Holdings or the Parent Borrower.
(j)(i) Each of the Security Documents, in form and substance
satisfactory to the Collateral Agent, relating to each of the Mortgaged
Properties shall have been duly executed by the parties thereto and
delivered to the Collateral Agent, (ii) each of such Mortgaged Properties
shall not be subject to any Lien other than those permitted under Section
6.02 and other than Permitted Encumbrances, (iii) each of such Security
Documents shall have been filed and recorded in the recording office as
specified on Schedule 3.19(d) and, in connection therewith, the Collateral
Agent shall have received evidence satisfactory to it of each such
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filing and recordation (or a lender's title insurance policy or a marked
"commitment" of title insurance, in form and substance reasonably
acceptable to the Collateral Agent, insuring such Security Document as a
lien on such Mortgaged Property (subject only to any Lien permitted by
Section 6.02 or otherwise noted on such title policy and acceptable to the
Collateral Agent) shall have been received by the Collateral Agent) and
(iv) the Collateral Agent shall have received such other documents,
including a policy or policies of title insurance issued by a nationally
recognized title insurance company, together with such endorsements and
reinsurance as may be reasonably requested by the Collateral Agent,
insuring the Mortgages as valid liens on the Mortgaged Properties, free of
Liens other than those permitted under Section 6.02 or otherwise noted on
such title policy and acceptable to the Collateral Agent, together with
such surveys and legal opinions as reasonably requested by the Collateral
Agent.
(k) Each of the Holdings Guarantee Agreement and the Subsidiary
Guarantee Agreement shall have been duly executed by the Loan Parties
party thereto and shall have been delivered to the Collateral Agent.
(l) The Indemnity, Subrogation and Contribution Agreement shall have
been duly executed by the Loan Parties party thereto and shall have been
delivered to the Collateral Agent.
(m) The Administrative Agent shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by
Section 5.02 and the applicable provisions of the Security Documents, each
of which shall be endorsed or otherwise amended to include a "standard" or
"New York" lender's loss payable endorsement (in the case of each property
or boiler policy) and to name the Collateral Agent as additional insured,
in form and substance reasonably satisfactory to the Administrative Agent.
(n) The Administrative Agent shall have received the following
documents for each Mortgaged Property to the extent that the Parent
Borrower has such documents in its possession on the Closing Date:
(i) a copy of the original permanent or temporary certificate
of occupancy, if any, issued upon completion of the Mortgaged
Property (or any amendment issued upon completion of any alteration)
by the appropriate Governmental Authority; and
(ii) one of the following: (A) a written confirmation from the
applicable zoning commission or other appropriate Governmental
Authority stating that the applicable Mortgaged Property complies
with existing land use and zoning ordinances, regulations and
restrictions applicable to such Mortgaged Property or (B) a zoning
endorsement reasonably satisfactory to the Administrative Agent in
connection with the Collateral Agent's mortgagee title insurance
policy of such Mortgaged Property.
(o) The Administrative Agent shall have received (i) for each owned
Mortgaged Property identified on Schedule 1.01(b) as items 1 through 3, a
Subordination, Nondisturbance and Attornment Agreement executed by the
tenant under such lease substantially in the form of Exhibit M hereto and
(ii) for each Mortgaged Property identified on Schedule 1.01(b) as
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items 4 and 9, a Subordination Agreement, in form and substance reasonably
satisfactory to the Administrative Agent.
(p) The Administrative Agent shall have received an estoppel letter
from the Pennsylvania Industrial Development Authority with respect to the
mortgage encumbering the Mortgaged Property located at Miller Street in
Sunbury, Pennsylvania in form and substance reasonably satisfactory to the
Administrative Agent.
(q) There shall have been no material adverse change in the
business, assets, operations, properties, financial condition, contingent
liabilities, prospects or material agreements of Holdings, the Parent
Borrower and the Subsidiaries, taken as a whole, since December 31, 1995.
(r) The Acquisition shall have been consummated or shall be
consummated simultaneously with the first Credit Event in accordance with
applicable law, in accordance with the Acquisition Agreement, including
the issuance of Capital Stock of Holdings to Masco (without giving effect
to any waiver of any material condition set forth in the Acquisition
Agreement not approved by the Lenders) and on other terms reasonably
satisfactory to the Lenders. The aggregate level of fees and expenses to
be paid in connection with the Transactions shall not exceed $40,000,000.
(s) The Equity Contribution shall have been made prior to or
simultaneously with the first Credit Event.
(t) The Parent Borrower shall have received at least $200,000,000 in
gross cash proceeds from the issuance of the Subordinated Notes in a
public offering or Rule 144A offering. The subordination provisions,
covenants, events of default and remedies with respect to the Subordinated
Notes shall be satisfactory in all respects to the Lenders (it being
understood and agreed that the Subordinated Notes shall not mature prior
to the tenth anniversary of the Closing Date).
(u) The terms of the Masco Notes shall be substantially as set forth
on Exhibit K attached hereto.
(v) The initial closing under the Receivables Sale Agreement and the
Receivables Pooling Agreement shall have been consummated and the Parent
Borrower shall have received not less than $150,000,000 as consideration
for the initial sale of receivables thereunder.
(w) After giving effect to the Transactions, Holdings, the Parent
Borrower and the Subsidiaries shall have outstanding no Indebtedness for
borrowed money or preferred stock other than (a) in the case of Holdings,
Indebtedness under the Loan Documents, the Masco Notes and the preferred
stock of Holdings issued in connection with the Acquisition and (b) in the
case of the Parent Borrower and the Subsidiaries, (i) Indebtedness under
the Loan Documents, (ii) the Subordinated Notes in an aggregate principal
amount not to exceed $200,000,000 and (iii) other Indebtedness permitted
under Section 6.01.
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(x) The Lenders shall have received the unaudited consolidated
balance sheet and related statements of income, stockholders' equity and
cash flows of the HFG Companies and their respective subsidiaries on a
consolidated basis as of and for the two fiscal quarter period ended June
30, 1996, as contemplated by Section 3.05(a)(ii) hereof.
(y) The Lenders shall be satisfied with the tax sharing arrangements
among Holdings and its subsidiaries (it being understood that the tax
liability of the Parent Borrower and the Subsidiaries will not exceed the
tax liability of Holdings and its consolidated subsidiaries, excluding
Simmons).
(z) The Lenders shall have received an unaudited pro forma
consolidated balance sheet of each of Holdings and the Parent Borrower as
of June 30, 1996, after giving effect to the Transactions and the other
transactions contemplated hereby as if they had occurred on such date
which balance sheets shall be consistent in all material respects with the
sources and uses shown on Schedule 4.02(z) and the forecasts previously
provided to the Lenders.
(aa) The Lenders shall have received a solvency letter, in form and
substance and from an independent evaluation firm satisfactory to the
Lenders.
(ab) All governmental consents and approvals and all material third
party consents shall have been obtained with respect to the Transactions
and the other transactions contemplated hereby to the extent required, all
applicable appeal periods shall have expired and there shall be no
governmental or judicial action, actual or threatened, that has or could
have a reasonable likelihood of restraining, preventing or imposing
burdensome conditions on the Transactions or the other transactions
contemplated hereby.
ARTICLE V
Affirmative Covenants
Each of Holdings and the Borrowers covenants and agrees with each Lender
that so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and all Letters of Credit have been canceled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, each of Holdings and the Borrowers
will, and will cause each of the Subsidiaries (other than the Receivables
Subsidiary and the Master Servicer) to:
SECTION 5.01. Existence; Businesses and Properties; Compliance with Laws.
(a) Do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its legal existence, except as otherwise expressly
permitted under Section 6.05.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; comply in all material respects with
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all applicable laws, rules, regulations (including any zoning, building,
Environmental and Safety Law, ordinance, code or approval or any building
permits or any restrictions of record or agreements affecting the Mortgaged
Properties) and decrees and orders of any Governmental Authority, whether now in
effect or hereafter enacted except where noncompliance could not reasonably be
expected to result in a Material Adverse Effect, or in the case of the Mortgaged
Properties, where noncompliance with zoning and building laws, rules and
regulations, building permits and certificates of occupancy could not reasonably
be expected to result in a material adverse effect on the business, assets,
operations or financial condition of the person that has title to the Mortgaged
Property; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition (reasonable wear and tear excepted) and from time to time make, or
cause to be made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the business
carried on in connection therewith may be properly conducted in all material
respects at all times.
SECTION 5.02. Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers; maintain such
other insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses operating in the same or similar locations,
including commercial general liability insurance against claims for bodily
injury or death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by it; and maintain
such other insurance as may be required by law.
(b) Cause all property and boiler policies to be endorsed or otherwise
amended to include a "standard" or "New York" lender's loss payable endorsement,
in form and substance reasonably satisfactory to the Administrative Agent and
the Collateral Agent, which endorsement shall provide that, from and after the
Closing Date, if the insurance carrier shall have received written notice from
the Administrative Agent or the Collateral Agent of the occurrence of an Event
of Default, the insurance carrier shall pay all proceeds otherwise payable to
the Loan Parties under such policies directly to the Collateral Agent; cause all
such policies to provide that none of Holdings, the Borrowers, the
Administrative Agent, the Collateral Agent or any other party shall be a
coinsurer thereunder and to contain a "Replacement Cost Endorsement", without
any deduction for depreciation, and such other provisions as the Administrative
Agent or the Collateral Agent may reasonably require from time to time to
protect their interests; deliver, promptly as available but in no event later
than 120 days after the Closing Date, original or certified copies of all such
policies to the Collateral Agent; cause each such policy to provide that it
shall not be canceled or not renewed (i) by reason of nonpayment of premium upon
not less than 10 days' prior written notice thereof by the insurer to the
Administrative Agent and the Collateral Agent (giving the Administrative Agent
and the Collateral Agent the right to cure defaults in the payment of premiums)
or (ii) for any other reason upon not less than 30 days' prior written notice
thereof by the insurer to the Administrative Agent and the Collateral Agent;
deliver to the Administrative Agent and the Collateral Agent, (A) prior to the
cancellation, or nonrenewal of any such policy of insurance, a copy of a renewal
or replacement policy (or other evidence of renewal of a policy previously
delivered to the Administrative Agent and the Collateral Agent) together with
evidence satisfactory to the Administrative Agent and the Collateral Agent of
payment of the premium therefor to the extent due and payable and (B) promptly
upon any modification of any such policy, a copy of such modified policy.
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(c) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any
successor agency), obtain flood insurance in such total amount as the
Administrative Agent or the Collateral Agent may from time to time reasonably
require, and otherwise comply with the National Flood Insurance Program as set
forth in the Flood Disaster Protection Act of 1973, as it may be amended from
time to time.
(d) With respect to any Mortgaged Property, carry and maintain commercial
general liability insurance including the "broad form CGL endorsement" and
coverage on an occurrence basis against claims made for bodily injury, death and
property damage and umbrella liability insurance against such claims, in no
event for a combined single limit of less than $25,000,000, naming the
Collateral Agent as an additional insured, on forms reasonably satisfactory to
the Collateral Agent.
(e) Notify the Administrative Agent and the Collateral Agent immediately
whenever any separate insurance concurrent in form or contributing in the event
of loss with that required to be maintained under this Section 5.02 is taken out
by Holdings or the Borrowers; and promptly deliver to the Administrative Agent
and the Collateral Agent a duplicate original or certified copy of such policy
or policies.
(f) In connection with the covenants set forth in this Section 5.02, it is
understood and agreed that:
(i) none of the Administrative Agent, the Lenders, the Issuing Bank,
or their respective agents or employees shall be liable for any loss or
damage insured by the insurance policies required to be maintained under
this Section 5.02, it being understood that (A) the Borrowers and the
other Loan Parties shall look solely to their insurance companies or any
other parties other than the aforesaid parties for the recovery of such
loss or damage and (B) Holdings and the Borrowers shall use reasonable
efforts to cause such insurance policies to waive the insurer's rights of
subrogation against the Administrative Agent, the Collateral Agent, the
Lenders, the Issuing Bank or their agents or employees. If, however, any
such insurance policy does not provide waiver of subrogation rights
against such parties, as required above, then Holdings and each Borrower
hereby agrees, to the extent permitted by law, to waive its right of
recovery, if any, against the Administrative Agent, the Collateral Agent,
the Lenders, the Issuing Bank and their agents and employees in respect of
any such loss or damage; and
(ii) the designation of any form, type or amount of insurance coverage
by the Administrative Agent or the Collateral Agent under this Section
5.02 shall in no event be deemed a representation, warranty or advice by
the Administrative Agent or the Collateral Agent that such insurance is
adequate for the purposes of the business of Holdings, the Borrowers and
the Subsidiaries or the protection of their properties.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
monetary obligations promptly and in accordance with their terms and pay and
discharge promptly when due all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or in respect of its
property, before such taxes, assessments and governmental charges shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise that,
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if unpaid, might give rise to a Lien upon such properties or any part thereof;
provided, however, that such payment and discharge shall not be required with
respect to (i) any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and Holdings or such Borrower, as applicable, shall have set aside
on its books adequate reserves with respect thereto in accordance with GAAP and
such contest operates to suspend collection of the contested obligation, tax,
assessment or charge and enforcement of a Lien and, in the case of a Mortgaged
Property, there is no risk of forfeiture of such property and (ii) any
Indebtedness or other obligation or any tax, assessment, charge, levy or claims,
the failure to pay and discharge when due which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.04. Financial Statements, Reports, etc. In the case of Holdings
and the Parent Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, its
consolidated balance sheet and related statements of income, stockholders'
equity and cash flows showing the consolidated financial condition of such
Person and its consolidated subsidiaries as of the close of such fiscal
year and the consolidated results of its operations and the operations of
such subsidiaries during such year (and showing, on a comparative basis,
the figures for the previous year), all audited by Ernst & Young LLP,
Coopers and Lybrand LLP or other independent public accountants of
recognized national standing acceptable to the Required Lenders and
accompanied by an opinion of such accountants (which shall not be
qualified in any material respect) to the effect that such consolidated
financial statements fairly present in all material respects the financial
condition and results of operations of such Person and its consolidated
subsidiaries on a consolidated basis in accordance with GAAP consistently
applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year, its unaudited consolidated balance sheet and
related statements of income, stockholders' equity and cash flows showing
the consolidated financial condition of such Person and its consolidated
subsidiaries as of the close of such fiscal quarter and the consolidated
results of its operations and the operations of such subsidiaries during
such fiscal quarter and the then elapsed portion of the fiscal year (and
showing, on a comparative basis, such information as of and for the
corresponding dates and periods of the preceding fiscal year), all
certified by a Financial Officer of such Person as fairly presenting in
all material respects the consolidated financial condition and results of
operations of such Person and its consolidated subsidiaries on a
consolidated basis in accordance with GAAP (except for the absence of
footnote disclosure) consistently applied, subject to year-end audit
adjustments;
(c) within 30 days after the end of each month (other than the last
month of any fiscal quarter), its unaudited consolidated balance sheet and
related statements of income, stockholders' equity and cash flows, showing
the consolidated financial condition of such Person and its consolidated
subsidiaries as of the close of such month and the consolidated results of
its operations and the operations of such subsidiaries during such month
and the thenelapsed portion of the fiscal year;
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(d) concurrently with any delivery of financial statements under
sub-paragraph (a) or (b) above, a certificate of the Financial Officer
certifying such statements and (i) certifying that no Event of Default or
Default has occurred or, if an Event of Default or Default has occurred,
specifying the nature and extent thereof and any corrective action taken
or proposed to be taken with respect thereto, (ii) setting forth
computations in reasonable detail satisfactory to the Administrative Agent
demonstrating compliance (A) with the covenants contained in Section
6.06(a)(vi), 6.09, 6.10, 6.11 and 6.12 and (B) with the maximum limitation
amounts contained in the several clauses in Section 6.01, 6.04, 6.05 and
6.06 and (iii) setting forth any change in the Applicable Percentage;
(e) concurrently with the delivery of financial statements under
sub-paragraph (a) above, a certificate of the accounting firm opining on
such statements (which certificate may be limited to accounting matters
and disclaim responsibility for legal interpretations) (i) certifying
whether such accounting firm has become aware of the occurrence of any
Event of Default or Default and (ii) confirming the accuracy of the
computations referred to in clauses (ii) and (iii) of sub-paragraph (d)
above;
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
Holdings, any Borrower or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, or
distributed to its shareholders generally, as the case may be;
(g) promptly, from time to time, such other information regarding
the operations, business affairs and financial condition of Holdings, any
Borrower or any Subsidiary, or compliance with the terms of any Loan
Document, or, if available, such financial statements showing the results
of operations of Simmons, in each case as the Administrative Agent or any
Lender may reasonably request; and
(h) prior to the beginning of each fiscal year, a copy of the budget
for its consolidated balance sheet and related statements of income and
cash flows for each quarter of such fiscal year.
SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative
Agent, the Issuing Bank and each Lender written notice of the following promptly
after (and, in any event, no later than five days after) any Responsible
Officers of Holdings or the Parent Borrower obtains knowledge thereof:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to be
taken with respect thereto;
(b) the filing or commencement of, or any written threat or notice
of intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against Holdings, any Borrower or any Subsidiary that could
reasonably be expected to result in a Material Adverse Effect; and
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(c) any development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material respects with
the applicable provisions of ERISA and the Code to the extent failure to comply
could reasonably be expected to result in a Material Adverse Effect and (b)
furnish to the Administrative Agent promptly, and in any event within 10 days
after any Responsible Officer of Holdings or any Borrower knows or has reason to
know that, any ERISA Event has occurred that, alone or together with any other
ERISA Event could reasonably be expected to result in liability of Holdings or
the Borrowers in an aggregate amount exceeding $5,000,000, a statement of a
Financial Officer of Holdings or the Parent Borrower, as applicable, setting
forth details as to such ERISA Event and the action, if any, that Holdings or
the Parent Borrower, as applicable, has taken or proposes to take with respect
thereto.
SECTION 5.07. Maintaining Records; Access to Properties and Inspections.
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all requirements of law are made in relation to its
business and activities. Each Loan Party and each Subsidiary (a) will permit any
representatives designated by the Administrative Agent or any Lender to visit
and inspect the financial records and the properties of Holdings, any Borrower
or any Subsidiary at reasonable times and as often as reasonably requested and
to make extracts from and copies of such financial records, and (b) will permit
any representatives designated by the Administrative Agent or any Lender to
discuss the affairs, finances and condition of Holdings, any Borrower or any
Subsidiary with the officers thereof and independent accountants therefor;
provided, however, that the number of visits pursuant to clause (a) above in any
year shall not exceed two, unless (i) a Default or Event of Default shall have
occurred and be continuing or (ii) the Collateral Agent, or the Required Lenders
through the Administrative Agent, determines in good faith that any material
event or material change has occurred with respect to Holdings, the Borrowers
and the Subsidiaries and that as a result of such event or change more frequent
visits are necessary or prudent.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.09. Compliance with Environmental Laws. Comply, and cause all
lessees and other persons occupying its Properties to comply, in all material
respects with all Environmental Laws and Environmental Permits applicable to its
operations and Properties and the operations conducted thereon; obtain and renew
all material Environmental Permits necessary for its Properties; and conduct any
Remedial Action in accordance with Environmental Laws, except where
noncompliance with Environmental Laws and Environmental Permits or the failure
to obtain or renew such Environmental Permits or conduct such Remedial Action,
in the aggregate, could not be reasonably expected to result in a Material
Adverse Effect.
SECTION 5.10. Preparation of Environmental Reports. If a Default caused by
reason of a breach of Section 3.17 or 5.09 relating to the presence of Hazardous
Materials at any Properties shall have occurred and be continuing, at the
request of the Required Lenders through the Administrative Agent, provide to the
Lenders within 45 days after such request, at the expense of the Borrowers, an
environmental site assessment report for the Properties which are the subject of
such Default prepared by an environmental consulting firm reasonably acceptable
to the Administrative Agent and indicating
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the presence or absence of Hazardous Materials and the estimated cost of any
compliance or Remedial Action in connection with such Properties.
SECTION 5.11. Further Assurances. Execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing Uniform Commercial Code and other financing statements,
mortgages and deeds of trust) that may be required under applicable law, or that
the Required Lenders, the Administrative Agent or the Collateral Agent may
reasonably request, in order to effectuate the transactions contemplated by the
Loan Documents and in order to grant, preserve, protect and perfect the validity
and first priority of the security interests created or intended to be created
by the Security Documents (subject to Liens permitted by Section 6.02). Holdings
and the Borrowers will cause any subsequently acquired or organized Domestic
Subsidiary to execute a Subsidiary Guarantee Agreement, Indemnity Subrogation
and Contribution Agreement and each applicable Security Document in favor of the
Collateral Agent. In addition, from time to time, Holdings and each Borrower
will, at its cost and expense, promptly secure the Obligations by pledging or
creating, or causing to be pledged or created, perfected security interests with
respect to such of its assets and properties as the Administrative Agent or the
Required Lenders shall designate (it being understood that it is the intent of
the parties that the Obligations shall be secured by, among other things,
substantially all the assets of Holdings, the Borrowers and the Domestic
Subsidiaries (other than the Receivables Subsidiary and the Master Servicer),
including real and other properties acquired subsequent to the Closing Date).
Such security interests and Liens will be created under the Security Documents
and other security agreements, mortgages, deeds of trust and other instruments
and documents in form and substance satisfactory to the Collateral Agent, and
Holdings and each Borrower shall deliver or cause to be delivered to the Lenders
all such instruments and documents (including legal opinions, title insurance
policies, lien searches and surveys) as the Collateral Agent shall reasonably
request to evidence compliance with this Section. Holdings and each Borrower
agrees to provide such evidence as the Collateral Agent shall reasonably request
as to the perfection and priority status of each such security interest and
Lien. Each Loan Party agrees promptly to notify the Collateral Agent if any
material portion of the Collateral owned or held by such Loan Party is damaged
or destroyed. The Parent Borrower shall deliver, no later than 60 days after the
Closing Date or such dates as otherwise agreed to by the Administrative Agent,
to the Administrative Agent, on behalf of itself, the Lenders and the Issuing
Bank a favorable written opinion of foreign local counsel with respect to
material Foreign Subsidiaries covering matters reasonably satisfactory to the
Administrative Agent.
SECTION 5.12. Interest Rate Protection. As promptly as practicable and in
any event within 90 days after the Closing Date, enter into, and for a period of
three years thereafter maintain at all times in full force and effect, Interest
Rate Protection Agreements at rates, in form and with parties reasonably
satisfactory to the Administrative Agent, the effect of which shall be to set at
fixed rates the interest cost to the Borrowers with respect to at least 50% of
the outstanding principal amount of the Term Loans.
SECTION 5.13. Assets of Holdings. (a) As promptly as practicable and in
any event within 30 days after the Closing Date, cause the Specified HFG Assets
to be contributed by Holdings to the Parent Borrower or a Subsidiary so that,
after giving effect to such contribution and any Intercompany Indebtedness owed
by Holdings to the Parent Borrower, the stockholders' equity of Holdings (on an
unconsolidated basis) shall be less than $5,000,000.
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(b) Holdings shall, from time to time commencing with the 30th day
following the Closing Date, upon the reasonable request of the Administrative
Agent, contribute additional assets of Holdings to the Parent Borrower or a
Subsidiary so that, after giving effect to such contribution and any
Intercompany Indebtedness owed by Holdings to the Parent Borrower, the
stockholders' equity of Holdings (on an unconsolidated basis) shall be less than
$5,000,000.
SECTION 5.14. Certificates of Occupancy, Permits and Zoning. (a) After the
Closing Date, each of Holdings, the Borrowers or any of the Subsidiaries shall
use reasonable efforts to obtain (and promptly upon obtaining the same shall
deliver to the Collateral Agent) the following:
(i)(A) a copy of the original permanent certificate or temporary
certificate of occupancy as the same may have been amended or issued from
time to time, covering each Improvement located upon the Mortgaged
Properties, that were required to have been issued by the appropriate
Governmental Authority for such Improvement, or (B) a letter from an
appropriate Governmental Authority stating that at the time of
construction or completion certificates of occupancy were not required for
each such Improvement for which a certificate as described above has not
been delivered and, if reasonably requested by the Administrative Agent or
the Collateral Agent, suitable evidence of the date of construction of
each Improvement on such Mortgaged Property; and
(ii) one of the following: (A) written confirmation from the
applicable zoning commission or other appropriate Governmental Authority
stating that with respect to each Mortgaged Property as built it complies
with existing land use and zoning ordinances, regulations and restrictions
to such Mortgaged Property, (B) an opinion from local counsel reasonably
acceptable to the Administrative Agent to the same effect as covered by
clause (i)(A) above or (C) a zoning endorsement reasonably satisfactory to
the Administrative Agent in connection with the Collateral Agent's
mortgage title insurance policy of such Mortgaged Property.
(b) In furtherance of, but without limiting, the obligations under
paragraph (a) above, Holdings, the Borrowers or any Subsidiaries, as applicable,
shall obtain (and promptly upon obtaining the same shall deliver to the
Collateral Agent) on at least 80% of the total number of Mortgaged Properties
all items required to be delivered pursuant to paragraphs (a)(i) and (ii) above
within one year after the Closing Date.
(c) Within 45 days after the Closing Date, each of Holdings, the Borrowers
or any of the Subsidiaries shall furnish the Collateral Agent with an as-built
survey for each Mortgaged Property that is certified to the Collateral Agent.
SECTION 5.15. Subsidiaries. In the event that any of Dixie Furniture
Company, Incorporated, Henry Link Corporation, Link-Taylor Corporation or
Young-Hinkle Corporation (i) acquires or otherwise obtains any assets (other
than rights associated with each such company's name) in excess of $5,000, (ii)
hires or otherwise retains any employees or (iii) conducts any business, then
such company shall become a Subsidiary Guarantor in accordance with Section 5.11
as if such company is a subsequently acquired or organized Domestic Subsidiary.
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ARTICLE VI
Negative Covenants
Each of Holdings and the Borrowers covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and all Letters of Credit have been cancelled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, neither Holdings nor the Borrowers
will, nor will they cause or permit any of the Subsidiaries (other than the
Receivables Subsidiary and the Master Servicer, except in the case of Section
6.14) to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness existing on the date hereof and set forth on
Schedule 6.01;
(b) Indebtedness created hereunder and under the other Loan
Documents;
(c) in the case of Holdings, the Masco Notes and the Debentures;
(d) (i) in the case of the Parent Borrower, the Subordinated Notes
and (ii) in the case of the Subsidiary Guarantors, the Guarantees
guaranteeing the Subordinated Notes;
(e) Permitted Foreign Indebtedness in an aggregate principal amount
at any time outstanding not to exceed $75,000,000 (less, without
duplication, the aggregate amount of Indebtedness of Foreign Subsidiaries
pursuant to Section 6.01(n) outstanding at such time and the aggregate
outstanding amount of Permitted Foreign Investments made pursuant to
Section 6.04(j));
(f) intercompany loans and letters of credit and guarantees in
support of Indebtedness and advances permitted by Section 6.04(b), (i),
(j) and (l);
(g) Indebtedness consisting of purchase money Indebtedness
(including purchase money Indebtedness that is in existence with respect
to any asset or other property at the time such asset or other property is
acquired), industrial revenue bonds or Capital Lease Obligations incurred
in the ordinary course of business after the Closing Date to finance
Capital Expenditures, provided that (i) the Indebtedness incurred shall
not exceed the purchase price of the assets financed thereby and (ii) the
aggregate principal amount of any Indebtedness or Capital Lease
Obligations incurred pursuant to this paragraph (g) outstanding at any
time shall not exceed $25,000,000;
(h) Indebtedness of the Borrowers pursuant to Exchange Rate
Protection Agreements and Interest Rate Protection Agreements, in the case
of Interest Rate Protection Agreements in form and with parties reasonably
satisfactory to the Administrative Agent;
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(i) Indebtedness of Holdings, the Parent Borrower and the
Subsidiaries owed to (including obligations in respect of letters of
credit for the benefit of) any person providing worker's compensation,
health, disability or other employee benefits or property, casualty or
liability insurance to Holdings, the Parent Borrower or any Subsidiary,
pursuant to reimbursement or indemnification obligations to such person,
in each case incurred in the ordinary course of business;
(j) Indebtedness of Holdings, the Parent Borrower or any Subsidiary
in respect of performance bonds, bid bonds, appeal bonds, surety bonds and
similar obligations and trade related letters of credit, in each case
provided in the ordinary course of business, including those incurred to
secure health, safety and environmental obligations in the ordinary course
of business;
(k) Indebtedness in a principal amount not to exceed $10,000,000,
provided that the proceeds from such Indebtedness shall be used to build,
purchase or equip a manufacturing facility for the Berkline Corporation;
(l) Indebtedness issued by Holdings or the Parent Borrower, in lieu
of the payment of cash, in connection with the purchase or redemption of
Capital Stock held by officers or employees of Holdings, the Parent
Borrower or any Subsidiary, subject to the proviso in Section 6.06(a)(iv);
(m) Indebtedness incurred pursuant to any Permitted Receivables
Financing or any factoring arrangements permitted under Section 6.05(d);
(n) Indebtedness not in excess of $15,000,000, which Indebtedness is
guaranteed by Masco, or with respect to which Masco has provided credit
support, in either case pursuant to the terms of the Acquisition Agreement
(the "Masco Guarantees");
(o) Indebtedness incurred pursuant to any sale and lease-back
transaction permitted by Section 6.03;
(p) unsecured Indebtedness in addition to that permitted by clauses
(a) through (o) above in an aggregate principal amount not to exceed
$20,000,000 at any time outstanding, so long as such Indebtedness is
created under agreements or instruments imposing covenants on the Parent
Borrower and the Subsidiaries no more restrictive than the covenants
imposed under this Agreement; and
(q) extensions, renewals or refinancings of Indebtedness under
paragraphs (a), (g) (subject to the proviso contained in such clause (g))
and (k) so long as (A) such Indebtedness ("Refinancing Indebtedness") is
in an aggregate principal amount not greater than the aggregate principal
amount of the Indebtedness being extended, renewed or refinanced plus the
amount of any premiums required to be paid thereon and fees and expenses
associated therewith, (B) such Refinancing Indebtedness has a later or
equal final maturity and a longer or equal weighted average life than the
Indebtedness being extended, renewed or refinanced, (C) the interest rate
applicable to such Refinancing Indebtedness is a market interest rate (as
determined in good
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faith by the Board of Directors of the Parent Borrower) as of the time of
such extension, renewal or refinancing, (D) if the Indebtedness being
extended, renewed or refinanced is subordinated to the Obligations, such
Refinancing Indebtedness is subordinated to the Obligations to the same
extent as the Indebtedness being extended, renewed or refinanced and (E)
at the time and after giving effect to such extension, renewal or
refinancing, no Default or Event of Default shall have occurred and be
continuing;
provided, however, that the aggregate principal amount of Indebtedness incurred
by Holdings pursuant to this Section 6.01 (other than pursuant to clauses (a)
(and Refinancing Indebtedness in respect thereof), (b), (c), (i), (j), (l) or
(m) above or any intercompany loan) shall not exceed $5,000,000 in the aggregate
at any time outstanding.
SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of Holdings, the Parent Borrower and
the Subsidiaries existing on the date hereof and set forth on Schedule
6.02(a), provided that such Liens shall secure only those obligations
which they secure on the date hereof (and extensions, renewals and
refinancings of such obligations permitted by Section 6.01);
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by Holdings, the Parent Borrower or any Subsidiary,
provided that (i) such Lien is not created in contemplation of or in
connection with such acquisition, (ii) such Lien does not apply to any
other property or assets of Holdings, any Borrower or any Subsidiary and
(iii) such Lien does not (A) materially interfere with the use, occupancy
and operation of any Mortgaged Property, (B) materially reduce the fair
market value of such Mortgaged Property but for such Lien or (C) result in
any material increase in the cost of operating, occupying or owning or
leasing such Mortgaged Property;
(d) Liens for taxes, assessments, governmental charges and levies
not yet due or which are being contested or are unpaid in compliance with
Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens arising in the ordinary course of
business and securing obligations that are not due and payable or which
are being contested in compliance with Section 5.03;
(f) Liens of landlords or of mortgagees of landlords arising by
operation of law, provided that the (A) rental payments secured thereby
are not yet due and payable and (B) the Borrowers use reasonable efforts
to obtain a consent from such landlord, in which such landlord or
mortgagee acknowledges the Collateral Agent's first priority security
interest in the Inventory (as defined in the Security Documents) pledged
by each Loan Party to the Collateral Agent and agrees to provide the
Collateral Agent with access to the premises covered by such lease in
order to enforce such security interest;
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(g) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security or similar laws or regulations;
(h) pledges and deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital Lease
Obligations), statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business;
(i) zoning restrictions, easements, rights-of-way, minor defects or
irregularities in title, restrictions on use of real property and other
similar encumbrances which, in the aggregate, do not materially detract
from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of Holdings, the Parent Borrower
or the Subsidiaries;
(j) purchase money security interests in real property, improvements
thereto or equipment hereafter acquired (or, in the case of improvements,
constructed) by Holdings, any Borrower or any Subsidiary, provided that
(i) such security interests secure Indebtedness permitted by Section
6.01(g), (ii) such security interests are incurred, and the Indebtedness
secured thereby is created, within 120 days after such acquisition (or
construction) or are incurred to extend, renew or refinance such security
interests and Indebtedness incurred within such 120-day period, (iii) the
Indebtedness secured thereby does not exceed the lesser of the cost or the
fair market value of such real property, improvements or equipment at the
time of such acquisition (or construction) and (iv) such security
interests do not apply to any other property or assets of Holdings, any
Borrower or any Subsidiary;
(k) attachment or judgment Liens securing judgments, unless the
aggregate amount of such judgments shall (A) exceed $7,500,000 (except to
the extent the Administrative Agent shall have received satisfactory
evidence that such judgments are covered by insurance) and (B) remain
undischarged for a period of more than 30 consecutive days during which
execution shall not be effectively stayed;
(l) Liens to secure Capital Lease Obligations, industrial revenue
bonds or Indebtedness permitted by Sections 6.01(g) or (k), provided that
such Liens (i) do not extend to any property or assets of Holdings, the
Parent Borrower or any Subsidiary other than the property or assets
financed thereby and (ii) do not interfere with the business of Holdings,
the Parent Borrower and the Subsidiaries in any material respect;
(m) rights of first offer or refusal relating to interests in joint
ventures;
(n) UCC filings that relate to the preservation of claims in respect
of interests in property subject to operating leases (it being agreed that
the permissiveness of such filing hereunder shall not be considered a
waiver of any claim that the Lenders or the Collateral Agent may have on
the property to which such interest relates);
(o) in the case of any Foreign Subsidiary, Liens securing any
Permitted Foreign Indebtedness permitted by Section 6.01(e);
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77
(p) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods in the ordinary course of business;
(q) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by
Holdings, the Parent Borrower or any of the Subsidiaries in the ordinary
course of business;
(r) Liens on accounts receivables financed in connection with any
Permitted Receivables Financing or factoring arrangement permitted by
Section 6.05; and
(s) pledges of any Capital Stock of Simmons.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred, provided that the Parent
Borrower and the Subsidiaries may enter into any such transaction (i) to the
extent that the Capital Lease Obligation and Liens associated therewith would be
permitted by Sections 6.01(g) and 6.02(l) or (ii) whereby Holdings shall
transfer assets to the Parent Borrower or a Subsidiary as contemplated by
Section 5.13 and Holdings shall thereafter rent or lease such assets from the
Parent Borrower or a Subsidiary.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire
any Capital Stock, evidences of Indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments by Holdings existing on the Closing Date in the
Capital Stock of the Parent Borrower and Simmons;
(b) investments, loans or advances made by (i) the Parent Borrower
in or to Holdings, (A) to pay the fees and expenses payable pursuant to
the Management Agreement (including all amounts due under the Transition
Services Agreement), (B) to the extent necessary to enable Holdings to
make payments consisting of indemnification obligations, guarantee fees
and reimbursement of amounts expended by Masco for the benefit of the
Parent Borrower and the Subsidiaries required to be made pursuant to the
Acquisition Agreement, (C) to pay interest on the Masco Notes to the
extent permitted by Section 6.08(b)(iv)(B) and (D) to the extent necessary
to cover any operating expenses of Holdings or (ii) Holdings, any Borrower
or any Subsidiary in or to any Borrower or any Subsidiary Guarantor;
provided, however, that any such loans or advances in excess of $200,000
shall (x) in the event that such loan or advance is made by Holdings or a
Subsidiary Guarantor, be evidenced by a note, substantially in the form of
Exhibit N, that shall be pledged to the Collateral Agent for the benefit
of the Secured Parties pursuant to the Pledge Agreement and (y) in the
event that such loan or advance is made by a Subsidiary (other than a Loan
Party), be subordinated to the prior payment in full of the Obligations as
evidenced by a note substantially in the form of Exhibit N;
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78
(c) Permitted Investments;
(d) investments by Holdings, any Borrower or any Subsidiary in (i)
the Capital Stock of the Receivables Subsidiary or any Master Servicer and
(ii) other interests in the Receivables Subsidiary, in each case to the
extent necessary in connection with or required by the terms of the
Permitted Receivables Financing;
(e) investments consisting of non-cash consideration received in
connection with a sale of assets permitted by Section 6.05;
(f) investments arising from transactions by any Loan Party or any
of the Subsidiaries with customers or suppliers (including Affiliates to
the extent permitted by Section 6.07) in the ordinary course of business,
including endorsements of negotiable instruments and debt obligations and
other investments received in connection with the bankruptcy or
reorganization of customers and suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers, arising
in the ordinary course of business, and in the exercise of the reasonable
business judgment of such Borrower or such Subsidiary;
(g) advances to employees made to cover payroll, travel and similar
expenses that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP and that are made in the
ordinary course of business, provided that in the event it is determined
that any item with respect to which any such advance is made will not be
treated as such an expense, this clause (g) shall be inapplicable with
respect to such advances;
(h) loans or advances to employees made in the ordinary course of
business not exceeding $5,000,000 in the aggregate outstanding at any
time;
(i) investments, loans or advances made by any Foreign Subsidiary in
or to any other Foreign Subsidiary;
(j) Permitted Foreign Investments not to exceed $75,000,000 at any
time outstanding (less, without duplication, the aggregate outstanding
principal amount of Permitted Foreign Indebtedness and the aggregate
amount of Indebtedness of Foreign Subsidiaries pursuant to Section 6.01(n)
outstanding at such time);
(k) Capital Expenditures and other purchases permitted hereunder;
(l) investments, loans and advances existing on the date hereof and
as set forth on Schedule 6.04(l) and renewals, replacements and extensions
thereof, provided that (i) the amount of any such renewed, replaced or
extended investment, loan or advance shall be for an amount no greater
than the amount of the investment, loan or advance being renewed or
extended and (ii) any such loan or advance in excess of $200,000 shall be
evidenced by a note pledged to the Collateral Agent for the benefit of the
Lenders to the extent required under the Pledge Agreement;
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79
(m) investments, loans and advances in or to customers and dealers
in the ordinary course of business (including investments, loans and
advances existing on the date hereof and set forth on Schedule 6.04(m))
not exceeding in the aggregate $60,000,000 at any time outstanding;
(n) investments, loans and advances in or to suppliers in the
ordinary course of business (including investments, loans and advances
existing on the date hereof and set forth on Schedule 6.04(n)) not
exceeding in the aggregate $20,000,000 at any time outstanding;
(o) investments, loans and advances in or to Joint Ventures not
exceeding in the aggregate $35,000,000 at any time outstanding, provided
that investments in equity of Joint Ventures permitted pursuant to this
clause (o) shall not exceed in the aggregate $15,000,000 at any time
outstanding;
(p) investments, loans and advances in or to a Foreign Subsidiary
originally arising from dividend receivables owed by such Foreign
Subsidiary or any other Foreign Subsidiary (whether or not thereafter
reclassified from a loan or an advance to an investment or vice versa),
provided that there shall be no net increase in the aggregate amount of
cash investments, cash loans and cash advances to Foreign Subsidiaries as
a result of any investments, loans and advances permitted pursuant to this
Section 6.04(p); and
(q) investments, loans or advances in addition to those permitted by
clauses (a) through (p) above not exceeding in the aggregate $15,000,000
at any time outstanding.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or any of its assets
(whether now owned or hereafter acquired) or any Capital Stock of the Parent
Borrower or any Subsidiary, or purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or any of the assets of any other
person, except that:
(a) Holdings, any Borrower and any Subsidiary may purchase and sell
inventory and Permitted Investments and purchase and sell obsolete or worn
out assets and scrap in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be
continuing, (i) any wholly owned Subsidiary may merge into the Parent
Borrower in a transaction in which the Parent Borrower is the surviving
corporation, (ii) any wholly owned Subsidiary may merge into or
consolidate with any other wholly owned Domestic Subsidiary in a
transaction in which the surviving entity is a wholly owned Domestic
Subsidiary; (iii) any 90%-Owned Foreign Subsidiary may merge into any
other 90%-Owned Foreign Subsidiary in a transaction in which the surviving
entity is a 90%-Owned Foreign Subsidiary and no person other than the
Parent Borrower, a wholly owned Domestic Subsidiary or a 90%-Owned Foreign
Subsidiary receives any consideration other than interests in the
surviving entity to any applicable minority interest holder not exceeding
the proportionate interests of such minority interest holder in the
applicable
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Subsidiary and (iv) any direct wholly owned subsidiary of any Foreign
Subsidiary may merge into such Foreign Subsidiary or into another direct
wholly owned subsidiary of such Foreign Subsidiary so long as no person
other than such Foreign Subsidiary receives any consideration;
(c) (i) any Loan Party or any Subsidiary may sell, transfer, lease
or otherwise dispose of any of its assets to any Borrower or any
Subsidiary Guarantor, (ii) any 90%-Owned Foreign Subsidiary may sell,
transfer, lease or otherwise dispose of any of its assets to any 90%-Owned
Foreign Subsidiary and (iii) any direct wholly owned subsidiary of any
Foreign Subsidiary may sell, transfer, lease or otherwise dispose of any
of its assets to such Foreign Subsidiary or another wholly owned
subsidiary of such Foreign Subsidiary;
(d) (i) Holdings, any Borrower or any Subsidiary may sell accounts
receivable and related assets to the Receivables Subsidiary pursuant to
any Permitted Receivables Financing or (ii) to the extent not included in
clause (i), Sunbury may sell accounts receivable pursuant to factoring
arrangements entered into in the ordinary course of business in an
aggregate amount not to exceed $20,000,000 at any time outstanding;
(e) any sale and lease-back transaction permitted by Section 6.03
may be effected;
(f) any Loan Party or any Subsidiary may sell any assets in the
ordinary course of business, provided that (i) the aggregate fair market
value of all such assets sold pursuant to this clause (f) shall not exceed
$10,000,000 in any fiscal year and (ii) within 180 days after any such
asset sale, such Loan Party or Subsidiary shall apply the Net Cash
Proceeds thereof to purchase assets used in the business of such Loan
Party or Subsidiary or to make an investment in another Loan Party that
within such 180-day period uses the proceeds of such investment to
purchase assets used in the business of such other Loan Party;
(g) any Loan Party or any Subsidiary may sell any other assets or
the Capital Stock of any Subsidiary, provided that (i) in the case of a
sale of Capital Stock of a Domestic Subsidiary, such sale shall be of all
the Capital Stock of such Subsidiary, (ii) the aggregate fair market value
of all such assets and Capital Stock sold pursuant to this clause (g)
shall not exceed in the aggregate $150,000,000 at any time, (iii) the Net
Cash Proceeds of such sale shall be applied to prepay outstanding Term
Loans to the extent required by Section 2.13(b), (iv) in the case of a
sale of all the Capital Stock of any Subsidiary Borrower, no Loans or
Letters of Credit shall be outstanding with respect to such person and (v)
at the time of, and immediately after giving effect to, such sale, no
Default or Event of Default shall have occurred and be continuing;
(h) any Loan Party or any Subsidiary may lease or sublease
properties in which it has interests or lease any other property in the
ordinary course of business;
(i) any Loan Party or any Subsidiary may make acquisitions
constituting Capital Expenditures permitted hereunder; provided, however,
that if such acquisition consists of all or substantially all the assets
or Capital Stock of any person or a division or a line of business of such
person, the Parent Borrower shall be in compliance, on a pro forma basis
after giving effect to such acquisition, with the covenants contained in
Sections 6.09, 6.10, 6.11 and 6.12
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81
recomputed as at the last day of the most recently ended fiscal quarter of
the Parent Borrower as if such acquisition had occurred on the first day
of each relevant period for testing such compliance, and the Parent
Borrower shall have delivered to the Administrative Agent and the Lenders
an officers' certificate to such effect, together with all relevant
financial information for such person or assets;
(j) the Parent Borrower or any Subsidiary may acquire the interests
not owned by the Parent Borrower, directly or indirectly, in an entity
that is a Subsidiary or otherwise is jointly owned by the Parent Borrower,
directly or indirectly, and a third party or parties at the time of such
acquisition, provided that (i) the consideration for such acquisition
shall be no greater than the fair market value of such interests (as
determined in good faith by the board of directors of the Parent
Borrower), (ii) upon such acquisition, to the extent applicable, such
entity shall become a Subsidiary and the Borrowers shall comply with
Section 5.11 with respect to such Subsidiary and (iii) the aggregate
consideration paid by Holdings, the Parent Borrower and the Subsidiaries
in connection with all such acquisitions pursuant to this clause (j) shall
not exceed an aggregate of $10,000,000 during the term of this Agreement;
(k) a Foreign Subsidiary may issue (i) any director qualifying
shares and (ii) its Capital Stock (A) to the extent it is required to do
so pursuant to local ownership laws in the applicable foreign country and
(B) to the management of such Foreign Subsidiary under any employee stock
option, stock purchase, stock grant or other similar incentive or employee
benefit plan in existence from time to time; and
(l) Holdings may sell, transfer or otherwise dispose of (including
by means of a dividend) the Capital Stock or assets of Simmons;
provided, however, that any sale, transfer or other disposition of assets or
stock otherwise permitted by this Section 6.05 (other than pursuant to clauses
(a), (b), (c), (d) and (l) above) shall not be permitted unless (A) such sale,
transfer or other disposition is for consideration at least 80% (or 100% in the
case of lease payments) of which is cash and (B) such consideration is at least
equal to the fair market value of the assets sold, transferred or disposed of
(as determined in good faith by the board of directors of the Parent Borrower)
and provided, further that for purposes of the immediately preceding proviso,
(i) any proceeds from such sale used to pay the outstanding principal amount of,
premium or penalty, if any, interest and other amounts on any Indebtedness
required to be repaid under the terms thereof or by applicable law as a result
of such sale, transfer or other disposition and (ii) in the case of a sale of a
distinct business unit that is structured as a sale of assets, the assumption of
liabilities (other than Indebtedness) of such business unit by the purchaser
thereof shall, in each case, be deemed cash.
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, with respect to
any shares of its Capital Stock or directly or indirectly redeem, purchase,
retire or otherwise acquire for value (or permit any Subsidiary to purchase or
acquire for value) any shares of any class of its Capital Stock or set aside any
amount for any such purpose; provided, however, that:
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(i) any Subsidiary may declare and pay dividends to, repurchase its
Capital Stock from, or make other distributions to, the Parent Borrower or
any wholly owned Subsidiary (or, in the case of non-wholly owned
Subsidiaries, to or from the Parent Borrower or any Subsidiary and each
other owner of Capital Stock of such Subsidiary on a pro rata basis (or
more favorable basis from the perspective of the Parent Borrower or such
Subsidiary) based on their relative ownership interests);
(ii) Holdings may declare and pay (A) dividends solely in shares of
Capital Stock (other than Disqualified Stock) of Holdings and may exchange
any shares of its Capital Stock for other shares of its Capital Stock or
(B) in connection with a disposition described in Section 6.05(l),
dividends consisting of either shares of Capital Stock or assets of
Simmons or the proceeds from the sale of assets or Capital Stock of
Simmons;
(iii) the Parent Borrower may declare and pay dividends or make
other distributions to Holdings to the same extent that the Parent
Borrower may loan or advance funds to Holdings pursuant to Section
6.04(b);
(iv) (A) the Parent Borrower or Holdings or a Foreign Subsidiary may
purchase or redeem, and Holdings or the Parent Borrower may make payments
of principal and interest on Indebtedness issued pursuant to Section
6.01(l) to purchase or redeem, shares of Capital Stock (or options or
warrants in respect of such shares) of Holdings, the Parent Borrower, or
any Subsidiary (including related stock appreciation rights or similar
securities) held by any current or former officer or employee of Holdings,
the Parent Borrower or any Subsidiary (or spouses or descendants of such
person or trusts or partnerships the beneficiaries of which are such
person, the spouse of such person or descendants of such person) upon such
person's death, disability, retirement or termination of employment or
under the terms of any agreement under which such shares of stock or
related rights or similar securities were issued and (B) the Parent
Borrower may declare and pay dividends or make other distributions to
Holdings the proceeds of which are to be used by Holdings pursuant to
clause (A), provided that the aggregate amount of cash purchases, cash
redemptions or other cash payments (without duplication) that may be made
pursuant to this paragraph (iv) (net of purchases of stock by such
officers or employees) shall not exceed $5,000,000 in any fiscal year;
(v) Holdings may redeem any of its Class D Common Stock with
consideration derived from or arising from Simmons or from the proceeds of
sales or issuances of such Class D Common Stock;
(vi) at any time during the period from the Closing Date through 270
days after the Closing Date, Holdings may redeem, purchase or otherwise
acquire for value shares of its Capital Stock pursuant to the terms of the
Call Agreement dated as of the date hereof between Holdings and 399
Venture Partners; and
(vii) Holdings shall be permitted to issue Debentures to any person
in exchange for shares of Series A Preferred Stock of Holdings in
accordance with the articles of incorporation of Holdings if (A) no Change
in Control would occur if (and assuming that), immediately after giving
effect to such exchange, such person were to transfer all Debentures then
held by such
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person to an unaffiliated third party or (B) at the time of and
immediately after giving effect to such exchange, (I) the ratio of (x)
Consolidated EBITDA minus Capital Expenditures for the period of four
consecutive fiscal quarters last ended prior such date to (y) Consolidated
Interest Expense for such four-fiscal-quarter period, shall be greater
than or equal to 2.50 to 1.00 and (II) the Total Debt Ratio as of the end
of such four-fiscal quarter period shall be less than or equal to 3.10 to
1.00, provided in each case that no Default or Event of Default shall have
occurred and be continuing.
(b) Permit its subsidiaries (other than the Receivables Subsidiary, the
Master Servicer and Simmons) to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any such subsidiary to (i) pay any dividends or make any other
distributions on its Capital Stock or any other equity interest or (ii) make or
repay any loans or advances to the Parent Borrower or the parent of such
subsidiary (subclauses (i) and (ii) are collectively referred to as an "Upstream
Payment") other than encumbrances and restrictions:
(A) pursuant to the Loan Documents;
(B) existing under, or by reason of, applicable law;
(C) contained in any debt instrument relating to (i) a person acquired
after the date hereof, provided that (x) such instrument was in
existence at the time of such acquisition and was not created in
contemplation of or in connection with such acquisition, (y) the
officers of the Parent Borrower reasonably believe at the time of
such acquisition that the terms of such instrument will not encumber
or restrict the ability of such acquired person to make an Upstream
Payment and (z) such instrument contains no express encumbrances or
restrictions on the ability of such acquired person to make an
Upstream Payment and (ii) industrial revenue bonds permitted under
Section 6.01(g) or Indebtedness permitted under Section 6.01(k),
provided that such instrument contains no express encumbrances or
restrictions on the ability of the applicable obligor thereon to
make an Upstream Payment;
(D) contained in or required by Permitted Foreign Indebtedness; and
(E) contained in agreements for Asset Sales permitted under Section 6.05.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any property
or assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except that
Holdings, any Borrower or any Subsidiary may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to Holdings, such Borrower or such Subsidiary than
could be obtained on an arm's-length basis from unrelated third parties;
provided, however, that the foregoing restriction shall not apply to (i) any
transactions expressly permitted by this Agreement, including those permitted by
Section 6.06 and any Permitted Receivables Financing, (ii) transactions among
Foreign Subsidiaries, (iii) transactions pursuant to agreements entered into or
in effect on the Closing Date and set forth on Schedule 6.07, including
amendments thereto entered into after the Closing Date, provided that the terms
of any such amendment are not, in the aggregate, less favorable to the Lenders
than the terms of such agreement prior to such amendment, (iv) any transactions
among the Loan Parties and
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(v) transactions with Affiliates of Citicorp conducted in the normal course of
such Affiliates' banking business.
SECTION 6.08. Other Indebtedness and Agreements. (a) (i) Make any
distribution, whether in cash, property, securities or a combination thereof,
other than scheduled payments of principal and interest as and when due (to the
extent not prohibited by applicable subordination provisions), in respect of, or
pay, or offer or commit to pay, or directly or indirectly redeem, repurchase,
retire or otherwise acquire for consideration, or set apart any sum for the
aforesaid purposes, any of the Masco Notes, the Subordinated Notes, the
Debentures or any other Indebtedness for borrowed money (other than Intercompany
Indebtedness, Indebtedness under the Loan Documents and Indebtedness incurred
pursuant to Section 6.01(a), (e), (g), (h), (i), (j), (k), (m), (n), (o) or (p)
or any Refinancing Indebtedness in respect thereof) of any Loan Party or any
Subsidiary, (ii) make any payment or prepayment of any such Indebtedness that
would violate the terms of this Agreement or of such Indebtedness, any agreement
or document evidencing, related to or securing the payment or performance of
such Indebtedness or any subordination agreement or provision applicable to such
Indebtedness or (iii) pay in cash any amount in respect of such Indebtedness
that may at the applicable Loan Party's or Subsidiary's option be paid in kind
thereunder.
(b) Notwithstanding anything contained in this Section 6.08 to the
contrary,
(i) Holdings, the Parent Borrower and the Subsidiaries shall be
permitted to refinance any Indebtedness to the extent permitted by Section
6.01;
(ii) the Parent Borrower shall be permitted to exchange the
Subordinated Notes for substantially identical notes in accordance with
the exchange agreement relating to the Subordinated Notes;
(iii) Holdings shall be permitted to exchange the Masco Notes for
substantially identical notes in accordance with the Registration Rights
Agreement dated as of the Closing Date, between Holdings and Masco,
subject to the transfer restrictions set forth in the Masco Notes;
(iv) (A) prior to the fifth anniversary of the Closing Date, Holdings
shall be permitted to pay interest on the Masco Notes solely in the form
of additional Masco Notes and (B) following the fifth anniversary of the
Closing Date, but not less than 15 days after the Parent Borrower has
delivered the financial statements pursuant to Section 5.04(a) for the
fiscal year ending immediately prior to such fifth anniversary of the
Closing Date and for each fiscal year thereafter, Holdings shall be
permitted to pay cash interest on the Masco Notes (and the Parent Borrower
shall be permitted to pay dividends to Holdings to fund the payment of
such interest) in an amount equal to the portion of Excess Cash Flow for
such applicable fiscal year that (x) is not required to be used to prepay
outstanding Term Loans pursuant to Section 2.13(d) and (y) has not
previously been used to prepay Indebtedness (excluding scheduled principal
payments) that cannot be redrawn or reborrowed or to make a Capital
Expenditure pursuant to Section 6.12(B) in any fiscal year, provided that
no deduction shall be required pursuant to this subclause (y) to the
extent the proceeds used for such prepayments or expenditures are derived
from casualty proceeds, condemnation awards, refinancings or equity
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issuances permitted hereunder, and provided, further, in each case that no
Default or Event of Default shall have occurred and be continuing at the
time of such payment;
(v) Holdings shall be permitted to redeem all or part of the Masco
Notes with the portion of the Net Cash Proceeds of any public offering of
Capital Stock (other than Disqualified Stock) of Holdings that is not
required to be used to prepay outstanding Term Loans pursuant to Section
2.13(c), provided that no Default or Event of Default shall have occurred
and be continuing at the time of such redemption; and
(vi) Holdings shall be permitted to pay interest on the Debentures
solely in the form of additional Debentures in accordance with the terms
thereof.
(c) Permit any waiver, supplement, modification, amendment, termination or
release of any indenture, instrument or agreement governing the Debentures, the
Masco Notes or the Subordinated Notes (or any Indebtedness issued to refinance
such Indebtedness in accordance with this Agreement), to the extent that any
such waiver, supplement, modification, amendment, termination or release would
be adverse to the Lenders in any material respect.
(d) Permit any waiver, supplement, modification, amendment, termination or
release of (i) the certificate of incorporation or by-laws of Holdings, any
Borrower or any Subsidiary, (ii) the Acquisition Agreement, (iii) the
Stockholders' Agreement, (iv) the Management Agreement, (v) the Transition
Services Agreement or (vi) the Tax Sharing Agreement, in each case to the extent
that any such waiver, supplement, modification, amendment, termination or
release would be adverse to the
Lenders in any material respect.
SECTION 6.09. Interest Coverage Ratio. Permit the ratio (the "Interest
Coverage Ratio") of (i) Consolidated EBITDA to (ii) Consolidated Interest
Expenses (A) for the fiscal-quarter ending September 30, 1996, to be less than
2.00 to 1.00, (B) for the two-fiscal-quarter period ending December 31, 1996, to
be less than 2.00 to 1.00, (C) for the three-fiscal-quarter period ending March
31, 1997, to be less than 2.00 to 1.00 and (D) for any period of four
consecutive fiscal quarters ending on the last day of any fiscal quarter
included in any period set forth below to be less than the ratio set forth below
for such period:
From and Including: To and Including: Interest Coverage Ratio
- ------------------- ----------------- -----------------------
April 1, 1997 December 30, 1998 2.00 to 1.00
December 31, 1998 December 30, 1999 2.25 to 1.00
December 31, 1999 December 30, 2000 2.50 to 1.00
December 31, 2000 December 30, 2001 2.75 to 1.00
December 31, 2001 and thereafter 3.00 to 1.00
SECTION 6.10. Total Debt Ratio. Permit the ratio (the "Total Debt Ratio")
of (i) Total Debt as of the last day of any fiscal quarter included in any
period set forth below to (ii) Consolidated EBITDA for the period of four fiscal
quarters ending on such day, to be in excess of the ratio set forth below for
such period, provided that for purposes of calculating Consolidated EBITDA for
each of the
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four-fiscal-quarter periods ending September 30, 1996, December 31, 1996, and
March 31, 1997, Consolidated EBITDA for such four-fiscal-quarter period shall
equal Consolidated EBITDA for the period commencing on July 1, 1996, and ending
on (A) September 30, 1996, multiplied by 4, (B) December 31, 1996, multiplied by
2 and (C) March 31, 1997, multiplied by 4/3, as applicable:
From and Including: To and Including: Total Debt Ratio
- ------------------- ----------------- ----------------
July 1, 1996 December 30, 1998 5.00 to 1.00
December 31, 1998 December 30, 1999 4.50 to 1.00
December 31, 1999 and thereafter 4.00 to 1.00
SECTION 6.11. Net Worth. Permit Consolidated Net Worth at any time to be
less than the sum of (a) $300,000,000 and (b) 50% of Consolidated Net Income (if
positive) for the period (taken as a single accounting period) from the Closing
Date and ending on the last date of the quarter as to which compliance with this
Section 6.11 is being determined.
SECTION 6.12. Capital Expenditures. Incur Capital Expenditures in excess
of $50,000,000 in any fiscal year commencing with the fiscal year ending
December 31, 1996; provided, however, that the amount of permitted Capital
Expenditures in any fiscal year ending after December 31, 1997, shall be
increased by the total amount of (A) unused permitted Capital Expenditures for
the immediately preceding year (less an amount equal to any unused permitted
Capital Expenditures carried forward to such preceding year pursuant to this
proviso) and (B) cumulative Excess Cash Flow in all fiscal years, commencing
with the fiscal year ending December 31, 1997, that (x) is not required to be
used to prepay outstanding Term Loans pursuant to Section 2.13(d) and (y) has
not previously been used to prepay Indebtedness (excluding scheduled principal
payments) that cannot be redrawn or reborrowed, to pay interest on the Masco
Notes pursuant to Section 6.08(b)(iv) or to make a Capital Expenditure pursuant
to this clause (B) in any fiscal year, but no deduction shall be required
pursuant to this subclause (y) to the extent the proceeds used for such
prepayments or expenditures are derived from casualty proceeds, condemnation
awards, refinancings or equity issuances permitted hereunder); and provided,
further, that Holdings, the Parent Borrower and the Subsidiaries may incur, in
the aggregate, an additional $10,000,000 in each fiscal year commencing with the
fiscal year ending December 31, 1997, of Capital Expenditures in connection with
matters relating to compliance with any Environmental Law or cleanup of any
Hazardous Materials that is not in the ordinary course of business.
SECTION 6.13. Bank Accounts. Establish or maintain any bank account or
similar account with any financial institution that is not a Lender, other than
(a) the accounts specified in Section 2A of the Perfection Certificate, (b) any
deposit account used exclusively for the payment of payroll of any Loan Party or
any Subsidiary, (c) foreign accounts of any Foreign Subsidiary and (d) other
accounts with an aggregate balance of less than $3,000,000.
SECTION 6.14. Business of Holdings, Borrowers and Subsidiaries. Engage at
any time in any business or business activity other than (a) in the case of the
Parent Borrower and the Subsidiaries (other than the Receivables Subsidiary and
the Master Servicer), the business currently conducted by it and business
activities reasonably incidental thereto; (b) in the case of Holdings, (i) the
ownership of
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all the outstanding Capital Stock of the Parent Borrower and Simmons, together
with activities directly related thereto, (ii) the business currently conducted
by the Specified HFG Companies and business activities reasonably incidental
thereto, (iii) performance of its obligations under the Loan Documents, under
intercompany Indebtedness and under all agreements, Capital Stock and
Indebtedness contemplated by the Acquisition Agreement, (iv) actions required by
law to maintain its status as a corporation, (v) actions incidental to the
consummation of the Transactions and (vi) sale and servicing obligations under a
Permitted Receivables Financing; (c) in the case of the Receivables Subsidiary,
the purchase and sale of receivables (or participation interests therein) in
connection with any Permitted Receivables Financing, together with activities
directly related thereto; and (d) in the case of the Master Servicer, the
servicing obligations under the Permitted Receivables Financing, together with
activities related thereto.
SECTION 6.15. Fiscal Year. Change the end of its fiscal year from December
31 to any other date.
ARTICLE VII
Events of Default
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made by a Loan Party
in or in connection with any Loan Document or the borrowings or issuances
of Letters of Credit hereunder, or any representation, warranty, statement
or information contained in any report, certificate, financial statement
or other instrument furnished in connection with or pursuant to any Loan
Document, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan
or the reimbursement with respect to any L/C Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or L/C Disbursement or any other amount (other than an amount
referred to in (b) above) due under any Loan Document, when and as the
same shall become due and payable, and such default shall continue
unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by
Holdings, any Borrower or any Subsidiary of any covenant, condition or
agreement contained in Section 5.01(a), 5.05, 5.08 or 5.13(a) or in
Article VI;
(e) default shall be made in the due observance or performance by
Holdings, any Borrower or any Subsidiary of any covenant, condition or
agreement contained in any Loan Document (other than those specified in
(b), (c) or (d) above) and such default shall continue
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unremedied for a period of 30 days after notice thereof from the
Administrative Agent or any Lender to the Borrowers;
(f) (i) Holdings, any Borrower or any Subsidiary shall (A) fail to pay
any principal or interest, regardless of amount, due in respect of any
Indebtedness in a principal amount in excess of $7,500,000, when and as
the same shall become due and payable, or (B) fail to observe or perform
any other term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any such Indebtedness if
the effect of any failure referred to in this clause (B) is to cause, or
to permit the holder or holders of such Indebtedness or a trustee on its
or their behalf (with or without the giving of notice, the lapse of time
or both) to cause, such Indebtedness to become due prior to its stated
maturity, or (ii) any default or other event shall have occurred under the
Receivables Sale Agreement, the Receivables Pooling Agreement or any other
document governing any Permitted Receivables Financing if the effect of
such default or other event is to cause, or to permit the holder or
holders of interests in the receivables purchased thereunder or a trustee
on its or their behalf (with or without the giving of notice, the lapse of
time or both) to cause, the termination of any Permitted Receivables
Financing;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of Holdings, any Borrower, any Domestic Subsidiary or
any Significant Foreign Subsidiary, or of a substantial part of the
property or assets of Holdings, any Borrower, any Domestic Subsidiary or
any Significant Foreign Subsidiary, under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other Federal, state
or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for Holdings, any Borrower, any Domestic Subsidiary or
any Significant Foreign Subsidiary or for a substantial part of the
property or assets of Holdings, any Borrower, any Domestic Subsidiary or
any Significant Foreign Subsidiary or (iii) the winding-up or liquidation
of Holdings, any Borrower, any Domestic Subsidiary or any Significant
Foreign Subsidiary; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of
the foregoing shall be entered;
(h) Holdings, any Borrower, any Domestic Subsidiary or any Significant
Foreign Subsidiary shall (i) voluntarily commence any proceeding or file
any petition seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal, state or
foreign bankruptcy, insolvency, receivership or similar law, (ii) consent
to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in (g)
above, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
Holdings, any Borrower, any Domestic Subsidiary or any Significant Foreign
Subsidiary or for a substantial part of the property or assets of
Holdings, any Borrower, any Domestic Subsidiary or any Significant Foreign
Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become
due or (vii) take any action for the purpose of effecting any of the
foregoing;
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(i) one or more judgments for the payment of money in an aggregate
amount in excess of $7,500,000, which amount is not covered by insurance
(provided that in the event such a judgment is covered by insurance, the
Administrative Agent is provided with satisfactory evidence that the
insurance provider will provide the coverage relating thereto) shall be
rendered against Holdings, any Borrower, any Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed,
or any action shall be legally taken by a judgment creditor to levy upon
assets or properties of Holdings, any Borrower or any Subsidiary to
enforce any such judgment;
(j) an ERISA Event shall have occurred that, in the reasonable opinion
of the Required Lenders, when taken together with all other such ERISA
Events, could reasonably be expected to result in liability of Holdings or
the Borrowers in an aggregate amount exceeding $5,000,000;
(k) any security interest purported to be created by any Security
Document and to extend to assets that are not immaterial to Holdings, the
Parent Borrower and the Subsidiaries shall cease to be, or shall be
asserted by any Borrower or any other Loan Party not to be, a valid,
perfected, first priority (except as otherwise expressly provided in this
Agreement or such Security Document) security interest in the securities,
assets or properties covered thereby, except to the extent that any such
loss of perfection or priority results from the failure of the Collateral
Agent to maintain possession of certificates representing securities
pledged under the Pledge Agreement and except to the extent that such loss
is covered by a lender's title insurance policy and the Administrative
Agent is provided with satisfactory evidence that related insurance
provider will provide the coverage relating thereto;
(l) any Loan Document shall not be for any reason, or shall be
asserted by any Loan Party not to be, in full force and effect and
enforceable in accordance with its terms; or
(m) there shall have occurred a Change in Control;
then, and in every such event (other than an event with respect to Holdings or
any Borrower described in paragraph (g) or (h) above), and at any time
thereafter during the continuance of such event, the Administrative Agent may
and, at the request of the Required Lenders shall, by written notice to the
Borrowers, take either or both of the following actions, at the same or
different times: (i) terminate forthwith the Commitments and (ii) declare the
Loans then outstanding to be forthwith due and payable in whole or in part,
whereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of Holdings and the Borrowers accrued hereunder and under any other
Loan Document, shall become forthwith due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by Holdings and the Borrowers, anything contained herein or in
any other Loan Document to the contrary notwithstanding; and in any event with
respect to Holdings or any of the Borrowers described in paragraph (g) or (h)
above, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of Holdings and the Borrowers accrued
hereunder and under any other Loan Document, shall automatically become due and
payable, without presentment, demand,
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protest or any other notice of any kind, all of which are hereby expressly
waived by Holdings and the Borrowers, anything contained herein or in any other
Loan Document to the contrary notwithstanding.
ARTICLE VIII
The Administrative Agent and the Collateral Agent
In order to expedite the transactions contemplated by this Agreement, The
Chase Manhattan Bank is hereby appointed to act as Administrative Agent and
Collateral Agent on behalf of the Lenders and the Issuing Bank (for purposes of
this Article VIII, the Administrative Agent and the Collateral Agent are
referred to collectively as the "Agents"). Each of the Lenders and each assignee
of any such Lender, hereby irrevocably authorizes the Agents to take such
actions on behalf of such Lender or assignee or the Issuing Bank and to exercise
such powers as are specifically delegated to the Agents by the terms and
provisions hereof and of the other Loan Documents, together with such actions
and powers as are reasonably incidental thereto. The Administrative Agent is
hereby expressly authorized by the Lenders and the Issuing Bank, without hereby
limiting any implied authority, (a) to receive on behalf of the Lenders and the
Issuing Bank all payments of principal of and interest on the Loans, all
payments in respect of L/C Disbursements and all other amounts due to the
Lenders hereunder (other than payments that are specifically required to be paid
directly to a Lender), and promptly to distribute to each Lender or the Issuing
Bank its proper share of each payment so received; (b) to give notice on behalf
of each of the Lenders to Holdings and the Borrowers of any Event of Default
specified in this Agreement of which the Administrative Agent has actual
knowledge acquired in connection with its agency hereunder; and (c) to
distribute to each Lender copies of all notices, financial statements and other
materials delivered by Holdings, any Borrower or any other Loan Party pursuant
to this Agreement or the other Loan Documents as received by the Administrative
Agent. Without limiting the generality of the foregoing, the Agents are hereby
expressly authorized to execute any and all documents (including releases) with
respect to the Collateral and the rights of the Secured Parties with respect
thereto, as contemplated by and in accordance with the provisions of this
Agreement and the Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrowers or any other Loan Party of any of the terms, conditions, covenants or
agreements contained in any Loan Document. The Agents shall not be responsible
to the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents, instruments or
agreements. The Agents shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Agents nor any of their respective directors, officers,
employees or agents shall have any responsibility to the Borrowers or any other
Loan Party on account of the
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failure of or delay in performance or breach by any Lender or the Issuing Bank
of any of its obligations hereunder or to any Lender or the Issuing Bank on
account of the failure of or delay in performance or breach by any other Lender
or the Issuing Bank or the Borrowers or any other Loan Party of any of their
respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. Each of the Agents may execute any and all
duties hereunder by or through agents or employees and shall be entitled to rely
upon the advice of legal counsel selected by it with respect to all matters
arising hereunder and shall not be liable for any action taken or suffered in
good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither Agent shall be under any duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
Borrowers. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor, provided that such appointment shall require the consent
of the Borrowers (which consent shall not be unreasonably withheld), so long as
no Default or Event of Default shall have occurred and be continuing. If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Agent gives notice
of its resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent which shall be a bank with an office in New York, New
York, having a combined capital and surplus of at least $500,000,000 or an
Affiliate of any such bank. Upon the acceptance of any appointment as Agent
hereunder by a successor bank, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After the Agent's resignation hereunder, the provisions of this Article and
Section 9.05 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with Holdings, any Borrower or any
Subsidiary or other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in the amount
of its pro rata share (based on its Commitments hereunder, or if such
Commitments have expired or been terminated, based on its outstanding Loans) of
any expenses incurred for the benefit of the Lenders by the Agents, including
counsel fees and compensation of agents and employees paid for services rendered
on behalf of the Lenders, that are required to be but shall not have been
reimbursed by the Borrowers and (b) to indemnify and hold harmless each Agent
and any of its directors, officers, employees or agents, on demand, in the
amount of such pro rata share, from and against any and all liabilities, taxes,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against it in its capacity as Agent or any of them
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by it or any of them under this
Agreement or any other Loan Document, to the extent the same are required to be
but shall not have been reimbursed by the
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Borrowers or any other Loan Party, provided that no Lender shall be liable to an
Agent or any such other indemnified person for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements that is determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Agent or any of its directors, officers,
employees or agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agents or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement or any other Loan Document, any related agreement or any
document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrowers or Holdings, to it at 1300 National Highway,
Thomasville, North Carolina 27360, Attention of President (Telecopy
No.(910) 476-2656) with a copy to the Attention of General Counsel
(Telecopy No. (910) 476-4551) and Morgan, Lewis & Bockius LLP, Attention
of Gerald M. Freedman (Telecopy No. (212) 309-6273);
(b) if to the Administrative Agent or the Swingline Lender, to Chase
Manhattan Agency Services, Grand Central Tower, 140 East 45th Street, New
York, New York 10017, Attention of Ms. Janet Belden (Telecopy No. (212)
622-0002), with a copy to The Chase Manhattan Bank, at 270 Park Avenue,
New York 10017, Attention of Robert Kellas (Telecopy No. (212) 270-1403);
and
(c) if to a Lender, to it at its address (or telecopy number) set
forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or when
receipt is acknowledged if sent by telecopy or on the date five Business Days
after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 9.01 or in accordance with the latest unrevoked direction from such
party given in accordance with this Section 9.01.
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SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrowers or Holdings herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated. The provisions of Sections 2.14, 2.16, 2.20, 9.05 and
9.16 shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the expiration of the
Commitments, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Administrative Agent,
the Collateral Agent, any Lender or the Issuing Bank.
SECTION 9.03. Binding Effect. This Agreement shall become effective when
it shall have been executed by each of the Borrowers, Holdings and the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Borrowers, Holdings, the Administrative
Agent, the Issuing Bank or the Lenders that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment, the Loans at the time owing to it and participations
in Letters of Credit held by it (it being understood that Revolving Credit
Commitments, Revolving Loans, L/C Disbursements and participations in Letters of
Credit may only be assigned in pro rata amounts)); provided, however, that (i)
except in the case of an assignment to a Lender or an Affiliate of such Lender,
(A) the Parent Borrower (only so long as an Event of Default pursuant to clauses
(b), (c), (g) or (h) of Article VII shall not have occurred and be continuing)
and the Administrative Agent (and, in the case of any assignment of a Revolving
Credit Commitment, the Issuing Bank and the Swingline Lender) must give their
prior written consent to such assignment (which consent shall not be
unreasonably withheld), (B) the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 (or, if less, the entire remaining
amount of such Lender's Commitment) and (C) the assigning Lender's percentage
interest in the Revolving Loans shall be no different than such Lender's
percentage interest in the Tranche A Term Loans upon such assignment, (ii) the
parties to each such assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with a processing and recordation
fee of $3,500 and (iii) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire. Upon acceptance and
recording pursuant
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to paragraph (e) of this Section 9.04, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement and (B) the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.16,
2.20 and 9.05, as well as to any Fees accrued for its account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Revolving Credit Commitment, and the outstanding balances of its Term Loans
and Revolving Loans, in each case without giving effect to assignments thereof
which have not become effective, are as set forth in such Assignment and
Acceptance, (ii) except as set forth in (i) above, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto, or the financial condition of
Holdings, any Borrower or any Subsidiary or the performance or observance by
Holdings, any Borrower or any Subsidiary of any of its obligations under this
Agreement, any other Loan Document or any other instrument or document furnished
pursuant hereto; (iii) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; (iv) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the most recent financial statements referred to in Section 3.05(a) or delivered
pursuant to Section 5.04 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agent and the Collateral Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent and the Collateral Agent,
respectively, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at one of its offices in The
City of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amount of the Loans owing to, each Lender pursuant
to the terms hereof from time to time (the "Register"). The entries in the
Register shall be conclusive and Holdings, the Borrowers, the other Loan
Parties, the Administrative Agent, the Issuing Bank, the Collateral Agent and
the Lenders shall treat each person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
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Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by Holdings, the Borrowers, the other Loan Parties, the
Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Parent Borrower, the
Swingline Lender, the Issuing Bank and the Administrative Agent to such
assignment, the Administrative Agent shall (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Lenders, the Issuing Bank and the
Swingline Lender. No assignment shall be effective unless and until it has been
recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Parent Borrower, the
Swingline Lender, the Issuing Bank or the Administrative Agent sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the participating banks or other entities shall be
entitled to the benefit of the cost protection provisions contained in Sections
2.14, 2.16 and 2.20 to the same extent as if they were Lenders, provided that no
such participating bank or entity shall be entitled to receive any greater
amount pursuant to such Sections than a Lender would have been entitled to
receive in respect of the amount of participation sold by such Lender to such
participating bank or entity had no sale occurred, and (iv) Holdings, the
Borrowers, the other Loan Parties, the Administrative Agent, the Issuing Bank
and the Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of Holdings
and the Borrowers relating to the Loans or L/C Disbursements and to approve any
amendment, modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing any fees payable hereunder or
the amount of principal of or the rate at which interest is payable on the
Loans, extending any scheduled principal payment date or date fixed for the
payment of interest on the Loans, increasing or extending the Commitments or
releasing all or any substantial part of the Collateral (except as expressly
permitted by the Loan Documents)).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to Holdings or the Borrowers furnished to
such Lender by or on behalf of Holdings or the Borrowers, provided that, prior
to any such disclosure of information, each such assignee or participant or
proposed assignee or participant shall execute an agreement in the form of
Exhibit L.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank to secure extensions of credit by
such Federal Reserve Bank to such Lender, provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
Bank for such Lender as a party hereto. In order to facilitate such an
assignment to
<PAGE>
96
a Federal Reserve Bank, the Borrowers shall, at the request of the assigning
Lender, duly execute and deliver to the assigning Lender a promissory note or
notes, in form and substance reasonably satisfactory to the Borrowers,
evidencing the Loans made to the Borrowers by the assigning Lender hereunder.
(i) Neither Holdings nor any Borrower shall assign or delegate any of its
rights or duties hereunder without the prior written consent of the
Administrative Agent, the Issuing Bank and each Lender, and any attempted
assignment without such consent shall be null and void.
(j) In the event that S&P, Moody's and Thompson's BankWatch (or
InsuranceWatch Ratings Service, in the case of Lenders that are insurance
companies (or Best's Insurance Reports, if such insurance company is not rated
by Insurance Watch Ratings Service)) shall, after the date that any Lender
becomes a Revolving Credit Lender, downgrade the long-term certificate deposit
ratings of such Lender, and the resulting ratings shall be below BBB-, Baa3 and
C (or BB, in the case of a Lender that is an insurance company (or B, in the
case of an insurance company not rated by InsuranceWatch Ratings Service)), then
the Issuing Bank shall have the right, but not the obligation, at its own
expense, upon notice to such Lender and the Administrative Agent, to replace (or
to request the Borrowers to use their reasonable efforts to replace) such Lender
with an assignee (in accordance with and subject to the restrictions contained
in paragraph (b) above), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in paragraph (b) above) all its interests, rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
Governmental Authority and (ii) the Issuing Bank or such assignee, as the case
may be, shall pay to such Lender in immediately available funds on the date of
such assignment the principal of and interest accrued to the date of payment on
the Loans made by such Lender hereunder and all other amounts accrued for such
Lender's account or owed to it hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrowers agree to pay all
reasonable out-of-pocket expenses incurred by the Administrative Agent, the
Collateral Agent, the Issuing Bank and the Swingline Lender in connection with
the syndication of the credit facilities provided for herein and the preparation
and administration of this Agreement and the other Loan Documents or in
connection with any amendments, modifications or waivers of the provisions
hereof or thereof or incurred by the Administrative Agent, the Collateral Agent
or any Lender in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents or in connection
with the Loans made or Letters of Credit issued hereunder, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Administrative Agent and the Collateral Agent, and, in connection with
any such enforcement or protection, the reasonable fees, charges and
disbursements of any other counsel for the Administrative Agent, the Collateral
Agent or any Lender.
(b) The Borrowers agree, jointly and severally, to indemnify the
Administrative Agent, the Collateral Agent, each Lender and the Issuing Bank,
each Affiliate of any of the foregoing persons and each of their respective
directors, trustees, officers, employees and agents (each such person being
called an "Indemnitee") against, and to hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, charges and disbursements, incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
<PAGE>
97
of (i) any claim, litigation, investigation or proceeding, whether or not any
Indemnitee is a party thereto, relating to the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder, the consummation of the Transactions and the other transactions
contemplated thereby or the use of the proceeds of the Loans or issuance of
Letters of Credit or (ii) any actual or alleged presence or Release of Hazardous
Materials on any property owned or operated by Holdings, the Borrowers or any of
the Subsidiaries, or any Environmental Claim related in any way to Holdings, the
Borrowers or the Subsidiaries; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the expiration of the Commitments, the expiration of any Letter of
Credit, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Administrative Agent, the Collateral Agent, any Lender or the Issuing
Bank. All amounts due under this Section 9.05 shall be payable on written demand
therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of Holdings or any Borrower against any of and all the
obligations of Holdings or any Borrower now or hereafter existing under this
Agreement and other Loan Documents held by such Lender, irrespective of whether
or not such Lender shall have made any demand under this Agreement or such other
Loan Document and although such obligations may be unmatured. The rights of each
Lender under this Section 9.06 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Collateral Agent, any Lender or the Issuing Bank in
exercising any power or right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a
<PAGE>
98
right or power, preclude any other or further exercise thereof or the exercise
of any other right or power. The rights and remedies of the Administrative
Agent, the Collateral Agent, the Issuing Bank and the Lenders hereunder and
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
this Agreement or any other Loan Document or consent to any departure by any
Borrower or any other Loan Party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice or demand on the Borrowers or Holdings in any case
shall entitle the Borrowers or Holdings to any other or further notice or demand
in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Borrowers, Holdings and the Required Lenders; provided, however,
that no such agreement (i) shall (A) decrease the principal amount of, or extend
the maturity of or any scheduled principal payment date or date for the payment
of any interest on, any Loan or any date for reimbursement of an L/C
Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or L/C Disbursement, without the prior
written consent of each Lender affected thereby, (B) increase or extend the
Commitment of any Lender or decrease or extend the date for payment of the
Commitment Fees of such Lender without the prior written consent of such Lender
or (C) amend or modify the provisions of Section 2.17 or 9.04(i), the provisions
of this Section, the definition of the term "Required Lenders" or release any
Guarantor or all or any substantial part of the Collateral (except, in each
case, as expressly permitted by the Loan Documents), without the prior written
consent of each Lender, (ii) shall amend, modify or otherwise affect the rights
or duties of the Administrative Agent, the Collateral Agent, the Issuing Bank or
the Swingline Lender hereunder or under any other Loan Document without the
prior written consent of the Administrative Agent, the Collateral Agent, the
Issuing Bank or the Swingline Lender, as the case may be, (iii) shall change the
allocation between Tranche A Term Loans and Tranche B Term Loans of any
prepayment pursuant to Section 2.12 or 2.13 without the prior written consent of
(A) Lenders holding Tranche A Term Loans representing more than 50% of the
aggregate outstanding principal amount of the Tranche A Term Loans and (B)
Lenders holding Tranche B Term Loans representing more than 50% of the aggregate
outstanding principal amount of the Tranche B Term Loans, (iv) shall decrease
the principal amount of, or extend the date for payment of, any prepayment of
(A) Tranche A Term Loans or (B) Tranche B Term Loans, in each case required
pursuant to Section 2.13 without the prior written consent of (A) Lenders
holding Tranche A Term Loans representing more than 50% of the aggregate
outstanding principal amount of the Tranche A Term Loans or (B) Lenders holding
Tranche B Term Loans representing more than 50% of the aggregate outstanding
principal amount of the Tranche B Term Loans, respectively, or (v) shall amend
Section 2.13(j) without the prior written consent of Lenders holding Tranche B
Term Loans representing more than 50% of the aggregate outstanding principal
amount of the Tranche B Term Loans.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest or loan charges on such Loan or
participation in such L/C Disbursement under applicable law (collectively the
"Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for, charged, taken, received or reserved by the Lender holding
such Loan or participation in accordance with applicable law, the
<PAGE>
99
rate of interest payable in respect of such Loan or participation hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan or participation but were not payable as a
result of the operation of this Section 9.09 shall be cumulated and the interest
and Charges payable to such Lender in respect of other Loans or participations
or periods shall be increased (but not above the Maximum Rate therefor) until
such cumulated amount, together with interest thereon at the Federal Funds
Effective Rate to the date of repayment, shall have been received by such
Lender.
SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter, the other
Loan Documents and the confidentiality agreements previously signed by the
Lenders constitute the entire contract between the parties relative to the
subject matter hereof. Any other previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and the
other Loan Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the
parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute a
single contract, and shall become effective as provided in Section 9.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
<PAGE>
100
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of
Holdings and the Borrowers hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent, the Collateral Agent, the Issuing Bank or
any Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Borrowers, Holdings or their
respective properties in the courts of any jurisdiction.
(b) Each of Holdings and the Borrowers hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court sitting in New
York City. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Confidentiality. The Administrative Agent, the Collateral
Agent, the Issuing Bank and each of the Lenders agrees to keep confidential and
not to publish, disclose or otherwise divulge (and to cause its respective
officers, directors, employees, agents and representatives to keep confidential
and not publish, disclose or otherwise divulge) the Information (as defined
below), except that the Administrative Agent, the Collateral Agent, the Issuing
Bank or any Lender shall be permitted to disclose Information (a) to such of its
respective officers, directors, employees, agents, affiliates and
representatives (including counsel) as need to know such Information (who will
be informed of the confidential nature of the Information), (b) to the extent
otherwise required by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any regulatory authority (in any which
event notice thereof will be provided to the Parent Borrower and the applicable
party to the extent not prohibited by applicable law), (c) in connection with
any suit, action or proceeding relating to the enforcement of its rights
hereunder or under the other Loan Documents or (d) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 9.16 or (ii) becomes available, or was available, to the
Administrative Agent, the Issuing Bank, any Lender or the Collateral Agent on a
nonconfidential basis from a source other than the Borrowers or Holdings or any
of their respective affiliates and such source is not bound by a confidentiality
agreement to any of the Borrowers or Holdings and is not otherwise prohibited
from transmitting the information to a third party. For the purposes of this
Section, the term "Information" shall mean all financial statements,
certificates, reports, agreements and information (including all analyses,
compilations and studies prepared by the Administrative Agent, the Collateral
Agent, the Issuing Bank or any Lender based on
<PAGE>
101
any of the foregoing) that are received from any of the Borrowers or Holdings or
any of their respective affiliates or representatives and related to any of the
Borrowers or Holdings or any of their respective affiliates, any shareholder of
any of the Borrowers or Holdings or any employee, customer or supplier of any of
the Borrowers or Holdings or any of their respective affiliates, other than any
of the foregoing that were available to the Administrative Agent, the Collateral
Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to its
disclosure thereto by the Borrowers or Holdings. The provisions of this Section
9.16 shall remain operative and in full force and effect regardless of the
expiration and term of this Agreement.
SECTION 9.17. Obligations Joint and Several. (a) Each Borrower agrees that
it shall, jointly with the other Borrowers and severally, be liable for all the
Obligations. Each Borrower further agrees that the Obligations of the other
Borrowers may be extended and renewed, in whole or in part, without notice to or
further assent from it, and that it will remain bound upon its agreement
hereunder notwithstanding any extension or renewal of any Obligation of the
other Borrowers.
(b) Each Borrower waives presentment to, demand of payment from and
protest to the other Borrowers of any of the Obligations, and also waives notice
of acceptance of its obligations and notice of protest for nonpayment. The
obligations of a Borrower hereunder shall not be affected by (i) the failure of
any Lender or the Administrative Agent to assert any claim or demand or to
enforce any right or remedy against the other Borrowers under the provisions of
this Agreement or any of the other Loan Documents or otherwise; (ii) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Agreement, any of the other Loan Documents or any other agreement; or
(iii) the failure of any Lender to exercise any right or remedy against any
other Borrower.
(c) Each Borrower further agrees that its agreement hereunder constitutes
a promise of payment when due and not of collection, and waives any right to
require that any resort be had by any Lender to any balance of any deposit
account or credit on the books of any Lender in favor of any other Borrower or
any other person.
(d) The Obligations of each Borrower hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including
compromise, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations of the other Borrowers or otherwise. Without
limiting the generality of the foregoing, the obligations of each Borrower
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Administrative Agent or any Lender to assert any claim or demand
or to enforce any remedy under this Agreement or under any other Loan Document
or any other agreement, by any waiver or modification in respect of any thereof,
by any default, failure or delay, wilful or otherwise, in the performance of the
Obligations of the other Borrowers, or by any other act or omission which may or
might in any manner or to any extent vary the risk of such Borrower or otherwise
operate as a discharge of such Borrower as a matter of law or equity.
(e) Each Borrower further agrees that its obligations hereunder shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Obligation of
the other Borrowers is rescinded or must otherwise be restored by the
Administrative Agent or any Lender upon the bankruptcy or reorganization of any
of the other Borrowers or otherwise.
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102
(f) In furtherance of the foregoing and not in limitation of any other
right which the Administrative Agent or any Lender may have at law or in equity
against any Borrower by virtue hereof, upon the failure of a Borrower to pay any
Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, each other Borrower
hereby promises to and will, upon receipt of written demand by the
Administrative Agent, forthwith pay, or cause to be paid, in cash the amount of
such unpaid Obligations, and thereupon each Lender shall, in a reasonable
manner, assign the amount of the Obligations of the other Borrowers owed to it
and paid by such Borrower pursuant to this guarantee to such Borrower, such
assignment to be pro tanto to the extent to which the Obligations in question
were discharged by such Borrower, or make such disposition thereof as such
Borrower shall direct (all without recourse to any Lender and without any
representation or warranty by any Lender).
(g) Upon payment by a Borrower of any sums as provided above, all rights
of such Borrower against another Borrower, as the case may be, arising as a
result thereof by way of right of subrogation or otherwise shall in all respects
be subordinated and junior in right of payment to the prior indefeasible payment
in full of all the Obligations to the Lenders.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
LIFESTYLE FURNISHINGS
INTERNATIONAL LTD., as the Parent
Borrower,
by
/s/ Ronald Hoffman
------------------
Name: Ronald Hoffman
Title: Vice President, Treasurer
<PAGE>
103
AMETEX FABRICS, INC.
THE BERKLINE CORPORATION,
DREXEL HERITAGE FURNISHINGS INC.,
HENREDON FURNITURE INDUSTRIES,
INC.,
INTERIOR FABRIC DESIGN, INC.,
INTRO EUROPE, INC.,
LA BARGE, INC.,
LEXINGTON FURNITURE INDUSTRIES,
INC.,
LIFESTYLE HOLDINGS, LTD.,
MAITLAND-SMITH, INC.,
MARBRO LAMP COMPANY,
RAMM, SON & CROCKER, INC.,
ROBERT ALLEN FABRICS, INC.,
ROBERT ALLEN FABRICS OF N.Y., INC.,
SUNBURY TEXTILE MILLS, INC.,
UNIVERSAL FURNITURE LIMITED,
each as a Subsidiary Borrower,
by
/s/ Ronald Hoffman
------------------
Name: Ronald Hoffman
Title: Vice President, Treasurer
FURNISHINGS INTERNATIONAL INC.,
by
/s/ Ronald Hoffman
------------------
Name: Ronald Hoffman
Title: Vice President, Treasurer
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent, Collateral Agent and Swingline
Lender,
by
/s/ Marian N. Schulman
----------------------
Name: Marian N. Schulman
Title: Attorney-in-fact
<PAGE>
104
CHASE MANHATTAN BANK DELAWARE,
as Issuing Bank,
by
/s/ Michael P. Handago
----------------------
Name: Michael P. Handago
Title: Vice President
ACADIA PARTNERS,
by
/s/ Glen R. August
------------------
Name: Glen R. August
Title: Vice President
AMSOUTH BANK OF ALABAMA,
by
/s/ John J. Hooker
------------------
Name: John J. Hooker
Title: Commercial Banking Officer
BANK OF AMERICA ILLINOIS,
by
/s/ Andrea Lapeyre
------------------
Name: Andrea Lapeyre
Title: Managing Director
BANK OF MONTREAL,
by
/s/ Brian L. Banke
------------------
Name: Brian L. Banke
Title: Director
BANK OF SCOTLAND,
by
/s/ Catherine M. Oniffrey
-------------------------
Name: Catherine M. Oniffrey
Title: Vice President
<PAGE>
105
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY,
by
/s/ Paul P. Malecki
-------------------
Name: Paul P. Malecki
Title: Vice President
CHL HIGH YIELD LOAN PORTFOLIO (a unit
of The Chase Manhattan Bank),
by
/s/ Richard W. Stewart
----------------------
Name: Richard W. Stewart
Title: Vice President
CIBC INC.,
by
/s/ Roger Colden
----------------
Name: Roger Colden
Title: Director
COMERICA BANK,
by
/s/ Tamara J. Gurne
-------------------
Name: Tamara J. Gurne
Title: Account Officer
CREDIT LYONNAIS NEW YORK BRANCH,
by
/s/ Robert H. Dial
------------------
Name: Robert H. Dial
Title: Vice President
<PAGE>
106
CREDIT LYONNAIS ATLANTA AGENCY,
by
/s/ David M. Cawrse
-------------------
Name: David M. Cawrse
Title: Vice President
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES,
by
/s/ John W. Sweeney
-------------------
Name: John W. Sweeney
Title: Assistant Vice
President
by
/s/ Lora Lam
------------
Name: Lora Lam
Title: Assistant Vice
President
FIRST AMERICAN NATIONAL BANK,
by
/s/ Russell S. Rogers
---------------------
Name: Russell S. Rogers
Title: Vice President
FIRST SOURCE FINANCIAL LLP,
By First National Source, Inc.,
Its Agent/Manager,
by
/s/ James W. Wilson
-------------------
Name: James W. Wilson
Title: Senior Vice President
<PAGE>
107
FLEET NATIONAL BANK,
by
/s/ Guy Smith
-------------
Name: Guy Smith
Title: Senior Vice President
HELLER FINANCIAL, INC.,
by
/s/ Christine M. Rashid
-----------------------
Name: Christine M. Rashid
Title: Vice President
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.,
by
/s/ R. Douglas Henderson
------------------------
Name: R. Douglas Henderson
Title: Authorized Signatory
NBD BANK,
by
/s/ R. H. Huttenlocher
----------------------
Name: R. H. Huttenlocher
Title: F. V. P.
NEW YORK LIFE INSURANCE COMPANY,
by
/s/ Lydia S. Sangree
--------------------
Name: Lydia S. Sangree
Title: Investment Vice
President
<PAGE>
108
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION,
by
/s/ Lydia S. Sangree
--------------------
Name: Lydia S. Sangree
Title: Investment Vice
President
PILGRIM AMERICA PRIME RATE TRUST,
by
/s/ Michael J. Bacevich
-----------------------
Name: Michael J. Bacevich
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
by
/s/ M. J. Williams
------------------
Name: M. J. Williams
Title: Vice President
PRIME INCOME TRUST,
by
/s/ Prime Income Trust
----------------------
Name:
Title:
PROTECTIVE LIFE INSURANCE
COMPANY,
by
/s/ Mark K. Okada
-----------------
Name: Mark K. Okada
Title: Principal
<PAGE>
109
THE BANK OF NEW YORK,
by
/s/ Gregory L. Batson
---------------------
Name: Gregory L. Batson
Title: Vice President
THE BANK OF NOVA SCOTIA,
by
/s/ William E. Zarrett
----------------------
Name: William E. Zarrett
Title: Senior Relationship
Manager
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH,
by
/s/ Takeshi Hemmi
-----------------
Name: Takeshi Hemmi
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ C. Andrew Piculell
----------------------
Name: C. Andrew Piculell
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
by
/s/ Patricia Loret de Mola
--------------------------
Name: Patricia Loret de Mola
Title: Senior Vice President
<PAGE>
110
THE SANWA BANK, LIMITED, CHICAGO
BRANCH,
by
/s/ Richard H. Ault
-------------------
Name: Richard H. Ault
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
by
/s/ Brian W. Good
-----------------
Name: Brian W. Good
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA,
N.A.,
by
/s/ Charlene A. Johnson
-----------------------
Name: Charlene A. Johnson
Title: Vice President
Exhibit 10.5
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
$200,000,000
10-7/8% Senior Subordinated Notes due 2006
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
August 5, 1996
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
World Financial Center
North Tower
New York, New York 10281
Dear Sirs:
Lifestyle Furnishings International Ltd., a Delaware corporation
(the "Company"), proposes to issue and sell to certain purchasers (the "Initial
Purchasers"), upon the terms set forth in a purchase agreement dated July 31,
1996 (the "Purchase Agreement"), $200,000,000 principal amount of its Senior
Subordinated Notes due 2006 (the "Notes") to be unconditionally guaranteed on a
senior subordinated basis (the "Guarantees" and, together with the Notes, the
"Securities") by certain of the Company's subsidiaries signatory hereto
(collectively, the "Guarantors"). The Securities are to be issued pursuant to an
Indenture dated as of August 5, 1996 (the "Indenture"), among the Company, the
Guarantors and IBJ Schroder Bank &
<PAGE>
2
Trust Company, as trustee (the "Trustee"). Capitalized terms used but not
specifically defined herein are defined in the Purchase Agreement. As an
inducement to the Initial Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to your obligations thereunder, the Company and the
Guarantors each agrees with you, for the benefit of the holders of the
Securities (including the Initial Purchasers) (the "Holders"), as follows:
1. Registered Exchange Offer. The Company and the Guarantors shall
prepare and, not later than 45 days following the Closing Date, shall file with
the Commission a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with respect to a
proposed offer (the "Registered Exchange Offer") to the Holders to issue and
deliver to such Holders, in exchange for the Securities, a like aggregate
principal amount of debt securities of the Company (the "Exchange Notes")
unconditionally guaranteed on a senior subordinated basis by the Guarantors (the
"Exchange Guarantee" and, together with the Exchange Notes, the "Exchange
Securities") identical in all material respects to the Securities, except for
the transfer restrictions relating to the Securities, shall use its best efforts
to cause the Exchange Offer Registration Statement to become effective under the
Securities Act within 105 days of the Closing Date and to keep the Exchange
Offer Registration Statement effective for not less than 30 days (or longer, if
required by applicable law) after the date notice of the Exchange Offer is
mailed to the Holders (such period being called the "Exchange Offer Registration
Period"). The Exchange Securities will be issued under the Indenture or an
indenture (the "Exchange Securities Indenture") between the Company, the
Guarantors and the Trustee or such other bank or trust company reasonably
satisfactory to you, as trustee (the "Exchange Securities Trustee"), such
indenture to be identical in all material respects with the Indenture except for
the transfer restrictions relating to the Securities (as described above).
<PAGE>
3
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company and the Guarantors shall promptly commence the Registered Exchange
Offer, it being the objective of such Registered Exchange Offer to enable each
Holder electing to exchange Securities for Exchange Securities (assuming that
such Holder is not an affiliate of the Company or any of the Guarantors within
the meaning of the Securities Act, acquires the Exchange Securities in the
ordinary course of such Holder's business and has no arrangements or
understandings with any person to participate in the distribution of the
Exchange Securities) to trade such Exchange Securities from and after their
receipt without any limitations or restrictions under the Securities Act and
without material restrictions under the securities laws of the several states of
the United States. The Company and each of the Guarantors acknowledge that,
pursuant to current interpretations by the Commission's staff of Section 5 of
the Securities Act, (i) each Holder which is a broker-dealer electing to
exchange Securities, acquired for its own account as a result of market making
activities or other trading activities, for Exchange Securities (an "Exchanging
Dealer"), is required to deliver a prospectus containing the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section, and in
Annex C hereto in the "Plan of Distribution" section of such prospectus in
connection with a sale of any such Exchange Securities received by such
Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if any
Initial Purchaser elects to sell Exchange Securities acquired in exchange for
Securities constituting any portion of an unsold allotment it is required to
deliver a prospectus, containing the information required by Items 507 and/or
508 of Regulation S-K under the Securities Act, as applicable, in connection
with such a sale.
In connection with the Registered Exchange Offer, the Company and
the Guarantors shall:
<PAGE>
4
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(c) utilize the services of a Depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all applicable laws
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer, the Company and the Guarantors shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the
case may be, promptly to authenticate and deliver to each Holder of
Securities, Exchange Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
<PAGE>
5
Each of the Company and the Guarantors shall make available for a
period of 180 days after the consummation of the Registered Exchange Offer, a
copy of the prospectus forming part of the Exchange Offer Registration Statement
to any broker-dealer for use in connection with any resale of any Exchange
Securities.
Interest on each Exchange Security issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which interest
was paid on the Securities surrendered in exchange therefor or, if no interest
has been paid on the Securities, from the date of original issue of the
Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company and the Guarantors that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act and (iii) such Holder is not an
affiliate of the Company or any of the Guarantors within the meaning of the
Securities Act.
Notwithstanding any other provisions hereof, the Company and the
Guarantors will ensure that (i) any Exchange Offer Registration Statement and
any amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any Exchange Offer Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not include an untrue statement of a
<PAGE>
6
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2. Shelf Registration. If, (a) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company and
the Guarantors determine that they are not permitted to effect the Registered
Exchange Offer as contemplated by Section 1 hereof, or (b) if for any other
reason the Registered Exchange Offer is not consummated within 135 days of the
date hereof, or (c) if any Initial Purchaser so requests with respect to
Securities not eligible to be exchanged for Exchange Securities in a Registered
Exchange Offer and held by it following consummation of the Registered Exchange
Offer, or (d) if any applicable laws or applicable interpretations do not permit
any Holder (including an Initial Purchaser, but excluding any Exchanging Dealer)
to participate in such Registered Exchange Offer, or (e) any Holder that
participates in the Registered Exchange Offer (other than an Exchanging Dealer),
does not receive freely tradeable Exchange Securities in exchange for tendered
Securities or (f) if the Company so elects, then the following provisions shall
apply:
(a) The Company and the Guarantors shall use its best efforts as
promptly as practicable to file with the Commission and thereafter shall use its
best efforts to cause to be declared effective a registration statement on an
appropriate form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined below) by the Holders from time to
time in accordance with the methods of distribution elected by such Holders and
set forth in such registration statement (hereafter, a "Shelf Registration
Statement" and, together with any Exchange Offer Registration Statement, a
"Registration Statement").
(b) The Company and the Guarantors each shall use its respective
best efforts to keep the Shelf Registration
<PAGE>
7
Statement continuously effective in order to permit the prospectus forming part
thereof to be usable by Holders for a period of three years from the Closing
Date or such shorter period that will terminate when all the Securities covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or pursuant to Rule 144 under the Securities Act (in any
such case, such period being called the "Shelf Registration Period"). The
Company and the Guarantors each shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the requisite
period if any of them voluntarily takes any action that would result in Holders
of Securities covered thereby not being able to offer and sell such Securities
during that period, unless such action, in the opinion of the Company after
consulting with legal counsel, is required by applicable law.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any prospectus forming part
of any Shelf Registration Statement, and any supplement to such prospectus does
not include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Securities will suffer damages if the Company or any of the Guarantors fails
to fulfill its obligations under Section 1 or Section 2, as applicable, and that
it would not be feasible to ascertain the extent of such damages. Accordingly,
if (i) the applicable
<PAGE>
8
Registration Statement is not filed with the Commission on or prior to 45 days
after the Closing Date, (ii) the Exchange Offer Registration Statement or, as
the case may be, the Shelf Registration Statement, is not declared effective
within 105 days after the Closing Date, (iii) the Exchange Offer is not
consummated on or prior to 135 days after the Closing Date, or (iv) the Shelf
Registration Statement is filed and declared effective within 105 days after the
Closing Date but shall thereafter cease to be effective (at any time that the
Company is obligated to maintain the effectiveness thereof) without being
succeeded within 30 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company will pay liquidated damages to each holder
of Transfer Restricted Securities (as defined below) in an amount equal to
$0.192 per week per $1,000 principal amount of the Securities constituting
Transfer Restricted Securities held by such holder until (i) the applicable
Registration Statement is filed, (ii) the Exchange Registration Statement is
declared effective and the Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease. "Transfer
Restricted Securities" means each Security until (i) the date on which such
Security has been exchanged for a freely transferrable Exchange Security in the
Exchange Offer, (ii) the date on which such Security has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) the date on which such Security is distributed
to the public pursuant to Rule 144 under the Securities Act or is salable
pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to
the contrary in this Section 3(a), the Company shall not be required to pay
liquidated damages to the holder of Transfer Restricted Securities if such
holder: (a) failed to comply with its obligations to make the representations in
the second to
<PAGE>
9
last paragraph of Section 1; or (b) failed to provide the information required
to be provided by it, if any, pursuant to Section 4(n).
(b) The Company shall notify the Trustee and Paying Agent under the
Indenture immediately upon the happening of each and every Registration Default.
The Company shall pay the liquidated damages due on the Transfer Restricted
Securities by depositing with the Paying Agent (which may not be the Company for
these purposes), in trust, for the benefit of the Holders thereof, prior to
10:00 a.m. New York City time on the next interest payment date specified by the
Indenture and the Securities, sums sufficient to pay the liquidated damages then
due. The liquidated damages due shall be payable on each interest payment date
specified by the Indenture and the Securities to the record holder entitled to
receive this interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to be declared effective or to remain effective, or
(iii) the Exchange Offer Registration Statement to be declared effective and the
Exchange Offer to be consummated, to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to you, prior to the filing
thereof with the Commission, a copy of the Registration Statement and each
amendment thereof and each
<PAGE>
10
supplement, if any, to the prospectus included therein and, in the event that
any of the Initial Purchasers (with respect to any portion of an unsold
allotment from the original offering) are participating in the Registered
Exchange Offer or the Shelf Registration, shall use reasonable efforts to
reflect in each such document, when so filed with the Commission, such comments
as you reasonably may propose; (ii) with respect to an Exchange Offer
Registration Statement, include the information set forth in Annex A hereto on
the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of the prospectus forming a part of the Exchange Offer
Registration Statement, and include the information set forth in Annex D hereto
in the Letter of Transmittal delivered pursuant to the Registered Exchange
Offer; and (iii) if requested by any Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K under the Securities Act, as
applicable, in the prospectus forming a part of the Exchange Offer Registration
Statement.
(b) The Company shall advise you and, in the case of a Shelf
Registration Statement, the Holders (if applicable), and, if requested by you or
any such Holder, confirm such advice in writing (which advice pursuant to
clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the
use of the prospectus until the requisite changes have been made):
(i) when the Registration Statement and any amendment thereto has
been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the prospectus included therein or for
additional information;
<PAGE>
11
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Securities or the Exchange
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in the Registration Statement or the prospectus so that, as of
such date, the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(c) The Company and the Guarantors will use its best efforts to
obtain the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(d) The Company will furnish to each Holder of Securities included
within the coverage of any Shelf Registration Statement, without charge, at
least one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits (including those incorporated by
reference).
(e) The Company will deliver to each Holder of Securities included
within the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included in
such Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company and the Guarantors each
<PAGE>
12
consents to the use of the prospectus or any amendment or supplement thereto by
each of the selling Holders of Securities in connection with the offering and
sale of the Securities covered by the prospectus or any amendment or supplement
thereto.
(f) The Company will furnish to each Exchanging Dealer or Initial
Purchaser, as applicable, which so requests, without charge, at least one copy
of the Exchange Offer Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Exchanging
Dealer or Initial Purchaser, as applicable, so requests in writing, all exhibits
(including those incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Exchanging Dealer or Initial Purchaser, as applicable, without charge, as many
copies of the prospectus included in such Exchange Offer Registration Statement
or Shelf Registration Statement, as applicable, and any amendment or supplement
thereto as such Exchanging Dealer or Initial Purchaser, as applicable, may
reasonably request for delivery by (i) such Exchanging Dealer in connection with
a sale of Exchange Securities received by it pursuant to the Registered Exchange
Offer or (ii) such Initial Purchaser in connection with a sale of Exchange
Securities received by it in exchange for Securities constituting any portion of
an unsold allotment; and the Company consents to the use of the prospectus or
any amendment or supplement thereto by any such Exchanging Dealer or Initial
Purchaser, as applicable, as aforesaid.
(h) Prior to any public offering of Securities or Exchange
Securities pursuant to any Registration Statement, the Company and the
Guarantors each will use its respective best efforts to register or qualify or
cooperate with the Holders of Securities included therein and their respective
counsel in connection with the registration or qualification of such securities
for offer and sale under the securities
<PAGE>
13
or blue sky laws of such jurisdictions as any such Holder reasonably requests in
writing and do any and all other acts or things necessary or advisable to enable
the offer and sale in such jurisdictions of the Securities or Exchange
Securities covered by such Registration Statement; provided, however, that
neither the Company nor the Guarantors will be required to qualify generally to
do business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
(i) The Company and the Guarantors each will cooperate with the
Holders of Securities to facilitate the timely preparation and delivery of
certificates representing Securities or Exchange Securities to be sold pursuant
to any Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request in writing
prior to sales of Securities or Exchange Securities pursuant to such
Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs
(b)(ii) through (v) above during the period for which the Company and the
Guarantors are required to maintain an effective Registration Statement, the
Company and the Guarantors will promptly prepare a post-effective amendment to
the Registration Statement or a supplement to the related prospectus or file any
other required document so that, as so amended or supplemented, the prospectus
will not include 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.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities or
Exchange Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities or Exchange
<PAGE>
14
Securities, as the case may be, in a form eligible for deposit with The
Depositary Trust Company.
(l) The Company and the Guarantors each will comply with all
applicable rules and regulations of the Commission and will make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement (which need
not be audited) satisfying the provisions of Section 11(a) of the Securities
Act.
(m) The Company and the Guarantors will cause the Indenture or the
Exchange Securities Indenture, as the case may be, to be qualified under the
Trust Indenture Act as required by applicable law in a timely manner.
(n) The Company may require each Holder of Securities to be sold
pursuant to any Shelf Registration Statement to furnish to the Company and the
Guarantors such information regarding the Holder and the distribution of such
Securities as the Company may from time to time reasonably require for inclusion
in such Registration Statement, and the Company or the Guarantors may exclude
from such registration the Securities of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such request.
(o) The Company and the Guarantors each shall enter into such
customary agreements (including, if requested, an underwriting agreement in
customary form) and take all such other action, if any, as Holders of a majority
in aggregate principal amount of Securities or Exchange Securities being sold or
the managing underwriters (if any) shall reasonably request in order to
facilitate the disposition of Securities pursuant to any Shelf Registration
Statement.
(p) In the case of a Shelf Registration Statement, the Company and
the Guarantors each shall (i) make reasonably available for inspection by a
representative
<PAGE>
15
of, and Special Counsel (as defined) acting for, a majority in aggregate
principal amount of the Holders, and any underwriter participating in any
disposition pursuant to a Shelf Registration Statement, all relevant financial
and other records, pertinent corporate documents and properties of the Company
and the Subsidiaries and (ii) use reasonable efforts to have Company's and the
Subsidiaries' officers, directors, employees, accountants and auditors supply
all relevant information reasonably requested by such representative, counsel or
any such underwriter (an "Inspector") in connection with any such Registration
Statement, subject to executing a confidentiality undertaking in customary form
with respect to confidential or proprietary information of the Company or such
Subsidiary.
(q) In the case of a Shelf Registration Statement, the Company and
the Guarantors, if requested by Holders of a majority in aggregate principal
amount of the Securities and Exchange Securities being sold, their Special
Counsel, or the managing underwriters (if any) in connection with any Shelf
Registration Statement, shall use their best efforts to cause (w) its counsel to
deliver an opinion relating to the Registration Statement and the Securities or
the Exchange Securities, as applicable, in customary form, (x) its officers to
execute and deliver all customary documents and certificates requested by
Holders of a majority in aggregate principal amount of the Securities and
Exchange Securities being sold, their Special Counsel, or the managing
underwriters (if any) and (y) its independent public accountants to provide a
comfort letter in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
(r) The Company and the Guarantors each will use reasonable efforts
to cause the Securities or the Exchange Securities, as applicable, covered by a
Registration Statement to be rated with an appropriate rating agency, if so
requested by Holders of a majority in aggregate principal
<PAGE>
16
amount of Securities covered by such Registration Statement or the Exchange
Securities, as the case may be, or by the managing underwriters, if any.
(s) The Company and the Guarantors each will use reasonable efforts
to cause the Securities or the Exchange Securities, as applicable, relating to
such Registration Statement to be listed on each securities exchange, if any, on
which debt securities issued by the Company or the Guarantors are then listed,
if so requested by Holders of a majority in aggregate principal amount of
Securities covered by such Registration Statement or the Exchange Securities, as
the case may be, or by the managing underwriters, if any.
(t) In the case of a Shelf Registration Statement, each Holder of
Securities agrees by acquisition of such Securities that, upon receipt of any
notice of the Company pursuant to Section 4(b)(ii) through (v) hereof, such
Holder will discontinue disposition of such Securities covered by such
Registration Statement until such Holder's receipt of copies of the supplemental
or amended prospectus contemplated by Section 4(j) hereof, or until advised in
writing (the "Advice") by the Company that the use of the applicable prospectus
may be resumed. If the Company shall give any notice under Section 4(b)(ii)
through (v) during the period that the Company is required to maintain an
effective Registration Statement (the "Effectiveness Period"), such
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each seller of Securities covered by such Registration Statement shall
have received (x) the copies of the supplemental or amended prospectus
contemplated by Section 4(j) (if an amended or supplemental prospectus is
required) or (y) the Advice (if no amended or supplemental prospectus is
required).
5. Registration Expenses. The Company and the Guarantors each will
bear all expenses incurred in connection with the performance of its obligations
under
<PAGE>
17
Sections 1, 2, 3 and 4 hereof and the Company and the Guarantors, jointly and
severally, will reimburse the Initial Purchasers and the Holders for the
reasonable fees and disbursements of one firm of attorneys (in addition to local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Securities and the Exchange Securities to be sold pursuant to a Registration
Statement (the "Special Counsel") acting for the Initial Purchasers or Holders
in connection therewith. The Holders shall be responsible for all underwriting
commissions and discounts in the case of a Shelf Registration Statement.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Exchanging Dealer or Initial Purchaser, as
applicable, as contemplated in Section 4(g) above, the Company and the
Guarantors, jointly and severally, shall indemnify and hold harmless each Holder
and each person, if any, who controls such Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; and
(ii) against any and all expense whatsoever, as incurred (including,
subject to Section 6(c) hereof, the reasonable fees and disbursements of
counsel chosen by the indemnified party) reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental or regulatory agency or
body, commenced or
<PAGE>
18
threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission;
provided, however, that (i) this indemnity shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company or the
Guarantors by you or the indemnified party expressly for use in such
Registration Statement and (ii) this indemnity with respect to any untrue
statement or alleged untrue statement or omission or alleged omission in any
related preliminary prospectus shall not enure to the benefit of any indemnified
party from whom the person asserting any such loss, claim damage or liability
received Securities or Exchange Securities if such persons did not receive a
copy of the final prospectus at or prior to the confirmation of the sale of such
Securities or Exchange Securities to such person in any case where such delivery
is required by the Securities Act and the untrue statement or omission of
material fact contained in the related preliminary prospectus was corrected in
the final prospectus unless such failure to deliver the final prospectus was a
result of noncompliance by the Company or any of the Guarantors with Sections
4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder
agrees to indemnify and hold harmless each of the Company and the Guarantors,
each of their respective directors, officers, agents and employees and each
person, if any, who controls each of the Company and the Guarantors within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
and the directors, officers, agents and employees of such controlling persons
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 6(a) hereof, as incurred, arising out of or based
upon any untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment or
<PAGE>
19
supplement thereto) in reliance on and in conformity with written information
furnished to the Company or the Guarantors by such Holder expressly for use in
the Registration Statement (or in such amendment or supplement); provided,
however, that no such Holder shall be liable for any indemnity claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Securities or Exchange Securities pursuant to the Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any claim or action
commenced against it in respect of which indemnity may be sought hereunder;
provided, however, that failure to so notify an indemnifying party shall not
relieve such indemnifying party from any obligation that it may have pursuant to
this Section except to the extent it has been materially prejudiced by such
failure; provided further, however, that the failure to notify the indemnifying
party shall not relieve it from any liability that it may have to an indemnified
party otherwise than on account of this Section. If any such claim or action
shall be brought against an indemnified party, the indemnified party 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 6 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, that an
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (1) the employment of counsel by the
indemnified
<PAGE>
20
party has been authorized in writing by the indemnifying party, (2) the
indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(3) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm of attorneys (in addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 6(a) and 6(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent, but if
settled with its written consent (which consent shall not be unreasonably
withheld) 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. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of
<PAGE>
21
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If a claim by an indemnified party for indemnification under
this Section 6 is found unenforceable in a final judgment by a court of
competent jurisdiction (not subject to further appeal or review) even though the
express provisions hereof provide for indemnification in such case, then each
applicable 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 in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in connection
with the actions, statements or omissions that resulted in such losses as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any losses shall be deemed to include, subject to the limitations set forth
in Section 6(c) herein, any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section, an indemnifying party that is a
holder of Transfer Restricted Securities or Exchange Securities shall not be
required to contribute any amount in excess of the amount by
<PAGE>
22
which the total price at which the Securities or Exchange Securities sold by
such indemnifying party and distributed to the public were offered to the public
exceeds the amount of any damages that such indemnifying party has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
any contribution from any person who was not guilty of such fraudulent
misrepresentation.
7. Rules 144 and 144A. Each of the Company and the Guarantors shall
use its best efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Company or any of the Guarantors is not required to file such reports, it will,
upon the written request of any holder of Transfer Restricted Securities, make
publicly available other information so long as necessary to permit sales of
their securities pursuant to Rules 144 and 144A. The Company covenants that it
will take such further action as any holder of Transfer Restricted Securities
may reasonably request, all to the extent required from time to time to enable
such holder to sell Transfer Restricted Securities without registration under
the Securities Act within the limitation of the exemptions provided by Rules 144
and 144A (including, without limitation, the requirements of Rule 144A(d)(4)).
Upon the written request of any holder of Transfer Restricted Securities, the
Company shall deliver to such holder a written statement as to whether it has
complied with such requirements. Notwithstanding the foregoing, nothing in this
Section 7 shall be deemed to require the Company or the Guarantors to register
any of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected
<PAGE>
23
by the holders of a majority in aggregate principal amount of such Transfer
Restricted Securities included in such offering, subject to the consent of the
Company (which shall not be unreasonably withheld or delayed). The Holders shall
be responsible for all underwriting commissions and discounts.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of Holders of a majority in aggregate principal
amount of the Securities and the Exchange Securities, taken as a single class.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of the
Holders of Securities whose Securities or Exchange Securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of a majority in
aggregate principal amount of the Securities or Exchange Securities being sold
by such Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
<PAGE>
24
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 9(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to Chase Securities Inc.;
(2) if to you, initially at the respective addresses set forth in
the Purchase Agreement; and
(3) if to the Company or any of the Guarantors, initially at their
respective addresses set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; when answered back, if faxed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and each of the Guarantors and their respective successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopies) 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.
(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
<PAGE>
25
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE COMPANY AND THE GUARANTORS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A TRANSFER RESTRICTED
SECURITY TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR ANY OF THE GUARANTORS IN
ANY OTHER JURISDICTION.
(g) Remedies. In the event of a breach by the Company or any of the
Guarantors, or by a holder of Transfer Restricted Securities, of any of their
obligations under this Agreement, each holder of Transfer Restricted Securities
or the Company or the Guarantors, as the case may be, in addition to being
entitled to exercise all rights granted by law, including recovery of damages
(other than the recovery of damages for a breach by the Company or the
Guarantors of their obligations under Sections 1 or 2 hereof for which
liquidated damages have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. The
Company, the Guarantors and each holder of Transfer Restricted Securities, agree
that monetary damages would not be adequate compensation for any loss incurred
by reason of a
<PAGE>
26
breach by it of any of the provisions of this Agreement and hereby further agree
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
(h) No Inconsistent Agreements. Neither the Company nor any of the
Guarantors has, nor shall the Company or any of the Guarantors on or after the
date of this Agreement, enter into any agreement that is inconsistent with the
rights granted to the holders of Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof. Neither the Company
nor any of the Guarantors has previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person. Without limiting the generality of the foregoing,
without the written consent of the holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities, neither the
Company nor any of the Guarantors shall grant to any person the right to request
the Company or any of the Guarantors to register any debt securities of the
Company or any of the Guarantors under the Securities Act unless the rights so
granted are subject in all respects to the prior rights of the holders of
Transfer Restricted Securities set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of the Agreement.
(i) No Piggyback on Registrations. None of the Company, the
Guarantors nor any of their respective securityholders (other than the holders
of Transfer Restricted Securities in such capacity) shall have the right to
include any securities of the Company or the Guarantors in any Shelf
Registration or Exchange Offer other than Transfer Restricted Securities.
(j) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
<PAGE>
27
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE>
28
Please confirm that the foregoing correctly sets forth the agreement
among the Company, each of the Guarantors and you.
Very truly yours,
LIFESTYLE FURNISHINGS
INTERNATIONAL LTD.,
By:_____________________________
Name:
Title:
LIFESTYLE HOLDINGS LTD.,
By:_____________________________
Name:
Title:
AMETEX FABRICS, INC.,
By:_____________________________
Name:
Title:
THE BERKLINE CORPORATION,
By:_____________________________
Name:
Title:
<PAGE>
29
BLUE MOUNTAIN TRUCKING
CORPORATION,
By:_____________________________
Name:
Title:
CUSTOM TRUCK TIRES, INC.,
By:_____________________________
Name:
Title:
D-H RETAIL SPACE, INC.,
By:_____________________________
Name:
Title:
DREXEL HERITAGE
ADVERTISING, INC.,
By:_____________________________
Name:
Title:
DREXEL HERITAGE
FURNISHINGS INC.,
By:_____________________________
Name:
Title:
<PAGE>
30
DREXEL HERITAGE
HOME INSPIRATIONS, INC.,
By:_____________________________
Name:
Title:
HENREDON FURNITURE
INDUSTRIES, INC.,
By:_____________________________
Name:
Title:
HENREDON TRANSPORTATION
COMPANY,
By:_____________________________
Name:
Title:
INTERIOR FABRIC DESIGN, INC.,
By:_____________________________
Name:
Title:
INTRO EUROPE, INC.,
By:_____________________________
Name:
Title:
<PAGE>
31
LA BARGE, INC.,
By:_____________________________
Name:
Title:
LEXINGTON FURNITURE
INDUSTRIES, INC.,
By:_____________________________
Name:
Title:
MAITLAND-SMITH, INC.,
By:_____________________________
Name:
Title:
MARBRO LAMP COMPANY,
By:_____________________________
Name:
Title:
<PAGE>
32
RAMM, SON & CROCKER, INC.,
By:_____________________________
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
By:_____________________________
Name:
Title:
ROBERT ALLEN FABRICS
OF N.Y., INC.,
By:_____________________________
Name:
Title:
SUNBURY TEXTILE MILLS, INC.,
By:_____________________________
Name:
Title:
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
By:_____________________________
Name:
Title:
<PAGE>
33
UNIVERSAL FURNITURE LIMITED,
By:_____________________________
Name:
Title:
<PAGE>
34
Accepted in New York, New York
CHASE SECURITIES INC.
By:_____________________________
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By:_____________________________
Name:
Title:
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging 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. 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 Securities received in exchange for Existing Notes
where such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. Each of the Company and
the Guarantors has agreed that, for a period of 180 days after the Expiration
Date (as defined herein), it will make this Prospectus available to any
broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. 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 Securities received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market-making activities or other trading activities. Each of the Company and
the Guarantors has agreed that, for a period of 180 days after the Expiration
Date, it will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
, 199 , all dealers effecting transactions in the
Exchange Securities may be required to deliver a
prospectus.*
Neither the Company nor the Guarantors will receive any proceeds
from any sale of Exchange Securities by broker-dealers. Exchange Securities
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received
- --------
*In addition, the legend required by Item 502(e) of Regulation S-K will appear
on the back cover page of the Exchange Offer prospectus.
<PAGE>
2
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and each of the Guarantors 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 Securities) other
than commissions or concessions of any brokers or dealers and will indemnify the
Holders of the Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
<PAGE>
ANNEX D
____
/____/ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ____________________________________________
Address: _________________________________________
_________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
EXHIBIT 10.6
EXECUTION COPY
LFI RECEIVABLES MASTER TRUST
POOLING AGREEMENT
Among
LFI RECEIVABLES CORPORATION
LFI SERVICING CORPORATION
as Master Servicer
and
THE CHASE MANHATTAN BANK
as Trustee
Dated as of August 5, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions . . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . 33
ARTICLE II
Conveyance of Receivables;
--------------------------
Issuance of Certificates
------------------------
SECTION 2.01. Conveyance of Receivables . . . . . 35
SECTION 2.02. Acceptance by Trustee . . . . . . . 39
SECTION 2.03. Representations and Warranties of
the Company Relating to the
Company . . . . . . . . . . . . 39
SECTION 2.04. Representations and Warranties of
the Company Relating to the
Receivables . . . . . . . . . . 44
SECTION 2.05. Adjustment Payment for Ineligible
Receivables . . . . . . . . . . 45
SECTION 2.06. Purchase of Investor
Certificateholders' Interest in
Trust Portfolio . . . . . . . . 46
SECTION 2.07. Affirmative Covenants of the
Company . . . . . . . . . . . . 47
SECTION 2.08. Negative Covenants of the Company . 52
<PAGE>
Contents, p. 2
Page
----
ARTICLE III
Rights of Certificateholders and
--------------------------------
Allocation and Application of Collections
-----------------------------------------
SECTION 3.01. Establishment of Collection
Account; Certain Allocations . . 57
ARTICLE IV
ARTICLE IV IS RESERVED AND MAY BE
SPECIFIED IN ANY SUPPLEMENT WITH
RESPECT TO THE SERIES RELATING THERETO.
ARTICLE V
The Certificates
----------------
SECTION 5.01. The Certificates . . . . . . . . . 63
SECTION 5.02. Authentication of Certificates . . 64
SECTION 5.03. Registration of Transfer and
Exchange of Certificates . . . . 65
SECTION 5.04. Mutilated, Destroyed, Lost or
Stolen Certificates . . . . . . 68
SECTION 5.05. Persons Deemed Owners . . . . . . . 68
SECTION 5.06. Appointment of Paying Agent . . . . 69
SECTION 5.07. Access to List of
Certificateholders' Names and
Addresses . . . . . . . . . . . 70
SECTION 5.08. Authenticating Agent . . . . . . . 71
SECTION 5.09. Tax Treatment . . . . . . . . . . . 73
SECTION 5.10. Tender of Exchangeable Company
Certificate . . . . . . . . . . 73
SECTION 5.11. Book-Entry Certificates . . . . . . 76
SECTION 5.12. Notices to Clearing Agency . . . . 77
SECTION 5.13. Definitive Certificates . . . . . . 77
<PAGE>
Contents, p. 3
Page
----
ARTICLE VI
Other Matters Relating to the Company
-------------------------------------
SECTION 6.01. Liability of the Company . . . . . 78
SECTION 6.02. Limitation on Liability of the
Company . . . . . . . . . . . . 78
SECTION 6.03. Liabilities . . . . . . . . . . . . 79
ARTICLE VII
Early Amortization Events
-------------------------
SECTION 7.01. Early Amortization Events . . . . . 79
SECTION 7.02. Additional Rights upon the
Occurrence of Certain Events . . 81
SECTION 7.03. Expense Account . . . . . . . . . . 82
ARTICLE VIII
The Trustee
-----------
SECTION 8.01. Duties of Trustee . . . . . . . . . 83
SECTION 8.02. Rights of the Trustee . . . . . . . 86
SECTION 8.03. Trustee Not Liable for Recitals . . 88
SECTION 8.04. Trustee May Own Certificates . . . 89
SECTION 8.05. Trustee's Fees and Expenses . . . . 89
SECTION 8.06. Eligibility Requirements for
Trustee . . . . . . . . . . . . 90
SECTION 8.07. Resignation or Removal of
Trustee . . . . . . . . . . . . 91
SECTION 8.08. Successor Trustee . . . . . . . . . 92
SECTION 8.09. Merger or Consolidation of
Trustee . . . . . . . . . . . . 92
SECTION 8.10. Appointment of Co-Trustee or
Separate Trustee . . . . . . . . 93
SECTION 8.11. Tax Returns . . . . . . . . . . . . 95
SECTION 8.12. Trustee May Enforce Claims Without
<PAGE>
Contents, p. 4
Page
----
Possession of Certificates . . . 95
SECTION 8.13. Suits for Enforcement . . . . . . . 96
SECTION 8.14. Rights of Investor Certificate-
holders To Direct Trustee . . . 96
SECTION 8.15. Representations and Warranties of
Trustee . . . . . . . . . . . . 97
SECTION 8.16. Maintenance of Office or Agency . . 97
SECTION 8.17. Limitation of Liability . . . . . . 97
ARTICLE IX
Termination
-----------
SECTION 9.01. Termination of Trust . . . . . . . 98
SECTION 9.02. Optional Purchase and Final
Termination Date of Investor
Certificates of Any Series . . . 98
SECTION 9.03. Final Payment with Respect to Any
Series . . . . . . . . . . . . . 101
SECTION 9.04. Company's Termination Rights . . . 102
ARTICLE X
Miscellaneous Provisions
------------------------
SECTION 10.01. Amendment . . . . . . . . . . . . . 103
SECTION 10.02. Protection of Right, Title and
Interest to Trust . . . . . . . 105
SECTION 10.03. Limitation on Rights of
Certificateholders . . . . . . . 105
SECTION 10.04. Governing Law . . . . . . . . . . . 107
SECTION 10.05. Notices . . . . . . . . . . . . . . 107
SECTION 10.06. Severability of Provisions . . . . 108
SECTION 10.07. Assignment . . . . . . . . . . . . 108
SECTION 10.08. Certificates Nonassessable and
Fully Paid . . . . . . . . . . . 108
SECTION 10.09. Further Assurances . . . . . . . . 109
SECTION 10.10. No Waiver; Cumulative Remedies . . 109
<PAGE>
Contents, p. 5
Page
----
SECTION 10.11. Counterparts . . . . . . . . . . . 109
SECTION 10.12. Third-Party Beneficiaries . . . . . 109
SECTION 10.13. Actions by Certificateholders . . . 109
SECTION 10.14. Merger and Integration . . . . . . 110
SECTION 10.15. Headings . . . . . . . . . . . . . 110
SECTION 10.16. Construction of Agreement . . . . . 110
SECTION 10.17. No Setoff . . . . . . . . . . . . . 110
SECTION 10.18. No Bankruptcy Petition . . . . . . 110
SECTION 10.19. Limitation of Liability . . . . . . 111
SECTION 10.20. Certain Information . . . . . . . . 112
<PAGE>
5
EXHIBITS
Exhibit A Form of Exchangeable Company Certificate
Exhibits B-1 Forms of Lockbox Agreements
through B-15
Exhibit C Form of Annual Opinion of Counsel
Exhibit D Internal Operating Procedures Memorandum
Exhibit E Depository Agreement with BayBank
SCHEDULES
Schedule 1 Receivables
Schedule 2 Identification of the Trust Accounts
Schedule 3 Location of Chief Executive Office of the Company
APPENDICES
Appendix A Description of Servicer Site Review Procedures
Appendix B Description of Standby Liquidation System
<PAGE>
EXECUTION COPY
POOLING AGREEMENT dated as of August 5, 1996, among LFI
RECEIVABLES CORPORATION, a Delaware corporation (the
"Company"); LFI SERVICING CORPORATION, a Delaware
corporation (in its capacity as master servicer, the "Master
Servicer"); and THE CHASE MANHATTAN BANK, a New York banking
corporation, not in its individual capacity, but solely as
trustee (in such capacity, the "Trustee").
W I T N E S S E T H :
WHEREAS, as of the date hereof, (i) the Company, the Sellers and the
Servicers are entering into a Receivables Sale Agreement (as amended,
supplemented or otherwise modified from time to time, the "Receivables Sale
Agreement") and (ii) the Company, the Master Servicer, the Servicers and the
Trustee are entering into a Servicing Agreement (as amended, supplemented or
otherwise modified from time to time, the "Servicing Agreement"); and
WHEREAS, the parties hereto wish to enter into this Agreement in order
to create a master trust to which the Company will transfer all its right, title
and interest in, to and under the Receivables and other Trust Assets now or
hereafter owned by the Company and such master trust shall, from time to time at
the direction of the Company, issue one or more Series of Investor Certificates,
which shall represent interests in the Receivables and such other Trust Assets
as specified in the Supplement related to such Series.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
<PAGE>
2
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Whenever used in this Agreement, the
------------
following words and phrases shall have the following meanings:
"Accounts" shall have the meaning specified in subsection 2.01(a)(vi)
--------
of this Agreement.
"Accrual Period" shall mean, for any Series, the period from and
--------------
including a Settlement Report Date, or, in the case of the initial Accrual
Period for such Series, the Issuance Date for such Series, to but excluding the
succeeding Settlement Report Date.
"Adjusted Invested Amount" shall mean, with respect to any Outstanding
------------------------
Series, the definition assigned to such term in the related Supplement.
"Adjustment Payments" shall mean the collective reference to payments
-------------------
of Transfer Deposit Amounts and Cash Dilution Payments.
"Affiliate" shall mean, with respect to any specified Person, any
---------
other Person which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such specified Person. For purposes of this
definition "control" of a Person means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" shall mean, with respect to any Series, the Person, if any, so
-----
designated in the related Supplement.
<PAGE>
3
"Aggregate Adjusted Invested Amount" shall mean, with respect to any
----------------------------------
date of determination, the sum of the Adjusted Invested Amounts with respect to
all Outstanding Series on such date of determination.
"Aggregate Allocated Receivables Amount" shall mean, with respect to
--------------------------------------
any date of determination, the sum of the Allocated Receivables Amounts with
respect to all Outstanding Series on such date of determination.
"Aggregate Daily Collections" shall mean, with respect to any Business
---------------------------
Day, the aggregate amount of all Collections deposited into the Collection
Account on such day.
"Aggregate Invested Amount" shall mean, at any date of determination,
-------------------------
the sum of the Invested Amounts with respect to all Outstanding Series on such
date of determination.
"Aggregate Overconcentration Amount" shall mean, with respect to any
----------------------------------
date of determination, the sum of the Overconcentration Amounts of all Eligible
Obligors at the end of the preceding Business Day.
"Aggregate Receivables Amount" shall mean, with respect to any date of
----------------------------
determination, (i) the aggregate Principal Amount of all Eligible Receivables in
the Trust at the end of the Business Day immediately preceding such date minus
(ii) the Aggregate Overconcentration Amount for such date.
"Aggregate Target Receivables Amount" shall mean, with respect to any
-----------------------------------
date of determination, the sum of the Target Receivables Amounts with respect to
all Outstanding Series on such date of determination.
"Agreement" shall mean this Pooling Agreement and all amendments
---------
hereof and supplements hereto, and including, unless expressly stated otherwise,
each Supplement.
<PAGE>
4
"Allocable Charged-Off Amount" shall have, with respect to any Series,
----------------------------
the meaning specified in subsection 3.01(e) and in any Supplement for such
Series.
"Allocable Recoveries Amount" shall have, with respect to any Series,
---------------------------
the meaning specified in subsection 3.01(e) and in any Supplement for such
Series.
"Allocated Receivables Amount" shall have, with respect to any
----------------------------
Outstanding Series, the meaning specified in the related Supplement for such
Outstanding Series.
"Amortization Period" shall have, with respect to any Outstanding
-------------------
Series, the definition assigned to such term in the related Supplement.
"Applicable Insolvency Laws" shall have the meaning specified in
--------------------------
subsection 7.01(a).
"Authorized Newspaper" shall have the meaning specified in
--------------------
subsection 7.02(a).
"Bankruptcy Code" shall mean the United States Federal Bankruptcy
---------------
Code, 11 U.S.C. Sec.Sec. 101-1330, as amended.
------
"BayBank Depository Agreement" shall mean the depository agreement
----------------------------
attached as Exhibit E hereto.
"Board" shall mean the Board of Governors of the Federal Reserve
-----
System of the United States of America.
"Book-Entry Certificates" shall mean certificates evidencing a
-----------------------
beneficial interest in the Certificates, ownership and transfers of which shall
be made through book entries by a Clearing Agency as described in Section 5.11;
provided, however, that after the occurrence of a condition whereupon book-entry
- -------- -------
registration and transfer are no longer permitted and Definitive Certificates
are issued to the Certificate Book-Entry Holders, such Certificates shall no
longer be "Book-Entry Certificates".
<PAGE>
5
"Business Day" shall mean any day other than (i) a Saturday or a
------------
Sunday or (ii) another day on which commercial banking institutions or trust
companies in the State of New York or in the city where the Corporate Trust
Office is located, are authorized or obligated by law, executive order or
governmental decree to be closed; provided that, when used in connection with
--------
the calculation of Certificate Rates which are determined by reference to LIBOR,
"Business Day" shall mean any Business Day banks are open for dealings in dollar
deposits in the London interbank market.
"Business Day Received" shall mean, except as otherwise set forth in
---------------------
the applicable Supplement, (i) with respect to funds deposited in the Collection
Account (a) if funds are deposited in the Collection Account by 1:30 p.m., New
York City time, such day of deposit and (b) if funds are deposited in the
Collection Account after 1:30 p.m., New York City time, the Business Day
immediately following such day of deposit and (ii) with respect to funds
deposited in any Lockbox Account (a) if funds are deposited in such Lockbox
Account by the cut-off time established by the related Lockbox Processor for
same-day processing of deposits, such day of deposit and (b) if funds are
deposited in such Lockbox Account after such cut-off time, the Business Day
immediately following such day of deposit.
"Cash Dilution Payment" shall have the meaning specified in
---------------------
subsection 4.05(a) of the Servicing Agreement.
"Certificate" shall mean any Investor Certificate, the Exchangeable
-----------
Company Certificate or, if applicable, any Subordinated Company Certificate.
"Certificate Book-Entry Holder" shall mean, with respect to a Book-
-----------------------------
Entry Certificate, the Person who is listed on the books of the Clearing Agency,
or on the books of a Person maintaining an account with such Clearing Agency, as
the beneficial owner of such Book-Entry Certificate (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).
<PAGE>
6
"Certificate Rate" shall mean with respect to any Series and Class of
----------------
Certificates, the percentage interest rate (or formula on the basis of which
such interest rate shall be determined) stated in the applicable Supplement.
"Certificate Register" shall mean the register maintained pursuant to
--------------------
Section 5.03, providing for the registration of the Certificates and transfers
and exchanges thereof.
"Certificateholder" shall mean the Person in whose name a Certificate
-----------------
is registered in the Certificate Register.
"Certificateholders' Interest" shall have the meaning specified in
----------------------------
subsection 3.01(b).
"Charged-Off Receivables" shall mean, with respect to any Settlement
-----------------------
Period, all Receivables which, in accordance with the Policies of the applicable
Seller, have or should have been written off during such Settlement Period as
uncollectible, including without limitation the Receivables of any Obligor which
becomes the subject of any voluntary or involuntary bankruptcy proceeding.
"Class" shall mean, with respect to any Series, any one of the classes
-----
of Certificates of that Series as specified in the related Supplement.
"Clean-Up Call Repurchase Price" shall have the meaning set forth in
------------------------------
subsection 9.02(a).
"Clearing Agency" shall mean each organization registered as a
---------------
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-
<PAGE>
7
entry transfers and pledges of securities deposited with such Clearing Agency.
"Collection Account" shall have the meaning specified in
------------------
subsection 3.01(a).
"Collections" shall mean all collections and all amounts received in
-----------
respect of the Receivables transferred to the Trust, including Recoveries,
Adjustment Payments, indemnification payments made by the Master Servicer, any
Servicer or the Company and payments received in respect of Dilution
Adjustments, together with all collections received in respect of the Related
Property in the form of cash, checks, wire transfers or any other form of cash
payment, and all proceeds of Receivables and collections thereof (including,
without limitation, collections evidenced by an account, note, instrument,
letter of credit, security, contract, security agreement, chattel paper, general
intangible or other evidence of indebtedness or security, whatever is received
upon the sale, exchange, collection or other disposition of, or any indemnity,
warranty or guaranty payable in respect of, the foregoing and all "proceeds" as
defined in Section 9-306 of the UCC as in effect in the State of New York).
"Company" shall mean LFI Receivables Corporation, a Delaware
-------
corporation.
"Company Collection Subaccount" shall have the meaning specified in
-----------------------------
subsection 3.01(a).
"Company Exchange" shall have the meaning specified in
----------------
subsection 5.10(a).
"Company Interest" shall have the meaning specified in
----------------
subsection 3.01(b).
"Company Material Adverse Effect" shall mean (i) any material
-------------------------------
impairment of the Company's ability to perform any of its material obligations
or to comply with or
<PAGE>
8
conduct its business in accordance with any of its material representations,
warranties, covenants or agreements under any Transaction Document or (ii) any
material impairment of the interests, rights or remedies of the Trustee or the
Investor Certificateholders against or with respect to the Company under any
Transaction Document.
"Company Subordinated Obligation" shall mean any payment obligation or
-------------------------------
other liability designated as such in any Pooling and Servicing Agreement, each
of which payment obligations and other liabilities shall (i) be subordinated and
subject to the prior payment in full of all Company Unsubordinated Obligations
then due, (ii) be made solely from funds available to the Company that are not
required to be applied to Company Unsubordinated Obligations then due, (iii) not
constitute a general recourse claim against the Company, but only a claim
against the Company to the extent of funds available to the Company after
satisfying all Company Unsubordinated Obligations then due.
"Company Unsubordinated Obligations" shall mean all payment
----------------------------------
obligations and other liabilities of the Company under any Pooling and Servicing
Agreement that are not designated as Company Subordinated Obligations.
"Contractual Obligation" shall mean, as to any Person, any provision
----------------------
of any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Corporate Trust Office" shall mean the principal office of the
----------------------
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at The Chase Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York,
New York 10001 (Attention of Advanced Structured Products Group).
<PAGE>
9
"Credit Enhancer" shall mean, with respect to any Series, that Person,
---------------
if any, designated as such in the applicable Supplement.
"Cut-Off Date", shall mean the close of business on July 30, 1996.
------------
"D&P" shall mean Duff & Phelps Credit Rating Co. or any successor
---
thereto.
"Daily Report" shall have the meaning specified in subsection 4.01 of
------------
the Servicing Agreement.
"Defaulted Receivable" shall mean any Receivable (a) which is unpaid
--------------------
in whole or in part for more than 61 days after its original due date or
(b) which is a Charged-Off Receivable.
"Definitive Certificates" shall have the meaning specified in
-----------------------
Section 5.11.
"Depository" shall mean, with respect to any Series, the Clearing
----------
Agency designated as the "Depository" in the related Supplement.
"Depository Agreement" shall mean, with respect to any series an
--------------------
agreement among the Company, the Trustee and a Clearing Agency, in a form
reasonably satisfactory to the Trustee and the Company.
"Dilution Adjustment" shall mean any payments, rebates, discounts,
-------------------
refunds or adjustments (including without limitation, as a result of the
application of any special or other discounts or any reconciliations) of any
Receivable, the amount owing for any returns (including, without limitation, as
a result of the return of any defective goods) or cancelations and the amount of
any other reduction of any payment under any Receivable, in each case granted or
made by the Seller to the related Obligor;
<PAGE>
10
provided, however, a "Dilution Adjustment" does not include any Charged-Off
- -------- -------
Receivable.
"Distribution Date" shall mean, except as otherwise set forth in the
-----------------
applicable Supplement, the 15th day of the month, beginning in the month
immediately following the month of the Initial Closing Date, or if such 15th day
is not a Business Day, the next succeeding Business Day.
"Dollars", "U.S. Dollars" and "$" shall mean dollars in lawful
------- ------------ -
currency of the United States of America.
"Early Amortization Event" shall have, with respect to any Series, the
------------------------
meaning specified in Section 7.01 of this Agreement (without taking into account
any Supplements) and in any Supplement for such Series.
"Early Amortization Period" shall have, with respect to any Series,
-------------------------
the definition assigned to such term in Section 7.01 of this Agreement and in
any Supplement for such Series.
"Eligible Institution" shall mean a depositary institution or trust
--------------------
company (which may include the Trustee and its Affiliates) organized under the
laws of the United States of America or any one of the states thereof or the
District of Columbia; provided, however, that at all times (i) such depositary
-------- -------
institution or trust company is a member of the Federal Deposit Insurance
Corporation, (ii) the unsecured and uncollateralized debt obligations of such
depositary institution or trust company are rated in one of the two highest
long-term or short-term rating categories by each Rating Agency and (iii) such
depositary institution or trust company has a combined capital and surplus of at
least $100,000,000.
<PAGE>
11
"Eligible Investments" shall mean any book-entry securities,
--------------------
negotiable instruments or securities represented by instruments in bearer or
registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) Federal funds, demand deposits, time deposits or certificates of
deposit of any depositary institution or trust company incorporated under
the laws of the United States of America or any state thereof (or any
domestic branch of a foreign bank) and subject to supervision and
examination by federal or state banking or depositary institution
authorities; provided, however, that at the time of the investment or
-------- -------
contractual commitment to invest therein the commercial paper or other
short-term unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such
depository institution or trust company) thereof shall have a credit rating
from each of the Rating Agencies rating such investment in the highest
investment category granted thereby;
(c) commercial paper rated, at the time of the investment or
contractual commitment to invest therein, in the highest rating category by
each Rating Agency rating such commercial paper;
(d) investments in money market funds (including funds for which the
Trustee or any of its Affiliates is investment manager or adviser) rated in
the highest rating category by each Rating Agency rating such money market
fund (provided that, if such Rating Agency is S&P, such rating shall be
--------
AAAm-G);
(e) bankers acceptances issued by any depository institution or trust
company referred to in clause (b) above;
<PAGE>
12
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b) above; or
(g) any other investment upon satisfaction of the
Rating Agency Condition with respect thereto.
"Eligible Letter of Credit" shall mean any irrevocable documentary
-------------------------
credit (a direct-pay letter of credit) or any irrevocable standby letter of
credit supporting a Receivable, or two or more Receivables sold to the Company
by the same Seller, that is (a) either (i) issued in favor of such Seller or the
Company and the right to draw under which is, or the proceeds of which are,
legally transferable and assignable to the Trustee or (ii) issued in favor of
the Trustee, (b) governed by the UCC of a state of the United States of America,
governed by the UCP 500 or governed as to certain terms by the UCP 500 and as to
any remaining terms by the UCC of a state of the United States of America,
(c) issued by a commercial bank that (i) has a combined capital and surplus of
at least $50,000,000 and (ii) has (or the holding company parent of which has)
either a long-term or a short-term senior unsecured debt rating in the highest
rating category by each Rating Agency and (d) permits the beneficiary to draw,
upon notice to the issuing bank, an amount equal to the entire Principal Amount
of any Receivable supported thereby in U.S. Dollars payable by the issuing bank
to the Trustee, as assignee or as original beneficiary, in the case of a
documentary credit (a direct-pay letter of credit), on or before the due date of
such Receivable and, in the case of a standby letter of credit, on or before the
fifth day following the due date of such Receivable.
<PAGE>
13
"Eligible Obligor" shall mean, as of any date of determination, each
----------------
Obligor in respect of a Receivable that satisfies the following eligibility
criteria:
(a) it is "located" (within the meaning of Section 9-103(3)(d) of the
UCC as in effect in the State of New York) in the United States; provided,
--------
however, that Obligors that are not so located within the United States
-------
shall be deemed Eligible Obligors if (i) the Receivables of such Obligor
would satisfy the definition of "Eligible Receivable" in all respects if
they were owing by an Eligible Obligor, (ii) each Receivable of such
Obligor is supported by an Eligible Letter of Credit (and all necessary
actions are taken for the perfection of the transfer of such Eligible
Letter of Credit to the Trust, including the delivery requirement set forth
in subsection 2.01(b)) and (iii) as of any date of determination after
giving effect to any proposed transfer of Receivables to the Trust owing by
Obligors that would be deemed Eligible Obligors pursuant to this proviso,
the aggregate Principal Amount of all Receivables included in the Trust
Assets that have been or would be transferred to the Trust on the basis of
this proviso does not exceed 5% of the aggregate Principal Amount of all
Receivables then included in the Trust Assets;
(b) if it is a Federal Government Obligor or if it is a State/Local
Government Obligor, then such Obligor shall be subject to the first proviso
contained in the definition of "Overconcentration Amount";
(c) it is not a Seller or an Affiliate of a Seller; and
(d) it is either (i) not the subject of any voluntary or involuntary
bankruptcy proceeding or (ii) a Qualifying DIP Obligor;
<PAGE>
14
provided, however, that, if 25% or more of the Principal Amount of
-------- -------
Receivables of an Obligor (measured by the Principal Amount of Receivables
in the Trust) is reported as being aged 91 days or more after the
respective due dates of such Receivables as at the end of the Settlement
Period immediately preceding the most recent Settlement Report Date
(commencing with the September 10, 1996 Settlement Report Date), such
Obligor shall not be deemed an Eligible Obligor until such time as the
Master Servicer or the responsible Servicer furnishes the Rating Agencies
with a report (which may be part of a Daily Report or a Monthly Settlement
Statement) indicating that less than 25% of the Principal Amount of
Receivables of such Obligor then in the Trust are aged 91 days or more
after the respective original invoice dates of such Receivables.
"Eligible Receivable" shall mean, as of any date of determination,
-------------------
each Receivable owing by an Eligible Obligor in existence as of such date that
satisfies the following eligibility criteria:
(a) it constitutes either (i) an account within the meaning of
Section 9-106 of the UCC of the state the law of which governs the
perfection of the interest granted in it, (ii) an instrument within the
meaning of Section 9-105 of such UCC, which shall be subject to compliance
with the delivery requirement set forth in subsection 2.01(b),
(iii) chattel paper within the meaning of Section 9-105 of such UCC, which
shall be subject to compliance with the delivery requirement set forth in
subsection 2.01(b), or (iv) a general intangible (including to the extent
that such Receivable includes interest, finance charges, returned check or
late charges on sales or similar charges) within the meaning of
Section 9-106 of such UCC;
(b) it is not a Defaulted Receivable;
<PAGE>
15
(c) the goods related to it shall have been shipped or the services
related to it shall have been performed and such Receivable shall have been
billed to the related Obligor;
(d) it is denominated and payable only in U.S. Dollars in the United
States;
(e) it arose in the ordinary course of business from the sale of
goods, products or services of a Seller and in accordance with the Policies
of such Seller and, at such date of determination, the Receivables Sale
Agreement has not been terminated;
(f) it does not contravene any applicable law, rule or regulation and
the related Seller is not in violation of any law, rule or regulation in
connection with it, in each case which in any way renders such Receivable
unenforceable or would otherwise impair in any material respect the
collectibility of such Receivable;
(g) it is not a Receivable with an original repayment term in excess
of 180 days from the invoice date;
(h) if the Company and the Trust are not excluded from the definition
of "investment company" pursuant to Rule 3a-7 under the 1940 Act, it is an
account receivable representing all or part of the sales price of
merchandise, insurance or services within the meaning of Section 3(c)(5) of
the 1940 Act;
(i) it is not a Receivable purchased by a Seller from any Person;
(j) it is not a Receivable for which a Seller has established an
offsetting specific reserve;
<PAGE>
16
(k) it is not a Receivable in respect of which a Seller has
(i) entered into an arrangement with the Obligor pursuant to which payment
of any portion of the purchase price has been extended or deferred, whether
by means of a promissory note or by any other means, to a date more than
60 days from the due date or (ii) altered the basis of the aging from the
initial due date for payment such that the final due date extends to a date
more than 60 days from the invoice date or (iii) otherwise made any
modification except in the ordinary course of business and consistent with
the Policies of such Seller;
(l) all required consents, approvals or authorizations necessary for
the creation and enforceability of such Receivable and the effective
assignment and sale thereof by a Seller to the Company and by the Company
to the Trust shall have been obtained with respect to the Receivable;
(m) a Seller is not in default in any material respect under the terms
of the contract, if any, from which such Receivable arose;
(n) all right, title and interest in it has been validly sold by a
Seller to the Company pursuant to the Receivables Sales Agreement;
(o) the Company or the Trust will have legal and beneficial ownership
therein free and clear of all Liens other than such Liens described in
clause (i) of the definition of Permitted Liens and such Receivable has
been the subject of either a valid transfer from the Company to the Trust
or, alternatively, the grant of a first priority perfected security
interest therein to the Trust free and clear of all Liens other than such
Liens described in clause (i) of the definition of Permitted Liens;
<PAGE>
17
(p) it represents an enforceable obligation of the related Obligor to
pay the full Principal Amount thereof and it is not subject to any dispute
in whole or in part or to any offset, counterclaim or defense;
(q) it is at all times the legal, valid and binding obligation of the
Obligor thereon, enforceable against such Obligor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or law);
(r) as of the related Receivables Purchase Date, neither the Company
nor a Seller has (i) taken any action in contravention of the terms of any
Transaction Document or (ii) failed to take any action required to be taken
by the terms of any Transaction Document that, in either case, is likely to
impair the rights therein of the Trustee or Investor Certificateholders
with respect to such Receivable;
(s) each of the representations and warranties with respect to such
Receivable made in the Receivables Sale Agreement by the related Seller is
true and correct in all material respects; and
(t) at the time such Receivable was sold by the related Seller to the
Company under the Receivables Sale Agreement, no event described in
subsection 7.01(d) of the Receivables Sale Agreement (without giving effect
to any requirement as to the passage of time) had occurred with respect to
such Seller;
provided that a Receivable which would otherwise not qualify as an Eligible
- --------
Receivable because of a failure to comply with clause (j) or (p) above shall
constitute an Eligible
<PAGE>
18
Receivable to the extent of the Principal Amount of such Receivable minus the
amount of such Receivable which fails to comply with such clause (j) or (p);
provided further that with respect to Receivables owing by Government Obligors,
- ----------------
such Receivables shall constitute Eligible Receivables notwithstanding the
failure of such Receivables to satisfy clause (l) above except to the extent
such failure adversely affects the actual collection of such Receivables by the
Company or the Trust.
"Eligible Successor Servicer" shall mean a Person which, at the time
---------------------------
of its appointment as Servicer (i) is legally qualified and has the corporate
power and authority to service the Receivables transferred to the Trust,
(ii) has demonstrated the ability to service a portfolio of similar receivables
in accordance with high standards of skill and care in the sole determination of
the Master Servicer and (iii) has a combined capital and surplus of at least
$5,000,000.
"Enhancement" shall mean, with respect to any Series (i) the funds on
-----------
deposit in or credited to any bank account (or subaccount thereof) of the Trust,
(ii) any surety arrangement, any letter of credit, guaranteed rate agreement,
maturity guaranty facility, tax protection agreement, interest rate swap,
currency swap or other contract, agreement or arrangement, in each case for the
benefit of any Certificateholders of such Series, as designated in the
applicable Supplement and (iii) the subordination of one Class of Certificates
in a Series to another class in such Series or the subordination of any
Certificate held by the Company to the Investor Certificates of such Series.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended.
"Exchange Date" shall have the meaning, with respect to any Series
-------------
issued pursuant to an Exchange, specified in Section 5.10.
<PAGE>
19
"Exchange Notice" shall have the meaning, with respect to any Series
---------------
issued pursuant to an Exchange, specified in Section 5.10.
"Exchangeable Company Certificate" shall mean the certificate executed
--------------------------------
by the Company and authenticated by the Trustee, substantially in the form of
Exhibit A and exchangeable as provided in Section 5.10.
"Excluded Note" shall mean any Receivable (i) which originally
-------------
represented obligations owing by the account debtor thereon to more than one
Seller, (ii) which is or will be evidenced by an instrument payable to the
Seller who will administer such Receivable, (iii) which will be treated as an
account receivable on the books and records of such Sellers until an instrument
is executed in favor of the Seller who will administer such Receivable and
thereafter will be treated as a note receivable on the books of such
administering Seller and (iv) for which payments are not at any time to be made
to a Lockbox or Lockbox Account.
"Excluded Receivable" shall mean, as of any date of determination, any
-------------------
indebtedness and payment obligations of any Person to any Seller arising from a
sale of merchandise or services by such Seller that has the attributes set forth
in any of the following paragraphs:
(a) it is owing by an Obligor that is an Affiliate of any Seller;
(b) it is owing by an Obligor that is not "located" (within the
meaning of Section 9-103(3)(d) of the UCC as in effect in the State of New
York) in the United States and it is not supported by an Eligible Letter of
Credit;
(c) it is an Excluded Note; or
(d) it is a Receivable originated by the Beacon Hill division of
Robert Allen Fabrics, Inc.
<PAGE>
20
"Expense Account" shall have the meaning specified in
---------------
subsection 7.03(a).
"Expense Account Limit" shall mean $500,000.
---------------------
"Federal Government Obligor" shall mean the United States Federal
--------------------------
government or any subdivision thereof or any agency, department or
instrumentality thereof.
"Force Majeure Delay" shall mean, with respect to any Servicer, any
-------------------
cause or event which is beyond the control and not due to the negligence of such
Servicer which delays, prevents or prohibits such Servicer's delivery of Daily
Reports and/or Monthly Settlement Statements, including, without limitation,
acts of God or the elements and fire, but shall not include strikes; provided
--------
that no such cause or event shall be deemed to be a Force Majeure Delay unless
such Servicer shall have given the Company and the Trustee written notice
thereof as soon as reasonably possible after the beginning of such delay.
"Fractional Undivided Interest" shall mean a fractional undivided
-----------------------------
interest, which, with respect to any Investor Certificate, can be expressed as a
percentage of the interest in the Trust Assets represented by the Series or
Class in which it was issued by taking the percentage equivalent of a fraction
the numerator of which is the principal amount of such Investor Certificate and
the denominator of which is the aggregate principal amount of all Investor
Certificates of such Series or Class.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect from time to time.
"General Opinion" shall mean, with respect to any action, an Opinion
---------------
of Counsel to the effect that (i) such action has been duly authorized by all
necessary corporate action on the part of the Servicers or the Company, as the
case may be and (ii) any agreement executed in connection
<PAGE>
21
with such action constitutes a legal, valid and binding obligation of the
Servicers or the Company, as the case may be, enforceable in accordance with the
terms thereof, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereinafter
in effect, affecting the enforcement of creditors' rights and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
"Government Obligor" shall mean any Federal Government Obligor or any
------------------
State/Local Government Obligor.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Indebtedness" shall mean, with respect to any Person at any date,
------------
(a) all indebtedness of such Person for borrowed money, (b) any obligation owed
for the deferred purchase price of property or services which purchase price is
evidenced by a note or similar written instrument, (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money, (d) that portion of obligations of such Person
under capital leases which is properly classified as a liability on a balance
sheet in conformity with GAAP and (e) all liabilities of the type described in
the foregoing clauses (a) through (d) secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof.
"Indemnified Person" shall have the meaning specified in
------------------
Section 10.19.
"Independent Public Accountants" shall mean, with respect to any
------------------------------
Person, any independent certified public accountants of nationally recognized
standing which
<PAGE>
22
constitute one of the accounting firms commonly referred to as the "big six"
accounting firms (or any successor thereto); provided that such firm is
--------
independent with respect to such Person within the meaning of Rule 2-01(b) of
Regulation S-X under the Securities Act.
"Ineligibility Determination Date" shall have the meaning specified in
--------------------------------
subsection 2.05(a).
"Ineligible Receivable" shall have the meaning specified in
---------------------
subsection 2.05(a).
"Initial Closing Date" shall mean August 5, 1996.
--------------------
"Initial Invested Amount" shall have, with respect to any Series, the
-----------------------
meaning specified in the related Supplement for such Series.
"Insolvency Event" shall mean the occurrence of any one or more of the
----------------
Early Amortization Events specified in paragraph (a) of Section 7.01.
"Internal Operating Procedures Memorandum" shall mean the internal
----------------------------------------
operating procedures memorandum prepared by the Trustee as set forth in
Exhibit D hereto.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
---------------------
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time.
"Invested Amount" shall have, with respect to any Series, the meaning
---------------
specified in the related Supplement for such Series.
"Invested Percentage" shall have, with respect to any Series, the
-------------------
meaning specified in the related Supplement for such Series.
<PAGE>
23
"Investment" shall mean the making by the Company or any Seller of any
----------
advance, loan, extension of credit or capital contribution to, the purchase of
any stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or the making by the Company or any Seller of
any other investment in, any Person.
"Investment Earnings" shall have the meaning specified in
-------------------
subsection 3.01(c).
"Investor Certificateholder" shall mean the holder of record of, or
--------------------------
the bearer of, an Investor Certificate.
"Investor Certificates" shall mean the Certificates executed by the
---------------------
Company and authenticated by or on behalf of the Trustee, substantially in the
form attached to the applicable Supplement, but shall not include the
Exchangeable Company Certificate, any Subordinated Company Certificate or any
other Certificate held by the Company.
"Issuance Date" shall mean, with respect to any Series, the date of
-------------
issuance of such Series, or the date of any increase to the Invested Amount of
such Series, as specified in the related Supplement.
"LHL Guarantee" shall mean the Guarantee dated as of August 5, 1996,
-------------
executed by Lifestyle Holdings Ltd. guaranteeing the performance of the
obligations of the Master Servicer under the Pooling and Servicing Agreements.
"LHL Demand Note" shall mean the demand note dated August 5, 1996,
---------------
issued by Lifestyle Holdings Ltd. to the Company in the amount of $5 million
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
----
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement
<PAGE>
24
relating to such asset and (c) in the case of securities, any purchase option,
call or other similar right of a third party with respect to such securities;
provided, however, that if a lien is imposed under Section 412(n) of the
- -------- -------
Internal Revenue Code or Section 302(f) of ERISA for a failure to make a
required installment or other payment to a plan to which Section 412(n) of the
Internal Revenue Code or Section 302(f) of ERISA applies, then such lien shall
not be treated as a "Lien" from and after the time any Person who is obligated
to make such payment pays to such plan the amount of such lien determined under
Section 412(n)(3) of the Internal Revenue Code or Section 302(f)(3) of ERISA, as
the case may be, and provides to the Trustee and any Agent a written statement
of the amount of such lien together with written evidence of payment of such
amount, or such lien expires pursuant to Section 412(n)(4)(B) of the Internal
Revenue Code or Section 302(f)(4)(B) of ERISA.
"Lien Creation" shall mean the creation, incurrence, assumption or
-------------
suffering to exist by the Company or any Seller of any Lien upon the
Receivables, Related Property or the proceeds thereof.
"Lockbox" shall mean the post office boxes and accounts listed on
-------
Schedule 2 to the Receivables Sale Agreement to which the Obligors are
instructed to remit payments on the Receivables and/or such other post office
boxes as may be established pursuant to Section 2.03 of the Servicing Agreement.
"Lockbox Account" shall mean the intervening account or accounts used
---------------
by a Lockbox Processor for deposit of funds received in a Lockbox prior to their
transfer to the Collection Account; provided, however, that until a lockbox
-------- -------
account is put into use for Collections received in respect of the Receivables
sold by Robert Allen Fabrics, Inc., the term "Lockbox Account" shall include the
account specified in the BayBank Depository Agreement used in lieu of an actual
lockbox account until such time as an actual lockbox account can be put into use
for such Collections.
<PAGE>
25
"Lockbox Agreement" shall mean a lockbox agreement substantially in
-----------------
the form set forth as Exhibit B-1, with such differences from such form as are
permitted upon satisfying the Rating Agency Condition and obtaining the consent
of each Agent as to such differences, or any of the lockbox agreements attached
as Exhibits B-2 through B-15.
"Lockbox Processor" shall mean the depositary institution or
-----------------
processing company (which may be the Trustee) that processes payments on the
Receivables sent by the Obligors thereon forwarded to a Lockbox; provided,
--------
however, in the case of the BayBank Depository Agreement, the term "Lockbox
- -------
Processor" shall include BayBank.
"Margin Stock" shall have the meaning given to such term in
------------
Regulation U of the Board.
"Master Servicer" shall mean LFI Servicing Corporation, a Delaware
---------------
corporation, and any successor Master Servicer under the Transaction Documents.
"Material Adverse Effect" shall mean a material impairment of the
-----------------------
collectibility of the Receivables or a material impairment of the interests,
rights or remedies of the Trustee or the Investor Certificateholders of any
Outstanding Series under or with respect to the Transaction Documents. Without
limiting the generality of the preceding sentence, any effect, result or
circumstance that adversely affects the collectibility of Receivables accounting
for 5% or more of the aggregate Principal Amount of all Receivables in the Trust
shall be deemed to be a Material Adverse Effect.
"Monthly Servicing Fee" shall have the meaning specified in
---------------------
subsection 2.05(a) of the Servicing Agreement.
"Monthly Settlement Statement" shall have the meaning specified in
----------------------------
Section 4.02 of the Servicing Agreement.
<PAGE>
26
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
--------
"Obligor" shall mean, with respect to any Receivable, the party
-------
obligated to make payments with respect to such Receivable, including any
guarantor thereof.
"Officer's Certificate" shall mean, with respect to any Person, unless
---------------------
otherwise specified in this Agreement, a certificate signed by the Chairman of
the Board, any Vice Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President (however denominated)
or the Treasurer of such Person (or an officer holding an office with equivalent
or more senior responsibilities).
"Opinion of Counsel" shall mean a written opinion or opinions of one
------------------
or more counsel (who may be internal counsel) to the Company, the Master
Servicer or any Servicer, designated by the Company, the Master Servicer or such
Servicer, as the case may be, that is reasonably acceptable to the Trustee.
"Optional Repurchase Percentage" shall have, with respect to any
------------------------------
Series, the meaning specified in the related supplement for such Series.
"Optional Termination Notice" shall have, with respect to any Series
---------------------------
the meaning specified in the related supplement for such Series.
"Outstanding Series" shall mean, at any time, a Series issued pursuant
------------------
to an effective Supplement for which the Series Termination Date for such Series
has not occurred.
"Overconcentration Amount" shall mean, at any date with respect to an
------------------------
Eligible Obligor, the Principal Amount of otherwise Eligible Receivables due
from such Obligor which, expressed as a percentage of the Principal Amount of
all
<PAGE>
27
Eligible Receivables in the Trust at such date, exceeds the percentage set forth
below for the applicable ratings category of that Obligor (or such larger
percentage upon satisfaction of the Rating Agency Condition);
Minimum Rating
--------------
S&P D&P Percentage
--- --- ----------
A-1+ or AA- D-1 or AA- 15%
A-1 or A+ D-1 or A+ 15%
A-2 or BBB+ D-2 or BBB+ 7.5%
A-3 or BBB- D-3 or BBB- 5%
Less than A-3 or Less than D-3 or
BBB-/Not rated BBB-/Not rated 3%
; provided, however, (i) that all Eligible Obligors that are Affiliates of each
-------- -------
other shall be deemed to be a single Eligible Obligor to the extent the Master
Servicer or any Servicer has actual knowledge of the affiliation and in that
case, the applicable debt rating for such group of Obligors shall be the debt
rating of the ultimate parent of the group, (ii) with respect to all Eligible
Obligors that are Federal Government Obligors, such Obligors shall,
notwithstanding the foregoing, be deemed to be a single Eligible Obligor for
which the applicable percentage set forth under the column headed "Percentage"
above shall be 3% and (iii) with respect to all Eligible Obligors that are
State/Local Government Obligors shall, notwithstanding the foregoing, be deemed
to be a single Eligible Obligor for which the applicable percentage set forth
under the column headed "Percentage" above shall be 3%; provided further that
----------------
the debt ratings set forth under the column headed "D&P" above and references in
the immediately succeeding paragraph to D&P shall apply only if D&P is a Rating
Agency under any Supplement for an Outstanding Series.
<PAGE>
28
If the ratings given by S&P and D&P to the debt of any Obligor (or the
ultimate parent of the affiliated group of which such Obligor is a member, as
the case may be) would result in different applicable percentages under the
table above, the applicable percentage shall be the percentage associated with
the lower rating, as between S&P's rating and D&P's rating, of such obligor's
(or such ultimate parent's, as the case may be) short-term senior debt; provided
--------
that: (i) if such short-term debt is rated only by S&P, the applicable
percentage will be the percentage associated with the rating issued by S&P and
(ii) if S&P issues no short-term rating with respect to such Obligor (or such
ultimate parent, as the case may be), then the percentage applicable to such
Obligor (or such ultimate parent, as the case may be) shall be the percentage
associated with the categories "Less than A-3 or BBB-/Not rated" and "Less than
D-3 or BBB-/Not rated." The ratings specified in the table are minimums for
each percentage category, so that a rating not shown in the table falls in the
category associated with the highest rating shown in the table that is lower
than that rating.
"Paying Agent" shall mean any paying agent and co-paying agent
------------
appointed pursuant to Section 5.06 and, unless otherwise specified in the
related Supplement of any Series and with respect to such Series, shall
initially be The Chase Manhattan Bank.
"Permitted Liens" shall mean, at any time, for any Person:
---------------
(i) Liens created pursuant to this Agreement or the Receivables Sale
Agreement and judgment Liens against any Seller that are in existence on
the Initial Closing Date in an aggregate amount for all Sellers not
exceeding $25,000; provided that such judgment Liens shall cease to be
--------
"Permitted Liens" on the 30th day following the Initial Closing Date;
<PAGE>
29
(ii) Liens for taxes, assessments or other governmental charges or
levies not yet due and with respect to which reserves in conformity with
GAAP have been provided on the books of such Person; and
(iii) Liens on a Receivable arising as a result of offsetting specific
reserves and rights of set-off, counterclaim or other defenses with respect
to such Receivable.
"Person" shall mean any individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Policies" shall mean, with respect to each Servicer, credit and
--------
collection policies of such Servicer, copies of which have been previously
delivered to the Trustee, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the Transaction Documents.
"Pooling and Servicing Agreements" shall have the meaning specified in
--------------------------------
subsection 10.01(a).
"Potential Early Amortization Event" shall mean an event which, with
----------------------------------
the giving of notice and/or the lapse of time, would constitute an Early
Amortization Event hereunder or under any Supplement.
"Potential Servicer Default" shall mean an event which, with the
--------------------------
giving of notice and/or the lapse of time, would constitute a Servicer Default
hereunder or under any Supplement.
"Prepayment Request" shall have, with respect to any Series, the
------------------
meaning specified in the related Supplement.
"Principal Amount" shall mean, with respect to any Receivable, the
----------------
amount due thereunder.
<PAGE>
30
"Principal Terms" shall have the meaning, with respect to any Series
---------------
issued pursuant to an Exchange, specified in subsection 5.10(c).
"Publication Date" shall have the meaning specified in
----------------
subsection 7.02(a).
"Qualifying DIP Obligor" shall mean, as of any date of determination,
----------------------
each Receivable owing by an Obligor (i) that is a "debtor in possession", for
which no trustee or examiner has been appointed and no application is pending
for the appointment of a trustee or examiner, in a case under Chapter 11 of the
Bankruptcy Code in which no motion has been made for an order liquidating all or
any substantial portion of such debtor's assets and no motion has been made for
the conversion of such case to a case under Chapter 7 of the Bankruptcy Code,
(ii) in the case of any proposed Qualifying DIP Obligor whose Receivables would,
if included in the Trust Assets, account for 1% or more of the aggregate
Principal Amount of all Receivables included in the Trust, each Agent has been
given notice at least five Business Days prior to any transfer of Receivables
owing by such Obligor to the Trust of the proposed inclusion of such Obligor as
an Eligible Obligor on the basis of being a Qualifying DIP Obligor and (iii) as
to which no Agent has, in the exercise of its reasonable discretion, given
notice to the Company and the Master Servicer that such Obligor shall not be
included as an Eligible Obligor.
"Rating Agency" shall mean, with respect to each Outstanding Series,
-------------
any rating agency or agencies designated as such in the related Supplement;
provided that (i) in the event that no Outstanding Series has been rated, then
- --------
for purposes of the definitions of "Eligible Institution" and "Eligible
Investments", "Rating Agency" shall mean S&P; (ii) except as provided in (i), in
the event no Outstanding Series has been rated, any reference to "Rating Agency"
or the "Rating Agencies" shall be deemed to have been deleted herefrom, except
that references to the term "Rating Agency
<PAGE>
31
Condition" shall not be deemed deleted, but shall be modified as set forth under
the definition of such term.
"Rating Agency Condition" shall mean, with respect to any action, that
-----------------------
each Rating Agency shall have notified the Company, the Master Servicer, any
Agent and the Trustee in writing that such action will not result in a reduction
or withdrawal of the rating of any Outstanding Series or any Class of any such
Outstanding Series with respect to which it is a Rating Agency; provided that in
--------
the event that no Outstanding Series has been rated, any reference to a "Rating
Agency Condition" shall be deemed to be a reference to the prior written consent
of the Agent with respect to such action.
"Receivable" shall mean the indebtedness and payment obligations of
----------
any Person to any Seller (including, without limitation, obligations evidenced
by an account, note, instrument, contract, security agreement, chattel paper,
general intangible or other evidence of indebtedness or security) arising from a
sale of merchandise or services by such Seller, including, without limitation,
any right to payment for goods sold or for services rendered, and including the
right to payment of any interest, sales taxes, finance charges, returned check
or late charges and other obligations of such Person with respect thereto, but
not including any Excluded Receivable.
"Receivables Purchase Date" shall mean, with respect to any
-------------------------
Receivable, the Business Day on which the Company purchases such Receivable from
a Seller and transfers such Receivable to the Trust.
"Receivables Sale Agreement" shall mean the Receivables Sale
--------------------------
Agreement, dated as of the date hereof, among the Sellers, the Servicers and the
Company, as buyer, as amended, supplemented or otherwise modified from time to
time in accordance with the Transaction Documents.
<PAGE>
32
"Record Date", shall mean, with respect to any Series, the date
-----------
specified as such in the applicable Supplement.
"Recoveries" shall mean all amounts collected (net of out-of-pocket
----------
costs of collection) in respect of Charged-Off Receivables.
"Regulation G" shall mean Regulation G of the Board as from time to
------------
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
------------
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
------------
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Property" shall mean, with respect to each Receivable:
----------------
(a) all of a Seller's interest in the goods (including returned
goods), if any, relating to the sale which gave rise to such Receivable;
(b) all other security interests or Liens and property subject thereto
from time to time purporting to secure payment of such Receivable, whether
pursuant to the contract related to such Receivable or otherwise, together
with all financing statements signed by an Obligor describing any
collateral securing such Receivable; and
(c) all guarantees, insurance, letters of credit (including any
Eligible Letter of Credit) and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such
Receivable whether pursuant to the contract related to such
<PAGE>
33
Receivable or otherwise;
including in the case of clauses (b) and (c), without limitation, pursuant to
any obligations evidenced by an account, note, instrument, contract, security
agreement, chattel paper, general intangible or other evidence of indebtedness
or security.
"Reported Day" shall have the meaning specified in subsection 4.01(a)
------------
of the Servicing Agreement.
"Repurchase Terms" shall mean, with respect to any Series, the terms
----------------
and conditions under which the Company may repurchase such Series pursuant to
Section 9.02, as modified by the related Supplement.
"Requirement of Law" for any Person shall mean the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer" shall mean (i) when used with respect to the
-------------------
Trustee, any officer within the Corporate Trust Office of the Trustee including
any Vice President, any Assistant Vice President, Trust Officer or Assistant
Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
(ii) when used with respect to any other Person, the Chairman of the Board, any
Vice Chairman of the Board, the Chief Executive Officer, the President, the
Chief Financial Officer, any Vice President or the Treasurer of such Person.
"Restricted Payments" shall have the meaning assigned in subsection
-------------------
2.08(o).
<PAGE>
34
"Revolving Period" shall have, with respect to any Outstanding Series,
----------------
the definition assigned to such term in the related Supplement.
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
---
McGraw-Hill Companies, Inc. or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933.
--------------
"Seller" shall mean each Seller listed as a party to, on Schedule 1
------
of, the Receivables Sale Agreement.
"Seller Material Adverse Effect" shall mean, with respect to any
------------------------------
Seller, (i) any material impairment of such Seller's ability to perform any of
its material obligations or to comply with or conduct its business in accordance
with any of its material representations, warranties, covenants or agreements
under any Transaction Document or (ii) any material impairment of the interests,
rights or remedies of the Trustee or the Investor Certificateholders against or
with respect to such Seller under any Transaction Document, including any
interests, rights or remedies of the Trustee or the Investor Certificateholders
as an assignee or assignees of the Company under, or a third-party beneficiary
or third-party beneficiaries of, the Receivables Sale Agreement.
"Seller Note" shall have the meaning specified in Section 8.01 of the
-----------
Receivables Sale Agreement.
"Series" shall mean any series of Investor Certificates and any
------
related Subordinated Company Certificate, the terms of which are set forth in a
Supplement.
"Series Account" shall mean any deposit, trust, escrow, reserve or
--------------
similar account maintained for the
<PAGE>
35
benefit of the Investor Certificateholders of any Series or Class, as specified
in any Supplement.
"Series Collection Subaccount" shall have the meaning specified in
----------------------------
subsection 3.01(a).
"Series Collection Sub-subaccount" shall have the meaning specified in
--------------------------------
subsection 3.01(a).
"Series Non-Principal Collection Sub-subaccount" shall have the
----------------------------------------------
meaning specified in subsection 3.01(a).
"Series Principal Collection Sub-subaccount" shall have the meaning
------------------------------------------
specified in subsection 3.01(a).
"Series Termination Date" shall have, with respect to any Series, the
-----------------------
meaning specified in the related Supplement for such Series.
"Service Transfer" shall have the meaning specified in Section 6.01 of
----------------
the Servicing Agreement.
"Servicer" shall initially mean each Servicer identified in Schedule 1
--------
to the Receivables Sale Agreement and, after any Service Transfer, the Successor
Servicer.
"Servicer Default" shall have, with respect to any Series, the meaning
----------------
specified in Section 6.01 of the Servicing Agreement and, if applicable, as
supplemented by the related Supplement for such Series.
"Servicer Material Adverse Effect" shall mean, with respect to the
--------------------------------
Master Servicer or any Servicer, (i) any material impairment of such Person's
ability to perform any of its material obligations or to comply with or conduct
its business in accordance with any of its material representations, warranties,
covenants or agreements under any Transaction Document or (ii) any material
impairment of the interests, rights or remedies of the Trustee or the
<PAGE>
36
Investor Certificateholders against or with respect to such Person under any
Transaction Document.
"Servicer Site Review" shall mean a review performed by the Trustee of
--------------------
the servicing operations of the Servicer's central site locations, as described
in Appendix A.
"Servicing Agreement" shall have the meaning specified in the recitals
-------------------
hereto.
"Servicing Fee" shall have the meaning specified in subsection 2.05(a)
-------------
of the Servicing Agreement.
"Servicing Fee Percentage" shall mean 1% per annum.
------------------------
"Settlement Period" shall mean, initially, the period commencing
-----------------
August 5, 1996, and ending at the end of the August 1996 fiscal month of the
Servicers and each fiscal month of the Servicers thereafter.
"Settlement Report Date" shall mean, except as otherwise set forth in
----------------------
the applicable Supplement, the 10th day of each calendar month or, if such 10th
day is not a Business Day, the next succeeding Business Day.
"Special Allocation Settlement Report Date" shall have the meaning
-----------------------------------------
specified in subsection 3.01(e).
"Specified Bankruptcy Opinion Provisions" shall mean the factual
---------------------------------------
assumptions (including those contained in the factual certificate referred to
therein) and the actions to be taken by the Sellers or the Company in each case
in the legal opinion of Morgan, Lewis & Bockius relating to certain bankruptcy
matters delivered on the Initial Closing Date.
"Standby Liquidation System" shall mean a system by which the Trustee
--------------------------
will receive and store electronic
<PAGE>
37
information regarding Receivables from the Servicers which may be utilized in
the event of a liquidation of the Receivables to be carried out by the Trustee,
as described in Appendix B.
"State/Local Government Obligor" shall mean any state or local
------------------------------
government or any subdivision thereof or any agency, department, or
instrumentality thereof.
"Subordinated Certificate Amount" shall have, with respect to any
-------------------------------
Outstanding Series, the meaning specified in the related Supplement for such
Outstanding Series.
"Subordinated Company Certificate" shall mean any Certificate issued
--------------------------------
to the Company pursuant to the Supplement for any Series which represents an
interest in the Trust Assets which is subordinated to the Investor Certificates
of such Series.
"Subsidiary" shall mean, as to any Person, a corporation, partnership
----------
or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.
"Successor Servicer" shall have the meaning specified in Section 6.02
------------------
of the Servicing Agreement.
"Supplement" shall mean, with respect to any Series, a supplement to
----------
this Agreement complying with the terms of Section 5.10(c), executed in
conjunction with the issuance of any Series.
<PAGE>
38
"Target Receivables Amount" shall have, with respect to any
-------------------------
Outstanding Series, the meaning specified in the related Supplement for such
Outstanding Series.
"Tax Opinion" shall mean, unless otherwise specified in the Supplement
-----------
for any Series with respect to such Series or any Class within such Series, with
respect to any action, an opinion of counsel (a) to the effect that, for Federal
income tax purposes, (i) such action will not adversely affect the
characterization as debt of any Investor Certificates of any Outstanding Series
or Class not retained by the Company, (ii) in the case of Section 5.10, the
Investor Certificates of the new Series that are not retained by the Company
will be characterized as debt and (iii) following such action, the Trust will
not be an association (or publicly traded partnership) taxable as a corporation
and (b) with respect to state taxation issues regarding the taxation of the
Trust, in substantially the form delivered at the Initial Closing Date.
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement, dated as
---------------------
of the date hereof, among Furnishings International Inc., Lifestyle Furnishings
International Ltd., the Company and Simmons Upholstered Furniture Corporation.
"Termination Notice" shall have the meaning specified in Section 6.01
------------------
of the Servicing Agreement.
"Transactions" shall have the meaning specified in subsection 2.03(b).
------------
"Transaction Documents" shall mean the collective reference to this
---------------------
Agreement, the Servicing Agreement, each Supplement with respect to any
outstanding Series, the Receivables Sale Agreement, the Lockbox Agreements, the
Certificates, the Tax Sharing Agreement and any other documents delivered
pursuant to or in connection therewith.
<PAGE>
39
"Transfer Agent and Registrar" shall have the meaning specified in
----------------------------
Section 5.03 and shall initially be the Trustee.
"Transfer Deposit Amount" shall have the meaning specified in
-----------------------
subsection 2.05(b).
"Transferred Agreements" shall have the meaning assigned in
----------------------
subsection 2.01(a)(v).
"Trust" shall mean the LFI Receivables Master Trust created by this
-----
Agreement.
"Trust Assets" shall have the meaning specified in subsection 2.01(a).
------------
"Trust Termination Date" shall have the meaning specified in
----------------------
subsection 9.01(a).
"Trustee" shall mean the institution executing this Agreement as
-------
trustee, or its successor in interest, or any successor trustee appointed as
herein provided.
"Trustee Force Majeure Delay" shall mean any cause or event that is
---------------------------
beyond the control and not due to the gross negligence of the Trustee that
delays, prevents or prohibits the Trustee's performance of its duties under
Article III, including acts of God, floods, fire, explosions of any kind,
snowstorms and other irregular weather conditions, unanticipated employee
absenteeism, mass transportation disruptions, any of power failure, telephone
failure or computer failure in the office of the Trustee, including without
limitation, failure of the Chemlink system or failure of the Fed Wire system
operated by the Federal Reserve Bank of New York and all similar events. The
Trustee shall notify the Company as soon as reasonably possible after the
beginning of any such delay.
<PAGE>
40
"UCC" shall mean the Uniform Commercial Code, as amended from time to
---
time, as in effect in any specified jurisdiction.
"UCP 500" shall mean "The Uniform Customs and Practices for
-------
Documentary Credits", 1993 Revision, International Chamber of Commerce
Publication No. 500.
SECTION 1.02. Other Definitional Provisions. (a) All terms defined
------------------------------
in this Agreement, the Servicing Agreement or in any Supplement shall have such
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in
Section 1.01, and accounting terms partly defined in Section 1.01 to the extent
not defined, shall have the respective meanings given to them under GAAP. To
the extent that the definitions of accounting terms herein are inconsistent with
the meanings of such terms under GAAP, the definitions contained herein shall
control.
(c) The words "hereof", "herein" 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, subsection,
Schedule, Exhibit and Appendix references contained in this Agreement are
references to Sections, subsections, Schedules, Exhibits and Appendices in or to
this Agreement unless otherwise specified.
(d) The definitions contained in Section 1.01 are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
<PAGE>
41
(e) Where a definition contained in Section 1.01 specifies that such
term shall have the meaning set forth in the related Supplement, the definition
of such term set forth in the related Supplement may be preceded by a prefix
indicating the specific Series or Class to which such definition shall apply.
(f) Where reference is made in this Agreement or any related
Supplement to the principal amount of Receivables, such reference shall, unless
explicitly stated otherwise, be deemed a reference to the Principal Amount (as
such term is defined in Section 1.01) of such Receivables.
(g) Any reference herein or in any other Transaction Document to a
provision of the Bankruptcy Code, the Internal Revenue Code or ERISA shall be
deemed a reference to any successor provision thereto.
(h) Any reference herein to a Schedule, Exhibit or Appendix to this
Agreement shall be deemed to be a reference to such Schedule, Exhibit or
Appendix as it may be amended, modified or supplemented from time to time to the
extent that such Schedule, Exhibit or Appendix may be amended, modified or
supplemented (or any term or provision of any Transaction Document may be
amended that would have the effect of amending, modifying or supplementing
information contained in such Schedule, Exhibit or Appendix) in compliance with
the terms of the Transaction Documents.
(i) Any reference herein to any representation, warranty or covenant
"deemed" to have been made is intended to encompass only representations,
warranties or covenants that are expressly stated to be repeated on or as of
dates following the execution and delivery of this Agreement, and no such
reference shall be interpreted as a reference to any implicit, inferred, tacit
or otherwise unexpressed representation, warranty or covenant.
<PAGE>
42
(j) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Conveyance of Receivables;
--------------------------
Issuance of Certificates
------------------------
SECTION 2.01. Conveyance of Receivables. (a) By execution and
--------------------------
delivery of this Agreement, the Company does hereby assign, set over and
otherwise convey to the Trust for the benefit of the Certificateholders, without
recourse (except as specifically provided herein), all its present and future
right, title and interest in, to and under:
(i) all Receivables, including those existing at the close of business
on the Initial Closing Date and all Receivables thereafter arising from
time to time until but not including the Trust Termination Date;
(ii) the Related Property;
(iii) all Collections;
(iv) all rights (including rescission, replevin or reclamation)
relating to any Receivable or arising therefrom;
(v) each of the Receivables Sale Agreement and the Servicing
Agreement, including in respect of each agreement, (A) all rights of the
Company to receive monies due and to become due under or pursuant to such
agreement, whether payable as fees, expenses, costs or otherwise, (B) all
rights of the Company to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to such agreement, (C) claims of the
Company for damages arising out of or for breach of or default under such
agreement, (D) the right of the
<PAGE>
43
Company to amend, waive or terminate such agreement, to perform thereunder
and to compel performance and otherwise exercise all remedies thereunder
and (E) all other rights, remedies, powers, privileges and claims of the
Company under or in connection with such agreement (whether arising
pursuant to such agreement or otherwise available to the Company at law or
in equity), including the rights of the Company to enforce such agreement
and to give or withhold any and all consents, requests, notices,
directions, approvals, extensions or waivers under or in connection
therewith (all of the foregoing set forth in subclauses (v)(A) through
-------
(E), inclusive, the "Transferred Agreements");
(vi) the Collection Account, each Lockbox and each Lockbox Account
(collectively, the "Accounts"), including (A) all funds and other evidences
of payment held therein and all certificates and instruments, if any, from
time to time representing or evidencing any of such Accounts or any funds
and other evidences of payment held therein, (B) all investments of such
funds held in such Accounts and all certificates and instruments from time
to time representing or evidencing such investments, (C) all notes,
certificates of deposit and other instruments from time to time hereafter
delivered or transferred to, or otherwise possessed by, the Trustee for and
on behalf of the Company in substitution for any of the then existing
Accounts and (D) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any and all of the then existing Accounts;
and
(vii) all proceeds of or payments in respect of any and all of the
foregoing clauses (i) through (vi) (including proceeds that constitute
property of the types described in clause (vi) above and including
Collections).
<PAGE>
44
Such property described in the foregoing clauses (i) through (vii), together
with all investments and all monies on deposit in any other bank account or
accounts maintained for the benefit of any Certificateholders for payment to
Certificateholders shall constitute the assets of the Trust (the "Trust
Assets").
Subject to Section 5.09, although it is the intent of the parties to
this Agreement that the conveyance of the Company's right, title and interest
in, to and under the Receivables and the other Trust Assets pursuant to this
Agreement shall constitute a purchase and sale and not a loan, in the event that
such conveyance is deemed to be a loan, it is the intent of the parties to this
Agreement that the Company hereby grants to the Trustee for the benefit of the
Certificateholders a perfected first priority security interest in all of the
Company's present and future right, title and interest in, to and under the
Receivables and the other Trust Assets, and that this Agreement shall constitute
a security agreement under applicable law in favor of the Trustee, for the
benefit of the Certificateholders.
(b) The assignment, setover and conveyance to the Trust pursuant to
Section 2.01(a) shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such assignment, setover and conveyance shall be
construed accordingly. In connection with the foregoing assignment, the Company
and the Master Servicer agree to deliver to the Trustee each Trust Asset
evidencing a Receivable to be included as an Eligible Receivable or any Related
Property with respect thereto (including any original document or instrument
necessary to effect or to perfect such assignment) in which the transfer of an
interest is being perfected under the UCC or otherwise by possession and not by
filing a financing statement or similar document (although a precautionary
filing of a financing statement or similar document is expected to be made in
respect of each such Trust Asset). Without limiting the generality of the
foregoing sentence, the Company and the Master Servicer agree to deliver or
cause to be
<PAGE>
45
delivered to the Trustee an original of (i) any promissory note or other
instrument evidencing a Receivable sold to the Trust, (ii) any chattel paper
evidencing a Receivable sold to the Trust and (iii) each Eligible Letter of
Credit related to any Person that is to be considered an Eligible Obligor on the
basis of paragraph (a) of the definition of "Eligible Obligor".
Notwithstanding the assignment of the Transferred Agreements set forth
in Section 2.01(a), the Company does not hereby assign or delegate any of its
duties or obligations under the Receivables Sale Agreement to the Trust or the
Trustee and neither the Trust nor the Trustee accepts such duties or
obligations, and the Company shall continue to have the right and the obligation
to purchase Receivables from the Sellers thereunder from time to time and to
consummate the other transactions and take any actions contemplated thereby.
The foregoing assignment, set-over and conveyance does not constitute and is not
intended to result in a creation or an assumption by the Trust, the Trustee, any
Investor Certificateholder or the Company, in its capacity as a
Certificateholder, of any obligation of the Master Servicer, the Servicers, the
Company, the Sellers or any other Person in connection with the Receivables or
under any agreement or instrument relating thereto, including, without
limitation, any obligation to any Obligor.
In connection with such assignment, the Company agrees to record and
file, or cause to be recorded or filed, at its own expense, any financing
statements (and continuation statements with respect to such financing
statements when applicable) or, where applicable, registrations in the
appropriate records, (i) with respect to the Receivables now existing and
hereafter created and (ii) with respect to any other Trust Assets for which a
security interest may be perfected under the relevant UCC, legislation or
similar statute by such filing or registration, as the case may be, in each case
meeting the requirements of applicable law in such manner and in such
<PAGE>
46
jurisdictions as are necessary to perfect and maintain perfection of the
assignment of the Receivables and such other Trust Assets (excluding returned
merchandise) to the Trust, and to deliver a file-stamped copy or certified
statement of such financing statement or registration or other evidence of such
filing or registration to the Trustee on or prior to the date of issuance of any
Certificates. The Trustee shall be under no obligation whatsoever to file such
financing statement, or a continuation statement to such financing statement, or
to make any other filing or other registration under the UCC, other relevant
legislation or similar statute in connection with such transfer. The Trustee
shall be entitled to conclusively rely on the filings or registrations made by
or on behalf of the Company without any independent investigation and the
Company's obligation to make such filings as evidence that such filings have
been made.
In connection with such assignment, the Company further agrees, at its
own expense, on or prior to the Initial Closing Date (a) to indicate, or to
cause to be indicated, in its computer files containing its master database of
Receivables and to cause each Seller to indicate in its records containing its
master database of Receivables that Receivables have been conveyed to the
Company or the Trust, as the case may be, pursuant to the Receivables Sale
Agreement or this Agreement, respectively, for the benefit of the
Certificateholders and (b) to deliver or transmit or cause to be delivered or
transmitted to the Trustee computer tapes, diskettes or data transmission
containing a true and complete list of all Receivables transferred to the Trust
specifying for each such Receivable, as of the Cut-Off Date, at least (i) the
name of the Obligor and (ii) the aggregate Principal Amount of the Receivables
owing by such Obligor. Such tapes, diskettes or data transmission shall
constitute Schedule 1 to this Agreement and are hereby incorporated into and
made a part of this Agreement whether they are delivered together with or
separate from this Agreement.
<PAGE>
47
SECTION 2.02. Acceptance by Trustee. (a) The Trustee hereby
----------------------
acknowledges its acceptance on behalf of the Trust of all right, title and
interest in, to and under the property, now existing and hereafter created,
assigned to the Trust pursuant to Section 2.01 and declares that it shall
maintain such right, title and interest, upon the trust herein set forth, for
the benefit of all Certificateholders. The Trustee further acknowledges that,
prior to or simultaneous with the execution and delivery of this Agreement, the
Company delivered to the Trustee the computer tapes containing a list of the
Receivables described in the last paragraph of Section 2.01. The Trustee shall
maintain a copy of Schedule 1, as delivered from time to time, at the Corporate
Trust Office.
(b) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
SECTION 2.03. Representations and Warranties of the Company Relating
------------------------------------------------------
to the Company. The Company hereby represents and warrants to the Trustee and
- ---------------
the Trust, for the benefit of the holders of Certificates of each Outstanding
Series, as of the Issuance Date of such Series, that:
(a) Organization; Powers. The Company (i) is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority to
own its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is qualified to do business in, and is in good
standing in, every jurisdiction where the nature of its business so requires,
except where the failure so to qualify could not reasonably be expected to
result in a Company Material Adverse Effect and (iv) has the corporate power and
authority to execute, deliver and perform its obligations under each of the
Transaction Documents and each other agreement or instrument contemplated hereby
to which it is or will be a party.
<PAGE>
48
(b) Authorization. The execution, delivery and performance by the
--------------
Company of each of the Transaction Documents and the other transactions contem-
plated hereby (collectively, the "Transactions") (i) have been duly authorized
by all requisite corporate and, if required, stockholder action and (ii) will
not (A) violate (1) any Requirement of Law or (2) any provision of any
Transaction Document or any other material Contractual Obligation to which the
Company is a party or by which it or any of its property is or may be bound
(B) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under, or give rise to any right to
accelerate or to require the prepayment, repurchase or redemption of any
obligation under any Transaction Document or any other material Contractual
Obligation or (C) result in the creation or imposition of any Lien upon or with
respect to any property or assets now owned or hereafter acquired by the Company
(other than any Lien created hereunder or contemplated or permitted hereby).
(c) Enforceability. This Agreement has been duly executed and
---------------
delivered by the Company and constitutes, and each other Transaction Document to
which the Company is a party when executed and delivered by the Company will
constitute, a legal, valid and binding obligation of the Company enforceable
against it in accordance with its respective terms, subject (a) as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally, from time to time in effect and (b) to general principles of equity
(whether enforcement is sought by a proceeding in equity or at law).
(d) Governmental Approvals. No action, consent or approval of,
-----------------------
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for (i) the
filing of appropriate Uniform Commercial Code financing statements and (ii) such
as have been made or obtained and are in full force and effect; provided,
--------
however, that with
- -------
<PAGE>
49
respect to Receivables owing by Government Obligors, any failure by the Company
to comply with the United States Federal Nonassignment Act (Public Contracts),
41 U.S.C. Sec. 15, or Assignment of Claims Act, 31 U.S.C. Sec. 3727, or with any
similar legislation of any State shall not constitute a breach of this
subsection 2.03(d).
(e) Litigation; Compliance with Laws. (i) There are not any
---------------------------------
actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of the Company,
threatened against or affecting the Company or any business, property or rights
of the Company, an adverse decision in which could reasonably be expected to
have a Company Material Adverse Effect.
(ii) The Company is not in default with respect to any judgment, writ,
injunction, decree or order of any Governmental Authority.
(f) Agreements. (i) The Company has no Contractual Obligations
-----------
other than (A) the Transaction Documents to which it is a party (including the
Seller Note) and (B) any other agreements or instruments that the Company is not
prohibited from entering into by subsection 2.08(g) and that, in the aggregate,
neither contain payment obligations or other liabilities on the part of the
Company in excess of $50,000 nor would upon default result in a Company Material
Adverse Effect. The Company is not subject to any corporate restriction that
could reasonably be expected to have a Company Material Adverse Effect.
(ii) The Company is not in default in any material respect under any
provision of any Transaction Document or any other material Contractual
Obligation to which it is a party or by which it or any of its properties or
assets are or may be bound.
(g) Federal Reserve Regulations. (i) The Company is not engaged
----------------------------
principally, or as one of its
<PAGE>
50
important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.
(ii) No part of the proceeds from the issuance of any Investor
Certificates will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the Regulations of
the Board, including Regulation G, U or X.
(h) Investment Company Act. Neither the Company nor the Trust is an
-----------------------
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940.
(i) No Early Amortization Event. No Early Amortization Event or
----------------------------
Potential Early Amortization Event has occurred and is continuing.
(j) Tax Returns. The Company has filed or caused to be filed all
------------
Federal, state or other material tax returns required to have been filed by it
and has paid or caused to be paid all taxes due and payable by it and all
assessments received by it to the extent that such failure to file or nonpayment
could reasonably be expected to have a Material Adverse Effect.
(k) Location of Records; Chief Executive Office. The offices at
--------------------------------------------
which the Company keeps its records concerning the Receivables either (x) are
located at the addresses set forth for the Sellers on Schedule 4 of the
Receivables Sale Agreement or (y) the Company has notified the Trustee of the
location thereof in accordance with the provisions of subsection 2.08(j) of this
Agreement. The chief executive office of the Company is located at the address
set forth on Schedule 3 and is the place where the Company is "located" for the
purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New
York. As of the Initial Closing Date, the state and county where the chief
executive office of the Company is "located" for the purposes of
<PAGE>
51
Section 9-103(3)(d) of the UCC as in effect in the State of New York has not
changed in the past four months.
(l) Solvency. No Insolvency Event with respect to the Company has
---------
occurred and the transfer of the Receivables by the Company to the Trust has not
been made in contemplation of the occurrence thereof. Both prior to and after
giving effect to the transactions occurring on each Issuance Date, (i) the fair
value of the assets of the Company at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Company; (ii) the
present fair salable value of the property of the Company will be greater than
the amount that will be required to pay the probable liability of the Company on
its debts and other liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; (iii) the Company will be
able to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (iv) the Company
will not have unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted. For all purposes of clauses (i) through (iv) above, the amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
The Company does not intend to, nor does it believe that it will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it and the timing of and amounts
of cash to be payable in respect of its Indebtedness.
(m) Ownership; Subsidiaries. All of the issued and outstanding
------------------------
capital stock of the Company is owned, legally and beneficially, by Lifestyle
Holdings Ltd. The Company has no Subsidiaries.
<PAGE>
52
(n) Names. The legal name of the Company is as set forth in this
------
Agreement. The Company has no trade names, fictitious names, assumed names or
"doing business as" names.
(o) Liabilities. Other than, (i) the liabilities, commitments or
------------
obligations (whether absolute, accrued, contingent or otherwise) arising under
or in respect of the Transaction Documents and (ii) immaterial amounts due and
payable in the ordinary course of business of a special-purpose company, the
Company does not have any liabilities, commitments or obligations (whether
absolute, accrued, contingent or otherwise), whether due or to become due.
(p) Collection Procedures. The Company and the Sellers have in place
----------------------
procedures pursuant to the Transaction Documents which are either necessary or
advisable to ensure the timely collection of Receivables.
(q) Lockbox Agreements; Lockbox Accounts. Except to the extent
-------------------------------------
otherwise permitted under the terms of this Agreement, (i) each Lockbox
Agreement to which the Company is party is in full force and effect and
(ii) each Lockbox Account set forth in Schedule 3 to the Receivables Sales
Agreement is free and clear of any Lien.
The representations and warranties as of the date made set forth in
this Section 2.03 shall survive the transfer and assignment of the Trust Assets
to the Trust. Upon discovery by a Responsible Officer of the Company or a
Servicer or by a Responsible Officer of the Trustee of a breach of any of the
foregoing representations and warranties with respect to any Outstanding Series
as of the Issuance Date of such Series, the party discovering such breach shall
give prompt written notice to the other parties and to each Agent with respect
to all Outstanding Series. The Trustee's obligations in respect of any breach
are limited as provided in Section 8.02(g).
<PAGE>
53
SECTION 2.04. Representations and Warranties of the Company Relating
------------------------------------------------------
to the Receivables. The Company hereby represents and warrants to the Trustee
- -------------------
and the Trust, for the benefit of the holders of Certificates of each Out-
standing Series, with respect to each Receivable transferred to the Trust as of
the related Receivables Purchase Date, unless, in either case, otherwise stated
in the applicable Supplement or unless such representation or warranty expressly
relates only to a prior date, that:
(a) Receivables Description. As of the Cut-Off Date, Schedule 1 to
------------------------
this Agreement sets forth a complete listing of all Receivables, aggregated
by Obligor, transferred to the Trust as of the Cut-Off Date and the
information contained therein specified in clauses (i) and (ii) of the last
paragraph of subsection 2.01(b) with respect to each such Receivable is
true and correct (except for any errors or omissions that do not result in
material impairment of the interests, rights or remedies of the Trustee or
the Investor Certificateholders with respect to any Receivable) as of the
Cut-Off Date. As of the Cut-Off Date, the aggregate amount of Receivables
owned by the Company is accurately set forth in Schedule 1 hereto.
(b) No Liens. Each Receivable existing on the Initial Closing Date
---------
or, in the case of Receivables transferred to the Trust after the Initial
Closing Date, on the date that each such Receivable shall have been
transferred to the Trust, has been conveyed to the Trust free and clear of
any Lien, except for Permitted Liens.
(c) Eligible Receivable. To the Company's knowledge, on the Initial
--------------------
Closing Date, each Receivable transferred to the Trust that is included in
the calculation of the initial Aggregate Receivables Amount is an Eligible
Receivable and, in the case of Receivables transferred to the Trust after
the Initial Closing Date, on the date such Receivable shall have
<PAGE>
54
been transferred to the Trust, each such Receivable that is included in the
calculation of the Aggregate Receivables Amount on such date is an Eligible
Receivable.
(d) Filings. On or prior to the Initial Closing Date, all filings
--------
and other acts necessary (including but not limited to all filings and
other acts necessary or advisable under the UCC) shall have been made or
performed in order to grant the Trust on the Initial Closing Date a first
priority perfected ownership or security interest in respect of all
Receivables.
The representations and warranties as of the date made set forth in
this Section 2.04 shall survive the transfer and assignment of the Trust Assets
to the Trust. Upon discovery by a Responsible Officer of the Company, the
Master Servicer or a Servicer or a Responsible Officer of the Trustee of a
breach of any of the representations and warranties (or of any Receivable
encompassed by the representation and warranty in subsection 2.04(c) not being
an Eligible Receivable as of the relevant Receivables Purchase Date) with
respect to each Outstanding Series as of the Issuance Date of such Series, the
party discovering such breach shall give prompt written notice to the other
parties and to each Agent with respect to all Outstanding Series. The Trustee's
obligations in respect of any breach are limited as provided in Section 8.02(g).
SECTION 2.05. Adjustment Payment for Ineligible Receivables. (a)
----------------------------------------------
Adjustment Payment Obligation. If (i) any representation or warranty under
- ------------------------------
subsections 2.04(a) or (b) is not true and correct as of the date specified
therein with respect to any Receivable transferred to the Trust or any
Receivable encompassed by the representation and warranty in subsection 2.04(c)
is determined not to be an Eligible Receivable as of the relevant Receivables
Purchase Date, (ii) there is a breach of any covenant under subsection 2.08(c)
with respect to any Receivable or (iii) the Trust's interest in any Receivable
is not a first
<PAGE>
55
priority perfected ownership or security interest at any time as a result of any
action taken by, or the failure to take action by, the Company (any Receivable
as to which the conditions specified in any of clause (i), (ii) or (iii) of this
subsection 2.05(a) exists is referred to herein as an "Ineligible Receivable")
then, after the earlier (the date on which such earlier event occurs, the
"Ineligibility Determination Date"), to occur of the discovery by the Company of
any such event that continues unremedied or receipt by the Company of written
notice given by the Trustee or any Servicer of any such event that continues
unremedied, the Company shall make an adjustment payment with respect to such
Ineligible Receivable on the terms and conditions set forth in
subsection 2.05(b).
(b) Adjustment Payment Amount. Subject to the last sentence of this
--------------------------
subsection 2.05(b), the Company shall make an adjustment payment with respect to
each Ineligible Receivable as required pursuant to subsection 2.05(a) by
depositing in the Collection Account in immediately available funds on the
Business Day following the related Ineligibility Determination Date an amount
equal to the lesser of (x) the amount by which the Aggregate Target Receivables
Amount exceeds the Aggregate Receivables Amount (after giving effect to the
reduction thereof by the Principal Amount of such Ineligible Receivable) and
(y) the aggregate outstanding Principal Amount of all such Ineligible
Receivables (the "Transfer Deposit Amount"). Upon transfer or deposit of the
Transfer Deposit Amount, the Trust shall automatically and without further
action be deemed to have agreed to pay to the Company, without recourse, repre-
sentation or warranty, all Collections in respect of each such Ineligible
Receivable. Except as otherwise specified in any Supplement, the obligation of
the Company to pay such Transfer Deposit Amount with respect to any Ineligible
Receivables shall constitute the sole remedy respecting the event giving rise to
such obligation available to Investor Certificateholders (or the Trustee on
behalf of Investor Certificateholders).
<PAGE>
56
SECTION 2.06. Purchase of Investor Certificateholders' Interest in
----------------------------------------------------
Trust Portfolio. (a) In the event of any breach of any of the representations
- ----------------
and warranties set forth in Section 2.03 as of the date made, which breach has a
Material Adverse Effect, then the Trustee, at the written direction of holders
evidencing more than 50% of the Invested Amount of each affected Outstanding
Series, shall notify the Company to purchase such Outstanding Series and the
Company shall be obligated to make such purchase on the next Distribution Date
occurring at least five Business Days after receipt of such notice on the terms
and conditions set forth below; provided however, that no such purchase shall be
----------------
required to be made if, by such Distribution Date, any Material Adverse Effect
caused thereby shall have been cured.
(b) The Company shall deposit into the Collection Account for credit
to the applicable subaccount of the Collection Account on the Business Day
preceding such Distribution Date an amount equal to the purchase price (as
described in the next succeeding sentence) for the Certificateholders' Interest
for such Outstanding Series on such day. The purchase price for any such
purchase will be equal to (i) the Adjusted Invested Amount of such Outstanding
Series on the date on which the purchase is made plus (ii) an amount equal to
all interest accrued but unpaid on such Series up to the Distribution Date on
which the distribution of such deposit is scheduled to be made pursuant to
Section 9.02 plus (iii) any other amount required to be paid in connection
therewith pursuant to any Supplement. Notwithstanding anything to the contrary
in this Agreement, the entire amount of the purchase price deposited in the
Collection Account shall be distributed to the related Investor
Certificateholders on such Distribution Date pursuant to Section 9.02. If the
Trustee gives notice directing the Company to purchase the Certificates of an
Outstanding Series as provided above, except as otherwise specified in any
Supplement, the obligation of the Company to purchase such Certificates pursuant
to this Section 2.6 shall constitute the sole remedy respecting an event of the
<PAGE>
57
type specified in the first sentence of this Section 2.06 available to the
applicable Investor Certificateholders (or the Trustee on behalf of such
Investor Certificateholders).
SECTION 2.07. Affirmative Covenants of the Company. The Company
-------------------------------------
hereby covenants that, until the Trust Termination Date occurs, the Company
shall:
(a) Financial Statements, Reports, etc.
-----------------------------------
(i) Furnish to the Trustee, each Agent, and the Rating Agencies,
within 90 days after the end of each fiscal year, the balance sheet
and related statements of income, stockholders' equity and cash flows
showing the financial condition of the Company as of the close of such
fiscal year and the results of its operations during such year, all
audited by the Company's Independent Public Accountants and accom-
panied by an opinion of such accountants (which shall not be qualified
in any material respect) to the effect that such financial statements
fairly present the financial condition and results of operations of
the Company in accordance with GAAP consistently applied;
(ii) Furnish to the Trustee and each Agent, within 45 days after
the end of each of the first three fiscal quarters of each fiscal
year, the Company's balance sheet and related statements of income,
stockholders' equity and cash flows showing the financial condition of
the Company as of the close of such fiscal quarter and the results of
its operations during such fiscal quarter and the then elapsed portion
of the fiscal year (and, beginning with the second fiscal year,
showing, on a comparative basis, such information as of and for the
corresponding dates and periods of the preceding fiscal year), all
certified by a Responsible Officer of such Person as fairly repre-
senting the financial condition and results
<PAGE>
58
of operations of the Company in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments; and
(iii) Furnish to the Trustee and each Agent, promptly, from time to
time, such other information regarding the operations, business
affairs and financial condition of the Company, or compliance with the
terms of any Transaction Document, in each case as any Agent or the
Trustee may reasonably request.
(b) Annual Opinion. Deliver to the Trustee an Opinion of Counsel
---------------
substantially in the form of Exhibit C, by January 31st of each fiscal year
of the Company commencing with the fiscal year ending December 31, 1996.
(c) Payment of Obligations; Compliance with Obligations. Pay,
--------------------------------------- ------------
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever nature,
except where the amount or validity thereof is currently being contested in
good faith by appropriate proceedings and reserves in conformity with GAAP
with respect thereto have been provided on the books of the Company or
where the failure to pay, discharge or otherwise satisfy such obligation
would not have a Company Material Adverse Effect. The Company shall defend
the right, title and interest of the Certificateholders in, to and under
the Receivables and the other Trust Assets, whether now existing or
hereafter created, against all claims of third parties claiming through or
under the Company, the Sellers, the Master Servicer or the Servicers. The
Company will duly fulfill all material obligations on its part to be
fulfilled under or in connection with each Receivable and will do nothing
to impair the rights of the Certificateholders in such Receivable.
<PAGE>
59
(d) Inspection of Property; Books and Records; Discussions. Keep
------------------------------------------ ------------
proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and
permit representatives of the Trustee upon reasonable advance notice to
visit and inspect any of its properties and examine and make abstracts from
any of its books and records during normal business hours on any Business
Day and as often as may reasonably be requested, subject to the Company's
security and confidentiality requirements, and to discuss the business,
operations, properties and financial and other condition of the Company
with officers and employees of the Company and with its Independent Public
Accountants.
(e) Compliance with Law and Policies.
---------------------------------
(i) Comply with all Requirements of Law, the provisions of the
Transaction Documents and all other material Contractual Obligations
applicable to the Company; and
(ii) Cause each of the Sellers to perform its respective
obligations in accordance and compliance with the Policies, as amended
from time to time in accordance with the Transaction Documents, in
regard to the Receivables and the Related Property.
(f) Purchase of Receivables. Purchase Receivables solely in
------------------------
accordance with the Receivables Sale Agreement or this Agreement.
(g) Delivery of Collections. In the event that the Company receives
------------------------
Collections directly from Obligors, deliver (which may be by regular mail)
or deposit such Collections into a Lockbox, a Lockbox
<PAGE>
60
Account or the Collection Account within two Business Days after its
receipt thereof.
(h) Notices. Promptly (and, in any event, within two Business Days
--------
after a Responsible Officer of the Company becomes aware of such event)
give written notice to the Trustee, each Rating Agency and each Agent for
any Outstanding Series of:
(i) the occurrence of any Early Amortization Event or Potential
Early Amortization Event; and
(ii) any Lien not permitted by subsection 2.08(c) on Receivables
accounting for 5% or more of the aggregate Principal Amount of all
Receivables in the Trust.
(i) Lockboxes. (i) Maintain, and keep in full force and effect,
----------
each Lockbox Agreement to which the Company is a party, except to the
extent otherwise permitted under the terms of this Agreement and the other
Transaction Documents and (ii) take all reasonable actions necessary to
ensure that each related Lockbox Account shall be free and clear of, and
defend each such Lockbox Account against, any writ, order, stay, judgment,
warrant of attachment or execution or similar process; provided, however,
-------- -------
that, upon satisfaction of the Rating Agency Condition, the Company may
enter into any amendments or modifications of a Lockbox Agreement that the
Company reasonably deems necessary to conform such Lockbox Agreement to the
cash management system of the Company or the applicable Servicer or
Servicers.
(j) Separate Corporate Existence.
-----------------------------
(i) Maintain its own deposit account or accounts, separate from
those of any Affiliate, with commercial banking institutions and
ensure that the funds of the Company will not be diverted
<PAGE>
61
to any other Person or for other than corporate uses of the Company,
nor will such funds be commingled with the funds of any Seller or any
Subsidiary or Affiliate of any Seller;
(ii) To the extent that it shares the same officers or other
employees as any of its stockholders or Affiliates, the salaries of
and the expenses related to providing benefits to such officers and
other employees shall be fairly allocated among such entities, and
each such entity shall bear its fair share of the salary and benefit
costs associated with all such common officers and employees;
(iii) To the extent that it jointly contracts with any of its
stockholders or Affiliates to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so
doing shall be allocated fairly among such entities, and each such
entity shall bear its fair share of such costs. To the extent that
the Company contracts or does business with vendors or service
providers where the goods and services provided are partially for the
benefit of any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit the goods
or services are provided, and each such entity shall bear its fair
share of such costs. All material transactions between the Company
and any of its Affiliates, whether currently existing or hereafter
entered into, shall be only on an arm's length basis;
(iv) Maintain office space separate from the office space of
each Seller and its Affiliates (but which may be located at the same
address as one of the Sellers or one of the Sellers' Affiliates). To
the extent that the Company and
<PAGE>
62
any of its stockholders or Affiliates have offices in the same
location, there shall be a fair and appropriate allocation of overhead
costs among them, and each such entity shall bear its fair share of
such expenses;
(v) Issue separate financial statements prepared not less
frequently than quarterly and prepared in accordance with GAAP;
(vi) Conduct its affairs strictly in accordance with its
articles of incorporation and observe all necessary, appropriate and
customary corporate formalities, including, but not limited to,
holding all regular and special stockholders' and directors' meetings
appropriate to authorize all corporate action, keeping separate and
accurate minutes of its meetings, passing all resolutions or consents
necessary to authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including, but not
limited to, payroll and intercompany transaction accounts;
(vii) Not assume or guarantee any of the liabilities of any
Seller, any Servicer or any Affiliate thereof; and
(viii) Take, or refrain from taking, as the case may be, all
other actions that are necessary to be taken or not to be taken in
order to (x) ensure that the assumptions and factual recitations set
forth in the Specified Bankruptcy Opinion Provisions remain true and
correct with respect to the Company and (y) comply with those
procedures described in such provisions which are applicable to the
Company.
(k) Preservation of Corporate Existence. (i) Preserve and maintain
------------------------------------
its corporate existence,
<PAGE>
63
rights, franchises and privileges in the jurisdiction of its incorporation
and (ii) qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where such qualification is required other
than any jurisdiction where the failure so to qualify would not have a
Company Material Adverse Effect.
(1) Assessments. Promptly pay and discharge all taxes, assessments,
------------
levies and other governmental charges imposed on it except such taxes,
assessments, levies and other governmental charges that (i) are being
contested in good faith by appropriate proceedings and for which the
Company shall have set aside on its books adequate reserves and (ii) the
failure to pay, satisfy or discharge would not, in any event, result in a
Company Material Adverse Effect.
(m) Net Worth. On the Initial Closing Date have a consolidated
----------
common stockholders' equity, and thereafter maintain at all times a net
worth, of at least $20,000,000.
SECTION 2.08. Negative Covenants of the Company. The Company hereby
----------------------------------
covenants that, until the Trust Termination Date occurs, it shall not directly
or indirectly:
(a) Limitation on Liabilities. Create, incur, assume or suffer to
--------------------------
exist any Indebtedness, except Indebtedness evidenced by the Seller Note;
or incur any liability or obligation other than (i) liabilities or
obligations representing fees, expenses and indemnities payable pursuant to
and in accordance with the Transaction Documents and (ii) liabilities or
obligations for services supplied or furnished to the Company in an amount
not to exceed $50,000 at any time outstanding.
<PAGE>
64
(b) Limitation on Transfers of Receivables, etc. At any time sell,
--------------------------------------------
transfer or otherwise dispose of any of the Receivables, Related Property
or the proceeds thereof pursuant to
(i) any Lien Creation except for Permitted Liens; or
(ii) any Investment except in respect of or in connection with
(A) the purchase of Receivables and Related Property from the Seller
or its Subsidiaries, (B) an advance or loan made to a Seller or
(C) investments of proceeds as contemplated in any Pooling and
Servicing Agreement.
(d) Limitation on Guarantee Obligations. Become or remain liable,
------------------------------------
directly or contingently, in connection with any Indebtedness or other
liability of any other Person, whether by guarantee, endorsement (other
than endorsements of negotiable instruments for deposit or collection in
the ordinary course of business), agreement to purchase or repurchase,
agreement to supply or advance funds, or otherwise other than under or in
connection with any Pooling and Servicing Agreement.
(e) Limitation on Fundamental Changes. Enter into any merger,
----------------------------------
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or make any material change in its
present method of conducting business, or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets other than the assignments and transfers contemplated
hereby.
(f) Business of the Company. Engage at any time in any business or
------------------------
business activity other than the acquisition of Receivables pursuant to the
Receivables
<PAGE>
65
Sale Agreement, the assignments and transfers hereunder, the other
transactions contemplated by the Transaction Documents or any Pooling and
Servicing Agreement and the holding of the LHL Demand Note, and any
activity incidental to the foregoing and necessary or convenient to
accomplish the foregoing, or enter into or be a party to any agreement or
instrument other than in connection with the foregoing.
(g) Agreements. (i) Become a party to any indenture, mortgage,
-----------
instrument, contract, agreement, lease or other undertaking, except the
Transaction Documents, leases of office space, equipment or other
facilities for use by the Company in its ordinary course of business,
employment agreements, service agreements, agreements relating to shared
employees and the other Transaction Documents or any Pooling and Servicing
Agreement and agreements necessary to perform its obligations under the
Transaction Documents or any Pooling and Servicing Agreement, (ii) issue
any power of attorney (except to the Trustee, the Master Servicer or the
Servicers or except for the purpose of permitting any Person to perform any
ministerial functions on behalf of the Company that are not prohibited by
or inconsistent with the terms of the Transaction Documents or any Pooling
and Servicing Agreement), or (iii) amend, supplement, modify or waive any
of the provisions of the Receivables Sale Agreement or any Lockbox
Agreement or request, consent or agree to or suffer to exist or permit any
such amendment, supplement, modification or waiver or exercise any consent
rights granted to it thereunder unless such amendment, supplement,
modification or waiver or such exercise of consent rights would not have an
adverse effect on the interests, rights or remedies of the Trustee or the
Investor Certificateholders of any Outstanding Series under or with respect
to the Transaction Documents and the Rating Agency Condition shall have
been satisfied with respect to any such amendments, supplements,
modifications or waivers.
<PAGE>
66
(h) Policies. Make any change or modification (or permit any change
---------
or modification to be made) in any material respect to the Policies, except
(i) if such changes or modifications are necessary under any Requirement of
Law or (ii) if the Rating Agency Condition is satisfied with respect
thereto; provided, however, that if any change or modification, other than
-------- --------
a change or modification permitted pursuant to clause (i) above, would be
reasonably likely to have a Material Adverse Effect on the interests of the
Investor Certificateholders of a Series which is not rated by a Rating
Agency, the consent of the applicable Agent (or if none, as specified in
the related Supplement) shall be required to effect such change or
modification.
(i) Receivables Not To Be Evidenced by Promissory Notes. Subject to
--------------------------------------------- ------
the delivery requirement set forth in subsection 2.01(b), take any action
to cause any Receivable not evidenced by an "instrument" (as defined in the
UCC as in effect in any state in which the Company's, or the related
Sellers' chief executive offices or books and records relating to such
Receivable are located) upon origination to become evidenced by an
instrument, except in connection with its enforcement or collection of a
Defaulted Receivable.
(j) Offices. Move the location of its chief executive office or of
--------
any of the offices where it keeps its records with respect to the
Receivables, or its legal head office to a new location within or outside
the state where such office is now located, without (i) 30 days prior
written notice to the Trustee and each Rating Agency and (ii) taking all
actions reasonably requested by the Trustee (including but not limited to
all filings and other acts necessary or advisable under the UCC or similar
statute of each relevant jurisdiction) in order to continue the Trust's
first priority perfected ownership or security interest
<PAGE>
67
in all Receivables now owned or hereafter created; provided, however, that
-------- -------
the Company shall not change the location of its chief executive office to
a state which is within the Tenth Circuit unless it delivers an opinion of
counsel reasonably acceptable to the Rating Agencies to the effect that
Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993) is no
-----------------------------------
longer controlling precedent in the Tenth Circuit.
(k) Change in Name. Change its name, identity or corporate structure
---------------
in any manner that would or is likely (i) to make any financing statement
or continuation statement (or other similar instrument) relating to this
Agreement seriously misleading within the meaning of Section 9-402(7) of
the UCC, or (ii) to impair the perfection of the Trust's interest in any
Receivable under any other similar law, without 30 days prior written
notice to the Trustee and each Rating Agency.
(l) Charter. Amend or make any change or modification to its
--------
certificate of incorporation without first satisfying the Rating Agency
Condition (other than an amendment, change or modification made pursuant to
changes in law of the state of its incorporation or amendments to change
the Company's name (subject to compliance with clause (k) above),
registered agent or address of registered office).
(m) Addition of Sellers. Agree to the addition of any additional
--------------------
Seller pursuant to subsection 9.13 of the Receivables Sale Agreement unless
such additional Seller shall have been simultaneously added as a Servicer
party to the Servicing Agreement pursuant to Section 7.04 thereof or
another Servicer has simultaneously agreed to service the Receivables
originated by such additional Seller.
(n) Optional Termination of Seller. Designate any Seller as a Seller
-------------------------------
to be terminated as a Seller
<PAGE>
68
pursuant to subsection 9.14(b) of the Receivables Sale Agreement unless, if
such Seller is a Servicer, such Seller shall have been terminated as a
Servicer pursuant to Section 6.04 of the Servicing Agreement.
(o) Limitation on Restricted Payments and Payments on Seller Note.
--------------------------------------------------------------
Declare or pay any dividend on, or make any payment on account of, or set
apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of
any class of capital stock of the Company, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of
the Company (such declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and distributions being
herein called "Restricted Payments"), or make, directly or indirectly,
payments in any form in respect of the Seller Note except, in either case,
in accordance with the terms of any Pooling and Servicing Agreement.
ARTICLE III
Rights of Certificateholders and
--------------------------------
Allocation and Application of Collections
-----------------------------------------
THE FOLLOWING PORTION OF THIS ARTICLE III
IS APPLICABLE TO ALL SERIES.
SECTION 3.01. Establishment of Collection Account; Certain
--------------------------------------------
Allocations. (a) The Trustee, for the benefit of the Certificateholders as
- ------------
their interests appear in this Agreement, shall cause to be established and
maintained in the name of the Trust with an Eligible Institution or with the
corporate trust department of the Trustee or an Eligible Institution or an
affiliate of the Trustee or an Eligible Institution, a segregated trust
<PAGE>
69
account (the "Collection Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the
Certificateholders. Schedule 2, which is hereby incorporated into and made a
part of this Agreement, identifies the Collection Account by setting forth the
account number of such account, the account designation of such account and the
name of the institution with which such account has been established. The
Collection Account shall be divided into individual subaccounts for each
Outstanding Series (each, respectively, a "Series Collection Subaccount" and,
collectively, the "Series Collection Subaccounts") and for the Company (the
"Company Collection Subaccount"). For administrative purposes only, the Trustee
shall establish or cause to be established for each Series, so long as such
Series is an Outstanding Series, sub-subaccounts of the Series Collection
Subaccounts with respect to such Series (respectively, the "Series Principal
Collection Sub-subaccount" and "Series Non-Principal Collection Sub-subaccount"
and, collectively, the "Series Collection Sub-subaccounts").
(b) Authority of the Trustee in Respect of the Collection Account and
------------------------------------------ ----------------------
Certificateholders' Interests Therein. (i) The Trustee shall possess all
- --------------------------------------
right, title and interest in all funds on deposit from time to time in the
Collection Account and in all proceeds thereof. The Collection Account shall be
under the sole dominion and control of the Trustee for the benefit of the
Investor Certificateholders and, to the extent set forth in any Supplement, any
holder of any Subordinated Company Certificate. If, at any time, the Master
Servicer or any Servicer has actual notice or knowledge that any institution
holding the Collection Account has ceased to be an Eligible Institution, any
such Servicer shall immediately notify the Master Servicer and the Master
Servicer shall direct the Trustee to establish within 30 days a substitute
account therefor with an Eligible Institution, transfer any cash and/or any
Eligible Investments to such new account and from the date any such substitute
accounts are established, such account shall be the Collection Account. Neither
the
<PAGE>
70
Company, the Master Servicer nor any Servicer, nor any person or entity claiming
by, through or under the Company, the Master Servicer or any Servicer, shall
have any right, title or interest in, except to the extent expressly provided
under the Transaction Documents, or any right to withdraw any amount from, the
Collection Account. Pursuant to the authority granted to the Servicers in
subsection 2.02(a) of the Servicing Agreement, each Servicer shall have the
power to instruct the Trustee to make withdrawals from and payments to the
Collection Account for the purposes of carrying out the Master Servicers', the
Servicers' or Trustee's duties hereunder.
(ii) The Master Servicer agrees to give written direction (which may
be included within any Daily Report) in a timely manner to the Trustee to apply
all Collections with respect to the Receivables and to make all other
applications, allocations and distributions described in Article III and in the
Supplement with respect to each Outstanding Series.
(iii) Each Series of Investor Certificates shall represent Fractional
Undivided Interests as indicated in the Supplement relating to such Series and
the right to receive Collections and other amounts at the times and in the
amounts specified in this Article III (as supplemented by the Supplement related
to such Series) to be deposited in the Collection Account and any other accounts
maintained for the benefit of the Investor Certificateholders or paid to the
Investor Certificateholders (with respect to each outstanding Series, the
"Certificateholders' Interest"). The Exchangeable Company Certificate shall
represent the interest in the Trust not represented by any Series of Investor
Certificates or Subordinated Company Certificates then outstanding, including
the right to receive Collections and other amounts at the times and in the
amounts specified in this Article III to be paid to the Company (the "Company
Interest"), and each Subordinated Company Certificate, if any, shall represent
the interests granted to such Subordinated Company Certificate pursuant to the
related
<PAGE>
71
Supplement; provided, however, that no such Subordinated Company Certificate
-------- -------
shall represent any interest in any Trust Account and any other accounts
maintained for the benefit of the Investor Certificateholders, except as
specifically provided in this Article III.
(c) Administration of the Collection Account. At the written
-----------------------------------------
direction of the Company, funds on deposit in the Collection Account available
for investment, shall be invested by the Trustee in Eligible Investments
selected by the Company. All such Eligible Investments shall be held by the
Trustee for the benefit of the Investor Certificateholders. Amounts on deposit
in each Series Non-Principal Collection Sub-subaccount shall, if applicable, be
invested in Eligible Investments that will mature, or that are payable or
redeemable upon demand of the holder thereof, so that such funds will be
available on or before the Business Day immediately preceding the next
Distribution Date. None of such Eligible Investments shall be disposed of prior
to the maturity date with respect thereto unless such disposition is reasonably
determined by the Company to be necessary to prevent a loss. All interest and
investment earnings (net of losses and investment expenses) on funds deposited
in a Series Non-Principal Collection Sub-subaccount shall be deposited in such
sub-subaccount. Amounts on deposit in the Series Principal Collection Sub-
subaccount and any other sub-subaccounts as specified in the related Supplement
shall be invested in Eligible Investments that mature, or that are payable or
redeemable upon demand of the holder thereof, so that such funds will be
available not later than the date which is specified in any Supplement. The
Trustee, or its nominee or custodian, shall maintain possession of the
negotiable instruments or securities, if any, evidencing any Eligible
Investments from the time of purchase thereof until the time of sale or
maturity. Any earnings (net of losses and investment expenses) (the "Investment
Earnings") on such invested funds in a Series Principal Collection
Sub-subaccount and any other sub-subaccounts as specified in the related
Supplement
<PAGE>
72
will be deposited in the related Series Non-Principal Collection Sub-subaccount.
(d) Daily Collections. (i) Promptly following its receipt of
------------------
Collections in the form of available funds in a Lockbox Account, but in no event
later than 1:30 p.m., New York City time, on the Business Day following the
Business Day Received, the related Servicer shall transfer, or cause to be
transferred, all Collections on deposit (less the aggregate amount of set-offs
permitted to be retained pursuant to any applicable Lockbox Agreement) in the
form of available funds in the Lockbox Accounts directly to the Collection
Account.
(ii) If the Aggregate Daily Collections are deposited into the
Collection Account pursuant to the preceding subsection 3.01(d)(i) at or before
1:00 p.m., New York City time, and the Daily Report specified in
subsection 3.01(b)(ii) is received by the Trustee at or before 1:00 p.m., New
York City time, the Trustee shall transfer, within a reasonable time, on such
Business Day, from such Aggregate Daily Collections, to the respective Series
Collection Subaccount, an amount equal to the product of (x) the applicable
Invested Percentage for such Outstanding Series and (y) such Aggregate Daily
Collections in accordance with the Daily Report.
(iii) If the Aggregate Daily Collections are deposited into the
Collection Account at or before 1:00 p.m., New York City time, and the Daily
Report is received by the Trustee at or before 1:00 p.m., New York City time, as
set forth in the preceding subsection 3.01(d)(ii), the Trustee shall allocate,
within a reasonable time, on such Business Day, funds transferred to the Series
Collection Subaccount for each Outstanding Series pursuant to the preceding
subsection 3.01(d)(ii) to the Series Non-Principal Collection Sub-subaccount and
the Series Principal Collection Sub-subaccount of each such Series in accordance
with the Daily Report and the related Supplement for such Series.
<PAGE>
73
(iv) Except as otherwise provided in a Supplement, if the Aggregate
Daily Collections are deposited into the Collection Account at or before
1:00 p.m., New York City time, and the Daily Report is received by the Trustee
at or before 1:00 p.m., New York City time, as set forth in
subsection 3.01(d)(ii), the Trustee shall, in accordance with the Daily Report,
transfer, within a reasonable time, on such Business Day, to the Company
Collection Subaccount the remaining funds, if any, on deposit in the Collection
Account on such day after giving effect to transfers to be made pursuant to
subsection 3.01(d)(ii).
(e) Certain Allocations Following an Amortization Period. (i) If, on any
-----------------------------------------------------
Settlement Report Date, an Amortization Period has occurred and is continuing
with respect to any Outstanding Series and at such Settlement Report Date, a
Revolving Period is still in effect with respect to any other Outstanding Series
(a "Special Allocation Settlement Report Date"), then the Master Servicer shall
-------------------------------------------
make the following calculations:
(A) the amount (the "Allocable Charged-Off Amount") equal to the
excess, if any, of (I) the aggregate Principal Amount of Charged-Off
Receivables for the related Settlement Period over (II) the aggregate
Principal Amount of Recoveries received during the related Settlement
Period;
(B) the amount (the "Allocable Recoveries Amount") equal to the
excess, if any, of (I) the aggregate Principal Amount of Recoveries
received during the related Settlement Period over (II) the aggregate
Principal Amount of Charged-Off Receivables for the related Settlement
Period; and
(ii) If, on any Special Allocation Settlement Report Date, either of
the Allocable Charged-off Amount or the Allocable Recoveries Amount is greater
than zero for the related Settlement Period, the Trustee shall (in accordance
with written directions received pursuant to
<PAGE>
74
subsection (b)(ii) above) make (A) a pro rata allocation to each Outstanding
Series (based on the Invested Percentage for such Series) of a portion (as
determined in clause (iii) below) of each such positive amount and (B) an
allocation to the Exchangeable Company Certificate of the remaining portion of
each such positive amount.
(iii) With respect to each portion of the Allocable Charged-off Amount
and the Allocable Recoveries Amount which is allocated to an Outstanding Series
pursuant to subsection 3.01(e)(ii), the Trustee shall (in accordance with the
written direction of the Master Servicer) apply each such amount to such Series
in accordance with the related Supplement for such Series.
(f) Allocations for the Exchangeable Company Certificate. Until the
-----------------------------------------------------
occurrence and continuation of an Early Amortization Period, on each Business
Day and, after the occurrence and continuation of an Early Amortization Period
and until the Trust Termination Date, on each Distribution Date, after making
all allocations required pursuant to subsection 3.01(d), the Trustee shall (in
accordance with the written direction of the Master Servicer) transfer, using
its best efforts to transfer within two hours of receipt of the Aggregate Daily
Collections and the Daily Report and, if the Aggregate Daily Collections and the
Daily Report are received by the Trustee no later than 1:00 p.m., New York City
time, making such transfer no later than 3:00 p.m., New York City time, on such
Business Day, the amounts on deposit in the Company Collection Subaccount to the
holder of the Exchangeable Company Certificate or to such accounts or such
Persons as the holder of the Company Exchangeable Certificate may direct in
writing (which direction may consist of standing instructions provided by the
holder of the Company Exchangeable Certificate that shall remain in effect until
changed by the holder of the Company Exchangeable Certificate in writing);
provided, however, that a transfer for purposes of this subsection 3.01(f) shall
- -------- -------
be deemed to have occurred at such time as the Trustee instructs the
<PAGE>
75
Federal Reserve Bank of New York of the outgoing amount; provided further that a
-------- -------
failure of the Trustee to transfer funds by 3:00 p.m., New York City time, shall
not be a breach of this subsection 3.01(f) if (i) Chemlink is not used by both
the Company and the Trustee to make such transfers or (ii) a Trustee Force
Majeure Delay occurs, and in either such event the Trustee shall use its best
efforts to transfer funds within a reasonable time.
(g) Set-Off. In addition to the provisions of Section 8.05, (i) if
--------
the Company shall fail to make a payment as provided in this Agreement or any
Supplement, the Master Servicer or the Trustee may set off and apply any amounts
otherwise payable to the Company under any Pooling and Servicing Agreement. The
Company hereby waives demand, notice or declaration of such set-off and
application; provided that notice will promptly be given to the Company of such
--------
set-off and application; provided further that failure to give such notice shall
----------------
not affect the validity of such set-off; and (ii) in the event any Servicer
shall fail to make a payment as provided in any Pooling and Servicing Agreement,
the Trustee may set off and apply any amounts otherwise payable to such Servicer
in its capacity as Servicer under the Transaction Documents on account of such
obligation. Each Servicer hereby waives demand, notice or declaration of such
set-off and application; provided that notice will promptly be given to such
--------
Servicer of such set-off; provided further that failure to give such notice
----------------
shall not affect the validity of such set-off.
(h) Allocation and Application of Funds. The Master Servicer shall
------------------------------------
direct the Trustee in writing (which may be given in the form of the Daily
Reports and the Monthly Settlement Statements) to apply all Collections with
respect to the Receivables as described in this Article III and in the
Supplement with respect to each Outstanding Series. The Master Servicer shall
direct the Trustee in writing to pay Collections to the holder of the
Exchangeable Company Certificate to the extent such Collections are allocated to
the Exchangeable Company Certificate under
<PAGE>
76
subsection 3.01(f) and as otherwise provided in Article III. Unless otherwise
provided in one or more Supplements, if the Trustee receives any Daily Report at
or before 1:00 p.m., New York City time, on any Business Day, the Trustee shall
make any applications of funds required thereby on the same Business Day and
otherwise on the next succeeding Business Day.
THE REMAINDER OF ARTICLE III SHALL BE SPECIFIED
IN THE SUPPLEMENT WITH RESPECT TO EACH SERIES.
SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE
SERIES RELATING TO THE SUPPLEMENT IN WHICH
SUCH REMAINDER APPEARS.
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO.
ARTICLE V
The Certificates
----------------
SECTION 5.01. The Certificates. The Investor Certificates of each
-----------------
Series, any Class thereof and any Subordinated Company Certificates related
thereto shall be in fully registered form and shall be substantially in the form
of the exhibits with respect thereto attached to the applicable Supplement. The
Exchangeable Company Certificate shall be substantially in the form of
Exhibit A. The Certificates shall, upon issue, be executed and delivered by the
Company to the Trustee for authentication and redelivery as provided in
Section 5.02. Except as otherwise set forth as to any Series or Class in the
related Supplement, the Investor Certificates shall be issued in minimum
denominations of $500,000 and in integral multiples of
<PAGE>
77
$100,000 in excess thereof. Unless otherwise specified in any Supplement for
any Series, the Investor Certificates shall be issued upon initial issuance as a
single global certificate in an original principal amount equal to the Initial
Invested Amount with respect to such Series. Each Subordinated Company
Certificate, if any, issued under any Supplement shall be a single certificate
and shall represent a subordinated interest in the Trust Assets allocated to
such Series, as designated in the related Supplement. The Exchangeable Company
Certificate shall also be a single certificate and shall represent the entire
Company Interest. The Company is hereby authorized to execute and deliver each
Certificate on behalf of the Trust. Each Certificate shall be executed by
manual or facsimile signature on behalf of the Company by a Responsible Officer.
Certificates bearing the manual or facsimile signature of the individual who
was, at the time when such signature was affixed, authorized to sign on behalf
of the Company or the Trustee shall not be rendered invalid, notwithstanding
that such individual has ceased to be so authorized prior to or on the date of
the authentication and delivery of such Certificates or does not hold such
office at the date of such Certificates. No Certificate shall be entitled to
any benefit under this Agreement, or be valid for any purpose, unless there
appears on such Certificate a certificate of authentication substantially in the
form provided for herein executed by or on behalf of the Trustee by the manual
signature of a duly authorized signatory, and such certificate of authentication
upon any Certificate shall be conclusive evidence, and the only evidence, that
such Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication but failure to do
so shall not render them invalid.
SECTION 5.02. Authentication of Certificates. The Trustee shall
-------------------------------
authenticate and deliver the initial Series of Investor Certificates that is
issued upon the written order of the Company in a form reasonably satisfactory
to the Trustee, to the holders of the initial Series of Investor Certificates,
against payment to the Company of the Initial
<PAGE>
78
Invested Amount and to the Company, the related Subordinated Company
Certificate, if any, as provided in the applicable Supplement. The Trustee
shall authenticate and deliver the Exchangeable Company Certificate to the
Company simultaneously with its delivery of the initial Series of Investor
Certificates. The Certificates shall be duly authenticated by or on behalf of
the Trustee, in the case of the Investor Certificates in authorized
denominations equal to (in the aggregate) the Initial Invested Amount, in the
case of any Subordinated Company Certificate, in a denomination equal to the
subordinated interest in the Trust Assets allocated to such Certificate in
accordance with the terms of the related Supplement and, in the case of the
Exchangeable Company Certificate, in a denomination equal to the remaining
Company Interest from time to time, and together evidencing the entire ownership
of the Trust. Upon an Exchange as provided in Section 5.10 and the satisfaction
of certain other conditions specified therein, the Trustee shall authenticate
and deliver the Certificates of additional Series (with the designation provided
in the applicable Supplement) (or, if provided in any Supplement, the additional
Investor Certificates of an existing Series), upon the written order of the
Company, to the Persons designated in such Supplement. Upon the order of the
Company, the Investor Certificates of any Series shall be duly authenticated by
or on behalf of the Trustee, in authorized denominations equal to (in the
aggregate) the initial Invested Amount of such Series of Investor Certificates.
SECTION 5.03. Registration of Transfer and Exchange of Certificates.
------------------------------------------------------
(a) The Trustee shall cause to be kept at the office or agency to be maintained
by a transfer agent and registrar (which may be the Trustee) (the "Transfer
Agent and Registrar") in accordance with the provisions of Section 8.16 a
register (the "Certificate Register") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Transfer Agent and Registrar shall
provide for the registration of the Investor Certificates and of transfers and
exchanges of the Investor
<PAGE>
79
Certificates as herein provided. The Company hereby appoints The Chase
Manhattan Bank as Transfer Agent and Registrar for the purpose of registering
the Investor Certificates and transfers and exchanges of the Investor
Certificates as herein provided. The Chase Manhattan Bank shall be permitted to
resign as Transfer Agent and Registrar upon 30 days prior written notice to the
Company, the Trustee and the Master Servicers; provided, however, that such
-------- -------
resignation shall not be effective and The Chase Manhattan Bank shall continue
to perform its duties as Transfer Agent and Registrar until the Trustee has
appointed a successor Transfer Agent and Registrar reasonably acceptable to the
Company and such successor Transfer Agent and Registrar has accepted such
appointment. The provisions of Sections 8.01, 8.02, 8.03, 8.05 and 10.19 shall
apply to The Chase Manhattan Bank (or the Trustee to the extent it is so acting)
also in its role as Transfer Agent or Registrar, as the case may be, for so long
as The Chase Manhattan Bank (or the Trustee to the extent it is so acting) shall
act as Transfer Agent or Registrar, as the case may be.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
Section 8.05, for the payment of any reasonable compensation payable to the
Transfer Agent and Registrar for their services under this Section 5.03. The
Trustee hereby agrees that, upon the receipt of such funds from the Company, it
shall pay the Transfer Agent and Registrar such amounts.
Upon surrender for registration of transfer of any Investor
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose, the Company shall execute, and the Trustee shall,
upon the written order of the Company, authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Investor Certificates
in authorized denominations of the same Series representing like aggregate
Fractional Undivided Interests and which bear numbers that are not
contemporaneously outstanding.
<PAGE>
80
At the option of an Investor Certificateholder, Investor Certificates
may be exchanged for other Investor Certificates of the same Series in
authorized denominations of like aggregate Fractional Undivided Interests,
bearing numbers that are not contemporaneously outstanding, upon surrender of
the Investor Certificates to be exchanged at any such office or agency of the
Transfer Agent and Registrar maintained for such purpose.
Whenever any Investor Certificates of any Series are so surrendered
for exchange, the Company shall execute, and the Trustee shall, upon the written
order of the Company, authenticate and (unless the Transfer Agent and Registrar
is different from the Trustee, in which case the Transfer Agent and Registrar
shall) deliver, the Investor Certificates of such Series which the
Certificateholder making the exchange is entitled to receive. Every Investor
Certificate presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in a form satisfactory
to the Trustee and the Transfer Agent and Registrar duly executed by the
Certificateholder thereof or his attorney-in-fact duly authorized in writing
delivered to the Trustee (unless the Transfer Agent and Registrar is different
from the Trustee, in which case to the Transfer Agent and Registrar) and
complying with any requirements set forth in the applicable Supplement.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Transfer Agent and Registrar may
require any Certificateholder that is transferring or exchanging one or more
Certificates to pay a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer or exchange of Investor
Certificates.
All Investor Certificates surrendered for registration of transfer and
exchange shall be canceled and
<PAGE>
81
disposed of in a customary manner satisfactory to the Trustee.
The Company shall execute and deliver Certificates to the Trustee or
the Transfer Agent and Registrar in such amounts and at such times as are
necessary to enable the Trustee and the Transfer Agent and Registrar to fulfill
their respective responsibilities under this Agreement and the Certificates.
(b) The Transfer Agent and Registrar will maintain at its expense in
the Borough of Manhattan, The City of New York and, subject to
subsection 5.03(a), if specified in the related Supplement for any Series, any
other city designated in such Supplement, an office or offices or agency or
agencies where Investor Certificates may be surrendered for registration or
transfer or exchange.
(c) Unless otherwise stated in any related Supplements, registration
of transfer of Certificates containing a legend relating to restrictions on
transfer of such Certificates (which legend shall be set forth in the Supplement
relating to such Investor Certificates) shall be effected only if the conditions
set forth in the related Supplement are complied with.
Certificates issued upon registration or transfer of, or in exchange
for, Certificates bearing the legend referred to above shall also bear such
legend unless the Company, the Master Servicer, the Trustee and the Transfer
Agent and Registrar receive an Opinion of Counsel satisfactory to each of them,
to the effect that such legend may be removed.
SECTION 5.04. Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate is surrendered to the Transfer Agent and
Registrar, or the Transfer Agent and Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b) there
is delivered to the Transfer Agent
<PAGE>
82
and Registrar and the Trustee such security or indemnity as may be required by
them to save the Trust, each of them and the Company harmless, then, in the
absence of actual notice to the Trustee or Transfer Agent and Registrar that
such Certificate has been acquired by a bona fide purchaser, the Company shall
execute and, upon the written request of the Company, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
aggregate Fractional Undivided Interest and bearing a number that is not
contemporaneously outstanding. In connection with the issuance of any new
Certificate under this Section 5.04, the Trustee or the Transfer Agent and
Registrar may require the payment by the Certificateholder of a sum sufficient
to cover any tax or other governmental expenses (including the fees and expenses
of the Trustee and Transfer Agent and Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section 5.04 shall constitute
complete and indefeasible evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time. The Company may not transfer, assign, exchange or otherwise pledge
or convey the Exchangeable Company Certificate, except pursuant to Section 5.10.
SECTION 5.05. Persons Deemed Owners. At all times prior to due
----------------------
presentation of a Certificate for registration of transfer, the Company, the
Trustee, the Paying Agent, the Transfer Agent and Registrar, any Agent and any
agent of any of them may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Article IV of the related Supplement and for all other
purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer
Agent and Registrar nor any agent of any of them shall be affected by any notice
to the contrary. Notwithstanding the foregoing provisions of this Section 5.05,
in determining whether the holders of the requisite Fractional Undivided
Interests have given any request, demand, authorization, direction, notice,
consent
<PAGE>
83
or waiver hereunder, Investor Certificates owned by the Company, the Master
Servicer or any Servicer or any Affiliate thereof, shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Investor Certificates which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Investor Certificates so owned by the Company, the Master Servicer
or any Servicer or any Affiliate thereof which have been pledged in good faith
shall not be disregarded and may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Investor Certificates and that the pledgee is not the
Company, the Master Servicer or any Servicer or any Affiliate thereof.
SECTION 5.06. Appointment of Paying Agent. The Paying Agent shall
----------------------------
make distributions to Investor Certificateholders from the Collection Account
(and/or any other account or accounts maintained for the benefit of
Certificateholders as specified in the related Supplement for any Series)
pursuant to Articles III and IV. The Trustee may revoke such power and remove
the Paying Agent if the Trustee determines in its sole discretion that the
Paying Agent shall have failed to perform its obligations under this Agreement
in any material respect. Unless otherwise specified in the related Supplement
for any Series and with respect to such Series, the Paying Agent shall initially
be The Chase Manhattan Bank and any co-paying agent chosen by The Chase
Manhattan Bank. Each Paying Agent shall have a combined capital and surplus of
at least $50,000,000. The Paying Agent shall be permitted to resign upon 30
days prior written notice to the Trustee. In the event that the Paying Agent
shall so resign, the Trustee shall appoint a successor to act as Paying Agent
(which shall be a depositary institution or trust company) reasonably acceptable
to the Company which appointment shall be effective on the date on which the
Person so appointed gives the Trustee written notice that it accepts the
<PAGE>
84
appointment. Any resignation or removal of the Paying Agent and appointment of
successor Paying Agent pursuant to this Section 5.06 shall not become effective
until acceptance of appointment by the successor Paying Agent, as provided in
this Section 5.06. The Trustee shall cause such successor Paying Agent or any
additional Paying Agent appointed by the Trustee to execute and deliver to the
Trustee an instrument in which such successor Paying Agent or additional Paying
Agent shall agree with the Trustee that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Investor Certificateholders in trust for the benefit of the
Investor Certificateholders entitled thereto until such sums shall be paid to
such Certificateholders. The Paying Agent shall return all unclaimed funds to
the Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Trustee. The provisions of
Sections 8.01, 8.02, 8.03, 8.05 and 10.19 shall apply to The Chase Manhattan
Bank (or the Trustee to the extent it is so acting) also in its role as Paying
Agent, for so long as The Chase Manhattan Bank (or the Trustee to the extent it
is so acting) shall act as Paying Agent. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
Section 8.05, for the payment of any reasonable compensation payable to the
Paying Agent for its services under this Section 5.06. The Trustee hereby
agrees that, upon the receipt of such funds from the Company, it shall pay the
Paying Agent such amounts.
SECTION 5.07. Access to List of Certificate-holders' Names and
------------------------------------------------
Addresses. The Trustee will furnish or cause to be furnished by the Transfer
- ----------
Agent and Registrar to the Company, the Master Servicer or the Paying Agent,
within 10 Business Days after receipt by the Trustee of a request therefor from
the Company, the Master Servicer or the Paying
<PAGE>
85
Agent, respectively, in writing, a list of the names and addresses of the
Investor Certificateholders as then recorded by or on behalf of the Trustee. If
three or more Investor Certificateholders of record or any Investor
Certificateholder of any Series or a group of Investor Certificateholders of
record representing Fractional Undivided Interests aggregating not less than 10%
of the Invested Amount of the related Outstanding Series (the "Applicants")
apply in writing to the Trustee, and such application states that the Applicants
desire to communicate with other Investor Certificateholders of any Series with
respect to their rights under this Agreement or under the Investor Certificates
and is accompanied by a copy of the communication which such Applicants propose
to transmit, then the Trustee, after having been adequately indemnified by such
Applicants for its costs and expenses, shall transmit or shall cause the
Transfer Agent and Registrar to transmit, such communication to the
Certificateholders reasonably promptly after the receipt of such application.
Every Certificateholder, by receiving and holding a Certificate,
agrees with the Trustee that neither the Trustee, the Transfer Agent and
Registrar, nor any of their respective agents, officers, directors or employees
shall be held accountable by reason of the disclosure or mailing of any such
information as to the names and addresses of the Certificateholders hereunder,
regardless of the sources from which such information was derived.
As soon as practicable following each Record Date, the Trustee shall
provide to the Paying Agent or its designee, a list of Certificateholders in
such form as the Paying Agent may reasonably request.
SECTION 5.08. Authenticating Agent. (a) The Trustee may appoint one
---------------------
or more authenticating agents with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates.
<PAGE>
86
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent.
(b) Any institution succeeding to the corporate trust business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee. Upon the receipt by the Trustee of any
such notice of resignation and upon the giving of any such notice of termination
by the Trustee, the Trustee shall immediately give notice of such resignation or
termination to the Company. Any resignation of an authenticating agent shall
not become effective until acceptance of appointment by the successor
authenticating agent as provided in this Section 5.08. The Trustee may at any
time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time an authenticating
agent shall cease to be acceptable to the Trustee, the Trustee promptly may
appoint a successor authenticating agent. Any successor authenticating agent
upon acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an authenticating agent. No successor authenticating agent
(other than an Affiliate of the Trustee) shall be appointed unless reasonably
acceptable to the Trustee and the Company.
(d) The Company hereby agrees to provide the Trustee from time to
time sufficient funds, on a timely
<PAGE>
87
basis and in accordance with and subject to Section 8.05, for the payment of any
reasonable compensation payable to each authenticating agent for its services
under this Section 5.08. The Trustee hereby agrees that, upon the receipt of
such funds from the Company it shall pay each authenticating agent such amounts.
(e) The provisions of Sections 8.01, 8.02, 8.03 and 8.05 shall be
applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 5.08, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
"This is one of the Certificates described in the Pooling Agreement
dated as of August 5, 1996, among LFI Receivables Corporation, LFI
Servicing Corporation, as Master Servicer and The Chase Manhattan Bank, as
Trustee.
THE CHASE MANHATTAN BANK
as Authenticating Agent
for the Trustee
By
-------------------------
Authorized Signatory
SECTION 5.09. Tax Treatment. It is the intent of the Master
--------------
Servicer, the Servicers, the Company, the Investor Certificateholders and the
Trustee that, under applicable U.S. Federal, state and local income and
franchise tax laws, the Investor Certificates will qualify as indebtedness
secured by the Trust Assets and the Trust will not be characterized as an
association taxable as a
<PAGE>
88
corporation. The Company and the Trustee, by entering into this Agreement, and
each Investor Certificateholder, by its acceptance of its Investor Certificate,
agree to treat the Investor Certificates for applicable U.S. Federal, state and
local income and franchise tax purposes as indebtedness. The provisions of this
Agreement and all related Transaction Documents shall be construed to further
these intentions of the parties. This Section 5.09 shall survive the
termination of this Agreement and shall be binding on all transferees of any of
the foregoing persons.
SECTION 5.10. Tender of Exchangeable Company Certificate. (a) The
------------------------------ ------------
Company may tender the Exchangeable Company Certificate to the Trustee in
exchange for (i)(A) an increase in the Invested Amount of a Class of Investor
Certificates of an Outstanding Series and an increase in any related
Subordinated Company Certificate in connection with an issuance of additional
Investor Certificates of such Outstanding Series or (B) one or more newly issued
Series of Investor Certificates and any related newly issued Subordinated
Company Certificate, and (ii) a reissued Exchangeable Company Certificate (any
such tender a "Company Exchange"). (A Company Exchange shall not be necessary
in connection with an increase in the Invested Amount of any Investor
Certificates issued in a Series with an Invested Amount that may increase or
decrease from time to time. Such Investor Certificates are expected to be
designated as "Variable Funding Certificates" or "VFC Certificates".) The
Company may perform a Company Exchange by notifying the Trustee, in writing at
least three days in advance (an "Exchange Notice") of the date upon which the
Company Exchange is to occur (an "Exchange Date"). Any Exchange Notice shall
state the designation of any Series to be issued on the Exchange Date and, with
respect to each such Series: (a) its additional or Initial Invested Amount, as
the case may be, if any, which in the aggregate at any time may not be greater
than the current principal amount of the Exchangeable Company Certificate, if
any, at such time and (b) its Certificate Rate (or the method for allocating
interest payments or other cash flow to such Series), if
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89
any. On the Exchange Date, the Trustee shall only authenticate and deliver any
Certificates evidencing an increase in the Invested Amount of a Class of
Investor Certificates or a newly issued Series upon delivery by the Company to
the Trustee of the following (together with the delivery by the Company to the
Trustee of any additional agreements, instruments or other documents as are
specified in the related Supplement): (a) a Supplement executed by the Company
and specifying the Principal Terms of such Series (provided that no such
--------
Supplement shall be required for any increase in the Invested Amount of a Class
of Investor Certificates unless it is so required by the related Supplement),
(b) a Tax Opinion addressed to the Trustee and the Trust, (c) a General Opinion
addressed to the Trustee and the Trust, (d) an Officer's Certificate certifying
that all conditions precedent to the authentication and delivery of such
Certificates have been satisfied, (e) written confirmation from each Rating
Agency that the Exchange will not result in the Rating Agency's reducing or
withdrawing its rating on any then Outstanding Series rated by it and (f) the
existing Exchangeable Company Certificate, the applicable Investor Certificates
and Subordinated Company Certificates, as the case may be. Upon delivery of the
items listed in clauses (a) through (f) above, the Trustee shall cancel the
existing Exchangeable Company Certificate, the applicable Investor Certificates
and Subordinated Company Certificate, as the case may be, and issue, as provided
above, such Series of Investor Certificates, such Subordinated Company
Certificate, if applicable, and a new Exchangeable Company Certificate, dated
the Exchange Date. There is no limit to the number of Company Exchanges that
the Company may perform under this Agreement. If the Company shall, on any
Exchange Date, retain any Investor Certificates issued on such Exchange Date, it
shall, prior to transferring any such Certificates to another Person, obtain a
Tax Opinion. Additional restrictions relating to a Company Exchange may be set
forth in any Supplement.
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90
(b) Upon any Company Exchange, the Trustee, in accordance with the
written directions of the Company, shall issue to the Company under
Section 5.01, for execution and redelivery to the Trustee for authentication
under Section 5.02, (i) one or more Certificates representing an increase in the
Invested Amount of an Outstanding Series, and an increase in the related
Subordinated Company Certificate, or (ii) one or more new Series of Investor
Certificates and any related Subordinated Company Certificate(s). Any such
Certificates shall be substantially in the form specified in the applicable
Supplement and each shall bear, upon its face, the designation for such Series
to which each such certificate belongs so selected by the Company.
(c) In conjunction with a Company Exchange, the parties hereto shall,
except as otherwise provided in subsection (a) above, execute a supplement to
this Agreement, which shall define, with respect to any additional Investor
Certificates or newly issued Series, as the case may be: (i) its name or
designation, (ii) its additional or initial principal amount, as the case may
be, (or method for calculating such amount), (iii) its coupon rate (or formula
for the determination thereof), (iv) the interest payment date or dates and the
date or dates from which interest shall accrue, (v) the method for allocating
Collections to Certificateholders, (vi) the names of any accounts to be used by
such Series and the terms governing the operation of any such accounts,
(vii) the issue and terms of a letter of credit or other form of Enhancement, if
any, with respect thereto, (viii) the terms on which the certificates of such
Series may be repurchased by the Company or may be remarketed to other
investors, (viii) the Series Termination Date, (ix) any deposit account
maintained for the benefit of Certificateholders, (x) the number of classes of
such Series, and if more than one class, the rights and priorities of each such
class, (xi) the rights of the holder of the Exchangeable Company Certificate
that have been transferred to the holders of such Series, (xii) the designation
of any Series Accounts and the terms governing
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91
the operation of any such Series Accounts, (xiii) provisions acceptable to the
Trustee concerning the payment of the Trustee's fees and expenses and
(xiv) other relevant terms (all such terms, the "Principal Terms" of such
Series). The Supplement executed in connection with the Company Exchange shall
contain administrative provisions which are reasonably acceptable to the
Trustee.
(d) The Company shall not transfer, assign, exchange or otherwise
dispose of any Subordinated Company Certificate or any interest represented
thereby without (i) the consent of Investor Certificateholders whose consent
would be necessary to amend the Agreement in accordance with the provisions of
Section 10.01 and the Trustee, (ii) the prior satisfaction of the Rating Agency
Condition and (iii) delivery of a Tax Opinion.
(e) Except as specified in any Supplement for a related Series, all
Investor Certificates of any Series shall be equally and ratably entitled as
provided herein to the benefits hereof without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Agreement and
the applicable Supplement.
SECTION 5.11. Book-Entry Certificates. If specified in any related
------------------------
Supplement, the Investor Certificates, or any portion thereof, upon original
issuance, shall be issued in the form of one or more typewritten Certificates
representing the Book-Entry Certificates, to be delivered to the depository
specified in such Supplement (the "Depository") which shall be the Clearing
Agency, specified by, or on behalf of, the Company for such Series. The
Investor Certificates shall initially be registered on the Certificate Register
in the name of the nominee of such Clearing Agency, and no Certificate
Book-Entry Holder will receive a definitive certificate representing such
Certificate Book-Entry Holder's interest in the Investor Certificates, except as
provided in
<PAGE>
92
Section 5.13. Unless and until definitive, fully registered Investor
Certificates ("Definitive Certificates") have been issued to Certificateholders
pursuant to Section 5.13 or the related Supplement:
(a) the provisions of this Section 5.11 shall be in full force and
effect;
(b) the Company, the Master Servicer, the Servicers and the Trustee
may deal with each Clearing Agency for all purposes (including the making
of distributions on the Investor Certificates) as the Certificateholder
without respect to whether there has been any actual authorization of such
actions by the Certificate Book-Entry Holders with respect to such actions;
(c) to the extent that the provisions of this Section 5.11 conflict
with any other provisions of this Agreement, the provisions of this
Section 5.11 shall control; and
(d) the rights of Certificate Book-Entry Holders shall be exercised
only through the Clearing Agency and the related Clearing Agency
Participants and shall be limited to those established by law and
agreements between such related Certificate Book-Entry Holders and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Investor Certificates to
such Clearing Agency Participants.
Notwithstanding the foregoing, no Class or Series of Investor
Certificates may be issued as Book-Entry Certificates (but, instead, shall be
issued as Definitive Certificates) unless at the time of issuance of such Class
or Series, the Company and the Trustee receive an opinion of
<PAGE>
93
independent counsel that the Certificates of such Class or Series will be
treated as indebtedness for Federal income tax purposes.
SECTION 5.12. Notices to Clearing Agency. Whenever notice or other
---------------------------
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Certificate Book-
Entry Holders pursuant to Section 5.13, the Trustee shall give all such notices
and communications specified herein to be given to the Investor
Certificateholders to the Clearing Agencies.
SECTION 5.13. Definitive Certificates. If (a) (i) the Company
------------------------
advises the Trustee in writing that any Clearing Agency is no longer willing or
able to properly discharge its responsibilities under the applicable Depository
Agreement, and (ii) the Company is unable to locate a qualified successor,
(b) the Company, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (c) after the
occurrence of a Servicer Default, Certificate Book-Entry Holders representing
Fractional Undivided Interests aggregating more than 50% of the Invested Amount
held by such Certificate Book-Entry Holders of each affected Series then issued
and outstanding advise the Clearing Agency through the Clearing Agency
Participants in writing, and the Clearing Agency shall so notify the Trustee,
that the continuation of a book-entry system through the Clearing Agency is no
longer in the best interests of the Certificate Book-Entry Holders, the Trustee
shall notify the Clearing Agency, which shall be responsible to notify the
Certificate Book-Entry Holders, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Book-Entry Holders
requesting the same. Upon surrender to the Trustee of the Book-Entry
Certificates by the Clearing Agency, accompanied by registration instructions
from the Clearing Agency for registration, the Trustee shall issue the
Definitive Certificates. Neither the Company nor the Trustee shall be
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94
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions.
ARTICLE VI
Other Matters Relating to the Company
-------------------------------------
SECTION 6.01. Liability of the Company. The Company shall be liable
-------------------------
for all obligations, covenants, representations and warranties of the Company
arising under or related to this Agreement or any Supplement. Except as
provided in the preceding sentence and otherwise herein, the Company shall be
liable only to the extent of the obligations specifically undertaken by it in
its capacity as Company hereunder.
SECTION 6.02. Limitation on Liability of the Company. Subject to
---------------------------------------
Sections 6.01, 6.03 and 10.19, neither the Company nor any of its directors or
officers or employees or agents shall be under any liability to the Trust, the
Trustee, the Certificateholders or any other Person for any action taken or for
refraining from the taking of any action pursuant to this Agreement whether or
not such action or inaction arises from express or implied duties under any
Transaction Document; provided, however, that this provision shall not protect
-------- -------
the Company against any liability which would otherwise be imposed by reason of
wilful misconduct, bad faith or negligence in the performance of any duties or
by reason of reckless disregard of any obligations and duties hereunder. The
Company and any director or officer or employee or agent of the Company may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person (other than, in the case of the Company, the Company or
the Servicer) respecting any matters arising hereunder.
SECTION 6.03. Liabilities. Notwithstanding Section 6.02 or any other
------------
provision of any Pooling and
<PAGE>
95
Servicing Agreement, by entering into this Agreement, the Company agrees to be
liable, directly to the injured party, for the entire amount of any losses,
claims, damages or liabilities, arising out of or based on the arrangement
created by any Pooling and Servicing Agreement and the actions of any Servicer
taken pursuant hereto or thereto as though the Pooling and Servicing Agreements
created a partnership under the New York Uniform Limited Partnership Act with
the Company as a general partner thereof (except those losses, claims, damages
or liabilities incurred by an Investor Certificateholder in the capacity of an
investor in the Investor Certificates as a result of the performance of the
Receivables, market fluctuations or other similar market or investment risks).
In the event of a Service Transfer, the Successor Servicer (except for the
Trustee in its capacity as Successor Servicer) will indemnify and hold harmless
the Company for any losses, claims, damages and liabilities of the Company
arising under this Section 6.03 from the actions or omissions of such Successor
Servicer.
ARTICLE VII
Early Amortization Events
-------------------------
SECTION 7.01. Early Amortization Events. Unless modified with respect
--------------------------
to any Series of Investor Certificates by any related Supplement, if any one of
the following events (each, an "Early Amortization Event") shall occur:
(a) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary case
under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect (the Bankruptcy Code and all other
such applicable laws being collectively, "Applicable Insolvency Laws"),
which decree or order is not stayed or any other similar relief shall be
granted under any applicable federal or state law now or hereafter in
<PAGE>
96
effect and shall not be stayed; (ii) (A) an involuntary case is commenced
against the Company under any Applicable Insolvency Law now or hereafter in
effect, a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Company, or over
all or a substantial part of the property of the Company shall have been
entered, an interim receiver, trustee or other custodian of the Company for
all or a substantial part of the property of the Company is involuntarily
appointed, a warrant of attachment, execution or similar process is issued
against any substantial part of the property of the Company, and (B) any
event referred to in clause (ii)(A) above continues for 60 days unless
dismissed, bonded or discharged; (iii) the Company shall at its request
have a decree or an order for relief entered with respect to it or commence
a voluntary case under any Applicable Insolvency Law, consent to the entry
of a decree or an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any Applicable
Insolvency Law, consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; (iv) the making by the Company of any general assignment for the
benefit of creditors; (v) the inability or failure of the Company generally
to pay its debts as such debts become due; or (vi) the Board of Directors
of the Company adopts any resolution or otherwise authorizes action to
approve any of the foregoing; or
(b) the Trust or the Company shall become an "investment company"
within the meaning of the 1940 Act;
then, an "Early Amortization Period" with respect to all Outstanding Series
shall commence without any notice or other action on the part of the Trustee or
any Investor
<PAGE>
97
Certificateholder immediately upon the occurrence of such event. The Master
Servicer shall notify each Rating Agency and the Trustee in writing of the
occurrence of any Early Amortization Period. Upon the commencement against the
Company of a case, proceeding or other action described in clause (a)(ii) above,
the Company shall cease to purchase Receivables from any Seller and cease to
transfer Receivables to the Trust, until such time, if any, as such case,
proceeding or other action is vacated, discharged, or stayed or bonded pending
appeal. If an Insolvency Event with respect to the Company occurs, the Company
shall immediately cease to transfer Receivables to the Trust (or, if the Company
has previously suspended the transfer of Receivables to the Trust to comply
with the preceding sentence, such suspension shall become a permanent cessation
of the transfer of Receivables to the Trust) and shall promptly give written
notice to the Trustee of such occurrence. Notwithstanding any cessation of the
transfer to the Trust of additional Receivables, Receivables transferred to the
Trust prior to the occurrence of such Insolvency Event and Collections in
respect of such Receivables and interest, whenever created, accrued in respect
of such Receivables, shall continue to be a part of the Trust.
Additional Early Amortization Events and the consequences thereof may
be set forth in each Supplement with respect to the Series relating thereto.
SECTION 7.02. Additional Rights upon the Occurrence of Certain
------------------------------------------------
Events. (a) If after the occurrence of an Insolvency Event, the Aggregate
- -------
Invested Amount and all accrued and unpaid interest thereon have not been paid
to the Investor Certificateholders, the Trustee in accordance with the written
direction of the Master Servicer shall (i) publish a notice in a newspaper with
a national circulation (an "Authorized Newspaper") that an Insolvency Event has
occurred and that the Trustee intends to sell, dispose of or otherwise liquidate
the Receivables in a commercially reasonable manner and (ii) send written notice
<PAGE>
98
to the Certificateholders and request instructions from such holders, which
notice shall request each Certificateholder to advise the Trustee in writing
that it elects one of the following options: (A) the Certificateholder wishes
the Trustee not to sell, dispose of or otherwise liquidate the Receivables;
(B) the Certificateholder wishes the Trustee to sell, dispose of or otherwise
liquidate the Receivables; or (C) the Certificateholder refuses to advise the
Trustee as to the specific action the Trustee should take. If after 60 days
from the day notice pursuant to clause (i) above is first published (the
"Publication Date"), the Trustee shall not have received written instructions
selecting option (A) above from (x) Investor Certificateholders representing
more than 50% of the Invested Amount of each Series (or, in the case of a Series
having more than one Class of Investor Certificates, Investor Certificateholders
representing more than 50% of the Invested Amount of each Class of such Series)
and (y) if there are any holders of the Exchangeable Company Certificate other
than the Company, the holders of the Exchangeable Company Certificate
representing more than 50% of the Company Interest not held by the Company, the
Trustee shall proceed to sell, dispose of, or otherwise liquidate the
Receivables in a commercially reasonable manner and on commercially reasonable
terms, which shall include the solicitation of competitive bids and the Trustee
shall proceed to consummate the sale, liquidation or disposition of the
Receivables as provided above with the highest bidder for the Receivables. The
Company or any of its Affiliates shall be permitted to bid for the Receivables.
In addition, the Company or any of its Affiliates shall have the right to match
any bid by a third person and be granted the right to purchase the Receivables
at such matched bid price. The provisions of Sections 7.01 and 7.02 shall be
cumulative. All reasonable costs and expenses incurred by the Trustee in such
sale shall be reimbursable to the Trustee as provided in Section 8.05.
(b) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to subsection (a) above shall be treated as Collections on
the Receivables and
<PAGE>
99
such proceeds shall be released to the Trustee in an amount equal to the amount
of any expenses incurred by the Trustee acting in its capacity either as Trustee
or as liquidating agent under this Section 7.02 that have not otherwise been
reimbursed and the remainder, if any, will be distributed to holders of each
Series after immediately being deposited in the Collection Account, in
accordance with the provisions of Section 3.01(e) and the related Supplement for
such Series. After giving effect to all such distributions, the remainder, if
any, shall be allocated to the Company Interest and shall be released to the
holder of the Exchangeable Company Certificate upon surrender thereof.
SECTION 7.03. Expense Account. (a) Upon the occurrence and during
----------------
the continuation of an Early Amortization Event, the Trustee, for the benefit of
the Successor Servicer under the Servicing Agreement shall establish and
maintain in the name of the Trustee with an Eligible Institution or with the
trust department of the Trustee, a segregated trust account accessible only by
and under the sole control and dominion of, the Trustee (such account, the
"Expense Account").
(b) So long as the initial Servicers or any subsidiary, Affiliate or
joint venture thereof are acting as Servicers, upon the occurrence and during
the continuation of an Early Amortization Event with respect to any Outstanding
Series as specified in the related Supplement, the Trustee shall, in accordance
with the written direction of the Master Servicer, deposit into the Expense
Account the portion of the Servicing Fee identified in such written direction as
allocable to such Series and payable to the initial Servicers or Affiliates
thereof, subject to the limitations specified in such Supplements.
(c) Amounts in the Expense Account shall be withdrawn by the
Successor Servicer in the manner specified in Section 6.02 of the Servicing
Agreement and in accordance with Section 8.05 herein.
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100
(d) The Trustee shall invest amounts on deposit in the Expense
Account in Eligible Investments and the income therefrom shall be deposited
therein. Any losses resulting from such investment shall be charged to amounts
on deposit in the Expense Account.
(e) Upon the earlier to occur of (i) the termination of the Trust
pursuant to Section 9.01, and (ii) 30 days after the termination of the duties
of the Successor Servicer under the Servicing Agreement, the Trustee shall
distribute all remaining funds in the Expense Account not otherwise owed to the
Trustee or any Successor Servicer to or at the written direction of the Company.
ARTICLE VIII
The Trustee
-----------
SECTION 8.01. Duties of Trustee. (a) The Trustee, prior to the
------------------
occurrence of a Servicer Default or Early Amortization Event of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Servicer Defaults and Early Amortization Events which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in the Pooling and Servicing Agreements or any Supplement and no implied
covenants or obligations shall be read into such Pooling and Servicing
Agreements against the Trustee. If a Servicer Default or Early Amortization
Event of which a Responsible Officer of the Trustee has actual knowledge
occurred (which has not been cured or waived), the Trustee shall exercise the
rights and powers vested in it by any Pooling and Servicing Agreement or any
Supplement and shall use the same degree of care and skill in their exercise as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) The Trustee may conclusively rely as to the truth of the
statements and the correctness of the opinions
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101
expressed therein upon resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to the Trustee; provided, that
--------
(i) in the case of any of the above which are specifically required to be
furnished to the Trustee pursuant to any provision of the Pooling and Servicing
Agreements, the Trustee shall, subject to Section 8.02, examine them to
determine whether they appear on their face to conform to the requirements of
this Agreement and (ii) in the case of any of the above as to which the Trustee
is required to perform procedures pursuant to the Internal Operating Procedures
Memorandum, the Trustee shall perform said procedures in accordance with the
Internal Operating Procedures Memorandum.
(c) Subject to subsection 8.01(a), no provision of this Agreement or
any Supplement shall be construed to relieve the Trustee from liability for its
own grossly negligent action, its own grossly negligent failure to act or its
own wilful misconduct; provided, however, that:
-------- -------
(i) the Trustee shall not be liable for an error of judgment unless it
shall be proved that the Trustee was grossly negligent, or acted in bad
faith, in ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith;
(iii) the Trustee shall not be charged with knowledge of any failure by
the Master Servicer or any Servicers to comply with any of their
obligations, unless a Responsible Officer of the Trustee obtains actual
knowledge of such failure or the Trustee receives written notice of such
failure from the Master Servicer or any Servicer, any Agent or any Investor
Certificateholder;
(iv) the Trustee shall not be charged with knowledge of a Servicer
Default or Early Amortization
<PAGE>
102
Event unless a Responsible Officer of the Trustee obtains actual knowledge
of such event or the Trustee receives written notice of such default or
event from the Master Servicer or any Servicer, any Agent or any holder of
Investor Certificates;
(v) the Trustee shall not be liable for any investment losses
resulting from any investments of funds on deposit in the Accounts or any
subaccounts thereof (provided that such investments are Eligible
--------
Investments); and
(vi) the Trustee shall have no duty to monitor the performance of the
Master Servicer or any Servicer, nor shall it have any liability in
connection with malfeasance or nonfeasance by the Master Servicer or any
Servicer; the Trustee shall have no liability in connection with compliance
of the Master Servicer or any Servicer or the Company with statutory or
regulatory requirements related to the Receivables; and the Trustee shall
have no duty to perform, except as otherwise required pursuant to the
Internal Operating Procedures Memorandum, any recalculation or verification
of any calculation with respect to data provided to the Trustee by the
Master Servicer or any Servicer.
(d) The Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties under any Pooling and Servicing Agreement or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it, and none of the provisions contained in any
Pooling and Servicing Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any obligations of
the Master Servicer or any Servicer under such Agreement except during such
time, if any, as the Trustee shall be the successor to, and be
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103
vested with the rights, duties, powers and privileges of, the Master Servicer or
any Servicer in accordance with the terms of such Agreement.
(e) Except as expressly provided in any Pooling and Servicing
Agreement, the Trustee shall have no power to vary the corpus of the Trust.
(f) Provided that the Master Servicer or any Servicer and the Company
shall have provided to the Trustee promptly upon request all books, records and
other information reasonably requested by the Trustee and shall have provided
the Trustee with all necessary access to the properties, books and records of
the Master Servicer or any Servicer and the Company which the Trustee may
reasonably require, then within 90 days following the Initial Closing Date, the
Trustee shall have (i) completed the Servicer Site Review and (ii) established
the Standby Liquidation System, and shall have notified the Master Servicer or
any Servicer, each Rating Agency and each Investor Certificateholder of such
events.
(g) The Trustee shall prepare, within 45 days of the Initial Closing
Date, the Internal Operating Procedures Memorandum. Once prepared, the Trustee
shall take such actions as are set forth in the Internal Operating Procedures
Memorandum unless prevented from doing so through no fault of the Trustee.
SECTION 8.02. Rights of the Trustee. Except as otherwise provided in
----------------------
Section 8.01 and in the Internal Operating Procedures Memorandum:
(a) The Trustee may conclusively rely on and shall be protected in
acting on, or in refraining from acting in accord with, any resolution,
Officers Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, appraisal, bond, note or other paper or document believed
by it to
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104
be genuine and to have been signed or presented to it pursuant to any
Pooling and Servicing Agreement by the proper party or parties.
(b) The Trustee may consult with counsel and any Opinion of Counsel
and any advice of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel.
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by any Pooling and Servicing Agreement, or to
institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the Certificate-
holders, pursuant to the provisions of any Pooling and Servicing Agreement,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby; provided, however, that nothing contained
-------- -------
herein shall relieve the Trustee of the obligations, upon the occurrence of
a Servicer Default or Early Amortization Event (which has not been cured),
to exercise such of the rights and powers vested in it by any Pooling and
Servicing Agreement, and to use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs. The right of the Trustee to
perform any discretionary act enumerated in this Agreement shall not be
construed as a duty, and the Trustee shall not be answerable for other than
its gross negligence or wilful misconduct in the performance of any such
act.
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by any
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105
Pooling and Servicing Agreement; provided that the Trustee shall be liable
for its gross negligence or wilful misconduct.
(e) The Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, direction, order,
approval, bond, note or other paper or document, unless requested in
writing so to do by the holders of Investor Certificates evidencing
Fractional Undivided Interests aggregating more than 50% of the Invested
Amount of any Series which could be materially and adversely affected if
the Trustee does not perform such acts; provided, however, that such
-------- -------
holders of Investor Certificates shall indemnify and reimburse the Trustee
for any liability or expense resulting from any such investigation
requested by them; provided further that the Trustee shall be entitled to
----------------
make such further inquiry or investigation into such facts or matters as it
may reasonably see fit, and if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books
and records of the Company, personally or by agent or attorney, at the sole
cost and expense of the Company.
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through affiliates,
agents or attorneys or a custodian or nominee, and the Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such affiliate, agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(g) The Trustee shall not be required to make any initial or periodic
examination of any documents or records related to the Receivables or the
Accounts for the purpose of establishing the presence or absence of
<PAGE>
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defects, the compliance by the Company with its representations and
warranties or for any other purpose.
(h) In the event that the Trustee is also acting as Paying Agent or
Transfer Agent and Registrar hereunder, the rights and protections afforded
to the Trustee pursuant to this Article VIII shall also be afforded to such
Paying Agent or Transfer Agent and Registrar.
SECTION 8.03. Trustee Not Liable for Recitals. The Trustee assumes
--------------------------------
no responsibility for the correctness of the recitals contained herein and in
the Certificates (other than the certificate of authentication on the
Certificates). Except as set forth in Section 8.15, the Trustee makes no
representations as to the validity or sufficiency of any Pooling and Servicing
Agreement or of the Certificates (other than the certificate of authentication
on the Certificates) or of any Receivable or related document. The Trustee
shall not be accountable for the use or application by the Company of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Company in respect of the Receivables or
deposited in or withdrawn from the Accounts or other accounts hereafter
established to effectuate the transactions contemplated herein and in accordance
with the terms of any Pooling and Servicing Agreement.
The Trustee shall not be accountable for the use or application by the
Master Servicer or any Servicer of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the Master
Servicer or any Servicer in respect of the Receivables or deposited in or
withdrawn from the Accounts or any Lockbox by or at the direction of the
Servicers or Lockbox Processors. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Receivable.
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SECTION 8.04. Trustee May Own Certificates. The Trustee in its
-----------------------------
individual or any other capacity (a) may become the owner or pledgee of Investor
Certificates with the same rights as it would have if it were not the Trustee
and (b) may transact any banking and trust business with the Company, the Master
Servicer or any Servicer or the Sellers as it would were it not the Trustee.
SECTION 8.05. Trustee's Fees and Expenses. The Master Servicer and
----------------------------
each Servicer covenant and agree to pay, but only from funds available to them
as the Servicing Fee paid under the Servicing Agreement, to the Trustee annually
in advance on the Initial Closing Date and on or about each one year anniversary
thereof, and the Trustee shall be entitled to receive, such reasonable
compensation as is agreed upon in writing between the Trustee and the Company
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trust hereby created and in the exercise and performance
of any of the powers and duties hereunder of the Trustee. The Trustee shall be
entitled to reimbursement upon its request for all reasonable expenses
(including, without limitation, expenses incurred in connection with notices,
requests for documentation or other communications to Certificate-holders),
disbursements, losses, liabilities, damages and advances incurred or made by the
Trustee in accordance with any of the provisions of any Pooling and Servicing
Agreement or by reason of its status as Trustee under any Pooling and Servicing
Agreement (including the reasonable fees and expenses of its agents, any co-
trustee and counsel) except any such expense, disbursement, loss, liability,
damage or advance as may arise from its gross negligence or bad faith. To the
extent the fees and expenses of the Trustee are not paid on a current basis, the
Trustee shall be entitled to be paid such items from amounts that would be
distributable to the Company under Article III of this Agreement and, to the
extent still unpaid in full, the Company will pay or reimburse the Trustee upon
its request for such items. If the Company fails so to reimburse the Trustee,
the Trustee
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shall be entitled to be paid from any amounts on deposit in the Expense Account.
Notwithstanding anything contained in this Agreement to the contrary, the
Trustee shall not be entitled to reimbursement for any costs or expenses
incurred in connection with the review, negotiation, preparation, execution and
delivery of any of the Transaction Documents or in connection with the issuance
of any Certificates on the Initial Closing Date except for such costs and
expenses as have been agreed to in writing between the Trustee and Company. If
the Trustee is appointed Successor Master Servicer or a Successor Servicer in
accordance with the Servicing Agreement, the provisions of this Section 8.05
shall not apply to expenses, disbursements, losses, liabilities, damages and
advances made or incurred by the Trustee in its capacity as Successor Master
Servicer or a Successor Servicer, which items shall be paid, first, out of the
Servicing Fee, second, to the extent not paid therefrom, by making an
appropriate withdrawal from the Expense Account, third, from amounts which would
be distributable to the Company under Article III of this Agreement, fourth,
from amounts distributable to the Company pursuant to Section 9.04 and to the
extent still unpaid in full, the Company will pay or reimburse the Trustee upon
its request for such items. The provisions of this Section 8.05 shall apply to
the reasonable expenses, disbursements and advances made or incurred by the
Trustee, or any other Person, in its capacity as liquidating agent, to the
extent not otherwise paid. The covenants to pay the expenses, disbursements,
losses, liabilities, damages and advances provided for in this Section shall
survive the termination of any Pooling and Servicing Agreement and shall be
binding on the Company, the Master Servicer, the Servicers and any Successor
Master Servicer or Successor Servicer. The Company's, the Master Servicer's and
the Servicers' covenants and agreements contained in this Section 8.05 shall
survive the termination of this Agreement.
SECTION 8.06. Eligibility Requirements for Trustee. The Trustee
-------------------------------------
hereunder shall at all times be a corporation organized and doing business under
the laws of
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the United States of America or any state thereof authorized under such laws to
exercise corporate trust powers, having (or having a holding company parent
with) a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then, for the
purpose of this Section 8.06, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 8.06, the Trustee shall resign immediately in the manner and with the
effect specified in Section 8.07.
SECTION 8.07. Resignation or Removal of Trustee. (a) Subject to
----------------------------------
paragraph (c) below, the Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the Company, the
Master Servicer and the Rating Agencies. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor
trustee shall have been so appointed and have accepted such appointment within
30 days after the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appointment of a
successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 hereof and shall fail to resign
after written request therefor by the Master Servicer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or if a receiver of the Trustee or of its
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property shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Company may remove the Trustee and
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of
successor trustee pursuant to any of the provisions of this Section 8.07 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.
(d) The obligations of the Company described in Sections 6.03 and
8.05 hereof and the obligations of the Master Servicer described in Section 8.05
hereof and Section 5.01 of the Servicing Agreement shall survive the removal or
resignation of the Trustee as provided in this Agreement.
(e) No Trustee under this Agreement shall be personally liable for
any action or omission of any successor trustee.
SECTION 8.08. Successor Trustee. (a) Any successor trustee
------------------
appointed as provided in Section 8.07 shall execute, acknowledge and deliver to
the Company and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein. The predecessor Trustee shall
deliver to the successor trustee all documents or copies thereof, at the expense
of the Master Servicer, and statements held by it hereunder; and the Company and
the predecessor Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
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confirming in the successor trustee all such rights, power, duties and
obligations. The Master Servicer shall immediately give notice, but in no event
less than 10 days prior to any such resignation or removal, to each Rating
Agency upon the appointment of a successor trustee.
(b) No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06.
(c) Upon acceptance of appointment by a successor trustee as provided
in this Section 8.08, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders at their addresses as shown in
the Certificate Register.
SECTION 8.09. Merger or Consolidation of Trustee. Any Person into
-----------------------------------
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 8.06, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Trustee shall promptly give notice (except to the
extent prohibited under any Requirement of Law or Contractual Obligation), but
in no event less than 10 days prior to any such merger or consolidation, to the
Company, the Master Servicer and the Rating Agencies upon any such merger or
consolidation of the Trustee. Information as to such merger or consolidation
that is made publicly available by the Trustee in at least two Authorized
Newspapers shall be deemed to satisfy the notice requirement of this
Section 8.09.
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SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
----------------------------------------------
(a) Notwithstanding any other provisions of any Pooling and Servicing
Agreement, at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof, and, subject
to the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as the Trustee may consider necessary. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 8.06 and no notice to Certificateholders of
the appointment of any co-trustee or separate trustee shall be required under
Section 8.08. The Trustee shall promptly notify each Rating Agency of the
appointment of any co-trustee.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any statute of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Master Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding of
title to the
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Trust or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of any Pooling and Servicing Agreement, specifically including every provision
of any Pooling and Servicing Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Master Servicer
and the Company.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to any
Pooling and Servicing Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted
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by law, without the appointment of a new or successor trustee.
SECTION 8.11. Tax Returns. In the event the Trust shall be required
------------
to file U.S. Federal, state, local or foreign income tax returns, the Company
shall prepare and file or shall cause to be prepared and filed any such tax
returns required to be filed by the Trust and shall remit such tax returns to
the Trustee for signature at least five Business Days before such tax returns
are due to be filed (including extensions). The Company shall also prepare or
shall cause to be prepared all U.S. Federal tax information in connection with
this Agreement required by law to be distributed to Certificateholders and shall
deliver such information to the Trustee at least five Business Days prior to the
date it is required by law to be distributed to the Certificateholders. The
Trustee, upon request, will furnish the Company with all such information known
to the Trustee as may be reasonably determined by the Company to be required in
connection with the preparation of all U.S. Federal, state, local or foreign
income tax returns of the Trust, and shall, upon the Company's written request,
execute such tax returns. In no event shall the Trustee in its individual
capacity be liable for any liabilities, costs or expenses of the Trust, the
Certificateholders, the Company the Master Servicer, or the Servicers arising
under any U.S. Federal, state, local or foreign income tax law or regulation,
including, without limitation, excise taxes or any other tax imposed by a
Governmental Authority on or measured by income (or any interest or penalty with
respect thereto or arising from any failure to comply therewith). The Trustee
shall not be required to determine whether any filing of tax returns is
required.
SECTION 8.12. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Certificates. All rights of action and claims under any Pooling and Servicing
- -------------
Agreement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto, and
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any such proceeding instituted by the Trustee shall be brought in its own name
as trustee. Any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the
Certificateholders in respect of which such judgment has been obtained.
SECTION 8.13. Suits for Enforcement. If a Servicer Default shall
----------------------
occur and be continuing, the Trustee may, as provided in Section 6.01 of the
Servicing Agreement, proceed to protect and enforce its rights and the rights of
the Certificateholders under this Agreement or any other Transaction Document by
suit, action or proceeding (including any suit, action or proceeding on behalf
of the Certificateholders against any third party) in equity or at law or
otherwise, whether for the specific performance of any covenant or agreement
contained in this Agreement or any other Transaction Document or in aid of the
execution of any power granted in this Agreement or any other Transaction
Document or for the enforcement of any other legal, equitable or other remedy as
the Trustee, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of the Trustee or the Certificateholders. In
furtherance of and without limiting the generality of subsection 8.01(d), the
Trustee shall have the right to obtain, before initiating any such action, such
reasonable indemnity from the Investor Certificateholders as the Trustee may
require against the costs, expenses and liabilities that may be incurred therein
or thereby. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Certificateholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Certificates or the rights of any holder thereof, or authorize the Trustee to
vote in respect of the claim of any Certificateholder in any such proceeding.
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SECTION 8.14. Rights of Investor Certificateholders To Direct
-----------------------------------------------
Trustee. Investor Certificateholders evidencing more than 50% of the Invested
- --------
Amount of any Series affected by the conduct of any proceeding or the exercise
of any right conferred on the Trustee shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
--------
however, that nothing in any Pooling and Servicing Agreement shall impair the
- -------
right of the Trustee to take any action deemed proper by the Trustee and which
is not inconsistent with such direction of the Investor Certificateholders;
provided further in furtherance and without limiting the generality of
- ----------------
subsection 8.01(d), the Trustee shall have the right to obtain, before acting in
accordance with any such direction of the Investor Certificateholders, such
reasonable indemnity from the Investor Certificateholders as the Trustee may
require against the costs, expenses and liabilities that may be incurred in so
acting.
SECTION 8.15. Representations and Warranties of Trustee. The Trustee
--------------------------------- --------
represents and warrants that:
(a) the Trustee is a banking corporation organized, existing and in
good standing under the laws of the State of New York and is duly
authorized to exercise trust powers under applicable law;
(b) the Trustee has the power and authority to enter into this
Agreement and any Supplement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement
and any Supplement; and
(c) each Pooling and Servicing Agreement and each of the Transaction
Documents executed by it have been duly executed and delivered by the
Trustee and, in the case of all such Transaction Documents, are legal,
valid and binding obligations of the Trustee,
<PAGE>
117
enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights generally and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
SECTION 8.16. Maintenance of Office or Agency. The Trustee will
--------------------------------
maintain at its expense in the Borough of Manhattan, The City of New York, an
office or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Certificates and the Pooling and Servicing Agreements
may be served. The Trustee will give prompt written notice to the Company, the
Master Servicer and the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
SECTION 8.17. Limitation of Liability. The Certificates are executed
------------------------
by the Trustee, not in its individual capacity but solely as Trustee of the
Trust, in the exercise of the powers and authority conferred and vested in it by
the Trust Agreement. Each of the undertaking and agreements made on the part of
the Trustee in the Certificates is made and intended not as a personal
undertaking or agreement by the Trustee but is made and intended for the purpose
of binding only the Trust.
ARTICLE IX
Termination
-----------
SECTION 9.01. Termination of Trust. (a) The Trust and the
---------------------
respective obligations and responsibilities of the Company, the Servicers and
the Trustee created hereby (other than the obligation of the Trustee to make
payments to Certificateholders as hereafter set forth) shall terminate, except
with respect to any such obligations or
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118
responsibilities expressly stated to survive such termination, on the earliest
of (i) the last day of the July 2011 Settlement Period, (ii) at the option of
the Company, at any time when the Aggregate Invested Amount is zero,
(iii) following the occurrence of either of the Early Amortization Events
specified in Section 7.01 of this Agreement, at any time when the Aggregate
Invested Amount is zero and (iv) upon completion of distribution of the amounts
referred to in subsection 7.02(b) (the "Trust Termination Date").
(b) If on the Distribution Date in the month immediately preceding
the month in which the Trust Termination Date occurs (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on such date and the
payment of principal on any Series of Certificates to be made on the related
Distribution Date pursuant to Article III) the Invested Amount of any Series
would be greater than zero (as certified in writing by the Master Servicer), the
Trustee, at the written direction of the Master Servicer, shall make reasonable
efforts to sell within 30 days of such Distribution Date all of the Receivables.
The proceeds of such sale shall be treated as Collections on the Receivables and
shall be allocated in accordance with Article III. During such 30-day period,
the Servicers shall continue to collect Collections on the Receivables and
allocate Collections in accordance with the provisions of Article III. The
reasonable costs and expenses incurred by the Trustee in such sale shall be
reimbursable to the Trustee as provided in Section 8.05.
SECTION 9.02. Optional Purchase and Final Termination Date of
-----------------------------------------------
Investor Certificates of Any Series. (a) On any Distribution Date during the
- ------------------------------------
Amortization Period with respect to any Series on which the Invested Amount (or
such other amount as may be set forth in the related Supplement) of such Series
is reduced to an amount equal to or less than the Optional Repurchase Percentage
of the Initial Invested Amount (or such other amount as may be set forth in the
related Supplement) for such Series as of the
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119
day preceding the beginning of such Amortization Period, the Company shall have
the option to repurchase the entire Certificateholders' Interest of such Series,
at a purchase price equal to (i) the outstanding Invested Amount of the Investor
Certificates of such Series plus (ii) accrued and unpaid interest through such
----
Distribution Date (after giving effect to any payment of principal and monthly
interest on such date of purchase) plus (iii) all other amounts payable to all
----
Investor Certificateholders of such Series under the related Supplement (such
purchase price, the "Clean-Up Call Repurchase Price"). The amount of the Clean-
Up Call Repurchase Price will be deposited into the Collection Account for
credit to the Series Collection Subaccount for such Series on such Distribution
Date in immediately available funds and will be passed through in full to the
applicable Investor Certificateholders. Following any such repurchase, such
Certificateholders' Interest in the Receivables shall terminate and such
interest therein will be allocated to the Company Interest and such
Certificateholders will have no further rights with respect thereto. In the
event that the Company fails for any reason to deposit the Clean-Up Call
Repurchase Price for such Receivables, the Certificateholders' Interest in the
Receivables will continue and monthly payments will continue to be made to the
Certificateholders.
(b) The amount deposited pursuant to subsection 9.02(a) shall be paid
to the Investor Certificateholders of the related Series pursuant to Article III
on the Distribution Date following the date of such deposit. All Certificates
of a Series which are purchased by the Company pursuant to subsection 9.02(a)
shall be delivered by the Company upon such purchase to, and be canceled by (in
accordance with the written directions of the Company), the Transfer Agent and
Registrar and be disposed of in a manner satisfactory to the Trustee and the
Company.
(c) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no
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later than the Series Termination Date with respect to such Series. Unless
otherwise provided in a Supplement, in the event that the Invested Amount of any
Series of Certificates is greater than zero on its Series Termination Date
(after giving effect to all transfers, withdrawals, deposits and drawings to
occur on such date and the payment of principal to be made on such Series on
such date), the Trustee will sell or cause to be sold, in accordance with the
directions of 50% of the Investor Certificateholders of such Series (upon which
the Trustee may conclusively rely) and pay the proceeds to all
Certificateholders of such Series pro rata (except that unless expressly
provided to the contrary in the related Supplement, no payment shall be made to
Certificateholders of any Class of any Series that is by its terms subordinated
to any other Class until such senior Class of Certificates have been paid in
full) in final payment of all principal of and accrued interest on such Series
of Certificates, an amount of Receivables or interests in Receivables up to the
Invested Amount of such Series at the close of business on such date; provided,
--------
however, in furtherance and without limiting the generality of subsection
- -------
8.01(d), the Trustee shall have the right to obtain, before acting in accordance
with any such direction of the Investor Certificateholders, such reasonable
indemnity from the Investor Certificateholders as the Trustee may require
against the costs, expenses and liabilities that may be incurred in so acting.
Absent such direction from Investor Certificateholders representing more than
50% of the Invested Amount of such Series or absent such reasonable indemnity as
the Trustee may require in connection with such direction, the Trustee shall
continue to hold the Trust Assets in respect of such Series in accordance with
the terms of the Pooling and Servicing Agreements until the Trust Termination
Date (or until a majority of the Certificateholders shall otherwise direct the
Trustee); provided that the terms of this Agreement, the related Supplement and
--------
the Servicing Agreement shall be deemed to remain in full force and effect,
except that no additional Receivables shall be allocated with respect to such
Series. The reasonable costs and expenses incurred by
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121
the Trustee in such sale shall be reimbursable to the Trustee as provided in
Section 8.05. Any proceeds of such sale in excess of such principal and
interest paid shall be paid to the holder of the Exchangeable Company
Certificate, unless and to the extent otherwise specified in any applicable
Supplement. Upon such Series Termination Date with respect to the applicable
Series of Certificates, final payment of all amounts allocable to any Investor
Certificates of such Series shall be made in the manner provided in this
Section 9.02.
SECTION 9.03. Final Payment with Respect to Any Series. (a) Written
-----------------------------------------
notice of any termination, specifying the Distribution Date upon which the
Investor Certificateholders of any Series may surrender their Investor
Certificates for payment of the final distribution with respect to such series
and cancelation, shall be given (subject to at least 30 days prior written
notice from the Master Servicer to the Trustee containing all information
required for the Trustee's notice or such shorter period as is acceptable to the
Trustee) by the Trustee to Investor Certificateholders of such Series mailed not
later than the fifth day of the month of such final distribution specifying
(i) the Distribution Date upon which final payment of the Investor Certificates
will be made upon presentation and surrender of Investor Certificates at the
office or offices therein designated, (ii) the amount of any such final payment
and (iii) that the Record Date otherwise applicable to such Distribution Date is
not applicable, payments being made only upon presentation and surrender of the
Investor Certificates at the office or offices therein specified. The Master
Servicer's notice to the Trustee in accordance with the preceding sentence shall
be accompanied by an Officer's Certificate setting forth the information
specified in Section 4.04 of the Servicing Agreement covering the period during
the then current calendar year through the date of such notice. The Trustee
shall give such notice to the Transfer Agent and Registrar and the Paying Agent
at the time such notice is given to such Investor Certificateholders.
<PAGE>
122
(b) Notwithstanding the termination of the Trust pursuant to
subsection 9.01(a) or the occurrence of the Series Termination Date with respect
to any Series pursuant to Section 9.02, all funds then on deposit in the
Collection Account (but only to the extent necessary to pay all outstanding and
unpaid amounts to Certificateholders) shall continue to be held in trust for,
the benefit of the Certificateholders and the Paying Agent or the Trustee shall
pay such funds to the Certificateholders upon surrender of their Certificates in
accordance with the terms hereof. Any Certificate not surrendered on the date
specified in subsection 9.03(a)(i) shall cease to accrue any interest provided
for such Certificate from and after such date. In the event that all of the
Investor Certificateholders shall not surrender their Certificates for
cancelation within six months after the date specified in the above-mentioned
written notice, the Trustee shall give a second written notice to the remaining
Investor Certificateholders of such Series to surrender their Certificates for
cancelation and receive the final distribution with respect thereto. If within
one year after the second notice all the Investor Certificates of such Series
shall not have been surrendered for cancelation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Investor Certificateholders of such Series concerning surrender of
their Certificates, and the cost thereof shall be paid out of the funds in the
Collection Account held for the benefit of such Investor Certificateholders.
The Trustee and the Paying Agent shall pay to the Company upon request any
monies held by them for the payment of principal or interest that remains
unclaimed for two years and neither the Trustee nor the Paying Agent shall be
liable to any Investor Certificateholder for such payment to the Company upon
its request. After payment to the Company, Certificateholders entitled to the
money must look to the Company for payment as general creditors unless an
applicable abandoned property law designates another Person.
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(c) All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancelation shall be canceled
by the Transfer Agent and Registrar and be disposed of in a customary manner
satisfactory to the Trustee.
SECTION 9.04. Company's Termination Rights. Upon the termination of
-----------------------------
the Trust pursuant to Section 9.01 and the surrender of the Exchangeable Company
Certificate and payment to the Trustee (in its capacity as such and/or in its
capacity as Successor Servicer) of all amounts owed to it under any Pooling and
Servicing Agreement, the Trustee shall assign and convey to the Company (without
recourse, representation or warranty) in exchange for the Exchangeable Company
Certificate all right, title and interest of the Trust in the Trust Assets,
whether then existing or thereafter created, and all proceeds thereof except for
amounts held by the Trustee pursuant to subsection 9.03(b). The Trustee shall
execute and deliver such instruments of transfer and assignment, in each case
without recourse, representation or warranty, as shall be reasonably requested
by the Company to vest in the Company all right, title and interest which the
Trust had in the Trust Assets.
ARTICLE X
Miscellaneous Provisions
------------------------
SECTION 10.01. Amendment. (a) This Agreement, the Servicing
----------
Agreement and each Supplement in respect of an Outstanding Series (collectively,
the "Pooling and Servicing Agreements") may be amended in writing from time to
time by the Master Servicer, the Company and the Trustee, without the consent of
any holder of any outstanding Certificate, to cure any ambiguity, to correct or
supplement any provisions herein or therein which may be inconsistent with any
other provisions herein or therein or to add any other provisions hereof to
change in any manner or eliminate any of the provisions with respect to matters
or questions raised under
<PAGE>
124
any Pooling and Servicing Agreement which shall not be inconsistent with the
provisions of any Pooling and Servicing Agreement; provided, however, that such
-------- -------
action shall not, as evidenced by an Officer's Certificate delivered to the
Trustee, have a Material Adverse Effect or a Company Material Adverse Effect
(but, to the extent that the determination of whether such action would have a
Material Adverse Effect or a Company Material Adverse Effect requires a
conclusion as to a question of law, an Opinion of Counsel shall be delivered to
the Trustee in addition to such Officer's Certificate); provided further that
----------------
(i) any deletion or modification of the first sentence of Section 6.03 or the
language of Section 7.02 that the Company elects to make that conforms to a
change in the Internal Revenue Code related to partnerships occurring after the
execution and delivery of this Agreement or (ii) any amendment that is entered
into to provide additional Enhancement for any Outstanding Series shall, to the
extent that such deletion, modification or amendment is entered into for the
purposes set forth in the foregoing clause (i) or (ii), as applicable, be deemed
to have no Material Adverse Effect or Company Material Adverse Effect. The
Trustee may, but shall not be obligated to, enter into any such amendment
pursuant to this paragraph or paragraph (b) below which affects the Trustee's
rights, duties or immunities under any Pooling and Servicing Agreement or
otherwise.
(b) Any Pooling and Servicing Agreement and, to the extent provided
in any Pooling and Servicing Agreement, any other agreement relating to the
Receivables may also be amended (other than in the circumstances referred to in
the preceding paragraph (a)) in writing from time to time by the Master
Servicer, the Company and the Trustee with the consent of Investor
Certificateholders evidencing more than 50% of the Invested Amount of any Series
adversely affected in any material respect by the amendment (or, if any such
Series shall have more than one Class of Investor Certificates adversely
affected in any material respect by the amendment, 50% or more of the Invested
Amount of each such Class) for the purpose of adding any provisions to or
<PAGE>
125
changing in any manner or eliminating any of the provisions of such Pooling and
Servicing Agreement or such other agreement or of modifying in any manner the
rights of holders of any Series then issued and outstanding; provided, however,
-------- -------
that no such amendment shall (i) reduce in any manner the amount of, or delay
the timing of, distributions which are required to be made on any Investor
Certificate of such Series without the consent of such Investor
Certificateholder of such Series; (ii) change the definition of or the manner of
calculating the interest of any Investor Certificateholder of such Series
without the consent of such Investor Certificateholder; or (iii) reduce the
aforesaid percentage of the Invested Amount of any adversely affected Series or
Class the holders of which are required to consent to any such amendment without
the consent of all Certificateholders of each Series adversely affected in any
material respect.
(c) Notwithstanding anything in this Section 10.01 to the contrary,
the Supplement with respect to any Series may be amended on the terms and with
the procedures provided in such Supplement.
(d) Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment to each Certificateholder of each Outstanding Series (or with respect
to an amendment of a Supplement, to each Certificateholder of the applicable
Series), and the Master Servicer shall furnish written notification of the
substance of such amendment to each Rating Agency. No such amendment (including
without limitation, the amendment of any Supplement notwithstanding anything to
the contrary contained in any Supplement) shall be effective until the Rating
Agency Condition has been satisfied.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 10.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the
<PAGE>
126
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(f) In executing or accepting any amendment pursuant to this
Section 10.01, the Trustee shall, upon request, be entitled to receive and rely
upon (i) an Opinion of Counsel stating that such amendment is authorized
pursuant to a specific provision of a Pooling and Servicing Agreement and
complies with such provision, (ii) a certificate from a Responsible Officer of
the Company stating that such (A) amendment shall not adversely affect the
interests of the holders of any outstanding Certificates in any material respect
except for holders of the Series whose consent to such amendment has been
obtained in accordance with clause (b) of this Section 10.01 and (B) all
conditions precedent to the execution and delivery of such amendment shall have
been satisfied in full and (iii) a Tax Opinion.
SECTION 10.02. Protection of Right, Title and Interest to Trust. The
-------------------------------------------------
Company shall cause each Pooling and Servicing Agreement, all amendments thereto
and/or all financing statements and continuation statements and any other
necessary documents covering the Certificateholders' and the Trustee's right,
title and interest to the Trust to be promptly recorded, registered and filed,
and at all times to be kept recorded, registered and filed, all in such manner
and in such places as may be required by law fully to preserve and protect the
right, title and interest of the Trustee hereunder to all property comprising
the Trust. The Company shall deliver to the Trustee file-stamped copies of, or
filing receipts for, any document recorded, registered or filed as provided
above, as soon as available following such recording, registration or filing.
In the event that the Company fails to file such financing or continuation
statements and the Trustee has received an opinion of counsel, at the expense of
the Company, that such filing is necessary to fully to preserve and to protect
the Trustee's
<PAGE>
127
right, title and interest in any Trust Asset then the Trustee shall have the
right to file the same on behalf of the Company and the Trustee shall be
reimbursed and indemnified by the Company for making such filing.
SECTION 10.03. Limitation on Rights of Certificateholders. (a) The
----------------------- -------------------
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor shall such death or incapacity entitle such
Certificateholders' legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
(b) Except with respect to the Investor Certificateholders as
expressly provided in any Pooling and Servicing Agreement, no Certificateholder
shall have any right to vote or in any manner otherwise control the operation
and management of the Trust, or the obligations of the parties hereto. Nor
shall any Certificateholder be under any liability to any third person by reason
of any action taken by the parties to this Agreement pursuant to any provision
hereof.
(c) No Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given to the Trustee, written request to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 60 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to initiate any such
action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each
<PAGE>
128
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Certificateholders shall have any right in any manner whatever by
virtue or by availing itself or themselves of any provisions of the Pooling and
Servicing Agreements to affect, disturb or prejudice the rights of any other of
the Investor Certificates, or to obtain or seek to obtain priority over or
preference to any other such Investor Certificateholder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Investor Certificateholders. For the
protection and enforcement of the provisions of this Section 10.03, each and
every Certificateholder and the Trustee shall be entitled to such relief as can
be given either at law or in equity.
(d) By their acceptance of Certificates pursuant to this Agreement
and the applicable Supplement, the Certificateholders agree to the provisions of
this Section 10.03.
SECTION 10.04. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT ISSUES
OF PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 10.05. Notices. All notices, requests and demands to or upon
--------
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows (i) in the case of the Company, the
<PAGE>
129
Master Servicer and the Trustee, or to such other address as may be hereafter
notified by the respective parties hereto:
The Company:
LFI Receivables Corporation
1300 National Highway
Thomasville, North Carolina 27360
Attention of Larry Milan and Richard Kennett
Telecopy: (910) 476-4551
with a copy to the Master Servicer
The Master Servicer:
LFI Servicing Corporation
1300 National Highway
Thomasville, North Carolina 27360
Attention of Larry Milan and Richard Kennett
Telecopy: (910) 476-4551
The Trustee:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10011
Attention of Advanced Structured Products Group
Telecopy: (212) 946-3240
Any notice required or permitted to be mailed to a Certificateholder shall be
given by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in any Pooling and Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
<PAGE>
130
SECTION 10.06. Severability of Provisions. If any one or more of the
---------------------------
covenants, agreements, provisions or terms of any Pooling and Servicing
Agreement shall for any reason whatsoever be held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of such Pooling and Servicing
Agreement and shall in no way affect the validity or enforceability of the other
provisions of any Pooling and Servicing Agreement or of the Certificates or
rights of the Certificateholders.
SECTION 10.07. Assignment. Notwithstanding anything to the contrary
-----------
contained herein, except as provided in Section 5.03 of the Servicing Agreement,
no Pooling and Servicing Agreement may be assigned by the Company, the Master
Servicer or any Servicer without the prior written consent of the Trustee acting
on behalf of the holders of 66-2/3% of the Invested Amount of each Outstanding
Series and without the Rating Agency Condition having been satisfied with
respect to such assignment.
SECTION 10.08. Certificates Nonassessable and Fully Paid. It is the
------------------------------------------
intention of the parties to each Pooling and Servicing Agreement that the
Investor Certificateholders shall not be personally liable for obligations of
the Trust, that the interests in the Trust represented by the Investor
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever and that Investor Certificates upon authentication
thereof by the Trustee pursuant to Section 5.02 are and shall be deemed fully
paid.
SECTION 10.09. Further Assurances. The Company and the Master
-------------------
Servicer agree to do and perform, from time to time, any and all acts and to
execute any and all further instruments required or reasonably requested by the
Trustee more fully to effect the purposes of each Pooling and Servicing
Agreement, including, without limitation, the execution of any financing
statements or continuation
<PAGE>
131
statements relating to the Receivables for filing under the provisions of the
UCC of any applicable jurisdiction.
SECTION 10.10. No Waiver; Cumulative Remedies. No failure to
-------------------------------
exercise and no delay in exercising, on the part of the Trustee or the Investor
Certificateholders, any right, remedy, power or privilege, hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 10.11. Counterparts. This Agreement may be executed in two
-------------
or more counterparts (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
SECTION 10.12. Third-Party Beneficiaries. This Agreement will inure
--------------------------
to the benefit of and be binding upon the parties hereto, the Certificateholders
and their respective successors and permitted assigns. Except as otherwise
provided in this Section 10.12, no other Person will have any right or
obligation hereunder.
SECTION 10.13. Actions by Certificateholders. (a) Wherever in any
------------------------------
Pooling and Servicing Agreement a provision is made that an action may be taken
or a notice, demand or instruction given by Investor Certificateholders, such
action, notice or instruction may be taken or given by any Investor
Certificateholders of any Series, unless such provision requires a specific
percentage of Investor Certificateholders of a certain Series or all Series.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind such Certificateholder and
<PAGE>
132
every subsequent holder of such Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee, the Company, the Master
Servicer or any Servicer in reliance thereon, whether or not notation of such
action is made upon such Certificate.
SECTION 10.14. Merger and Integration. Except as specifically stated
-----------------------
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement and the Servicing Agreement.
This Agreement and the Servicing Agreement may not be modified, amended, waived,
or supplemented except as provided herein.
SECTION 10.15. Headings. The headings herein are for purposes of
---------
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 10.16. Construction of Agreement. (a) The Company hereby
--------------------------
grants to the Trustee, for the benefit of the Certificateholders a security
interest in all of the Company's right, title and interest in, to and under the
Receivables and the other Trust Assets now existing and hereafter created, all
monies due or to become due and all amounts received with respect thereto and
all "proceeds" thereof (including Recoveries), to secure all of the Company's
and the Master Servicers' obligations hereunder, including, without limitation,
the Company's obligation to sell or transfer Receivables hereafter created to
the Trust.
(b) This Agreement shall constitute a security agreement under
applicable law.
SECTION 10.17. No Setoff. Except as expressly provided in this
----------
Agreement or any other Transaction Document, the Trustee agrees that it shall
have no right of setoff or banker's lien against, and no right to otherwise
<PAGE>
133
deduct from, any funds held in the Collection Account for any amount owed to it
by the Company, the Master Servicer, any Servicers or any Certificateholder.
SECTION 10.18. No Bankruptcy Petition. Each of the Trustee and the
-----------------------
Master Servicer hereby covenant and agree that, prior to the date which is one
year and one day after the date of the end of the Amortization Period with
respect to all Outstanding Series, it will not institute against, or join any
other Person in instituting against, the Company any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any Federal or state bankruptcy or similar law.
SECTION 10.19. Limitation of Liability. It is expressly understood
------------------------
and agreed by the parties hereto that (a) each Pooling and Servicing Agreement
is executed and delivered by the Trustee, not individually or personally but
solely as Trustee of the Trust, in the exercise of the powers and authority
conferred and vested in it, (b) except with respect to Section 8.15 hereof the
representations, undertakings and agreements herein made on the part of the
Trust are made and intended not as personal representations, undertakings and
agreements by the Trustee, but are made and intended for the purpose of binding
only the Trust, (c) nothing herein contained shall be construed as creating any
liability on the Trustee, individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties who are signatories to this Agreement and by any
Person claiming by, through or under such parties; provided, however, the
-------- -------
Trustee shall be liable in its individual capacity for its own wilful misconduct
or gross negligence and for any tax assessed against the Trustee based on or
measured by any fees, commission or compensation received by it for acting as
Trustee and (d) under no circumstances shall the Trustee be personally liable
for the payment of any indebtedness or expenses of the Trust or be liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by
<PAGE>
134
the Trust under any Pooling and Servicing Agreement; provided further that the
----------------
foregoing clauses (a) through (d) shall survive the resignation or removal of
the Trustee.
The Company hereby agrees to indemnify and hold harmless the Trustee
and the Trust for the benefit of the Certificateholders (each, an "Indemnified
Person") from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of any acts, omissions or alleged acts or
omissions arising out of, or relating to, activities of the Company pursuant to
any Pooling and Servicing Agreement to which it is a party, including but not
limited to any judgment, award, settlement, reasonable attorneys' fees and other
reasonable costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim, except to the extent such
loss, liability, expense, damage or injury resulted from the gross negligence,
bad faith or wilful misconduct of an Indemnified Person or resulted from the
performance of any Receivable, market fluctuations or other market or investment
risk not attributable to acts or omissions or alleged acts or omissions of the
Company; provided, however, that any payments to be made by the Company pursuant
-------- -------
to this subsection shall be Company Subordinated Obligations.
SECTION 10.20. Certain Information. The Master Servicer and the
--------------------
Company shall promptly provide to the Trustee such information in computer tape,
hard copy or other form regarding the Receivables as the Trustee may reasonably
determine to be necessary to perform its obligations hereunder.
<PAGE>
135
IN WITNESS WHEREOF, the Company, the Master Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers as
of the day and year first above written.
LFI RECEIVABLES CORPORATION,
by
---------------------------
Name:
Title:
LFI SERVICING CORPORATION, as
Master Servicer,
by
---------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by
---------------------------
Name:
Title:
<PAGE>
SCHEDULE 1 to the
POOLING AGREEMENT
-----------------
Receivables
-----------
Delivered or transmitted via computer tapes, diskettes or data
transmission pursuant to Section 2.01.
<PAGE>
SCHEDULE 2 to the
Identification of Trust Accounts POOLING AGREEMENT
-------------------------------- -----------------
The following accounts have been established by and at The Chase
Manhattan Bank:
Name Number
---- ------
Collection Account 507-863623
Company Collection Subaccount 507-863763
<PAGE>
SCHEDULE 3 to the
POOLING AGREEMENT
-----------------
Location of Chief Executive Office of the Company
-------------------------------------------------
LFI Receivables Corporation
1300 National Highway
Thomasville, North Carolina 27360
<PAGE>
LFI RECEIVABLES MASTER TRUST EXHIBIT A to the
POOLING AGREEMENT
-----------------
FORM OF EXCHANGEABLE COMPANY CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT"). NEITHER THIS CERTIFICATE NOR ANY PORTION HEREOF MAY BE
OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS.
THIS CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED,
EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT AS EXPRESSLY PERMITTED BY THE
TERMS OF THE POOLING AGREEMENT REFERRED TO HEREIN.
This Certificate evidences a fractional undivided interest in assets
of the
LFI RECEIVABLES MASTER TRUST
the corpus of which consists of receivables representing amounts payable for
goods or services, which receivables have been purchased by LFI Receivables
Corporation, a Delaware corporation, which in turn transferred and assigned such
receivables to the LFI Receivables Master Trust.
(Not an interest in or obligation of
LFI Receivables Corporation, the Sellers listed on
Schedule 1 to the Receivables Sale Agreement
or any Affiliate thereof)
This certifies that LFI Receivables Corporation, a Delaware
corporation (the "Company"), is the registered owner of the undivided interest
-------
(the "Company Interest") in the LFI Receivables Master Trust (the "Trust") not
----------------
represented by the Investor Certificates or the Subordinated Company
Certificates pursuant to Article V of the Pooling Agreement, dated as of
August 5, 1996 (as amended, supplemented or otherwise modified from time to
time, the
<PAGE>
2
"Agreement"), by and among the Company, LFI Servicing Corporation, a Delaware
---------
corporation (in its capacity as master servicer, the "Master Servicer"), and The
---------------
Chase Manhattan Bank, a New York banking corporation, not in its individual
capacity but solely as trustee (the "Trustee") for the Trust. The corpus of the
-------
Trust consists of receivables (the "Receivables") representing amounts payable
-----------
for goods or services and all other Trust Assets referred to in the Agreement.
Although a summary of certain provisions of the Agreement is set forth below,
this Certificate does not purport to summarize the Agreement, is qualified in
its entirety by the terms and provisions of the Agreement and reference is made
to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and obligations of the Trustee. A copy of the Agreement may be requested
by writing to the Trustee at The Chase Manhattan Bank, 450 W. 33rd Street, 15th
Floor, New York, New York 10011, Attn: Advanced Structured Products Group. To
the extent not defined herein, the capitalized terms used herein have the
meanings ascribed to them in the Agreement.
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Company by
virtue of the acceptance hereof assents and is bound.
This Certificate is the Exchangeable Company Certificate, which
represents an interest in the Trust including the right to receive certain
Collections and other amounts at the times and in the amounts specified in the
Agreement to be paid to the holder of the Exchangeable Company Certificate. In
addition to this Certificate, Investor Certificates will be issued to investors
pursuant to the Agreement, which will represent the interests of Investor
Certificateholders in the Trust and, to the extent provided in the related
Supplement of any Series, Subordinated Company Certificates will be issued
pursuant to the Agreement and such Supplement. This Certificate shall not
represent any interest in the Collection Account or
<PAGE>
3
other account except as expressly provided in the Agreement or in any
Supplement. This Certificate may be exchanged by the Company pursuant to the
Agreement for an increase in the Invested Amount of a Class of Investor
Certificates of an Outstanding Series and an increase in the related
Subordinated Company Certificate or one or more newly issued Series of Investor
Certificates representing an interest in any additional Receivables, and the
related newly issued Subordinated Company Certificate, and a reissued
Certificate upon the conditions set forth in the Agreement.
Subject to certain conditions in the Agreement and in each Supplement,
the obligations created by the Agreement (other than the obligation to make
payments to the Certificateholders as therein set forth) and the Trust created
thereby shall terminate, except with respect to any such obligations or
responsibilities expressly stated to survive such termination, upon the earlier
of (i) the last day of the July 2011 Settlement Period, (ii) at the option of
the Company, at any time when the Aggregate Invested Amount is zero,
(iii) following the occurrence of either of the Early Amortization Events
specified in Section 7.01 of the Agreement, at any time when the Aggregate
Invested Amount is zero and (iv) upon completion of distribution of the amounts
referred to in subsection 7.02(b) of the Agreement.
Upon termination of the Trust pursuant to Article IX of the Agreement,
subject to the provisions of the Agreement and the surrender of this
Certificate, the Trustee shall assign and convey to the Company (without
recourse, representation or warranty) all right, title and interest of the Trust
in the Receivables, whether then existing or thereafter created, and all
proceeds thereof, except for amounts held by the Trustee pursuant to subsection
9.03(b) of the Agreement. The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without recourse,
representation or warranty as shall be reasonably requested by the Company to
<PAGE>
4
vest in the Company all right, title and interest which the Trust has in the
Receivables.
It is expressly understood and agreed by the Company that (a) the
Agreement is executed and delivered by the Trustee, not individually or
personally but solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it, (b) the representations, undertakings and
agreements made on the part of the Trust in the Agreement are made and intended
not as personal representations, undertakings and agreements by the Trustee, but
are made and intended for the purpose of binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability of the Trustee,
individually or personally, to perform any covenant either expressed or implied
contained in the Agreement, all such liability, if any, being expressly waived
by the parties who are signatories to the Agreement and by any Person claiming
by, through or under such parties, provided, however, the Trustee shall be
-------- -------
liable in its individual capacity for its own willful misconduct or gross
negligence and for any tax assessed against the Trustee based on or measured by
any fees, commission or compensation received by it for acting as Trustee and
(d) under no circumstances shall the Trustee be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under the Agreement.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ANY CONFLICT OF LAW
PRINCIPLES.
<PAGE>
5
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this Exchangeable Company
Certificate to be duly executed.
Dated: August 5, 1996
LFI RECEIVABLES CORPORATION, as authorized
pursuant to Section 5.01 of the Agreement,
by
__________________________
Title:
<PAGE>
6
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Exchangeable Company Certificate described in the within-
mentioned Agreement.
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by
_______________________
Authorized Signatory
OR
by
_______________________
Authenticating Agent
by
_______________________
Authorized Signatory
<PAGE>
EXHIBIT B-1 to the
[FORM OF LOCKBOX AGREEMENT]
POOLING AGREEMENT
-----------------
, 1996
[Name and address of Lockbox Bank]
Attention:
Ladies and Gentlemen:
LFI Receivables Corporation, a Delaware corporation (the "Company"), has
agreed to purchase certain receivables (the "Receivables") from a number of
Sellers (the "Sellers", and in their capacity as servicers pursuant to the
Transaction Documents, the "Servicers") pursuant to the Receivables Sale
Agreement, dated as of August 5, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Receivables Sale Agreement"), among the
Sellers, the Servicers and the Company. The Company has in turn assigned the
Receivables to a master trust (the "Master Trust") pursuant to a Pooling
Agreement, dated as of August 5, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Pooling Agreement"), among the Company, LFI
Servicing Corporation, as master servicer (in such capacity, the "Master
Servicer") and The Chase Manhattan Bank, a New York banking corporation, as
trustee (the "Trustee"). The Receivables are serviced pursuant to the terms of
a Servicing Agreement, dated as of August 5, 1996 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Servicing Agreement";
and, collectively with the Pooling Agreement, the "Pooling and Servicing
Agreements") among the Company, the Servicers, the Master Servicer and the
Trustee. Capitalized terms used herein but not defined herein shall have the
meanings assigned to such terms in the Pooling Agreement.
<PAGE>
2
Pursuant to the terms of the Pooling and Servicing Agreements and except as
otherwise provided therein, (i) each of the Servicers has agreed to instruct all
Obligors under the Receivables originated by it as Seller to make all payments
in respect of such Receivables to a blocked deposit account (each, a "Lockbox
Account") designated by such Servicer to such Obligor and (ii) the Company has
agreed to grant a security interest in its right, title and interest in each
Lockbox Account and all funds and other evidences of payment held therein to the
Trustee. Furthermore, the Company, the Master Servicer, each of the Servicers
and the Trustee have agreed, pursuant to the Pooling and Servicing Agreements,
to enter into an agreement with each bank maintaining a Lockbox Account and
hereby request that [name of Lockbox Bank] (the "Lockbox Bank") act as, and the
Lockbox Bank hereby agrees to act as, a lockbox deposit bank for the Company
with respect to the Lockbox Account. This Letter Agreement defines certain
rights and obligations with respect to the appointment of the Lockbox Bank.
Accordingly, the Company, the Master Servicer, the Servicer party hereto, the
Trustee and the Lockbox Bank agree as follows:
Reference is made to the Lockbox Account (Account No. ), including
box number thereunder (collectively, the "Specified Account"),
maintained with you by the related Servicer. The related Servicer hereby
transfers the Specified Account to the Company and hereafter the Specified
Account shall be in the name of the Company and maintained by the Lockbox Bank
for the benefit of the Company and the Trustee, as set forth herein. All funds
and other evidences of payment received by the Lockbox Bank in its capacity as
Lockbox Bank shall be deposited in the Specified Account. Such payments shall
not be commingled with other funds. All funds and other evidences of payment at
any time on deposit in the Specified Account shall be held by the Lockbox Bank
for application strictly in accordance with the terms of this Letter Agreement.
The Lockbox Bank agrees to give the Trustee, the Company, the
<PAGE>
3
Master Servicer and the related Servicer prompt notice if the Specified Account
shall become subject to any writ, judgment, warrant of attachment, execution or
similar process.
The Trustee shall have sole and exclusive dominion over and control of the
Specified Account and all Collections and other property from time to time
deposited therein, and shall have the sole right of withdrawal from the
Specified Account. Each of the Company, the Master Servicer and the related
Servicer acknowledges and agrees that it shall not have any dominion over or
control of the Specified Account or any Collections or other property from time
to time deposited therein including any right to withdraw or utilize any funds
or other evidences of payment on deposit in the Specified Account, other than
the right to authorize transfers to the Collection Account as set forth herein
and pursuant to the terms of the Pooling and Servicing Agreements. The Lockbox
Bank shall automatically, by 1:00 p.m., New York City time, at least as often as
once each day that is a business day for the Lockbox Bank and for the Trustee,
transfer, by means of the Automated Clearing House System, all available funds
on deposit in the Specified Account, including all funds transferred from
Obligors on or before the end of the preceeding day, along with, subject to the
next succeeding sentence, all remittance advisements and payment invoices on
deposit therein, to the Collection Account. The Lockbox Bank acknowledges that,
until it receives instructions from the Trustee to the contrary, the Lockbox
Bank shall return to the Company, upon the Company's reasonable request
therefor, any remittance advisements and payment invoices deposited into the
Specified Account.
Deposited checks with respect to the Specified Account returned to the
Lockbox Bank for any reason will be charged against the Specified Account.
Nothing contained in the previous sentence shall be construed to prejudice other
rights of the Lockbox Bank, which rights include the right
<PAGE>
4
of recourse against the Company for any overdrafts in the Specified Account.
The Trustee is authorized to receive mail delivered to the Lockbox Bank with
respect to the Specified Account and the Company has filed a form of standing
delivery order with the United States Postal Service authorizing the Trustee to
receive mail delivered to the Lockbox Bank with respect to the Specified
Account.
The Lockbox Bank shall also furnish the Trustee with statements, in the form
and manner typical for the Lockbox Bank, of amounts of deposits in, and amounts
transferred to the Collection Account from, the Specified Account pursuant to
any reasonable request of the Trustee but in any event not less frequently than
monthly and such other information relating to the Specified Account at such
times as shall be reasonably requested by the Trustee.
For purposes of this Letter Agreement, any officer of the Trustee shall be
authorized to act, and to give instructions and notice, on behalf of the Trustee
hereunder.
The fees for the services of the Lockbox Bank shall be mutually agreed upon
between the Company and the Lockbox Bank and paid by the Company. Neither the
Trustee nor any investor in the Master Trust shall have any responsibility or
liability for the payment of any such fee.
The Lockbox Bank may perform any of its duties hereunder by or through its
officers, employees or agents and shall be entitled to rely upon the advice of
counsel as to its duties. The Lockbox Bank shall not be liable to the Trustee,
the Master Servicer, any Servicer or the Company for any action taken or omitted
to be taken by it in good faith, nor shall the Lockbox Bank be responsible to
the Trustee, the Master Servicer, any Servicer or the Company for the
consequences of any oversight or error of judgment or be answerable to the
Trustee for the same, unless such action, omission, oversight or error of
judgment shall
<PAGE>
5
happen through the Lockbox Bank's negligence or willful misconduct.
The Lockbox Bank hereby represents and warrants that (a) it is a banking
corporation duly organized, validly existing and in good standing under the laws
of [ ] and has full corporate power and authority under such laws to
execute, deliver and perform its obligations under this Agreement and (b) the
execution, delivery and performance of this Agreement by the Lockbox Bank have
been duly and effectively authorized by all necessary coporate action and this
Agreement has been duly executed and delivered by the Lockbox Bank and
constitutes a valid and binding obligation of the Lockbox Bank enforceable in
accordance with its terms.
The Lockbox Bank may resign at any time as Lockbox Bank hereunder by delivery
to the Trustee and the Company of written notice of resignation not less than 30
days prior to the effective date of such resignation. The Company may, with the
written consent of the Trustee, and, if the Company shall refuse any demand by
the Trustee to do so in the event (i) an Early Amortization Event shall occur
and be continuing or (ii) there has been a failure by the Lockbox Bank to
perform any of its material obligations hereunder and such failure could
adversely affect the Trustee's interest in any Receivable or the Trustee's
rights, or ability to exercise any remedies, under this Letter Agreement or the
Pooling and Servicing Agreements, the Trustee may close the Specified Account at
any time by delivery of notice to the Lockbox Bank and the Company at the
addresses appearing below. This Letter Agreement shall terminate upon receipt
of such notice of closing, or delivery of such notice of resignation, except
that the Lockbox Bank shall immediately transfer to the Collection Account, or
any other account designated by the Trustee all available funds or, subject to
the Company's reasonable request to retain such items, any remittance
advisements or payment invoices, if any, then on deposit in, or otherwise to the
credit of, the Specified Account and deliver any
<PAGE>
6
available funds or such remittance advisements or payment invoices relating to
the Receivables received by the Lockbox Bank after such notice directly to the
Collection Account or any other account designated by the Trustee.
All notices and communications hereunder shall be in writing (except where
telephonic instructions or notices are authorized herein) and shall be deemed to
have been received and shall be effective on the day on which delivered
(including delivery by telex):
(i) in the case of the Trustee, to it at:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10011
Attention: Advanced Structured Products Group
Telecopy No.: (212) 946-3240
(ii) in the case of the Lockbox Bank, to it at:
Attention:
Telecopy No.:
(iii) in the case of the Company, to it at:
LFI Receivables Corporation
1300 National Highway
Thomasville, NC 27360
Attention: Larry Milan and Richard Kennett
Telecopy No.: (910) 476-4551
<PAGE>
7
(iv) in the case of the Master Servicer, to it at:
LFI Servicing Corporation
1300 National Highway
Thamasville, NC 27360
Attention: Larry Milan and Richard Kennett
Telecopy No.: (910) 476-4551
(v) in the case of the Servicer party hereto, to it at:
Attention:
Telecopy No.:
The Lockbox Bank shall not assign or transfer any of its rights or
obligations hereunder (other than to the Trustee) without the prior written
consent of the Trustee. Notwithstanding anything herein to the contrary, upon
the succession of the Master Servicer to the Servicer party hereto in accordance
with and under the [Servicing Agreement], the Master Servicer shall succeed to,
and be substituted for, and may exercise every right and power of, the Servicer
party hereto under this Letter Agreement with the same effect as if the Master
Servicer had been named as the Servicer party hereto. This Letter Agreement may
be amended only by a written instrument executed by the Company, the Master
Servicer, the Servicer party hereto, the Trustee and the Lockbox Bank, acting by
their representative officers thereunto duly authorized. Except with respect to
the amount of its fees payable hereunder, the Lockbox Bank hereby
unconditionally and irrevocably waives (so long as the Pooling and Servicing
Agreements are in effect) any rights of setoff or banker's lien against, or to
otherwise deduct from, any funds or other evidences of payment held in any
Specified Account for any indebtedness or other claim owed by the Company, the
Master Servicer or any Servicer to the Lockbox Bank.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW
<PAGE>
8
YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST OR REMEDIES HEREUNDER IN RESPECT OF ANY RECEIVABLE MAY BE GOVERNED BY
THE LAW OF A JURISDICTION OTHER THAN NEW YORK.
This Letter Agreement (i) shall inure to the benefit of, and be binding upon,
the Company, the Servicers, the Master Servicer, the Trustee, the Lockbox Bank
and their respective successors and assigns and (ii) may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Letter Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Letter Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Letter Agreement to
be executed by their duly authorized officers as of the date first above
written.
Very truly yours,
LFI RECEIVABLES CORPORATION,
by
__________________________
Title:
[ ], as Servicer,
by
__________________________
Title:
<PAGE>
9
LFI SERVICING CORPORATION, as
Master Servicer,
by
_________________________
Title:
Agreed to and accepted:
[NAME OF LOCKBOX BANK],
as Lockbox Bank
by
__________________________
Title:
THE CHASE MANHATTAN BANK, as Trustee
by
__________________________
Title:
<PAGE>
EXHIBIT D to the
POOLING AGREEMENT
-----------------
Internal Operating Procedures Memorandum
----------------------------------------
Trustee to provide within 45 days of
the Initial Closing Date pursuant to
subsection 8.01(g).
<PAGE>
APPENDIX A to the
POOLING AGREEMENT
Description of Servicer Site Review Procedures
----------------------------------------------
Trustee to provide within 90 days
of The Initial Closing Date pursuant
to subsection 8.01(f)(i).
<PAGE>
APPENDIX B to the
POOLING AGREEMENT
-----------------
Description of Standby Liquidation System
-----------------------------------------
Trustee to establish within 90 days
of the Initial Closing Date pursuant to
subsection 8.01(f)(ii).
<PAGE>
Exhibit C to the
Pooling Agreement
-----------------
FORM OF ANNUAL OPINION OF COUNSEL
PROVISIONS TO BE INCLUDED
IN ANNUAL OPINION OF COUNSEL DELIVERED PURSUANT TO
SECTION 2.07(b) OF THE POOLING AGREEMENT ON JANUARY ,
OF EACH YEAR COMMENCING WITH JANUARY , 1997
The opinion set forth below, which is to be
delivered pursuant to Section 2.07(b) of the Pooling Agreement, dated as of
August 5, 1996, among LFI Receivables Corporation, LFI Servicing Corporation, as
Master Servicer, and The Chase Manhattan Bank, as Trustee, may be subject to
certain qualifications, assumptions, limitations and exceptions taken or made in
the opinions of counsel delivered on the initial Issuance Date with respect to
similar matters. In addition, the opinion may contain the following
qualification as applicable:
With your permission, we have based our opinions set forth in
paragraphs 1, 2 and 3 below as they relate to the laws of [states in
which the opiner does not have an office] (each a "UCC State") solely
upon our review of the relevant provisions of Sections 9-102, 9-103,
9-105, 9-106, 9-302, 9-304, 9-306, 9-401, 9-402 and 9-403 [and such
additional Sections as the opiner may determine] of the Uniform
Commercial Code as enacted in each UCC State as set forth in [the CCH
Secured Transactions Guide or a similar compilation]. We have assumed
such provisions are presently in effect and have not been modified in
any respect by any other statute, regulation or court decision with
respect to the laws of each such UCC State or otherwise. We call to
your attention that we are not licensed to practice in any of the UCC
States nor do we profess any expertise with respect to the laws
thereof.
1. With respect to the transfer by each Seller to LFI
Receivables Corporation of all of such Seller's right, title and interest in, to
and under the Receivables, Related Property, Collections and all rights
(including
<PAGE>
2
rescission, replevin or reclamation) relating to any Receivable originated by
such Seller or arising therefrom (collectively, the "Seller Property") pursuant
to the terms of the Receivables Sale Agreement, dated as of August 5, 1996 (as
amended, supplemented or otherwise modified, the "Receivables Sale Agreement"),
among LFI Receivables Corporation, the Sellers named therein and the Servicers
named therein, no filing or other action, other than such filing or action
described in the [opinions of counsel delivered on the initial Issuance Date]
[or the opinions delivered on [ ] of the prior year pursuant to
Section 2.07(b) of the Pooling Agreement] with respect to similar matters, is
necessary from the date of such opinions through 90 days into the following
calendar year to continue the perfected and priority status of the interest of
LFI Receivables Corporation in such Seller Property.
2. With respect to the transfer by LFI Receivables
Corporation to the Trust of all of LFI Receivables Corporation's right, title
and interest in, to and under the Receivables and the other Trust Assets (as
defined in the Pooling Agreement) (collectively, the "Trust Property") pursuant
to the terms of the Pooling Agreement, no filing or other action, other than
such filing or action described in the [opinions of counsel delivered on the
initial Issuance Date] [or the opinions delivered on [ ] of the prior year
pursuant to Section 2.07(b) of the Pooling Agreement] with respect to similar
matters is necessary from the date of such opinions through 90 days into the
following calendar year to continue the perfected and priority status of the
interest of the Trust in such Trust Property.
3. Set forth on Schedule __ to this opinion is a list of all
UCC Financing Statements which have been filed by each Seller relating to the
Seller Property and by LFI Receivables Corporation relating to the Trust
Property and the earliest and latest date under the applicable UCC on
<PAGE>
3
which continuation statements may be filed for each such financing
statement. 1/
-
- --------------------
1/ In the event that the earliest date for filing any continuation
-
statement occurs prior to January 30 of the following year, such opinion shall
also be delivered to each Seller, LFI Receivables Corporation and the Servicers
with a notice stating that such continuation statements shall be filed on such
earliest date.
<PAGE>
SCHEDULE 4 to the
POOLING AGREEMENT
-----------------
Contractual Obligations
-----------------------
NONE
----
Exhibit 10.7
EXECUTION COPY
================================================================================
LFI RECEIVABLES MASTER TRUST
SERIES 1996-A SUPPLEMENT
Dated as of August 5, 1996
to
POOLING AGREEMENT
Dated as of August 5, 1996
Among
LFI RECEIVABLES CORPORATION,
LFI SERVICING CORPORATION,
as Master Servicer,
THE CHASE MANHATTAN BANK,
as Agent and as Initial Purchaser
and
THE CHASE MANHATTAN BANK,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions . . . . . . . . . . . . . . 2
ARTICLE II
Designation of Certificates; Purchase and Sale
----------------------------------------------
of the VFC Certificates
-----------------------
SECTION 2.01. Designation . . . . . . . . . . . . . . 24
SECTION 2.02. The Series 1996-A Certificates . . . . 24
SECTION 2.03. Purchases of Interests in the VFC
Certificates . . . . . . . . . . . . 25
SECTION 2.04. Delivery . . . . . . . . . . . . . . . 26
SECTION 2.05. Procedure for Initial Issuance and for
Increasing the Series 1996-A
Invested Amount . . . . . . . . . . 26
SECTION 2.06. Procedure for Decreasing the Series
1996-A Invested Amount; Optional
Termination . . . . . . . . . . . . 28
SECTION 2.07. Reductions of the Commitments . . . . . 29
SECTION 2.08. Interest; Commitment Fee . . . . . . . 30
SECTION 2.09. Indemnification by the Company and the
Master Servicer . . . . . . . . . . 30
ARTICLE III
Article III of the Agreement
----------------------------
SECTION 3A.02. Establishment of Trust Accounts . . . . 32
SECTION 3A.03. Daily Allocations . . . . . . . . . . . 34
SECTION 3A.04. Determination of Interest . . . . . . . 39
<PAGE>
Page
----
SECTION 3A.05. Determination of Series 1996-A Monthly
Principal . . . . . . . . . . . . . 41
SECTION 3A.06. Applications . . . . . . . . . . . . . 43
SECTION 3A.07. Refinancing . . . . . . . . . . . . . . 44
-ii-
<PAGE>
Page
----
ARTICLE IV
Distributions and Reports
-------------------------
SECTION 4A.01. Distributions . . . . . . . . . . . . . 45
SECTION 4A.02. Daily Reports . . . . . . . . . . . . . 46
SECTION 4A.03. Statements and Notices . . . . . . . . 46
ARTICLE V
Additional Early Amortization Events
------------------------------------
SECTION 5.01. Additional Early Amortization Events . 47
ARTICLE VI
Servicing Fee
-------------
SECTION 6.01. Servicing Compensation . . . . . . . . 51
ARTICLE VII
Change in Circumstances
-----------------------
SECTION 7.01. Reserve Requirements; Change in
Circumstances . . . . . . . . . . . . 51
SECTION 7.02. Change in Legality . . . . . . . . . . 53
SECTION 7.03. Indemnity . . . . . . . . . . . . . . . 54
SECTION 7.04. Taxes . . . . . . . . . . . . . . . . . 55
SECTION 7.05. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate . . . 59
SECTION 7.06. Limitation . . . . . . . . . . . . . . 60
-iii-
<PAGE>
Page
----
ARTICLE VIII
Covenants, Representations and Warranties
-----------------------------------------
SECTION 8.01. Representations and Warranties of the
Company and the Master Servicer . . 61
SECTION 8.02. Covenants of the Company and the Master
Servicer . . . . . . . . . . . . . . 61
SECTION 8.03. Negative Covenant of the Company;
Covenants of the Master Servicer . . 62
SECTION 8.04. Obligations Unaffected . . . . . . . . 63
SECTION 8.05. Representations and Warranties of the
Initial Purchasers and Acquiring
Purchasers . . . . . . . . . . . . . 63
ARTICLE IX
Conditions Precedent
--------------------
SECTION 9.01. Conditions Precedent to Effectiveness
of Supplement . . . . . . . . . . . 65
ARTICLE X
The Agent
---------
SECTION 10.01. Appointment . . . . . . . . . . . . . . 69
SECTION 10.02. Delegation of Duties . . . . . . . . . 69
SECTION 10.03. Exculpatory Provisions . . . . . . . . 70
SECTION 10.04. Reliance by Agent . . . . . . . . . . . 70
SECTION 10.05. Notice of Master Servicer Default or
Early Amortization Event or
Potential Early Amortization Event . 71
SECTION 10.06. Non-Reliance on Agent and Other
Purchasers . . . . . . . . . . . . . 71
SECTION 10.07. Indemnification . . . . . . . . . . . . 72
SECTION 10.08. Agent in Its Individual Capacity . . . 73
SECTION 10.09. Successor Agent . . . . . . . . . . . . 73
-iv-
<PAGE>
Page
----
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Ratification of Agreement . . . . . . . 73
SECTION 11.02. Governing Law . . . . . . . . . . . . . 73
SECTION 11.03. Further Assurances . . . . . . . . . . 74
SECTION 11.04. Payments . . . . . . . . . . . . . . . 74
SECTION 11.05. Costs and Expenses . . . . . . . . . . 74
SECTION 11.06. No Waiver; Cumulative Remedies . . . . 75
SECTION 11.07. Amendments . . . . . . . . . . . . . . 75
SECTION 11.08. Severability . . . . . . . . . . . . . 76
SECTION 11.09. Notices . . . . . . . . . . . . . . . . 76
SECTION 11.10. Successors and Assigns . . . . . . . . 77
SECTION 11.11. Counterparts . . . . . . . . . . . . . 82
SECTION 11.12. Adjustments; Setoff . . . . . . . . . . 82
SECTION 11.13. Limitation of Payments by Company . . . 83
SECTION 11.14. No Bankruptcy Petition . . . . . . . . 83
SECTION 11.15 Rating of VFC Certificates . . . . . . 83
SECTION 11.16. Limitation on Addition and Termination
of Sellers . . . . . . . . . . . . . . 84
ARTICLE XII
Final Distributions
-------------------
SECTION 12.01. Certain Distributions . . . . . . . . . 85
EXHIBITS
Exhibit A Form of VFC Certificate, Series 1996-A
Exhibit B Form of Subordinated Company
Certificate, Series 1996-A
Exhibit C Form of Commitment Transfer Supplement
Exhibit D Form of Administrative Questionnaire
Exhibit E Form of Daily Report
Exhibit F Form of Monthly Settlement Statement
-v-
<PAGE>
Page
----
Exhibit G Form of Notice of Issuance/Increase
Exhibit H Form of Confidentiality Agreement
SCHEDULES
Schedule 1 Commitments
Schedule 2 Trust Accounts
Schedule 3 Timetable for Establishment of Disaster
Recovery Plan, Computer Back-Up Systems
and Operational Readiness of Off-Site
Disaster Recovery Facility
-vi-
<PAGE>
EXHIBIT A TO SERIES
1996-A SUPPLEMENT
-----------------
LFI RECEIVABLES MASTER TRUST
FORM OF VFC CERTIFICATE, SERIES 1996-A
REGISTERED UP TO $_____________.00 SERIES
NO. VFC-[ ] 1996-A PURCHASER INVESTED AMOUNT*
(OF UP TO $_____________.00 SERIES
1996-A INVESTED AMOUNT ISSUED)
*THE SERIES 1996-A PURCHASER INVESTED AMOUNT OF THIS VFC CERTIFICATE
IS SUBJECT TO CHANGE AS DESCRIBED HEREIN.
THIS VFC CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "SECURITIES ACT"). NEITHER THIS VFC CERTIFICATE NOR ANY PORTION
HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
REGISTRATION PROVISIONS.
THIS VFC CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED,
EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE POOLING AGREEMENT REFERRED TO HEREIN.
This VFC Certificate evidences a fractional undivided interest in
assets of the
LFI RECEIVABLES MASTER TRUST
the corpus of which consists of receivables representing amounts payable for
goods or services, which receivables have been purchased by LFI Receivables
Corporation, a Delaware corporation, which in turn transferred and assigned such
receivables to the LFI Receivables Master Trust.
(Not an interest in or obligation of
LFI Receivables Corporation, the Sellers listed on
Schedule 1 to the Receivables Sale Agreement
<PAGE>
2
or any Affiliate thereof)
This certifies that
[NAME OF CERTIFICATEHOLDER]
(the "VFC Certificateholder") is the registered owner of a fractional undivided
interest in the assets of LFI Receivables Master Trust (the "Trust"), created
pursuant to the Pooling Agreement, dated as of August 5, 1996 (as the same has
been and may from time to time be amended, restated, supplemented or otherwise
modified, the "Pooling Agreement"), by and among LFI Receivables Corporation, a
Delaware corporation (the "Company"), LFI Servicing Corporation, a Delaware
corporation, as master servicer (the "Master Servicer"), and The Chase Manhattan
Bank, a New York banking corporation, not in its individual capacity but solely
as trustee (in such capacity, the "Trustee") for the Trust, as supplemented by
the Series 1996-A Supplement, dated as of August 5, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Supplement",
collectively, with the Pooling Agreement, the "Agreement"), by and among the
Company, the Master Servicer, the Trustee, the purchasers named therein and from
time to time parties thereto (the "Purchasers") and The Chase Manhattan Bank, a
New York banking corporation, as initial purchaser and agent for the Purchasers
(in such capacity, the "Agent"). The corpus of the Trust consists of
receivables (the "Receivables") representing amounts payable for goods or
services and all other Trust Assets referred to in the Agreement. Although a
summary of certain provisions of the Agreement is set forth below, this VFC
Certificate does not purport to summarize the Agreement, is qualified in its
entirety by the terms and provisions of the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
obligations of the Trustee. A copy of the Agreement may be requested by a
holder hereof by writing to the Trustee at The Chase Manhattan Bank, 450 W. 33rd
Street, 15th Floor,
<PAGE>
3
New York, New York 10011, Attention of Advanced Structured Products Group. To
the extent not defined herein, the capitalized terms used herein have the
meanings ascribed to them in the Agreement.
This VFC Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the VFC
Certificateholder, by virtue of the acceptance hereof, assents and is bound.
The Master Servicer, the Company, each VFC Certificateholder and the
Trustee intend, for federal, state and local income and franchise tax purposes
only, that the VFC Certificates be evidence of indebtedness of the Company
secured by the Receivables. The VFC Certificateholder, by the acceptance
hereof, assents to and is bound by such intent.
This VFC Certificate is one in a Series of Investor Certificates
entitled "LFI Receivables Master Trust, VFC Certificates, Series 1996-A" (the
"VFC Certificates") representing a fractional undivided interest in the assets
of the Trust consisting of the right to receive (i) the Invested Percentage
(expressed as a decimal) of Collections received with respect to the Receivables
and all other funds on deposit in the Collection Account and (ii) to the extent
such interests appear in the Series 1996-A Supplement, all other funds on
deposit in the Series 1996-A Collection Subaccount and any subaccounts thereof
(collectively, the "VFC Certificateholders' Interest"). Concurrent with the
issuance of the VFC Certificates, the Trust shall also issue a Subordinated
Company Certificate entitled "LFI Receivables Master Trust, Subordinated Company
Certificate, Series 1996-A" (the "Series 1996-A Subordinated Company
Certificate") representing a fractional undivided interest in the assets of the
Trust consisting of the right to receive Collections allocated to the VFC
Certificateholders' Interest and not required to be distributed to or for the
benefit of the Purchasers (the "Series 1996-A Subordinated Interest"). The
Trust's assets
<PAGE>
4
are allocated in part to the VFC Certificateholders and the holder of the Series
1996-A Subordinated Company Certificate with the remainder allocated to the
Certificateholders of other Series (if any) and to the Company. In addition to
the VFC Certificates and the Series 1996-A Subordinated Company Certificate, an
Exchangeable Company Certificate will be issued to the Company pursuant to the
Agreement which will represent the Company's interest (if any) in the Trust.
The Exchangeable Company Certificate will represent the interest in the Trust
Assets not represented by the Certificates of each Outstanding Series. The
Exchangeable Company Certificate may be exchanged by the Company pursuant to the
Agreement for an increase in the Invested Amount of a Class of Investor
Certificates of an Outstanding Series and an increase in the related Series
1996-A Subordinated Company Certificate, or one or more newly issued Series of
Investor Certificates and the related newly issued Series 1996-A Subordinated
Company Certificate, and a reissued Exchangeable Company Certificate upon the
conditions set forth in the Agreement.
Distributions with respect to this VFC Certificate shall be paid by
the Agent in immediately available funds to the VFC Certificateholder at the
office of the Agent set forth in the Agreement. Final payment of this VFC
Certificate shall be made only upon presentation and surrender of this
Certificate at the office or agency specified in the notice of final
distribution delivered by the Trustee to the VFC Certificateholders in
accordance with the Agreement.
This VFC Certificate does not represent an obligation of, or an
interest in, the Company, the Master Servicer or any Affiliate of either of
them.
The transfer of this VFC Certificate shall be registered in the
Certificate Register upon surrender of this VFC Certificate for registration of
transfer at any office or agency maintained by the Transfer Agent and Registrar
accompanied by a written instrument of transfer,
<PAGE>
5
in a form satisfactory to the Trustee and the Transfer Agent and Registrar, duly
executed by the VFC Certificateholder or the VFC Certificateholder's attorney,
and duly authorized in writing with such signature guaranteed, and thereupon one
or more new VFC Certificates of authorized denominations and of like aggregate
Fractional Undivided Interests will be issued to the designated transferee or
transferees.
The Company, the Trustee, the Paying Agent, the Transfer Agent and
Registrar and any agent of any of them, may treat the person in whose name this
VFC Certificate is registered as the owner hereof for all purposes.
It is expressly understood and agreed by the Company and the VFC
Certificateholder that (a) the Agreement is executed and delivered by the
Trustee, not individually or personally but solely as Trustee of the Trust, in
the exercise of the powers and authority conferred and vested in it, (b) the
representations, undertakings and agreements made on the part of the Trust in
the Agreement are made and intended not as personal representations,
undertakings and agreements by the Trustee, but are made and intended for the
purpose of binding only the Trust, (c) nothing herein contained shall be
construed as creating any liability of the Trustee, individually or personally,
to perform any covenant either expressed or implied made on the part of the
Trust in the Agreement, all such liability, if any, being expressly waived by
the parties who are signatories to the Agreement and by any Person claiming by,
through or under such parties; provided, however, the Trustee shall be liable in
-------- -------
its individual capacity for its own wilful misconduct or gross negligence and
for any tax assessed against the Trustee based on or measured by any fees,
commission or compensation received by it for acting as Trustee and (d) under no
circumstances shall the Trustee be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under the Agreement.
<PAGE>
6
The holder of this VFC Certificate is authorized to record the date
and amount of each increase and decrease in the Series 1996-A Purchaser Invested
Amount with respect to such holder on the schedules annexed hereto and made a
part hereof and any such recordation shall constitute prima facie evidence of
-----------
the accuracy of the information so recorded, absent manifest error, provided
--------
that the failure of the holder of this VFC Certificate to make such recordation
(or any error in such recordation) shall not affect the obligations of the
Company, the holder of the Series 1996-A Subordinated Company Certificate, the
Master Servicer or the Trustee under the Agreement.
This VFC Certificate shall be construed in accordance with and
governed by the laws of the State of New York without reference to any conflict
of law principles.
The VFC Certificateholder hereby agrees that, prior to the date which
is one year and one day after the later of (i) the last day of the Series 1996-A
Amortization Period and (ii) the last day of the amortization period of any
other Outstanding Series, it will not institute against, or join any other
Person in instituting against, the Company any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any federal or state bankruptcy or similar law.
<PAGE>
7
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this VFC Certificate shall not
be entitled to any benefit under the Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this VFC Certificate to be
duly executed.
Dated: , 1996
------------
LFI RECEIVABLES CORPORATION,
as authorized pursuant to
Section 5.01 of the Agreement,
by
------------------------------
Title
<PAGE>
8
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the VFC Certificates described in the within-mentioned
Agreement.
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by
------------------------------
Authorized Signatory
OR
by
------------------------------
Authenticating Agent
by
------------------------------
Authorized Signatory
<PAGE>
Schedule 1
to VFC Certificate
------------------
Increase Decrease
in Series in Series
1996-A 1996-A Series 1996-
Invested Invested A Invested Notation
Date Amount Amount Amount Made By
<PAGE>
EXECUTION COPY
SERIES 1996-A SUPPLEMENT dated as of August 5,
1996 (this "Supplement"), among LFI RECEIVABLES
CORPORATION, a Delaware corporation (the "Company"),
LFI SERVICING CORPORATION, a Delaware corporation, as
master servicer (the "Master Servicer"), THE CHASE
MANHATTAN BANK, as the initial purchaser (the "Initial
Purchaser"), the other financial institutions from time
to time parties hereto as purchasers pursuant to
Section 11.10, THE CHASE MANHATTAN BANK, a New York
banking corporation, as agent (the "Agent") for the
Purchasers (as hereinafter defined) and THE CHASE
MANHATTAN BANK, in its capacity as Trustee (the
"Trustee") under the Agreement.
W I T N E S S E T H :
WHEREAS, the Company, the Master Servicer and the Trustee have entered
into a Pooling Agreement, dated as of August 5, 1996 (the "Agreement");
WHEREAS, the Agreement provides, among other things, that the Company,
the Master Servicer and the Trustee may at any time and from time to time enter
into supplements to the Agreement for the purpose of authorizing the issuance on
behalf of the Trust by the Company for execution and redelivery to the Trustee
for authentication of one or more Series of Certificates; and
WHEREAS, the Company, the Master Servicer, the Trustee and the Initial
Purchaser wish to supplement the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of
<PAGE>
2
which are hereby expressly acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. (a) The following words and phrases
------------
shall have the following meanings with respect to Series 1996-A and the
definitions of such terms are applicable to the singular as well as the plural
form of such terms and to the masculine as well as the feminine and neuter
genders of such terms:
"ABR" shall mean, for any day, a per annum alternate base rate
---
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such
day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any
reason, including the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms of the definition thereof, the Alternate
Base Rate shall be determined without regard to clause (b) or (c), or both, of
the immediately preceding sentence, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
The term "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced
<PAGE>
3
as being effective. The term "Base CD Rate" shall mean the sum of (a) the
product of (i) the Three-Month Secondary CD Rate and (ii) Statutory Reserves and
(b) the Assessment Rate. The term "Three-Month Secondary CD Rate" shall mean,
for any day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a Business
Day, the next preceding Business Day) by the Board through the public
information telephone line of the Federal Reserve Bank of New York (which rate
will, under the current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if such
rate shall not be so reported on such day or such next preceding Business Day,
the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately
10:00 a.m., New York City time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by the Agent from three New
York City negotiable certificate of deposit dealers of recognized standing
selected by it. The term "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for the day for such transactions received by
the Agent from three Federal funds brokers of recognized standing selected by
it.
"Accrued Expense Adjustment" shall mean, for any Business Day in any
--------------------------
Accrual Period, the amount, if any, which may be less than zero, equal to the
difference between (a) the entire amount of (A) the Commitment Fee, if any, due
and payable on such succeeding Distribution Date, (B) the Series 1996-A Monthly
Interest, (C) the Series 1996-A Monthly Servicing Fee and (D) all accrued
Program Costs, in each case for such Accrual Period determined as of such day,
and (b) the aggregate of the amounts transferred to the
<PAGE>
4
Series 1996-A Non-Principal Collection Sub-subaccount on or before such day in
respect of such Accrual Period pursuant to subsection 3A.03(a)(i), before giving
effect to any transfer made in respect of the Accrued Expense Adjustment on such
day pursuant to the further proviso to such subsection.
"Accrued Expense Amount" shall mean, for each Business Day during an
----------------------
Accrual Period, the sum of (a) one-tenth of the Series 1996-A Monthly Interest
determined as of such Business Day, (b) one-tenth of the Commitment Fee payable
to the VFC Certificateholders on the next succeeding Distribution Date,
(c) one-tenth of the Series 1996-A Monthly Servicing Fee (in the case of each of
the foregoing clauses (a) through (c), up to the amount thereof due and payable
on the succeeding Distribution Date, but subject to Accrued Expense Adjustments
as provided in subsection 3A.03(a)(i)) and (d) all Program Costs that have
accrued since the preceding Business Day.
"Acquiring Purchaser" shall have the meaning assigned in
-------------------
subsection 11.10(b).
"Additional Amount" shall have the meaning assigned in
-----------------
subsection 7.04(a).
"Additional Interest" shall have the meaning assigned in
-------------------
subsection 3A.04(b).
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar
------------------
Borrowing for any Eurodollar Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a) the
LIBO Rate in effect for such Eurodollar Period and (b) Statutory Reserves.
"Aged Receivables Ratio" shall mean, as of the last day of each
----------------------
Settlement Period, the percentage equivalent of a fraction, the numerator of
which shall be the sum of (a) the aggregate unpaid balance of Receivables
<PAGE>
5
originated by the Sellers that were 91 to 120 days past due and (b) the
aggregate amount of Receivables of such Sellers that were charged off as
uncollectible prior to the day that is 91 days after its original due date
during such Settlement Period, and the denominator of which shall be the
aggregate Principal Amount of Receivables originated by the Sellers during the
third prior Settlement Period.
"Agent" shall have the meaning specified in the recitals hereto.
-----
"Aggregate Commitment Amount" shall mean, with respect to any Business
---------------------------
Day, the aggregate amount of the Commitments of all Purchasers on such date, as
reduced from time to time pursuant to Section 2.07.
"Applicable Margin" shall mean (a) at any date of determination before
-----------------
the 180th day following the Issuance Date, for each Eurodollar Tranche, 1.00%
per annum and, for the Floating Tranche, 0% per annum and (b) at any date of
determination on or after the 180th day following the Issuance Date, for each
Eurodollar Tranche, 2.50% per annum (or, if less, the "Applicable Percentage"
with respect to "Eurodollar Loans" (as each such term is defined in the Credit
Agreement")) and, for the Floating Tranche, 1.50% per annum (or, if less, the
"Applicable Percentage" with respect to "ABR Loans" (as each such term is
defined in the Credit Agreement)).
"Article VII Costs" shall mean any amounts due pursuant to
-----------------
Article VII.
"Assessment Rate" shall mean, for any date, the annual rate (rounded
---------------
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the
Agent as the then current net annual assessment rate that will be employed in
determining amounts payable by the Agent to the Federal Deposit Insurance
Corporation (or any successor) for insurance by such Corporation (or such
successor) of time
<PAGE>
6
deposits made in U.S. Dollars at the Agent's domestic offices.
"Available Commitment" shall mean, with respect to any Business Day,
--------------------
the (i) Aggregate Commitment Amount on such Business Day minus (ii) the
Series 1996-A Invested Amount.
"Available Pricing Amount" shall mean, on any Business Day, the sum of
------------------------
(i) the Unallocated Balance plus (ii) the Increase, if any, on such date.
"Benefitted Purchaser" shall have the meaning assigned in
--------------------
Section 11.12.
"Board" shall mean the Board of Governors of the Federal Reserve
-----
System of the United States.
"Carrying Cost Reserve Ratio" shall mean, as of any Settlement Report
---------------------------
Date and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) equal to (a) the product of (i) 2.0 times
Days Sales Outstanding as of such day and (ii) 1.50 times the Discount Rate as
of such day divided by (b) 360; provided, however, that for any day during the
-------- -------
continuation of an Early Amortization Period, the "Carrying Cost Reserve Ratio"
for such day shall mean an amount (expressed as a percentage) equal to (a) the
product of (i) 2.0 times Days Sales Outstanding as of such day and (ii) 1.20
times a rate equal to the ABR in effect on such day plus 2.00% per annum divided
by (b) 365.
"Certificate Rate" shall mean on any date of determination, the
----------------
average (weighted based on the respective outstanding amounts of the Floating
Tranche and each Eurodollar Tranche) of the ABR in effect on such day and the
Adjusted LIBO Rates in effect on such day plus, in each case, the Applicable
Margin.
<PAGE>
7
"Change in Control" shall mean the occurrence of any event the result
-----------------
of which causes Lifestyle Furnishings International Ltd., Lifestyle Holdings
Ltd. or the Company not to be a direct or indirect, wholly owned Subsidiary of
Furnishings International, Inc.
"Claim" shall have the meaning specified in subsection 2.09(a).
-----
"Clean-Up Call Amount" shall mean the Clean-Up Call Percentage of the
--------------------
largest Series 1996-A Invested Amount at any time during the Series 1996-A
Revolving Period.
"Clean-Up Call Percentage" shall mean 10%.
------------------------
"Commitment" shall mean, as to any Purchaser, its obligation to
----------
maintain and, subject to certain conditions, increase, its Series 1996-A
Purchaser Invested Amount, in an aggregate amount not to exceed at any one time
outstanding the amount set forth opposite such Purchaser's name on Schedule 1
under the caption "Commitment", as such amount may be reduced from time to time
as provided herein; collectively, as to all Purchasers, the "Commitments".
"Commitment Fee" shall have the meaning assigned in
--------------
subsection 2.08(b).
"Commitment Percentage" shall mean, as to any Purchaser and as of any
---------------------
date, the percentage equivalent of a fraction, the numerator of which is such
Purchaser's Commitment as set forth on Schedule 1 and the denominator of which
is the Aggregate Commitment Amount as of such date.
"Commitment Period" shall mean the period commencing on the Issuance
-----------------
Date and terminating on the date that the Series 1996-A Amortization Period
commences.
"Commitment Reduction" shall have the meaning assigned in
--------------------
subsection 2.07(a).
<PAGE>
8
"Commitment Termination Date" shall mean the earlier of (a) the
---------------------------
Scheduled Revolving Termination Date and (b) the date on which the Commitments
are terminated in whole pursuant to Section 2.07.
"Commitment Transfer Supplement" shall have the meaning assigned in
------------------------------
subsection 11.10(c).
"Company Indemnified Person" shall have the meaning assigned in
--------------------------
subsection 2.09(a).
"Credit Agreement" shall mean the Credit Agreement dated as of
----------------
August 5, 1996, among: Lifestyle Furnishings International Ltd.; each subsidiary
of Lifestyle Furnishings International Ltd. listed on Schedule 1 thereto;
Furnishings International Inc.; the lenders identified therein; The Chase
Manhattan Bank, as a lender and as administrative agent and collateral agent for
the lenders; and Chase Manhattan Bank Delaware, as a letter of credit issuer
thereunder (including any amendments or modifications thereto or refinancings
thereof).
"Daily Interest Adjustment" shall mean, for any Business Day in any
-------------------------
Accrual Period, the amount, if any, which may be less than zero, equal to the
difference between (i) Series 1996-A Monthly Interest determined as of such day
and (ii) the amount on deposit in the Series 1996-A Accrued Interest Sub-
subaccount on such day after making any deposit thereto pursuant to subsection
3A.03(c), before giving effect to any transfer made in respect of the Daily
Interest Adjustment on such day pursuant to the proviso to such subsection.
"Daily Interest Deposit" shall mean, for any Business Day, an amount
----------------------
equal to (i) the amount of accrued and unpaid Daily Interest Expense in respect
of such day plus (ii) the aggregate amount of all previously accrued and unpaid
Daily Interest Expense plus (iii) the aggregate amount of all accrued and unpaid
Additional Interest.
<PAGE>
9
"Daily Interest Expense" for any day in any Accrual Period, shall mean
----------------------
the sum of (A) the product of (i) the portion of the Series 1996-A Invested
Amount (calculated without regard to clauses (d) and (e) of the definition of
Series 1996-A Purchaser Invested Amount) allocable to the Floating Tranche on
such day divided by 365 and (ii) the ABR plus the Applicable Margin in effect on
such day, and (B) the product of (i) the portion of the Series 1996-A Invested
Amount (calculated without regard to clauses (d) and (e) of the definition of
Series 1996-A Purchaser Invested Amount) allocable to Eurodollar Tranches on
such day divided by 360 and (ii) the weighted average Adjusted LIBO Rate plus
the Applicable Margin on such day in effect with respect thereto; provided,
--------
however, that for the purposes of calculating Series 1996-A Monthly Interest,
- -------
the "Daily Interest Expense" for any day following the date of determination
shall be based on the allocable portions of the Series 1996-A Invested Amount,
the ABR, the weighted average Adjusted LIBO Rate and the Applicable Margins as
of or in effect on such date of determination; provided, further, that for any
-------- -------
such day during the continuation of an Early Amortization Period, the "Daily
Interest Expense" for such day shall be equal to the greater of (i) the sum of
the amounts calculated pursuant to clauses (A) and (B) above and (ii) the
product of (x) the Series 1996-A Invested Amount on such day divided by 365 and
(y) the ABR in effect on such day plus 2.00% per annum.
"Daily Report" shall mean a report prepared by the Master Servicer on
------------
each Business Day for the period specified therein, in substantially the form of
Exhibit E.
"Days Sales Outstanding" shall mean, as of any Settlement Report Date
----------------------
and continuing until the next Settlement Report Date, the number of days equal
to the product of (a) 91 and (b) the amount obtained by dividing (i) the
aggregate Principal Amount of Eligible Receivables as at the last day of the
Settlement Period immediately preceding such earlier Settlement Report Date, by
(ii) the aggregate Principal Amount of Receivables generated by the
<PAGE>
10
Sellers for the three Settlement Periods immediately preceding such earlier
Settlement Report Date.
"Decrease" shall have the meaning assigned in Section 2.06.
--------
"Dilution Horizon" shall mean the number of days from the occurrence
----------------
of any event that gives rise to a Dilution Adjustment with respect to a
Receivable until a Dilution Adjustment with respect to such Receivable is issued
by the related Servicer in accordance with its Policies.
"Dilution Horizon Factor" shall mean (a) for the period from the
-----------------------
Issuance Date until the sixth Settlement Report Date to occur thereafter, 2.37
and (b) for each six-month period to occur after such initial period, a
fraction, the numerator of which is the dollar weighted average Dilution Horizon
of the Sellers (based upon the Dilution Adjustment of the selected Receivables)
for such period (which shall be calculated by the related Servicer, in
accordance with its past procedures for such calculations, selecting a random
sample of approximately 200 Dilution Adjustment memos from each Seller created
during such period and determining the Dilution Horizon therefrom) and the
denominator of which is 30; provided, however, that if the Dilution Horizon
-------- -------
Factor for any period is less than the Dilution Horizon Factor for the
immediately preceding period, then the actual Dilution Horizon Factor for such
current period shall be recalculated to equal a fraction, the numerator of which
is equal to the average of the numerators used to calculate the Dilution Horizon
Factor for such immediately preceding period and such current period and the
denominator of which is 30.
"Dilution Period" shall mean as of any Settlement Report Date and
---------------
continuing until (but not including) the next Settlement Report Date), the
quotient of (i) the product of (A) the aggregate Principal Amount of Receivables
that were originated by the Sellers during the Settlement
<PAGE>
11
Period preceding such earlier Settlement Report Date and (B) the Dilution
Horizon Factor and (ii) the aggregate Principal Amount of Eligible Receivables
as of the last day of the Settlement Period preceding such earlier Settlement
Report Date.
"Dilution Ratio" shall mean, as of the last day of each Settlement
--------------
Period, an amount (expressed as a percentage) equal to the aggregate amount of
Dilution Adjustments made during such Settlement Period divided by the aggregate
Principal Amount of Receivables that were originated by the Sellers during the
immediately preceding Settlement Period.
"Dilution Reserve Ratio" shall mean, as of any Settlement Report Date
----------------------
and continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) that is calculated as follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio;
c = 2.00;
d = the average of the Dilution Ratio during the period of twelve
consecutive Settlement Periods ending prior to such earlier Settlement
Report Date;
e = the highest Dilution Ratio for any Settlement Period during the period
of twelve consecutive Settlement Periods ending prior to such earlier
Settlement Report Date; and
f = the Dilution Period.
<PAGE>
12
"Discount Rate" shall mean, as of any date of determination, the sum
-------------
of (a) the weighted average interest rate in effect with respect to the VFC
Certificates as of the end of the Settlement Period immediately preceding the
most recent Settlement Report Date and (b) an amount equal to (i) the aggregate
amount of fees (other than the Servicing Fee and Program Costs) accrued with
respect to the VFC Certificates during the Settlement Period immediately
preceding the most recent Settlement Report Date divided by (ii) the average
daily Series 1996-A Invested Amount during such Settlement Period.
"Early Amortization Event" shall have the meanings assigned in
------------------------
Section 5.01 of this Supplement and Section 7.01 of the Agreement.
"Early Amortization Period" shall have the meaning assigned in
-------------------------
Section 5.01 of this Supplement and Section 7.01 of the Agreement.
"Effective Date" shall have the meaning assigned in Section 9.01.
--------------
"Eligible Receivables Percentage" shall mean a percentage equal to
-------------------------------
(a) 100 percent minus (b) the Ineligible Receivables Percentage.
-----
"Eurodollar Period" shall mean, with respect to any Eurodollar
-----------------
Tranche:
(a) initially, the period commencing on the Issuance Date or
conversion date, as the case may be, with respect to such Eurodollar
Tranche and ending one, two or three months thereafter, as selected by the
Company in its notice of issuance or notice of conversion, as the case may
be, given with respect thereto; and
<PAGE>
13
(b) thereafter, each period commencing on the last day of the next
preceding Eurodollar Period applicable to such Eurodollar Tranche and
ending one, two or three months thereafter, as selected by the Company by
irrevocable notice to the Agent not less than three Business Days prior to
the last day of the then current Eurodollar Period with respect thereto;
provided that, all of the foregoing provisions relating to Eurodollar Periods
- --------
are subject to the following:
(1) if any Eurodollar Period would otherwise end on a day that is not
a Business Day, such Eurodollar Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to
carry such Eurodollar Period into another calendar month in which event
such Eurodollar Period shall end on the immediately preceding Business Day;
(2) any Eurodollar Period that would otherwise extend beyond the
Scheduled Revolving Termination Date shall end on the Scheduled Revolving
Termination Date; and
(3) any Eurodollar Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Eurodollar Period) shall end
on the last Business Day of a calendar month.
"Eurodollar Tranche" shall mean a portion of the Series 1996-A
------------------
Invested Amount for which the Series 1996-A Monthly Interest is calculated by
reference to an Adjusted LIBO Rate determined by reference to a particular
Eurodollar Period.
"Excess Program Costs" shall have the meaning assigned to such term
--------------------
within the definition of "Program Costs".
<PAGE>
14
"Excluded Taxes" shall have the meaning assigned in subsection
--------------
7.04(a).
"Floating Tranche" shall mean that portion of the Series 1996-A
----------------
Invested Amount not allocated to a Eurodollar Tranche for which the
Series 1996-A Monthly Interest is calculated by reference to the ABR.
"Government Obligor Factor" shall mean 2.5% for the six month period
-------------------------
from November through April of any year and 1.5% for the six month period from
May through October of any year.
"HFG Companies" shall have the meaning assigned in the Credit
-------------
Agreement.
"Increase" shall have the meaning assigned in subsection 2.05(a).
--------
"Increase Amount" shall have the meaning assigned in
---------------
subsection 2.05(a).
"Increase Date" shall have the meaning assigned in subsection 2.05(a).
-------------
"Ineligible Receivables Percentage" shall mean the percentage
---------------------------------
equivalent of a fraction the numerator of which is the excess of the aggregate
Principal Amount of Receivables over the Aggregate Receivables Amount, in each
case on the last Business Day of the Series 1996-A Revolving Period, and the
denominator of which is the aggregate Principal Amount of Receivables on the
last Business Day of the Series 1996-A Revolving Period.
"Initial Purchasers" shall have the meaning specified in the recitals
------------------
hereto.
"Initial Series 1996-A Invested Amount" shall mean $155,000,000.
-------------------------------------
<PAGE>
15
"Initial Series 1996-A Subordinated Certificate Amount" shall mean the
-----------------------------------------------------
Series 1996-A Subordinated Certificate Amount in respect of the Issuance Date.
"Interest Shortfall" shall have the meaning assigned in
------------------
subsection 3A.04(b).
"Invested Amount" shall mean, with respect to Series 1996-A, the
---------------
Series 1996-A Invested Amount.
"Invested Percentage" shall mean, with respect to any Business Day
-------------------
(i) during the Series 1996-A Revolving Period, the percentage equivalent of a
fraction, the numerator of which is the Series 1996-A Allocated Receivables
Amount as of the end of the immediately preceding Business Day and the
denominator of which is the greater of (A) the Aggregate Receivables Amount as
of the end of the immediately preceding Business Day and (B) the sum of the
numerators used to calculate the Invested Percentage for all Outstanding Series
on the Business Day for which such percentage is determined and (ii) during the
Series 1996-A Amortization Period, the percentage equivalent of a fraction, the
numerator of which is the Series 1996-A Allocated Receivables Amount as of the
end of the last Business Day of the Series 1996-A Revolving Period (provided
--------
that if during the Series 1996-A Amortization Period, the amortization periods
of all other Outstanding Series which were outstanding prior to the commencement
of the Series 1996-A Amortization Period commence, then, from and after the date
the last of such series commences its Amortization Period, the numerator shall
be the Series 1996-A Allocated Receivables Amount as of the end of the Business
Day preceding such date) and the denominator of which is the greater of (A) the
Aggregate Receivables Amount as of the end of the immediately preceding Business
Day and (B) the sum of the numerators used to calculate the Invested Percentage
for all Outstanding Series on the Business Day for which such percentage is
determined.
"Issuance Date" shall mean August 5, 1996.
-------------
<PAGE>
16
"LIBO Rate" shall mean, with respect to any Eurodollar Tranche for any
---------
Eurodollar Period, the rate appearing on Page 3750 of the Telerate Service (or
on any successor or substitute page of such service, or any successor to or
substitute for such service, providing rate quotations comparable to those
currently provided on such page of the Telerate Service, as determined by the
Agent from time to time for purposes of providing quotations of interest rates
applicable to U.S. Dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Eurodollar Period, as the rate for U.S. Dollar deposits
with a maturity comparable to such Eurodollar Period. In the event that such
rate is not so available at such time for any reason, then the "LIBO Rate" with
respect to such Eurodollar Tranche for such Eurodollar Period shall be the rate
at which U.S. Dollar deposits approximately equal in principal amount to the
Agent's portion of such Eurodollar Tranche and for a maturity comparable to such
Eurodollar Period are offered to the principal London office of the Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Eurodollar Period.
"Loss Reserve Ratio" shall mean, as of any Settlement Report Date and
------------------
continuing until (but not including) the next Settlement Report Date, an amount
(expressed as a percentage) that is calculated as follows:
LRR = [(a * b)/c] * d * e
Where:
LRR = Loss Reserve Ratio;
a = the aggregate Principal Amount of Receivables originated by the
Sellers during the three Settlement Periods immediately preceding such
earlier Settlement Report Date;
<PAGE>
17
b = the highest three-month rolling average of the Aged Receivables Ratio
that occurred during the period of twelve consecutive Settlement
Periods ending prior to such earlier Settlement Report Date;
c = the aggregate Principal Amount of Eligible Receivables as of the last
day of the Settlement Period immediately preceding such earlier
Settlement Report Date;
d = 2.00; and
e = the Payment Terms Factor.
"Majority Purchasers" shall mean, on any day, Purchasers having, in
-------------------
the aggregate, more than 50% of the Aggregate Commitment Amount.
"Master Servicer Indemnified Person" shall have the meaning specified
----------------------------------
in subsection 2.09(b).
"Maximum Commitment Amount" shall mean $175,000,000.
-------------------------
"Maximum Invested Amount" shall mean, as of any day, the lesser of
-----------------------
(a) the Maximum Commitment Amount as of such day and (b) the Aggregate
Receivables Amount as of such day minus the Series 1996-A Required Subordinated
Amount as of such day.
<PAGE>
18
"Minimum Ratio" shall mean, as of any Settlement Report Date and
-------------
continuing until (but not including) the next Settlement Report Date, an amount
(expressed as a percentage) that is calculated as follows:
MR = (a * b) + c + d
Where:
MR = Minimum Ratio;
a = the average of the Dilution Ratio during the period of the twelve
consecutive Settlement Periods ending prior to such earlier Settlement
Report Date;
b = the Dilution Period;
c = 10.0%; and
d = Government Obligor Factor.
"Monthly Interest Payment" shall have the meaning assigned in
------------------------
subsection 3A.06(b).
"New Lending Office" shall have the meaning assigned in subsection
------------------
7.04(e).
"Non-U.S. Purchaser" shall have the meaning assigned under
------------------
subsection 7.04(b).
"Optional Repurchase Percentage" shall mean 10% of the largest
------------------------------
Series 1996-A Invested Amount at any time on or before the date of
determination.
"Optional Termination Date" shall have the meaning assigned in
-------------------------
subsection 2.06(d).
"Optional Termination Notice" shall have the meaning assigned in
---------------------------
subsection 2.06(d).
<PAGE>
19
"Other Taxes" shall have the meaning assigned under
-----------
subsection 7.04(b).
"Participants" shall have the meaning assigned in subsection 11.10(f).
------------
"Payment Terms Factor" shall mean (a) for the period from the Issuance
--------------------
Date until the third Settlement Report Date to occur thereafter, 1.14 and
(b) for each three-month period to occur after such initial period, a fraction,
the numerator of which is the sum of (i) the weighted average payment terms
(based upon the Principal Amount of the Receivables and expressed as a number of
days) for the Receivables originated during such period and (ii) 60 and the
denominator of which is 90; provided, however, that if the Payment Terms Factor
-------- -------
for any period is less than the Payment Terms Factor for the immediately
preceding period, then the actual Payment Terms Factor for such current period
shall be recalculated to equal a fraction, the numerator of which is equal to
the average of the numerators used to calculate the Payment Terms Factor for
such current period and the three immediately preceding periods and the
denominator of which is 90.
"Program Costs" shall mean, for any Business Day, the sum of (i) all
-------------
expenses, indemnities and other amounts due and payable to the Purchasers and
the Agent under the Agreement or this Supplement (including, without limitation,
any Article VII Costs), (ii) all unpaid fees and expenses due and payable to
counsel to, and independent auditors of, the Company (other than fees and
expenses payable on or in connection with the closing of the issuance of the
Series 1996-A Certificates) and (iii) all unpaid fees and expenses due and
payable to Rating Agencies rating the VFC Certificates; provided, however, that
-------- -------
Program Costs shall not exceed $50,000 in the aggregate in any fiscal year of
the Master Servicer (any amount of the foregoing expenses, indemnities and fees
in excess of $50,000 shall be referred to herein as "Excess Program Costs").
--------------------
<PAGE>
20
"Purchase Termination Event" shall have the meaning assigned in
--------------------------
Section 7.01 of the Receivables Sale Agreement.
"Purchaser" shall mean each purchaser of a VFC Certificate, including
---------
each Initial Purchaser and each Acquiring Purchaser.
"Rating Agency" shall mean, in the event that Series 1996-A has been
-------------
rated, S&P, D&P or any such other rating agency that has rated the VFC
Certificates at the request of the Agent for a rating pursuant to Section 11.15,
as applicable; provided that in the event that Series 1996-A has not been rated,
--------
any reference to "Rating Agency" or the "Rating Agencies" shall be deemed to
have been deleted herefrom and from the Agreement; provided that, in the case of
--------
the term "Rating Agency Condition" and in the event that Series 1996-A has not
been rated, references to such term shall not be deemed deleted but shall be
modified as set forth under the definition of such term.
"Rating Agency Condition" shall, with respect to any action, have the
-----------------------
meaning assigned in Section 1.01 of the Agreement; provided that in the event
--------
that Series 1996-A has not been rated, any reference to a "Rating Agency
Condition" shall be deemed to be a reference to the prior written consent of the
Agent with respect to such action.
"Record Date" shall mean, with respect to any Distribution Date, the
-----------
Business Day immediately preceding such date.
"Register" shall have the meaning assigned in subsection 11.10(d).
--------
"Scheduled Revolving Termination Date" shall mean the last day of the
------------------------------------
Settlement Period ending in January 2002.
<PAGE>
21
"Seller Addition Date" shall have the meaning assigned in Section 3.05
--------------------
of the Receivables Sale Agreement.
"Series 1996-A" shall mean the Series of Certificates the Principal
-------------
Terms of which are set forth in this Supplement.
"Series 1996-A Accrued Interest Sub-subaccount" shall have the meaning
---------------------------------------------
assigned in subsection 3A.02(a).
"Series 1996-A Adjusted Invested Amount" shall mean, as of any date of
--------------------------------------
determination, (i) the Series 1996-A Invested Amount on such date, minus
(ii) the amount on deposit in the Series 1996-A Principal Collection Sub-
subaccount on such date.
"Series 1996-A Allocable Charged-Off Amount" shall mean, with respect
------------------------------------------
to any Special Allocation Settlement Report Date, the "Allocable Charged-Off
Amount", if any, that has been allocated to Series 1996-A.
"Series 1996-A Allocable Recoveries Amount" shall mean, with respect
-----------------------------------------
to any Special Allocation Settlement Report Date, the "Allocable Recoveries
Amount", if any, that has been allocated to Series 1996-A.
"Series 1996-A Allocated Receivables Amount" shall mean, on any date
------------------------------------------
of determination, the lower of (i) the Series 1996-A Target Receivables Amount
on such day and (ii) the Aggregate Receivables Amount on such day times the
percentage equivalent of a fraction the numerator of which is the Series 1996-A
Target Receivables Amount on such day and the denominator of which is the
Aggregate Target Receivables Amount on such day.
"Series 1996-A Amortization Period" shall mean the period commencing
---------------------------------
on the Business Day following the earliest to occur of (i) the date on which an
Early Amortization Period is declared to commence or automatically commences,
(ii) the Optional Termination Date and (iii) the Scheduled
<PAGE>
22
Revolving Termination Date and ending on the earlier of (i) the date when the
Series 1996-A Invested Amount shall have been reduced to zero and all accrued
interest and other amounts owing on the VFC Certificates and to the Agent and
the Purchasers hereunder shall have been paid and (ii) the Series 1996-A
Termination Date.
"Series 1996-A Certificates" shall mean, collectively, those
--------------------------
Certificates designated as the VFC Certificates and the Series 1996-A
Subordinated Certificate.
"Series 1996-A Collection Subaccount" shall have the meaning assigned
-----------------------------------
in subsection 3A.02(a).
"Series 1996-A Invested Amount" shall mean, as of any date of
-----------------------------
determination, the sum of the Series 1996-A Purchaser Invested Amounts of all
Purchasers on such date.
"Series 1996-A Monthly Interest" shall mean, with respect to any
------------------------------
Accrual Period, the sum of the Daily Interest Expense for each day in such
Accrual Period.
"Series 1996-A Monthly Interest Distribution" shall have the meaning
-------------------------------------------
assigned in subsection 3A.04(a).
"Series 1996-A Monthly Principal Payment" shall have the meaning
---------------------------------------
assigned in Section 3A.05.
"Series 1996-A Monthly Servicing Fee" shall have the meaning assigned
-----------------------------------
in Section 6.01.
"Series 1996-A Non-Principal Collection Sub-subaccount" shall have the
-----------------------------------------------------
meaning assigned in subsection 3A.02(a).
"Series 1996-A Non-Subordinated Percentage" shall mean an amount equal
-----------------------------------------
to 100 percent minus the Series 1996-A Subordinated Percentage.
<PAGE>
23
"Series 1996-A Principal Collection Sub-subaccount" shall have the
-------------------------------------------------
meaning assigned in subsection 3A.02(a).
"Series 1996-A Principal Collection Subordinated Sub-subaccount" shall
--------------------------------------------------------------
have the meaning assigned in subsection 3A.02(a).
"Series 1996-A Purchaser Invested Amount" shall mean, with respect to
---------------------------------------
any Purchaser on the Issuance Date, an amount equal to the product of such
Purchaser's Commitment Percentage on such date and the Initial Series 1996-A
Invested Amount, and with respect to such Purchaser on any date of determination
thereafter, an amount equal to (a) such Purchaser's Series 1996-A Invested
Amount on the immediately preceding Business Day (or, with respect to the day as
of which such Purchaser becomes a party to this Supplement, whether by executing
a counterpart hereof, a Commitment Transfer Supplement or otherwise, the portion
of the transferor's Series 1996-A Purchaser Invested Amount being purchased, in
the case of an Acquiring Purchaser), plus (b) the amount of any increases in
such Purchaser's Series 1996-A Invested Amount pursuant to Section 2.05 made on
such day, minus (c) the amount of any distributions to such Purchaser pursuant
to Section 2.06 on such day minus (d) the aggregate Series 1996-A Allocable
Charged-Off Amount applied to such Purchaser on or prior to such date pursuant
to subsection 3A.05(b)(ii) plus (e) (but only to the extent of any unreimbursed
reductions made pursuant to clause (d) above) the aggregate Series 1996-A
Allocable Recoveries Amount applied to such Purchaser on or prior to such date
pursuant to subsection 3A.05(c)(i).
"Series 1996-A Required Reserves" shall mean, as of any date of
-------------------------------
determination, an amount equal to the sum of:
(a) an amount equal to the product of (i) the Series 1996-A Adjusted
Invested Amount on such day and (ii) a fraction the numerator of which is
the Series 1996-A Required Reserves Ratio and the
<PAGE>
24
denominator of which is one minus the Series 1996-A Required Reserves
Ratio;
(b) the product of (i) the Series 1996-A Invested Amount and (ii) a
fraction the numerator of which is the Carrying Cost Reserve Ratio and the
denominator of which is one minus the Series 1996-A Required Reserves
Ratio; and
(c) the product of (i) the Principal Amount of Receivables in the
Trust on such day, (ii) a fraction the numerator of which is the
Series 1996-A Adjusted Invested Amount and the denominator of which is the
Aggregate Adjusted Invested Amount on such day and (iii) a fraction the
numerator of which is the Servicing Reserve Ratio and the denominator of
which is one minus the Series 1996-A Required Reserves Ratio.
"Series 1996-A Required Reserves Ratio" shall mean, the greater of
-------------------------------------
(i) the sum of the Dilution Reserve Ratio and the Loss Reserve Ratio and
(ii) the Minimum Ratio.
"Series 1996-A Required Subordinated Amount" shall mean, (a) on any
------------------------------------------
date of determination during the Series 1996-A Revolving Period, the
Series 1996-A Required Reserves and (b) on any date of determination during the
Series 1996-A Amortization Period, an amount equal to the Series 1996-A Required
Subordinated Amount on the last Business Day of the Series 1996-A Revolving
Period; provided that such amount shall be adjusted on each Special Allocation
--------
Settlement Report Date, if any, as set forth in Section 3A.05(b)(i) and
Section 3A.05(c)(ii).
"Series 1996-A Revolving Period" shall mean the period commencing on
------------------------------
the Issuance Date and terminating on the earliest to occur of the close of
business on (i) the date on which an Early Amortization Period is declared to
commence or automatically commences, (ii) the Optional Termination Date and
(iii) the Commitment Termination Date.
<PAGE>
25
"Series 1996-A Subordinated Certificate" shall mean the Subordinated
--------------------------------------
Company Certificate, Series 1996-A, executed by the Company and authenticated by
or on behalf of the Trustee, substantially in the form of Exhibit B.
"Series 1996-A Subordinated Certificate Amount" shall mean, for any
---------------------------------------------
date of determination, an amount equal to (i) the Series 1996-A Allocated
Receivables Amount minus (ii) the Series 1996-A Adjusted Invested Amount.
"Series 1996-A Subordinated Certificate Increase Amount" shall have
------------------------------------------------------
the meaning assigned in subsection 2.05(a).
"Series 1996-A Subordinated Certificate Reduction Amount" shall have
-------------------------------------------------------
the meaning assigned in subsection 2.06(b).
"Series 1996-A Subordinated Interest" shall have the meaning assigned
-----------------------------------
in subsection 2.02(b).
"Series 1996-A Subordinated Percentage" shall mean the percentage
-------------------------------------
equivalent of a fraction the numerator of which is the Series 1996-A Required
Subordinated Amount on the last Business Day of the Series 1996-A Revolving
Period and the denominator of which is the sum of the Series 1996-A Adjusted
Invested Amount and the Series 1996-A Required Subordinated Amount, in each
case, on the last Business Day of the Series 1996-A Revolving Period.
"Series 1996-A Target Receivables Amount" shall mean, on any date of
---------------------------------------
determination, the sum of (i) the Series 1996-A Adjusted Invested Amount on such
day and (ii) the Series 1996-A Required Subordinated Amount for such day.
"Series 1996-A Termination Date" shall mean the Distribution Date that
------------------------------
occurs in April 2003.
<PAGE>
26
"Series 1996-A Unreimbursed Amount" shall have the meaning assigned in
---------------------------------
subsection 3A.03(d).
"Servicing Reserve Ratio" shall mean, as of any Settlement Report Date
-----------------------
and continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) equal to (i) the product of (A) the Servicing
Fee Percentage and (B) 2.0 times Days Sales Outstanding as of such earlier
Settlement Report Date divided by (c) 360.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Agent or any Purchaser (including any branch, Affiliate, or other
fronting office making or holding a Loan) is subject (a) with respect to the
Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over
$100,000 with maturities approximately equal to three months, and (b) with
respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as defined in
Regulation D of the Board). Such reserve percentages shall include those
imposed pursuant to such Regulation D. Eurodollar Tranches shall be deemed to
constitute Eurocurrency Liabilities and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Purchaser under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"Taxes" shall have the meaning assigned in subsection 7.04(a).
-----
"Transfer Issuance Date" shall mean the date on which a Commitment
----------------------
Transfer Supplement becomes effective pursuant to the terms of such Commitment
Transfer Supplement.
<PAGE>
27
"Transferee" shall have the meaning assigned in subsection 11.10(f).
----------
"Trust Accounts" shall have the meaning assigned in
--------------
subsection 3A.02(a).
"Unallocated Balance" shall mean, as of any Business Day, the sum of
-------------------
(i) the portion of the Series 1996-A Invested Amount for which interest is then
being calculated by reference to the ABR and (ii) the portion of the
Series 1996-A Invested Amount allocated to any Eurodollar Tranche that expires
on such Business Day.
"VFC Certificate" shall mean a VFC Certificate, Series 1996-A,
---------------
executed by the Company and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"VFC Certificateholders" shall mean the Purchasers.
----------------------
"VFC Certificateholders' Interest" shall have the meaning assigned in
--------------------------------
subsection 2.02(a).
(b) If any term or provision contained herein conflicts with or is
inconsistent with any term, definition or provision contained in the Agreement,
the terms and provisions of this Supplement shall govern. All capitalized terms
not otherwise defined herein are defined in the Agreement. All Article,
Section, subsection, Exhibit and Schedule references herein shall mean Article,
Section or subsection of or Exhibit or Schedule to this Supplement, except as
otherwise provided herein. Unless otherwise stated herein, as the context
otherwise requires or if such term is otherwise defined in the Agreement, each
capitalized term used or defined herein shall relate only to the
<PAGE>
28
Series 1996-A Certificates and no other Series of Certificates issued by the
Trust.
(c) Any reference herein to a Schedule or Exhibit to this Supplement
shall be deemed to be a reference to such Schedule or Exhibit as it may be
amended, modified or supplemented from time to time to the extent that such
Schedule or Exhibit may be amended, modified or supplemented (or any term or
provision of any Transaction Document may be amended that would have the effect
of amending, modifying or supplementing information contained in such Schedule
or Exhibit) in compliance with the terms of the Transaction Documents.
(d) Any reference in this Supplement to any representation, warranty
or covenant "deemed" to have been made is intended to encompass only
representations, warranties or covenants that are expressly stated to be
repeated on or as of dates following the execution and delivery of this
Supplement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit or otherwise unexpressed representation, warranty or
covenant.
(e) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Designation of Certificates; Purchase and
-----------------------------------------
Sale of the VFC Certificates
----------------------------
SECTION 2.01. Designation. The Certificates created and authorized
------------
pursuant to the Agreement and this Supplement shall be divided into two Classes,
which shall be designated respectively as (i) the "VFC Certificates,
Series 1996-A", and (ii) the "Subordinated Company Certificate, Series 1996-A."
<PAGE>
29
SECTION 2.02. The Series 1996-A Certificates. (a) The VFC
-------------------------------
Certificates shall represent fractional undivided interests in the Trust Assets,
consisting of the right of the VFC Certificateholders to receive the
distributions specified herein out of (i) the Invested Percentage (expressed as
a decimal) of Collections received with respect to the Receivables and all other
funds on deposit in the Collection Account and (ii) to the extent such interests
appear herein, all other funds on deposit in the Series Collection Subaccounts
and any subaccounts thereof (collectively, the "VFC Certificateholders'
Interest").
(b) The Series 1996-A Subordinated Certificate shall represent a
fractional undivided interest in the Trust Assets, consisting of the right to
receive the distributions specified herein out of (i) the Invested Percentage
(expressed as a decimal) of Collections received with respect to the Receivables
and all other funds on deposit in the Collection Account and (ii) to the extent
such interests appear herein, all other funds on the Series Collection
Sub-accounts and any Sub-accounts thereof in each case to the extent not
required to be distributed to or for the benefit of the VFC Certificateholders
(the "Series 1996-A Subordinated Interest"). The Exchangeable Company
Certificate and any other Series of Investor Certificates outstanding shall
represent the ownership interest in the remainder of the Trust not allocated
pursuant hereto to the VFC Certificateholders' Interest or the Series 1996-A
Subordinated Interest.
(c) The VFC Certificates and the Series 1996-A Subordinated
Certificate shall be substantially in the forms of Exhibits A and B,
respectively, and shall, upon issue, be executed and delivered by the Company to
the Trustee for authentication and redelivery as provided in Section 2.04 hereof
and Section 5.02 of the Agreement. The VFC Certificates shall not be issued in
the form of a single global certificate as provided for in Section 5.01 of the
Agreement, but shall instead be issued in the form of one or
<PAGE>
30
more definitive certificates, each registered in the name of a Purchaser as the
holder thereof.
SECTION 2.03. Purchases of Interests in the VFC Certificates.
-----------------------------------------------
(a) Initial Purchase. Subject to the terms and conditions of this Supplement,
-----------------
including delivery of notice in accordance with Section 2.04, (i) each Initial
Purchaser hereby severally agrees (A) to purchase on the Issuance Date a VFC
Certificate in an amount equal to such Initial Purchaser's Commitment Percentage
of the Initial Series 1996-A Invested Amount and (B) to maintain its VFC
Certificate, subject to increase or decrease during the Series 1996-A Revolving
Period, in accordance with the provisions of this Supplement and (ii) the
Company hereby agrees (A) to purchase from the Trust on the Issuance Date the
Series 1996-A Subordinated Certificate in an amount equal to the Initial
Series 1996-A Subordinated Certificate Amount and (B) to maintain such interest
in the Series 1996-A Subordinated Certificate, subject to increase or decrease
during the Series 1996-A Revolving Period, in accordance with the provisions of
this Supplement. Payments by the Initial Purchasers in respect of the VFC
Certificates shall be made in immediately available funds on the Issuance Date
to the Agent for payment to the Trust.
(b) Subsequent Purchases. Subject to the terms and conditions of
---------------------
this Supplement, each Acquiring Purchaser shall be deemed to have severally
agreed, by its acceptance of its VFC Certificate, to maintain its VFC
Certificate, subject to increase or decrease during the Series 1996-A Revolving
Period, in accordance with the provisions of this Supplement.
(c) Maximum Series 1996-A Purchaser Invested Amount. Notwithstanding
------------------------------------------------
anything to the contrary contained in this Supplement, at no time shall the
Series 1996-A Purchaser Invested Amount (calculated without regard to
clauses (d) and (e) of the definition thereof) of any Purchaser exceed such
Purchaser's Commitment at such time.
<PAGE>
31
SECTION 2.04. Delivery. On the Issuance Date, the Company shall sign
---------
on behalf of the Trust and shall direct the Trustee in writing pursuant to
Section 5.02 of the Agreement to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate (i) the VFC Certificates in such
names and such denominations and deliver such VFC Certificates to the Initial
Purchasers in accordance with such written directions and (ii) a Series 1996-A
Subordinated Certificate and deliver such Series 1996-A Subordinated Certificate
to the Company as holder thereof in accordance with such written directions.
The Trustee shall mark on its books the actual Series 1996-A Invested Amount and
Series 1996-A Subordinated Certificate Amount outstanding on any date of
determination, which, absent manifest error, shall constitute prima facie
evidence of the outstanding Series 1996-A Invested Amount and Series 1996-A
Subordinated Certificate Amount from time to time.
SECTION 2.05. Procedure for Initial Issuance and for Increasing the
-----------------------------------------------------
Series 1996-A Invested Amount. (a) Subject to subsection 2.05(b), on any
- ------------------------------
Business Day during the Commitment Period, each Purchaser agrees that the
Series 1996-A Invested Amount may be increased by increasing each Purchaser's
Series 1996-A Invested Amount (an "Increase"), up to an amount not exceeding
each Purchaser's Commitment, upon the request of the Master Servicer or the
Company on behalf of the Trust (each date on which an increase in the
Series 1996-A Invested Amount occurs hereunder being herein referred to as the
"Increase Date" applicable to such Increase); provided, however, that the Master
-------- -------
Servicer or the Company, as the case may be, shall have given the Agent
irrevocable written notice (effective upon receipt), substantially in the form
of Exhibit G hereto, of such request no later than (i) if the Initial
Series 1996-A Invested Amount or Increase Amount is to be priced solely with
reference to the ABR, 1:00 p.m., New York City time, on the Issuance Date or
such Increase Date, as the case may be, or (ii) if all or a portion of the
Initial Series 1996-A Invested Amount or Increase Amount is to be
<PAGE>
32
allocated to a Eurodollar Tranche, 1:00 p.m., New York City time, three Business
Days prior to the Issuance Date or such Increase Date, as the case may be;
provided further that the provisions of this subsection shall not restrict the
- -------- -------
allocations of Collections pursuant to Article III. Such notice shall state
(x) the Issuance Date or the Increase Date, as the case may be; (y) the Initial
Series 1996-A Invested Amount or the proposed amount of such Increase (the
"Increase Amount"), as the case may be; (y) what portions thereof will be
allocated to a Eurodollar Tranche and the Floating Tranche; and (z) if any
portions thereof are to be allocated to a Eurodollar Tranche, the length of the
Eurodollar Period with respect thereto. No Purchaser shall be obligated to fund
any such Increase, unless concurrently with any such Increase in the
Series 1996-A Invested Amount, the Series 1996-A Subordinated Certificate Amount
shall be increased by an amount (the "Series 1996-A Subordinated Certificate
Increase Amount") such that after giving effect to such increase, the
Series 1996-A Adjusted Invested Amount plus the Series 1996-A Subordinated
Certificate Amount equals the Series 1996-A Target Receivables Amount.
(b) The Purchasers shall not be required to make the initial purchase
of VFC Certificates on the Issuance Date or to increase their respective
Series 1996-A Invested Amounts on any Increase Date hereunder unless:
(i) the related aggregate initial purchase amount or Increase Amount
is equal to (A) in the case of a Floating Tranche, $100,000 or an integral
multiple of $100,000 in excess thereof and (B) in the case of a Eurodollar
Tranche, $500,000 or an integral multiple of $500,000 in excess thereof;
(ii) after giving effect to the initial purchase amount or Increase
Amount, (A) the Series 1996-A Invested Amount (calculated without regard to
clauses (d) and (e) of the definition of Series 1996-A Purchaser Invested
Amount) would not exceed the Maximum Commitment Amount on the Issuance Date
or such Increase
<PAGE>
33
Date, as the case may be, and (B) the Series 1996-A Allocated Receivables
Amount would not be less than the Series 1996-A Target Receivables Amount
on the Issuance Date or such Increase Date, as the case may be; and
(iii) no Early Amortization Event or Potential Early Amortization Event
shall have occurred and be continuing.
(c) After receipt by the Agent of the notice required by
subsection 2.05(a) from the Master Servicer or the Company on behalf of the
Trust, the Agent shall, so long as the conditions set forth in subsections
2.05(a) and (b) are satisfied, promptly provide telephonic notice to each
Purchaser of the Increase Date and of the portion of the Increase Amount
allocable to such Purchaser (which shall equal such Purchaser's Commitment
Percentage of the Increase Amount). The Master Servicer shall promptly notify
the Company of the Increase Date and the amount of the Series 1996-A
Subordinated Certificate Increase Amount. Each Purchaser agrees to pay in
immediately available funds such Purchaser's Commitment Percentage of each
Increase on the related Increase Date to the Agent for payment to the Trust.
SECTION 2.06. Procedure for Decreasing the Series 1996-A Invested
---------------------------------------------------
Amount; Optional Termination. (a) On any Business Day during the Series 1996-A
- -----------------------------
Revolving Period or the Series 1996-A Amortization Period (except for
Distribution Dates during the Series 1996-A Amortization Period (which shall be
governed by subsection 3A.06(c))), upon the written request of the Master
Servicer or the Company on behalf of the Trust, the portion of the Series 1996-A
Invested Amount not allocated to a Eurodollar Tranche may be reduced (a
"Decrease") by the distribution by the Trustee to the Agent for the pro rata
benefit of the Purchasers in accordance with their Commitment Percentages of
some or all of the funds on deposit in the Series 1996-A Principal Collection
Sub-subaccount on such day; provided that the Master Servicer shall have given
--------
the Agent and the
<PAGE>
34
Trustee irrevocable written notice (effective upon receipt), prior to 1:00 p.m.,
New York City time, on the Business Day of such Decrease and which notice shall
state the amount of such Decrease; provided further that such Decrease shall be
-------- -------
in an amount equal to $100,000 and integral multiples of $100,000 in excess
thereof; provided further, however, that no prepayment of any Eurodollar Tranche
-------- -------
prior to the termination of a Eurodollar Period may occur unless, concurrently
with such prepayment, the Sellers shall have paid to the Purchasers any amounts
due and payable pursuant to Section 7.03.
(b) Simultaneously with any such Decrease during the Series 1996-A
Revolving Period, the Series 1996-A Subordinated Certificate Amount shall be
reduced by an amount (the "Series 1996-A Subordinated Certificate Reduction
Amount") such that the Series 1996-A Subordinated Certificate Amount shall equal
the Series 1996-A Required Subordinated Amount after giving effect to such
Decrease. During the Series 1996-A Revolving Period, after the distribution
described in subsection (a) above has been made, and the Series 1996-A
Subordinated Certificate Amount shall have been reduced by the Series 1996-A
Subordinated Certificate Reduction Amount, a distribution shall be made to the
holder of the Series 1996-A Subordinated Certificate out of remaining funds on
deposit in the Series 1996-A Principal Collection Sub-subaccount in an amount
equal to the lesser of (x) the Series 1996-A Subordinated Certificate Reduction
Amount and (y) the amount of such remaining funds on deposit in the
Series 1996-A Principal Collection Sub-subaccount.
(c) Any reduction in the Series 1996-A Invested Amount on any
Business Day shall be allocated first to reduce the Available Pricing Amount.
(d) (i) On any Business Day to occur following the six month
anniversary of the Issuance Date and prior to the occurrence of the Scheduled
Revolving Termination Date, an Early Amortization Event or Potential Early
Amortization
<PAGE>
35
Event, the Company shall have the right to deliver an irrevocable notice (an
"Optional Termination Notice") to the Trustee and the Master Servicer in which
the Company declares that the Series 1996-A Revolving Period shall terminate on
the date (the "Optional Termination Date") set forth in such notice (which date,
in any event, shall not be less than 10 days from the date on which such notice
is delivered).
(ii) From and after the Optional Termination Date, the Series 1996-A
Amortization Period shall commence for all purposes under this Agreement and the
other Transaction Documents. The Trustee shall give prompt written notice of
its receipt of an Optional Termination Notice to the Purchasers and each Rating
Agency.
SECTION 2.07. Reductions of the Commitments. (a) On any Business
------------------------------
Day during the Series 1996-A Revolving Period, the Company, on behalf of the
Trust, may, upon three Business Days prior written notice (effective upon
receipt) reduce or terminate the Commitments (a "Commitment Reduction") in an
aggregate amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess
thereof; provided that no such termination or reduction shall be permitted if,
--------
after giving effect thereto and to any reduction in the Series 1996-A Invested
Amount (calculated without regard to clauses (d) and (e) of the definition of
Series 1996-A Purchaser Invested Amount) on such date, the Series 1996-A
Invested Amount would exceed the Commitment Amount then in effect. Each
Purchaser's Commitment shall be reduced by such Purchaser's Commitment
Percentage of the amount of such Commitment Reduction.
(b) Once reduced, the Commitments may not be subsequently reinstated.
Upon effectiveness of any such reduction, the Agent shall prepare a revised
Schedule 1 to reflect the reduced Commitment of each Purchaser and Schedule 1 of
this Supplement shall be deemed to be
<PAGE>
36
automatically superseded by such revised Schedule 1. The Agent shall distribute
such revised Schedule 1 to the Company, the Master Servicer, the Trustee and
each Purchaser.
SECTION 2.08. Interest; Commitment Fee. (a) Interest shall be
-------------------------
payable on the VFC Certificates on each Distribution Date pursuant to
subsection 3A.06(a).
(b) The Company shall pay to the Agent, for the pro rata account of
the Purchasers in accordance with their Commitment Percentages, on the Issuance
Date an initial commitment fee at a rate equal to 0.5% per annum of the
Aggregate Commitment Amount for the period from March 29, 1996 to the Issuance
Date. The Trustee (acting at the written direction of the Master Servicer)
shall pay to the Agent, for the pro rata account of the Purchasers in accordance
with their Commitment Percentages, on the last Business Day of March, June,
September and December in each year and on each date on which any Commitment of
any Purchaser shall expire or terminate (the "Commitment Fee") equal to 0.5% per
annum of the average daily excess of the Aggregate Commitment Amount over the
average Series 1996-A Invested Amount during the preceding quarterly period (or
other applicable period in the case of a termination or expiration.) To the
extent that funds on deposit in the Series 1996-A Accrued Interest Sub-
subaccount and the Series 1996-A Non-Principal Collection Sub-subaccount at any
such date are insufficient to pay the Commitment Fee due on such date, the
Trustee shall so notify the Company and the Company shall immediately pay the
Agent the amount of any such deficiency.
(c) Calculations of per annum rates and fees under this Supplement
shall be made on the basis of a 365-day year with respect to Commitment Fees,
other fees, and, except with respect to Eurodollar Tranches, interest rates.
Each determination of an Adjusted LIBO Rate by the Agent shall be conclusive and
binding upon each of the parties hereto in the absence of manifest error.
<PAGE>
37
SECTION 2.09. Indemnification by the Company and the Master Servicer.
-------------------------------------------------------
(a) The Company agrees to indemnify and hold harmless the Agent, each Purchaser
and each of their respective officers, directors, agents and employees (each, a
"Company Indemnified Person") from and against any loss, liability, expense,
damage or injury (a "Claim") suffered or sustained by such Company Indemnified
Person by reason of (i) any acts, omissions or alleged acts or omissions arising
out of, or relating to, activities of the Company pursuant to any Pooling and
Servicing Agreement or the other Transaction Documents to which it is a party,
(ii) in the case of a Claim brought by a third party, a breach of any
representation or warranty made or deemed made by the Company (or any of its
officers), except to the extent that such Company Indemnified Person would be
indemnified and held harmless by the repurchase of Ineligible Receivables
pursuant to Section 2.05 of the Agreement or (iii) in the case of Claim brought
by a third party, a failure by the Company to comply with any applicable law or
regulation or to perform its covenants, agreements, duties or obligations
required to be performed or observed by it in accordance with the provisions of
any Pooling and Servicing Agreement or the other Transaction Documents including
but not limited to any judgment, award settlement, reasonable attorneys' fees
and other reasonable costs or expenses incurred in connection with the defense
of any actual or threatened action, proceeding or claim, except to the extent
such loss, liability, expense, damage or injury resulted from the negligence,
bad faith or wilful misconduct of such Company Indemnified Person or its
officers, directors, agents, principals, employees or employers; provided,
--------
however, that any payments made by the Company pursuant to this subsection shall
- -------
be Company Subordinated Obligations.
(b) The Master Servicer agrees to indemnify and hold harmless the
Agent, each Purchaser and each of their respective officers, directors, agents
and employees (each, a "Master Servicer Indemnified Person") from and against
any Claim by reason of (i) any acts, omissions or alleged acts
<PAGE>
38
or omissions arising out of, or relating to, activities of the Master Servicer
pursuant to any Pooling and Servicing Agreement or the other Transaction
Documents to which it is a party, (ii) in the case of a Claim brought by a third
party, a breach of any representation or warranty made or deemed made by the
Master Servicer or any Servicer (or any of their respective officers) or (c) in
the case of Claim brought by a third party, a failure by the Master Servicer or
any Servicer to comply with any applicable law or regulation or to perform its
covenants, agreements, duties or obligations required to be performed or
observed by it in accordance with the provisions of any Pooling and Servicing
Agreement or the other Transaction Documents including but not limited to any
judgment, award, settlement, reasonable attorneys, fees and other reasonable
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim, except to the extent such loss,
liability, expense, damage or injury resulted from the negligence, bad faith or
wilful misconduct of such Master Servicer Indemnified Person or its officers,
directors, agents, principals, employees or employers.
ARTICLE III
Article III of the Agreement
----------------------------
SECTION 3.01 of the Agreement and each other section of Article III of
the Agreement relating to another Series shall be read in its entirety as
provided in the Agreement. Article III of the Agreement (except for
Section 3.01 thereof and any portion thereof relating to another Series) shall
read in its entirety as follows and shall be exclusively applicable to the
Series 1996-A Certificates:
SECTION 3A.02. Establishment of Trust Accounts. (a) The Trustee
--------------------------------
shall cause to be established and maintained in the name of the Trustee, on
behalf of the Trust, (i) for the benefit of the Purchasers and (ii) in the
<PAGE>
39
case of clauses (A), (B) and (C) below, for the benefit, subject to the prior
and senior interest of the Purchasers, of the holder of the Series 1996-A
Subordinated Certificate, (A) a subaccount of the Collection Account (the
"Series 1996-A Collection Subaccount"), which subaccount is the Series
Collection Subaccount with respect to Series 1996-A; (B) two subaccounts of the
Series 1996-A Collection Subaccount: (1) the Series 1996-A Principal Collection
Sub-subaccount and (2) the Series 1996-A Non-Principal Collection Sub-subaccount
(respectively, the "Series 1996-A Principal Collection Sub-subaccount" and the
"Series 1996-A Non-Principal Collection Sub-subaccount"), (C) a subaccount of
the Series 1996-A Principal Collection Sub-subaccount (the "Series 1996-A
Principal Collection Subordinated Sub-subaccount"), and (D) a subaccount of the
Series 1996-A Non-Principal Collection Sub-subaccount (the "Series 1996-A
Accrued Interest Sub-subaccount"; all accounts established pursuant to this
subsection 3A.02(a) and listed on Schedule 2, collectively, the "Trust
Accounts"), each Trust Account to bear a designation indicating that the funds
deposited therein are held for the benefit of the Persons (and, for each such
Person, to the extent) set forth in clauses (i) and (ii) above. The Trustee, on
behalf of the Certificateholders, shall possess all right, title and interest in
all funds from time to time on deposit in, and all Eligible Investments credited
to, the Trust Accounts and in all proceeds thereof. The Trust Accounts shall be
under the sole dominion and control of the Trustee for the exclusive benefit of
the Persons (and, for each such Person, to the extent) set forth in clauses (i)
and (ii) above. In any case that the Company has not provided applicable
written direction as to Eligible Investments to the Trustee, the Trustee shall
invest in demand deposits or money market funds that constitute Eligible
Investments.
(b) All Eligible Investments in the Trust Accounts shall be held by
the Trustee, on behalf of the Certificateholders, for the benefit of the
Purchasers and, subject to the prior interest of the Purchasers, of the
<PAGE>
40
holder of the Series 1996-A Subordinated Certificate; provided, however, that
-------- -------
funds on deposit in a Trust Account that is a Sub-subaccount of a Collection
Account shall, at the direction of the Company, be invested together with funds
held in other Sub-subaccounts of a Collection Account. After giving effect to
any distribution to the Company pursuant to subsection 3A.03(b)(i), amounts on
deposit and available for investment in the Series 1996-A Principal Collection
Sub-subaccount and the Series 1996-A Principal Collection Subordinated Sub-
subaccount shall be invested by the Trustee at the written direction of the
Company in Eligible Investments that mature, or that are payable or redeemable
upon demand of the holder thereof, (i) in the case of any such investment made
during the Series 1996-A Revolving Period, on or prior to the next Business Day
and (ii) in the case of any such investment made during the Series 1996-A
Amortization Period, on or prior to the Business Day immediately preceding the
next Distribution Date. Amounts on deposit and available for investment in the
Series 1996-A Non-Principal Collection Sub-subaccount and the Series 1996-A
Accrued Interest Sub-subaccount shall be invested by the Trustee at the written
direction of the Company in Eligible Investments that mature, or that are
payable or redeemable upon demand of the holder thereof, on or prior to the
Business Day immediately preceding the subsequent Distribution Date. As of the
Business Day immediately preceding the Settlement Report Date, all interest and
other investment earnings (net of losses and investment expenses) on funds
deposited in the Series 1996-A Accrued Interest Sub-subaccount shall be
deposited in the Series 1996-A Non-Principal Collection Sub-subaccount. All
interest and investment earnings (net of losses and investment expenses) on
funds deposited in the Series 1996-A Principal Collection Sub-subaccount and the
Series 1996-A Principal Collection Subordinated Sub-subaccount shall be
deposited in the Series 1996-A Non-Principal Collection Sub-subaccount.
SECTION 3A.03. Daily Allocations. (a) The portion of the Aggregate
------------------
Daily Collections allocated to the
<PAGE>
41
Series 1996-A Certificates pursuant to Article III of the Agreement shall be
allocated and distributed as set forth in this Article III by the Trustee based
solely on the information provided it by the Master Servicer in the Daily Report
(upon which the Trustee may conclusively rely):
(i) on each Business Day, an amount equal to the Accrued Expense
Amount for such day (or, during the Series 1996-A Revolving Period, such
greater amount as the Company may request in writing) shall be transferred
from the Series 1996-A Collection Subaccount to the Series 1996-A Non-
Principal Collection Sub-subaccount; provided that during the Series 1996-A
--------
Amortization Period to the extent of funds on deposit (after giving effect
to deposits on such Business Day) in the Series 1996-A Principal Collection
Subordinated Sub-subaccount, such transfer shall be made from funds on
deposit in the Series 1996-A Principal Collection Subordinated Sub-
subaccount; provided further, that (A) on the tenth Business Day of each
----------------
Accrual Period (and each Business Day thereafter, if necessary, until the
full amount of any positive Accrued Expense Adjustment is transferred),
(B) on the day of any Increase (and each Business Day thereafter, if
necessary, until the full amount of any positive Accrued Expense Adjustment
is transferred), (C) on the day of any Decrease and (D) on the last
Business Day of each Accrual Period, an amount equal to the Accrued Expense
Adjustment shall, if such adjustment is a positive amount, be transferred
from the Series 1996-A Collection Subaccount to the Series 1996-A Non-
Principal Collection Sub-subaccount or, if such adjustment is a negative
amount, be transferred from the Series 1996-A Non-Principal Collection Sub-
subaccount to the Series 1996-A Collection Subaccount (or deducted from the
transfer in respect of the Accrued Expense Amount for such day);
(ii) on each Business Day during the Series 1996-A Revolving Period
(including Distribution Dates),
<PAGE>
42
following the transfers pursuant to clause (i) above, any remaining funds
on deposit in the Series 1996-A Collection Subaccount shall be transferred
by the Trustee to the Series 1996-A Principal Collection Sub-subaccount;
and
(iii) on each Business Day during the Series 1996-A Amortization Period
(including Distribution Dates), following the transfers pursuant to
clause (i) above, any remaining funds on deposit in the Series 1996-A
Collection Subaccount shall be transferred by the Trustee as follows:
(A) an amount equal to the sum of (I) the product of (x) the
Series 1996-A Collections and (y) the Ineligible Receivables
Percentage and (II) the product of (x) the Series 1996-A Collections
and (y) the Eligible Receivables Percentage and (z) the Series 1996-A
Subordinated Percentage shall be transferred to the Series 1996-A
Principal Collection Subordinated Sub-subaccount; and
(B) following the transfers pursuant to clause (A) above, any
remaining funds on deposit in the Series 1996-A Collection Subaccount
shall be transferred to the Series 1996-A Principal Collection Sub-
subaccount.
(b) (i) On each Business Day during the Series 1996-A Revolving
Period (including Distribution Dates), after giving effect to all allocations of
Aggregate Daily Collections referred to in subparagraphs (a)(i) and (a)(ii) on
such Business Day, amounts on deposit in the Series 1996-A Principal Collection
Sub-subaccount shall be distributed by the Trustee, based solely on the
information provided to the Trustee by the Master Servicer in the Daily Report
(upon which the Trustee may conclusively rely, subject to its obligation to
perform the procedures set forth in the Internal Operating Procedures
Memorandum),
<PAGE>
43
(A) first, to pay Excess Program Costs and (B) second, to the Company (but only
to the extent that the Trustee has received a Daily Report which reflects the
receipt of the Collections on deposit therein) in accordance with directions
contained in the Daily Report or to such accounts or such persons as the Company
may direct in writing (which directions may consist of standing instructions
provided by the Company that shall remain in effect until changed by the Company
in writing); provided that such distribution shall be made only if no Early
--------
Amortization Event or Potential Early Amortization Event relating to an Early
Amortization Event set forth in subsections (a), (d) (but only with respect to a
Servicer Default set forth in subsection 6.01(e) of the Servicing Agreement
relating to the Master Servicer or to one or more Servicers that are responsible
for servicing Receivables representing 15% or more of the Aggregate Receivables
Amount), (g) or (j) of Section 5.01 of this Supplement has occurred and is
continuing and only to the extent that if, after giving effect to such
distribution, the Series 1996-A Target Receivables Amount would not exceed the
Series 1996-A Allocated Receivables Amount; provided further that if the Company
----------------
or the Master Servicer, on behalf of the Company, shall have given the Agent and
the Trustee irrevocable written notice (effective upon receipt) at least one
Business Day prior to such day (or, in the case of the Floating Tranche, notice
may be given on such day), the Company or the Master Servicer may instruct the
Trustee in writing (specifying the related amount) to withdraw all or a portion
of such amounts on deposit in the Series 1996-A Principal Collection Sub-
subaccount and apply such withdrawn amounts toward the reduction of the
Series 1996-A Invested Amount and the Series 1996-A Subordinated Certificate
Amount in accordance with Section 2.06. Amounts distributed to the Company
hereunder shall be deemed to be paid first from Collections received directly by
the Master Servicer and second from Collections received in the Lockboxes.
(ii) During the Series 1996-A Amortization Period, amounts on deposit
in the Series 1996-A Principal Collection
<PAGE>
44
Sub-subaccount and the Series 1996-A Principal Collection Subordinated Sub-
subaccount on each Distribution Date shall be distributed on such Distribution
Date in accordance with subsection 3A.06(c). No amounts on deposit in the
Series 1996-A Principal Collection Sub-subaccount or the Series 1996-A Principal
Collection Subordinated Sub-subaccount shall be distributed by the Trustee to
the Company or the holder of the Series 1996-A Subordinated Certificate during
the Series 1996-A Amortization Period.
(c) On each Business Day, an amount equal to the Daily Interest
Deposit for such day shall be transferred by the Trustee, based solely on the
information provided to the Trustee by the Master Servicer in the Daily Report
(upon which the Trustee may conclusively rely, subject to its obligation to
perform the procedures set forth in the Internal Operating Procedures
Memorandum), from the Series 1996-A Non-Principal Sub-subaccount to the
Series 1996-A Accrued Interest Sub-subaccount provided, that, on each Business
--------
Day that a transfer of funds is required to be made in respect of an Accrued
Expense Adjustment pursuant to the further proviso to subsection 3A.03(a)(i), an
amount equal to the Daily Interest Adjustment shall, if such adjustment is a
positive amount, be transferred from the Series 1996-A Non-Principal Collection
Sub-subaccount to the Series 1996-A Accrued Interest Sub-subaccount or, if such
adjustment is a negative amount, be transferred from the Series 1996-A Accrued
Interest Sub-subaccount to the Series 1996-A Non-Principal Collection Sub-
subaccount (or deducted from the transfer in respect of the Daily Interest
Deposit for such day);
(d) On each Business Day during the Series 1996-A Amortization Period
(including Distribution Dates), after giving effect to the transfers pursuant to
subsection 3A.03(a) the Trustee shall also transfer, based solely on the
information provided to the Trustee by the Master Servicer in the Daily Report
(upon which the Trustee may conclusively rely, subject to its obligation to
perform the procedures set forth in the Internal Operating
<PAGE>
45
Procedures Memorandum), from the Series 1996-A Principal Collection Subordinated
Sub-subaccount to the Series 1996-A Principal Collection Sub-subaccount an
amount equal to the lesser of (i) the sum of (A) the product of (1) the Series
1996-A Non-Subordinated Percentage, times (2) the Invested Percentage, times
----- -----
(3) the Eligible Receivables Percentage, times (4) the excess of (x) the sum of
-----
Dilution Adjustments arising or identified, and the outstanding Principal Amount
of Ineligible Receivables with respect to which a Repurchase Event has occurred,
in each case since the preceding Business Day, over (y) the amount specified in
----
the Daily Report as having been deposited by the Company in respect of such
Dilution Adjustments and Ineligible Receivables (either from the deposit in the
Collection Account of cash payments made in respect thereof by the Sellers or
from other cash Collections in respect thereof) in the Series 1996-A Principal
Collection Sub-subaccount since the preceding Business Day, (B) the product of
(1) the Series 1996-A Non-Subordinated Percentage, times (2) the Invested
-----
Percentage, times (3) the Eligible Receivables Percentage, times (4) the
----- -----
Principal Amount of Receivables that became Defaulted Receivables since the
preceding Business Day, and (C)(x) the Series 1996-A Unreimbursed Amount (as
defined in the following sentence) for the prior Business Day minus (y) the
-----
amount specified in the Daily Report as having been deposited by the Company on
such Business Day in respect of such Series 1996-A Unreimbursed Amount (either
from the deposit in the Collection Account of cash payments made in respect
thereof by the Sellers or from other cash Collections in respect thereof) in the
Series 1996-A Principal Collection Sub-subaccount and (ii) the amount on deposit
in the Series 1996-A Principal Collection Subordinated Sub-subaccount on such
Business Day. If on any Business Day the amount calculated pursuant to clause
(i) exceeds the amount calculated pursuant to clause (ii), such excess shall be
referred to as the "Series 1996-A Unreimbursed Amount" for such Business Day.
(e) In addition to the foregoing, on any Distribution Date during the
Series 1996-A Amortization
<PAGE>
46
Period following the Settlement Report Date on which (i) the Series 1996-A
Invested Amount has been reduced to an amount that is equal to or less than the
Clean-Up Call Amount, and (ii) the sum of (x) the amount on deposit in the
Series 1996-A Principal Collection Subordinated Sub-subaccount, plus (y) the
----
amount on deposit in the Series 1996-A Principal Collection Sub-subaccount,
equals or exceeds the Clean-Up Call Repurchase Price, the Trustee shall
transfer, based solely on the information provided to the Trustee by the Master
Servicer in the Daily Report (upon which the Trustee may conclusively rely,
subject to its obligation to perform the procedures set forth in the Internal
Operating Procedures Memorandum), from the Series 1996-A Principal Collection
Subordinated Sub-subaccount to the Series 1996-A Principal Collection
Sub-subaccount (which amount shall be used to pay the Clean-Up Call Repurchase
Price in full) the lesser of (i) the Clean-Up Call Repurchase Price minus the
-----
amount on deposit in the Series 1996-A Principal Collection Sub-subaccount on
such day and (ii) the amount on deposit in the Series 1996-A Principal
Collection Subordinated Sub-subaccount. In addition, on the Distribution Date
during the Series 1996-A Amortization Period on which the Company has exercised
its clean-up option pursuant to Section 9.02 of the Agreement to repurchase the
Series 1996-A Certificates, the Trustee shall, upon the written request of the
Company, transfer from the Series 1996-1 Principal Collection Subordinated
Sub-subaccount to the Series 1996-A Principal Collection Sub-account (which
amount shall be applied towards payment of the Clean-Up Call Repurchase Price)
the lesser of (i) the Series 1996-A Invested Amount minus the amount on deposit
-----
in the Series 1996-A Principal Collection Sub-subaccount on such day and
(ii) the amount on deposit in the Series 1996-A Principal Collection
Subordinated Sub-subaccount. Further, (i) if the Amortization Period has
commenced with respect to all Outstanding Series, then, on the date that is six
months after the latest date on which the last Amortization Period for an
Outstanding Series commenced and (ii) if the Receivables have been disposed of
pursuant to subsection 7.02(b) of the Agreement, on the Distribution Date
following
<PAGE>
47
the date of such disposition, the Trustee shall transfer from the Series 1996-A
Principal Collection Subordinated Sub-subaccount to the Series 1996-A Principal
Collection Sub-subaccount (which amount shall be applied towards payment of the
Series 1996-A Invested Amount) the remaining amount on deposit in the Series
1996-A Principal Collection Subordinated Sub-subaccount. The provisions of the
foregoing paragraph (d) and this paragraph (e) shall in no event be construed to
affect any other obligations of any Seller, any Servicer, the Master Servicer or
the Company under any of the Transaction Documents.
(f) The allocations to be made pursuant to this Section 3A.03 are
subject to the provisions of Sections 2.05, 2.06, 7.02, 9.01 and 9.04 of the
Agreement.
SECTION 3A.04. Determination of Interest. (a) (i) The amount of
--------------------------
interest distributable with respect to the VFC Certificates ("Series 1996-A
Monthly Interest Distribution") on each Distribution Date shall be the aggregate
amount of Daily Interest Expense accrued during the immediately preceding
Accrual Period.
(ii) Following any change in the amount of any Eurodollar Tranche or
Floating Tranche during an Accrual Period, the Series 1996-A Monthly Interest
shall be calculated with respect to such changed amount for the number of days
in the Accrual Period during which such changed amount is outstanding.
(iii) If the Certificate Rate changes during any Accrual Period, the
Master Servicer shall amend the Monthly Settlement Statement to reflect the
adjustment in the Series 1996-A Monthly Interest for such Accrual Period caused
by such change and any consequent adjustments and the Master Servicer shall also
provide written notification to the Trustee of any such change in the
Certificate Rate. Any amendment to the Monthly Settlement Statement pursuant to
this subsection 3A.04(a)(iii) shall be completed by
<PAGE>
48
1:00 p.m. on the day preceding the next Settlement Report Date.
(b) On each Distribution Date, the Master Servicer shall determine
the excess, if any (the "Interest Shortfall"), of (i) the aggregate
Series 1996-A Monthly Interest Distribution for the Accrual Period ending on
such Distribution Date over (ii) the amount that will be available to be
distributed to the Purchasers on such Distribution Date in respect thereof
pursuant to this Supplement. If the Interest Shortfall with respect to any
Distribution Date is greater than zero, an additional amount ("Additional
Interest") equal to the product of (A) the number of days until such Interest
Shortfall shall be repaid divided by 365, (B) the ABR plus 2.0% per annum and
(C) such Interest Shortfall (or the portion thereof that has not been paid to
the Purchasers) shall be payable as provided herein with respect to the VFC
Certificates on each Distribution Date following such Distribution Date to and
including the Distribution Date on which such Interest Shortfall is paid to the
VFC Certificateholders.
(c) On any Business Day, the Company may, subject to
subsection 3A.04(e), elect to allocate all or any portion of the Available
Pricing Amount to one or more Eurodollar Tranches with Eurodollar Periods
commencing on such Business Day by giving the Agent irrevocable written or
telephonic (confirmed in writing) notice thereof, which notice must be received
by the Agent prior to 1:00 p.m., New York City time, three Business Days prior
to such Business Day. Such notice shall specify (i) the applicable Business
Day, (ii) the Eurodollar Period for each Eurodollar Tranche to which a portion
of the Available Pricing Amount is to be allocated and (iii) the portion of the
Available Pricing Amount being allocated to each such Eurodollar Tranche.
Promptly upon receipt of each such notice the Agent shall notify each Purchaser
of the contents thereof. If the Agent shall not have received timely notice as
aforesaid with respect to all or any portion of the Available Pricing
<PAGE>
49
Amount, the Monthly Interest Payment on such amount shall be calculated by
reference to the ABR.
(d) Any reduction in the Series 1996-A Invested Amount on any
Business Day shall be allocated in the following order of priority:
first, to reduce the Unallocated Balance, as appropriate; and
-----
second, to reduce the portion of the Series 1996-A Invested Amount
------
allocated to Eurodollar Tranches in such order as the Company may select in
order to minimize costs payable pursuant to Section 7.04.
(e) Notwithstanding anything to the contrary contained in this
Section 3A.04, (i) the portion of the Series 1996-A Invested Amount allocable to
each Eurodollar Tranche must be in an amount equal to $500,000 or an integral
multiple of $500,000 in excess thereof; (ii) no more than five Eurodollar
Tranches shall be outstanding at any one time; (iii) after the occurrence and
during the continuance of any Early Amortization Event or Potential Early
Amortization Event relating to an Early Amortization Event set forth in
subsections (a), (d) (but only with respect to a Servicer Default set forth in
subsection 6.01(e) of the Servicing Agreement), (e), (g) or (j) of Section 5.01
of this Supplement, the Company, may not elect to allocate any portion of the
Available Pricing Amount to a Eurodollar Tranche; and (iv) after the end of the
Series 1996-A Revolving Period, the Company may not select any Eurodollar Period
that exceeds one month or that does not end on or prior to the next succeeding
Distribution Date.
SECTION 3A.05. Determination of Series 1996-A Monthly Principal.
-------------------------------------------------
(a) Payments of Series 1996-A Principal. The amount (the "Series 1996-A
------------------------------------
Monthly Principal Payment") distributable from the Series 1996-A Principal
Collection Sub-subaccount on each Distribution Date during
<PAGE>
50
the Series 1996-A Amortization Period shall be equal to the amount on deposit in
such account on the immediately preceding Settlement Report Date; provided,
--------
however, that the Series 1996-A Monthly Principal Payment on any Distribution
- -------
Date shall not exceed the Series 1996-A Invested Amount on such Distribution
Date after giving effect to the reductions and increases pursuant to
paragraphs (b) and (c) below. Further, on any other Business Day during the
Series 1996-A Amortization Period, funds may be distributed from the
Series 1996-A Principal Collection Sub-subaccount to the Purchasers in
accordance with Section 2.06 of this Supplement.
(b) Reductions to Series 1996-A Principal. If, on any Special
--------------------------------------
Allocation Settlement Report Date, the Series 1996-A Allocable Charged-Off
Amount is greater than zero for the related Settlement Period, the Trustee shall
(in accordance with written directions from the Master Servicer upon which the
Trustee may conclusively rely) make the following applications of such amounts
in the following order of priority:
(i) the Series 1996-A Required Subordinated Amount shall be reduced
(but not below zero) by an amount equal to the Series 1996-A Allocable
Charged-Off Amount (which shall also be reduced by the amount so applied);
(ii) then, to the extent that the Series 1996-A Allocable Charged-Off
Amount is greater than zero following the application in clause (i) above,
the Series 1996-A Invested Amount shall be reduced (but not below zero) by
such remaining Series 1996-A Allocable Charged-Off Amount (which shall also
be reduced by the amount so applied).
(c) Increases to Series 1996-A Principal. If, on any Special
-------------------------------------
Allocation Settlement Report Date, the Series 1996-A Allocable Recoveries Amount
is greater than zero for the related Settlement Period, the Trustee shall (in
accordance with written directions from the Master
<PAGE>
51
Servicer upon which the Trustee may conclusively rely) make the following
applications (after giving effect to the applications in paragraph (b) of such
amount in the following order of priority):
(i) the Series 1996-A Invested Amount shall be increased (but only to
the extent of any previous reductions of the Series 1996-A Invested Amount
pursuant to subsection 3A.05(b)(ii)) by the amount of the Series 1996-A
Allocable Recoveries Amount (which shall also be reduced by the amount so
applied);
(ii) then, to the extent that the Series 1996-A Allocable Recoveries
Amount is greater than zero following the applications in clause (i) above,
the Series 1996-A Required Subordinated Amount shall be increased (but only
to the extent of any previous reductions of the Series 1996-A Required
Subordinated Amount pursuant to subsection 3A.05(b)(i)) by such remaining
Series 1996-A Allocable Recoveries Amount (which shall also be reduced by
the amount so applied).
SECTION 3A.06. Applications. (a) The Trustee shall distribute,
-------------
based solely on the information provided to the Trustee by the Master Servicer
in the Monthly Settlement Statement (upon which the Trustee may conclusively
rely, subject to its obligation to perform the procedures set forth in the
Internal Operating Procedures Memorandum), on each Distribution Date, from
amounts on deposit in the Series 1996-A Accrued Interest Sub-subaccount, an
amount equal to the Series 1996-A Monthly Interest Distribution payable on such
Distribution Date (such amount, the "Monthly Interest Payment"), plus the amount
of any Monthly Interest Payment previously due but not distributed to the
Purchasers on a prior Distribution Date, plus the amount of any Additional
Interest for such Distribution Date and any Additional Interest previously due
but not distributed to the Purchasers on a prior Distribution Date, to the
Purchasers.
<PAGE>
52
(b) On each Distribution Date, the Trustee shall apply funds on
deposit in the Series 1996-A Non-Principal Collection Sub-subaccount in the
following order of priority to the extent funds are available:
(i) an amount equal to the Series 1996-A Monthly Servicing Fee for the
Accrual Period ending on such Distribution Date shall be withdrawn from the
Series 1996-A Non-Principal Collection Sub-subaccount by the Trustee and
paid to the Master Servicer (less any amounts payable to the Trustee
pursuant to Section 8.05 of the Agreement which shall be paid to the
Trustee); provided that if an Early Amortization Event shall have occurred
--------
and is continuing and LFI Servicing Corporation or any Affiliate thereof is
a Servicer, the Trustee shall deposit the Series 1996-A Monthly Servicing
Fee, up to the Expense Account Limit, into the Expense Account; and
(ii) an amount equal to any Program Costs due and payable shall be
withdrawn from the Series 1996-A Non-Principal Collection Sub-subaccount by
the Trustee and paid to the Persons owed such amounts.
Any remaining amounts on deposit in the Series 1996-A Non-Principal Collection
Sub-subaccount (in excess of the Accrued Expense Amount as of such day) not
allocated pursuant to clauses (i) and (ii) above shall be paid to the holder of
the Series 1996-A Subordinated Certificate; provided, however, that during the
-------- -------
Series 1996-A Amortization Period, such remaining amounts shall be deposited in
the Series 1996-A Principal Collection Sub-subaccount for distribution in
accordance with subsection 3A.06(c).
(c) During the Series 1996-A Amortization Period, the Trustee shall
apply, on each Distribution Date, amounts
<PAGE>
53
on deposit in the Series 1996-A Principal Collection Sub-subaccount in the
following order of priority:
(i) an amount equal to the Series 1996-A Monthly Principal Payment for
such Distribution Date shall be distributed from the Series 1996-A
Principal Collection Sub-subaccount to the Purchasers in reduction of the
Series 1996-A Invested Amount; and
(ii) if, following the repayment in full of the Series 1996-A Invested
Amount, any amounts are owed to the Trustee or any other Person, on account
of its fees, expenses and disbursements incurred in respect of the
performance of its responsibilities hereunder or as Successor Master
Servicer, such amounts shall be transferred from the Series 1996-A
Principal Collection Sub-subaccount and paid to the Trustee or such other
Person; and
(iii) following the repayment in full of the Series 1996-A Invested
Amount and of all of the amounts set forth in clause (ii), the remaining
amount on deposit in the Series 1996-A Principal Collection Sub-subaccount
on such Distribution Date, if any, shall be distributed to the holder of
the Series 1996-A Subordinated Certificate.
SECTION 3A.07. Refinancing. On any Distribution Date, the Company
------------
may, with 30 days' prior written notice to the Agent, the Trustee and the Master
Servicer, refinance all or a portion of the Series 1996-A Invested Amount. The
Series 1996-A Invested Amount may be refinanced in full or in part, but the
VFC Certificates and all other amounts (if any) then owed to the Purchasers by
the Trust, the Company, the Master Servicer, any Servicer or any Seller pursuant
to the Transaction Documents must, at the time of such refinancing, be paid in
full from the proceeds of such refinancing together with any other funds made
available by the Company as may be necessary for such payment in full. The
Company shall, to effect such refinancing, deposit no
<PAGE>
54
later than 11:00 a.m. on such Distribution Date either (i) (A) an amount equal
to the Monthly Interest Payment, plus the amount of any Monthly Interest Payment
previously due but not distributed to the Purchasers on a prior Distribution
Date, plus the amount of any Additional Interest for such Distribution Date and
any Additional Interest previously due but not distributed to the Purchasers on
a prior Distribution Date, to the Series 1996-A Accrued Interest Sub-subaccount,
(B) the Series 1996-A Adjusted Invested Amount to the Series 1996-A Principal
Collection Sub-subaccount and (C) all other amounts then owing to the Purchasers
pursuant to the Transaction Documents to the Series 1996-A Non-Principal
Collection Sub-subaccount, in each case, for distribution to the Purchasers by
the Trustee in accordance with subsection 4A.01(a) or (ii) funds in the same
aggregate amount as specified in the foregoing clause (i) to such accounts of
the Agent or the Purchasers and in such amounts as may be specified by the
Agent. In either case (i) or (ii), the Master Servicer's Daily Report and
Monthly Settlement Statement delivered pursuant to subsection 4A.01(b) shall
reflect such deposits in connection with the refinancing.
ARTICLE IV
Distributions and Reports
-------------------------
Article IV of the Agreement (except for any portion thereof relating
to another Series) shall read in its entirety as follows and the following shall
be exclusively applicable to the VFC Certificates issued pursuant to this
Supplement:
SECTION 4A.01. Distributions. (a) On each Distribution Date, the
--------------
Trustee shall distribute to each Purchaser from the account indicated in
Article III an amount equal to the product of (i) the amount to be distributed
to the Purchasers pursuant to Article III and (ii) such Purchaser's Commitment
Percentage.
<PAGE>
55
(b) All allocations and distributions hereunder shall be in
accordance with the Daily Report and the Monthly Settlement Statement and shall
be made in accordance with the provisions of Section 11.04 hereof and subject to
Section 3.01(h) of the Agreement.
SECTION 4A.02. Daily Reports. The Master Servicer shall provide the
--------------
Agent and the Trustee with a Daily Report in accordance with subsection 4.02(a)
of the Servicing Agreement. The Agent shall make copies of the Daily Report
available to the Purchasers at their reasonable request at the Agent's office in
The City of New York.
SECTION 4A.03. Statements and Notices. (a) Monthly Settlement
----------------------- ------------------
Statements. On each Settlement Report Date (commencing with the Settlement
- -----------
Report Date occurring in September 1996), the Master Servicer shall deliver to
the Trustee and the Agent a Monthly Settlement Statement in the Form of
Exhibit F setting forth, among other things, the Loss Reserve Ratio, the
Dilution Reserve Ratio, the Minimum Ratio, the Carrying Cost Reserve Ratio and
the Servicing Reserve Ratio, each as recalculated for the next succeeding
Settlement Period. The Agent shall forward a copy of each Monthly Settlement
Statement to any Purchaser upon request by such Purchaser. The Company and the
Master Servicer will deliver copies of all notices, reports (other than Daily
Reports), statements and other documents delivered by it pursuant to the Pooling
and Servicing Agreements to each Rating Agency.
(b) Annual Certificateholders' Tax Statement. On or before April 1
-----------------------------------------
of each calendar year (or such earlier date as required by applicable law),
beginning with calendar year 1997, the Company on behalf of the Trustee shall
furnish, or cause to be furnished, to each Person who at any time during the
preceding calendar year was a Purchaser, a statement prepared by the Company
containing the aggregate amount distributed to such Person for such calendar
year or the applicable portion thereof during which such Person was a Purchaser,
together with such other information as is
<PAGE>
56
required to be provided by an issuer of indebtedness under the Internal Revenue
Code and such other customary information as the Company deems necessary to
enable the Purchasers to prepare their tax returns. Such obligation of the
Company shall be deemed to have been satisfied to the extent that substantially
comparable information shall have been provided by the Trustee or the Agent
pursuant to any requirements of the Internal Revenue Code as from time to time
in effect. The Trustee shall be under no obligation to prepare tax returns for
the Trust.
(c) Early Amortization Event/Distribution of Principal Notices. Upon
-----------------------------------------------------------
the occurrence of an Early Amortization Event with respect to the Series 1996-A,
the Company or the Master Servicer, as the case may be, shall give prompt
written notice thereof to the Trustee and the Agent. As promptly as reasonably
practicable after its receipt of notice of the occurrence of an Early
Amortization Event with respect to Series 1996-A, the Trustee shall give notice
(i) to each Rating Agency (which notice shall be given, by telephone or
otherwise, not later than the second Business Day after such receipt) and
(ii) to the Agent, who in turn shall give notice to each Purchaser. In
addition, on the Business Day preceding each day on which a distribution of
principal is to be made during the Series 1996-A Amortization Period, the Master
Servicer shall direct the Agent to send notice to each Purchaser, which notice
shall set forth the amount of principal to be distributed on the related date to
the Purchasers with respect to the outstanding VFC Certificates.
ARTICLE V
Additional Early Amortization Events
------------------------------------
SECTION 5.01. Additional Early Amortization Events. If any one of
-------------------------------------
the events specified in Section 7.01 of the Agreement (after any grace periods
or consents applicable thereto) or any one of the following events
<PAGE>
57
(each, an "Early Amortization Event") shall occur during the Series 1996-A
Revolving Period with respect to the Series 1996-A Certificates:
(a) (i) failure on the part of the Master Servicer to direct any
payment to be made, or failure of any payment to be made, in respect of
interest owing on any VFC Certificate or the Commitment Fee within five
Business Days of the date such interest or Commitment Fee is due or
(ii) failure on the part of the Master Servicer to direct any payment to be
made, or of the Company to make any payment in respect of any other amounts
owing by the Company, under any Pooling and Servicing Agreement to or for
the benefit of the Purchasers within five Business Days of the date such
other amount is due;
(b) failure on the part of the Company duly to observe or perform in
any material respect any covenant or agreement of the Company set forth in
any Pooling and Servicing Agreement that continues unremedied 30 days
after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Company by the Trustee, or to
the Company and the Trustee by the Agent or Purchasers evidencing 25% or
more of the Series 1996-A Invested Amount;
(c) any representation or warranty made or deemed made by the Company
in any Pooling and Servicing Agreement to or for the benefit of the
Purchasers shall prove to have been incorrect in any material respect when
made or when deemed made that continues to be incorrect 30 days after the
date on which notice of such failure, requiring the same to be remedied,
shall have been given to the Company by the Trustee or to the Company and
the Trustee by the Agent or Purchasers evidencing 25% or more of the
Series 1996-A Invested Amount and as a result of such incorrectness, the
interests, rights or remedies of the Purchasers have
<PAGE>
58
been materially and adversely affected; provided, however, that an Early
-------- -------
Amortization Event with respect to the Series 1996-A Certificates shall not
be deemed to have occurred under this paragraph if the incorrectness of
such representation or warranty gives rise to an obligation to repurchase
the related Receivables and the Company has repurchased the related
Receivable or all such Receivables, if applicable, in accordance with the
provisions of any Pooling and Servicing Agreement within 10 Business Days
of when the Company was obligated to do so;
(d) a Servicer Default with respect to (i) the Master Servicer, other
than any Servicer Default that is within subsection 5.01(a) above, or
(ii) one or more Servicers that are responsible for servicing Receivables
representing 15% or more of the Aggregate Receivables Amount shall have
occurred and be continuing;
(e) a Purchase Termination Event with respect to one or more Sellers
that are responsible for originating Receivables representing 5% or more of
the Aggregate Receivables Amount shall have occurred and be continuing;
(f) a Change in Control shall have occurred;
(g) the Series 1996-A Allocated Receivables Amount shall be less than
the Series 1996-A Target Receivables Amount for a period of five
consecutive Business Days;
(h) any of the Agreement, the Servicing Agreement, this Supplement or
the Receivables Sale Agreement shall cease, for any reason, to be in full
force and effect, or the Company, Master Servicer, any Servicer, any Seller
or any Affiliate thereof shall so assert in writing;
<PAGE>
59
(i) the Trust shall for any reason cease to have a valid and perfected
first priority undivided ownership or first priority security interest in
any of the Trust Assets (subject to no other Liens other than any Permitted
Liens) and such cessation would individually, or together with other
cessations, have a Material Adverse Effect;
(j) a Federal tax notice of lien that affects the Company shall have
been filed and 40 days shall have elapsed without such notice having been
effectively withdrawn or such lien having been released or discharged;
(k) any "Event of Default", as such term is defined in the Credit
Agreement as in effect on the Effective Date, after giving effect to any
grace period applicable thereto under the Credit Agreement as in effect on
the Effective Date, shall have occurred and be continuing; or
(l) (i) one or more judgments for the payment of money (to the extent
not bonded or covered by insurance to the reasonable satisfaction of the
Agent) shall be rendered against the Company (A) in an aggregate amount
greater than $50,000 or (B) that, individually or in the aggregate, have
resulted or could reasonably be expected to result in a Company Material
Adverse Effect or (ii) one or more judgments for the payment of money (to
the extent not bonded or covered by insurance to the reasonable
satisfaction of the Agent) shall be rendered against the Master Servicer,
any Servicer, any Seller or any combination thereof (A) in an aggregate
amount greater than $7,500,000 or (B) that, individually or in the
aggregate, have resulted or could reasonably be expected to result in a
Servicer Material Adverse Effect or a Seller Material Adverse Effect, as
applicable, with respect to one or more Servicers or Sellers, as
applicable, that are responsible for servicing or originating, as the case
<PAGE>
60
may be, 5% or more of the Aggregate Receivables Amount and, in either case,
the same shall remain undischarged for a period of 30 consecutive days
during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to levy upon assets or properties
of the Company, the Master Servicer, any Servicer or any Seller to enforce
any such judgment;
then, in the case of (x) any event described in Section 7.01 of the Agreement,
automatically without any notice or action on the part of the Trustee or
Purchasers, an early amortization period shall immediately commence or (y) any
event described above, after the applicable grace period (if any) set forth in
the applicable subsection, the Trustee may, and at the written direction of the
Majority Purchasers shall, by written notice then given to the Company and the
Master Servicer, declare that an early amortization period has commenced as of
the date of such notice with respect to the Series 1996-A (any such period under
clause (x) or (y) above, an "Early Amortization Period; provided, however, that
-------- -------
in the case of the event described in clause (g) above, if an Early Amortization
Period has not been declared within 10 Business Days from the occurrence of such
event, then an Early Amortization Period shall occur automatically unless,
(i) prior to the end of such 10 Business Day period, the Series 1996-A Allocated
Receivables Amount shall no longer be less than the Series 1996-A Target
Receivables Amount and (ii) so long as the Series 1996-A Allocated Receivables
Amount continues to be equal to or greater than the Series 1996-A Target
Receivables Amount, VFC Certificateholders evidencing 66-2/3% or more of the
Series 1996-A Invested Amount shall have waived the occurrence of such event.
Notwithstanding the foregoing, a delay or failure in performance
referred to in clause (a) above for a period of 10 Business Days after the
applicable grace period, or in clause (b) above for a period of 30 Business Days
after the applicable grace period, will not constitute an Early
<PAGE>
61
Amortization Event if such delay or failure could not have been prevented by the
exercise of reasonable diligence by the Company and such delay or failure was
caused by a Force Majeure Delay. The Company will nevertheless be required to
use its best efforts to perform its obligations in a timely manner in accordance
with the terms of the Transaction Documents, and the Company shall promptly give
the Trustee an Officer's Certificate notifying it of any such delay or failure.
ARTICLE VI
Servicing Fee
-------------
SECTION 6.01. Servicing Compensation. A monthly servicing fee (the
-----------------------
"Series 1996-A Monthly Servicing Fee") shall be payable to the Master Servicer
on each Distribution Date for the preceding Settlement Period, in an amount
equal to the product of (a) the Servicing Fee and (b) a fraction, the numerator
of which shall be equal to the Series 1996-A Target Receivables Amount as of the
end of the preceding Settlement Period and the denominator of which shall be
equal to the Principal Amount of all Receivables in the Trust as of the end of
such preceding Settlement Period; provided, however, that, for the purposes of
-------- -------
calculating the Accrued Expense Adjustment on the last Business Day of any
Accrual Period, such calculation shall be based on the Series 1996-A Target
Receivables Amount and Principal Amount of all Receivables in the Trust as of
the end of the most recent Settlement Period that has elapsed. To the extent
that funds on deposit in the Series 1996-A Non-Principal Collection
Sub-subaccount at any such date are insufficient to pay the Series 1996-A
Monthly Servicing Fee due on such date as set forth in the Monthly Settlement
Statement delivered by the Master Servicer to the Trustee, the Trustee shall so
notify the Company and the Company shall immediately pay the Master Servicer the
amount of any such deficiency.
<PAGE>
62
ARTICLE VII
Change in Circumstances
-----------------------
SECTION 7.01. Reserve Requirements; Change in Circumstances.
----------------------------------------------
(a) Notwithstanding any other provision of this Supplement, if after the
Issuance Date any change in applicable law or regulation or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to any Purchaser in
respect of any Eurodollar Tranche or any fees or other amounts payable hereunder
(other than changes in respect of Excluded Taxes and taxes described in
Section 7.04) or shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of or credit extended by any Purchaser (except any such reserve
requirement that is reflected in the Adjusted LIBO Rate) or shall impose on such
Purchaser or the London interbank market any other condition affecting the
Supplement or any Eurodollar Tranche or participation therein, and the result of
any of the foregoing shall be to increase the cost to such Purchaser of
purchasing or holding a portion thereof or to reduce the amount of any sum
received or receivable by such Purchaser hereunder (whether of principal,
interest or otherwise) in each case by an amount deemed by such Purchaser to be
material, then the Company agrees to pay to such Purchaser upon demand such
additional amount or amounts as will compensate such Purchaser for such
additional costs incurred or reduction suffered.
(b) If any Purchaser shall have determined that the adoption after the
Issuance Date of any law, rule, regulation or guideline regarding capital
adequacy, or any change after the Issuance Date in any such law, rule,
regulation or guideline (whether such law, rule, regulation or guideline has
been adopted) or in the interpretation or administration thereof by any
Governmental Authority charged
<PAGE>
63
with the interpretation or administration thereof, or compliance by any
Purchaser (or any lending office of such Purchaser) or any Purchaser's holding
company with any request or directive regarding capital adequacy issued or
adopted after the Issuance Date (whether or not having the force of law) of any
Governmental Authority has or would have the effect of reducing the rate of
return on such Purchaser's capital or on the capital of such Purchaser's holding
company, if any, as a consequence of this Supplement or purchasing or holding
VFC Certificates or maintaining such Purchaser's Commitment pursuant hereto to a
level below that which such Purchaser or such Purchaser's holding company could
have achieved but for such applicability, adoption, change or compliance (taking
into consideration such Purchaser's policies and the policies of such
Purchaser's holding company with respect to capital adequacy) by an amount
deemed by such Purchaser to be material, then from time to time the Company
agrees to pay to such Purchaser such additional amount or amounts as will
compensate such Purchaser or such Purchaser's holding company for any such
reduction suffered.
(c) A certificate of a Purchaser setting forth (i) the amount or amounts
necessary to compensate such Purchaser or its holding company, as applicable, as
specified in subsection 7.01(a) or 7.01(b) above and (ii) a reasonably detailed
explanation of the calculation of such amount or amounts shall be delivered to
the Company and shall be conclusive absent manifest error. The Company shall
pay such Purchaser the amount shown as due on any such certificate delivered by
it within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Purchaser to demand compensation
for any increased costs or reduction in amounts received or receivable or
reduction in return on capital shall not constitute a waiver of such Purchaser's
right to demand such compensation. The protection of this Section shall be
available to each Purchaser regardless of any possible contention of the
invalidity or inapplicability
<PAGE>
64
of the law, rule, regulation, agreement, guideline or other change or condition
that shall have occurred or been imposed.
SECTION 7.02. Change in Legality. (a) Notwithstanding any other
-------------------
provision of the Agreement or this Supplement, if, after the Issuance Date, any
change in any law or regulation or in the interpretation thereof by any Gov-
ernmental Authority charged with the administration or interpretation thereof
shall make it unlawful for any Purchaser to purchase or hold a portion of any
Eurodollar Tranche or to give effect to its obligations as contemplated hereby
with respect to any Eurodollar Tranche, then, by written notice to the Company,
the Trustee and the Agent:
(i) such Purchaser may declare that Eurodollar Tranches will not
thereafter, for the duration of such unlawfulness, be funded by such
Purchaser hereunder (or be continued for additional Eurodollar Periods) and
the portion of any Available Pricing Amount in respect of such Purchaser's
Commitment Percentage will not thereafter, for the duration of such
unlawfulness, be allocated to Eurodollar Tranches, whereupon any request
for a Eurodollar Tranche (or to continue a Eurodollar Tranche for an
additional Eurodollar Period or to allocate any Available Pricing Amount to
a Eurodollar Tranche) shall, as to such Purchaser only, be deemed a request
to fund a portion of a Floating Tranche in an amount equal to such
Purchaser's Commitment Percentage of such Eurodollar Tranche, with interest
on such amount to be calculated on the basis of the ABR (or a request to
continue a portion of such Eurodollar Tranche or to allocate a portion of
such Available Pricing Amount, in an amount equal to such Purchaser's
Commitment Percentage of such Eurodollar Tranche, with interest on such
amount to be calculated on the basis of the ABR for the specified
Eurodollar Period), unless such declaration shall be subsequently
withdrawn; and
<PAGE>
65
(ii) such Purchaser may require that interest on the portion of all
outstanding Eurodollar Tranches funded by such Purchaser shall be
calculated on the basis of the ABR as of the effective date of such notice
as provided in subsection 7.02(b) below.
(b) For purposes of this Section 7.02, a notice to the Company by any
Purchaser shall be effective as to the portion of each Eurodollar Tranche held
by such Purchaser, if lawful, on the last day of the Eurodollar Period currently
applicable to such Eurodollar Tranche; in all other cases such notice shall be
effective on the date of receipt by the Company.
SECTION 7.03. Indemnity. The Company and the Master Servicer,
----------
jointly and severally, shall indemnify each Purchaser against any loss or
expense that such Purchaser may sustain or incur as a consequence of (a) any
event, other than a default by such Purchaser in the performance of its
obligations hereunder, that results in (i) such Purchaser receiving or being
deemed to receive any amount on account of the portion of the Series 1996-A
Invested Amount in respect of any Eurodollar Tranche prior to the end of the
Eurodollar Period in effect therefor, (ii) such Purchaser receiving interest
with respect to any portion of any Eurodollar Tranche calculated on the basis of
the ABR for any period before the last day of the Eurodollar Period in effect
therefor, or (iii) any Eurodollar Tranche to be funded by such Purchaser
(whether pursuant to an Increase under Section 2.05 or an allocation of the
Available Pricing Amount under subsection 3A.04(c)) not being funded after the
applicable notice with respect to such Eurodollar Tranche shall have been given
by the Master Servicer or the Company to the Agent hereunder (any of the events
referred to in this clause (a) being called a "Breakage Event") or (b) any
default in the making of any payment required to be made hereunder. In the case
of any Breakage Event, such loss shall include an amount equal to the excess, as
reasonably determined by such Purchaser, of (i) its cost of obtaining funds for
the Eurodollar Tranche that is the subject of such
<PAGE>
66
Breakage Event for the period from the date of such Breakage Event to the last
day of the Eurodollar Period in effect (or that would have been in effect) for
such Eurodollar Tranche over (ii) the amount of interest likely to be realized
by such Purchaser in redeploying the funds released or not utilized by reason of
such Breakage Event for such period; provided, however, that any payments made
-------- -------
by the Company pursuant to this Section shall be Company Subordinated
Obligations. This covenant shall survive the termination of this Supplement and
the payment of all amounts payable hereunder. A certificate of any Purchaser
setting forth (i) any amount or amounts that such Purchaser is entitled to
receive pursuant to this Section 7.03 and (ii) a reasonably detailed explanation
of the calculation of such amount or amounts shall be delivered to the Company
and shall be conclusive absent manifest error.
SECTION 7.04. Taxes. (a) Any and all payments by or on behalf of
------
the Company hereunder and under any other Transaction Document shall be made, in
accordance with the terms of this Supplement, free and clear of and without
deduction for any and all current or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
(i) taxes imposed on the net income of the Agent or any Purchaser (or any
transferee or assignee thereof, including a participation holder (any such
entity a "Transferee")), however denominated, and (ii) franchise taxes imposed
on the net income or in lieu of net income of the Agent or any Purchaser (or
Transferee) (the taxes referred to in the foregoing clauses (i) and (ii)
individually or collectively being called "Excluded Taxes"), in each case
imposed: (a) by the U.S. or any political subdivision or taxing authority
thereof or therein; (b) by any jurisdiction under the laws of which the Agent or
such Purchaser (or Transferee) or lending office is organized or in which its
lending office or office is located, managed or controlled or in which its
principal office is located or any political subdivision or taxing authority
thereof or therein; or (c) by reason of any connection between the jurisdiction
imposing such tax and
<PAGE>
67
the Agent, such Purchaser, such Transferee or such lending office or office
other than a connection arising solely from the Agreement or this Supplement or
any transaction thereunder or hereunder (all such nonexcluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities, collectively or
individually, being called "Taxes"). If the Company shall be required to deduct
any Taxes from or in respect of any sum payable on the VFC Certificates or any
other sum payable hereunder or under any other Transaction Document to the Agent
any Purchaser (or any Transferee), (i) the sum payable shall be increased by the
amount (an "Additional Amount") necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 7.04) the Agent or such Purchaser (or Transferee), as the case may
be, shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such deductions and (iii) the
Company shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Company agrees to pay to the relevant Governmental
Authority in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies (including mortgage recording taxes and similar fees) that arise from any
payment made hereunder or under any other Transaction Document or from the
execution, delivery or registration of, or otherwise solely with respect to, the
Agreement, this Supplement or any other Transaction Document ("Other Taxes").
(c) The Company shall indemnify the Agent and each Purchaser (or
Transferee) for the full amount of Taxes and Other Taxes paid by the Agent or
such Purchaser (or Transferee), as the case may be, and any liability (including
penalties, interest and expenses (including reasonable attorney's fees and
expenses)), other than those resulting solely from a failure by the Agent or
such Purchaser (or Transferee), as the case may be, to pay any
<PAGE>
68
Taxes or Other Taxes which it is required to pay and for which it received an
indemnity payment, arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability prepared by the Agent or a Purchaser (or Transferee), absent manifest
error, shall be final, conclusive and binding for all purposes. Such
indemnification shall be made within 30 days after the date the Agent or any
Purchaser (or Transferee), as the case may be, makes written demand therefor.
If the Agent or any Purchaser (or any Transferee) shall become aware that it is
entitled to receive a refund or other tax credit or benefit in respect of any
Taxes or Other Taxes, it shall promptly notify the Company thereof and, in the
case of a refund, shall within 30 days after receipt of a request by the
Company, apply for such refund at the Company's expense. If the Agent or any
Purchaser (or any Transferee) receives a refund or other tax credit or benefit
in respect of any Taxes or Other Taxes for which the Agent or such Purchaser (or
such Transferee) has received payment from the Company hereunder, it shall
promptly notify the Company thereof and shall promptly repay such refund or, in
the case of a tax credit or other benefit shall repay the amount of the tax
credit or benefit received promptly following the date on which such tax credit
or other benefit is offset against such party's tax liability, in each case to
the Company without interest and net of any expenses incurred, except to the
extent interest shall have explicitly accompanied such refund or other tax
credit or benefit, provided that the Company, upon the request of such Purchaser
--------
or the Agent, agrees to return the amount of such refund or other tax benefit or
credit (plus any penalties, interest or other charges required to be paid) to
such Purchaser or the Agent in the event such Purchaser or the Agent is required
to repay such amount to the relevant taxing authority.
(d) As soon as practicable after the date of any payment of Taxes or Other
Taxes by the Company to the relevant Governmental Authority, the Company will
deliver to
<PAGE>
69
the Agent and the Trustee, at their respective addresses referred to in
Section 11.09, the original or a certified copy of any receipt issued by such
Governmental Authority or other proof reasonably acceptable to the indemnified
party evidencing payment thereof.
(e) Each Purchaser (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Purchaser") shall deliver to the Company and the Agent two
copies of either United States Internal Revenue Service Form 1001 or Form 4224,
or, in the case of a Non-U.S. Purchaser claiming exemption from U.S. Federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a Form W-8, or any subsequent versions thereof
or successors thereto (and, if such Non-U.S. Purchaser delivers a Form W-8, a
certificate representing that such Non-U.S. Purchaser is not a bank for purposes
of Section 881(c) of the Code, is not a 10-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of the Company and is not a
controlled foreign corporation related to the Company (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Non-U.S. Purchaser claiming complete exemption from, or reduced rate of, U.S.
Federal withholding tax on payments of interest by the Company on the VFC
Certificates and other amounts payable under the Agreement, this Supplement and
the other Transaction Documents; provided, that if such Non-U.S. Purchaser is a
--------
bank for purposes of Section 881(c) of the Code, such Non-U.S. Purchaser shall
make whole the Company for reliance on such certificate. Such forms shall be
delivered by each Non-U.S. Purchaser on or before the date it becomes a
Purchaser (or, in the case of a Transferee that is a participation holder, on or
before the date such participation holder becomes a Transferee hereunder) and on
or before the date, if any, such Non-U.S. Purchaser changes its applicable
lending office by designating a different lending office (a "New Lending
Office"). In addition, each Non-U.S. Purchaser shall deliver such forms
promptly upon
<PAGE>
70
the obsolescence or invalidity of any form previously delivered by such Non-U.S.
Purchaser. Notwithstanding any other provision of this subsection 7.04(e), a
Non-U.S. Purchaser shall not be required to deliver any form pursuant to this
subsection 7.04(e) that such Non-U.S. Purchaser is not legally able to deliver.
(f) The Company shall not be required to indemnify any Non-U.S. Purchaser
or to pay any additional amounts to any Non-U.S. Purchaser, in respect of United
States Federal withholding tax pursuant to subsection 7.04(a) or 7.04(c) above
to the extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S. Purchaser
became a Purchaser (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S.
Purchaser designated such New Lending Office; provided, however, that this
-------- -------
subsection 7.04(f) shall not apply (x) to any Transferee or New Lending Office
that becomes a Transferee or New Lending Office as a result of an assignment,
participation, transfer or designation made at the request of the Company and
(y) to the extent the indemnity payment or additional amounts any Transferee or
any Purchaser, acting through a New Lending Office, would be entitled to receive
(without regard to this subsection 7.04(f)) do not exceed the indemnity payment
or additional amounts that the Person making the assignment, participation or
transfer to such Transferee or Purchaser making the designation of such New
Lending Office, would have been entitled to receive in the absence of such
assignment, participation, transfer or designation or (ii) the obligation to pay
such additional amounts would not have arisen but for a failure by such Non-U.S.
Purchaser to comply with the provisions of subsection 7.04(e) above (taking into
account the last sentence thereof).
(g) Nothing contained in this Section 7.04 shall require any Purchaser (or
any Transferee) or the Agent to
<PAGE>
71
make available any of its tax returns (or any other information that it deems to
be confidential or proprietary).
SECTION 7.05. Assignment of Commitments Under Certain Circumstances;
------------------------------------------------------
Duty to Mitigate. (a) In the event (i) any Purchaser delivers a certificate
- -----------------
requesting compensation pursuant to Section 7.01, (ii) any Purchaser delivers a
notice described in Section 7.02 or (iii) the Company is required to pay any
additional amount or indemnification payment to any Purchaser or any
Governmental Authority on account of any Purchaser pursuant to Section 7.04, the
Company may, at its sole expense and effort (including with respect to the
processing and recordation fee referred to in subsection 11.10(b)), upon notice
to such Purchaser and the Agent, require such Purchaser to transfer and assign,
without recourse (in accordance with and subject to the restrictions contained
in Section 11.10), all of its interests, rights and obligations under this
Agreement to an assignee that shall assume such assigned obligations (which
assignee may be another Purchaser, if another Purchaser accepts such
assignment); provided that (A) such assignment shall not conflict with any law,
--------
rule or regulation or order of any court or other Governmental Authority having
jurisdiction, (B) the Company shall have received the prior written consent of
the Agent, which consent shall not unreasonably be withheld, and (C) the Company
or such assignee shall have paid to the affected Purchaser in immediately
available funds an amount equal to the sum of the principal of, and interest
accrued to the date of such payment on, the outstanding VFC Certificates of such
Purchaser plus all fees and other amounts accrued for the account of such
Purchaser hereunder (including any amounts under Section 7.01 and Section 7.03);
and provided further that, if prior to any such transfer and assignment the
-------- -------
circumstances or event that resulted in such Purchaser's claim for compensation
under Section 7.01 or notice under Section 7.02 or the amounts paid pursuant to
Section 7.04, as the case may be, cease to cause such Purchaser to suffer
increased costs or reductions in amounts received or
<PAGE>
72
receivable or reduction in return on capital, or cease to have the consequences
specified in Section 7.02, or cease to result in amounts being payable under
Section 7.04, as the case may be (including as a result of any action taken by
such Purchaser pursuant to subsection 7.05(b) below), or if such Purchaser shall
waive its right to claim further compensation under Section 7.01 in respect of
such circumstances or event or shall withdraw its notice under Section 7.02 or
shall waive its right to further payments under Section 7.04 in respect of such
circumstances or event, as the case may be, then such Purchaser shall not
thereafter be required to make any such transfer and assignment hereunder.
(b) If (i) any Purchaser shall request compensation under Section 7.01,
(ii) any Purchaser delivers a notice described in Section 7.02 or (iii) the
Company is required to pay any additional amount to any Purchaser (or
Transferee) or any Governmental Authority on account of any Purchaser (or
Transferee), pursuant to Section 7.04, then such Purchaser shall use reasonable
efforts (which shall not require such Purchaser to incur an unreimbursed loss or
unreimbursed cost or expense or otherwise take any action inconsistent with its
internal policies or legal or regulatory restrictions or suffer any disadvantage
or burden reasonably deemed by it to be significant) (A) to file any certificate
or document reasonably requested in writing by the Company or (B) to assign its
rights and delegate and transfer its obligations hereunder to another of its
offices, branches or affiliates, if such filing or assignment would reduce its
claims for compensation under Section 7.01 or enable it to withdraw its notice
pursuant to Section 7.02 or would reduce amounts payable pursuant to Section
7.04, as the case may be, in the future. The Company hereby agrees to pay all
reasonable costs and expenses incurred by any Purchaser in connection with any
such filing or assignment, delegation and transfer.
<PAGE>
73
SECTION 7.06. Limitation. The obligations of the Company under this
-----------
Article VII shall be limited by Section 11.13.
ARTICLE VIII
Covenants, Representations and Warranties
-----------------------------------------
SECTION 8.01. Representations and Warranties of the Company and the
-----------------------------------------------------
Master Servicer. The Company and the Master Servicer each hereby represents and
- ----------------
warrants to the Trustee, the Agent and each of the Purchasers that each and
every of their respective representations and warranties contained in the
Agreement and the Servicing Agreement is true and correct as of the Issuance
Date and as of the date of each Increase.
SECTION 8.02. Covenants of the Company and the Master Servicer. The
-------------------------------------------------
Company and the Master Servicer hereby agree, in addition to their obligations
under the Agreement and the Servicing Agreement, that:
(a) they shall not terminate the Agreement unless in compliance with
the terms of the Agreement and the supplements relating to each Outstanding
Series;
(b) they will (i) provide the Agent with evidence, satisfactory to the
Agent, of (A) the establishment of a disaster recovery plan, (B) the
establishment of computer back-up systems and (C) the operational readiness
of an off-site disaster recovery facility (all in accordance with the
time limits set forth in Schedule 3), and (ii) within 90 days of the
Issuance Date, deliver to the Trustee executed copies of any landlord
waivers, in a form reasonably acceptable to the Trustee, that may be
necessary to grant to the Trustee access to any leased premises of the
Master Servicer for which the Trustee may require access to perform the
collection and administrative functions to
<PAGE>
74
be performed by the Trustee under the Transaction Documents;
(c) they shall observe in all material respects each and every of
their respective covenants (both affirmative and negative) contained in the
Agreement, the Servicing Agreement, this Supplement and all other
Transaction Documents to which each is a party;
(d) they shall afford the Agent or any representative of the Agent
access to all records relating to the Receivables at any reasonable time
during regular business hours, upon reasonable prior notice, for purposes
of inspection and shall permit the Agent or any representative of the Agent
to visit any of the Company's or the Master Servicer's, as the case may be,
offices or properties during regular business hours and as often as may
reasonably be requested, subject to the Company's or the Master Servicer's,
as the case may be, normal security and confidentiality requirements and to
discuss the business, operations, properties, financial and other
conditions of the Company or the Master Servicer with their respective
officers and employees and with their Independent Public Accountants;
provided that the Agent shall notify the Company or the Master Servicer, as
--------
the case may be, prior to any contact with such accountants and shall give
the Company or the Master Servicer the opportunity to participate in such
discussions; and
(e) they shall not waive the provisions of subsections 7.01(d),
(e)(i), (g) and (h) of the Receivables Sale Agreement without the consent
of the Agent.
SECTION 8.03. Negative Covenant of the Company; Covenants of the
--------------------------------------------------
Master Servicer. (a) The Company shall not make any Restricted Payment while
- ----------------
Series 1996-A is an Outstanding Series, except (i) from amounts distributed to
the Company pursuant to subsection 3A.03(b), (ii) in
<PAGE>
75
compliance with all terms of the Transaction Documents, including the Company's
covenant as to net worth set forth in subsection 2.07(m) of the Agreement and
(iii) such Restricted Payment is made no more frequently than on a monthly basis
and such Restricted Payment is made in accordance with all corporate and legal
formalities applicable to the Company; provided that no Restricted Payment shall
--------
be made if an Early Amortization Event has occurred and is continuing (or would
occur as a result of making such Restricted Payment).
(b) (i) The Master Servicer hereby agrees that it shall observe each and
all of its respective covenants (both affirmative and negative) contained in
each Pooling and Servicing Agreement in all material respects;
(ii) It shall provide to the Agent, simultaneously with delivery to
the Trustee or the Rating Agencies, all reports, notices, certificates,
statements and other documents required to be delivered to the Trustee or the
Rating Agencies pursuant to the Agreement, the Servicing Agreement and the other
Transaction Documents and furnish to the Agent promptly after receipt thereof a
copy of each material notice, material demand or other material communication
(excluding routine communications) received by or on behalf of the Company or
the Master Servicer with respect to the Transaction Documents; and
(iii) It shall provide notice to the Agent of the appointment of a
Successor Master Servicer pursuant to Section 6.02 of the Servicing Agreement.
SECTION 8.04. Obligations Unaffected. The obligations of the Company
-----------------------
and the Master Servicer to the Agent and the Purchasers under this Supplement
shall not be affected by reason of any invalidity, illegality or irregularity of
any of the Receivables or any sale of any of the Receivables.
<PAGE>
76
SECTION 8.05. Representations and Warranties of the Initial
---------------------------------------------
Purchasers and Acquiring Purchasers. Each Initial Purchaser and Acquiring
- ------------------------------------
Purchaser represents, warrants and covenants to the Company, as of the Issuance
Date (or, in the case of each Acquiring Purchaser, as of the effective date of
the applicable Assignment and Assumption), that:
(a) It acknowledges that the VFC Certificates have not been and will
not be registered under the Securities Act and are being offered and sold to the
it in reliance upon the exemption provided in Section 4(2) of the Securities
Act, and have not and will not be registered or qualified under the securities
or "blue sky" laws of any jurisdiction, and may not be resold or otherwise
transferred unless so registered or qualified or unless any exemption from such
requirements is available.
(b) It is purchasing the VFC Certificates in the ordinary course of
its business and for investment only solely for its own account or accounts for
which it exercises sole investment discretion and not as nominee or agent for
any other Person and not with a view to, or for offer or sale in connection
with, any distribution thereof (within to meaning of the Securities Act) that
would be in violation of the securities laws of the United States of America or
any state thereof.
(c) It is an institutional investor that is an "Accredited Investor"
(as defined under Rule 501(a)(1), (2), (3) or (7), of the Securities Act) or, if
the VFC Certificates are to be purchased for one or more institutional accounts
("investor accounts") for which it is acting as a fiduciary or agent, each such
investor account is an institutional investor that is an Accredited Investor.
(d) It invests in or has such knowledge and experience in business
and financial matters and with respect to investments in securities so as to
enable it to understand and evaluate the risks of such investments and
<PAGE>
77
form an investment decision with respect thereto and is able to bear the risk of
such investment for an indefinite period and to afford a complete loss thereof.
(e) It has been afforded access to information (including the
financial condition) about the Company, and the Sellers to enable it to evaluate
its investment in the VFC Certificates (the "Information") and acknowledges that
it has been afforded the opportunity (i) to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company, the
Sellers or Persons acting on their behalf concerning the terms and conditions of
the offering of the VFC Certificates and the merits and risks of investing in
the VFC Certificates, (ii) to obtain such additional information that the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy and completeness of the Information and
(iii) to review the filings of the Sellers with the Securities and Exchange
Commission and all of the public disclosure of the Sellers.
(f) It acknowledges that it is the expressed intent of the Company
that the VFC Certificates are being issued only in transactions not involving
any public offering within the meaning of the Securities Act and that the VFC
Certificates will bear a legend substantially as set forth in the form of the
VFC Certificates included in this Supplement and will be subject to certain
limitations on transfer and exchange specified in the Agreement, this Supplement
and the other Transaction Documents.
<PAGE>
78
ARTICLE IX
Conditions Precedent
--------------------
SECTION 9.01. Conditions Precedent to Effectiveness of Supplement.
----------------------------------------------------
This Supplement will become effective on the date (the "Effective Date") on
which the following conditions precedent have been satisfied:
(a) Transaction Documents. The Agent shall have received an original
----------------------
copy for itself and photocopies for each Purchaser, each executed and delivered
in form and substance satisfactory to the Agent, of (i) the Agreement executed
by a duly authorized officer of each of the Company, the Master Servicer and the
Trustee, (ii) this Supplement executed by a duly authorized officer of each of
the Company, the Master Servicer, the Trustee, the Agent and the Initial
Purchasers and (iii) the other Transaction Documents duly executed by the
parties thereto.
(b) Corporate Documents; Corporate Proceedings of the Company and
-------------------------------------------------------------
Master Servicer. The Agent shall have received, with a copy for each Purchaser,
- ----------------
from the Company, each Seller and the Master Servicer, complete copies of:
(i) the certificate of incorporation including all amendments thereto,
of such Person, certified as of a recent date by the Secretary of State or
other appropriate authority of the state of incorporation, as the case may
be, and a certificate of compliance, of status or of good standing, as and
to the extent applicable, of each such Person as of a recent date, from the
Secretary of State or other appropriate authority of such jurisdiction;
(ii) a certificate of the Secretary or Assistant Secretary of such
Person dated the Effective Date and certifying (A) that attached thereto is
a true and complete copy of the By-laws of such Person, as in
<PAGE>
79
effect on the Effective Date and at all times since a date prior to the
date of the resolutions described in clause (B) below, (B) that attached
thereto is a true and complete copy of the resolutions of the Board of
Directors of such Person or committees thereof authorizing the execution,
delivery and performance of the Transaction Documents to which it is a
party and the transactions contemplated thereby, and that such resolutions
have not been amended, modified, revoked or rescinded and are in full force
and effect, (C) that the certificate of incorporation of such Person has
not been amended since the date of the last amendment thereto shown on the
certificate of good standing (or its equivalent) furnished pursuant to
clause (i) above and (D) as to the incumbency and specimen signature of
each officer executing any Transaction Documents or any other document
delivered in connection herewith or therewith on behalf of such Person; and
(iii) a certificate of another officer as the incumbency and specimen
signature of the Secretary or Assistant Secretary executing the certificate
pursuant to clause (ii) above.
(c) Good Standing Certificates. The Agent shall have received copies
---------------------------
of certificates of compliance, of status or of good standing, dated as of a
recent date from the Secretary of State or other appropriate authority of such
jurisdiction, with respect to the Company, the Master Servicer, each Servicer
and each Seller, in each State where the ownership, lease or operation of
property or the conduct of business requires it to qualify as a foreign
corporation, except where the failure to so qualify would not have a material
adverse effect on the business, operations, properties or condition (financial
or otherwise) of the Company, the Master Servicer, such Servicer or such Seller,
as the case may be.
<PAGE>
80
(d) Consents, Licenses, Approvals, Etc. The Agent shall have
-----------------------------------
received, with a photocopy for each Purchaser, certificates dated the date
hereof of the President, Vice Chairman, Chief Financial Officer or any Vice
President of the Company, the Master Servicer, each Servicer and each Seller
either (i) attaching copies of all material consents, licenses and approvals
required in connection with the execution, delivery and performance by the
Company, the Master Servicer, such Servicer or such Seller, as the case may be,
of the Agreement, this Supplement, the Receivables Sale Agreement and/or the
Servicing Agreement, as the case may be, and the validity and enforceability of
the Agreement, this Supplement, the Receivables Sale Agreement and/or the
Servicing Agreement against the Company, the Master Servicer, such Servicer or
such Seller, as the case may be, and such consents, licenses and approvals shall
be in full force and effect or (ii) stating that no such consents, licenses or
approvals are so required, except those that may be required under state
securities or "blue sky" laws.
(e) Filings, Registrations and Recordings. Any documents (including,
--------------------------------------
without limitation, financing statements) required to be filed in order (i) to
perfect the sale of the Receivables by each Seller to the Company pursuant to
the Receivables Sale Agreement and (ii) to create, in favor of the Trustee, a
perfected ownership/perfected first security interest in the Trust Assets under
the Agreement with respect to which an ownership/security interest may be
perfected by a filing under the UCC or other comparable statute shall, in each
case, have been properly prepared and executed for immediate filing in each
office in each jurisdiction listed in the Agreement or the Receivables Sale
Agreement, as the case may be, and such filings are the only filings required in
order to perfect the sale of the Receivables to the Company under the
Receivables Sale Agreement or to the Trust, under the Agreement, as the case may
be, in the jurisdictions listed
<PAGE>
81
therein. The Agent shall have received photocopies of each such filing,
registration or recordation made or to be made.
(f) Lien Searches. The Agent and the Trustee shall have received the
--------------
results of a recent search satisfactory to the Agent of any UCC filings (or
equivalent filings) made with respect to the Company (and with respect to such
other Persons as the Agent deems necessary) in the states (or other
jurisdictions) in which the chief executive office of the Company and each such
other Person is located, any offices of the Company and each such other Person
in which records have been kept relating to the Receivables and the other
jurisdictions in which UCC filings (or equivalent filings) are to be made
pursuant to the preceding subsection, together with copies of the financing
statements (or similar documents) disclosed by such search, and accompanied by
evidence satisfactory to the Agent that any Liens disclosed by such search would
be Permitted Liens or have been released.
(g) Legal Opinions. The Agent and the Trustee shall have received,
---------------
with a counterpart for each Purchaser, opinions of counsel to the Company and
the Master Servicer, dated the Issuance Date, as to corporate, tax, bankruptcy,
perfection and other matters in form and substance acceptable to the Agent and
its counsel.
(h) Arrangement Fee. The Agent, each Initial Purchaser and the
----------------
Trustee shall have received payment of all fees and other amounts due and
payable to any of them on or before the Effective Date.
(i) Funding Under Credit Agreement. The initial funding under the
-------------------------------
Credit Agreement shall have occurred or shall occur simultaneously with the
Effective Date.
(j) Conditions Under the Receivables Sale Agreement. A Responsible
------------------------------------------------
Officer of the Company shall have certified that all conditions to the
obligations of the Company and each of the Sellers under the Receivables Sale
<PAGE>
82
Agreement shall have been satisfied in all material respects.
(k) Copies of Written Policies. The Agent and the Trustee shall have
---------------------------
received, as certified by a Responsible Officer of the Company, copies of the
written Policies or, to the extent that the credit and collection policies of
any of the Sellers are not in written form at the Effective Date, a written
description of the historical credit and collection practices of each such
Seller, in each case in form and substance acceptable to the Agent.
(l) Insurance. The Agent and the Trustee shall have received
----------
evidence satisfactory to the Agent of each Servicer's fidelity bond or other
coverage insuring against losses through wrongdoing of its officers and
employees who are involved in the servicing of Receivables, including coverage
of depositor's forgery, in an amount and breadth of coverage satisfactory to the
Rating Agencies and the Agent.
(m) Company's Board of Directors. The composition of the Company's
-----------------------------
Board of Directors (including two independent directors) shall be reasonably
acceptable to the Agent.
(n) Financial Statements. The Agent and the Trustee shall have
---------------------
received a pro forma balance sheet for the Company giving effect to all
transactions occurring on or before the Issuance Date. The Agent shall have
received the consolidated balance sheets and statements of income, stockholders'
equity and cash flows of the HFG Companies and their respective subsidiaries on
a consolidated basis (i) as of and for the fiscal year ended December 31, 1995,
audited by and accompanied by the opinion of Coopers & Lybrand LLP, independent
public accountants, and (ii) as of and for the fiscal quarter ended March 31,
1996, certified by its chief financial officer.
(o) Solvency Certificate. The Agent and the Trustee shall have
---------------------
received a certificate dated the
<PAGE>
83
Effective Date and signed by a Responsible Officer of the Company, in form
satisfactory to the Agent, to the effect that the Company will be solvent after
giving effect to the transactions occurring on or before the Issuance Date.
(p) Representations and Warranties. The representations and
-------------------------------
warranties of the Company and the Master Servicer in the Agreement and this
Supplement shall be true and correct in all material respects.
ARTICLE X
The Agent
---------
SECTION 10.01. Appointment. Each Purchaser hereby irrevocably
------------
designates and appoints the Agent as the agent of such Purchaser under this
Supplement and each such Purchaser irrevocably authorizes the Agent, in such
capacity, to take such action on its behalf under the provisions of this
Supplement and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Supplement, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Supplement, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Supplement or otherwise exist against the Agent.
SECTION 10.02. Delegation of Duties. The Agent may execute any of
---------------------
its duties under this Supplement by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel (who may be counsel for the Company or
the Master Servicer), independent public accountants and other experts selected
by it concerning all matters pertaining to such duties. The Agent shall not be
responsible for the
<PAGE>
84
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
SECTION 10.03. Exculpatory Provisions. Neither the Agent nor any of
-----------------------
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with the Agreement or this Supplement
(x) with the consent or at the request of the Majority Purchasers or (y) in the
absence of its own gross negligence or wilful misconduct or (ii) responsible in
any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by the Company or any officer thereof
contained in this Supplement or any other Transaction Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Supplement or any
other Transaction Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Supplement or any other
Transaction Document or for any failure of the Company to perform its
obligations hereunder or thereunder. The Agent shall not be under any
obligation to any Purchaser to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Supplement or any other Transaction Document, or to inspect the properties,
books or records of the Company.
SECTION 10.04. Reliance by Agent. The Agent shall be entitled to
------------------
rely, and shall be fully protected in relying, upon any Certificate, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other documents or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company or the Master Servicer),
independent accountants and other experts selected by the Agent and shall not be
liable for any action taken or omitted to be taken by it in good faith
<PAGE>
85
in accordance with the advice of such counsel, accountants or experts. The
Agent may deem and treat the payee of any Certificate as the owner thereof for
all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Supplement or any
other Transaction Document unless it shall first receive such advice or
concurrence of the Majority Purchasers as it deems appropriate and it shall
first be indemnified to its satisfaction by the Purchasers against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Supplement and the
other Transaction Documents in accordance with a request of the Majority
Purchasers, and such request and any action taken or failure to act pursuant
thereto shall be binding.
SECTION 10.05. Notice of Master Servicer Default or Early
------------------------------------------
Amortization Event or Potential Early Amortization Event. The Agent shall not
- ---------------------------------------------------------
be deemed to have knowledge or notice of the occurrence of any Master Servicer
Default with respect to the Master Servicer or any Early Amortization Event or
Potential Early Amortization Event hereunder unless the Agent has received
written notice from a Purchaser, the Company or the Master Servicer referring to
the Agreement or this Supplement, describing such Master Servicer Default or
Early Amortization Event or Potential Early Amortization Event and stating that
such notice is a "notice of a Master Servicer Default with respect to the Master
Servicer" or a "notice of an Early Amortization Event or Potential Early
Amortization Event", as the case may be. In the event that the Agent receives
such a notice, the Agent shall give notice thereof to the Purchasers, the
Trustee, the Company and the Master Servicer. The Agent shall take such action
with respect to such Master Servicer Default or Early Amortization Event or
Potential Early Amortization Event as shall be reasonably directed by the
Majority Purchasers; provided that unless and until the Agent shall have
--------
received
<PAGE>
86
such directions and indemnification satisfactory to the Agent from the
Purchasers, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Master Servicer Default or
Early Amortization Event or Potential Early Amortization Event as it shall deem
advisable in the best interests of the Purchasers.
SECTION 10.06. Non-Reliance on Agent and Other Purchasers. Each
-------------------------------------------
Purchaser expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Company, shall be deemed to
constitute any representation or warranty by the Agent to any Purchaser. Each
Purchaser represents to the Agent that it has, independently and without
reliance upon the Agent or any other Purchaser, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Company and made its own decision to enter
into this Supplement. Each Purchaser also represents that it will,
independently and without reliance upon the Agent or any other Purchaser, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Supplement and the other Transaction
Documents, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly required to be furnished to the Purchasers by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Purchaser with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower which may come into the possession of the Agent
<PAGE>
87
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
SECTION 10.07. Indemnification. The Purchasers agree to indemnify
----------------
the Agent in its capacity as such (to the extent not reimbursed by the Company
and the Master Servicer and without limiting the obligation of the Company and
the Master Servicer to do so), ratably according to their respective Commitment
Percentages in effect on the date on which indemnification is sought (or, if
indemnification is sought after the Commitment Termination Date, ratably in
accordance with their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time be imposed or, incurred by or asserted
against the Agent in any way relating to or arising out of, the Commitments,
this Supplement any of the other Transaction Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Purchaser shall be
--------
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or wilful misconduct. The
agreements in this Section shall survive the payment of all amounts payable
hereunder.
SECTION 10.08. Agent in Its Individual Capacity. The Agent and its
---------------------------------
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Company, the Master Servicer or any of their
Affiliates as though the Agent were not the Agent hereunder. With respect to
any VFC Certificate held by the Agent, the Agent shall have the same rights and
powers under this Supplement and the other Transaction Documents as any
Purchaser and may exercise the same as though it were not
<PAGE>
88
the Agent, and the terms "Purchaser" and "Purchasers" shall include the Agent in
its individual capacity.
SECTION 10.09. Successor Agent. The Agent may resign as Agent upon
----------------
10 days' notice to the Purchasers. If the Agent shall resign as Agent under
this Supplement, then the Majority Purchasers shall appoint from among the
Purchasers a successor agent for the Purchasers, which successor agent shall be
approved by the Company and the Master Servicer (which approval shall not be
unreasonably withheld), whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Supplement. After any retiring Agent's resignation as Agent,
the provisions of this Article X shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Supplement.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Ratification of Agreement. As supplemented by this
--------------------------
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION 11.02. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY
--------------
AND, CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICT OF LAW PRINCIPLES, EXCEPT TO THE EXTENT ISSUES OF
PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
<PAGE>
89
SECTION 11.03. Further Assurances. Each of the Company, the Master
-------------------
Servicer and the Trustee agrees, from time to time, to do and perform any and
all acts and to execute any and all further instruments required or reasonably
requested by the Agent or Majority Purchasers more fully to effect the purposes
of this Supplement and the sale of the VFC Certificates hereunder, including,
without limitation, in the case of the Company and the Master Servicer, the
execution of any financing or registration statements or similar documents or
notices or continuation statements relating to the Receivables and the other
Trust Assets for filing or registration under the provisions of the UCC or
similar legislation of any applicable jurisdiction, provided that, in the case
--------
of the Trustee, in furtherance and without limiting the generality of subsection
8.01(d) of the Agreement, the Trustee shall have received reasonable assurance
of adequate reimbursement and indemnity in connection with taking such action
before the Trustee shall be required to take any such action.
SECTION 11.04. Payments. Each payment to be made hereunder shall be
---------
made on the required payment date in lawful money of the United States and in
immediately available funds, if to the Purchasers, at the office of the Agent
set forth below its signature hereto. On each Distribution Date, the Agent
shall remit in like funds to each Purchaser its applicable pro rata share (based
--- ----
on each such Purchaser's Series 1996-A Invested Amount) of each such payment
received by the Agent for the account of the Purchasers.
SECTION 11.05. Costs and Expenses. The Company agrees to pay all
-------------------
reasonable fees, out-of-pocket costs and expenses of the Agent (including,
without limitation, reasonable fees and disbursements of one counsel to the
Agent) in connection with (i) the preparation, execution and delivery of this
Supplement, the Agreement and the other Transaction Documents and amendments or
waivers of any such documents and (ii) the enforcement by the Agent of the
obligations and liabilities of the Company and the Master
<PAGE>
90
Servicer under the Agreement, this Supplement or any related document; provided,
--------
however, that any payments made by the Company pursuant to this Section shall be
- -------
Company Subordinated Obligations.
SECTION 11.06. No Waiver; Cumulative Remedies. No failure to
-------------------------------
exercise and no delay in exercising, on the part of the Trustee, the Agent or
any Purchaser, any right, remedy, power or privilege hereunder, shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 11.07. Amendments. (a) Subject to subsection (c) of this
-----------
Section 11.07, this Supplement may be amended in writing from time to time by
the Master Servicer, the Company and the Trustee, with the consent of the Agent
but without the consent of any holder of any outstanding VFC Certificate, to
cure any ambiguity, to correct or supplement any provisions herein or therein
which may be inconsistent with any other provisions herein or therein or to add
any other provisions to or changing in any manner or eliminating any of the
provisions with respect to matters or questions raised under this Supplement
which shall not be inconsistent with the provisions of any Pooling and Servicing
Agreement; provided, however, that such action shall not, as evidenced by an
-------- -------
Officer's Certificate delivered to the trustee, have a Material Adverse Effect
or a Company Material Adverse Effect (but, to the extent that the determination
of whether such action would have a Material Adverse Effect or a Company
Material Adverse Effect requires a conclusion as to a question of law, an
Opinion of Counsel shall be delivered to the Trustee in addition to such
Officer's Certificate); provided, further, that (i) any amendment made to
-------- -------
conform to a deletion or modification of the first sentence of Section 6.03 of
the Agreement or the language of Section 7.02 of the
<PAGE>
91
Agreement that the Company elects to make that conforms to a change in the
Internal Revenue Code related to partnerships occurring after the execution and
delivery of the Agreement or (ii) any amendment that is entered into to provide
additional Enhancement for any Outstanding Series shall, to the extent that such
amendment is entered into for the purposes set forth in the foregoing clause (i)
or (ii), as applicable, be deemed to have no Material Adverse Effect or Company
Material Adverse Effect. If the Agent requests that the VFC Certificates be
rated in accordance with Section 11.15, any amendment in connection therewith
shall be deemed to have no Material Adverse Effect or Company Material Adverse
Effect. The Trustee may, but shall not be obligated to, enter into any such
amendment pursuant to this paragraph or paragraph (b) below that affects the
Trustee's rights, duties or immunities under any Pooling and Servicing Agreement
or otherwise.
(b) Subject to subsection (c) of this Section 11.07, this Supplement
may also be amended (other than in the circumstances referred to in subsection
(a)) in writing from time to time by the Master Servicer, the Company and the
Trustee with the consent of the Majority Purchasers for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Supplement or of modifying in any manner the rights of the VFC
Certificateholders; provided, however, that no such amendment shall, unless
-------- -------
signed or consented to in writing by all Purchasers, (i) extend the time for
payment, or reduce the amount, of any amount on money payable to or for the
account of any Purchaser under any provision of this Supplement, (ii) subject
any Purchaser to any additional obligation (including, without limitation, any
change in the determination of any amount payable by any Purchaser) or
(iii) change the Aggregate Commitment Amount or the number of Purchasers which
shall be required for any action under this subsection or any other provision of
this Supplement.
(c) Any amendment hereof can be affected without the Agent being a
party thereto; provided, however, that no
-------- -------
<PAGE>
92
such amendment, modification or waiver of this Supplement that affects rights or
duties of the Agent shall be effective unless the Agent shall have given its
prior written consent thereto.
(d) No such amendment shall be effective until the Rating Agency
Condition is satisfied.
SECTION 11.08. Severability. If any provision hereof is void or
-------------
unenforceable in any jurisdiction, such voidness or unenforceability shall not
affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION 11.09. Notices. All notices, requests and demands to or upon
--------
any party hereto to be effective shall be given (i) in the case of the Company,
the Master Servicer and the Trustee, in the manner set forth in Section 10.05 of
the Agreement and (ii) in the case of the Agent, each Purchaser and the Rating
Agencies, in writing (including a confirmed transmission by telecopy), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand or three days after being deposited in the
mail, postage prepaid, or, in the case of telecopy notice, when received, (A) in
the case of the Agent and each Purchaser, at their respective addresses set
forth below their names on Schedule 1 hereto and (B) in the case of the Rating
Agencies, at the addresses notified by such Rating Agencies; or to such other
address as may be hereafter notified by the respective parties hereto.
SECTION 11.10. Successors and Assigns. (a) This Supplement shall be
-----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
(b) Any Purchaser may assign to one or more assignees (any such
assignee shall be referred to herein as
<PAGE>
93
an "Acquiring Purchaser") all or a portion of its interests, rights and
obligations under this Supplement and the Transaction Documents; provided,
--------
however, that (i) except in the case of an assignment to a Purchaser or an
- -------
Affiliate, the amount of the Commitment of the assigning Purchaser subject to
each such assignment (determined as of the date the Commitment Transfer
Supplement with respect to such assignment is delivered to the Agent) shall not
be less than $5,000,000 (or, if less, the entire remaining amount of such
Purchaser's Commitment), (ii) the parties to each such assignment shall execute
and deliver to the Agent the Commitment Transfer Supplement, substantially in
the form of Exhibit C, together with a processing and recordation fee of $3,500
and (iii) the Acquiring Purchaser, if it shall not be a Purchaser, shall deliver
to the Agent an Administrative Questionnaire, substantially in the form of
Exhibit D. Upon acceptance and recording pursuant to paragraph (e) of this
Section 11.10, from and after the effective date specified in each Commitment
Transfer Supplement, which effective date shall be at least five Business Days
after the execution thereof, (A) the Acquiring Purchaser thereunder shall be a
party hereto and, to the extent of the interest assigned by such Commitment
Transfer Supplement, have the rights and obligations of a Purchaser under this
Supplement and (B) the assigning Purchaser thereunder shall, to the extent of
the interest assigned by such Commitment Transfer Supplement, be released from
its obligations under this Supplement and the other Transaction Documents (and,
in the case of an Commitment Transfer Supplement covering all or the remaining
portion of an assigning Purchaser's rights and obligations under this Supplement
and the other Transaction Documents, such Purchaser shall cease to be a party
hereto but shall continue to be entitled to the benefits of Sections 7.01, 7.03,
7.04 and 11.05, as well as to any fees accrued for its account and not yet
paid).
(c) By executing and delivering an Commitment Transfer Supplement,
the assigning Purchaser thereunder and the Acquiring Purchaser thereunder shall
be deemed to confirm to and agree with each other and the other parties
<PAGE>
94
hereto as follows: (i) such assigning Purchaser warrants that it is the legal
and beneficial owner of the interest being assigned thereby free and clear of
any adverse claim and that its Commitment, and the outstanding balances of its
VFC Certificates, in each case without giving effect to assignments thereof
which have not become effective, are as set forth in such Commitment Transfer
Supplement; (ii) except as set forth in (i) above, such assigning Purchaser
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Supplement, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Supplement, any other Transaction
Document or any other instrument or document furnished pursuant hereto or
thereto, or the financial condition of any Seller, any Servicer, the Company or
the Master Servicer, or the performance or observance by any Seller, any
Servicer, the Company or the Master Servicer of any of its obligations under
this Supplement, any other Transaction Document or any other instrument or
document furnished pursuant hereto or thereto; (iii) such Acquiring Purchaser
represents and warrants that it is legally authorized to enter into such
Commitment Transfer Supplement; (iv) such Acquiring Purchaser confirms that it
has received a copy of this Supplement and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Commitment Transfer Supplement; (v) such Acquiring Purchaser
will independently and without reliance upon the Agent, the Trustee, the
assigning Purchaser or any other Purchaser and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Supplement or any
other Transaction Document; (vi) such Acquiring Purchaser appoints and
authorizes the Agent and the Trustee to take such action as agent on its behalf
and to exercise such powers under this Supplement as are delegated to the Agent
and the Trustee, respectively, by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vii) such Acquiring Purchaser
<PAGE>
95
agrees that it will perform in accordance with their terms all the obligations
which by the terms of this Supplement are required to be performed by it as a
Purchaser.
(d) Notwithstanding the provisions of Section 5.03 of the Agreement
(which shall not apply to the Series 1996-A Certificates) the Agent shall
maintain at one of its offices in The City of New York a copy of each Commitment
Transfer Supplement delivered to it and a register for the recordation of the
names and addresses of the Purchasers, and the Commitments of, and the principal
amount of the VFC Certificates issued to, each Purchaser pursuant to the terms
hereof from time to time (the "Register"). Notwithstanding the provisions of
--------
Section 5.05 of the Agreement, the entries in the Register as provided in this
subsection 11.10(d) shall be conclusive and the Company, the Master Servicer,
the Purchasers, the Agent and the Trustee shall treat each person whose name is
recorded in the Register pursuant to the terms hereof as a Purchaser hereunder
for all purposes of this Supplement, notwithstanding notice to the contrary.
However, in accordance with Section 5.05 of the Agreement, in determining
whether the holders of the requisite Fractional Undivided Interests have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, VFC Certificates owned by the Company, the Master Servicer or any
Servicer or any Affiliate thereof, shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only VFC Certificates which a Responsible Officer of the
Trustee actually knows to be so owned shall be so disregarded. VFC Certificates
so owned by the Company, the Master Servicer or any Servicer or any Affiliate
thereof which have been pledged in good faith shall not be disregarded and may
be regarded as outstanding if the pledgee establishes to the satisfaction of the
trustee the pledgee's right so to act with respect to such VFC Certificates and
that the pledgee is not the Company, the Master Servicer or any Servicer or any
Affiliate
<PAGE>
96
thereof. The Register shall be available for inspection by the Company, the
Master Servicer, the Purchasers and the Trustee, at any reasonable time and from
time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Commitment Transfer
Supplement executed by an assigning Purchaser and an Acquiring Purchaser, an
Administrative Questionnaire completed in respect of the Acquiring Purchaser
(unless the Acquiring Purchaser shall already be a Purchaser hereunder) and the
processing and recordation fee referred to in paragraph (b) above, the Agent
shall (i) accept such Commitment Transfer Supplement, (ii) record the
information contained therein in the Register and (iii) give prompt written
notice thereof to the Purchasers, the Company, the Master Servicer and the
Trustee. No assignment shall be effective unless and until it has been recorded
in the Register as provided in this paragraph (e).
(f) Any Purchaser may sell participations to one or more banks or
other entities (the "Participants") in all or a portion of its rights and
obligations under this Supplement and the other Transaction Documents (including
all or a portion of its Commitment and VFC Certificates); provided, however,
-------- -------
that (i) such Purchaser's obligations under this Agreement shall remain
unchanged, (ii) such Purchaser shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the Participants
shall be entitled to the benefit of the cost protection provisions contained in
Sections 7.01, 7.03 and 7.04 to the same extent as if they were Purchasers,
provided that no such Participant shall be entitled to receive any greater
- --------
amount pursuant to such Sections than a Purchaser would have been entitled to
receive in respect of the amount of participation sold by such Purchaser to such
Participant had no sale occurred, (iv) the Company, the Master Servicer, the
other Purchasers, the Agent and the Trustee, shall continue to deal solely and
directly with such Purchaser in connection with such Purchaser's rights and
obligations under this Supplement, and such Purchaser
<PAGE>
97
shall retain the sole right to enforce its rights under VFC Certificates and to
approve any amendment, modification or waiver of any provision of this
Supplement (other than amendments, modifications or waivers decreasing any fees
payable hereunder or the amount of principal of or the rate at which interest is
payable on the VFC Certificates, extending any scheduled principal payment date
or date fixed for the payment of interest on the VFC Certificates or increasing
or extending the Commitments) and (v) the sum of the aggregate amount of any
Commitment or portion thereof subject to each such participation plus the
portion of the Series 1996-A Invested Amount represented by any VFC Certificates
subject to such participation shall not be less than $5,000,000.
(g) Any Purchaser may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 11.10, disclose to the Acquiring Purchaser or Participant or proposed
Acquiring Purchaser or Participant any information relating to the Sellers, the
Servicers, the Master Servicer, the Trust or the Company furnished to such
Purchaser by or on behalf of such entities, provided that, prior to any such
--------
disclosure of information, each such Acquiring Purchaser or Participant or
proposed Acquiring Purchaser or Participant shall execute a confidentiality
agreement in the form of Exhibit H.
(h) Neither the Company nor the Master Servicer shall assign or
delegate any of its rights or duties hereunder without the prior written consent
of the Agent, the Trustee and each Purchaser, and any attempted assignment
without such consent shall be null and void.
(i) Notwithstanding any other provisions herein, no transfer or
assignment of any interests or obligations of any Purchaser hereunder or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would result in a prohibited transaction under Section 4975 of the
Internal Revenue Code or Section 406 of ERISA or cause the Trust Assets to be
regarded as "plan
<PAGE>
98
assets" pursuant to 29 C.F.R. Sec. 2510.3-101, or require the Company or any
Seller to file a registration statement with the Securities and Exchange
Commission or to qualify under the "blue sky" laws of any state.
(j) In the event that S&P, Moody's and Thompson's BankWatch (or
InsuranceWatch Ratings Service, in the case of any Purchaser that is an
insurance company (or Best's Insurance Reports, if such insurance company is not
rated by InsuranceWatch Ratings Service)) shall, after the date that any
Purchaser becomes a Purchaser, downgrade the long-term certificate deposit
ratings of such Purchaser, and the resulting ratings shall be below BBB-, Baa3
and C (or BB, in the case of a Purchaser that is an insurance company (or B, in
the case of such insurance company not rated by InsuranceWatch Ratings
Service)), then the Trustee shall have the right, but not the obligation, at the
Trust's expense, upon notice to such Purchaser and the Agent, to replace (or to
request the Agent to use its reasonable efforts to replace) such Purchaser with
an assignee (in accordance with and subject to the restrictions contained in
paragraphs (b) and (g) above), and such Purchaser hereby agrees to transfer and
assign without recourse (in accordance with and subject to the restrictions
contained in paragraphs (b) and (g) above) all its interests, rights and
obligations in respect of its Commitment to such assignee; provided, however,
-------- -------
that (i) no such assignment shall conflict with any law, rule and regulation or
order of any Governmental Authority and (ii) the Trustee or such assignee, as
the case may be, shall pay to such Purchaser in immediately available funds on
the date of such assignment the principal of and interest accrued to the date of
payment on the VFC Certificates held by such Purchaser and all other amounts
accrued for such Purchaser's account or owed to it hereunder.
SECTION 11.11. Counterparts. This Supplement may be executed in any
-------------
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
<PAGE>
99
and all of which taken together shall constitute one and the same agreement.
SECTION 11.12. Adjustments; Setoff. (a) If any Purchaser (a
--------------------
"Benefitted Purchaser") shall at any time receive in respect of its
Series 1996-A Purchaser Invested Amount any distribution of principal, interest,
Commitment Fees or other fees, or any interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by setoff,
or otherwise) in a greater proportion than any such distribution received by any
other Purchaser, if any, in respect of such other Purchaser's Series 1996-A
Purchaser Invested Amount, or interest thereon, such Benefitted Purchaser shall
purchase for cash from the other Purchasers such portion of each such other
Purchaser's interest in the VFC Certificates, or shall provide such other
Purchasers with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such Benefitted Purchaser to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Purchasers; provided, however, that if all or any portion of such excess payment
-------- -------
or benefits is thereafter recovered from such Benefitted Purchaser, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. The Company agrees that each
Purchaser so purchasing a portion of the VFC Certificateholders' Interest may
exercise all rights of payment (including, without limitation, rights of setoff)
with respect to such portion as fully as if such Purchaser were the direct
holder of such portion.
(b) In addition to any rights and remedies of the Purchasers provided
by law, each Purchaser shall have the right, without prior notice to the
Company, any such notice being expressly waived by the Company to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Company hereunder or under the VFC Certificates to setoff and appropriate and
apply against any and all deposits (general or special, time or demand,
<PAGE>
100
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 Purchaser to
or for the credit or the account of the Company. Each Purchaser agrees promptly
to notify the Company and the Agent after any such setoff and application made
by such Purchaser; provided that the failure to give such notice shall not
--------
affect the validity of such setoff and application.
SECTION 11.13. Limitation of Payments by Company. The Company's
----------------------------------
obligations under Article VII shall be limited to the funds available to the
Company which have been properly distributed to the Company pursuant to the
Agreement and any Supplement and neither the Agent nor any Purchaser shall have
any actionable claim against the Company for failure to satisfy such obligation
because it does not have funds available therefor from amounts properly
distributed.
SECTION 11.14. No Bankruptcy Petition. Each Purchaser hereby
-----------------------
covenants and agrees that, prior to the date which is one year and one day after
the later of (i) the last day of the Series 1996-A Amortization Period and
(ii) the last day of the amortization period of any other Outstanding Series, it
will not institute against, or join any other Person in instituting against, the
Company any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other similar proceedings under any Federal or state bankruptcy
or similar law.
SECTION 11.15 Rating of VFC Certificates. If Series 1996-A is
---------------------------
outstanding six months from the Issuance Date, then, at the request of the
Agent, the Company shall, at its own expense, cause the VFC Certificates to be
rated by up to two Rating Agencies designated by the Agent.
SECTION 11.16 Limitation on Addition and Termination of Sellers.
--------------------------------------------------
(a) Notwithstanding anything to the
<PAGE>
101
contrary contained in the Receivables Sale Agreement or the Agreement, the
Company shall not consent to the addition of a Seller thereunder unless each of
the following conditions shall have been satisfied:
(i) Each of the conditions set forth in Section 3.05 of the
Receivables Sale Agreement shall have been satisfied.
(ii) The Company, the Trustee and the Agent shall have received
evidence that the Rating Agency Condition shall have been satisfied with
respect to the addition of such Seller.
(iii) The Company, the Trustee and the Agent shall have received a
certificate prepared by a Responsible Officer of each Servicer certifying
that after giving effect to the addition of such Seller, the Aggregate
Target Receivables Amount shall equal or exceed the Aggregate Allocated
Receivables Amount on the related Seller Addition Date.
(iv) Each Purchaser shall have given its prior written consent to the
addition of such Seller, which shall not be unreasonably withheld.
(b) Following the addition of a Seller pursuant to the Receivables
Sale Agreement, the Agreement and the foregoing paragraph (a), the Agent may in
its discretion require that for a period of up to six months commencing on the
related Seller Addition Date, for purposes of the calculation of the
Series 1996-A Required Reserves, the Series 1996-A Required Reserves Ratio shall
be equal to the greater of (i) the Series 1996-A Ratio calculated on the basis
that the Receivables shall be deemed not to include any Receivable originated by
such additional Seller and (ii) the Series 1996-A Required Reserves Ratio
calculated without regard to this paragraph (b).
<PAGE>
102
(c) Notwithstanding anything to the contrary contained in the
Receivables Sale Agreement, the Company shall not consent to any request made
pursuant to Section 9.14(b) thereof, nor shall any Seller which is the subject
of such request be terminated under the Receivables Sale Agreement, in each case
unless (i) no Early Amortization Event, Potential Early Amortization Event or
Potential Purchase Termination Event (as defined in the Receivables Sale
Agreement) (other than with respect to the Seller to be so terminated) has
occurred and is continuing (both before and after giving effect to such
termination) and (ii) the Trustee shall have received prior written notice of
such termination (which notice shall be accompanied by a pro forma Daily Report
--- -----
confirming that the Aggregate Target Receivables Amount equals or exceeds the
Aggregate Allocated Receivables Amount, each calculated after giving effect to
such termination and excluding all Receivables originated by the Seller to be
terminated).
(d) Upon the termination of a Seller pursuant to Section 9.14(b) of
the Receivables Sale Agreement and the foregoing paragraph (c), the calculation
(including, without limitation, for purposes of the pro forma calculations
--- -----
pursuant to paragraph (c) above) of the Aggregate Target Receivables Amount, the
Aggregate Allocated Receivables Amount, the Series 1996-A Required Subordinated
Amount and all other amounts from which each such amount is directly or
indirectly derived shall exclude in each case the Receivables originated by such
terminated Seller.
ARTICLE XII
Final Distributions
-------------------
SECTION 12.01. Certain Distributions. (a) Not later than 2:00 p.m.,
----------------------
New York City time, on the Distribution Date following the date on which the
proceeds from the disposition of the Receivables pursuant to
<PAGE>
103
subsection 7.02(b) of the Agreement are deposited into the Series 1996-A Non-
Principal Collection Sub-subaccount and the Series 1996-A Principal Collection
Sub-subaccount, the Trustee shall distribute such amounts pursuant to
Article III of this Supplement.
(b) Notwithstanding anything to the contrary in this Supplement or
the Agreement, any distribution made pursuant to this Section shall be deemed to
be a final distribution pursuant to Section 9.03 of the Agreement with respect
to the VFC Certificates.
IN WITNESS WHEREOF, the Company, the Master Servicer, the Trustee, the
Agent and the Initial Purchasers have caused this Series 1996-A Supplement to be
duly executed by their respective officers as of the day and year first above
written.
LFI RECEIVABLES CORPORATION,
by
--------------------------
Name:
Title:
LFI SERVICING CORPORATION, as
Master Servicer,
by
--------------------------
Name:
Title:
<PAGE>
104
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by
--------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Agent,
by
--------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Initial Purchaser,
by
--------------------------
Name:
Title:
<PAGE>
EXHIBIT B TO SERIES
1996-A SUPPLEMENT
-----------------
LFI RECEIVABLES MASTER TRUST
FORM OF SUBORDINATED COMPANY CERTIFICATE, SERIES 1996-A
THIS SUBORDINATED CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). NEITHER THIS SUBORDINATED CERTIFICATE NOR
ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF THE ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION PROVISIONS.
THIS SUBORDINATED CERTIFICATE IS NOT PERMITTED TO BE TRANSFERRED,
ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH
THE TERMS OF THE POOLING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO CERTAIN
CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
This Subordinated Certificate evidences a fractional undivided
interest in assets of the
LFI RECEIVABLES MASTER TRUST
the corpus of which consists of receivables representing amounts payable for
goods or services, which receivables have been purchased by LFI Receivables
Corporation, a Delaware corporation, which in turn transferred and assigned such
receivables to the LFI Receivables Master Trust,
(Not an interest in or obligation of
LFI Receivables Corporation,
the Sellers listed on Schedule 1
of the Receivables Sales Agreement
or any Affiliate thereof)
This certifies that
<PAGE>
2
LFI Receivables Corporation
(the "Subordinated Certificateholder") is the registered owner of a fractional
undivided interest in the assets of the LFI Receivables Master Trust (the
"Trust"), created pursuant to the Pooling Agreement, dated as of August 5, 1996
(as the same may from time to time be amended, restated, supplemented or
otherwise modified, the "Pooling Agreement"), by and among LFI Receivables
Corporation, a Delaware Corporation (the "Company"), LFI Servicing Corporation,
a Delaware corporation, as master servicer (the "Master Servicer"), and The
Chase Manhattan Bank not in its individual capacity but solely as trustee (in
such capacity, the "Trustee") for the Trust, as supplemented by the Series 1996-
A Supplement, dated as of August 5, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Supplement", collectively, with the Pooling
Agreement, the "Agreement"), by and among the Company, the Master Servicer, The
Chase Manhattan Bank, as agent and initial Purchaser and the Trustee. The
corpus of the Trust consists of receivables (the "Receivables") representing
amounts payable for goods or services and all other Trust Assets referred to in
the Agreement. Although a summary of certain provisions of the Agreement is set
forth below, this Subordinated Certificate does not purport to summarize the
Agreement, is qualified in its entirety by the terms and provisions of the
Agreement and reference is made to the Agreement for information with respect to
the interests, rights, benefits, obligations, proceeds and duties evidenced
hereby and the rights, duties and obligations of the Trustee. A copy of the
Agreement may be requested by writing to the Trustee at The Chase Manhattan
Bank, 450 W. 33rd Street, 15th Floor, New York, New York 10011, Attention of
Advanced Structured Products Group. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Agreement.
This Subordinated Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the holder
of the Subordinated
<PAGE>
3
Certificate, by virtue of the acceptance hereof, assents and is bound.
This Subordinated Certificate is the Subordinated Company Certificate
entitled "Series 1996-A Subordinated Company Certificate", representing a
fractional undivided interest in the assets of the Trust consisting of the right
to receive Collections allocated to the Series 1996-A Certificateholders'
Interest (as hereinafter defined) and not required to be distributed to or for
the benefit of the holders of the VFC Certificates (as hereinafter defined).
Concurrently with the issuance of the Subordinated Certificate, the Trust shall
also issue a Class of Investor Certificates entitled "LFI Receivables Master
Trust, VFC Certificates, Series 1996-A" (the "VFC Certificates"). The VFC
Certificates represent a fractional undivided interest in the assets of the
Trust, consisting of the right to receive the sum of (i) the Invested Percentage
(expressed as a decimal) of the Collections received with respect to the
Receivables and of all other funds on deposit in the Collection Account and (ii)
to the extent such interests appear in the Series 1996-A Supplement, all other
funds on deposit in the Series 1996-A Collection Subaccount and any subaccounts
thereof (the "Series 1996-A Certificateholders' Interest"). The Trust's assets
are allocated in part to the holder of VFC Certificates and the holder of the
Series 1996-A Subordinated Company Certificate with the remainder allocated to
Certificateholders of the other Series, if any, and to the Company. In addition
to the VFC Certificates and the Series 1996-A Subordinated Company Certificate,
an Exchangeable Company Certificate will be issued to the Company pursuant to
the Agreement which will represent the Company's interest (if any) in the Trust.
The Exchangeable Company Certificate will represent the interest in the Trust
Assets not represented by the Investor or Subordinated Company Certificate of
each Outstanding Series. The Exchangeable Company Certificates may be exchanged
by the Company pursuant to the Agreement for an increase in the Invested Amount
of a Class of Investor Certificates of an Outstanding Series and an increase in
the related
<PAGE>
4
Subordinated Company Certificate, or one or more newly issued Series of Investor
Certificates and the related newly issued Subordinate Company Certificate, and a
reissued Exchangeable Company Certificate upon the conditions set forth in the
Agreement.
The aggregate interest represented by the Series 1996-A Subordinated
Company Certificate at any time in the assets of the Trust shall not exceed an
amount equal to the Series 1996-A Subordinated Company Certificate Amount at the
time. The Initial Series 1996-A Subordinated Certificate Amount shall mean the
Series 1996-A Subordinated Certificate Amount in respect of the Issuance Date.
Thereafter, the Series 1996-A Subordinated Company Certificate Amount on any
date of determination shall be an amount equal to the Series 1996-A Allocated
Receivables Amount minus the Series 1996-A Adjusted Invested Amount.
-----
Distributions with respect to this Series 1996-A Subordinated Company
Certificate shall be paid monthly, but only to the extent provided under the
Agreement, on each Distribution Date by the Trustee, to the holder of the Series
1996-A Subordinated Company Certificate. Final payment of this Series 1996-A
Subordinated Certificate shall be made only upon presentation and surrender of
this Series 1996-A Subordinated Company Certificate at the office or agency
specified in the notice of the final distribution delivered by the Trustee to
the holder of the Series 1996-A Subordinated Company Certificate in accordance
with the Agreement.
This Series 1996-A Subordinated Company Certificate does not represent
an obligation of, or an interest in, the Company, the Master Servicer or any
Affiliate of either of them.
It is expressly understood and agreed by the Company and the holder of
the Series 1996-A Subordinated Company Certificate that (a) the Agreement is
executed and delivered by the Trustee, not individually or personally but
<PAGE>
5
solely as Trustee of the Trust, in the exercise of the powers and authority
conferred and vested in it, (b) the representations, undertakings and agreements
made on the part of the Trust in the agreement are made and intended not as
personal representations, undertakings, and agreements by the Trustee, but are
made and intended for the purpose of binding only the Trust, (c) nothing herein
contained shall be construed as creating any liability of the Trustee,
individually or personally, to perform any covenant either expressed or implied
made on the part of the Trust in the Agreement, all such liability, if any,
being expressly waived by the parties who are signatories to the Agreement and
by any Person claiming by, through or under such parties; provided, however, the
-------- -------
Trustee shall be liable in its individual capacity for its own wilful misconduct
or gross negligence and for any tax assessed against the Trustee based on or
measured by any fees, commission or compensation received by it for acting as
Trustee and (d) under no circumstances shall the Trustee be personally liable
for the payment of any indebtedness or expenses of the Trust or be liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Trust under the Agreement.
THIS SERIES 1996-A SUBORDINATED COMPANY CERTIFICATE SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICT OF LAW PRINCIPLES.
<PAGE>
6
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, by manual signature, this Series 1996-A
Subordinated Company Certificate shall not be entitled to any benefit under the
Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this Series 1996-A
Subordinated Company Certificate to be duly executed.
Dated: , 1996
----------------- ----
LFI RECEIVABLES CORPORATION
as authorized pursuant to
Section 5.01 of the Agreement,
by
------------------------------
Name
Title
<PAGE>
7
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Subordinated Company Certificates described in the
within-mentioned Agreement.
THE CHASE MANHATTAN BANK, not in
its individual capacity but
solely as Trustee,
by
------------------------------
Authorized Signatory
OR
by
------------------------------
Authenticating Agent
by
------------------------------
Authorized Signatory
<PAGE>
EXHIBIT C
TO SERIES 1996-A
SUPPLEMENT
----------
[FORM OF COMMITMENT TRANSFER SUPPLEMENT]
COMMITMENT TRANSFER SUPPLEMENT, dated as of [ , ]
among [ ] (the "Transferor"), each purchaser listed as an
Acquiring Purchaser on the signature pages hereof (each, an "Acquiring
Purchaser") and THE CHASE MANHATTAN BANK, a New York banking corporation as
Agent for the Purchasers under the Pooling Agreement described below (in such
capacity, the "Agent").
W I T N E S S E T H:
WHEREAS this Commitment Transfer Supplement is being executed and
delivered in accordance with subsection 11.10(b) of the Series 1996-A
Supplement, dated as of August 5, 1996 (as from time to time amended,
supplemented or otherwise modified in accordance with the terms thereof, the
"Supplement"; terms defined therein being used herein as therein defined), among
the Company, the Master Servicer, the Transferor, the other Purchasers from time
to time parties thereto, the Trustee and the Agent, to the Pooling Agreement,
dated as of August 5, 1996 (as the same may be from time to time amended,
supplemented or otherwise modified, the "Pooling Agreement"), among the Company,
the Master Servicer and the Trustee;
WHEREAS each Acquiring Purchaser (if it is not already a Purchaser
party to the Supplement) wishes to become a Purchaser party to the Supplement;
and
WHEREAS the Transferor is selling and assigning to each Acquiring
Purchaser, rights, obligations and commitments under the Supplement.
<PAGE>
2
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Upon the execution and delivery of this Commitment Transfer
Supplement by each Acquiring Purchaser, the Transferor and the Agent (the
date of such execution and delivery, the "Transfer Issuance Date"), each
Acquiring Purchaser shall be a Purchaser party to the Supplement for all
purposes thereof.
2. This Commitment Transfer Supplement is being delivered to the
Agent together with (i) if the Acquiring Purchaser is organized under the
laws of a jurisdiction outside the United States, the forms specified in
Section 7.04(e) of the Supplement, duly completed and executed by such
Acquiring Purchaser, (ii) if the Acquiring Purchaser is not already a
Purchaser under the Supplement, an Administrative Questionnaire in the form
of Exhibit D to the Supplement and (iii) a processing and recordation fee
of $3,500.
3. The Transferor acknowledges receipt from each Acquiring Purchaser
of an amount equal to the purchase price, as agreed between the Transferor
and such Acquiring Purchaser (the "Purchase Price"), of the portion being
purchased by such Acquiring Purchaser (such Acquiring Purchaser's
"Purchased Percentage") of the undivided interest in the VFC Certificate
owned by, and other amounts owing to, the Transferor under the Supplement.
The Transferor hereby irrevocably sells, assigns and transfers to each
Acquiring Purchaser, without recourse, representation or warranty (except
as set forth in paragraph 8(i) below), and each Acquiring Purchaser hereby
irrevocably purchases, takes and assumes from the Transferor, such
Acquiring Purchaser's Purchased Percentage of the commitment of the
Transferor to increase its VFC Invested Amount under, and the portion of
the undivided interest in, the VFC
<PAGE>
3
Certificate, Series 1996-A owned by, and other amounts owing to, the
Transferor, in each case under the Supplement together with all
instruments, documents and collateral security pertaining thereto.
4. The Transferor has made arrangements with each Acquiring Purchaser
with respect to (i) the portion, if any, to be paid, and the date or dates
for payment, by the Transferor to such Acquiring Purchaser of any
Commitment Fees heretofore received by the Transferor pursuant to the
Supplement prior to the Transfer Issuance Date and (ii) the portion, if
any, to be paid, and the date or dates for payment, by such Acquiring
Purchaser to the Transferor of Commitment Fees or Series 1996-A Monthly
Interest received by such Acquiring Purchaser pursuant to the Supplement
from and after the Transfer Issuance Date.
5. From and after the Transfer Issuance Date, amounts that would
otherwise by payable to or for the account of the Transferor pursuant to
the Supplement shall, instead, be payable to or for the account of the
Transferor and the Acquiring Purchasers, as the case may be, in accordance
with their respective interests as reflected in this Commitment Transfer
Supplement, whether such amounts have accrued prior to the Transfer
Issuance Date or accrue subsequent to the Transfer Issuance Date.
6. Prior to or concurrently with the execution and delivery hereof,
the Agent will, at the expense of the Transferor, provide to each Acquiring
Purchaser (if it is not already a Purchaser party to the Supplement)
photocopies of all documents delivered to the Agent on the Issuance Date in
satisfaction of the conditions precedent set forth in the Supplement.
7. Each of the parties to this Commitment Transfer Supplement agrees
that at any time and from time to time upon the written request of any
other
<PAGE>
4
party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order
to effect the purposes of this Commitment Transfer Supplement.
8. By executing and delivering this Commitment Transfer Supplement,
the Transferor and each Acquiring Purchaser confirm to and agree with each
other and the Purchasers as follows: (i) the Transferor warrants that it
is the legal and beneficial owner of the interest being assigned hereby
free and clear of any adverse claim and that its Commitment, and the
outstanding balances of its VFC Certificates, in each case without giving
effect to assignments thereof which have not become effective, are
[ ] and [ ], respectively; (ii) except as set forth in
(i) above, the Transferor makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or in connection with the Supplement, or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Supplement, any other Transaction Document or any other
instrument or document furnished pursuant hereto or thereto, or the
financial condition of any Seller, any Servicer, the Company or the Master
Servicer, or the performance or observance by any Seller, any Servicer, the
Company or the Master Servicer of any of its obligations under the
Supplement, any other Transaction Document or any other instrument or
document furnished pursuant hereto or thereto; (iii) the Acquiring
Purchaser represents and warrants that it is legally authorized to enter
into this Commitment Transfer Supplement; (iv) the Acquiring Purchaser
confirms that it has received a copy of the Supplement and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Commitment Transfer
Supplement; (v) the Acquiring Purchaser will independently and without
reliance upon the Agent, the Trustee, the assigning Purchaser or any other
Purchaser
<PAGE>
5
and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Supplement or any other Transaction Document; (vi) the
Acquiring Purchaser appoints and authorizes the Agent and the Trustee to
take such action as agent on its behalf and to exercise such powers under
the Supplement as are delegated to the Agent and the Trustee, respectively,
by the terms hereof, together with such powers as are reasonably incidental
thereto; and (vii) the Acquiring Purchaser agrees that it will perform in
accordance with their terms all the obligations which by the terms of the
Supplement are required to be performed by it as a Purchaser.
9. Schedule I hereto sets forth the revised Commitment Percentages of
the Transferor and each Acquiring Purchaser as well as administrative
information with respect to each Acquiring Purchaser.
10. This Commitment Transfer Supplement shall be governed by, and
construed in accordance with, the laws of the State of New York, without
giving effect to principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Commitment
Transfer Supplement to be executed by their respective duly authorized officers
as of the date first set forth above.
[NAME OF SELLING PURCHASER],
as Transferor,
by
------------------------------
Title
<PAGE>
6
[NAME OF PURCHASING
PURCHASER], as Acquiring
Purchaser,
by
------------------------------
Title
THE CHASE MANHATTAN BANK, as
Agent,
by
-------------------------
Title
<PAGE>
SCHEDULE I
TO EXHIBIT C
TO SERIES 1996-A
SUPPLEMENT
----------------
LIST OF ADDRESSES FOR NOTICES
AND OF COMMITMENT PERCENTAGES
THE CHASE MANHATTAN BANK, as Agent
Address: 270 Park Avenue
New York, New York 10017
Attention of
Telecopier:
[TRANSFEROR]
Address:
Prior Commitment Percentage:
Revised Commitment Percentage:
[ACQUIRING PURCHASER]
Address:
[Prior] Commitment Percentage:
[Revised Commitment Percentage:]
<PAGE>
Schedule 1 to the
Series 1996-A Supplement
------------------------
Commitments
-----------
Purchaser Commitment
--------- ----------
The Chase Manhattan Bank $175,000,000
Address: 270 Park Avenue
New York, New York 10017
Attention of
Telecopier:
<PAGE>
Schedule 2 to the
Series 1996-A Supplement
------------------------
Trust Accounts
--------------
Account Account Number
------- --------------
Series 1996-A Collection Subaccount
Series 1996-A Principal Collection Sub-
subaccount
Series 1996-A Non-Principal Collection
Sub-subaccount
Series 1996-A Principal Collection
Subordinated Sub-subaccount
Series 1996-A Accrued Interest Sub-
subaccount
<PAGE>
EXHIBIT D
to Series 1996-A
Supplement
----------
[Form of]
[ ]
ADMINISTRATIVE QUESTIONNAIRE
Please accurately complete the following information and return via Telecopy to
the attention of [ ] at Chase Securities Inc. as soon as possible, at
Telecopy No. (212) [ ].
PURCHASER LEGAL NAME TO APPEAR IN DOCUMENTATION:
- ------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL INFORMATION:
- --------------------
Institution Name:
-------------------------------------------------------------
Street Address:
---------------------------------------------------------------
City, State, Zip Code:
--------------------------------------------------------
POST-CLOSING, ONGOING CREDIT CONTACTS/NOTIFICATION METHODS:
- -----------------------------------------------------------
CREDIT CONTACTS:
Primary Contact:
--------------------------------------------------------------
Street Address:
---------------------------------------------------------------
City, State, Zip Code:
--------------------------------------------------------
Phone Number:
-----------------------------------------------------------------
Telecopy Number:
--------------------------------------------------------------
<PAGE>
2
Backup Contact:
---------------------------------------------------------------
Street Address:
---------------------------------------------------------------
City, State, Zip Code:
--------------------------------------------------------
Phone Number:
-----------------------------------------------------------------
Telecopy Number:
--------------------------------------------------------------
TAX WITHHOLDING:
- ----------------
Nonresident Alien Y* N
------- -------
* Form 4224 Enclosed
Tax ID Number _________________________
POST-CLOSING, ONGOING ADMINISTRATIVE CONTACTS/NOTIFICATION METHODS:
- -------------------------------------------------------------------
ADMINISTRATIVE CONTACTS - PAYMENTS, FEES, ETC.
Contact:
----------------------------------------------------------------------
Street Address:
---------------------------------------------------------------
City, State, Zip Code:
--------------------------------------------------------
Phone Number:
-----------------------------------------------------------------
Telecopy Number:
--------------------------------------------------------------
PAYMENT INSTRUCTIONS:
- ---------------------
Name of Bank to which funds are to be transferred:
- --------------------------------------------------------------------------------
<PAGE>
3
Routing Transit/ABA number of Bank to which funds are to be transferred:
- --------------------------------------------------------------------------------
Name of Account, if applicable:
- --------------------------------------------------------------------------------
Account Number:
---------------------------------------------------------------
Additional information:
-------------------------------------------------------
- --------------------------------------------------------------------------------
It is very important that all the above information be accurately completed and
---
that this questionnaire be returned to the person specified in the introductory
paragraph of this questionnaire as soon as possible. If there is someone other
than yourself who should receive this questionnaire, please notify us of that
person's name and telecopy number and we will telecopy a copy of the
questionnaire. If you have any questions about this form, please call
[ ] at (212) [ ].
<PAGE>
<TABLE><CAPTION>
Schedule 3 to the
Series 1996-A Supplement
------------------------
Timetable
---------
SELLER DISASTER RECOVERY COMPUTER BACK-UP OPERATIONAL READINESS
PLAN SYSTEMS OF OFF-SITE DISASTER
RECOVERY FACILITY
<S> <C> <C> <C>
Ametex Fabrics, Inc.
Operational
Completed Initial Closing Date Hot-Site with IBM
Drexel Heritage Furnishings, Inc.
12-1-96 Initial Closing Date By End of Year
Drexel Heritage Home Inspirations, Inc.
12-1-96 Initial Closing Date By End of Year
Furnishings International Inc.
2-1-97 Initial Closing Date By End of Year
Henredon Furniture Industries, Inc.
Operational
12-1-96 Initial Closing Date Hot-Site with IBM
LaBarge, Inc. 2-1-97 Initial Closing Date By End of Year
Lexington Furniture Industries, Inc.
Operational
12-1-96 Initial Closing Date Have own Hot-Site
Maitland-Smith, Inc. 2-1-97 Initial Closing Date By End of Year
Robert Allen Fabrics, Inc.
Operational
Completed Initial Closing Date Hot-Site with IBM
The Berkline Corporation
12-1-96 Initial Closing Date By End of Year
Universal Furniture Industries, Inc.
12-1-96 Initial Closing Date By End of Year
</TABLE>
<PAGE>
EXHIBIT H TO SERIES
1996-A SUPPLEMENT
-----------------
Form of Confidentiality Agreement
(Telecopy to [ ] at 212- )
[Name of assignee purchaser]
Ladies and Gentlemen:
You are prepared to furnish to the undersigned [describe information
to be provided]. The [described information] and any other materials, documents
and information which you, the Sellers, the Servicers, the Master Servicer, the
Company and the Trustee, on behalf of the Trust, or any of your or their
respective affiliates may furnish to us in connection with our evaluation of a
possible assignment or participation are collectively called the "Information".
Terms used herein that are not otherwise defined herein shall have the meaning
ascribed to such terms in the Pooling Agreement, dated as of August 5, 1996
among LFI Receivables Corporation, LFI Servicing Corporation and The Chase
Manhattan Bank.
We agree to keep confidential, and to not publish, disclose or
otherwise divulge, the Information (and to cause our officers, directors,
employees, agents and representatives to keep confidential, and to not publish,
disclose or otherwise divulge, the Information) and, at your, the Sellers', the
Servicers', the Master Servicer's, the Company's or the Trustee's, request
(except as provided below), promptly to return to you, the Sellers, the
Servicers, the Master Servicer, the Company or the Trustee (as applicable), or
destroy, the Information and all copies thereof, extracts therefrom and analyses
or other materials based thereon, except that we shall be permitted to disclose
<PAGE>
2
Information (i) to such of our officers, directors, employees, agents and
representatives as need to know such Information in connection with our
evaluation of a possible assignment or participation (who will be informed of
the confidential nature of the Information); (ii) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, or
requested by any bank regulatory authority (in any which event we will notify
you, the Sellers, the Servicers, the Master Servicer, the Company or the Trustee
to the extent not prohibited by applicable law); (iii) to the extent such
Information (A) becomes publicly available other than as a result of a breach of
this agreement, (B) becomes available to us on a non-confidential basis from a
source other than you, the Sellers, the Servicers, the Master Servicer, the
Company or the Trustee or any of your affiliates or (C) was available to us on a
non-confidential basis prior to its disclosure to us by you; (iv) to the extent
you, the Sellers, the Servicers, the Master Servicer, the Company and the
Trustee shall have consented to such disclosure in writing; or (v) pursuant to
the last paragraph of this letter.
We further agree that we will use the Information (except to the
extent the conditions referred to in subclauses (A), (B) and (C) of clause (iii)
above have been met and as provided in the last paragraph of this letter) only
to evaluate a possible assignment or participation.
We further agree, in the event we participate in an assignment or
participation, that we will not disclose any of the Information to any assignee
or participant or proposed assignee or participant unless and until such
assignee or participant or proposed assignee or participant first executes and
delivers to you a letter substantially in the form hereof.
Our obligations under this letter are for the benefit of you, the
Sellers, the Servicers, the Master Servicer, the Company and the Trustee and
your and their affiliates and you and each of them may pursue remedies
<PAGE>
3
against us for the breach hereof, either in equity or at law.
Notwithstanding anything to the contrary contained above if we
participate in an assignment or participation, we will be entitled to retain all
information and to use it in monitoring our investment and in exercising our
rights with respect thereto. This agreement shall be governed by the laws of
the State of New York.
Name of Recipient:
by:
_____________________________
Authorized Officer
______________________________
[Name of Assignee/Participant/
Proposed Assignee/Proposed
Participant]
<PAGE>
EXHIBIT G
TO SERIES 1996-A
SUPPLEMENT
----------
FORM OF ISSUANCE/INCREASE NOTICE
________, 199__
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Telecopier:
Attention:
Ladies and Gentlemen:
Reference is hereby made to the Series 1996-A Supplement, dated as of
August 5, 1996 (as amended or supplemented, the "Supplement"), among LFI
----------
Receivables Corporation (the "Company"), LFI Servicing Corporation (the "Master
Servicer"), The Chase Manhattan Bank, as Agent and Initial Purchaser, and The
Chase Manhattan Bank, as Trustee. Capitalized terms used in this Notice and not
otherwise defined herein shall have the meanings assigned thereto in the
Supplement.
This Notice constitutes the notice required in connection with [the
initial issuance] [any Increase] pursuant to subsection 2.05(a) of the
Supplement.
The [Master Servicer] [Company] hereby requests [a purchase in respect
of the initial issuance of Investor Certificates] [an Increase] be made by the
Purchasers on ______, ___ in the aggregate amount of $_______, such [purchase]
[Increase] to be allocated to a [Floating Tranche] [Eurodollar Tranche with a
Eurodollar Period of [one] [two] [three] months].
The [Master Servicer] [Company] hereby represents and warrants, as of
the date of such [purchase] [Increase]
<PAGE>
2
after giving effect thereto, that the conditions set forth in
subsections 2.05(a) and (b) of the Supplement with respect to such [purchase]
[Increase] have been satisfied.
IN WITNESS WHEREOF, the undersigned has caused this Notice to be
executed by its duly authorized officer as of the date first above written.
[LFI SERVICING CORPORATION, as
Master Servicer] [LFI
RECEIVABLES CORPORATION]
By:___________________________
Name:
Title:
EXHIBIT 10.8
EXECUTION COPY
SERVICING AGREEMENT
Among
LFI RECEIVABLES CORPORATION,
LFI SERVICING CORPORATION,
as Master Servicer,
the Servicers Party Hereto
and
THE CHASE MANHATTAN BANK,
as Trustee
Dated as of August 5, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . . . 1
ARTICLE II
Administration and Servicing of Receivables
-------------------------------------------
SECTION 2.01. Appointment of Master Servicer,
Servicers . . . . . . . . . . . . . . 3
SECTION 2.02. Servicing Procedures . . . . . . . . . 4
SECTION 2.03. Collections . . . . . . . . . . . . . . 6
SECTION 2.04. Reconciliation of Deposits . . . . . . 8
SECTION 2.05. Servicing Compensation . . . . . . . . 8
ARTICLE III
Representations and Warranties of the
-------------------------------------
Master Servicer and the Servicers
---------------------------------
SECTION 3.01. Organization; Powers . . . . . . . . . 10
SECTION 3.02. Authorization; No Conflict . . . . . . 10
SECTION 3.03. Enforceability . . . . . . . . . . . . 11
SECTION 3.04. Governmental Approvals . . . . . . . . 11
SECTION 3.05. Litigation; Compliance with Laws . . . 11
SECTION 3.06. Agreements . . . . . . . . . . . . . . 12
SECTION 3.07. No Servicer Default . . . . . . . . . . 12
SECTION 3.08. Servicing Ability . . . . . . . . . . . 12
SECTION 3.09. Location of Records . . . . . . . . . . 12
SECTION 3.10. Insurance . . . . . . . . . . . . . . . 12
<PAGE>
2
ARTICLE IV
Covenants of the Master Servicer
--------------------------------
and the Servicers
-----------------
SECTION 4.01. Delivery of Daily Reports . . . . . . . 13
SECTION 4.02. Delivery of Monthly Settlement
Statement . . . . . . . . . . . . . . 13
SECTION 4.03. Delivery of Annual Master Servicer's and
Servicers' Certificates . . . . . . . 14
SECTION 4.04. Delivery of Independent Public
Accountants' Servicing Reports . . . 15
SECTION 4.05. Extension, Amendment and Adjustment of
Receivables; Amendment of Policies . 15
SECTION 4.06. Protection of Certificateholders'
Rights . . . . . . . . . . . . . . . 16
SECTION 4.07. Security Interest . . . . . . . . . . . 16
SECTION 4.08. Location of Records . . . . . . . . . . 17
SECTION 4.09 Visitation Rights . . . . . . . . . . . 17
SECTION 4.10. Lockbox Agreement; Lockbox Accounts . . 18
SECTION 4.11. Delivery of Financial Statements . . . 18
SECTION 4.12. Notices . . . . . . . . . . . . . . . . 20
SECTION 4.13. Insurance . . . . . . . . . . . . . . . 20
ARTICLE V
Other Matters Relating to the Master Servicer
---------------------------------------------
and the Servicers
-----------------
SECTION 5.01. Merger, Consolidation, etc. . . . . . . 21
SECTION 5.02. Indemnification of the Trust and the
Trustee . . . . . . . . . . . . . . . 21
SECTION 5.03. Master Servicer and Servicers Not to
Resign . . . . . . . . . . . . . . . 22
SECTION 5.04. Access to Certain
Documentation and
Information Regarding the
Receivables . . . . . . . . . . . . . 23
<PAGE>
3
ARTICLE VI
Servicer Defaults; Servicer Termination
---------------------------------------
SECTION 6.01. Servicer Defaults . . . . . . . . . . . 23
SECTION 6.02. Trustee to Act; Appointment of
Successor . . . . . . . . . . . . . . 29
SECTION 6.03. Waiver of Past Defaults . . . . . . . . 32
SECTION 6.04. Other Servicer Terminations . . . . . . 33
ARTICLE VII
Miscellaneous Provisions
------------------------
SECTION 7.01. Amendment . . . . . . . . . . . . . . . 33
SECTION 7.02. Termination . . . . . . . . . . . . . . 33
SECTION 7.03. Governing Law . . . . . . . . . . . . . 34
SECTION 7.04. Addition of Servicers . . . . . . . . . 34
SECTION 7.05. Notices . . . . . . . . . . . . . . . . 34
SECTION 7.06. Counterparts . . . . . . . . . . . . . 34
SECTION 7.07. Third-Party Beneficiaries . . . . . . . 35
SECTION 7.08. Merger and Integration . . . . . . . . 35
SECTION 7.09. Headings . . . . . . . . . . . . . . . 35
SECTION 7.10. No Set-Off . . . . . . . . . . . . . . 35
SECTION 7.11. No Bankruptcy Petition . . . . . . . . 35
Exhibit A Form of Annual Servicer's Certificate
Exhibit B Form of Agreed Upon Procedures
Exhibit C Insurance Requirements
<PAGE>
EXECUTION COPY
SERVICING AGREEMENT, dated as of August 5,
1996, among LFI RECEIVABLES CORPORATION, a Delaware
corporation (the "Company"), LFI SERVICING CORPORATION,
a Delaware corporation, as the master servicer (the
"Master Servicer"), the servicers party hereto (the
"Servicers") and THE CHASE MANHATTAN BANK, not in its
individual capacity, but solely as trustee (in such
capacity, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company and the Sellers have entered into a Receivables
Sale Agreement, dated as of the date hereof (the "Receivables Sale Agreement");
WHEREAS, pursuant to the Receivables Sale Agreement, the Sellers sell
to the Company, and the Company purchases from the Sellers, all the Sellers'
right, title and interest in, to and under the Receivables and Related Property
(as defined in the Pooling Agreement dated as of the date hereof among the
Company, the Master Servicer and the Trustee (the "Pooling Agreement"));
WHEREAS, the parties hereto wish to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definitions. Unless otherwise defined herein,
------------
capitalized terms that are used herein shall
<PAGE>
2
have the meanings assigned to such terms in the Pooling Agreement and each
Supplement thereto.
SECTION 1.02. Other Definitional Provisions. (a) All terms defined
------------------------------
in this Agreement (directly or by incorporation by reference pursuant to Section
1.01) shall have the defined meanings when used in any certificates or other
document made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined herein
(directly or by incorporation by reference pursuant to Section 1.01) and
accounting terms partly defined herein (directly or by incorporation by
reference pursuant to Section 1.01), to the extent not defined, shall have the
respective meanings given to them under GAAP. To the extent that the
definitions of accounting terms herein are inconsistent with the meanings of
such terms under GAAP, the definitions contained herein shall control.
(c) The words "hereof", "herein" 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, subsection,
Schedule and Exhibit references contained in this Agreement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement unless
otherwise specified.
(d) The definitions contained herein are applicable to the singular
as well as the plural forms of such terms and to the masculine, the feminine and
the neuter genders of such terms.
(e) Where reference is made in this Agreement to the principal amount
of Receivables, such reference shall, unless explicitly stated otherwise, be
deemed a reference to the Principal Amount of such Receivables.
<PAGE>
3
(f) Any reference herein or in any other Transaction Document to a
provision of the Internal Revenue Code or ERISA shall be deemed to be also a
reference to any successor provision thereto.
(g) Any reference herein to a Schedule or Exhibit to this Agreement
shall be deemed to be a reference to such Schedule or Exhibit as it may be
amended, modified or supplemented from time to time to the extent that such
Schedule or Exhibit may be amended, modified or supplemented (or any term or
provision of any Transaction Document may be amended that would have the effect
of amending, modifying or supplementing information contained in such Schedule
or Exhibit) in compliance with the terms of the Transaction Documents.
(h) Any reference in this Agreement to any representation, warranty
or covenant "deemed" to have been made is intended to encompass only
representations, warranties or covenants that are expressly stated to be
repeated on or as of dates following the execution and delivery of this
Agreement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit or otherwise unexpressed representation, warranty or
covenant.
(i) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Administration and Servicing of Receivables
-------------------------------------------
SECTION 2.01. Appointment of Master Servicer, Servicers. The Company
------------------------------------------
hereby appoints LFI Servicing Corporation and the Servicers to act as, and LFI
Servicing Corporation and the Servicers hereby accept their respective
appointments and agree to act as, Master Servicer and
<PAGE>
4
Servicers, respectively, under the Pooling and Servicing Agreements and the
Investor Certificateholders, by their acceptance of the Certificates, consent to
LFI Servicing Corporation and the Servicers acting as Master Servicer and
Servicers, respectively. Each Servicer shall have responsibility for the
management of the servicing and receipt of collections in respect of each
Receivable originated by itself as a Seller and/or by one or more of its
Affiliates as Seller(s) as identified on Schedule 1 to the Receivables Sale
Agreement (such Servicer is sometimes referred to as the "Responsible Servicer"
--------------------
with respect to any Receivable that it is responsible to service hereunder and
such a Receivable is sometimes referred to herein as a "Serviced Receivable"
-------------------
with respect to the Servicer that is responsible to service such Receivable
hereunder). Each Servicer shall have the authority to make any management
decisions relating to each Serviced Receivable to the extent such authority is
granted to such Servicer under any Pooling and Servicing Agreement. LFI
Servicing Corporation, in its role as Master Servicer, shall coordinate the
servicing of all Receivables by all Servicers. The Company, the Trustee and the
Investor Certificateholders shall treat LFI Servicing Corporation and the
Servicers as Master Servicer and Servicers, respectively, and may conclusively
rely on the instructions, notices and reports of LFI Servicing Corporation and
the Servicers as Master Servicer and Servicers, respectively, for so long as LFI
Servicing Corporation and the Servicers continue in their appointments as Master
Servicer and Servicers, respectively.
SECTION 2.02. Servicing Procedures. (a) Each Servicer shall manage
---------------------
the servicing and administration of its Serviced Receivables, the collection of
payments due under such Serviced Receivables and charging off of any such
Serviced Receivables as uncollectible, all in accordance with its Policies and
the terms of the Pooling and Servicing Agreements. Each Servicer shall have
full power and authority, acting alone or through any party properly designated
by it hereunder, to do any and all things in connection with such servicing and
administration that it
<PAGE>
5
may deem necessary or desirable, but subject to the terms of this Agreement and
the other Transaction Documents. Without limiting the generality of the
foregoing and subject to Section 6.01, each Servicer or its designee, with
respect to its Serviced Receivables, and the Master Servicer or its designee,
with respect to all Receivables, is hereby authorized and empowered (i) to
execute and deliver, on behalf of the Trust for the benefit of the
Certificateholders, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
and, after the delinquency of any such Receivable and to the extent permitted
under and in compliance with applicable Requirements of Law, to commence
enforcement proceedings with respect to such Receivable and (ii) to make any
filings, reports, notices, applications, registrations with, and to seek any
consents or authorizations from the Securities and Exchange Commission and any
state securities authority on behalf of the Trust as may be necessary or
advisable to comply with any Federal or state securities or reporting
requirements or laws.
(b) Without limiting the generality of the foregoing and subject to
Section 6.01, the Master Servicer or its designee is hereby authorized and
empowered to give written direction to the Trustee with respect to withdrawals
from, and payments to, the Collection Account in accordance with the Daily
Report and as otherwise specified in the Pooling and Servicing Agreements.
(c) Each Servicer shall, at its cost and expense and as agent for the
Company and the Trust, use its best efforts to collect, consistent with its past
practices, as and when the same becomes due, the amount owing on each Serviced
Receivable. No Servicer shall make any material change in its administrative,
servicing and collection systems that deviates from its Policies, except as
expressly permitted by the terms of any applicable Pooling and Servicing
Agreement and after giving written notice to the Trustee. In the event of
default under any Receivable, the Responsible Servicer shall have the power and
authority, on behalf of the Company and the Trust, for the benefit of the
Investor Certificateholders, to take such action in respect of such Receivable
as such Responsible Servicer may deem advisable. In the enforcement or
collection of any Receivable, the
<PAGE>
6
Responsible Servicer shall be entitled to sue thereon in (i) its own name or
(ii) if, but only if, the Company consents in writing (which consent shall not
be unreasonably withheld), as agent for the Company. In no event shall any
Servicer be entitled to take any action that would make the Company, the
Trustee, any Agent or any Investor Certificateholder a party to any litigation
without the express prior written consent of such Person.
(d) Without limiting the generality of the foregoing and subject to
Section 6.01, each Servicer is hereby authorized and empowered to delegate any
or all of its servicing, collection, enforcement and administrative duties
hereunder with respect to the Serviced Receivables to a Person who agrees to
conduct such duties in accordance with such Servicer's Policies; provided,
--------
however, that such Servicer shall give prior written notice to the Company, the
- -------
Trustee, each Agent and the Rating Agencies of any such delegation relating to a
material duty prior to such delegation being effective, such Servicer shall have
received notice that the Rating Agency Condition shall be satisfied after giving
effect to such delegation and the consent of the Company, the Trustee and each
Agent to such delegation shall have been obtained. No delegation of duties by
any Servicer permitted hereunder shall relieve such Servicer of its liability
and responsibility with respect to such duties.
(e) Except as provided in any Pooling and Servicing Agreement, no
Servicer or any Successor Servicer shall be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Serviced
Receivables transferred to the Company (and, subsequently, to the Trust) from
the procedures, offices, employees and accounts used by such Servicer or such
Successor Servicer,
<PAGE>
7
as the case may be, in connection with servicing other receivables.
(f) Each Servicer shall maintain fidelity bond or other coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of the Serviced Receivables, including depositor's
forgery, in an amount and breadth of coverage satisfactory to the Rating
Agencies and each Agent. Each Servicer shall, upon reasonable prior notice, and
as often as may reasonably be requested by any Agent, provide evidence to such
Agent of such coverage.
(g) Each Servicer shall comply with and perform its servicing
obligations with respect to the Serviced Receivables in accordance with the
contracts, if any, relating to the Serviced Receivables and its Policies.
(h) No Servicer shall take any action to cause any Serviced
Receivable not evidenced by any "instrument" (as defined in the UCC as in effect
in the State of New York) upon origination to become evidenced by an instrument
and no Servicer shall take any action to cause any interest in any Receivable to
be evidenced by any title documents in bearer form, except in connection with
its enforcement or collection of a Serviced Receivable, in which event such
Servicer shall deliver such instrument or title documents to the Trustee as soon
as reasonably practicable, but in no event more than five days after execution
thereof; provided that any origination of Receivables by any Servicer, in its
--------
capacity as a Seller, in compliance with applicable Pooling and Servicing
Agreements shall not constitute a breach of this subsection 2.02(h).
SECTION 2.03. Collections. (a) Each Servicer shall have instructed
------------
all Obligors to make all payments in respect of the Serviced Receivables to a
Lockbox or a Lockbox Account. Each of the Company and each Servicer represents,
warrants and agrees that all Collections shall be collected, processed and
deposited by it pursuant to, and
<PAGE>
8
in accordance with the terms of, the Pooling and Servicing Agreements. Without
limiting the generality of the foregoing, each Servicer shall comply with the
provisions of subsection 3.01(d) of the Pooling Agreement as to remittance of
funds available in any Lockbox Account. In the event that any payments in
respect of any Receivable are made directly to a Servicer (including any
employees thereof or independent contractors employed thereby), such Servicer
shall, within two Business Days of receipt thereof, deliver (which may be via
regular mail) or deposit such amounts to a Lockbox, a Lockbox Account or the
Collection Account and, prior to forwarding such amounts, such Servicer shall
hold such payments in trust as custodian for the Company and the Trustee.
(b) Each Lockbox Agreement shall provide that the Lockbox Processor
thereunder is irrevocably directed, and such Lockbox Processor irrevocably
agrees, (i) to deposit funds received in the Lockbox directly into the Lockbox
Account and (ii) to transfer all available funds on deposit in the Lockbox
Account within one Business Day of the Business Day Received to the Trustee for
deposit in the Collection Account. Each Lockbox Agreement shall be
substantially in the form specified in the Pooling Agreement, subject to
modifications thereof as provided in the Pooling Agreement and applicable
Supplements. Prior to any resignation of the Lockbox Processor or termination
of the Lockbox Processor by the Company or the Trustee with respect to any
Receivables, each Servicer hereby agrees (to the extent that it is a Responsible
Servicer with respect to such Receivables) to obtain a replacement Lockbox
Processor. Upon satisfaction of the Rating Agency Condition and the consent of
the Trustee (which shall not be unreasonably withheld), a Servicer may enter
into any amendments or modifications of a Lockbox Agreement that the Servicer
reasonably deems necessary to conform such Lockbox Agreement to the cash
management system of the Company or the Responsible Servicer(s).
<PAGE>
9
(c) The Trustee shall administer amounts on deposit in the Collection
Account in accordance with the terms of the Pooling and Servicing Agreements.
Each of the Company, the Master Servicer and each Servicer acknowledges and
agrees that (i) it shall not have any right to withdraw any funds on deposit in
the Collection Account or any Lockbox Account and (ii) all amounts deposited in
the Collection Account or any Lockbox Account shall be under the sole dominion
and control of the Trustee (subject to the Master Servicer's or Servicers'
rights to direct the application of any such amounts as provided by the terms of
any Pooling and Servicing Agreement).
(d) As soon as practicable, but in any event not later than the
Business Day following the date that a Servicer identifies any of the collected
funds received in the Collection Account as funds that do not constitute
Collections on account of the Receivables, such moneys that do not constitute
such Collections shall be remitted to the Master Servicer and then by the Master
Servicer to the appropriate Seller.
(e) Unless otherwise required by law or unless an Obligor designates
that a payment be applied to a specific Receivable, all Collections received
from an Obligor shall be applied to the oldest Receivables of such Obligor.
SECTION 2.04. Reconciliation of Deposits. If in respect of
---------------------------
Collections on account of a Receivable the Responsible Servicer deposits into
the Collection Account (a) a check that is not honored for any reason or (b) an
amount that is less than or more than the actual amount of such Collections,
such Servicer shall, in lieu of making a reconciling withdrawal or deposit, as
the case may be, adjust the amount subsequently deposited into such Collection
Account to reflect such dishonored check or mistake. Any Receivable in respect
of which a dishonored check is received shall be deemed not to have been paid;
provided, that no adjustments made pursuant to this
- --------
<PAGE>
10
Section 2.04 shall change any amount previously reported pursuant to Section
4.02.
SECTION 2.05. Servicing Compensation. (a) As full compensation for
-----------------------
the Servicers' servicing activities hereunder and reimbursement for their
expenses as set forth in subsection 2.05(b), the Master Servicer, on behalf of
the Servicers, shall be entitled to receive on each Distribution Date, for the
preceding Settlement Period prior to the termination of the Trust pursuant to
Section 9.01 of the Pooling Agreement, a servicing fee (the "Servicing Fee").
-------------
The Servicing Fee shall be an amount equal to (i) the product of (A) the
Servicing Fee Percentage and (B) the average aggregate Principal Amount of the
Receivables in the Trust for such Settlement Period and (C) the number of days
in such Settlement Period, divided by (ii) 360. Except as otherwise set forth
in the related Supplement, the share of the Servicing Fee allocable to each
Outstanding Series for any Settlement Period shall be an amount equal to the
product of (i) the Servicing Fee for such Settlement Period and (ii) a fraction
(expressed as a percentage) (A) the numerator of which is the daily average
Invested Amount for such Settlement Period with respect to such Outstanding
Series and (B) the denominator of which is the daily average Aggregate Invested
Amount for such Settlement Period (with respect to any such Series, the "Monthly
-------
Servicing Fee"); provided, however, that if on any day a Seller or any Affiliate
- ------------- -------- -------
thereof is acting as a Servicer and an Early Amortization Event has occurred and
is continuing with respect to any Outstanding Series, (i) until the amount on
deposit in the Expense Account equals the Expense Account Limit, the portion of
the Monthly Servicing Fee payable to such Seller or Affiliate thereof with
respect to such Outstanding Series shall be deposited into the Expense Account
in accordance with Section 7.03 of the Pooling Agreement and (ii) thereafter,
the portion of the Monthly Servicing Fee payable to a Seller or an Affiliate
thereof with respect to such Outstanding Series shall be deferred until all
amounts due under the Investor Certificates of such Outstanding Series have been
paid in full. The
<PAGE>
11
Servicing Fee shall be payable to the Master Servicer, on behalf of the
Servicers, solely pursuant to the terms of, and to the extent amounts are
available for payment under, Article III of the Pooling Agreement.
(b) The Company hereby directs the Master Servicer and each Servicer
to pay amounts due to the Trustee pursuant to Section 8.05 of the Pooling
Agreement and the reasonable fees and disbursements of independent accountants,
and all other reasonable fees and expenses of the Trust (including counsel fees,
if any) not expressly stated herein to be for the account of the Certificate-
holders; provided however, that in no event shall the Master Servicer, any
-------- -------
Servicer or the Trustee be liable for any Federal, state or local income or
franchise tax, or any interest or penalties with respect thereto, assessed on
the Trust or the Certificateholders except in accordance with Section 5.02 and
as otherwise expressly provided herein. Notwithstanding anything to the
contrary herein or in any other Pooling and Servicing Agreement, in the event
that the Master Servicer or any Servicer fails to pay any amount due to the
Trustee pursuant to Section 8.05 of the Pooling Agreement, or following the
commencement and continuation of an Early Amortization Period, the Trustee shall
be entitled, in addition to any other rights it may have under law and under the
Pooling Agreement, to receive directly such amounts owing to it under the
Pooling and Servicing Agreements from, and in the same order of priority as, the
Servicing Fee before payment to the Master Servicer, for the benefit of the
Servicers, of any portion thereof; provided, that in the event any Servicer
--------
shall have elected to waive its rights to payment of its portion of the
Servicing Fee or the Servicing Fee is deferred pursuant to subsection 2.05(a),
the Trustee shall nonetheless be entitled to receive such amounts from payments
that would ordinarily be applied to the payment of the Servicing Fee, in the
same order of priority as though such portion of the Servicing Fee were payable.
Each Servicer shall be required to pay expenses for its own account, and shall
not be entitled to any payment therefor other than its portion of the Servicing
<PAGE>
12
Fee. Nothing contained herein shall be construed to limit the obligation of the
Master Servicer, each Servicer or the Company to pay any amounts due the Trustee
pursuant to Section 8.05 of the Pooling Agreement.
ARTICLE III
Representations and Warranties of the
-------------------------------------
Master Servicer and the Servicers
---------------------------------
As of (a) the Initial Closing Date and (b) each Issuance Date, each of
the Master Servicer and each Servicer hereby makes the following representations
and warranties to each of the other parties hereto:
SECTION 3.01. Organization; Powers. It (i) is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority to
own its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is qualified to do business in, and is in good
standing in, every jurisdiction where the nature of its business so requires,
except where the failure so to qualify could not reasonably be expected to
result in a Servicer Material Adverse Effect and (iv) has the corporate power
and authority to execute, deliver and perform its obligations under each of the
Transaction Documents and each other agreement or instrument contemplated hereby
to which it is or will be a party.
SECTION 3.02. Authorization; No Conflict. The execution, delivery
---------------------------
and performance by it of each of the Transaction Documents that it is a party to
and the other transactions contemplated hereby and thereby (collectively, the
"Transactions") (i) have been duly authorized by all requisite corporate and, if
------------
required, stockholder action and (ii) will not (A) violate (1) any Requirement
of Law or (2) any provision of any Contractual Obligation to which it or any
Subsidiary is a party or by which any of them or any
<PAGE>
13
of their property is or may be bound, (B) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under, or give rise to any right to accelerate or to require the
prepayment, repurchase or redemption of any obligation under any such
Contractual Obligation, except where any such conflict, violation, breach or
default referred to in clause (A) or (B), individually or in the aggregate,
could not reasonably be expected to have a Servicer Material Adverse Effect, or
(C) result in the creation or imposition of any Lien upon or with respect to any
property or assets now owned or hereafter acquired by it or any Subsidiary
(other than any Lien created hereunder or contemplated or permitted hereby).
SECTION 3.03. Enforceability. This Agreement has been duly executed
---------------
and delivered by it and constitutes, and each other Transaction Document to
which it is a party when executed and delivered by it will constitute, its
legal, valid and binding obligation enforceable against it in accordance with
such document's terms, subject (a) as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally, from time to time in
effect and (b) to general principals of equity (whether enforcement is sought by
a proceeding in equity or at law).
SECTION 3.04. Governmental Approvals. No action, consent or approval
-----------------------
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(i) the filing of Uniform Commercial Code financing statements and (ii) such as
have been made or obtained and are in full force and effect; provided, however,
-------- -------
that with respect to Receivables owing by Government Obligors, any failure by it
to comply with the United States Federal Nonassignment Act (Public Contracts),
41 U.S.C. Sec. 15, or Assignment of Claims Act, 31 U.S.C. Sec. 3727, or with any
<PAGE>
14
similar legislation of any State shall not constitute a breach of this Section
3.04.
SECTION 3.05. Litigation; Compliance with Laws. (i) There are no
---------------------------------
actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to its knowledge, threatened against or
affecting it or any Subsidiary or any business, property or rights of any such
Person (A) that involve any Transaction Document or the Transactions or (B) as
to which there is a reasonable possibility of an adverse determination and that,
if adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Servicer Material Adverse Effect.
(ii) Neither it nor any Subsidiary is in default with respect to any
judgment, writ, injunction, decree or order of any Governmental Authority, where
such violation or default could reasonably be expected to result in a Servicer
Material Adverse Effect.
SECTION 3.06. Agreements. (i) Neither it nor any Subsidiary is a
-----------
party to any agreement or instrument or subject to any corporate restriction
that has resulted or could reasonably be expected to result in a Servicer
Material Adverse Effect.
(ii) Neither it nor any Subsidiary is in default in any manner under
any provision of any Contractual Obligation to which it is a party or by which
it or any of its properties or assets are bound, where such default could
reasonably be expected to result in a Servicer Material Adverse Effect.
SECTION 3.07. No Servicer Default. No Servicer Default or Potential
--------------------
Servicer Default has occurred and is continuing.
SECTION 3.08. Servicing Ability. As of the related Issuance Date,
------------------
there has not been since the date of
<PAGE>
15
this Agreement any adverse change in its ability to perform its obligations as
Master Servicer or Servicer, as applicable, under any Transaction Document to
which it is a party.
SECTION 3.09. Location of Records. The office at which it keeps its
--------------------
records concerning any Receivables either (i) is located at the address set
forth for it on Schedule 1 to the Receivables Sale Agreement or (ii) has been
notified to the Company and the Trustee in accordance with the provisions of
Section 4.08. Its chief executive office is located at such location and such
office is the place where it is "located" for the purposes of Section
9-103(3)(d) of the UCC as in effect in the State of New York.
SECTION 3.10. Insurance. Each Servicer has fidelity bond or other
----------
coverage in full force and effect insuring against losses through wrongdoing of
its officers and employees who are involved in the servicing of Receivables,
including coverage of depositor's forgery, in an amount at least equal to and
with breadth of coverage at least as comprehensive as the coverage indicated on
Exhibit C and with the insurers indicated on Exhibit C.
ARTICLE IV
Covenants of the Master Servicer and the Servicers
--------------------------------------------------
SECTION 4.01. Delivery of Daily Reports. Unless otherwise specified
--------------------------
in the Supplement with respect to any Series, for each Business Day (the
"Reported Day") and with respect to each Outstanding Series, the Master Servicer
------------
shall submit to the Company, the Trustee and the relevant Agent no later than
1:30 p.m., New York City time, on the next Business Day following each Reported
Day, a written report substantially in the form attached to the related
Supplement for each such Series (the "Daily Report") setting forth for the
------------
Reported Day total Collections on the Receivables, the amount of Collections
attributable to
<PAGE>
16
previously identified Ineligible Receivables for which an Adjustment Payment and
a Seller Adjustment Payment have been made pursuant to the Pooling Agreement and
the Receivables Sale Agreement, respectively (which are payable to the
appropriate Seller in accordance with subsection 2.06(a) of the Receivables Sale
Agreement), the amount of Receivables originated, the amount of Ineligible
Receivables (if any) identified on the Reported Day, and such other information
as the Company, the Trustee or such Agent may reasonably request. The Daily
Report may be delivered in an electronic format mutually agreed upon by the
Master Servicer and the Trustee, or pending such agreement, by facsimile. By
delivery of a Daily Report, the Master Servicer shall be deemed to have made a
representation and warranty that all information set forth therein is true and
correct in all material respects.
SECTION 4.02. Delivery of Monthly Settlement Statement. Unless
-----------------------------------------
otherwise specified in the Supplement with respect to any Outstanding Series,
the Master Servicer hereby covenants and agrees that it shall deliver to the
Company, the Trustee, the relevant Agent and each Rating Agency by 11:00 a.m.,
New York City time, on each Settlement Report Date, a certificate of a
Responsible Officer of the Master Servicer substantially in the form attached to
the related Supplement for each such Outstanding Series (a "Monthly Settlement
------------------
Statement") setting forth, as of the last day of the Settlement Period most
- ---------
recently ended and for such Settlement Period, (a) the information described in
the form of such Monthly Settlement Statement with such changes as may be agreed
to by the Master Servicer, the Company, the Trustee and the relevant Agent (if
any) and subject to satisfaction of the Rating Agency Condition and (b) such
other information as the Trustee or the relevant Agent may reasonably request.
Such certificate shall include a certification by a Responsible Officer of the
Master Servicer that, to such Responsible Officer's knowledge, the information
contained therein is true and correct in all material respects and each of the
Master Servicer and each Servicer has performed all of its
<PAGE>
17
respective obligations in all material respects under each Transaction Document
to which it is a party throughout such preceding Settlement Period (or, if there
has been a default in the performance of any such obligation, specifying each
such default known to such Responsible Officer and the nature and status
thereof). A copy of each Monthly Settlement Statement may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust office.
SECTION 4.03. Delivery of Annual Master Servicer's and Servicers'
---------------------------------------------------
Certificates. Each of the Master Servicer and each Servicer shall deliver to
- -------------
the Company, the Trustee, each Agent and each Rating Agency, a certificate of a
Responsible Officer of the Master Servicer or such Servicer, as applicable,
substantially in the form of Exhibit A hereto, certifying that:
(a) a review of its activities during the preceding calendar year (or
in the case of the first such certificate issued after the Initial Closing
Date, during the period from the Initial Closing Date) and of its performance
under each Transaction Document was made under the supervision of such
Responsible Officer;
(b) to such Responsible Officer's knowledge, based on such review, it
has performed its obligations in all material respects under each Transaction
Document throughout the period covered by such certificate (or, if there has
been a material default in the performance of any such obligation, specifying
each such default known to such Responsible Officer and the nature and status
thereof); and
(c) in the case of the certificate of a Responsible Officer of the
Master Servicer, each Daily Report and Monthly Settlement Statement was
accurate and correct in all material respects.
<PAGE>
18
Such certificate shall be delivered by the Master Servicer and each Servicer
within 90 days after the end of each calendar year commencing with the year
ending December 31, 1996. A copy of each such certificate may be obtained by
any Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
SECTION 4.04. Delivery of Independent Public Accountants' Servicing
-----------------------------------------------------
Reports. Each of the Master Servicer and each Servicer shall cause Independent
- --------
Public Accountants to furnish to the Company, the Trustee, each Agent and each
Rating Agency within 120 days following the last day of each of its fiscal years
a letter to the effect that such firm has performed certain agreed-upon
procedures (as set forth in Exhibit B hereto) relating to it and its performance
hereunder during the preceding fiscal year and describing such accountants'
findings with respect to such procedures. A copy of such report may be obtained
by any Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
SECTION 4.05. Extension, Amendment and Adjustment of Receivables;
---------------------------------------------------
Amendment of Policies. (a) Each Servicer hereby covenants and agrees with the
- ----------------------
Company and the Trustee that it shall not extend, rescind, cancel, amend or
otherwise modify, or attempt or purport to extend, rescind, cancel, amend or
otherwise modify, the terms of, or grant any Dilution Adjustment to, any
Serviced Receivable, or otherwise take any action that is intended to cause or
permit a Serviced Receivable that is an Eligible Receivable to cease to be an
Eligible Receivable, except in any such case (i) in accordance with the terms of
its Policies, (ii) as required by any Requirement of Law or (iii) in the case of
any Dilution Adjustments, upon the payment by or on behalf of the appropriate
Seller of a Seller Adjustment Payment pursuant to Section 2.05 of the
Receivables Sale Agreement. Any Dilution Adjustment authorized to be made
pursuant to the preceding sentence shall result in the reduction, on the
Business Day on which such Dilution Adjustment arises or is identified, in the
aggregate
<PAGE>
19
Principal Amount of Receivables and if as a result of such a reduction the
Aggregate Target Receivables Amount exceeds the Aggregate Receivables Amount,
the Company (in addition to the obligations of the Sellers under the Receivables
Sale Agreement in respect of such Dilution Adjustment) shall be required to pay
into the Series Principal Collection Sub-subaccount with respect to each
Outstanding Series in immediately available funds, within one Business Day of
such determination, the pro rata share for such Series of the amount (the "Cash
----
Dilution Payment") by which the Aggregate Target Receivables Amount exceeds the
- ----------------
Aggregate Receivables Amount.
(b) No Servicer shall change or modify its Policies in any material
respect, except (i) if such change or modification is necessary under any
Requirement of Law or (ii) if the Rating Agency Condition is satisfied with
respect thereto. Each Servicer shall provide notice to the Company, the
Trustee, each Agent and each Rating Agency of any change or modification of its
Policies; provided, however, that if any change or modification, other than a
-------- --------
change or modification permitted pursuant to clause (i) above, would be
reasonably likely to have a Material Adverse Effect on the interests of the
Investor Certificateholders of a Series that is not rated by a Rating Agency,
the consent of the applicable Agent (or if none, as specified in the related
Supplement) shall be required to effect such change or modification.
SECTION 4.06. Protection of Certificateholders' Rights. Each
-----------------------------------------
Servicer hereby agrees with the Company and the Trustee that it shall take no
action, nor intentionally omit to take any action, that could reasonably be
expected to adversely impair the rights, remedies or interests of the
Certificateholders under the Transaction Documents in respect of the Serviced
Receivables or any Related Property nor shall it reschedule, revise or defer
payments due on any Serviced Receivable except in accordance with its Policies
or Section 4.05 above.
<PAGE>
20
SECTION 4.07. Security Interest. Each Servicer hereby covenants and
------------------
agrees that it shall not sell, pledge, assign or transfer to any other Person,
or grant, create, incur, assume or suffer to exist any Lien on, any Serviced
Receivable, whether now existing or hereafter created, or any interest therein,
and each Servicer shall defend the right, title and interest of the Company and
the Trust in, to and under any Serviced Receivable, whether now existing or
hereafter created, against all claims of third parties claiming through or under
such Servicer or the Company; provided, however, that nothing in this
-------- -------
Section 4.07 shall prevent or be deemed to prohibit a Servicer from suffering to
exist upon any of the Serviced Receivables any Permitted Liens described in
clause (i) or (ii) of the definition thereof.
SECTION 4.08. Location of Records. Each of the Master Servicer and
--------------------
each Servicer hereby covenants and agrees that it (a) shall not move its chief
executive office or any of the offices where it keeps its records with respect
to any Receivables outside of the location specified in respect thereof on
Schedule 1 to the Receivables Sale Agreement, in any such case, without giving
30 days prior written notice to the Company, the Trustee, each Agent and the
Rating Agencies and (b) shall promptly take all actions (including any filings
under the UCC) required or reasonably necessary in order to continue the valid
and enforceable interest of the Trust in all Receivables now owned by the Trust
or hereafter created.
SECTION 4.09. Visitation Rights. (a) Each of the Master Servicer
------------------
and each Servicer shall, at any reasonable time during normal business hours on
any Business Day and from time to time, upon reasonable prior notice, and as
often as may reasonably be requested, subject to its security and
confidentiality requirements, (i) permit the Company, the Trustee, any Agent or
any of their respective agents or representatives, (A) to examine and make
copies of and abstracts from its records, books of account and documents
(including computer tapes and disks) relating to
<PAGE>
21
the Receivables or the Serviced Receivables, as the case may be, and
(B) following the termination of its appointment as Master Servicer or Servicer,
as the case may be, to be present at its offices and properties to administer
and control the Collection of the Receivables or the Serviced Receivables, as
the case may be, and to allow the Trustee access to documents, instruments and
other records (including the documents, instruments and other records required
to be transferred to a successor pursuant to Section 6.01 upon a Master Service
Transfer or Service Transfer, as the case may be), equipment and personnel that
are necessary to enable a Successor Master Servicer to continue master servicing
operations or a Successor Servicer to continue servicing operations, as the case
may be, in accordance with the terms of the Transaction Documents and
(ii) permit the Company, the Trustee, any Agent or any of their respective
agents or representatives to visit its properties to discuss its affairs,
finances and accounts relating to the Receivables or the Serviced Receivables,
as the case may be, or its performance hereunder or under any of the other
Transaction Documents to which it is a party with any of its officers or
directors and with its Independent Public Accountants; provided, that the
--------
Company, the Trustee or the Agent, as the case may be, shall notify it prior to
any contact with such accountants and shall give it the opportunity to
participate in such discussions.
(b) Each of the Master Servicer and each Servicer shall provide the
Trustee with such other information as the Trustee may reasonably request in
connection with the fulfillment of the Trustee's obligations under any Pooling
and Servicing Agreement.
SECTION 4.10. Lockbox Agreement; Lockbox Accounts. The Master
------------------------------------
Servicer and each Servicer shall (a) maintain, and keep in full force and
effect, each Lockbox Agreement to which it is a party, except to the extent
otherwise permitted under the terms of the Transaction Documents, and (b) take
all reasonable actions necessary to ensure that each related Lockbox Account
shall
<PAGE>
22
be free and clear of, and defend each such Lockbox Account against, any writ,
order, stay, judgment, warrant of attachment or execution or similar process;
provided, however, that upon satisfaction of the Rating Agency Condition and the
- -------- -------
consent of the Trustee (which shall not be unreasonably withheld), the Company
may enter into any amendments to or modifications of a Lockbox Agreement that
the Company reasonably deems necessary to conform such Lockbox Agreement to the
cash management system of the Company or the Responsible Servicer(s).
SECTION 4.11. Delivery of Financial Statements. The Master Servicer
---------------------------------
shall furnish to the Company, the Trustee, each Agent and the Rating Agencies:
(a) within 90 days after the end of each fiscal year, Furnishings
International Inc.'s consolidated balance sheet and related statements of
income, stockholders' equity and cash flows showing the consolidated
financial condition of Furnishings International Inc. and its consolidated
subsidiaries as of the close of such fiscal year and the consolidated results
of its operations and the operations of such subsidiaries during such year
(and showing, on a comparative basis, the figures for the previous year), all
audited by Ernst & Young LLP, Coopers and Lybrand LLP or other independent
public accountants of recognized national standing acceptable to the Required
Lenders (as defined in the Credit Agreement) and accompanied by an opinion of
such accountants (which shall not be qualified in any material respect) to
the effect that such consolidated financial statements fairly present in all
material respects the financial condition and results of operations of
Furnishings International Inc. and its consolidated subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year,
<PAGE>
23
Furnishings International Inc.'s unaudited consolidated balance sheet and
related statements of income, stockholders' equity and cash flows showing the
consolidated financial condition of Furnishings International Inc. and its
consolidated subsidiaries as of the close of such fiscal quarter and the
consolidated results of its operations and the operations of such
subsidiaries during such fiscal quarter and the then elapsed portion of the
fiscal year (and showing, on a comparative basis, such information as of and
for the corresponding dates and periods of the preceding fiscal year), all
certified by a Financial Officer (as defined in the Credit Agreement) of
Furnishings International Inc. as fairly presenting in all material respects
the consolidated financial condition and results of operations of Furnishings
International Inc. and its consolidated subsidiaries on a consolidated basis
in accordance with GAAP (except for the absence of footnote disclosure)
consistently applied, subject to year-end audit adjustments;
(c) within 30 days after the end of each month (other than the last
month of any fiscal quarter), Furnishings International Inc.'s unaudited
consolidated balance sheet and related statements of income, stockholders'
equity and cash flows, showing the consolidated financial condition of
Furnishings International Inc. and its consolidated subsidiaries as of the
close of such month and the consolidated results of its operations and the
operations of such subsidiaries during such month and the then-elapsed
portion of the fiscal year;
(d) concurrently with any delivery of financial statements under sub-
paragraph (a) or (b) above, a certificate of the Financial Officer certifying
such statements;
<PAGE>
24
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
Furnishings International Inc., any Servicer or any Subsidiary with the
Securities and Exchange Commission, or any Governmental Authority succeeding
to any or all of the functions of said Commission, or with any national
securities exchange, or distributed to its shareholders generally, as the
case may be; and
(f) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of Furnishings
International Inc., any Servicer or any Subsidiary, or compliance with the
terms of any Transaction Document, in each case as the Agent or any Purchaser
may reasonably request.
SECTION 4.12. Notices. Each of the Master Servicer and each Servicer
--------
shall furnish to the Company, the Trustee, each Agent and each Rating Agency,
promptly upon obtaining knowledge of the occurrence of any Purchase Termination
Event, Potential Purchase Termination Event, Early Amortization Event, Potential
Early Amortization Event or Servicer Default, written notice thereof.
SECTION 4.13. Insurance. Each Servicer hereby covenants and agrees
----------
that it shall maintain in full force and effect fidelity bond or other coverage
insuring against losses through wrongdoing of its officers and employees who are
involved in the servicing of Receivables, including coverage of depositor's
forgery, in an amount at least equal to and with breadth of coverage at least as
comprehensive as the coverage indicated on Exhibit C and with insurers having a
claims-paying ability substantially comparable to the insurers indicated on
Exhibit C.
<PAGE>
25
ARTICLE V
Other Matters Relating to the
-----------------------------
Master Servicer and the Servicers
---------------------------------
SECTION 5.01. Merger, Consolidation, etc. Neither the Master
---------------------------
Servicer nor any Servicer shall enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or make any material change in its present method
of conducting business, or convey, sell, transfer, lease, assign or otherwise
dispose of, all or substantially all of its property, business or assets other
than the assignments and transfers contemplated hereby; provided that the Master
--------
Servicer or any Servicer may merge into or consolidate with any other
corporation or convey, sell or transfer its property, business or assets
substantially as an entirety to another Person, if:
(a) the corporation into which it is merged or the corporation formed
by such consolidation or the Person that acquires by conveyance, sale or
transfer its property, business or assets substantially as an entirety shall
be a corporation organized and existing under the laws of the United States
of America or any State or the District of Columbia, and, if it is not the
surviving entity, such corporation shall assume, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, the performance of every one of its covenants and obligations
hereunder; and
(b) it has delivered to the Trustee an officer's certificate executed
by a Vice President or other senior officer and an Opinion of Counsel
addressed to the Trust and the Trustee each stating that such consolidation,
merger, conveyance or transfer complies with this Section 5.01 and an
officer's certificate executed by a Vice President or other senior officer
stating that all conditions precedent herein provided
<PAGE>
26
for relating to such transaction have been complied with.
SECTION 5.02. Indemnification of the Trust and the Trustee.
---------------------------------------------
(a) Each of the Master Servicer and the Servicer hereby agrees to indemnify and
hold harmless the Company, the Trustee for the benefit of the Certificateholders
and the Trustee and their respective directors, officers, agents and employees
(an "Indemnified Person") from and against any loss, liability, expense, damage
------------------
or injury suffered or sustained by reason of any acts, omissions or alleged acts
or omissions arising out of, or relating to, its activities pursuant to any
Pooling and Servicing Agreement to which it is a party, including but not
limited to any judgment, award, settlement, reasonable attorneys' fees and other
reasonable costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim; provided that neither the
--------
Master Servicer nor any Servicer shall indemnify any Indemnified Person for any
liability, cost or expense of such Indemnified Person (i) arising solely from a
default by an Obligor with respect to any Receivable (except that
indemnification shall be made to the extent that such default arises out of its
failure to perform its duties or obligations under this Agreement), or (ii) to
the extent that such liability, cost or expense arises from the gross
negligence, bad faith or wilful misconduct of such Indemnified Person (or any of
its respective directors, officers, agents or employees). The provisions of
this indemnity shall run directly to, and be enforceable by, an injured party
and shall survive the termination of the Agreement or the resignation of the
Master Servicer or Servicer, as the case may be.
(b) In addition to and without giving effect to any limitations set
forth in subsection (a) above, each Servicer shall indemnify and hold harmless
each Indemnified Person from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of a breach by such Servicer of any
covenant contained in subsections
<PAGE>
27
2.02(g) or 2.02(h) or Sections 4.05, 4.06 or 4.07 that adversely affects the
interest of the Company or the Investor Certificateholders under the Transaction
Documents with respect to any Serviced Receivable (an "Indemnification Event"),
---------------------
in an amount equal to the outstanding Principal Amount at such time of such
Receivable. Payment shall occur on or prior to the 30th Business Day after the
day such Indemnification Event becomes known to such Servicer unless such
Indemnification Event shall have been cured on or before such day.
SECTION 5.03. Master Servicer and Servicers Not to Resign. Neither
--------------------------------------------
the Master Servicer nor any Servicer shall resign from the obligations and
duties hereby imposed on it except upon determination that (a) the performance
of its duties hereunder is no longer permissible under applicable law, and
(b) there is no reasonable course of action that it could take to make the
performance of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Master Servicer or any Servicer
shall be evidenced as to clause (a) above by an Opinion of Counsel to such
effect delivered to the Company, the Trustee and each Agent. No such
resignation shall become effective until a Successor Master Servicer or
Successor Servicer, as the case may be, or the Trustee shall have assumed the
responsibilities and obligations of the Master Servicer or such Servicer in
accordance with Section 6.02. The Trustee, the Company, each Agent and each
Rating Agency (and, in the case of the resignation of any Servicer, the Master
Servicer) shall be notified of such resignation by the resigning Person.
SECTION 5.04. Access to Certain Documentation and Information
-----------------------------------------------
Regarding the Receivables. Each Servicer shall hold in trust for the Company
- --------------------------
and the Trustee at the office of such Servicer such computer programs, books of
account and other records as are reasonably necessary to enable the Trustee to
determine at any time the status of the Serviced Receivables and all collections
and payments in respect thereof (including, without limitation, an ability to
<PAGE>
28
recreate records evidencing the Serviced Receivables in the event of the
destruction of the originals thereof).
ARTICLE VI
Servicer Defaults;
------------------
Servicer Termination
--------------------
SECTION 6.01. Servicer Defaults. If any one of the following events
------------------
(a "Servicer Default") shall occur and be continuing with respect to the Master
----------------
Servicer or one or more Servicers, as the case may be:
(a) failure by the Master Servicer to deliver, within two Business
Days of the earlier date set forth below in clause (i) or (ii), any Daily
Report or, within three Business Days of the earlier date set forth below in
clause (i) or (ii), any Monthly Settlement Statement conforming in all
material respects to the requirement of Section 4.01 or 4.02, as the case may
be, in each case, after the earlier to occur of (i) the date upon which a
Responsible Officer of the Master Servicer obtains knowledge of such failure
or (ii) the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Master Servicer by the Company
or the Trustee, or to the Company, the Master Servicer and the Trustee from
holders of Investor Certificates evidencing 25% or more of the Aggregate
Invested Amount or by any Agent;
(b) failure by the Master Servicer or any Servicer to pay any amount
required to be paid by it under any Pooling and Servicing Agreement on or
before the date occurring five Business Days after the earlier to occur of
(i) the date upon which a Responsible Officer of the Master Servicer or such
Servicer obtains knowledge of such failure or (ii) the date on which written
notice of such failure, requiring the same to be remedied,
<PAGE>
29
shall have been given (A) (I) in the case of a failure on the part of the
Master Servicer, to the Master Servicer or (II) in the case of a failure on
the part of any Servicer, to the Master Servicer or such Servicer, by the
Company or the Trustee, or (B) to the Company, to the Trustee and (I) in the
case of a failure on the part of the Master Servicer, to the Master Servicer
or (II) in the case of a failure on the part of any Servicer, to the Master
Servicer or such Servicer by holders of Investor Certificates evidencing 25%
or more of the Aggregate Invested Amount or by any Agent;
(c) failure on the part of the Master Servicer or any Servicer duly to
observe or to perform any other of its covenants or agreements set forth in
any Pooling and Servicing Agreement that has an adverse effect on the holders
of any Outstanding Series and that continues unremedied until 30 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given (A) (I) in the case of a failure on the part
of the Master Servicer, to the Master Servicer or (II) in the case of a
failure on the part of any Servicer, to the Master Servicer or such Servicer,
by the Company or the Trustee, or (B) to the Company, to the Trustee and
(I) in the case of a failure on the part of the Master Servicer, to the
Master Servicer or (II) in the case of a failure on the part of any Servicer,
to the Master Servicer or such Servicer by holders of Investor Certificates
evidencing 25% or more of the Aggregate Invested Amount or by any Agent;
provided, that no Servicer Default shall be deemed to occur under this
--------
subsection with respect to a failure on the part of any Servicer if such
Servicer shall have complied with the provisions of Section 5.02(b) with
respect thereto;
(d) any representation, warranty or certification made by the Master
Servicer or any Servicer in any Pooling and Servicing Agreement or in any
certificate
<PAGE>
30
delivered pursuant thereto shall prove to have been incorrect in any material
respect when made or deemed made, which incorrectness has an adverse effect
on the holders of any Outstanding Series and which adverse effect continues
unremedied until 30 days after the date on which written notice thereof,
requiring the same to be remedied, shall have been given (A) (I) in the case
of a failure on the part of the Master Servicer, to the Master Servicer or
(II) in the case of a failure on the part of any Servicer, to the Master
Servicer or such Servicer, by the Company or the Trustee, or (B) to the
Company, to the Trustee and (I) in the case of a failure on the part of the
Master Servicer, to the Master Servicer or (II) in the case of a failure on
the part of any Servicer, to the Master Servicer or such Servicer by holders
of Investor Certificates evidencing 25% or more of the Aggregate Invested
Amount or by any Agent; provided, that no Servicer Default shall be deemed to
--------
occur under this subsection with respect to a failure on the part of any
Servicer if such Servicer shall have complied with the provisions of
Section 5.02(b) with respect thereto;
(e)(i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Master Servicer or any Servicer
in an involuntary case under any Applicable Insolvency Law, which decree or
order is not stayed, or any other similar relief shall be granted under any
applicable Federal or state law and shall not be stayed; (ii) an involuntary
case is commenced against the Master Servicer or any Servicer under any
Applicable Insolvency Law, a decree or order of a court having jurisdiction
in the premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Master
Servicer or any Servicer, or over all or a substantial part of the property
of the Master Servicer or any Servicer shall have been entered, an interim
receiver, trustee or other custodian of the Master Servicer or any Servicer
<PAGE>
31
for all or a substantial part of the property of the Master Servicer or such
Servicer is involuntarily appointed or a warrant of attachment, execution or
similar process is issued against any substantial part of the property of the
Master Servicer or any Servicer, and the continuance of any such events in
this clause (ii) for 60 days unless dismissed, bonded or discharged; (iii)
the Master Servicer or any Servicer shall at its request have a decree or an
order for relief entered with respect to it, commence a voluntary case under
the Bankruptcy Code or any Applicable Insolvency Law, consent to the entry of
a decree or an order for relief in an involuntary case, or to the conversion
of an involuntary case to a voluntary case, under any such law, or consent to
the appointment of or taking possession by a receiver, trustee or other
custodian of all or a substantial part of its property; (iv) the making by
the Master Servicer or any Servicer of any general assignment for the benefit
of creditors; (v) the inability or failure of the Master Servicer or any
Servicer generally to pay its debts as such debts become due; or (vi) the
Board of Directors of the Master Servicer or any Servicer adopts any
resolution or otherwise authorizes action to approve any of the foregoing; or
(f) there shall have occurred and be continuing a Purchase Termination
Event under the Receivables Sale Agreement affecting any Serviced Receivables
of such Servicer;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied or waived, the Company (with the consent of the
Trustee) may, the Company at the direction of the Trustee shall, and the Company
and the Trustee shall, at the written direction of the holders of Investor
Certificates evidencing more than 50% of the Aggregate Invested Amount voting as
a single class, by notice then given in writing to the Master Servicer, to each
Rating Agency and, if the Servicer Default relates to a
<PAGE>
32
default on the part of any Servicer, to such Servicer (a "Termination Notice"),
------------------
terminate all or any part of the rights and obligations of the Master Servicer
or such Servicer, as the case may be, under the Pooling and Servicing
Agreements. Notwithstanding anything to the contrary in this Section 6.01, a
delay in or failure of performance referred to under clause (b) above for a
period of 10 Business Days after the applicable grace period or a delay in or
failure of performance referred to under clauses (a), (c) or (d) above for a
period of 30 Business Days after the applicable grace period shall not
constitute a Servicer Default, if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Master Servicer or such
Servicer and such delay or failure was caused by a Force Majeure Delay. After
receipt by the Master Servicer or a Servicer of a Termination Notice, and on the
date that a Successor Master Servicer or Successor Servicer, as the case may be,
shall have been appointed by the Company and the Trustee pursuant to Section
6.02, all authority and power of the Master Servicer or such Servicer, as the
case may be, under any Pooling and Servicing Agreement to the extent specified
in such Termination Notice shall pass to and be vested in the Successor Master
Servicer (a "Master Service Transfer") or a Successor Servicer (a "Service
----------------------- -------
Transfer"), as the case may be; and, without limitation, the Trustee is hereby
- --------
directed, authorized and empowered (upon the failure of the Master Servicer or
such Servicer to cooperate) to execute and deliver, on behalf of the Master
Servicer or such Servicer, as attorney-in-fact or otherwise, all documents and
other instruments upon the failure of the Master Servicer or such Servicer to
execute or to deliver such documents or instruments, and to do and to accomplish
all other acts or things necessary or appropriate to effect the purposes of such
Master Service Transfer or Service Transfer and the Trustee shall incur no
liability in connection with effecting such Master Service Transfer or Service
Transfer. Each of the Master Servicer and each Servicer agrees to cooperate
with the Company and the Trustee and such Successor Master Servicer or Successor
Servicer, as the case may be, in effecting the termination
<PAGE>
33
of the responsibilities and rights of the Master Servicer or such Servicer to
conduct its duties hereunder, including, without limitation, the transfer to
Successor Master Servicer or Successor Servicer, as the case may be, of all
authority of the Master Servicer to coordinate the servicing of all Receivables
or all authority of such Servicer to service the Serviced Receivables, as the
case may be, provided for under the Pooling and Servicing Agreements (including
in the case of such Servicer, without limitation, all authority over all
Collections that shall on the date of transfer be held by such Servicer for
deposit, or that have been deposited by such Servicer, in the Collection
Account, or that shall thereafter be received with respect to the Serviced
Receivables), and in assisting the Successor Master Servicer or Successor
Servicer, as the case may be. Upon a Master Service Transfer, the terminated
Master Servicer shall promptly (x) assemble all of its documents, instruments
and other records (including credit files, licenses (to the extent
transferable), rights, copies of all relevant computer programs and any
necessary licenses (to the extent transferable) for the use thereof, related
material, computer tapes, disks, cassettes and data) that (i) evidence or record
Receivables sold and assigned to the Trust and (ii) are otherwise necessary to
enable a Successor Master Servicer to coordinate servicing of all such
Receivables and to prepare and deliver Daily Reports and Monthly Settlement
Statements, with or without the participation of the terminated Master Servicer
and (y) deliver or license (to the extent transferable) the use of all of the
foregoing documents, instruments and other records to such Successor Master
Servicer at a place designated by such Successor Master Servicer. Upon any
Service Transfer, the terminated Servicer shall promptly (x) assemble all of its
documents, instruments and other records (including credit files, licenses (to
the extent transferable), rights, copies of all relevant computer programs and
any necessary licenses (to the extent transferable) for the use thereof, related
material, computer tapes, disks, cassettes and data) that (i) evidence or will
evidence or record Receivables sold and assigned to
<PAGE>
34
the Trust and (ii) are otherwise necessary to enable a Successor Servicer to
effect the immediate Collection of such Receivables, with or without the
participation of the applicable Seller or such Servicer and (y) deliver or
license (to the extent transferable) the use of all of the foregoing documents,
instruments and other records to such Successor Servicer at a place designated
by such Successor Servicer. In recognition of any terminated Servicer's need to
have access to any such documents, instruments and other records that may be
transferred to a Successor Servicer hereunder, whether as a result of its
continuing responsibility as a servicer of accounts receivable that are not sold
and assigned to the Trust or otherwise, such Successor Servicer shall provide to
such terminated Servicer reasonable access to such documents, instruments and
other records transferred by such terminated Servicer to it in connection with
any activity arising in the ordinary course of such terminated Servicer's
business; provided that such terminated Servicer shall not disrupt or otherwise
--------
interfere with the Successor Servicer's use of and access to such documents,
instruments and other records. To the extent that compliance with this Section
6.01 shall require the terminated Master Servicer or any terminated Servicer to
disclose to the Successor Master Servicer or Successor Servicer information of
any kind that the terminated Master Servicer or such terminated Servicer
reasonably deems to be confidential, the Successor Master Servicer or Successor
Servicer, as the case may be, shall be required to enter into such customary
licensing and confidentiality agreements as the terminated Master Servicer or
such terminated Servicer shall reasonably deem necessary to protect its
interests. All costs and expenses incurred by the terminated Master Servicer or
any terminated Servicer, the Successor Master Servicer or any Successor Servicer
and the Trustee in connection with any Master Service Transfer or Service
Transfer shall be for the account of the terminated Master Servicer or
terminated Servicer, as the case may be, and to the extent any costs or expenses
incurred by the Trustee are not so paid, the Trustee shall be entitled to be
paid such items from amounts that would otherwise be
<PAGE>
35
distributable to the Company under Article III of the Pooling Agreement.
SECTION 6.02. Trustee To Act; Appointment of Successor. (a) On and
-----------------------------------------
after (i) the receipt by a Servicer of a Termination Notice pursuant to Section
6.01 or (ii) the date on which a Servicer notifies the Trustee, the Master
Servicer, the Company and each Rating Agency in writing of its resignation
pursuant to Section 5.03 (the "Resignation Notice"), such Servicer shall
------------------
continue to perform all servicing functions under the Pooling and Servicing
Agreements until the earlier of (i) the date on which a Successor Servicer
accepts its appointment and (ii) 60 days after the delivery of such Termination
Notice or Resignation Notice, as the case may be. Upon the receipt by the
Master Servicer of a Termination Notice or Resignation Notice with respect to
any Servicer, the Master Servicer shall, without any action on the part of the
Company, the Trustee or any other Person, be deemed appointed as successor
servicer (a "Successor Servicer") with respect to the Serviced Receivables. The
------------------
Master Servicer shall accept its appointment as Successor Servicer by a written
assumption in a form acceptable to the Trustee and the Company, unless the
Master Servicer is unable to act as Servicer for the Serviced Receivables for
the reasons set forth in Section 5.03. If the Master Servicer is unable to act
as Servicer for the Serviced Receivables, the Master Servicer shall promptly
deliver a Resignation Notice and Opinion of Counsel to the Company and the
Trustee in the same manner as if the Master Servicer were resigning as Servicer
under Section 5.03, but such Resignation Notice from the Master Servicer shall
not have the effect of postponing the beginning of the 60-day period referred to
in the first sentence of this subsection 6.01(a). The Trustee and the Company,
or the Company (with the consent of the Trustee) shall, as promptly as
reasonably possible after the receipt of a Resignation Notice from the Master
Servicer in accordance with the preceding sentence, appoint an Eligible
Successor Servicer and such Successor Servicer shall accept its appointment by a
written assumption in a form acceptable to the Trustee and
<PAGE>
36
the Company. Subject to any prior claim of the Trustee for reimbursement from
the Expense Account pursuant to Section 8.05, amounts in the Expense Account
shall be available for the Successor Servicer, including the Trustee, if acting
in such capacity (but only if such Successor Servicer is not Lifestyle Holdings
Ltd. or any Affiliate thereof), for payment of all costs, losses, liabilities,
expenses, damages or injuries (including, but not limited to, attorneys' fees
and other costs and expenses incurred in connection with any actual or
threatened action, proceeding or claim) in connection with the performance of
such Successor Servicer's duties under any Pooling and Servicing Agreement
except any such cost, loss, liability, expense, damage or injury as may arise
from its negligence or bad faith.
(b) On and after (i) the receipt by the Master Servicer of a
Termination Notice pursuant to Section 6.01 or (ii) the date on which the Master
Servicer delivers a Resignation Notice to the Trustee, the Company and each
Rating Agency notifying them of its resignation pursuant to Section 5.03, the
Master Servicer shall continue to perform all of its functions under the Pooling
and Servicing Agreements until the earlier of (i) the date on which a Successor
Master Servicer accepts its appointment and (ii) 60 days after the delivery of
such Termination Notice or Resignation Notice, as the case may be. The Trustee
and the Company, or the Company (with the consent of the Trustee) shall, as
promptly as reasonably possible after the receipt of a Resignation Notice from
the Master Servicer, appoint an Eligible Successor Servicer as Successor Master
Servicer and such Successor Master Servicer shall accept its appointment by a
written assumption in a form acceptable to the Trustee and the Company. All
amounts in the Expense Account shall be available for the Successor Master
Servicer, including the Trustee, if acting in such capacity (but only if such
Successor Master Servicer is not Lifestyle Holdings Ltd. or any Affiliate
thereof), for payment of all costs, losses, liabilities, expenses, damages or
injuries (including, but not limited to, attorneys' fees and other costs and
expenses incurred in connection with any actual or
<PAGE>
37
threatened action, proceeding or claim) in connection with the performance of
the Successor Master Servicer's duties under any Pooling and Servicing Agreement
except any such cost, loss, liability, expense, damage or injury as may arise
from its negligence or bad faith.
(c) In the event that a Successor Master Servicer or Successor
Servicer has not been appointed or has not accepted its appointment at the time
when the Master Servicer or a Servicer ceases to act as Master Servicer or
Servicer, as the case may be, the Trustee without further action shall be
appointed Successor Master Servicer or Successor Servicer, as the case may be;
provided, that the Trustee shall only be responsible for the duties and
- --------
liabilities of Successor Master Servicer or such Successor Servicer that are
consistent with an orderly collection and liquidation of the Receivables and
other Trust Assets in the manner contemplated for such liquidations in Section
7.02 of the Pooling Agreement. The Trustee shall not be liable for any action
taken or not taken in effecting such liquidations of Receivables so long as such
liquidations are conducted in a commercially reasonable manner and on
commercially reasonable terms. The Trustee may delegate any of its master
servicing or servicing obligations to an affiliate or agent in accordance with
subsection 2.02(d). Notwithstanding the above, the Trustee shall, if the Trustee
is legally unable so to act, petition a court of competent jurisdiction to
appoint any Person qualifying as an Eligible Successor Servicer as the Successor
Master Servicer or a Successor Servicer hereunder. The Master Servicer shall
immediately give notice to each Rating Agency of the appointment of any
Successor Master Servicer or Successor Servicer.
(d) Upon its appointment, the Successor Master Servicer or Successor
Servicer shall be the successor in all respects to the Master Servicer or the
Servicer to which it is successor with respect to master servicing or servicing
functions, as the case may be, under the Pooling and Servicing Agreements (with
such changes as are agreed to between such Successor Master Servicer or
Successor
<PAGE>
38
Servicer, as the case may be, and either the Company (with the consent of the
Rating Agencies) or the Company and the Trustee) and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer or such Servicer, as the case may be, by the terms and provisions
hereof, and all references in any Pooling and Servicing Agreement to the Master
Servicer or such Servicer, as the case may be, shall be deemed to refer to such
Successor Master Servicer or such Successor Servicer, as the case may be. The
Successor Master Servicer or such Successor Servicer shall not be liable for,
and the replaced Master Servicer or Servicer, as the case may be, shall
indemnify the Successor Master Servicer or such Successor Servicer, as the case
may be, against costs incurred by the Successor Master Servicer or Successor
Servicer as a result of, any acts or omissions of such replaced Master Servicer
or Servicer or any events or occurrences occurring prior to the Successor Master
Servicer's or Successor Servicer's acceptance of its appointment as Successor
Master Servicer or Successor Servicer. Any Successor Servicer shall manage the
servicing and administration of the Serviced Receivables in accordance with the
Policies of the replaced Servicer and the terms of the Pooling and Servicing
Agreements.
(e) If the Master Servicer becomes a Successor Servicer, the Master
Servicer shall receive the same servicing compensation in respect of the
Serviced Receivables as the replaced Servicer. If the Master Servicer is unable
to act as Successor Servicer, the Company and the Trustee shall review any bids
obtained from Eligible Successor Servicers and the Company and the Trustee, or
the Company (with the consent of the Trustee) may appoint any Eligible Successor
Servicer submitting such a bid as a Successor Servicer for servicing
compensation not in excess of the portion of the Servicing Fee previously
payable to the replaced Servicer.
SECTION 6.03. Waiver of Past Defaults. Holders of Investor
------------------------
Certificates evidencing more than 50% of the Aggregate Invested Amount may waive
any continuing default
<PAGE>
39
by the Master Servicer, any Servicer or the Company in the performance of its
respective obligations hereunder and its consequences, except a default in the
failure to make any required deposits or payments in respect of any Series of
Certificates, which shall require a waiver by the holders of all of the affected
Investor Certificates. Upon any such waiver of a past default, such default
shall cease to exist, and any default arising therefrom shall be deemed to have
been remedied for every purpose of the Pooling and Servicing Agreements. No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived. Either the
Company, the Master Servicer or such Servicer shall provide notice to each
Rating Agency of any such waiver.
SECTION 6.04. Other Servicer Terminations. The Company shall
----------------------------
terminate all of the rights and obligations of any Servicer of Receivables
originated by any Seller that is terminated pursuant to Section 9.14 of the
Receivables Sale Agreement, but only with respect to Receivables originated by
such terminated Seller after such termination. Any such Servicer shall remain
bound hereunder (unless terminated hereunder otherwise than pursuant to this
Section 6.04) to perform all of its obligations as a Servicer with respect to
all Receivables originated by such Seller and sold to the Company (and sold by
the Company to the Trust) before such termination of such Seller under the
Receivables Sale Agreement.
ARTICLE VII
Miscellaneous Provisions
------------------------
SECTION 7.01. Amendment. This Agreement may only be amended,
----------
supplemented or otherwise modified from time to time if such amendment,
supplement or modification is effected in accordance with the provisions of
Section 10.01 of the Pooling Agreement.
<PAGE>
40
SECTION 7.02. Termination. (a) The respective obligations and
------------
responsibilities of the parties hereto shall terminate on the Trust Termination
Date (unless such obligations or responsibilities are expressly stated to
survive the termination of this Agreement).
(b) All authority and power granted to the Master Servicer and any
Servicer under any Pooling and Servicing Agreement shall automatically cease and
terminate on the Trust Termination Date, and shall pass to and be vested in the
Company and, without limitation, the Company is hereby authorized and empowered
to execute and deliver, on behalf of the Master Servicer or any Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of rights from and after the Trust Termination Date.
The Master Servicer and each Servicer shall cooperate with the Company in
effecting the termination of its responsibilities and rights to conduct master
servicing or servicing, as the case may be, of the Receivables. The Master
Servicer and each Servicer shall transfer all of its records relating to the
Receivables to the Company in such form as the Company may reasonably request
and shall transfer all other records, correspondence and documents to the
Company in the manner and at such times as the Company shall reasonably request.
To the extent that compliance with this subsection 7.02(b) shall require the
Master Servicer or any Servicer to disclose to the Company information of any
kind that the Master Servicer or such Servicer deems to be confidential, the
Company shall be required to enter into such customary licensing and
confidentiality agreements as the Master Servicer or such Servicer, as the case
may be, shall reasonably deem necessary to protect its interests.
SECTION 7.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICTS OF LAWS PRINCIPLES.
<PAGE>
41
Section 7.04 Addition of Servicers. Subject to the terms and
----------------------
conditions hereof, from time to time one or more wholly owned, direct or
indirect Subsidiaries of Furnishings International Inc. that have been approved
as additional Sellers pursuant to the Pooling Agreement and any Supplement shall
become additional Servicers parties hereto upon (a) execution by each such
Subsidiary of an Additional Seller/Servicer Supplement and (b) satisfaction of
all conditions precedent set forth in Section 3.05 of the Receivables Sale
Agreement to such Subsidiary becoming an additional Seller.
SECTION 7.05. Notices. All notices, requests and demands to or upon
--------
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as set forth in Section 10.05 of the Pooling Agreement or
Section 9.09 of the Receivables Sale Agreement, or to such other address as may
be hereafter notified by the respective parties hereto.
SECTION 7.06. Counterparts. This Agreement may be executed in two or
-------------
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument. Delivery of an executed counterpart of a signature page to
this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 7.07. Third-Party Beneficiaries. This Agreement shall inure
--------------------------
to the benefit of and be binding upon the parties hereto and the
Certificateholders and their respective successors and permitted assigns.
Except as provided in this Article VII, no other person shall have any right or
obligation hereunder.
<PAGE>
42
SECTION 7.08. Merger and Integration. Except as specifically stated
-----------------------
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 7.09. Headings. The headings herein are for purposes of
---------
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 7.10. No Set-Off. Except as expressly provided in this
-----------
Agreement, each of the Master Servicer and each Servicer agrees that it shall
have no right of set-off or banker's lien against, and no right to otherwise
deduct from, any funds held in the Collection Account for any amount owed to it
by the Company, the Trust, the Trustee or any Certificateholder.
SECTION 7.11. No Bankruptcy Petition. Each of the Master Servicer
-----------------------
and each Servicer hereby covenants and agrees that, prior to the date which is
one year and one day after the Trust Termination Date, it shall not institute
against, or join any other Person in instituting against, the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any Federal or state bankruptcy or similar law.
<PAGE>
43
IN WITNESS WHEREOF, the Company, the Master Servicer, each Servicer
and the Trustee have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
LFI RECEIVABLES CORPORATION,
by
--------------------------
Name:
Title:
LFI SERVICING CORPORATION,
Master Servicer,
by
--------------------------
Name:
Title:
AMETEX FABRICS, INC.,
Servicer,
by
--------------------------
Name:
Title:
THE BERKLINE CORPORATION,
Servicer,
by
--------------------------
Name:
Title:
<PAGE>
44
DREXEL HERITAGE
FURNISHINGS INC.,
Servicer,
by
--------------------------
Name:
Title:
FURNISHINGS
INTERNATIONAL INC.,
Servicer,
by
--------------------------
Name:
Title:
HENREDON FURNITURE
INDUSTRIES, INC.,
Servicer,
by
--------------------------
Name:
Title:
LA BARGE, INC.,
Servicer,
by
--------------------------
Name:
Title:
<PAGE>
45
LEXINGTON FURNITURE
INDUSTRIES, INC.,
Servicer,
by
--------------------------
Name:
Title:
MAITLAND-SMITH, INC.,
Servicer,
by
--------------------------
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
Servicer,
by
--------------------------
Name:
Title:
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
Servicer,
by
--------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not
in its individual capacity but
solely as Trustee,
by
--------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO
SERVICING AGREEMENT
-------------------
FORM OF ANNUAL [MASTER] SERVICER'S CERTIFICATE
(As required to be delivered within 90 days after the end
of each calendar year of the [Servicer/Master Servicer]
pursuant to Section 4.03 of the
Servicing Agreement referred to below)
[NAME OF SERVICER]
_________________________________________
LFI RECEIVABLES MASTER TRUST
-----------------------------------------
The undersigned, a duly authorized representative of [NAME OF
SERVICER/MASTER SERVICER] (the ["Servicer"/Master Servicer"]), as
-------- ---------------
[Servicer/Master Servicer] pursuant to (a) the Pooling Agreement, dated as of
August 5, 1996 (as amended, supplemented or otherwise modified from time to
time, the "Pooling Agreement"), by and among LFI Receivables Corporation (the
-----------------
"Company"), LFI Servicing Corporation, as Master Servicer and The Chase
-------
Manhattan Bank, as Trustee (the "Trustee") and (b) the Servicing Agreement,
dated as of August 5, 1996 (as amended, supplemented or otherwise modified from
time to time, the "Servicing Agreement"; the Pooling Agreement and the Servicing
-------------------
Agreement, collectively, the "Pooling and Servicing Agreements"), by and among
--------------------------------
the Company, the Servicers party thereto, the Master Servicer and the Trustee,
do hereby certify that:
1. [NAME OF SERVICER/MASTER SERVICER] is, as of the date hereof, the
[Servicer/Master Servicer] under the Pooling and Servicing Agreements.
<PAGE>
2
2. The undersigned is duly authorized pursuant to the Pooling and
Servicing Agreements to execute and deliver this Certificate to the Trustee.
3. A review of the activities of the Company and the [Servicer/Master
Servicer] during the calendar year ended , and of its performance
--------- ---
under each Transaction Document was conducted under my supervision.
4. Based on such review, to my knowledge, each of the Company and the
[Servicer/Master Servicer] has performed in all material respects all its
obligations under each Transaction Document and no material default in the
performance of such obligations has occurred or is continuing except as set
forth in paragraph 5 below.
5. The following is a description of all material defaults in the
performance of the [Servicer/Master Servicer] or the Company under the
provisions of the Transaction Documents known to us to have been made during the
calendar year ended , , which sets forth in detail (i) the nature
--------- ---
of each such default, (ii) the action taken by the [Servicer/Master Servicer]
and /or the Company, if any, to remedy each such default and (iii) the current
status of each default:
[If applicable, insert "None."]
6. [if the Master Servicer is completing] The following is a
description of each material inaccuracy known to us to exist in any Daily Report
and/or Monthly Settlement Statement during the calendar year ended ,
--------
:
- ----
Capitalized terms used in this certificate have the meanings ascribed
to them in the Pooling and Servicing Agreements.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
this day of , 199 .
--- --------- -
By:
------------------------
Name:
Title:
<PAGE>
EXHIBIT B TO
SERVICING AGREEMENT
-------------------
FORM OF AGREED-UPON PROCEDURES
To the Board of Directors of LFI Receivables Corporation, the Trustee,
the Agent, the Rating Agencies and the Certificateholders:
At your request, we have performed the procedures enumerated below
with respect to the receivables of LFI Receivables Corporation, (the "Company")
that are serviced by [list] (the "Servicers") for the period from ,
199 to , 199 as set forth in the accompanying Monthly Settlement
Statements (the "Statements") and in the five accompanying Daily Reports (which
were selected on a random basis from the above-referenced period) (the "Daily
Reports"). Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in the Pooling Agreement dated as of August 5,
1996, between the Company, LFI Servicing Corporation, as Master Servicer, and
The Chase Manhattan Bank, as Trustee, as amended, supplemented or otherwise
modified to the date hereof. These procedures, which were specified by you,
were performed solely to assist you, and this report is solely for your
information and should not be used by those who did not participate in
determining the procedures. The procedures and findings are as follows:
A. We obtained all Statements for the period from , 199 through
, 199 (the "Fiscal Period") and performed the following:
-- We recalculated the mathematical accuracy of the statements.
-- With respect to Receivables, we agreed the amounts appearing as
principal amounts, amounts outstanding with respect to each
Receivable and the amount of interest paid by Obligors with
respect to each Receivable as a result of late payment to either
schedules
<PAGE>
2
prepared by the Servicers or to reports generated by the
Servicers' systems.
B. For a selection of three Statements (one of which was the Statement for the
last Settlement Period of the Fiscal Period), we performed the following
procedures:
With respect to the amount appearing as Collections on such Statements:
-- Obtained a daily listing of Collections for that Settlement
Period and agreed the total on the Statements to a cumulative
total of the daily listing of Collections for that period.
-- Agreed a random sample of 10% (but at least 10) of the daily
collections appearing on the daily listing of cash Collections to
the bank statements of LFI Master Trust (the "Trust").
-- Agreed the total amount of cash Collections allocated to the
Series Collection Subaccount of each Outstanding Series during
that Settlement Period to the Trust's bank statements.
-- Agreed the total amount of cash Collections allocated to the
Series Principal Collection Sub-subaccount and Series
Non-Principal Collection Sub-subaccount of each Outstanding
Series during that Settlement Period to the Trust's bank
statement.
-- Agreed the aggregate amount of Recoveries received during that
Settlement Period to the Servicer's system-generated reports.
-- For each Obligor the amount of whose Receivables is greater than
2.5% of the
<PAGE>
3
aggregate amount of all Receivables, agreed the aggregate amount
of Receivables with respect to such Obligor to the Sellers'
system-generated reports.
With respect to the amount appearing as Defaulted Receivables:
-- Agreed the total Defaulted Receivables to the Servicers'
system-generated reports.
-- From a random sample of 10% (but at least 10) of Defaulted
Receivables during the month, agreed the default amount to the
Obligor's file in the Servicer's system.
With respect to the amount appearing as Adjustment Amounts:
-- Agreed the Adjustment Amount amount to a schedule prepared by the
[Master] Servicer.
With respect to the amount appearing as Eligible Receivables:
-- Recalculated the mathematical accuracy of the Company's schedule
of Eligible Receivables.
-- Agreed the amounts appearing in this schedule to a Statement
generated by the Servicers' system.
With respect to the amounts appearing as Invested Percentages applicable
during that Settlement Period:
-- Agreed amounts to schedules provided by the Servicer.
<PAGE>
4
C. With respect to each of the Daily Reports, agreed amounts to the
system-generated reports provided by each Originator for such day.
D. Agreed the calculation used in computing the aggregate Servicing Fee to the
Agreement and agreed amounts appearing in the schedule of Servicing Fee
prepared by the Servicer to the Statements.
Because the above procedures do not constitute an audit made in
accordance with generally accepted auditing standards, we do not express an
opinion on any of the elements referred to above. Had we performed additional
procedures or had we made an audit of the financial statements of the Company in
accordance with generally accepted auditing standards, (other) matters might
have come to our attention that would have been reported to you. This report
relates only to the elements specified above and does not extend to any
financial statements of the Company taken as a whole.
This report is solely for your information and is not to be used,
referred to or distributed for any other purpose.
EXHIBIT 10.9
EXECUTION COPY
RECEIVABLES SALE AGREEMENT
Among
LFI RECEIVABLES CORPORATION,
THE SELLERS NAMED HEREIN
and
THE SERVICERS NAMED HEREIN
Dated as of August 5, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . 6
ARTICLE II
Purchase and Sale of Receivables
--------------------------------
SECTION 2.01. Purchase and Sale of Receivables . 7
SECTION 2.02. Purchase Price . . . . . . . . . . 10
SECTION 2.03. Payment of Purchase Price . . . . . 10
SECTION 2.04. No Repurchase . . . . . . . . . . . 12
SECTION 2.05. Rebates, Adjustments, Returns,
Reductions and Modifications . . 12
SECTION 2.06. Payments in Respect of and
Indemnification for Ineligible
Receivables . . . . . . . . . . 12
SECTION 2.07. Certain Charges . . . . . . . . . . 14
SECTION 2.08. Certain Allocations . . . . . . . . 14
ARTICLE III
Conditions to Purchase and Sale
-------------------------------
SECTION 3.01. Conditions Precedent to the
Company's Initial Purchase of
Receivables . . . . . . . . . . 15
SECTION 3.02. Conditions Precedent to All the
<PAGE>
Contents p.2
Page
----
Company's Purchases of
Receivables . . . . . . . . . . 16
SECTION 3.03. Conditions Precedent to Sellers'
Obligations on the Effective Date 17
SECTION 3.04. Conditions Precedent to All the
Sellers' Obligations . . . . . . 17
SECTION 3.05. Conditions Precedent to the
Addition of a Seller . . . . . . 18
ARTICLE IV
Representations and Warranties
------------------------------
SECTION 4.01. Representations and Warranties of
the Sellers Relating to the
Sellers . . . . . . . . . . . . 20
SECTION 4.02. Representations and Warranties of
the Sellers Relating to the
Receivables . . . . . . . . . . 25
SECTION 4.03. Representations and Warranties of
the Company . . . . . . . . . . 26
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Certificates; Other Information . . 28
SECTION 5.02. Compliance with Law and Policies . 28
SECTION 5.03. Preservation of Corporate
Existence . . . . . . . . . . . 28
SECTION 5.04. Separate Corporate Existence . . . 28
SECTION 5.05. Inspection of Property; Books and
Records; Discussions . . . . . . 30
SECTION 5.06. Location of Records . . . . . . . . 30
SECTION 5.07. Computer Files . . . . . . . . . . 30
SECTION 5.08. Payment of and Compliance with
Obligations . . . . . . . . . . 30
<PAGE>
Contents p.3
Page
----
SECTION 5.09. Collections . . . . . . . . . . . . 31
SECTION 5.10. Furnishing Copies, Etc. . . . . . . 31
SECTION 5.11. Obligations with Respect to
Obligors and Receivables . . . . 32
SECTION 5.12. Responsibilities of the Sellers . . 32
SECTION 5.13. Assessments . . . . . . . . . . . . 32
SECTION 5.14. Further Action . . . . . . . . . . 33
SECTION 5.15. Sale of Receivables . . . . . . . . 33
SECTION 5.16. Baybank Depository Agreement . . . 34
SECTION 5.17. Discharge or Bonding of Liens . . 34
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01. Limitations on Transfers of
Receivables, Etc. . . . . . . . 34
SECTION 6.02. Extension or Amendment of
Receivables . . . . . . . . . . 34
SECTION 6.03. Change in Payment Instructions to
Obligors . . . . . . . . . . . . 34
SECTION 6.04. Change in Name . . . . . . . . . . 35
SECTION 6.05. Policies . . . . . . . . . . . . . 35
SECTION 6.06. Modification of Ledger . . . . . . 35
SECTION 6.07. Accounting for Purchases . . . . . 36
SECTION 6.08. Instruments . . . . . . . . . . . . 36
SECTION 6.09. Ineligible Receivables . . . . . . 36
SECTION 6.10. Business of the Seller . . . . . . 36
SECTION 6.11. Limitation on Fundamental Changes . 37
ARTICLE VII
Purchase Termination Events
---------------------------
SECTION 7.01. Purchase Termination Events . . . . 37
SECTION 7.02. Remedies . . . . . . . . . . . . . 40
<PAGE>
Contents p.4
Page
----
ARTICLE VIII
Seller Note
-----------
SECTION 8.01. Seller Note . . . . . . . . . . . . 42
SECTION 8.02. Restrictions on Transfer of Seller
Note . . . . . . . . . . . . . . 43
SECTION 8.03. Discretion; Aggregate Amount . . . 43
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Further Assurances . . . . . . . . 43
SECTION 9.02. Payments . . . . . . . . . . . . . 44
SECTION 9.03. Costs and Expenses . . . . . . . . 44
SECTION 9.04. Successors and Assigns . . . . . . 46
SECTION 9.05. Governing Law . . . . . . . . . . . 46
SECTION 9.06. No Waiver; Cumulative Remedies . . 46
SECTION 9.07. Amendments and Waivers . . . . . . 46
SECTION 9.08. Severability . . . . . . . . . . . 47
SECTION 9.09. Notices . . . . . . . . . . . . . . 47
SECTION 9.10. Counterparts . . . . . . . . . . . 47
SECTION 9.11. Waivers of Jury Trial . . . . . . . 48
SECTION 9.12. Jurisdiction; Consent to Service of
Process . . . . . . . . . . . . 48
SECTION 9.13. Addition of Sellers . . . . . . . . 49
SECTION 9.14. Termination of Seller . . . . . . . 49
SECTION 9.15. No Bankruptcy Petition . . . . . . 50
SECTION 9.16. Termination . . . . . . . . . . . . 51
SECTION 9.17. Construction of Agreement . . . . . 51
EXHIBITS
Exhibit A Form of Seller Note
Exhibit B Form of Additional Seller/
Servicer Supplement
<PAGE>
Contents p.5
SCHEDULES
Schedule 1 Sellers and Servicers
Schedule 2 Receivables
Schedule 3 Lockboxes
Schedule 4 Location of Chief Executive Offices; Location of
Books and Records
Schedule 5 Names
Schedule 6 Discounted Percentage
<PAGE>
EXECUTION COPY
RECEIVABLES SALE AGREEMENT dated as of August 5,
1996 (this "Agreement"), among each seller and
servicer listed on Schedule 1 hereto (in their
capacity as sellers, the "Sellers" and in their
capacity as servicers, the "Servicers"), and LFI
RECEIVABLES CORPORATION, a Delaware corporation
(the "Company").
W I T N E S S E T H :
WHEREAS, in the ordinary course of business, the Sellers generate
Receivables (such term and all other capitalized terms being defined or
referenced in Article I);
WHEREAS, the Sellers are willing to sell to the Company, and the
Company is willing to purchase from the Sellers, all the Sellers' right, title
and interest in, to and under the Receivables now existing or hereafter created
and in the rights of the Sellers in, to and under all Related Property; and
WHEREAS, the Master Servicer, the Company and The Chase Manhattan
Bank, as Trustee, have entered into a Pooling Agreement dated as of the date
hereof (such agreement, as it may be amended, modified or otherwise supplemented
from time to time, being the "Pooling Agreement") in order to create a master
trust into which the Company will transfer all its right, title and interest in,
to and under the Receivables and certain other assets now or hereafter owned by
the Company.
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. Capitalized terms defined or referenced
--------------
in the Pooling Agreement shall be used herein as therein defined (unless other-
wise defined or referenced herein), and the following terms shall have the
following meanings:
"Adjustment Amount" shall have the meaning specified in Section 2.06.
-----------------
"Applicable Insolvency Laws" has the meaning specified in
--------------------------
Section 7.01(d).
"Collections" shall mean all collections and all amounts received in
-----------
respect of the Receivables sold to the Company, including Recoveries, Adjustment
Payments, indemnification payments made by the Master Servicer or, any Servicer
and payments received in respect of Dilution Adjustments, together with all
collections received in respect of the Related Property in the form of cash,
checks, wire transfers or any other form of cash payment, and all proceeds of
Receivables and collections thereof (including, without limitation, collections
evidenced by an account, note, instrument, letter of credit, security, contract,
security agreement, chattel paper, general intangible or other evidence of
indebtedness or security, whatever is received upon the sale, exchange,
collection or other disposition of, or any indemnity, warranty or guaranty
payable in respect of, the foregoing and all "proceeds" as defined in
Section 9-306 of the UCC as in effect in the State of New York).
<PAGE>
3
"Discounted Percentage" shall have the meaning specified in
---------------------
Schedule 6.
"Documents" shall have the meaning specified in sub-
---------
section 7.02(b)(iii).
"Early Termination" shall have the meaning specified in Article VII.
-----------------
"Effective Date" shall mean August 5, 1996.
--------------
"ERISA Affiliate" shall mean with respect to any Person, any trade or
---------------
business (whether or not incorporated) that is a member of a group of which such
Person is a member and which is treated as a single employer under Section 414
of the Internal Revenue Code.
"Excluded Note" shall mean any Receivable (i) which originally
-------------
represented obligations owing by the account debtor thereon to more than one
Seller, (ii) which is or will be evidenced by an instrument payable to the
Seller who will administer such Receivable, (iii) which will be treated as an
account receivable on the books and records of such Sellers until an instrument
is executed in favor of the Seller who will administer such Receivable and
thereafter will be treated as a note receivable on the books of such
administering Seller and (iv) for which payments are not at any time to be made
to a Lockbox or Lockbox Account.
"Excluded Receivables" shall mean, as of any date of determination,
--------------------
any indebtedness and payment obligations of any Person to any Seller arising
from a sale of merchandise or services by such Seller that has the attributes
set forth in any of the following paragraphs:
(a) it is owing by an Obligor that is an Affiliate of any Seller;
(b) it is owing by an Obligor that is not "located" (within the
meaning of Section 9-103(3)(d) of
<PAGE>
4
the UCC as in effect in the State of New York) in the United States
and it is not supported by an Eligible Letter of Credit;
(c) it is an Excluded Note; or
(d) it is a Receivable originated by the Beacon Hill division of
Robert Allen Fabrics, Inc.
"Indemnification Event" shall have the meaning specified in
---------------------
subsection 2.06(b).
"Ineligibility Event" shall have the meaning specified in
-------------------
Section 2.06.
"Multiemployer Plan" shall mean with respect to any Person, a multi-
------------------
employer plan as defined in Section 4001(a)(3) of ERISA to which such Person or
any ERISA Affiliate of such Person (other than one considered an ERISA Affiliate
only pursuant to subsection (m) or (o) of Section 414 of the Internal Revenue
Code) is making or accruing an obligation to make contributions, or has within
any of the preceding five plan years made or accrued an obligation to make
contributions.
"One-Month LIBOR" shall mean for any Accrual Period after the initial
---------------
Accrual Period, the rate per annum, as determined by the Trustee, which is the
arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered rates for
U.S. Dollar deposits having a maturity of one month commencing on the first day
of such Accrual Period that appears on Page 3750 of the Telerate Service (or on
any successor or substitute page of such service, or any successor to or
substitute for such service, providing rate quotations comparable to those
currently provided on such page of the Telerate Service, as determined by the
Agent for purposes of providing interest rates applicable to U.S. Dollar
deposits having a maturity of one month in the London interbank market) at
approximately 11:00 a.m., London time, three Business Days prior to the
commencement of such
<PAGE>
5
Accrual Period. In the event that such rate is not so available at such time
for any reason, then "One-Month LIBOR" for such Accrual Period shall be the rate
at which U.S. Dollar deposits in a principal amount of not less than $1,000,000
maturing in one month are offered to the principal London office of the Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, three Business Days prior to the commencement of such
Accrual Period.
"Payment Date" shall have the meaning specified in Section 2.03(a).
------------
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA, or any successor thereto.
"Plan" shall mean, with respect to any Person, any pension plan (other
----
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Internal Revenue Code which is maintained for employees of
such Person or any ERISA Affiliate of such Person.
"Pooling Agreement" shall have the meaning specified in the recitals
-----------------
hereto.
"Potential Purchase Termination Event" shall mean any condition or act
------------------------------------
specified in Article VII that, with the giving of notice or the lapse of time or
both, would become a Purchase Termination Event.
"Purchase Price" shall have the meaning specified in Section 2.02.
--------------
"Purchase Termination Event" shall have the meaning specified in
--------------------------
Section 7.01.
"Purchased Receivable" shall mean, at any time, any Receivable sold to
--------------------
the Company by any Seller pursuant to, and in accordance with the terms of, this
Agreement.
<PAGE>
6
"Receivable" shall mean the indebtedness and payment obligations of
----------
any Person to any Seller (including, without limitation, obligations evidenced
by an account, note, instrument, contract, security agreement, chattel paper,
general intangible or other evidence of indebtedness or security) arising from a
sale of merchandise or services by such Seller, including, without limitation,
any right to payment for goods sold or for services rendered, and including the
right to payment of any interest, sales taxes, finance charges, returned check
or late charges and other obligations of such Person with respect thereto, but
not including any Excluded Receivable.
"Reportable Event" shall mean any reportable event as defined in
----------------
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Internal Revenue Code).
"Sale Documents" shall mean this Agreement and the Seller Note.
--------------
"Sale Termination Date" shall have the meaning specified in
---------------------
subsection 9.14(b).
"Seller Addition Date" shall have the meaning specified in
--------------------
Section 3.05.
"Seller Adjustment Payment" shall have the meaning specified in
-------------------------
subsection 2.06(a).
"Seller Dilution Adjustment Payment" shall have the meaning specified
----------------------------------
in Section 2.05.
"Seller Indemnification Payment" shall have the meaning specified in
------------------------------
subsection 2.06(b).
"Seller Note" shall have the meaning specified in Section 8.01.
-----------
<PAGE>
7
"Series 1996-A Supplement" shall mean the Series 1996-A Supplement,
------------------------
dated as of August 5, 1996, among the Company, the Master Servicer, The Chase
Manhattan Bank, as Agent and Initial Purchaser and The Chase Manhattan Bank, as
Trustee, as amended, supplemented or otherwise modified from time to time.
"Subordinated Notes" shall mean the 10 7/8% Senior Subordinated Notes
------------------
due 2006 issued by Lifestyle Furnishings International Ltd. on the Effective
Date in an aggregate principal amount of not less than $200,000,000 and shall
include any substantially identical notes issued in exchange therefore after the
Effective Date, pursuant to the indenture governing such Notes.
"Transactions" shall have the meaning specified in subsection 4.01(b).
------------
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
--------------------
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Other Definitional Provisions. (a) The words
------------------------------
"hereof", "herein", "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 article, section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms relating to the Sellers and the
Company, unless otherwise defined herein, shall have the respective meanings
given to them under GAAP.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE>
8
(d) Any reference herein to a Schedule or Exhibit to this Agreement
shall be deemed to be a reference to such Schedule or Exhibit as it may be
amended, modified or supplemented from time to time to the extent that such
Schedule or Exhibit may be amended, modified or supplemented (or any term or
provision of any Transaction Document may be amended that would have the effect
of amending, modifying or supplementing information contained in such Schedule
or Exhibit) in compliance with the terms of the Transaction Documents.
(e) Any reference in this Agreement to any representation, warranty
or covenant "deemed" to have been made is intended to encompass only
representations, warranties or covenants that are expressly stated to be
repeated on or as of dates following the execution and delivery of this
Agreement, and no such reference shall be interpreted as a reference to any
implicit, inferred, tacit or otherwise unexpressed representation, warranty or
covenant.
(f) The words "include", "includes" or "including" shall be
interpreted as if followed, in each case, by the phrase "without limitation".
ARTICLE II
Purchase and Sale of Receivables
--------------------------------
SECTION 2.01. Purchase and Sale of Receivables. (a) Subject to the
---------------------------------
terms and conditions of this Agreement (including, without limitation,
Article III), each Seller hereby sells, transfers, assigns, and conveys, without
recourse (except as expressly provided herein), to the Company, all its present
and future right, title and interest in, to and under:
(i) all Receivables originated by such Seller, including those
existing at the close of business on
<PAGE>
9
the Effective Date and all such Receivables thereafter arising from time to
time until but not including the date an Early Termination occurs;
(ii) the Related Property;
(iii) all Collections; and
(iv) all rights (including rescission, replevin or reclamation)
relating to any Receivable originated by such Seller or arising therefrom.
(b) Subject to the terms and conditions of this Agreement (including,
without limitation, Article III), on the Effective Date and on the date of
creation of each newly created Receivable (but only so long as no Early
Termination shall have occurred and be continuing), all of each Seller's right,
title and interest in and to (i) in the case of the Effective Date, all then
existing Receivables originated by such Seller and all Related Property,
Collections and all rights (including rescission, replevin or reclamation) in
respect of such Receivables originated by such Seller and (ii) in the case of
each such date of creation, all such newly created Receivables originated by
such Seller and all Related Property, Collections and all rights (including
rescission, replevin or reclamation) in respect of such Receivables shall be
considered to be part of the assets that have been sold, transferred, assigned,
set over and otherwise conveyed to the Company pursuant to paragraph (a) above
without any further action by such Seller or any other Person. Anything herein
to the contrary notwithstanding, to the extent any Seller shall not have
received payment from the Company of the Purchase Price for any Receivable and
Related Property in accordance with the terms of Section 2.03, such Seller shall
give written notice to the Company and the Trustee on the Payment Date for such
Purchase to the effect that such Receivable and Related Property shall be deemed
to not have been so sold, transferred, assigned, set over or conveyed to the
Company.
<PAGE>
10
(c) The parties to this Agreement intend that, for accounting and
commercial purposes, the transactions contemplated by Section 2.01 hereby shall
be, and shall be treated as, a purchase by the Company and a sale by the Sellers
of the Purchased Receivables and not a lending transaction. All sales of
Receivables and Related Property by the Sellers hereunder shall be without
recourse to, or representation or warranty of any kind (express or implied) by,
the Sellers, except as otherwise specifically provided herein. The foregoing
sale, assignment, transfer and conveyance does not constitute and is not
intended to result in a creation or assumption by the Company of any obligation
of the Sellers or any other Person in connection with the Receivables, the
Related Property or any agreement or instrument relating thereto, including any
obligation to any Obligor. Although it is the intent of the parties to this
Agreement that the conveyance of the Sellers' right, title and interest in, to
and under the Receivables, the Related Property, Collections and all rights
(including rescission, replevin or reclamation) in respect of the Receivables
pursuant to this Agreement shall constitute purchases and sales and not loans,
in the event that any such conveyance is deemed to be a loan, it is the intent
of the parties to this Agreement that each Seller hereby grant to the Company a
perfected first priority security interest in all of such Seller's present and
future right, title and interest in, to and under the Receivables, the Related
Property, all Collections and all rights (including rescission, replevin or
reclamation) relating to any Receivable originated by such Seller or arising
therefrom and that this Agreement shall constitute a security agreement under
applicable law in favor of the Company.
(d) In connection with the foregoing conveyances, each Seller agrees
to record and file, or cause to be recorded and filed, at its own expense,
financing statements (and continuation statements with respect to such financing
statements when applicable), (i) with respect to the Receivables originated by
such Seller now existing and hereafter acquired pursuant to this Agreement by
the Company
<PAGE>
11
from such Seller and (ii) with respect to any Related Property for which a
security interest may be perfected under the relevant UCC, legislation or
similar statute by such filing, in each case meeting the requirements of
applicable law in such manner and in such jurisdictions as are necessary to
perfect and maintain perfection of the conveyance of such Receivables and any
Related Property to the Company, and to deliver to the Company on or prior to
the Effective Date (i) where available, a file-stamped copy or certified
statement of such financing statement or other evidence of such filing and
(ii) otherwise, a photocopy, certified by a Responsible Officer to be a true and
correct copy, of each such financing statement or other filing made or to be
made on or prior to the Effective Date.
(e) In connection with the foregoing sales, transfers, assignments
and conveyances, each Seller agrees at its own expense, on or prior to the
Effective Date with respect to the Receivables and any other similar receivables
originated by such Seller that it will, as agent of the Company, (i) indicate or
cause to be indicated on the computer files and other physical records (but not
including individual invoices or individual collection files) relating to such
Receivables and any such other receivables (by means of a general legend that
will automatically appear at or near the beginning of any screen, list or print-
out of such Receivables) that, unless otherwise specifically identified on such
screen, list or print-out as a receivable not so sold, transferred, assigned and
conveyed, all Receivables (and any such other receivables) included in such
screen, list or print-out and all Related Property (and any other similar
related property) have been sold, transferred, assigned and conveyed to the
Company in accordance with this Agreement and (ii) deliver or transmit or cause
to be delivered or transmitted to the Company a computer tape, diskette or data
transmission containing at least the information specified in Schedule 2 as to
all such Receivables, as of a date no later than the Cut-Off Date.
<PAGE>
12
SECTION 2.02. Purchase Price. The aggregate purchase price payable
---------------
by the Company to the Sellers (the "Purchase Price") for Receivables and Related
Property on any Payment Date under this Agreement shall be equal to the product
of (a) the aggregate outstanding Principal Amount of Eligible Receivables as set
forth in the applicable Daily Reports and (b) the Discounted Percentage.
SECTION 2.03. Payment of Purchase Price. (a) The Company shall pay
--------------------------
or provide for the Purchase Price for Receivables and Related Property (net of
the deductions referred to in Section 2.03(e)) in the manner provided below on
each day for which Daily Reports are prepared and delivered to the Company (each
such day, a "Payment Date"). Each Seller hereby appoints the related Servicer
as its agent to receive payment of the Purchase Price and hereby authorizes the
Company to make all payments due to such Seller directly to, or as directed by,
the related Servicer. Each Servicer hereby accepts and agrees to such
appointment.
(b) The Purchase Price (net of the deductions referred to in
Section 2.03(e)) for the initial purchase of Receivables hereunder shall be paid
by the Company to the Sellers or, in the case of amounts payable pursuant to
clauses (i) and (ii) below, to the Sellers or to such accounts or such Persons
as the Sellers may direct in writing (which direction may consist of standing
instructions provided by the Sellers that shall remain in effect until changed
by the Sellers in writing), as follows:
(i) to the extent available for such purpose, in cash from the net
proceeds of a transfer of such Purchased Receivables by the Company to
other Persons (including the Trustee pursuant to the Pooling Agreement);
(ii) from contributions made by Lifestyle Holdings Ltd., in its sole
discretion, to the capital of the Company in respect of Lifestyle Holdings
Ltd.'s common equity interest in the Company; and
<PAGE>
13
(iii) at the option of the Company (subject to the provisions of
Sections 8.03), by incurring Indebtedness to the Sellers evidenced by the
Seller Note.
(c) The Purchase Price (net of the deductions referred to in
Section 2.03(e)) shall be paid by the Company to the Sellers or, in the case of
amounts payable pursuant to clauses (i), (ii) and (iii) below, to the Sellers or
to such accounts or such Persons as the Sellers may direct in writing (which
direction may consist of standing instructions provided by the Sellers that
shall remain in effect until changed by the Sellers in writing), on each Payment
Date occurring after the initial purchase of Receivables hereunder as follows:
(i) to the extent available for such purpose, in cash from the net
proceeds of a transfer of such Purchased Receivables by the Company to
other Persons (including the Trustee pursuant to the Pooling Agreement);
(ii) to the extent available for such purpose, in cash from Collections
received by the Company from other Persons (including from the Trustee
pursuant to the Pooling Agreement and any Supplement thereto);
(iii) from contributions made by Lifestyle Holdings Ltd., in its sole
discretion, to the capital of the Company in respect of Lifestyle Holdings
Ltd.'s common equity interest in the Company; and
(iv) at the option of the Company (subject to the provisions of
Sections 8.03), by incurring Indebtedness to the Sellers evidenced by the
Seller Note.
(d) Any increase in the principal amount of the Seller Note, in
payment of any Purchase Price pursuant to Section 2.03(b) or (c), shall be
applied to the Purchase Price in an amount equal to such increase.
<PAGE>
14
(e) The Company shall deduct from the Purchase Price otherwise pay-
able to the Sellers on any Payment Date, any Seller Dilution Adjustment
Payments, Seller Adjustment Payments or Seller Indemnification Payments pursuant
to Section 2.05, 2.06(a) or 2.06(b), respectively.
(f) All cash payments under this Agreement shall be made not later
than 3:30 p.m. (New York City time) on the date specified therefor in same day
funds, and if to the Sellers, to the bank account for each Seller designated in
writing by the related Servicer to the Company and if to the Servicers, to the
bank account designated in writing by the Servicers to the Company.
(g) Whenever any payment to be made under this Agreement shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day. Amounts not paid when due in accordance
with the terms of this Agreement shall bear interest at a rate equal at all
times to the ABR plus 2.00% per annum, payable on demand.
----
SECTION 2.04. No Repurchase. No Seller shall have any right or
--------------
obligation under this Agreement, by implication or otherwise, to repurchase from
the Company any Purchased Receivables originated by such Seller or Related
Property or to rescind or otherwise retroactively effect any purchase of any
such Purchased Receivables or Related Property after the Payment Date relating
thereto; provided that the foregoing shall not be interpreted to limit the right
--------
of the Company herein to receive a Seller Adjustment Payment with respect to any
Ineligible Receivable.
SECTION 2.05. Rebates, Adjustments, Returns, Reductions and
---------------------------------------------
Modifications. From time to time a Seller may make Dilution Adjustments to
- --------------
Receivables in accordance with this Section 2.05 and Section 6.02.
Each Seller agrees to pay to the Company, on the Payment Date
immediately succeeding the date of the grant of
<PAGE>
15
any Dilution Adjustment, the amount of any such Dilution Adjustment (a "Seller
Dilution Adjustment Payment"). The amount of any Dilution Adjustment shall be
set forth on the first Daily Report prepared after the date of the grant
thereof.
SECTION 2.06. Payments in Respect of and Indemnification for
----------------------------------------------
Ineligible Receivables. (a) If (i) any representation or warranty under
- -----------------------
subsections 4.02(a) or (b) is not true and correct as of the date specified
therein with respect to any Receivable sold to the Company or any Receivable
encompassed by the representation or warranty under subsection 4.02(c) is
determined not to be an Eligible Receivable as of its date of purchase,
(ii) there is a breach of any covenant under Section 6.01 with respect to any
Receivable or (iii) the Company's interest in any Receivable is not a first
priority perfected ownership or security interest at any time as a result of any
action taken by, or the failure to take action by, a Seller (each event referred
to in clause (i), (ii) and (iii) of this Section 2.06(a) shall be referred to
herein as an "Ineligibility Event" and any Receivable as to which an
Ineligibility Event applies shall be referred to herein as an "Ineligible
Receivable"), then the Seller that originated such Receivable agrees to pay to
the Company, upon the request of the Company or such Seller obtaining knowledge
thereof, an amount (the "Adjustment Amount") equal to the Principal Amount of
such Receivable (whether the Company paid the related Purchase Price in cash or
otherwise) less Collections received by the Company in respect of such
Receivable. Such payment shall be made on or prior to the 30th day after the
day the Company requests such payment or such Seller obtains knowledge thereof
(except that if such day is not a Business Day, then such payment shall be made
on the Business Day immediately succeeding such day); provided that in the event
--------
that (x) a Purchase Termination Event has occurred and is continuing or (y) the
Company shall be required to make a payment in respect of such Receivable
pursuant to Section 2.05 of the Pooling Agreement and the Company has
insufficient funds to make such payment,
<PAGE>
16
such Seller shall make such payment immediately. Any payment by such Seller
pursuant to this Section 2.06(a) is referred to as a "Seller Adjustment
Payment". If, on or prior to such 30th day (or the Business Day immediately
succeeding such 30th day, as applicable), a Seller shall make a Seller
Adjustment Payment in respect of any such Ineligible Receivable, then the
Company shall have no further remedy against such Seller in respect of the
Ineligibility Event with respect to such Receivable. Upon a Seller Adjustment
Payment, the Company shall automatically agree to pay to the appropriate Seller
all Collections received with respect to such Ineligible Receivable.
(b) Special Indemnification. In addition to its obligations under
------------------------
Section 9.03 hereunder, each Seller agrees to pay, indemnify and hold harmless
the Company from any loss, liability, expense, damage or injury which may at any
time be imposed on, incurred by or asserted against the Company in any way
relating to or arising out of (i) any Eligible Receivable originated by such
Seller becoming subject to any defense, dispute, offset or counterclaim of any
kind (other than as expressly permitted by this Agreement or the Pooling
Agreement) or (ii) such Seller breaching any covenant contained in Section 5.02,
5.08, 5.09, 5.10, 6.01, 6.02, 6.03, 6.04, 6.05, 6.09 or 6.10 with respect to any
Receivable originated by it (each of the foregoing events or circumstances being
an "Indemnification Event"), and such Receivable (or a portion thereof) ceasing
to be an Eligible Receivable on the date on which such Indemnification Event
occurs. The amount of such indemnification shall be equal to the Principal
Amount of such Receivable (whether the Company paid the related Purchase Price
in cash or otherwise) less Collections received by the Company in respect of
such Receivable. Such payment shall be made on or prior to the 30th Business
Day after the day the Company requests such payment or such Seller obtains
knowledge thereof unless such Indemnification Event shall have been cured on or
before such 30th Business Day; provided, however, that in the event that (x) a
-------- -------
Purchase Termination Event has occurred and is continuing or
<PAGE>
17
(y) the Company shall be required to make a payment with respect to such
Receivable pursuant to Section 2.05 of the Pooling Agreement and the Company has
insufficient funds to make such a payment, such Seller shall make such payment
immediately. If, on or prior to such 30th Business Day, such Seller shall make
such payment, then the Company shall have no further remedy against such Seller
in respect of such Indemnification Event. Any payment by such Seller pursuant
to this Section 2.06(b) is referred to as a "Seller Indemnification Payment".
SECTION 2.07. Certain Charges. Each of the Sellers and the Company
----------------
agree that late charge revenue, reversals of discounts, other fees and charges
and other similar items, whenever created, accrued in respect of Purchased
Receivables shall be the property of the Company notwithstanding the occurrence
of an Early Termination and all Collections with respect thereto shall continue
to be allocated and treated as Collections in respect of Purchased Receivables.
SECTION 2.08. Certain Allocations. Each Seller hereby agrees that,
--------------------
following the occurrence of an Early Termination, all Collections and other
proceeds received in respect of Receivables generated by the Sellers shall be
applied, first, to pay the outstanding Principal Amount of Purchased Receivables
-----
(as of the date of such Early Termination) of the Obligor to whom such
Collections are attributable until such Purchased Receivables are paid in full
and, second, to the Sellers to pay Receivables of such Obligor not sold to the
------
Company; provided, however, that notwithstanding the foregoing, if any Seller
-------- -------
can attribute a Collection to a specific Obligor and a specific Receivable, then
such Collection shall be applied to pay such Receivable of such Obligor.
<PAGE>
18
ARTICLE III
Conditions to Purchase and Sale
-------------------------------
SECTION 3.01. Conditions Precedent to the Company's Initial Purchase
------------------------------------------------------
of Receivables. The obligation of the Company to purchase the Receivables and
- ---------------
the Related Property hereunder on the Effective Date from the Sellers is subject
to the conditions precedent, which may be waived by the Company, that (a) each
of the Sale Documents shall be in full force and effect and (b) the conditions
set forth below shall have been satisfied on or before the Effective Date:
(i) the Company shall have received copies of duly adopted resolutions
of the Board of Directors of each Seller, as in effect on such Effective
Date, authorizing this Agreement, the documents to be delivered by such
Seller hereunder and the transactions contemplated hereby, certified by the
Secretary or Assistant Secretary of such Seller;
(ii) the Company shall have received duly executed certificates of the
Secretary or an Assistant Secretary of each Seller, dated the Effective
Date, and in form and substance reasonably satisfactory to the Company,
certifying the names and true signatures of the officers authorized on
behalf of such Seller to sign this Agreement and any instruments or
documents in connection with this Agreement;
(iii) each Seller shall have filed and recorded or will file on such
Effective Date, at its own expense, UCC-1 financing statements with respect
to the Receivables originated by such Seller and Related Property in such
manner and in such jurisdictions as are necessary to perfect the Company's
ownership interest thereof under the UCC and delivered evidence of such
filings to the Company on or prior to such Effective Date; and all other
action necessary, in the reasonable judgment of the Company, to perfect
under
<PAGE>
19
the UCC (to the extent applicable) the Company's ownership of the
Receivables originated by such Seller and Related Property shall have been
duly taken;
(iv) each Seller shall have delivered or transmitted to the Company,
with respect to the Receivables originated by it, a computer tape, diskette
or data transmission reasonably acceptable to the Company showing, as of a
date no later than the Cut-Off Date, at least the information specified in
Schedule 2 as to all Receivables to be transferred by such Seller to the
Company on such Effective Date;
(v) the Company shall have received reports of UCC-1 and other
searches of each Seller with respect to the Receivables originated by such
Seller and the Related Property reflecting the absence of Liens thereon,
except for (A) Liens created in connection with the sale by the Company of
such Receivables and Related Property, (B) Liens as to which the Company
has received UCC termination statements to be filed on or prior to the
Effective Date and (C) judgment liens against the Sellers in existence on
the Effective Date in an aggregate amount for all Sellers not to exceed
$25,000, which the Sellers shall cause to be fully released, discharged,
bonded or insured no later than 30 days following such Effective Date;
(vi) the Company shall be satisfied that each Seller's systems,
procedures and record keeping relating to the Purchased Receivables
originated by such Seller are sufficient and satisfactory in order to
permit the purchase and administration of such Purchased Receivables in
accordance with the terms and intent of this Agreement; and
(vii) the Company shall have received such other approvals, opinions or
documents as the Company may reasonably request.
<PAGE>
20
SECTION 3.02. Conditions Precedent to All the Company's Purchases of
------------------------------------------------------
Receivables. The obligation of the Company to purchase any Receivable and the
- ------------
Related Property with respect thereto on each date (including the Effective
Date) shall be subject to the further conditions precedent, which may be waived
by the Company, that, on and as of the related Payment Date, the following
statements shall be true (and the acceptance by the related Seller of the
Purchase Price for such Receivable on such Payment Date shall constitute a
representation and warranty by such Seller that on such Payment Date the
statements in clauses (i) and (ii) below are true):
(i) the representations and warranties of such Seller contained in
Sections 4.01 and 4.02 shall be true and correct on and as of such Payment
Date as though made on and as of such date, except insofar as such
representations and warranties are expressly made only as of another date
(in which case they shall be true and correct as of such other date);
(ii) after giving effect to such purchase, no Purchase Termination
Event or Potential Purchase Termination Event with respect to such Seller
shall have occurred and be continuing;
(iii) after giving effect to such purchase, no Early Amortization Event
or Potential Early Amortization Event with respect to any Outstanding
Series shall have occurred and be continuing; and
(iv) the Company shall have received such other approvals, opinions or
documents as the Company may reasonably request;
provided, however, that the failure of any Seller to satisfy any of the fore-
- -------- -------
going conditions shall not prevent such Seller from subsequently selling
Receivables originated by it upon satisfaction of all such conditions.
<PAGE>
21
SECTION 3.03. Conditions Precedent to Sellers' Obligations on the
---------------------------------------------------
Effective Date. The obligations of each Seller on the Effective Date shall be
- ---------------
subject to the conditions precedent, which may be waived by such Seller, that
such Seller shall have received on or before the Effective Date the following,
each dated such Effective Date and in form and substance satisfactory to such
Seller:
(i) a copy of duly adopted resolutions of the Board of Directors of
the Company authorizing this Agreement, the documents to be delivered by
the Company hereunder and the transactions contemplated hereby, certified
by the Secretary or Assistant Secretary of the Company; and
(ii) a duly executed certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of the
officers authorized on its behalf to sign this Agreement and the other
documents to be delivered by it hereunder.
SECTION 3.04. Conditions Precedent to All the Sellers' Obligations.
-----------------------------------------------------
The obligation of each Seller to sell any Receivable on any date (including on
the Effective Date) shall be subject to the further conditions precedent, which
may be waived by such Seller, that, on the related Payment Date, the following
statement shall be true (and the payment by the Company of the Purchase Price
for such Receivable on such date shall constitute a representation and warranty
by the Company that on such Payment Date such statement is true): after giving
effect to such purchase, no Purchase Termination Event set forth in
paragraph (d) of Section 7.01 hereof, and no Early Amortization Event set forth
in paragraph (a) of Section 7.01 of the Pooling Agreement (as in effect on the
date hereof and without giving effect to any amendment or supplement to, or
modification or waiver of, or departure from, such paragraph unless, in each
case, each Seller shall have consented thereto) shall have occurred and be
continuing.
<PAGE>
22
SECTION 3.05. Conditions Precedent to the Addition of a Seller. No
-------------------------------------------------
wholly owned, direct or indirect, Subsidiary of Furnishings International Inc.
approved by the Company as an additional Seller pursuant to Section 9.13 shall
be added as a Seller hereunder unless the conditions set forth below shall have
been satisfied on or before the date designated for the addition of such Seller
(the "Seller Addition Date"):
(i) the Company shall have received an Additional Seller Supplement
substantially in the form of Exhibit B hereto, duly executed and delivered
by such Seller;
(ii) each of the conditions precedent set forth in Section 2.08(m) of
the Pooling Agreement and in any supplement, including Section 11.16 of the
Series 1996-A Supplement shall have been satisfied;
(iii) the Company shall have received copies of duly adopted resolutions
of the Board of Directors of such Seller, as in effect on the related
Seller Addition Date, authorizing this Agreement, the documents to be
delivered by such Seller hereunder and the transactions contemplated
hereby, certified by the Secretary or Assistant Secretary of such Seller;
(iv) the Company shall have received duly executed certificates of the
Secretary or an Assistant Secretary of such Seller, dated the related
Seller Addition Date, and in form and substance reasonably satisfactory to
the Company, certifying the names and true signatures of the officers
authorized on behalf of such Seller to sign the Additional Seller
Supplement or any instruments or documents in connection with this
Agreement;
(v) a Lockbox Account with respect to Receivables to be sold by such
Seller shall have been established in the name of the Trustee;
<PAGE>
23
(vi) such Seller shall have filed and recorded, at its own expense,
UCC-1 financing statements (and other similar instruments) with respect to
the Receivables originated by such Seller and the Related Property in such
manner and in such jurisdictions as are necessary to perfect the Company's
ownership interest thereof under the UCC and delivered evidence of such
filings to the Company on or prior to the Seller Addition Date; and all
other action necessary, in the reasonable judgment of the Company, to
perfect the Company's ownership of the Receivables originated by such
Seller shall have been duly taken;
(vii) such Seller shall have delivered or transmitted to the Company,
with respect to the Receivables originated by it, a computer tape, diskette
or data transmission reasonably acceptable to the Company showing, as of a
date no later than five Business Days preceding the related Seller Addition
Date, at least the information specified in Schedule 2 as to all
Receivables to be transferred by such Seller to the Company on the related
Seller Addition Date;
(viii) the Company shall have received reports of UCC-1 and other
searches of such Seller with respect to the Receivables originated by such
Seller and the Related Property reflecting the absence of Liens thereon,
except for (i) Liens created in connection with the sale by the Company of
such Receivables and Related Property and (ii) Liens as to which the
Company has received UCC termination statements to be filed on or prior to
the related Seller Addition Date;
(ix) the Company shall be satisfied that such Seller's systems,
procedures and record keeping relating to the Purchased Receivables
originated by such Seller are sufficient and satisfactory in order to
permit the purchase and administration of such Purchased Receivables in
accordance with the terms and intent of this Agreement; and
<PAGE>
24
(x) the Company shall have received such other approvals, opinions or
documents as the Company may reasonably request.
ARTICLE IV
Representations and Warranties
------------------------------
SECTION 4.01. Representations and Warranties of the Sellers Relating
------------------------------------------------------
to the Sellers. Each Seller represents and warrants as to itself as follows:
- ---------------
(a) Organization; Powers. It (i) is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has all requisite power and authority to own its property and
assets and to carry on its business as now conducted and as proposed to be
conducted, (iii) is qualified to do business in, and is in good standing in,
every jurisdiction where the nature of its business so requires, except where
the failure so to qualify could not reasonably be expected to result in a Seller
Material Adverse Effect and (iv) has the corporate power and authority to
execute, deliver and perform its obligations under each of the Transaction
Documents and each other agreement or instrument contemplated hereby or thereby
to which it is or will be a party.
(b) Authorization. The execution, delivery and performance by such
--------------
Seller of each of the Transaction Documents to which such Seller is a party and
the other transactions contemplated hereby and thereby (collectively, the
"Transactions") (i) have been duly authorized by all requisite corporate and, if
required, stockholder action and (ii) will not (A) violate (1) any Requirement
of Law or the certificate or articles of incorporation or other constitutive
document or by-laws of any Subsidiary or (2) any provision of any Contractual
Obligation to which it or any Subsidiary is a party or by which any of them or
any of
<PAGE>
25
their property is or may be bound, (B) be in conflict with, result in a breach
of or constitute (alone or with notice or lapse of time or both) a default
under, or give rise to any right to accelerate or to require the prepayment,
repurchase or redemption of any obligation under any such Contractual Obligation
except where any such conflict, violation, breach or default referred to in
clause (A) or (B), individually or in the aggregate, could not reasonably be
expected to have a Seller Material Adverse Effect or (C) result in the creation
or imposition of any Lien upon or with respect to any property or assets now
owned or hereafter acquired by it or any Subsidiary (other than any Lien created
hereunder or contemplated or permitted hereby).
(c) Enforceability. This Agreement has been duly executed and
---------------
delivered by such Seller and constitutes, and each other Transaction Document to
which such Seller is a party when executed and delivered by such Seller will
constitute, a legal, valid and binding obligation of such Seller enforceable
against such Seller in accordance with its respective terms, subject (a) as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally, from time to time in effect and (b) to general principles of equity
(whether enforcement is sought by a proceeding in equity or at law).
(d) Governmental Approvals. No action, consent or approval of,
-----------------------
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for (i) the
filing of Uniform Commercial Code financing statements, (ii) such as have been
made or obtained and are in full force and effect and (iii) such actions,
consents, approvals and filings the failure of which to obtain or make could not
reasonably be expected to result in a Seller Material Adverse Effect; provided,
--------
however, that with respect to Receivables owing by Government Obligors, any
- -------
failure by such Seller to comply with the United States Federal
<PAGE>
26
Nonassignment Act (Public Contracts), 41 U.S.C. Sec. 15, or Assignment of Claims
Act, 31 U.S.C. Sec. 3727, or with any similar legislation of any State shall not
constitute a breach of this subsection 4.01(d).
(e) Litigation; Compliance with Laws. (i) There are no actions,
---------------------------------
suits or proceedings at law or in equity or by or before any Governmental
Authority now pending or, to the knowledge of such Seller, threatened against or
affecting such Seller or any Subsidiary or any business, property or rights of
any such Person (A) that involve any Transaction Document or the Transactions or
(B) as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected, individually or
in the aggregate, to result in a Seller Material Adverse Effect.
(ii) Neither it nor any Subsidiary is in default with respect to any
judgment, writ, injunction, decree or order of any Governmental Authority, where
such violation or default could reasonably be expected to result in a Seller
Material Adverse Effect.
(f) Agreements. (i) Neither it nor any Subsidiary is a party to any
-----------
agreement or instrument or subject to any corporate restriction that has
resulted or could reasonably be expected to result in a Seller Material Adverse
Effect.
(ii) Neither it nor its Subsidiary is in default in any manner under
any provision of any Contractual Obligation to which it is a party or by which
it or any of its properties or assets are bound, where such default could
reasonably be expected to result in a Seller Material Adverse Effect.
(g) Federal Reserve Regulations. (i) Neither it nor its Subsidiary
----------------------------
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of buying or carrying Margin Stock.
<PAGE>
27
(ii) No part of the proceeds from the sale of Receivables hereunder
will be used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, for any purpose that entails a violation of, or that
is inconsistent with, the provisions of the Regulations of the Board, including
Regulation G, U or X.
(h) Investment Company Act. It is not an "investment company" as
-----------------------
defined in, or subject to regulation under, the Investment Company Act of 1940.
(i) Tax Returns. It and each Subsidiary has filed or caused to be
------------
filed all Federal, state and other material tax returns or materials required to
have been filed by it and has paid or caused to be paid all taxes due and pay-
able by it and all assessments received by it to the extent that nonpayment
could reasonably be expected to result in a Seller Material Adverse Effect.
(j) Employee Benefit Plans. Except to the extent failure to comply
-----------------------
could not reasonably be expected to result in a Seller Material Adverse Effect,
such Seller and its ERISA Affiliates are in compliance in all material respects
with the applicable provisions of ERISA and the Code and the regulations and
published interpretations thereunder. No Reportable Event has occurred or is
reasonably expected to occur that, when taken together with all other such
Reportable Events, could reasonably be expected to result in a Seller Material
Adverse Effect.
(k) Accounting Treatment. It will not prepare any financial
---------------------
statements that shall account for the transactions contemplated hereby, nor will
it in any other respect (other than for tax purposes) account for the trans-
actions contemplated hereby, in a manner that is inconsistent with the Company's
ownership interest in the Receivables.
(l) Indebtedness to Company. Immediately prior to consummation of
------------------------
the transactions contemplated hereby on
<PAGE>
28
such Effective Date, it had no outstanding Indebtedness to the Company other
than amounts permitted by this Agreement.
(m) Lockboxes. Set forth in Schedule 3 is a complete and accurate
----------
description as of the Effective Date of each Lockbox Account currently
maintained by each of the Sellers. Each of the Lockbox Agreements to which such
Seller is to be a Party, once entered into, shall be the legal, valid and
binding obligation of such Seller, enforceable against such Seller in accordance
with its terms.
(n) Chief Executive Office. The offices at which each Seller keeps
-----------------------
its records concerning the Receivables originated by it either (x) are located
as set forth on Schedule 4 hereto or (y) such Seller has notified the Company of
the location thereof in accordance with Section 5.06. The chief executive
office of such Seller is listed opposite its name on Schedule 4 and is the place
where such Seller is "located" for the purposes of Section 9-103(3)(d) of the
UCC as in effect in the State of New York. As of the Effective Date, the state
and county where the chief executive office of such Seller is "located" for the
purposes of 9-103(3)(d) of the UCC as in effect in the State of New York has not
changed in the past four months, except for Furnishings International Inc. whose
chief executive office was located at 1314 Hanley Industrial Court, St. Louis,
MO 63144, up to the day prior to the Effective Date. Furnishings International
Inc. will not have its chief executive office in Missouri after the Effective
Date.
(o) Bulk Sales Act. No transaction contemplated hereby with respect
---------------
to such Seller requires compliance with, or will be subject to avoidance under,
any bulk sales act or similar law.
(p) Names. The legal name of such Seller is as set forth in this
------
Agreement. It has no trade names, fictitious names, assumed names or "doing
business as" names except as set forth on Schedule 5.
<PAGE>
29
(q) Solvency. No Insolvency Event with respect to such Seller has
---------
occurred and the sale of the Receivables by it to the Company has not been made
in contemplation of the occurrence thereof. Both prior to and after giving
effect to the transactions occurring on the Effective Date and after giving
effect to each subsequent transaction contemplated hereunder, (i) the fair value
of the assets of such Seller at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of such Seller; (ii) the
present fair salable value of the property of such Seller will be greater than
the amount that will be required to pay the probable liability of such Seller on
its debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (iii) such Seller will
be able to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (iv) such Seller
will not have unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted. For all purposes of clauses (i) through (iv) above, the amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
Such Seller does not intend to, nor does it believe that it will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it and the timing of the amounts
of cash to be payable on or in respect of its Indebtedness.
(r) No Purchase Termination Event. As of the Effective Date, no
------------------------------
Purchase Termination Event or Potential Purchase Termination Event with respect
to such Seller has occurred and is continuing.
(s) No Fraudulent Transfer. Such Seller is not entering into this
-----------------------
Agreement with the intent (whether actual or constructive) to hinder, delay, or
defraud its present or
<PAGE>
30
future creditors and is receiving reasonably equivalent value and fair
consideration for the Receivables originated by it being transferred hereunder.
(t) Liabilities. Other than the liabilities, commitments or
------------
obligations (whether absolute, accrued, contingent or otherwise) arising under
or in respect of the Transaction Documents, the Credit Agreement, the
Subordinated Notes or any documents executed in connection with any of the
foregoing, such Seller does not have any liabilities, commitments or obligations
(whether absolute, accrued, contingent or otherwise), whether due or to become
due which would be reasonably likely to have a Seller Material Adverse Effect.
(u) Collection Procedures. Such Seller has in place procedures
----------------------
pursuant to the Transaction Documents which are either necessary or advisable to
ensure the timely collection of Receivables originated by it.
(v) Ownership. Except in the case of Furnishings International Inc.,
----------
all of its issued and outstanding capital stock is wholly owned, directly or
indirectly, legally and beneficially, by Furnishings International Inc.
SECTION 4.02. Representations and Warranties of the Sellers Relating
------------------------------------------------------
to the Receivables. Each Seller hereby represents and warrants to the Company
- -------------------
on each Payment Date that with respect to the Receivables originated by it being
paid for as of such date:
(a) Receivables Description. As of the Cut-Off Date, the computer
------------------------
tape, diskette or data transmission delivered or transmitted pursuant to
Section 2.01(e) sets forth in all material respects an accurate and
complete listing of all Receivables sold to the Company as of the Cut-Off
Date and the information contained therein in accordance with Schedule 2
with respect to each such Receivable is true and correct as of the Cut-Off
Date. As of the Cut-Off Date, the aggregate
<PAGE>
31
amount of Receivables owned by the Sellers is accurately set forth on such
computer tape, diskette or data transmission.
(b) No Liens. Each Receivable existing on the Initial Closing Date
---------
or, in the case of Receivables sold to the Company after the Initial
Closing Date, on the date that each such Receivable shall have been sold to
the Company, has been conveyed to the Company free and clear of any Liens,
except for Permitted Liens specified in clause (i) of the definition
thereof.
(c) Eligible Receivable. On the Initial Closing Date, each
--------------------
Receivable that is represented to be an Eligible Receivable sold to the
Company on such date is an Eligible Receivable on the Initial Closing Date
and, in the case of Receivables sold to the Company after the Initial
Closing Date, each such Receivable that is represented to be an Eligible
Receivable sold to the Company on such later date is an Eligible Receivable
on such later date.
(d) Filings. On or prior to the Effective Date, all filings and
--------
other acts necessary (including but not limited to all filings and other
acts necessary or advisable under the UCC) shall have been made or
performed in order to grant the Company on the Effective Date a first
priority perfected ownership or security interest in respect of all
Receivables.
SECTION 4.03. Representations and Warranties of the Company. The
----------------------------------------------
Company represents and warrants as to itself as follows:
(a) Organization; Powers. The Company (i) is a corporation duly
---------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority to
own its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is quali-
<PAGE>
32
fied to do business in, and is in good standing in, every jurisdiction where the
nature of its business so requires, except where the failure so to qualify would
not have a Company Material Adverse Effect and (iv) has the corporate power and
authority to execute, deliver and perform its obligations under each of the
Transaction Documents and each other agreement or instrument contemplated hereby
or thereby to which it is or will be a party.
(b) Authorization. The execution, delivery and performance by the
--------------
Company of each of the Transactions (i) have been duly authorized by all
requisite corporate and, if required, stockholder action and (ii) will not
(A) violate (1) any Requirement of Law or (2) any provision of any Transaction
Document or any other material Contractual Obligation to which the Company is a
party or by which it or any of its property is or may be bound, (B) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under, or give rise to any right to accelerate
or to require the prepayment, repurchase or redemption of any obligation under
any Transaction Document or any other material Contractual Obligation or
(C) result in the creation or imposition of any Lien upon or with respect to any
property or assets now owned or hereafter acquired by the Company (other than
any Lien created hereunder or contemplated or permitted hereby).
(c) Enforceability. This Agreement has been duly executed and
---------------
delivered by the Company and constitutes, and each other Transaction Document to
which the Company is a party when executed and delivered by the Company will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its respective terms, subject (a) as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally, from time to time in effect and (b) to general principles of equity
whether enforcement is sought by a proceeding in equity or at law.
<PAGE>
33
(d) Accounting Treatment. The Company will not prepare any financial
---------------------
statements that shall account for the transactions contemplated hereby, nor will
it in any other respect (other than for tax purposes) account for the
transactions contemplated hereby, in a manner that is inconsistent with the
Company's ownership interest in the Receivables.
ARTICLE V
Affirmative Covenants
---------------------
Each Seller hereby agrees that, so long as there are any amounts out-
standing with respect to Purchased Receivables originated by it previously sold
by such Seller to the Company or until an Early Termination, whichever is later,
such Seller shall:
SECTION 5.01. Certificates; Other Information. Furnish to the
--------------------------------
Company:
(a) not later than 120 days after the end of each fiscal year and not
later than 90 days after the end of each of the first three fiscal quarters
of each fiscal year, a certificate of a Responsible Officer of the Seller
stating that, to the knowledge of such Responsible Officer (after due
inquiry), such Seller during such period has observed or performed all of
its covenants and other agreements, and satisfied every condition,
contained in the Sale Documents to which it is a party to be observed,
performed or satisfied by it, and that such Responsible Officer has
obtained no knowledge of any Purchase Termination Event or Potential
Purchase Termination Event except as specified in such certificate; and
(b) promptly, such additional financial and other information as the
Company may from time to time reasonably request.
<PAGE>
34
SECTION 5.02. Compliance with Law and Policies. (i) Comply with all
---------------------------------
Requirements of Law and material Contractual Obligations applicable to it.
(ii) Perform its obligations in accordance and compliance with the
Policies, as amended from time to time in accordance with the Transaction
Documents, in regard to the Receivables originated by it and the Related
Property.
SECTION 5.03. Preservation of Corporate Existence. (i) Preserve and
------------------------------------
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation and (ii) qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the nature of its
business so requires, except where the failure so to qualify would not,
individually or in the aggregate with other such failures, have a Seller
Material Adverse Effect.
SECTION 5.04. Separate Corporate Existence.
-----------------------------
(i) Maintain its deposit account or accounts, separate from those of
the Company and ensure that its funds will not be diverted to the Company, nor
will such funds be commingled with the funds of the Company;
(ii) To the extent that it shares any officers or other employees with
the Company, the salaries of and the expenses related to providing benefits to
such officers and other employees shall be fairly allocated among it and the
Company, and it and the Company shall bear their fair shares of the salary and
benefit costs associated with all such common officers and employees;
(iii) To the extent that it jointly contracts with the Company to do
business with vendors or service providers or to share overhead expenses, the
costs incurred in so doing shall be allocated fairly between it and the Company,
and it and the Company shall bear their fair shares of such costs. To the
extent that it contracts or does business
<PAGE>
35
with vendors or service providers where the goods and services provided are
partially for the benefit of the Company, the costs incurred in so doing shall
be fairly allocated between it and the Company in proportion to the benefit of
the goods or services each is provided, and it and the Company shall bear their
fair shares of such costs. All material transactions between it and the
Company, whether currently existing or hereafter entered into, shall be only on
an arm's length basis;
(iv) Maintain office space separate from the office space of the
Company (but which may be located at the same address as the Company). To the
extent that it and the Company have offices in the same location, there shall be
a fair and appropriate allocation of overhead costs between them, and each shall
bear its fair share of such expenses;
(v) Issue financial statements separate from any financial statements
issued by the Company;
(vi) Not assume or guarantee any of the liabilities of the Company;
and
(vii) Take, or refrain from taking, as the case may be, all other
actions that are necessary to be taken or not to be taken in order (x) to ensure
that the assumptions and factual recitations set forth in the Specified
Bankruptcy Opinion Provisions remain true and correct with respect to it (and,
to the extent within its control, to ensure that the assumptions and factual
recitations set forth in the Specified Bankruptcy Opinion Provisions remain true
and correct with respect to the Company) and (y) to comply with those procedures
described in such provisions that are applicable to it.
SECTION 5.05. Inspection of Property; Books and Records; Discussions.
-------------------------------------------------------
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business
<PAGE>
36
and activities; and permit representatives of the Company upon reasonable
advance notice to visit and inspect any of its properties and examine and make
abstracts from any of its books and records during normal business hours on any
Business Day and as often as may reasonably be requested, subject to such
Seller's security and confidentiality requirements and to discuss the business,
operations, properties and financial and other condition of such Seller with
officers and employees of such Seller and with its Independent Public
Accountants.
SECTION 5.06. Location of Records. Keep its chief place of business
--------------------
and chief executive office, and the offices where it keeps the records
concerning the Purchased Receivables (and all original documents relating
thereto), at the locations referred to for it on Schedule 4 hereto or upon
30 days' prior written notice to the Company, at such other locations in a
jurisdiction where all action required by Section 5.14 shall have been taken and
completed and be in full force and effect; provided, however, that the Rating
-------- -------
Agency shall be notified of any such changes in location and such location shall
not be changed to a state which is within the Tenth Circuit unless it delivers
an opinion of counsel reasonably acceptable to the Rating Agencies to the effect
that Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), is no
-----------------------------------
longer controlling precedent in the Tenth Circuit.
SECTION 5.07. Computer Files. At its own cost and expense, retain
---------------
the ledger used by it as a master record of the Obligors and retain copies of
all documents relating to each Obligor as custodian and agent for the Company
and other Persons with interests in the Purchased Receivables originated by it.
SECTION 5.08. Payment of and Compliance with Obligations. Pay, dis-
-------------------------------------------
charge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever nature, except
where the amount or validity thereof is currently being
<PAGE>
37
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on its books or except where
the failure to so pay, discharge or otherwise satisfy such obligations would not
have a Seller Material Adverse Effect. Such Seller shall defend the right,
title and interest of the Company in, to and under the Receivables originated by
it and the Related Property, whether now existing or hereafter created, against
all claims of third parties claiming through such Seller. Such Seller will duly
fulfill all obligations on its part to be fulfilled under or in connection with
each Receivable originated by it and will do nothing to impair the rights of the
Company in such Receivable.
SECTION 5.09. Collections. Instruct each Obligor to make payments in
------------
respect of its Receivables to a Lockbox or a Lockbox Account or by wire transfer
to the applicable Collection Account and to comply in all material respects with
procedures with respect to Collections reasonably specified from time to time by
the Company. In the event that any payments in respect of any such Receivables
are made directly to such Seller (including, without limitation, any employees
thereof or independent contractors employed thereby), such Seller shall, within
two Business Days of receipt thereof, deliver (which may be via regular mail) or
deposit such amounts to a Lockbox, a Lockbox Account or the Collection Account
and, prior to forwarding such amounts, such Seller shall hold such payments in
trust as custodian for the Company and the Trustee.
SECTION 5.10. Furnishing Copies, Etc. Furnish to the Company:
-----------------------
(a) within five Business Days of the Company's request, a certificate
of the chief financial officer of such Seller or of the related Servicer,
on behalf of such Seller, certifying, as of the date thereof, to the
knowledge of such officer, that no Purchase Termination Event has occurred
and is continuing or if one has so occurred, specifying the nature and
extent thereof and
<PAGE>
38
any corrective action taken or proposed to be taken with respect thereto;
(b) promptly after a Responsible Officer of such Seller obtains
knowledge of the occurrence of any Purchase Termination Event or Potential
Purchase Termination Event, written notice thereof;
(c) promptly following request therefor, such other information,
documents, records or reports regarding or with respect to the Purchased
Receivables of such Seller, as the Company may from time to time reasonably
request;
(d) promptly after a Responsible Officer of such Seller obtains
knowledge of the occurrence thereof, written notice of any event of default
or default under any other Sale Document; and
(e) promptly upon determining that any Purchased Receivable originated
by it designated as an Eligible Receivable on the applicable Daily Report
or Monthly Settlement Statement was not an Eligible Receivable as of the
date provided therefor, written notice of such determination.
SECTION 5.11. Obligations with Respect to Obligors and Receivables.
-----------------------------------------------------
Take all actions on its part reasonably necessary to maintain in full force and
effect its rights under all contracts relating to the Purchased Receivables
originated by it.
SECTION 5.12. Responsibilities of the Sellers. Notwithstanding any-
--------------------------------
thing herein to the contrary, (i) such Seller shall perform or cause to be
performed all its obligations under the Policies related to the Purchased
Receivables to the same extent as if such Purchased Receivables had not been
transferred to the Company hereunder, (ii) the exercise by the Company of any of
its rights hereunder shall not relieve such Seller of its obligations
<PAGE>
39
with respect to such Purchased Receivables and (iii) except as provided by law,
the Company shall not have any obligation or liability with respect to any
Purchased Receivables, nor shall the Company be obligated to perform any of the
obligations or duties of such Seller thereunder.
SECTION 5.13. Assessments. Promptly pay and discharge all taxes,
------------
assessments, levies and other governmental charges imposed on it except such
taxes, assessments, levies and charges which are being contested in good faith
and for which such Seller has set aside on its books adequate reserves.
SECTION 5.14. Further Action. In addition to the foregoing:
---------------
(a) Such Seller agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary in such Seller's reason-
able judgment or that the Company may reasonably request, in order to more
fully effect the purposes of this Agreement and the transfer of the
Receivables hereunder, to protect or more fully evidence the Company's
right, title and interest in the Purchased Receivables, or to enable the
Company to exercise or enforce any of its rights in respect thereof. With-
out limiting the generality of the foregoing, the Seller will upon the
request of the Company (i) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices,
as may be necessary or, in the opinion of the Company, advisable and
(ii) obtain the agreement of any Person having a Lien on any Receivables
owned by such Seller (other than any Lien created or imposed hereunder or
under the Pooling Agreement or any Permitted Lien) to release such Lien
upon the purchase of any such Receivables by the Company.
<PAGE>
40
(b) Such Seller hereby irrevocably authorizes the Company to file one
or more financing or continuation statements (and other similar
instruments), and amendments thereto, relative to all or any part of the
Purchased Receivables and the Related Property sold or to be sold by such
Seller without the signature of such Seller to the extent permitted by
applicable law.
(c) If such Seller fails to perform any of its agreements or
obligations under this Agreement, the Company may (but shall not be
required to) perform, or cause performance of, such agreements or
obligations, and the expenses of the Company incurred in connection there-
with shall be payable by such Seller as provided in Section 9.03. The
Company agrees promptly to notify such Seller after any such performance;
provided, however, that the failure to give such notice shall not affect
-------- -------
the validity of any such performance.
SECTION 5.15. Sale of Receivables. Sell Receivables solely in
--------------------
accordance with the terms of this Agreement.
SECTION 5.16. BayBank Depository Agreement. Robert Allen Fabrics,
-----------------------------
Inc., as Seller and Servicer, will take all reasonably necessary steps to
establish a lockbox account to replace the BayBank Depository Agreement as soon
as reasonably possible.
SECTION 5.17. Discharge or Bonding of Liens. Such Seller shall cause
------------------------------
the judgment Liens described in clause (b)(v)(C) of Section 3.01 and clause (i)
of the definition of "Permitted Liens" affecting such Seller or any of its
properties to be fully released, discharged, bonded or insured no later than 30
days following the Effective Date.
<PAGE>
41
ARTICLE VI
Negative Covenants
------------------
Each Seller hereby agrees that, so long as there are any amounts out-
standing with respect to Purchased Receivables originated by it previously sold
by such Seller to the Company or until an Early Termination with respect to such
Seller, whichever is later, such Seller shall not, directly or indirectly:
SECTION 6.01. Limitations on Transfers of Receivables, Etc. At any
---------------------------------------------
time sell, transfer or otherwise dispose of any of the Receivables, Related
Property or the proceeds thereof pursuant to:
(i) any Lien Creation except for Permitted Liens; or
(ii) any Investment.
SECTION 6.02. Extension or Amendment of Receivables. Extend, make
--------------------------------------
any Dilution Adjustment to, rescind, cancel, amend or otherwise modify, or
attempt or purport to extend, amend or otherwise modify, the terms of any
Purchased Receivables, except (a) in accordance with the terms of the Policies,
(b) as required by any Requirement of Law or (c) in the case of Dilution
Adjustments, upon making a Seller Dilution Adjustment Payment pursuant to
Section 2.05.
SECTION 6.03. Change in Payment Instructions to Obligors. Except as
-------------------------------------------
otherwise provided in Section 5.15, instruct any Obligor of any Purchased
Receivables to make any payments with respect to any Receivables other than, in
accordance with Section 5.09, to a Lockbox, a Lockbox Account or by wire
transfer to the Collection Account; provided, however, that, in accordance with
-------- -------
Section 2.03 of the Servicing Agreement, (i) it may terminate any Lockbox
Agreements or Lockbox Accounts and (ii) it may execute
<PAGE>
42
additional Lockbox Agreements or Lockbox Accounts and instruct Obligors to make
payments in respect of any Receivables to such additional accounts; provided,
--------
however, upon the satisfaction of the Rating Agency Condition (or, if no
- -------
Outstanding Series has been rated by a Rating Agency, with the consent of the
Agent) the Seller may enter into any amendments or modifications of a Lockbox
Agreement that the Seller reasonably deems necessary to conform such Lockbox
Agreement to the cash management system of the Company or such Seller.
SECTION 6.04. Change in Name. Change its name, use an additional
---------------
name, or change its identity or corporate structure in any manner which would or
might make any financing statement or continuation statement (or other similar
instrument) relating to this Agreement seriously misleading within the meaning
of Section 9-402(7) of the UCC, or impair the perfection of the Company's
interest in any Receivable under any other similar law, without 30 days' prior
written notice to the Company.
SECTION 6.05. Policies. Make any change or modification (or permit
---------
any change or modification to be made) in any material respect to the Policies,
except (i) if such changes or modifications are necessary under any Requirement
of Law, or (ii) if the Rating Agency Condition is satisfied with respect
thereto; provided, however, that if any change or modification, other than a
-------- -------
change or modification permitted pursuant to clause (i) above, would be
reasonably likely to have a Material Adverse Effect on the interests of the
Investor Certificateholders of a Series which is not rated by a Rating Agency,
the consent of the applicable Agent (or if none, as specified in the related
Supplement) shall be required to effect such change or modification.
SECTION 6.06. Modification of Ledger. Delete or otherwise modify the
-----------------------
marking on the ledger referred to in Section 2.01(e).
<PAGE>
43
SECTION 6.07. Accounting for Purchases. Prepare any financial
-------------------------
statements which shall account for the transactions contemplated hereby (other
than capital contributions and the Seller Note contemplated hereby) in any
manner other than as a sale of the Purchased Receivables originated by such
Seller to the Company or in any other respect account for or treat the
transactions contemplated hereby (including for financial accounting purposes,
except as required by law) (other than capital contributions and the Seller Note
contemplated hereby) in any manner other than as sales of the Purchased
Receivables originated by such Seller to the Company; provided, however, that
-------- -------
this subsection shall not apply for any tax or tax accounting purposes.
SECTION 6.08. Instruments. Subject to the delivery requirements set
------------
forth in Section 2.01(b) of the Pooling Agreement, take any action to cause any
Receivable not evidenced by an "instrument" (as defined in the UCC as in effect
in the State of New York or other similar statute or legislation) upon
origination to become evidenced by an instrument, except in connection with the
enforcement or collection of an overdue Receivable.
SECTION 6.09. Ineligible Receivables. Without the prior written
-----------------------
approval of the Company, take any action to cause, or which would permit, a
Receivable that was designated as an Eligible Receivable on the Payment Date
relating to such Receivable to cease to be an Eligible Receivable, except as
otherwise expressly provided by this Agreement.
SECTION 6.10. Business of the Seller. Fail to maintain and operate
-----------------------
the business currently conducted by such Seller and business activities reason-
ably incidental or related thereto in substantially the manner in which it is
presently conducted and operated if such failure would materially adversely
affect the interests of the Company under the Transaction Documents.
<PAGE>
44
SECTION 6.11. Limitation on Fundamental Changes. Enter into any
----------------------------------
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or make any material change in its
present method of conducting business, or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets other than the assignments and transfers contemplated hereby.
ARTICLE VII
Purchase Termination Events
---------------------------
SECTION 7.01. Purchase Termination Events. If any of the following
----------------------------
events (herein called "Purchase Termination Events") shall have occurred and be
continuing with respect to one or more Sellers:
(a) a Seller shall fail (i) to pay any amount due pursuant to
Section 2.06 in accordance with the provisions thereof and such failure
shall continue unremedied for a period of five Business Days from the
earlier of (A) the date any Responsible Officer of such Seller obtains
knowledge of such failure and (B) the date such Seller receives notice of
such failure from the Company, the related Servicer or the Trustee or
(ii) to pay any other amount required to be paid by such Seller hereunder
within two Business Days of the date when due; or
(b) a Seller shall fail to observe or perform in any material respect
any covenant or agreement applicable to it contained herein (other than as
specified in paragraph (a) of this Section 7.01); provided that no such
--------
failure shall constitute a Purchase Termination Event under this
paragraph (b) unless such failure shall continue unremedied for a period of
30 consecutive days from the date such Seller
<PAGE>
45
receives notice of such failure from the Company, the related Servicer or
the Trustee; or
(c) any representation, warranty, certification or statement made or
deemed made by such Seller in this Agreement or in any statement, record,
certificate, financial statement or other document delivered pursuant to
this Agreement shall prove to have been incorrect in any material respect
when made or deemed made, provided that a Purchase Termination Event shall
--------
not be deemed to have occurred under this paragraph (c) based upon a breach
of any representation or warranty set forth in Section 4.02 if such Seller
shall have complied with the provisions of Section 2.06 in respect thereof;
or
(d) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Seller in an involuntary case
under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect (the Bankruptcy Code and all other
such applicable laws being collectively, "Applicable Insolvency Laws"),
which decree or order is not stayed or any other similar relief shall be
granted under any applicable federal or state law now or hereafter in
effect and shall not be stayed; (ii)(A) an involuntary case is commenced
against the Seller under any Applicable Insolvency Law now or hereafter in
effect, a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Seller, or over
all or a substantial part of the property of the Seller, shall have been
entered, an interim receiver, trustee or other custodian of the Seller for
all or a substantial part of the property of the Seller is involuntarily
appointed, a warrant of attachment, execution or similar process is issued
against any substantial part of the property of the Seller, and (B) any
event
<PAGE>
46
referred to in clause (ii)(A) above continues for 60 days unless dismissed,
bonded or disclosed; (iii) the Seller shall at its request have a decree or
an order for relief entered with respect to it or commence a voluntary case
under any Applicable Insolvency Law now or hereafter in effect, or shall
consent to the entry of a decree or an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case,
under any such Applicable Insolvency Law, consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; (iv) the making by the Seller of any
general assignment for the benefit of creditors; (v) the inability or
failure of the Seller generally to pay its debts as such debts become due;
or (vi) the Board of Directors of the Seller authorizes action to approve
any of the foregoing; or
(e) there shall have occurred (i) an Early Amortization Event set
forth in Section 7.01 of the Pooling Agreement or (ii) the Amortization
Period with respect to all Outstanding Series shall have occurred and be
continuing; or
(f) a Seller has been terminated as Servicer following a Servicer
Default with respect to such Seller under the Servicing Agreement; or
(g) a Responsible Officer of a Seller receives notice or becomes aware
that a notice of Lien has been filed by the PBGC against such Seller, the
Company or the Trust under Section 412(n) of the Code or Section 302(f) of
ERISA for a failure to make a required installment or other payment to a
plan to which Section 412(n) of the Code or Section 302(f) of ERISA
applies; or
(h) any Lien in an amount equal to or greater than $1,000,000 has been
asserted against or imposed on, any
<PAGE>
47
real or personal property of a Seller pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Sec. 9607(l), or any equivalent or comparable state law, relating to or
arising from the costs of, response to, or investigation, remediation or
monitoring of, any environmental contamination resulting from the current
or past operations of such Seller; or
(i) a Federal tax notice of Lien affecting any Seller, in an amount
equal to or greater than $1,000,000, shall have been filed and 40 days
shall have elapsed without such notice having been effectively withdrawn or
such lien having been released or discharged.
then, (x) in the case of any Purchase Termination Event described in
paragraph (d), (e)(i), (g), (h) or (i) above, the obligation of the Company to
purchase Receivables from such Seller shall thereupon automatically terminate
without further notice of any kind, which is hereby waived by such Seller,
(y) in the case of any Purchase Termination Event described in paragraph (e)(ii)
above, the obligation of the Company to purchase Receivables from such Seller
shall thereupon terminate without notice of any kind, which is hereby waived by
such Seller unless both the Company and such Seller agree in writing that such
event shall not trigger an Early Termination hereunder and (z) in the case of
any other Purchase Termination Event, so long as such Purchase Termination Event
shall be continuing, the Company may terminate its obligation to purchase
Receivables from such Seller by written notice to such Seller (any termination
pursuant to clause (x), (y) or (z) of this Article VII is herein called an
"Early Termination"); provided, however, that in the event of an involuntary
-------- -------
petition or proceeding as described in paragraphs (d)(i) and (d)(ii) above, the
Company shall not purchase Receivables from such Seller unless such involuntary
petition or proceeding is dismissed, bonded or discharged within 60 days
<PAGE>
48
of the filing of such petition or the commencement of such proceeding.
SECTION 7.02. Remedies. (a) If a Purchase Termination Event has
---------
occurred and is continuing, the Company (and its assignees) shall have all of
the rights and remedies provided to a secured creditor or a purchaser of
accounts under the UCC by applicable law in respect thereto.
(b) Such Seller agrees that, upon the occurrence and during the
continuation of a Purchase Termination Event under Section 7.01(d) or (e)(i):
(i) the Company (and its assignees) shall have the right at any time
to notify, or require that such Seller at such Seller's expense notify, the
respective Obligors of the Company's ownership of the Purchased Receivables
and Related Property and may direct that payment of all amounts due or to
become due under the Purchased Receivables be made directly to the Company
or its designee;
(ii) the Company (and its assignees) shall have the right to (A) sue
for collection on any Purchased Receivables or (B) sell any Purchased
Receivables to any Person for a price that is acceptable to the Company.
If required by the terms of Section 9-504 or 9-505 of the UCC (or analogous
provisions of any other similar law applicable to the Receivables), the
Company (and its assignees) may offer to sell any Purchased Receivable to
any Person, together, at its option, with all other Receivables created by
the same Obligor. Any Purchased Receivable sold hereunder (other than
pursuant to the Pooling Agreement) shall cease to be a Receivable for all
purposes under this Agreement as of the effective date of such sale;
(iii) such Seller shall, upon the Company's written request and at such
Seller's expense, (A) assemble all of such Seller's documents, instruments
and other
<PAGE>
49
records (including credit files and computer tapes or disks) that
(1) evidence or will evidence or record Receivables sold by such Seller and
(2) are otherwise necessary or desirable to effect Collections of such
Purchased Receivables (collectively, the "Documents") and (B) deliver the
Documents to the Company or its designee at a place designated by the
Company. In recognition of such Seller's need to have access to any
Documents which may be transferred to the Company hereunder, whether as a
result of its continuing business relationship with any Obligor for
Receivables purchased hereunder or as a result of its responsibilities as a
Servicer, the Company hereby grants to such Seller an irrevocable license
to access the Documents transferred by such Seller to the Company and to
access any such transferred computer software in connection with any
activity arising in the ordinary course of such Seller's business or in
performance of such Seller's duties as a Servicer; provided that such
--------
Seller shall not disrupt or otherwise interfere with the Company's use of
and access to the Documents and its computer software during such license
period;
(iv) such Seller hereby grants to the Company an irrevocable power of
attorney (coupled with an interest) to take any and all steps in such
Seller's name necessary or desirable, in the reasonable opinion of the
Company, to collect all amounts due under the Purchased Receivables,
including, without limitation, endorsing such Seller's name on checks and
other instruments representing Collections, enforcing the Purchased
Receivables and exercising all rights and remedies in respect thereof; and
(v) upon written request of the Company, such Seller will (A) deliver
to the Company all licenses, rights, computer programs, related material,
computer tapes, disks, cassettes and data necessary for the immediate
collection of the Purchased Receivables by the Company, with or without the
participation of such
<PAGE>
50
Seller (excluding software licenses which by their terms are not permitted
to be so delivered; provided that such Seller shall use reasonable efforts
--------
to obtain the consent of the relevant licensor to such delivery) and
(B) make such arrangements with respect to the collection of the Purchased
Receivables as may be reasonably required by the Company.
ARTICLE VIII
Seller Note
-----------
SECTION 8.01. Seller Note. On the Effective Date, the Company shall
------------
issue to the Sellers a subordinated note substantially in the form of Exhibit A
(as amended, supplemented or otherwise modified from time to time, the "Seller
Note"). The Company may incur Indebtedness evidenced by the Seller Note on any
date only (i) if such date is a Payment Date; (ii) in payment to the Sellers of
all or a portion of the Purchase Price (net of such deductions as provided in
Section 2.03(e)) for Receivables and Related Property required to be paid for by
the Company to the Sellers on such Payment Date in accordance with Section 2.02;
(iii) to the extent that cash was not available to pay such Purchase Price (net
of such deductions) in accordance with subsections 2.03(b)(i), 2.03(b)(ii),
2.03(c)(i), 2.03(c)(ii) and 2.03(c)(iii) (as applicable); and (iv) subject, in
any event, to Section 8.03. Interest on the principal amount of the Seller Note
(as such principal amount may have been increased pursuant to the following
proviso) shall accrue at One-Month LIBOR plus 2.50% per annum (or, if less, the
"Applicable Percentage" with respect to "Eurodollar Loans" (as each such term is
defined in the Credit Agreement)) from and including the Effective Date and
shall be paid on each Distribution Date with respect to amounts accrued and not
paid as of the last day of the preceding Settlement Period and the maturity date
thereof; provided, however, that, to the maximum extent permitted by law,
-------- -------
accrued interest on the
<PAGE>
51
Seller Note which is not so paid shall be added, at the request of the Sellers,
to the principal amount of the Seller Note. The principal amount of the Seller
Note (as such principal amount may have been increased pursuant to the proviso
to the preceding sentence) shall be payable on the maturity date of the Seller
Note (unless sooner prepaid pursuant to the terms thereof and of the other
Transaction Documents). Each Seller's interest in, and all payments in respect
of, the Seller Note shall be allocated among the Sellers by the Master Servicer
pro-rata in accordance with the amount of Receivables sold by each such Seller
- --- ----
to the Company that are paid for by the incurrence of debt under the Seller
Note. Default in the payment of principal or interest under the Seller Note
shall not constitute a default or event of default or a Purchase Termination
Event hereunder, a Servicer Default under the Servicing Agreement or an Early
Amortization Event under the Pooling Agreement or any Supplement thereto.
SECTION 8.02. Restrictions on Transfer of Seller Note. Neither the
----------------------------------------
Seller Note, nor any right of the Sellers to receive payments thereunder, shall
be assigned, transferred, exchanged, pledged, hypothecated, participated or
otherwise conveyed.
SECTION 8.03. Discretion; Aggregate Amount. Anything herein to the
-----------------------------
contrary notwithstanding, no Seller shall be obligated to accept payment of any
Purchase Price in the form of Indebtedness of the Company under the Seller Note
if, after giving effect to such Indebtedness to be incurred on such date, the
aggregate principal amount of Indebtedness evidenced by the Seller Note,
incurred on or before such Payment Date and outstanding on such Payment Date
(after giving effect to all repayments thereof on or before such Payment Date)
would be more than 50% of the outstanding balance of the Receivables on such
Payment Date, unless such Seller shall be satisfied (and, for purposes hereof,
in the absence of notice to the contrary by such Seller to the Company and the
Trustee, such Seller shall be deemed satisfied) that, in the ordinary course of
its
<PAGE>
52
business, the Company will pay the principal of, and interest on, such
Indebtedness in accordance with the terms thereof. The principal amount of
Indebtedness evidenced by the Seller Note incurred on any Payment Date shall
not, in any event, be greater than the excess, if any, of (x) the Purchase Price
for Receivables and Related Property required to be paid for by the Company on
such Payment Date pursuant to Section 2.03 over (y) the portion of such Purchase
Price paid in cash pursuant to subsections 2.03(b)(i), 2.03(b)(ii), 2.03(c)(i),
2.03(c)(ii) or 2.03(c)(iii).
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Further Assurances. (a) Each Seller agrees, from time
-------------------
to time, to do and perform any and all acts and to execute any and all further
instruments reasonably required or requested by the Company more fully to effect
the purposes of this Agreement and the sales of the Receivables hereunder,
including, without limitation, the execution of any financing statements or
continuation statements (and other similar instruments) relating to the
Receivables for filing under the provisions of the UCC (or any other similar
law) of any applicable jurisdiction.
(b) From time to time at the request of a Seller, the Company shall
deliver to such Seller such documents, assignments, releases and instruments of
termination as such Seller may reasonably request to evidence the reconveyance
by the Company to such Seller of a Receivable pursuant to the terms of
Section 2.6; provided that the Company shall have been paid all amounts due
--------
thereunder; and the Company and the applicable Servicer shall take such action
as such Seller may reasonably request, at the expense of the Seller, to assure
that any such Receivable, the Related Property with respect thereto and the
proceeds thereof do not remain commingled with Collections hereunder.
<PAGE>
53
SECTION 9.02. Payments. Each cash payment to be made by any of the
---------
Company or a Seller hereunder shall be made on the required payment date and in
immediately available funds at the office of the payee set forth below its
signature hereto or to such other office as may be specified by either party in
a notice to the other party hereto.
SECTION 9.03. Costs and Expenses. Each Seller agrees (a) to pay or
-------------------
reimburse the Company for all its out-of-pocket costs and expenses incurred in
connection with the preparation and execution of, and any amendment, supplement
or modification to, this Agreement, the other Sale Documents and any other
documents prepared in connection herewith and therewith, the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, all reasonable fees and disbursements of counsel, (b) to pay
or reimburse the Company for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under this Agreement and any
of the other Transaction Documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Company, (c) to pay,
indemnify, and hold the Company harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay
caused by such Seller in paying, stamp, excise and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement and any such
other documents, and (d) to pay, indemnify, and hold the Company harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (i) which may at any time be imposed on, incurred by
or asserted against the Company in any way relating to or arising out of this
Agreement or the other Sale Documents or
<PAGE>
54
the transactions contemplated hereby and thereby or in connection herewith or
any action taken or omitted by the Company under or in connection with any of
the foregoing (all such other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements being
herein called "Indemnified Liabilities") or (ii) which would not have been
imposed on, incurred by or asserted against the Company but for its having
acquired the Receivables hereunder; provided, however, that such indemnity shall
-------- -------
not be available to the extent that such Indemnified Liabilities result from the
gross negligence or wilful misconduct of the Company; and provided, further,
-------- -------
that such Seller shall have no obligation under this Section 9.03 to the Company
with respect to Indemnified Liabilities arising from (i) any action taken, or
omitted to be taken, by a Servicer that is not such Seller itself or an
Affiliate of such Seller, (ii) any action taken by the Trustee or the Company at
the direction of the Trustee in collecting from an Obligor or (iii) a default by
an Obligor with respect to any Purchased Receivable (other than arising out of
(x) any discharge, claim, offset or defense (other than discharge in bankruptcy
of the Obligor) of the Obligor to the payment of any Purchased Receivable
(including, without limitation, a defense based on such Purchased Receivable not
being a legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms) or any other claim resulting from the sale of
the merchandise or services related to any such Purchased Receivable or the
furnishing or failure to furnish such merchandise or services, (y) a failure by
such Seller to perform its duties or obligations under this Agreement or (z) the
sale of any Purchased Receivable that is designated on the applicable Daily
Report to be an Eligible Receivable and is determined to have been at the date
of such sale an Ineligible Receivable or any Purchased Receivable which
thereafter becomes subject to a Dilution Adjustment). The agreements in this
Section 9.03 shall survive the collection of all Receivables, the termination of
this Agreement and the payment of all amounts payable hereunder.
<PAGE>
55
SECTION 9.04. Successors and Assigns. This Agreement shall be
-----------------------
binding upon and inure to the benefit of the Sellers and the Company and their
respective successors (whether by merger, consolidation or otherwise) and
assigns. Each Seller agrees that it will not assign or transfer all or any
portion of its rights or obligations hereunder without the prior written consent
of the Company. Each Seller acknowledges that the Company shall assign all of
its rights hereunder to the Trustee. Each Seller consents to such assignment
and agrees that the Trustee, to the extent provided in the Pooling Agreement,
shall be entitled to enforce the terms of this Agreement and the rights
(including, without limitation, the right to grant or withhold any consent or
waiver) of the Company directly against such Seller, whether or not a Purchase
Termination Event or a Potential Purchase Termination Event has occurred. Each
Seller further agrees that, in respect of its obligations hereunder, it will act
at the direction of and in accordance with all requests and instructions from
the Trustee until all amounts due to the Investor Certificateholders are paid in
full. The Trustee, on behalf of the Investor Certificateholders, shall have the
rights of a third-party beneficiary under this Agreement.
SECTION 9.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ANY CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT ISSUES OF
PERFECTION ARE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
SECTION 9.06. No Waiver; Cumulative Remedies. No failure to exercise
-------------------------------
and no delay in exercising, on the part of the Company, any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.
<PAGE>
56
SECTION 9.07. Amendments and Waivers. Neither this Agreement nor any
-----------------------
terms hereof may be amended, supplemented or modified except in a writing signed
by the Company and each Seller. Any amendment, supplement or modification shall
not be effective until the Rating Agency Condition has been satisfied.
SECTION 9.08. 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 unenforce-
able such provision in any other jurisdiction.
SECTION 9.09. Notices. All notices, requests and demands to or upon
--------
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Company and each Seller, or to
such other address as may be hereafter notified by the respective parties
hereto:
The Company:
LFI Receivables Corporation
1300 National Highway
Thomasville, North Carolina 27360
Attention: Larry Milan and
Richard Kennett
Telecopy: (910) 476-4551
The Sellers:
to the addresses set
forth in Schedule 4
<PAGE>
57
in each case, with a copy to
Trustee: The Chase Manhattan Bank, as Trustee
450 W. 33rd Street, 15th Floor
New York, New York 10011
Attention: Advanced Structured
Products Group
Telecopier: (212) 946-3240
SECTION 9.10. 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. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Company.
SECTION 9.11. Waivers of Jury Trial. EACH PARTY HERETO HEREBY
----------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER SALE
DOCUMENTS.
(b) This Agreement shall constitute a security agreement under
applicable law.
SECTION 9.12. Jurisdiction; Consent to Service of Process. (a) EACH
--------------------------------------------
PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER SALE DOCUMENTS OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE
<PAGE>
58
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING MAY
BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT
THE COMPANY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR THE OTHER SALE DOCUMENTS AGAINST ANY SELLER OR ITS PROPERTIES
IN THE COURTS OF ANY JURISDICTION.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER SALE
DOCUMENTS IN ANY NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.
(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.09. NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 9.13. Addition of Sellers. Subject to Section 3.05,
--------------------
Section 2.08(m) of the Pooling Agreement, any applicable provisions in any
Supplement, including Section 11.16 of the Series 1996-A Supplement dated as of
August 5, 1996, and the terms and conditions of this Section 9.13, from time to
time one or more additional wholly owned, direct or indirect, Subsidiaries of
Furnishings International Inc. may become Sellers hereunder and parties hereto.
If any such Subsidiary wishes to become an additional Seller, it shall submit a
request to such effect in writing to the Company. If the Company shall have
agreed to any such request, such Subsidiary shall become an additional Seller
hereunder and a party hereto on the
<PAGE>
59
related Seller Addition Date upon satisfaction of the conditions set forth in
Section 3.05.
SECTION 9.14. Termination of Seller. (a) Any Seller (other than
----------------------
Furnishings International Inc.) shall be terminated as a Seller hereunder by the
Company on the date such Seller ceases to be a wholly owned, direct or indirect,
Subsidiary of Furnishings International Inc.; provided (i) that the aggregate
--------
outstanding Principal Amount of Purchased Receivables sold by all Sellers which
so cease to be wholly owned Subsidiaries at such time (together with the
aggregate outstanding Principal Amount of Purchased Receivables sold by all
Sellers which have been terminated pursuant to this Section 9.14 within the
preceding 90 days) shall not exceed 10% of the aggregate outstanding Principal
Amount of all Purchased Receivables and (ii) that no Purchase Termination Event
or Potential Purchase Termination Event has occurred and is continuing, or would
result as a result thereof. From and after the date any such Seller ceases to
be a wholly owned, direct or indirect, Subsidiary of Furnishings International
Inc., the Company shall cease buying Receivables and Related Property from such
Seller. Each such Seller shall be released as a Seller party hereto for all
purposes and shall cease to be a party hereto on the 90th day after the date on
which there are no amounts outstanding with respect to Purchased Receivables
previously sold by such Seller to the Company, whether such amounts have been
collected or written off in accordance with the Policies of such Seller. Prior
to such date, such Seller shall be obligated to perform its servicing and other
obligations hereunder and under the Transaction Documents to which it is a party
with respect to Purchased Receivables previously sold by such Seller to the
Company, including, without limitation, its obligation to direct the deposit of
Collections into the appropriate Lockbox.
(b) From time to time the Sellers, or the Master Servicer on behalf
of the Sellers, may request in writing that the Company designate one or more
Sellers as Sellers that shall cease to be parties to this Agreement; provided
--------
<PAGE>
60
that no Purchase Termination Event or Potential Purchase Termination Event has
occurred and is continuing, or would result as a result thereof. Any such
request shall specify the minimum aggregate Principal Amount of outstanding
Purchased Receivables sold by the Sellers to be so designated and terminated by
the Company. Promptly after receipt of any such designation by the Company, the
Sellers shall either (i) elect not to terminate such designated Sellers or
(ii) select a date, which date shall not be later than 30 days after the date of
receipt of such designation, as the "Sale Termination Date" for such designated
Sellers. From and after such date, the Company shall cease buying Receivables
and Related Property from such Sellers. Each such Seller shall be released as a
Seller hereunder and a party hereto for all purposes and shall cease to be a
party hereto on the 90th day after the date on which there are no amounts
outstanding with respect to Purchased Receivables previously sold by such Seller
to the Company, whether such amounts have been collected or written off in
accordance with the Policies of such Seller. Prior to such date, such Seller
shall be obligated to perform its servicing and other obligations hereunder and
under the Transaction Documents to which it is a party with respect to Purchased
Receivables previously sold by such Seller to the Company, including, without
limitation, its obligation to direct the deposit of Collections into the
appropriate Lockbox.
(c) A terminated Seller shall have no obligation to repurchase any
Receivables previously sold by it to the Company, but will have continuing
obligations with respect to such Receivables (including making any Seller
Dilution Adjustment Payments and Seller Adjustment Payments) to the extent such
obligations arise hereunder.
SECTION 9.15. No Bankruptcy Petition. Each Seller, by entering into
-----------------------
this Agreement, and any present or future holder of the Seller Note, by its
acceptance thereof, covenants and agrees that, prior to the date which is one
year and one day after the date of termination of this Agreement pursuant to
Section 9.16, it will not institute
<PAGE>
61
against, or join any other Person in instituting against, the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any Applicable Insolvency Laws.
SECTION 9.16. Termination. This Agreement will terminate at such
------------
time as (a) the commitment of the Company to purchase Receivables from all the
Sellers hereunder shall have terminated and (b) all Receivables purchased here-
under have been collected, and the proceeds thereof turned over to the Company
and all other amounts owing to the Company hereunder shall have been paid in
full or, if Receivables sold hereunder have not been collected, such Receivables
have become Defaulted Receivables and the Company shall have completed its
collection efforts in respect thereto; provided, however, that the indemnities
-------- -------
of the Sellers to the Company set forth in this Agreement shall survive such
termination and provided, further that, to the extent any amounts remain due and
-------- -------
owing to the Company hereunder, the Company shall remain entitled to receive any
collections on Receivables sold hereunder which have become Defaulted
Receivables after it shall have completed its collection efforts in respect
thereof.
SECTION 9.17. Construction of Agreement. (a) Each Seller hereby
--------------------------
grants to the Company a security interest in all of such Seller's right, title
and interest in, to and under the Receivables originated by it and Related
Property now existing and hereafter created, all monies due or to become due and
all amounts received with respect thereto and all "proceeds" thereof (including
Recoveries), to secure all of such Seller's obligations hereunder.
(b) This Agreement shall constitute a security agreement under
applicable law.
<PAGE>
62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the day and year first above written.
AMETEX FABRICS, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
THE BERKLINE CORPORATION,
Seller and Servicer,
by
--------------------------
Name:
Title:
DREXEL HERITAGE
FURNISHINGS INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
<PAGE>
63
DREXEL HERITAGE HOME
INSPIRATIONS, INC.,
Seller,
by
--------------------------
Name:
Title:
FURNISHINGS
INTERNATIONAL INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
HENREDON FURNITURE
INDUSTRIES, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
<PAGE>
64
LA BARGE, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
LEXINGTON FURNITURE
INDUSTRIES, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
MAITLAND-SMITH, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
<PAGE>
65
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
Seller and Servicer,
by
--------------------------
Name:
Title:
LFI RECEIVABLES CORPORATION,
by
--------------------------
Name:
Title:
<PAGE>
Exhibit A to the
Receivables Sale Agreement
--------------------------
[FORM OF
SELLER NOTE]
New York, New York
August 5, 1996
LFI RECEIVABLES CORPORATION, a Delaware corporation (the "Company"),
hereby promises to pay to the order of the Sellers listed on Schedule 1 to the
Receivables Sale Agreement described below the principal amount of this Seller
Note, determined as described below, together with interest thereon at a rate
per annum equal to One-Month LIBOR plus 2.50% (or, if less, the "Applicable
Percentage" with respect to "Eurodollar Loans" (as each such term is defined in
the Credit Agreement)) in lawful money of the United States of America.
Capitalized terms used herein but not defined herein shall have the meanings
assigned to such terms in the Receivables Sale Agreement dated as of August 5,
1996, among the Company, the Sellers named therein and the Servicers named
therein (as amended, supplemented or otherwise modified from time to time in
accordance with its terms, the "Receivables Sale Agreement") and in the Pooling
Agreement, dated as of August 5, 1996, among the Company, LFI Servicing
Corporation, as Master Servicer, and The Chase Manhattan Bank, a New York
banking corporation, as Trustee (as amended, supplemented or otherwise modified
from time to time in accordance with its terms, the "Pooling Agreement"). This
Seller Note is the Seller Note referred to in the Receivables Sale Agreement and
is subject to the terms and conditions thereof.
1. Principal Amount. The aggregate principal amount of this Seller
-----------------
Note at any time shall be calculated in accordance with Section 8.01 of the
Receivables Sale Agreement and shall be recorded by the Master Servicer (the
authority to so record such amounts being hereby granted to
<PAGE>
2
the Master Servicer) on the schedule annexed to and constituting a part of this
Seller Note.
2. Payments of Principal and Interest. (a) Principal on this Seller
-----------------------------------
Note may be prepaid at any time. Principal not prepaid shall be due and payable
on the Trust Termination Date (as defined in the Pooling Agreement).
(b) Payments of interest on this Seller Note shall be paid on each
Distribution Date (with respect to interest accrued and not paid as of the
preceding Distribution Date (or, in the case of the first Distribution Date, as
of the date on which this Seller Note is issued)) and on the Trust Termination
Date by depositing such payment in such account of the Sellers as the Sellers
may designate in writing; provided, however, that accrued interest on this
-------- -------
Seller Note which is not so paid may (to the maximum extent permitted by law) be
added to the principal amount of this Seller Note as indicated on the schedule
annexed to and constituting a part of this Seller Note. Notwithstanding the
foregoing, no payments of interest or principal may be made under this Seller
Note at the times and to the extent prohibited under the Subordination
Provisions and Certain Termination Events described in Sections 3 and 6 below.
3. Subordination Provisions. The Company covenants and agrees, and
-------------------------
the Sellers, by their acceptance of this Seller Note, likewise covenant and
agree, that the payment of all obligations of the Company to the Sellers under
this Seller Note from or with the proceeds (such proceeds being the "Proceeds")
of Receivables (as defined in the Pooling Agreement), Related Property (as
defined in the Pooling Agreement) or the LHL Demand Note (as defined in the
Pooling Agreement) (and any extensions, renewals, financing, refundings and
replacements of all or any part of such obligations) (the "Seller Subordinated
Debt") are hereby expressly subordinated in right of payment to the payment and
performance of the obligations of the Company to the Trustee for the benefit of
the Certificateholders (as
<PAGE>
3
defined in the Pooling Agreement) howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due (the "Senior Obligations") to the extent and in the
manner set forth in this paragraph including each of the following subparts:
(a) Insolvency Events; Priority of Senior Obligations; Payments Made
----------------------------------------------------------------
Directly to the Trustee. In the event of any bankruptcy, dissolution,
------------------------
winding up, liquidation, readjustment, reorganization or other similar
event relating to the Company, whether voluntary or involuntary, partial or
complete, and whether in bankruptcy, insolvency, receivership or other
similar proceedings, or upon an assignment for the benefit of creditors, or
any other marshalling of the assets and liabilities of the Company (each an
"Insolvency Event") or any sale of all or substantially all the assets of
the Company (except pursuant to the Pooling Agreement and any Supplement
thereto),
(i) the Senior Obligations shall first be paid and performed in
full and in cash before the Sellers shall be entitled to receive and
to retain any payment or distribution from or with the Proceeds in
respect of the Seller Subordinated Debt, whether of principal,
interest or otherwise; and
(ii) any payment or distribution from or with the Proceeds of any
kind (including cash or property arising from Proceeds which may be
payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the
Seller Subordinated Debt) in respect of the Seller Subordinated Debt
that otherwise would be payable or deliverable with respect to the
Seller Subordinated Debt directly or indirectly, by set-off or in any
other manner to the Sellers, shall
<PAGE>
4
be paid or delivered by the Person making such payment or delivery
(whether a trustee in bankruptcy, a receiver, custodian, liquidating
trustee or otherwise) directly to the Trustee on behalf of the
Certificateholders for application to (in the case of cash) or as
collateral for (in the case of noncash property or securities) the
payment of the Senior Obligations until the Senior Obligations shall
have been paid in full in cash.
(b) Payments Received by Sellers. In the event that any Seller
-----------------------------
receives any payment or other distribution of any kind or character arising
from Proceeds from the Company or from any other source whatsoever in
respect of the Seller Subordinated Debt after the commencement of an
Insolvency Event, such payment or other distribution shall be deemed to be
property of the Certificateholders and shall be received and held by such
Seller in trust for the Trustee on behalf of the Certificateholders and
shall be turned over by such Seller to the Trustee for the benefit of the
Certificateholders forthwith, until all Senior Obligations have been paid
and performed in full and in cash.
(c) Application of Payments. All payments and distributions arising
------------------------
from Proceeds received by the Trustee in respect of the Seller Subordinated
Debt, to the extent received in or converted into cash, may be applied by
the Trustee for the benefit of the Certificateholders (i) first to the
payment of any and all reasonable expenses (including reasonable attorneys'
fees and legal expenses) paid or incurred by the Trustee or any
Certificateholder in enforcing these Subordination Provisions, or in
endeavoring to collect or realize upon the Seller Subordinated Debt, and
(ii) any balance remaining therefrom shall be applied by the Trustee toward
the payment of the Senior Obligations in a manner determined by the Trustee
to be in accordance with the Pooling Agreement.
<PAGE>
5
(d) Sellers' Rights of Subrogation. Each Seller agrees that no
-------------------------------
payment or distribution to Certificateholders pursuant to these
Subordination Provisions shall entitle any Seller to exercise any right of
subrogation in respect thereof until the Senior Obligations shall have been
paid in full in cash. Each Seller agrees that these Subordination
Provisions herein shall not be affected by any action, or failure to act,
by any holder of Senior Obligations which results, or may result, in
affecting, impairing or extinguishing any right of reimbursement or
subrogation or other right or remedy of any Seller.
(e) Company's Obligations Absolute. The provisions of this paragraph
-------------------------------
are intended solely for the purpose of defining the relative rights with
respect to Proceeds of the Sellers, on the one hand, and the
Certificateholders, on the other hand. Nothing contained in these
provisions or elsewhere in this Seller Note is intended to or shall impair,
as between the Company, its creditors (other than the Certificateholders)
and the Sellers, the Company's obligation, which is unconditional and
absolute, to pay the Seller Subordinated Debt as and when the same shall
become due and payable in accordance with the terms hereof and of the
Receivables Sale Agreement or to affect the relative rights of the Sellers
and creditors of the Company (other than the Certificateholders); provided
--------
that any payments made by the Company pursuant to this subsection shall be
made solely from funds available to the Company which are not otherwise
needed to be applied to the payment of any amounts pursuant to any Pooling
and Servicing Agreements, shall be non-recourse other than with respect to
proceeds in excess of the proceeds to make such payment, and shall not
constitute a claim against the Company to the extent that insufficient
proceeds exist to make such payment.
(f) Avoided Payments. If, at any time, any payment (in whole or in
-----------------
part) made with respect to any
<PAGE>
6
Senior Obligations is rescinded or must be restored or returned by a
Certificateholder or the Trustee on behalf of the Certificateholders, the
provisions of this paragraph shall continue to be effective or shall be
reinstated, as the case may be, as though such payment had not been made.
(g) Subordination Not Affected by Certain Actions of
------------------------------------------------
Certificateholders or the Trustee. As between the Sellers, on the one
----------------------------------
hand, and the Certificateholders and the Trustee, on the other hand, each
of the Certificateholders or the Trustee may, from time to time, at its
sole discretion, without notice to the Sellers, and without waiving any of
its rights under these Subordination Provisions, take any or all of the
following actions: (i) retain or obtain an interest in any property to
secure any of the Senior Obligations; (ii) extend or renew for one or more
periods (whether or not longer than the original period), alter, increase
or exchange any of the Senior Obligations, or release or compromise any
obligation of any nature with respect to any of the Senior Obligations;
(iii) amend, supplement, amend and restate, or otherwise modify any
Transaction Document; and (iv) release its security interest in, or
surrender, release or permit any substitution or exchange for all or any
part of any rights or property securing any of the Senior Obligations.
(h) Waiver of Notice. By its acceptance hereof, each Seller hereby
-----------------
waives: (i) notice of acceptance of the provisions of this paragraph by any
of the Certificateholders or the Trustee; (ii) notice of the existence,
creation, non-payment or non-performance of all or any of the Senior
Obligations; and (iii) all diligence in enforcement, collection or
protection of, or realization upon, the Senior Obligations or any security
therefor.
<PAGE>
7
4. Restrictions on Assignment. Neither this Seller Note, nor any
---------------------------
right of the Sellers to receive payments hereunder, shall be assigned,
transferred, exchanged, pledged, hypothecated, participated or otherwise
conveyed.
5. No Bankruptcy Petition. Each Seller covenants and agrees that,
-----------------------
prior to the date which is one year and one day after the date of termination of
the Receivables Sale Agreement pursuant to Section 9.16 thereof, it will not
institute against, or join any other Person in instituting against, the Company
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state bankruptcy or
similar law.
6. Certain Termination Events. During the continuance of any Early
---------------------------
Amortization Event:
(a) the Company shall cease making any payments to the Sellers under
this Seller Note;
(b) the Trustee (on behalf of the Certificateholders) may demand, sue
for, collect and receive every payment or distribution of any kind made in
respect of the Seller Subordinated Debt and file claims and proofs of claim
and take such other action (including enforcing any security interest or
other lien securing payment of the Seller Subordinated Debt) as the Trustee
(on behalf of the Certificateholders) may deem necessary for the exercise
or enforcement of any of the rights or interests of Certificateholders;
provided that in the event the Trustee takes such action, it shall apply
--------
all proceeds first to the payment of costs under this Seller Note, then to
the payment of the Senior Obligations and any surplus proceeds remaining
thereafter to be paid over to whosoever may be lawfully entitled thereto;
and
<PAGE>
8
(c) each Seller shall promptly take such action as the Trustee (on
behalf of the Certificateholders) may request (i) to file appropriate
claims or proofs of claim in respect of the Seller Subordinated Debt;
(ii) to execute and deliver to the Trustee (on behalf of the
Certificateholders) such powers of attorney, assignments, or other
instruments as the Trustee may request in order to enable it to enforce any
and all claims with respect to, and any security interests and other liens
securing payment of, the Seller Subordinated Debt, and (iii) to collect and
receive any and all payments or distributions which may be payable or
deliverable upon or with respect to the Seller Subordinated Debt for
account of the Trustee (on behalf of the Certificateholders).
THIS SELLER NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ANY CONFLICT OF LAW
PRINCIPLES.
LFI RECEIVABLES CORPORATION,
by
____________________________
Name:
Title:
<PAGE>
Schedule 1 to
Seller Note
-----------
Subordinated Loans and Payments of Principal
--------------------------------------------
Amount of Unpaid
Amount of Principal Principal Notation
Date Loans Repaid Balance Made By
---------- ---------- ---------- ---------- ----------
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
<PAGE>
2
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
<PAGE>
Exhibit B to the
Receivables Sale Agreement
--------------------------
[FORM OF ADDITIONAL SELLER/SERVICER SUPPLEMENT]
SUPPLEMENT, dated [ ], to (i) the Receivables Sale
Agreement, dated as of August 5, 1996, (the "Receivables Sale Agreement"), among
LFI Receivables Corporation, the Sellers named therein and the Servicers named
therein and (ii) the Servicing Agreement, dated as of August 5, 1996 (the
"Servicing Agreement"), among LFI Receivables Corporation, LFI Servicing
Corporation, as Master Servicer, the Servicers party thereto and The Chase
Manhattan Bank, as Trustee.
W I T N E S S E T H:
WHEREAS, the Receivables Sale Agreement provides that any wholly
owned, direct or indirect Subsidiary of Furnishings International Inc., although
not originally a Seller thereunder, may become a Seller under the Receivables
Sale Agreement upon the satisfaction of each of the conditions precedent set
forth in Sections 3.05 and 9.13 of the Receivables Sale Agreement,
Section 2.08(m) of the Pooling Agreement and any applicable provisions in any
supplement, including Section 11.16 of the Series 1996-A Supplement dated as of
August 5, 1996;
WHEREAS, the Servicing Agreement provides that any wholly owned,
direct or indirect, Subsidiary of Furnishings International Inc., although not
originally a Servicer thereunder, may become a Servicer under the Servicing
Agreement upon, (i) the delivery to the Company of a supplement in substantially
the form of this Supplement and (ii) the satisfaction of each of the conditions
precedent set forth in Sections 3.05 of the Receivables Sale Agreement; and
WHEREAS, the undersigned was not an original Seller under the
Receivables Sale Agreement and the Seller Note or an original Servicer under the
Servicing Agreement
<PAGE>
2
but now desires to become a Seller and a Servicer, respectively, thereunder.
<PAGE>
3
NOW, THEREFORE, the undersigned hereby agrees as follows:
The undersigned agrees to be bound by all of the provisions of each of
the Receivables Sale Agreement and the Servicing Agreement applicable to a
Seller and a Servicer, respectively, thereunder and agrees that it shall, on the
date this Supplement is accepted by the Company and the Trustee, on behalf of
the Certificateholders, become (a) in the case of the Receivables Sale
Agreement, a Seller and (b) in the case of the Servicing Agreement, a Servicer,
for all purposes of the Receivables Sale Agreement and the Servicing Agreement,
respectively, to the same extent as if originally a party thereto.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
[Insert name of Seller/Servicer]
by
________________________________
Title:
Accepted as of the date
first above written:
LFI RECEIVABLES COMPANY
by
__________________________
Title:
<PAGE>
4
Acknowledged as of the date
first above written:
THE CHASE MANHATTAN BANK, as Trustee, on
behalf of the Certificateholders,
by
__________________________
Title:
<PAGE>
Schedule 1 to the
Receivables Sale Agreement
--------------------------
Sellers and Servicers 1/
--------------------- -
Ametex Fabrics, Inc.
The Berkline Corporation
Drexel Heritage Furnishings Inc.
Drexel Heritage Home Inspirations, Inc.
Furnishings International Inc.
Henredon Furniture Industries, Inc.
LaBarge, Inc.
Lexington Furniture Industries, Inc.
Maitland-Smith, Inc.
Robert Allen Fabrics, Inc.
Universal Furniture Industries, Inc.
--------------------
1/ Each Seller will service the Receivables originated
-
by it, except that Drexel Heritage Furnishings Inc. will
service the Receivables originated by Drexel Heritage Home
Inspirations, Inc. and Lineage Home Furnishings, Inc. (which
will be merged into Furnishings International Inc. upon
closing).
<PAGE>
Schedule 2 to the
Receivables Sale Agreement
--------------------------
Receivables
-----------
Delivered or transmitted via computer tape, diskette or data transmission
pursuant to Section 3.01(iv).
<PAGE>
Schedule 3 to the
Receivables Sale Agreement
--------------------------
Lockboxes
---------
<PAGE>
<TABLE><CAPTION>
Schedule 4 to the
Receivables Sale Agreement
--------------------------
Jurisdiction of Location of Chief Office Where
Seller Incorporation Executive Office Records are Kept
------ --------------- ----------------- ----------------
<S> <C> <C> <C>
Ametex Fabrics, Delaware 120 Forbes Blvd. Same
Inc. Mansfield, MA
02048
The Berkline Delaware One Berkline Same
Corporation Drive
P.O. Box 6003
Morristown, TN
37815
Drexel Heritage New York 101 North Main Same
Furnishings Street
Inc. Drexel, NC 28619
Drexel Heritage North Carolina 101 North Main Same
Home Street
Inspirations, Drexel, NC 28619
Inc.
Furnishings Delaware 1300 National Same 1/
-
International Highway
Inc. Thomasville, NC
27360
Henredon North Carolina 400 Henredon Road Same
Furniture Morganton, NC
Industries, 28655
Inc.
LaBarge, Inc. Michigan 300 East 40th Same
Street
P.O. Box 1769
Holland, MI
49422-1769
Lexington North Carolina 411 S. Salisbury Same
Furniture Lexington, NC
Industries, 27292
Inc.
</TABLE>
--------------------
1/ The same, except that i) the Lineage Home Furnishings
-
division's records are kept at 101 North Main Street, Drexel, NC 28619
and (ii) the Contract Furnishings division's records are kept at 1515
Green Drive, Thomasville, NC 27360.
<PAGE>
2
<TABLE><CAPTION>
Jurisdiction of Location of Chief Office Where
Seller Incorporation Executive Office Records are Kept
------ --------------- ----------------- ----------------
<S> <C> <C> <C>
Maitland-Smith, North Carolina 4000 Lineage Same
Inc. Court
Suite 201
High Point, NC
27265
Robert Allen Delaware 55 Cabot Blvd. Same
Fabrics, Inc. Mansfield, MA
02048
Universal Delaware 2622 Uwharrie Same
Furniture Road
Industries, High Point, NC
Inc. 27263
</TABLE>
<PAGE>
Schedule 5 to the
Receivables Sale Agreement
--------------------------
Names
-----
Trade, "Doing Business As"
Seller or Assumed Name[s]
------ -------------------------
Ametex Fabrics, Inc. Ametex Fabrics, Inc. Contract
Division
The Berkline Corporation Motionworks
Drexel Heritage Furnishings Inc. D-H Retail Space, Inc.
Drexel
Frederick Edward
Drexel Heritage Advertising Inc.
Heritage
Lineage
Drexel Heritage Home None
Inspirations, Inc.
Furnishings International Inc. Lineage Home Furnishings, Inc.
Masco Home
Furnishings, Inc.
Henredon Furniture Industries, Inc. Henredon
Henredon Acquisition
Henredon Furniture
Henredon/Ralph Lauren
Henredon Transportation, Inc.
Henredon Upholstery
N.C. Schoonbeck
La Barge, Inc. Entree
La Barge Mirrors, Inc.
La Barge/Marbro Factory
Outlet Store
LMI Advertising
Marbro Lamp
Lexington Furniture Industries, Inc. Henry Link
Maitland-Smith, Inc. None
<PAGE>
2
Trade, "Doing Business As"
Seller or Assumed Name[s]
------ -------------------------
Robert Allen Fabrics, Inc. American Textiles
Robert Allen Canada, Inc.
Robert Allen of New York
Robert Allen Fabrics, Inc. Contract
Division
Robert Allen Fabrics of Cleveland
Robert Allen Fabrics of Houston
Universal Furniture Industries, Inc. Bench Craft
Blue Mountain Trucking
Carrington Hall
Harris Scott
Norfolk Veneer Mills
Simply Together
Universal Bedroom Furniture
Universal Bedroom Furniture Ltd.
Universal Dining Room Furniture,
Ltd.
Universal Flooring Ltd.
Universal Occasional Furniture
Limited
Universal Upholstery
Woodmaster
<PAGE>
Schedule 6 to the
Receivables Sale Agreement
--------------------------
Discounted Percentage
---------------------
All terms defined or referenced in the Receivables Sale Agreement, the
Pooling Agreement or a Supplement and not otherwise defined or referenced herein
are used herein as therein defined or referenced.
The Discounted Percentage applicable to the Receivables purchased on any date
from any Seller shall equal (a) until the date which is 90 days after the
initial Effective Date, 97.96% and (b) thereafter, the percentage obtained from
the following formula:
100% - (A + B + C + D)
all determined by the Company as of the related Payment Date,
Where
A = Adjusted Loss Reserve Percentage, which as of such Payment Date will equal
the ratio obtained by dividing (a) Charged-Off Receivables (net of
recoveries in respect of Charged-Off Receivables) with respect to such
Seller during the six-fiscal-month period immediately preceding the
Settlement Report Date most recently preceding such Payment Date by (b) two
times the aggregate amount of Collections during the three-fiscal-month
period immediately preceding the Settlement Report Date most recent to such
Payment Date with respect to Receivables originated by such Seller.
B = Adjusted Carrying Cost Reserve Percentage, which as of such Payment Date
will equal the amount obtained by dividing (a) the product of (i) 1.5,
(ii) Days Sales Outstanding and (iii) the ABR plus 2% by (b) 365.
C = The Servicing Fee Percentage divided by 360.
----------
<PAGE>
2
D = Processing Expense Reserve Percentage, which will equal 1/2% and reflects
the cost of the Company's overhead, including costs of processing the
purchase of Receivables and other normal operating costs and a reasonable
profit margin.
None of the elements of the above-referenced formula, in respect of any purchase
of Receivables, will be adjusted following the related Payment Date.
With respect to each calculation set forth above with respect to a Settlement
Report Date, such calculation as calculated on such Settlement Report Date and
included in the applicable Monthly Settlement Statement shall remain in effect
from and including the related Settlement Report Date to but excluding the
following Settlement Report Date.
=======================
STOCKHOLDERS' AGREEMENT
among
FURNISHINGS INTERNATIONAL INC.
and
ITS STOCKHOLDERS
=======================
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS..................................................................... 1
ARTICLE I
CERTAIN DEFINITIONS..................................................... 2
1.1 Defined Terms...................................................... 2
ARTICLE II
RESTRICTIONS ON TRANSFERS .............................................. 24
2.1 Restrictions Generally; Securities Act............................. 24
2.2 Legend............................................................. 24
2.3 Limitations on Repurchases, Dividends, Etc......................... 24
2.4 Transfer Restrictions.............................................. 25
2.5 Right of First Refusal............................................. 27
2.6 Involuntary Transfers.............................................. 29
2.7 Drag-Along Rights.................................................. 31
2.8 Special Right of First Offer....................................... 34
ARTICLE III
RIGHTS OF INCLUSION..................................................... 36
3.1 Rights of Inclusion................................................ 36
3.2 Article III Sales.................................................. 39
ARTICLE IV
REPURCHASE OF SECURITIES................................................ 40
4.1 Sale Event......................................................... 40
4.2 Purchase Price..................................................... 41
4.3 Closing............................................................ 42
4.4 Postponement....................................................... 42
ARTICLE V
CORPORATE GOVERNANCE.................................................... 43
5.1 Board of Directors................................................. 43
5.2 Removal............................................................ 45
5.3 Vacancies.......................................................... 46
5.4 Weighted Board Voting.............................................. 46
5.5 Special Approval Rights............................................ 47
5.6 Committees of the Board; Subsidiary Boards......................... 47
5.7 Observer's Rights.................................................. 48
5.8 Action by Written Consent of Stockholders.......................... 49
5.9 Regulatory Right................................................... 49
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5.10 Post-Qualifying Offering Board..................................... 49
ARTICLE VI
CERTAIN COVENANTS OF THE PARTIES........................................ 50
6.1 Registration....................................................... 50
6.2 Management Stockholders; Additional Stockholders................... 50
6.3 Stockholder List; Certain Notices.................................. 51
6.4 Regulatory Compliance Cooperation.................................. 51
6.5 Rights Offering.................................................... 52
ARTICLE VII
MISCELLANEOUS........................................................... 53
7.1 Governing Law...................................................... 53
7.2 Entire Agreement; Amendments....................................... 53
7.3 Term............................................................... 54
7.4 Certain Actions.................................................... 54
7.5 Inspection......................................................... 55
7.6 Compliance with Regulations........................................ 55
7.7 Waiver............................................................. 56
7.8 Successors and Assigns............................................. 56
7.9 Remedies........................................................... 57
7.10 Income Tax Withholding............................................. 58
7.11 Invalid Provisions................................................. 58
7.12 Headings........................................................... 58
7.13 Further Assurances................................................. 58
7.14 Gender............................................................. 58
7.15 Counterparts....................................................... 59
7.16 Payment............................................................ 59
7.17 Notices............................................................ 59
7.18 Consent to Jurisdiction and Service of Process..................... 61
7.19 Waiver of Jury Trial............................................... 62
7.20 Omnibus Signature Page............................................. 62
Exhibit A Form of Joinder Agreement
Exhibit B Legends
Exhibit C Directors
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Stockholders' Agreement (this "Agreement") dated as of August 5, 1996 by
and among FURNISHINGS INTERNATIONAL INC., a Delaware corporation (the
"Company"), MASCO Corporation, a Delaware corporation ("Masco"), 399 Venture
Partners, Inc., a Delaware corporation ("399"), Associated Madison Companies,
Inc., a Delaware corporation ("AMC"), TRV Employees Fund, L.P., a Delaware
limited partnership ("TRV"), Greenwich Street Capital Partners, L.P., a Delaware
limited partnership ("Greenwich Street"), GSCP Offshore Fund Ltd., a British
Virgin Islands corporation ("GSCP"), The Travelers Insurance Company, a
Connecticut corporation ("Travelers"), The Travelers Life and Annuity Company, a
Connecticut corporation ("TLAC" and together with 399, AMC, TRV, Greenwich
Street, GSCP, Travelers and TLAC, each individually, an "Institutional
Stockholders Group Member"), and each of the individuals whose name appears on
the omnibus signature pages hereto (individually, a "Management Group Member"
and collectively, the "Management Group"). Capitalized terms are used as defined
in Article I hereto.
RECITALS
WHEREAS, the Company and Masco have entered into an Acquisition Agreement
dated as of March 29, 1996 as amended by Amendment No. 1 thereto dated as of
June 21, 1996 (as so amended and as may be further amended, supplemented or
modified from time to time, the "Acquisition Agreement"), pursuant to which the
Company is acquiring all of the issued and outstanding capital stock of the HFG
Companies (as such term is defined in the Acquisition Agreement);
WHEREAS, at the Closing under the Acquisition Agreement (the "Closing") and
immediately prior to the execution and delivery of this Agreement (but after the
effectiveness of the mergers of each of Masco Home Furnishings, Inc. and Lineage
Furnishings, Inc. into the Company), the Company has amended and restated its
Certificate of Incorporation;
WHEREAS, in connection with the consummation of the transactions
contemplated by the Acquisition Agreement and pursuant to the Subscription
Agreements, the Company will issue shares of its capital stock to the
Institutional Stockholders, the Masco Stockholders and the Management
Stockholders, Wayne B. Lyon will sell shares of the Company's capital stock to
certain Management Stockholders pursuant to the Stock Purchase Agreements and
Masco will sell shares of the Company's capital stock to certain Management
Stockholders pursuant to the Stock Purchase Agreements all as set forth in Annex
I hereto;
WHEREAS, the Company, 399, Masco and certain other stockholders named
therein (collectively, the "Existing Stockholders") and the Company are parties
to a Securities Purchase and Holders Agreement dated as of November 28, 1995, as
amended by Amendment No. 1 dated as of March 4, 1996, Amendment No. 2 dated as
of March 22, 1996, and Amendment
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Stockholders' Agreement
No. 3 dated as of the date hereof (as so amended and as may be further amended,
supplemented or modified from time to time, the "Share Purchase Agreement"); and
WHEREAS, pursuant to the Certificate of Incorporation, the shares of
capital stock of the Company authorized, issued and outstanding as of the date
hereof have been reclassified into shares of Class D Common; and
WHEREAS, each of the Stockholders and the Company desire to enter into this
Agreement to regulate certain aspects of their relationship and to provide for,
among other things, restrictions on the transfer or other disposition of
securities of the Company and matters relating to the corporate governance of
the Company and its Subsidiaries.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Defined Terms.
(a) The following capitalized terms, when used in this Agreement, have
the respective meanings set forth below (such definitions to be equally
applicable to both singular and plural forms of the terms defined):
"Additional Management Stockholder" means an Additional Stockholder
who is an employee, officer or director of the Company or any of its
subsidiaries.
"Additional Stockholder" means any Person (other than any
Institutional Stockholder, Masco Stockholder or Management Stockholder), to
whom the Company issues Restricted Securities or Restricted Preferred
Securities after the date hereof other than pursuant to a public offering
registered under the Securities Act, in each case who has executed a
Joinder Agreement as an Additional Stockholder pursuant to Section 6.2, and
its direct and indirect Permitted Transferees, so long as any such Person
shall hold (directly or indirectly through the Voting Trust) Restricted
Securities or Restricted Preferred Securities.
"Affiliate" means, with respect to any Person, any other Person that
controls, is controlled by or is under common control with such Person. For
the purposes of this definition, "control" (including, with its correlative
meanings, the terms "controlled by" and "under common control with"), as
used with respect to any Person, shall mean the
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Stockholders' Agreement
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of securities, by contract or otherwise. For purposes of this
Agreement, employees, officers and directors of 399 and its Affiliates
shall be "Affiliates" of 399.
"Affirmative Board Vote" means the affirmative vote of at least a
majority of the weighted votes of the Board, which majority shall include,
unless the Institutional Stockholders have elected in writing not to
designate the Institutional Directors, at least one-half of the weighted
votes of the Institutional Directors.
"Associate" means, with respect to any Person, (i) any trust or other
estate in which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity and
(ii) any relative or spouse of such Person, or any relative of such spouse,
who has the same home as such Person.
"Board" means the Board of Directors of the Company.
"Call" means the right of the Company to purchase Restricted
Securities and Restricted Preferred Securities from 399 pursuant to the
Call Agreement dated as of the date hereof between 399 and the Company.
"Cause" means, with respect to a Management Stockholder or an
Additional Management Stockholder, (i) a material breach by such Management
Stockholder of this Agreement or any employment, non-compete or
confidentiality agreement with the Company or any of its Subsidiaries to
which such person is a party (including without limitation any Management
Subscription Agreement), if such breach has continued unremedied for a
period of twenty-one (21) days following notice from the Company (unless
the Company reasonably determines in good faith that such breach is not
capable of remedy or unless under such employment agreement or
confidentiality agreement, as a result of such breach, the Company may
terminate the employment of such person without an opportunity to remedy
such breach) or (ii) the commission by such person of a felony, a crime
involving moral turpitude or any other willful act causing material harm to
the business, financial condition, standing or reputation of the Company or
any of its Subsidiaries.
"Certificate of Incorporation" means the Restated Certificate of
Incorporation of the Company, as amended and restated as of the Closing
Date and as the same thereafter may be amended or restated from time to
time.
"Change of Control" means the occurrence of
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Stockholders' Agreement
(i) a sale in one or more transactions of more than 66 2/3% of
the consolidated assets of the Company and its Subsidiaries,
(ii) any transaction as a result of which the 399 Stockholders
cease to own at least ten percent (10%) of the HFG Common Stock on a
Fully-Diluted Basis,
(iii) any transaction as a result of which any Person other than
an Institutional Stockholder, a Masco Stockholder or a Management
Stockholder (or any group consisting of such Persons who (x) shall
have agreed in writing (other than pursuant to this Agreement) to act
as a group with respect to the acquisition or voting of securities of
the Company or the power to designate and elect members of the Board,
with a copy of such agreement having been provided to the Company, (y)
shall have advised the Company that such group is acting as a group
with respect to the acquisition or voting of securities of the Company
or the power to designate and elect members of the Board, or (z) in
connection with the purchase of securities of the Company, shall have
filed or notified the Company that it will file as a group, a Schedule
13D or 13G) has the power to designate and elect members of the Board
with weighted votes constituting a majority of the weighted votes on
the Board (or, if no such weighting is then in effect, the power to
designate and elect a majority of the members of the Board),
excluding, however, any such Person or group that would not have held
such power if it had not acquired from a Masco Stockholder securities
of the Company having rights and privileges conferring such power,
other than by a transfer from a Masco Stockholder through the exercise
of Rights of Inclusion under Article III in connection with a transfer
by the 399 Stockholders, provided, that no Change of Control under the
circumstances set forth in this clause (iii) shall be deemed to have
occurred under any circumstances solely as a result of the acquisition
by any such Person or group of the right to designate and elect the
Management Directors and the Masco Director, or
(iv) the 399 Stockholders (x) have sold in one or more
transactions to Persons other than their Permitted Transferees in
excess of 66 2/3% of the HFG Common Stock, on a Fully-Diluted Basis
(excluding HFG Common Stock which is subject to transfer by 399
Stockholders to the Company pursuant to the Call), owned by the 399
Stockholders on the Closing Date (subject to adjustment for any stock
dividends, stock splits, combinations, reclassifications, mergers,
consolidations and the like) and (y) following such sales, the
percentage of HFG Common Stock on a Fully-Diluted Basis owned by the
399 Stockholders on the date of the last of such sales is less than
the percentage thereof owned by the Masco Stockholders on the date of
the last of such sales.
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Stockholders' Agreement
For purposes of this definition of Change of Control only, the term "399
Stockholders" and the term "Permitted Transferees" do not include any
Permitted Transferee of a 399 Stockholder pursuant to clauses (iii) (C) and
(iii) (D) of the definition of Permitted Transferee (unless such Permitted
Transferee is, with respect to 399, a Person described in clauses (iii)(A)
and (iii)(B) of such definition).
"Class A Common" means the Company's Class A Common Stock, par value
$.01 per share, consisting of four series of Class A Common Stock, the
Series A-1 Common Stock, the Series A-2 Common Stock, the Series A-3 Common
Stock and the Series I Common Stock, and any securities into which such
Class A Common shall have been changed or any securities resulting from any
reclassification or recapitalization of such Class A Common.
"Class B Common" means the Company's Class B Common Stock, par value
$.01 per share, consisting of four series of Class B Common Stock, the
Series B-1 Common Stock, the Series B-2 Common Stock, the Series B-3 Common
Stock and the Series II Common Stock, and any securities into which such
Class B Common shall have been changed or any securities resulting from any
reclassification or recapitalization of such Class B Common.
"Class C Common" means the Company's Class C Common Stock, par value
$.01 per share, and any securities into which such Class C Common shall
have been changed or any securities resulting from any reclassification or
recapitalization of such Class C Common.
"Class D Common" means the Company's Class D Common Stock, par value
$.01 per share, and any securities into which such Class D Common shall
have been changed or any securities resulting from any reclassification or
recapitalization of such Class D Common.
"Class D Equity Equivalents" means securities exercisable, convertible
or exchangeable for or into Class D Common.
"Closing Date" has the meaning ascribed thereto in the Acquisition
Agreement.
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering
the Securities Act or the Exchange Act.
"Common Stock" means the Class A Common, the Class B Common, the Class
C Common and the Class D Common, any securities into which such Class A
Common,
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Stockholders' Agreement
the Class B Common, the Class C Common or the Class D Common shall have
been changed, and all other securities of any class or classes (however
designated) of the Company, the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution,
liquidation or winding-up, either to all or to a share of the balance of
payments upon such dissolution, liquidation or winding-up.
"Credit Agreement" means the Credit Agreement dated as of the date
hereof among the Company, LIFESTYLE FURNISHINGS INTERNATIONAL LTD., the
Subsidiary Borrowers named therein, the Lenders named therein, The Chase
Manhattan Bank, as Administrative Agent and Collateral Agent, and Chase
Manhattan Bank Delaware, as Issuing Bank.
"Debentures" means the Company's Junior Subordinated Debentures issued
or issuable in exchange for shares of the Restricted Preferred Securities
or in payment of interest on any such Junior Subordinated Debentures
(including Junior Subordinated Debentures so issued in payment of
interest).
"Equity Equivalents" means securities exercisable, convertible or
exchangeable for or into HFG Common Stock, including without limitation the
Series B Preferred and the Series C Preferred.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the Commission
thereunder.
"Fair Market Value" means (i) with respect to each share of Common
Stock as of a particular date, the average of the closing prices of such
Common Stock on the New York Stock Exchange, Inc. on each of the thirty
(30) trading days next preceding such date or, if such Common Stock is not
then listed or admitted to trading on such exchange, on the principal
national securities exchange on which such Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any
national securities exchange, on the Nasdaq National Market, or if such
Common Stock is not then listed or admitted to trading on a national
securities exchange or quoted on the Nasdaq National Market, the average of
the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected by the
Company or if no such prices are available, the fair market value per share
as determined in good faith by the Board acting by Affirmative Board Vote;
and (ii) with respect to Restricted Preferred Securities, the fair market
value per share as determined in good faith by the Board acting by
Affirmative Board Vote.
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Stockholders' Agreement
"Fully-Diluted Basis" means, (A) with respect to the calculation of
the number of shares of HFG Common Stock, (i) all shares of HFG Common
Stock outstanding at the time of determination and (ii) all shares of HFG
Common Stock issuable upon the exercise, conversion or exchange of Equity
Equivalents and (B) with respect to the calculation of the number of shares
of Class D Common, (i) all shares of Class D Common outstanding at the time
of determination and (ii) all shares of Class D Common issuable upon the
exercise, conversion or exchange of Class D Equity Equivalents.
"Funded Debt" means, without duplication, with respect to any Person
(i) all indebtedness for borrowed money or for the deferred purchase price
of property, (ii) the face amount of all letters of credit, banker's
acceptances and other credit facilities issued for the account of such
Person and, without duplication, all drafts drawn thereunder, (iii) all
indebtedness secured by any lien on any property owned by such Person, to
the extent attributable to such Person's interest in such property, even
though such Person has not assumed or become liable for the payment
thereof, (iv) lease obligations of such Person which, in accordance with
generally accepted accounting principles, should be capitalized, (v)
obligations with respect to any conditional sale agreement or title
retention agreement and (vi) guarantees by such Person of the Funded Debt
of another Person; but excluding in each case trade and other accounts
payable in the ordinary course of business.
"HFG Common Stock" means the Common Stock, but excluding the Class D
Common.
"HFG Restricted Securities" means the Restricted Securities, but
excluding the Class D Common and Class D Equity Equivalents.
"Institutional Stockholders" means each Institutional Stockholder
Group Member and their respective direct and indirect Permitted
Transferees, so long as any such Person shall hold Restricted Securities or
Restricted Preferred Securities.
"Involuntary Transfer" means, with respect to Restricted Securities or
Restricted Preferred Securities of any Stockholder, any involuntary
Transfer or Transfer by operation of law of such Restricted Securities or
Restricted Preferred Securities (other than to a Permitted Transferee of
such Stockholder) by or in which such Stockholder shall be deprived or
divested of any right, title or interest in or to Restricted Securities or
Restricted Preferred Securities, including without limitation by seizure
under levy of attachment or execution, by foreclosure upon a pledge, in
connection with any voluntary or involuntary bankruptcy or other court
proceeding to a debtor in possession, trustee in bankruptcy or receiver or
other officer or agency, pursuant to any statute pertaining to escheat or
abandoned property, pursuant to a divorce or separation agreement or a
final decree of a court in a divorce action, upon or occasioned by the
incompetence of any
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Stockholders' Agreement
Stockholder and to a legal representative of any Stockholder; provided that
"Involuntary Transfer" shall not include any Transfer effected pursuant to
the exercise by Institutional Stockholders of Drag-Along Rights under
Section 2.7 hereof, any Transfer effected pursuant to Article IV hereof,
any Transfer to the Company solely resulting from a reclassification of the
capital stock of the Company or a recapitalization of the Company and any
Transfer effected as a result of a merger of the Company with or into any
other person.
"Joinder Agreement" means a Joinder Agreement substantially in the
form attached hereto as Exhibit A.
"Lien" means any lien, claim, option, charge, encumbrance, security
interest or other adverse claim of any kind.
"Management Note" means a promissory note (i) issued by the Company
pursuant to Section 4.2 in payment of the purchase price for shares of
Management Securities purchased pursuant to Section 4.1, (ii) bearing
interest at the rate of 12% per annum, compounded semiannually (subject to
reduction as may be required to preserve the deductibility of interest for
tax purposes), (iii) pursuant to which payments of principal and interest
may be made only to the extent permitted from time to time under any
agreement evidencing Funded Debt of the Company on any of its direct or
indirect subsidiaries, (iv) subordinated in right of payment to the Senior
Notes and all other "Senior Indebtedness" as defined in the Debentures and
(v) which otherwise ranks pari passu in right of payment with the
Debentures.
"Management Securities" means all shares of Restricted Securities and
Restricted Preferred Securities issued to or acquired by Management
Stockholders and Additional Management Stockholders, unless otherwise
agreed between the Company and any Management Stockholder or Additional
Management Stockholder.
"Management Stockholders" means the Management Group and their
respective direct and indirect Permitted Transferees, so long as any such
Person shall hold (directly or indirectly through the Voting Trust)
Restricted Securities or Restricted Preferred Securities.
"Management Subscription Agreement" means any Management Subscription
Agreement dated as of the date hereof between the Company and a member of
the Management Group.
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Stockholders' Agreement
"Masco Approval Transaction" means:
(i) any amendment to or modification or repeal of any provision
of the Certificate of Incorporation or By-Laws of the Company (whether
effected directly or through a merger or other transaction (other than
any merger or other transaction which would result in a Change of
Control (including any merger or other transaction to be effected
pursuant to the exercise of the Drag-Along Right))) which (A)
disparately (relative to other holders of the same class or series of
securities) and adversely affects the rights and privileges of any HFG
Restricted Securities or Restricted Preferred Securities held by a
Masco Stockholder or which would disparately (relative to other
holders of the same class or series of securities) and adversely
affect any rights or benefits of a Masco Stockholder under this
Agreement; provided, however, that nothing contained in this clause
(A) shall restrict the ability of the Company (I) to increase the
authorized shares of its Common Stock, (II) to so amend, modify or
repeal (subject to the rights and privileges set forth in the Series
A-1 Preferred and Series B Preferred and in clause (B) below) to the
extent customary and reasonably necessary in order to facilitate a
Qualifying Offering and to become effective upon the closing of such
Qualifying Offering, (III) to authorize the issuance of any preferred
stock ranking junior to the Series A-1 Preferred or (IV) to so amend,
modify or repeal in connection with the exercise of the Drag-Along
Right, or (B) has the primary purpose of hindering an unsolicited
takeover of the Company (e.g., fair price provision, staggered board,
poison pills and similar provisions);
(ii) any transaction between (x) the Company or any of its
Subsidiaries (other than a Simmons Entity) on the one hand, and (y)
one or more of its Stockholders (or any Affiliate of any Stockholder
other than the Company or any of its Subsidiaries (other than a
Simmons Entity)) other than a Masco Stockholder (including its
Permitted Transferees and its and their Affiliates) on the other hand,
except that no such approval shall be required for the following:
(A) transactions with Stockholders or their Affiliates
contemplated or required by (X) this Agreement, the Registration
Rights Agreement, the Certificate of Incorporation or the By-laws
of the Company (including any transaction involving the
Drag-Along Right or a Rights Offering under Section 6.5) or (Y)
any other agreement approved by the Board without violation of
the requirements of Section 5.5(b),
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Stockholders' Agreement
(B) transactions with Stockholders in their capacity as
Stockholders where all stockholders of the Company receive pro
rata treatment in accordance with their rights and privileges,
(C) transactions with any Management Stockholder (other than
transactions resulting in the issuance of shares of HFG Common
Stock or Equity Equivalents to the Management Stockholders
representing in the aggregate more than five percent (5%) of the
outstanding shares of HFG Common Stock on a Fully-Diluted Basis,
but excluding from such five percent (5%) calculation any
reissuance of shares of HFG Common Stock to any Management
Stockholder following repurchase by the Company pursuant to
Article IV),
(D) transactions with any Stockholder or any of its
Affiliates if (x) such Stockholder or one or more of its
Affiliates is a financial institution (other than an
Institutional Stockholder or an Affiliate thereof) which holds
preferred stock of the Company or indebtedness of the Company or
its subsidiaries having an original stated value or original
principal amount in excess of $10,000,000 and (y) such
Stockholder, together with its Affiliates, hold(s) shares of HFG
Common Stock or Equity Equivalents which do not represent more
than fifteen percent (15%) of the HFG Common Stock on a
Fully-Diluted Basis,
(E) transactions with a Stockholder (other than an
Institutional Stockholder or an Affiliate thereof) who (x) has
acquired HFG Common Stock or Equity Equivalents in connection
with an arm's-length acquisition by the Company or one of its
Subsidiaries of a company or business and (y) holds shares of HFG
Common Stock or Equity Equivalents which do not represent more
than fifteen percent (15%) of the HFG Common Stock on a
Fully-Diluted Basis, or
(F) any transaction concerning the Class D Common and not
involving any other class of capital stock;
(iii) any of the following:
(I) the amendment or modification by the Company or its
subsidiaries in any material respect of (A) the definition of the
term "Excess Cash Flow," which amendment or modification would
cause such definition to be more limiting or restrictive or (B)
the "Restricted
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Stockholders' Agreement
Payments" covenants which restrict the ability of the Company's
subsidiaries to distribute funds to the Company in order to make
current interest payments in cash when due under the terms of the
Senior Notes, which amendment or modification would cause such
covenant to be more restrictive, as such definition is defined
in, and as such covenants are set forth in, the Credit Agreement
(as in effect on the Closing Date) or in any indenture pertaining
to the Senior Subordinated Notes (as in effect on the Closing
Date), it being understood that the foregoing shall not be deemed
to require the affirmative vote of the Masco Director for the
amendment or modification of any other covenants in the Credit
Agreement or such indenture,
(II) the entry by the Company or any of its Subsidiaries
into any agreement or instrument which contains covenants
expressly restricting the ability of the Company's Subsidiaries
to distribute funds to the Company in order to make current
interest payments in cash when due under the terms of the Senior
Notes, which covenants are more restrictive than such "Restricted
Payments" covenants described in the preceding clause (I)(B),
(III) the amendment or modification by the Company or its
Subsidiaries of the definition of "Change of Control" as such
term is defined in the Credit Agreement (as in effect on the
Closing Date) or in any indenture pertaining to the Senior
Subordinated Notes (as in effect on the Closing Date), if such
amendment or modification would expand such definition as it
relates to the securities of the Company owned by the Masco
Stockholders, or
(IV) the entry by the Company or any of its Subsidiaries
into any agreement or instrument evidencing third party
indebtedness, capitalized leases or other financings (in each
case in an amount where a default under such agreement or
instrument would be a cross-default under the Credit Agreement)
that contains a change of control provision, event of default or
other prepayment obligation based upon the transfer of securities
of the Company that is more restrictive of the rights of the
Masco Stockholders to transfer the securities of the Company than
the more restrictive of the "Change of Control" provisions
described in the preceding clause (III);
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Stockholders' Agreement
(iv) any material transaction between the Company (or any of
its Subsidiaries (other than Simmons and its Subsidiaries)) and
Simmons or any of its Subsidiaries (each, a "Simmons Entity"),
including:
(A) any guaranty of any obligation of any Simmons
Entity (unless the recourse under such guaranty is limited
to a pledge of the stock of a Simmons Entity or the Class D
Common, in which case no such approval will be required);
(B) any capital contribution or loan by the Company to
a Simmons Entity (unless such capital contribution or loan
is directly funded by a contemporaneous capital contribution
from a stockholder of the Company in connection with a
purchase of shares of Class D Common by such stockholder, in
which case no such approval will be required); and
(C) any repurchase, redemption, dividend or
distribution to holders of the Class D Common (unless such
transaction is directly funded by a distribution in kind of
the common stock of a Simmons Entity or is directly funded
by distributions upon the capital stock of the Simmons
Entity held by the Company and is pursuant to the provisions
of the Class D Common as set forth in the Certificate of
Incorporation, in which case no such approval will be
required);
provided, that no affirmative vote of the Masco Director under
Section 5.5(b) is required for any offering or sale of shares of
Class D Common.
"Masco Stockholders" means Masco and its direct and indirect Permitted
Transferees, so long as any such Person shall hold Restricted Securities,
Restricted Preferred Securities or Debentures.
"New Common Stock" means any HFG Common Stock or Equity Equivalent,
other than any;
(i) HFG Common Stock and Equity Equivalents issued in connection
with any stock split, stock dividend or reclassification of any
Restricted Securities, Restricted Preferred Securities or Equity
Equivalents;
(ii) HFG Common Stock or Equity Equivalents issuable in a public
offering registered under the Securities Act;
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Stockholders' Agreement
(iii) HFG Common Stock or Equity Equivalents issuable upon
conversion of the Class A Common, the Class B Common or the Class C
Common or upon conversion, exchange or exercise of the Series B
Preferred or Series C Preferred or any other Equity Equivalents;
(iv) issuances of stock options and HFG Common Stock to
Management Stockholders or Additional Management Stockholders (I) with
respect to shares of HFG Common Stock repurchased by the Company from
Management Stockholders or Additional Management Stockholders under
Article IV hereof or (II) pursuant to stock option plans or similar
stock purchase plans provided to management of the Company and its
Subsidiaries which plans have been approved by the Board;
(v) issuances of HFG Common Stock or Equity Equivalents to
financial institution(s) on arm's-length terms in connection with (and
ancillary to) an extension of credit by such financial institution;
and
(vi) issuances of HFG Common Stock or Equity Equivalents to an
unaffiliated seller or sellers of another company or business in
connection with an arm's-length acquisition by the Company or one or
more of its Subsidiaries of such company or business.
"Original Cost" means, (i) as to each share of HFG Common Stock issued
to Management Stockholders or Additional Management Stockholders in
consideration of services, $0.01, and (ii) as to each share of HFG Common
Stock purchased or otherwise acquired by Management Stockholders or
Additional Management Stockholders after the Closing Date, the price paid
therefor, in each case appropriately adjusted to reflect all stock splits,
stock dividends, recapitalizations or similar events affecting the HFG
Common Stock subsequent to the date of purchase thereof.
"Permitted Transferee" means:
(i) with respect to any Stockholder who is a natural person, the
spouse or any lineal descendant (including by adoption and
stepchildren) of such Stockholder, or any trust of which such
Stockholder is the trustee and which is established solely for the
benefit of any of the foregoing individuals and whose terms are not
inconsistent with the terms of this Agreement, or any partnership, all
of the general partner(s) and limited partner(s) (if any) of which are
one or more Persons identified in this clause (i) (or any other trust
or partnership established by any such Stockholder to the extent
approved in writing by the Company
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Stockholders' Agreement
(acting with approval of the Board, including the consent of the Masco
Director and the Institutional Directors);
(ii) with respect to a Masco Stockholder, (x) any direct or
indirect Subsidiary of Masco (including any such Subsidiary which
ceases to be a Subsidiary of Masco after the Closing Date) unless such
Subsidiary or former Subsidiary does not qualify as (A) a "Permitted
Transferee" of Masco, under the more restrictive of the definitions of
such term with respect to Masco ("Permitted Transferee Definitions"),
under the Credit Agreement (as in effect on the Closing Date) and the
indenture pertaining to the Senior Subordinated Notes (as in effect on
the Closing Date), or (B) in the event that the agreements referred to
in clause (A) above are no longer in effect, a "Permitted Transferee"
of Masco under the most restrictive Permitted Transferee Definition in
any other material agreement or instrument evidencing indebtedness for
borrowed money of the Company or any of its Significant Subsidiaries,
which Permitted Transferee Definition is no more restrictive in scope
with respect to "Permitted Transferees" of Masco than the most
restrictive of the Permitted Transferee Definitions referred to in
clause (A) above ("Masco Subsidiary"), and (y) subject to the prior
written consent of the Institutional Stockholders (which consent shall
be in their sole discretion), any corporation (I) in which Masco owns
shares of capital stock representing at least 19% of the total
ordinary voting power of such corporation and (II) which is
"controlled" (within the meaning under Rule 12b-2 of the regulations
under the Exchange Act) by Masco (such corporation, a "Permitted Masco
Subsidiary");
(iii) with respect to the Institutional Stockholders, (A) any
Associate or Affiliate of any such Institutional Stockholder and any
officer, director or employee of any Institutional Stockholders or
such Associate or Affiliate, (B) any spouse or lineal descendant
(including by adoption and stepchildren) of the officers, directors
and employees referred to in clause (A) above, and any trust (where a
majority in interest of the beneficiaries thereof are any of the
persons described in this clause (B) and in clause (A) above),
corporations or partnerships (where a majority in interest of the
stockholders or limited partners, or where the managing general
partner, is one of more of the persons described in clause (A) above),
(C) any other Institutional Stockholder or (D) if, after taking
commercially reasonable steps, with the cooperation of the Company,
such Institutional Stockholder is unable to restructure its ownership
of the Company's securities in a manner which avoids a Regulatory
Problem and which is not materially adverse to such Institutional
Stockholder, upon the giving of notice to the Company and the Masco
Stockholders that the Institutional Stockholders have determined that
such Regulatory Problem may not be avoided, then to any third party to
avoid such Regulatory Problem;
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Stockholders' Agreement
(iv) with respect to any Travelers Stockholder, in addition to
any Permitted Transferee described in paragraph (iii) above, any
Permitted Assignee (as defined in the Reciprocal Call Agreement) which
shall have acquired from such Travelers Stockholder in a single
transaction prior to the close of business on August 1, 1997 (x)
shares of HFG Restricted Securities and (y) the right to acquire
Restricted Preferred Securities, in each case pursuant to the
Reciprocal Call Agreement;
(v) with respect to any Additional Stockholder who is not a
natural person, any Affiliate of such Additional Stockholder; and
(vi) with respect to any Management Stockholder and any
Additional Management Stockholder, the Voting Trust established
pursuant to the Voting Trust Agreement.
"Person" or "person" means an individual, partnership, corporation,
trust, unincorporated organization, joint venture, government (or agency or
political subdivision thereof) or any other entity of any kind.
"Pro Rata" means, with respect to one or more Stockholders (i) as it
relates to the HFG Restricted Securities, the New Common Stock, the HFG
Common Stock or Equity Equivalents, in proportion to the number of shares
of HFG Restricted Securities on a Fully-Diluted Basis owned by such
Stockholder or Stockholders, (ii) as it relates to the Class D Common or
Class D Equity Equivalents, in proportion to the number of shares of Class
D Common on a Fully-Diluted Basis owned by such Stockholder or Stockholders
and (iii) as it relates to Restricted Preferred Securities (or any class or
series thereof), in proportion to the number of shares of Series A-1
Preferred and Series A-2 Preferred (taken together) owned by such
Stockholder or Stockholders.
"Purchased Shares" means Management Securities, (i) which have been
purchased for cash by a Management Stockholder or Additional Management
Stockholder after the Closing Date and which have been designated as
"Purchased Shares" hereunder by agreement between the Company and such
Management Stockholder or Additional Management Stockholder or (ii) which
have been purchased for cash in units consisting of Restricted Preferred
Securities and HFG Restricted Securities (the "Units") by a Management
Stockholder on the Closing Date.
"Qualifying Offering" means the consummation by the Company of an
underwritten primary or secondary public offering of HFG Common Stock
pursuant to an effective registration statement under the Securities Act,
covering the offer and sale of the HFG Common Stock (i) which (taken
together with all similar previous public
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Stockholders' Agreement
offerings) raises at least $100,000,000 of aggregate net proceeds to the
Company (after underwriters' fees, commissions and discounts and offering
expenses) and (ii) as a result of which, at that time, at least 25% of the
HFG Common Stock on a Fully-Diluted Basis has been sold to the public.
"Reciprocal Call Agreement" means the Reciprocal Call Agreement, dated
as of the date hereof, among the Travelers Stockholders and 399, as in
effect on the date hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, among the parties hereto as the
same may be amended, modified or supplemented from time to time.
"Restricted Preferred Securities" means the Series A-1 Preferred and
the Series A-2 Preferred.
"Restricted Securities" means the Common Stock, the Class D Equity
Equivalents, the Equity Equivalents and any securities issued with respect
thereto as a result of any stock dividend, stock split, reclassification,
recapitalization, reorganization, merger, consolidation or similar event or
upon the conversion, exchange or exercise thereof.
"Rule 144 Transaction" means a transfer of Common Stock (A) complying
with Rule 144 under the Securities Act as such Rule is in effect on the
date of such transfer (but not including a sale other than pursuant to a
"brokers transaction" as defined in clauses (1) and (2) of paragraph (g) of
such Rule as in effect on the date hereof) and (B) occurring at a time when
shares of such Common Stock are registered pursuant to Section 12 of the
Exchange Act (or any successor to such Section).
"Sale Transaction" means any transaction of the type described in
clause (i) or clause (ii) of Section 2.7(a) (whether or not effected
pursuant to an exercise of a Drag-Along Right).
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations of the Commission thereunder.
"Senior Debt" means "Senior Indebtedness" as such term is defined in
the Senior Notes and any obligations in respect of "Permitted Receivables
Financing" as such term is defined in the Credit Agreement (as the same may
be amended, modified or supplemented from time to time).
"Senior Notes" means the Company's Senior PIK Notes in an initial
aggregate principal amount of $285,000,000 (subject to adjustment as
provided in the Acquisition
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Stockholders' Agreement
Agreement) issued to Masco on the date hereof and any Senior PIK Note
issued thereafter in accordance with the terms thereof.
"Senior Subordinated Notes" means the Senior Subordinated Notes due
2006 issued by Lifestyle Furnishings International Ltd. in an initial
aggregate principal amount of $200,000,000 issued on the date hereof.
"Series A-1 Common Stock" means the Company's Series A-1 Common Stock,
par value $.01 per share, and any securities into which such Series A-1
Common Stock shall have been changed or any securities resulting from any
reclassification or recapitalization of such Series A-1 Common Stock.
"Series A-2 Common Stock" means the Company's Series A-2 Common Stock,
par value $.01 per share, and any securities into which such Series A-2
Common Stock shall have been changed or any securities resulting from any
reclassification or recapitalization of such Series A-2 Common Stock.
"Series A-3 Common Stock" means the Company's Series A-3 Common Stock,
par value $.01 per share, and any securities into which such Series A-3
Common Stock shall have been changed or any securities resulting from any
reclassification or recapitalization of such Series A-3 Common Stock.
"Series A-1 Preferred" means the Company's Series A-1 Preferred Stock,
par value $.01 per share, and any securities (other than the Debentures)
into which such Series A-1 Preferred shall have been changed or any
securities resulting from any reclassification or recapitalization of such
Series A-1 Preferred.
"Series A-2 Preferred" means the Company's Series A-2 Preferred Stock,
par value $.01 per share, and any securities (other than the Debentures)
into which such Series A-2 Preferred shall have been changed or any
securities resulting from any reclassification or recapitalization of such
Series A-2 Preferred.
"Series B Preferred" means the Company's Series B Convertible
Preferred Stock, par value $.01 per share, and any securities into which
such Series B Preferred shall have been changed or any securities resulting
from any reclassification or recapitalization of such Series B Preferred.
"Series C Preferred" means the Company's Series C Convertible
Preferred Stock, par value $.01 per share, and any securities into which
such Series C Preferred shall have been changed or any securities resulting
from any reclassification or recapitalization of such Series C Preferred.
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Stockholders' Agreement
"Series I Common Stock" means the Company's Series I Common Stock,
$.01 par value per share, and any securities into which such Series I
Common Stock shall have been changed or any security resulting from any
reclassification or recapitalization of such Series I Common Stock.
"Series II Common Stock" means the Company's Series II Common Stock,
$.01 par value per share, and any securities into which such Series II
Common Stock shall have been changed or any securities resulting from any
reclassification or recapitalization of such Series II Common Stock.
"Significant Subsidiaries" means those Subsidiaries of the Company
which constitute a "Significant Subsidiary" as defined in Regulation S-X
promulgated by the Commission under the Securities Act, as such Regulation
is in effect on the date hereof.
"Significant Transaction" means:
(i) any merger, consolidation or other business combination of
the Company or any of its Significant Subsidiaries with or into any Person
or any formation by the Company or any of its Significant Subsidiaries of
any subsidiary which would, upon such formation, be a Significant
Subsidiary;
(ii) any sale, lease, exchange or other disposition by the
Company or any of its Significant Subsidiaries of a significant portion of
the Company's assets on a consolidated basis, in a single transaction or a
series of related transactions, to or with any person;
(iii) any amendment to or modification or repeal of any provision
of the Certificate of Incorporation or the By-Laws of the Company;
(iv) any acquisition by the Company or any of its Significant
Subsidiaries of securities or assets, in a single transaction or a series
of related transactions, if such securities or assets will represent a
substantial portion of the total assets of the Company, as reflected on the
Company's most recent consolidated balance sheet, as such is determined in
accordance with the generally accepted accounting principles used to
prepare such balance sheet;
(v) any increase or reduction of the capital of the Company or
any of its Significant Subsidiaries or the creation of any additional class
of capital stock of the Company or any of its Significant Subsidiaries, or
the issuance by the Company or any of its Significant Subsidiaries of
Equity Equivalents on a basis other than pro rata to the holders of capital
stock other than (A) the issuance of Common Stock upon the exercise
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Stockholders' Agreement
or conversion of Equity Equivalents where the issuance of such securities
has been approved by the Board and (B) the issuance of Common Stock upon
the conversion of any outstanding class of Common Stock, Series B Preferred
or Series C Preferred;
(vi) the incurrence or guaranty after the Closing Date by the
Company or any of its subsidiaries of any material Funded Debt or any
modification or amendment to any agreement governing the extension or
guaranty thereof (other than any incurrence under the terms of the Credit
Agreement, the Senior Notes, the Senior Subordinated Notes, the Debentures
or an agreement previously approved by the Board or the incurrence of
Funded Debt as permitted under any such agreement);
(vii) the dissolution of the Company (or any of its
Subsidiaries), the adoption of a plan of liquidation by the Company (or any
of its Subsidiaries), any action by the Company (or any of its
Subsidiaries) to commence any suit, case, proceeding or other action (A)
under any existing or future law of any jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of debtors seeking to have
an order for relief of debtors entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or
any substantial part of its assets, or making a general assignment for the
benefit of its creditors;
(viii) any increase, decrease or change in the compensation or
benefits of the senior management of the Company or any of its
Subsidiaries, or the issuance of any Management Note; and
(ix) any transaction or dealing between the Company or any of it
subsidiaries and one or more of its Stockholders (or any Affiliate of any
Stockholder) not entered into in the ordinary course of business or on an
arm's-length basis or which is material to the Company or any of its
Subsidiaries (including without limitation any amendment, modification,
supplement or waiver of the Voting Trust Agreement).
"Simmons" means Simmons Upholstered Furniture Corporation, a Delaware
corporation.
"Simmons Business" has the meaning provided in the Certificate of
Incorporation.
"Stockholders" means each of the Institutional Stockholders, the Masco
Stockholders, the Management Stockholders and the Additional Stockholders.
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Stockholders' Agreement
"Stock Purchase Agreements" means, collectively, (i) each of the Stock
Purchase Agreements, each dated as of the date hereof, by and between Wayne
B. Lyon and the Purchaser named therein and (ii) each of the Stock Purchase
Agreements, each dated as of the date hereof, by and between Masco and the
Purchaser named therein.
"Subscription Agreements" means, collectively, the following
agreements, each dated as of the date hereof: the Lyon Unit Purchase
Agreement between Wayne B. Lyon and the Company, the Lyon Subscription
Agreement between Wayne B. Lyon and the Company, each of the Management
Subscription Agreements between the Company and the members of the
Management Group named therein, the Stock Purchase Agreements, the
Travelers Subscription Agreements dated as of the date hereof between the
Company and each of the Travelers Stockholders and the 399 Subscription
Agreement dated as of the date hereof between the Company and 399.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of 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 that Person or one or more
of the other Subsidiaries of that Person or a combination thereof, or (ii)
if a partnership, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest
in a partnership, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, association or other
business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other
business entity.
"399 Stockholders" means 399 and each of its respective direct and
indirect Permitted Transferees, so long as any such Person shall hold
Restricted Securities or Restricted Preferred Securities.
"Transfer" means, directly or indirectly, any sale, transfer,
assignment, grant of a participation in, gift, hypothecation, pledge or
other disposition of any securities or any interests therein or, as the
context may require, to sell, transfer, assign, grant a participation in,
give as a gift, hypothecate, pledge or otherwise dispose of any securities
or any interests therein; provided that the exercise of any conversion or
exchangeability right provided for in the terms of any security (including
without limitation the right of the Company to exchange shares of Series
A-1 Preferred and Series A-2 Preferred for the Debentures) shall not be
deemed a "Transfer."
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Stockholders' Agreement
"Travelers Stockholders" means each of AMC, TRV, Greenwich Street,
GSCP, Travelers and TLAC and each of their respective Permitted Transferees
(other than (A) a Permitted Transferee pursuant to clauses (iii)(C) and
(iii)(D) of the definition of Permitted Transferee (unless such Permitted
Transferee is, with respect to a Travelers Stockholder, a Person described
in clause (iii)(A) and (iii)(B) of such definition) and (B) a Permitted
Transferee pursuant to clause (iv) of the definition of Permitted
Transferee), so long as any such Person shall hold Restricted Securities or
Restricted Preferred Securities.
"Unvested Shares" shall mean, with respect to each Management
Stockholder or Additional Management Stockholder, all Management Securities
other than Purchased Shares, Vested Shares and Restricted Preferred
Securities.
"Vested Shares" means:
(i) with respect to each Management Stockholder that portion of
Management Securities (other than Purchased Shares, Restricted
Preferred Securities and Management Securities acquired by any
Management Stockholder after the Closing) held by such person and by
such person's Permitted Transferees who hold such Management
Securities which are attributable to such person which is the product
of:
(x) the number of such Management Securities listed on the
omnibus signature pages hereto executed and delivered by such
Management Stockholder next to the caption "Shares Subject to
Vesting", and
(y) the fraction in which the numerator is the number of
anniversaries that have elapsed after the Closing Date and the
denominator is five (5);
provided, however, that in the event such fraction is greater than one
it shall be deemed to equal one; and provided, further, that
simultaneously with a Sale Transaction, all Unvested Shares shall
become Vested Shares; and
(ii) with respect to Management Securities (other than Restricted
Preferred Securities) acquired by any Management Stockholder or
Additional Management Stockholder after the Closing, the shares which
are "Vested Shares" as provided by written agreement approved by the
Board (acting by Affirmative Board Vote) between the Company and such
Management Stockholder or Additional Management Stockholder, as the
case may be (it being understood that
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Stockholders' Agreement
all such acquired shares shall be Unvested Shares in the absence of
any such agreement that such acquired shares constitute "Purchased
Shares" or "Vested Shares").
"Voting Trust" means the Voting Trust created under the Voting Trust
Agreement.
"Voting Trust Agreement" means the Voting Trust Agreement dated as of
the date hereof by and among the Company, the Stockholders named therein
and the trustee named therein (the "Trustee"), as such agreement may be
amended, supplemented or modified from time to time.
(b) Unless otherwise provided herein, all accounting terms used in this
Agreement shall be interpreted in accordance with generally accepted accounting
principles as in effect from time to time, applied on a consistent basis.
(c) The following terms, when used in this Agreement, shall have the
meanings defined for such terms in the Section set forth below (such definitions
to be equally applicable to both singular and plural forms of the terms
defined):
Term Section
---- -------
"Acceptance Date" 6.5(b)
"Accounting Determination" 2.8(a)
"Acquiror" 2.7(a)
"Agreement" Preamble
"Acquisition Agreement" Recitals
"AMC" Preamble
"Article III Offer" 3.1(a)
"Buyer" 3.1(a)
"Class D Tag-Along Transfer" 3.1(a)
"Closing" Recitals
"Company" Preamble
"Company Designee" 4.1(a)
"Company Notice" 2.5(b)
"Disinterested Director" 5.1(a)
"Drag-Along Right" 2.7(a)
"Drag-Along Sale" 2.7(a)
"Existing Stockholders" Recitals
"GSCP" Preamble
"Inclusion Notice" 3.1(a)
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Stockholders' Agreement
"Inclusion Right" 3.1(b)
"Institutional Director" 5.1(a)
"Institutional Stockholders Group Member" Preamble
"Management Director" 5.1(a)
"Management Group" Preamble
"Management Group Member" Preamble
"Masco" Preamble
"Masco Director" 5.1(a)
"Masco Subsidiary" Def'n of Permitted Transferee
"Masco Tag-Along Transfer" 3.1(a)
"New Common Stock Notice" 6.5
"New Common Stock Offer" 6.5
"New Common Stock Units" 6.5
"Nominating Committee" 5.1(a)
"Notice of Intention" 2.5(a)
"Observer" 5.7
"Offered Securities" 2.5(a)
"Offerees" 3.1(a)
"Offer Price" 2.5(a)
"Other Businesses" 2.7(d)
"Permitted Masco Subsidiary" Def'n of Permitted Transferee
"Prospective Buyers" 2.5(a)
"Prospective Buyer Notice" 2.5(c)
"Purchase Notice" 4.1(a)
"Regulatory Problem" 6.4(c)
"Regulatory Right" 5.9
"Sale Event" 4.1(a)
"Section 2.8 Notice" 2.8(a)
"Section 2.8 Securities" 2.8(a)
"Sellers" 4.1(a)
"Selling Stockholder" 2.5(a)
"Share Purchase Agreement" Recitals
"Simmons Entity" Def'n of Masco Approval
Transaction
"Subject Securities" 2.6(b)
"Third Party" 2.5(e)
"399" Preamble
"TLAC" Preamble
"Transferor" 3.1(a)
"Transferor Shares" 3.1(a)
"Travelers" Preamble
"Travelers Amount" 3.1(a)
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Stockholders' Agreement
"Trustee" Def'n of Voting Trust
Agreement
"TRV" Preamble
"Units" Def'n of Purchased Shares
ARTICLE II
RESTRICTIONS ON TRANSFERS
2.1 Restrictions Generally; Securities Act.
(a) Each Stockholder agrees that it will not, directly or indirectly,
Transfer any Restricted Securities or Restricted Preferred Securities except in
accordance with the terms of this Agreement. Any attempt to Transfer or any
purported Transfer of any Restricted Securities or Restricted Preferred
Securities not in accordance with the terms of this Agreement shall be null and
void and neither the Company nor any transfer agent of such securities shall
give any effect to such attempted Transfer in its stock records.
(b) Each Stockholder agrees that, in addition to the other requirements set
forth herein and in each Stockholder's respective subscription agreement between
such Stockholder and the Company relating to Transfer, it will not Transfer any
Restricted Securities or Restricted Preferred Securities except (i) pursuant to
an effective registration statement under the Securities Act, or (ii) unless
such requirement is waived by the Company, upon receipt by the Company of an
opinion of counsel to the Stockholder (which opinion and counsel are reasonably
satisfactory to the Company) or of an opinion of counsel to the Company, or of a
no-action letter from the Commission addressed to the Company or such
Stockholder, to the effect that no registration statement is required because of
the availability of an exemption from registration under the Securities Act.
2.2 Legend.
(a) Each certificate representing Restricted Securities or Restricted
Preferred Securities shall be endorsed with the legends set forth in Exhibit B
hereto and such other legends as may be required by applicable state securities
laws.
(b) Any certificate issued at any time in exchange or substitution for any
certificate bearing such legends (except a new certificate issued upon the
completion of a Transfer pursuant to a registered public offering under the
Securities Act and made in accordance with the Securities Act) shall also bear
such legends, unless the Restricted Securities or Restricted Preferred
Securities, as the case may be, represented thereby are no longer subject to the
provisions of this Agreement or, in the opinion of the Company (with advice from
counsel to the Company, as the Company
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Stockholders' Agreement
may deem appropriate), the restrictions imposed under the Securities Act or
state securities laws, in which case the applicable legend (or legends) may be
removed.
2.3 Limitations on Repurchases, Dividends, Etc. Each Stockholder
understands that the Company is entering or has entered into certain financing
agreements which will or do contain prohibitions, restrictions and limitations,
among other things, on the ability of the Company to purchase any Restricted
Securities and/or Restricted Preferred Securities (whether pursuant to this
Agreement or otherwise), to pay dividends and to waive, modify or discharge any
rights or obligations under this Agreement.
2.4 Transfer Restrictions.
(a) Each of the Management Stockholders and the Additional Stockholders
severally agrees that it will not Transfer any HFG Restricted Securities, except
(i) to a Permitted Transferee who shall have executed a Joinder Agreement and
thereby become a party to this Agreement; (ii) pursuant to Section 2.6
(Involuntary Transfers); (iii) pursuant to 2.7 (Drag-Along Rights); (iv) in
accordance with Article III (Rights of Inclusion) in the capacity of an Offeree
thereunder; (v) pursuant to Article IV (Repurchase of Securities); (vi) in a
registered public offering of such Restricted Securities or in a Rule 144
Transaction; (vii) pursuant to Section 2.5 (Right of First Refusal) or (viii)
for the Transfer by Wayne B. Lyon of certain HFG Restricted Securities to
Management Stockholders on the Closing Date pursuant to the terms of the Stock
Purchase Agreements; provided, however, that no Management Stockholder shall
Transfer any HFG Restricted Securities pursuant to Section 2.5 for a period of
five years following the Closing Date, and provided, further, that no Management
Stockholder or Additional Management Stockholder shall transfer any Unvested
Shares except (x) to a Permitted Transferee who shall have executed a Joinder
Agreement and thereby become a party to this Agreement or (y) pursuant to
Section 2.6 (Involuntary Transfers), Section 2.7 (Drag-Along Rights) or Article
IV (Repurchase of Securities).
(b) Each of the Masco Stockholders severally agrees that it will not
Transfer any HFG Restricted Securities, except (i) to a Permitted Transferee who
shall have executed a Joinder Agreement and thereby become a party to this
Agreement; (ii) pursuant to Section 2.8 (Special Right of First Offer); (iii)
pursuant to Section 2.5 (Right of First Refusal); (iv) pursuant to Section 2.7
(Drag-Along Rights); (v) in accordance with Article III (Rights of Inclusion) in
the capacity of an Offeree thereunder; (vi) in a registered public offering or
in a Rule 144 Transaction; or (vii) for the Transfer by Masco of certain HFG
Restricted Securities to Management Stockholders on the Closing Date pursuant to
the terms of the Stock Purchase Agreements.
(c) Each of the Institutional Stockholders severally agrees that it will
not Transfer any HFG Restricted Securities, except (i) to a Permitted Transferee
who shall have executed a Joinder Agreement and thereby become a party to this
Agreement (subject to any required
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Stockholders' Agreement
compliance with Section 3.1(a)); (ii) to any other person in a transaction which
has been effected without violation of the terms of Article III (Rights of
Inclusion); (iii) pursuant to Section 2.7 (Drag-Along Rights); (iv) in a
registered public offering or in a Rule 144 Transaction; or (v) to the Company
pursuant to the Call.
(d) Each of the Stockholders severally agrees that it will not Transfer any
shares of Class D Common or any Class D Equity Equivalents, except (i) to a
Permitted Transferee who shall have executed a Joinder Agreement and thereby
become a party to this Agreement; (ii) to any other person in a transaction
which has been effected without violation of the terms of Article III (Rights of
Inclusion) in the capacity of a Transferor or of an Offeree thereunder; (iii)
pursuant to Section 2.6 (Involuntary Transfers); (iv) pursuant to Section 2.7
(Drag-Along Rights); (v) pursuant to Section 2.5 (Right of First Refusal); (vi)
in a registered public offering or in a Rule 144 Transaction; (vii) pursuant to
the terms of the Share Purchase Agreement providing for the repurchase of shares
of Class D Common or any Class D Equity Equivalents; (viii) to the Company
pursuant to a redemption, exchange or repurchase of such Class D Common or any
Class D Equity Equivalents as may be provided for under the terms of the
Certificate of Incorporation; or (ix) as may otherwise agreed by the Company,
the Masco Stockholders and the Institutional Stockholders; provided, however,
that no Management Stockholder or Additional Management Stockholder shall
Transfer any shares of Class D Common or Class D Equity Equivalents pursuant to
Section 2.5 or pursuant to the preceding clause (ii) (other than in its capacity
as an Offeree thereunder) prior to November 28, 1999.
(e) Each of the Stockholders severally agrees that it will not Transfer any
Restricted Preferred Securities, except (i) to a Permitted Transferee who shall
have executed a Joinder Agreement and thereby become a party to this Agreement;
(ii) in a transaction which has been effected without violation of the terms of
Article III (Rights of Inclusion) in the capacity of a Transferor or of an
Offeree thereunder; (iii) pursuant to Section 2.6 (Involuntary Transfers); (iv)
pursuant to Section 2.7 (Drag-Along Rights); (v) pursuant to Article IV
(Repurchase of Securities); (vi) to the Company pursuant to a mandatory
redemption of such Restricted Preferred Securities as may be provided for under
the Certificate of Incorporation; (vii) to the Company pursuant to the Call;
(viii) for the Transfer by Wayne B. Lyon of certain Restricted Preferred
Securities to Management Stockholders on the Closing Date pursuant to the terms
of the Stock Purchase Agreements; or (ix) for the Transfer by Masco of certain
Restricted Preferred Securities to Management Stockholders on the Closing Date
pursuant to the terms of the Stock Purchase Agreements.
(f) Notwithstanding anything to the contrary contained herein, no Transfer
(including without limitation any Involuntary Transfer) or entry into any
agreement or other arrangement with respect to Transfer or the exercise of
rights under Article V hereof (including without limitation any agreement or
arrangement entered into by Masco Stockholders which would cause the Masco
Stockholders to cease to have the full right and power to designate the
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Masco Director or any agreement or arrangement entered into by the Management
Stockholders which would cause the Management Stockholders to cease to have the
full right and power to designate the Management Directors) by a Masco
Stockholder, Management Stockholder or Additional Management Stockholder of
Restricted Securities, Restricted Preferred Securities or Debentures will be
permitted or will be effective (other than pursuant to Rights of Inclusion
exercised in connection with a Transfer by the Institutional Stockholders,
pursuant to the exercise of a Drag-Along Right by the Institutional Stockholders
or in connection with any registered public offering) to the extent such
Transfer, agreement or other arrangement would result in (i) a change of
control, event of default or other prepayment obligation by the Company (or any
of its Subsidiaries) under (A) any agreement or instrument (including amendments
to any such agreement or instrument) evidencing Senior Debt (including without
limitation the Credit Agreement), the Senior Subordinated Notes, the Senior
Notes, the Debentures or the Restricted Preferred Securities or (B) any
agreement or instrument that contains such a provision which is no more
restrictive of the rights of a Masco Stockholder, Management Stockholder or
Additional Management Stockholder (as the case may be) to transfer the
securities of the Company than the most restrictive provision contained in the
agreements and instruments referred to in clause (A) above or (C) any other
agreement or instrument that contains such a provision which agreement or
instrument has been approved by vote of the Board which vote includes the
affirmative vote of the Masco Director, (ii) the Masco Stockholders no longer
having the right to designate the Masco Director pursuant to Section 5.1 or
(iii) the Management Stockholders and the Additional Management Stockholders no
longer having the right to designate the Management Directors pursuant to
Section 5.1 by virtue of their ownership of shares of Class C Common.
(g) Prior to the consummation of any transaction that would result in (A)
any Permitted Transferee of a Masco Stockholder which is a Masco Subsidiary no
longer constituting a Masco Subsidiary or (B) any Permitted Transferee of a
Masco Stockholder which is a Permitted Masco Subsidiary no longer constituting a
Permitted Masco Subsidiary, Masco shall cause any Restricted Securities or
Restricted Preferred Securities held by such person to be Transferred to, in the
case of clause (A), Masco or any Person which will thereafter qualify as a Masco
Subsidiary, and in the case of clause (B), Masco or any Person which will
thereafter qualify as either a Masco Subsidiary or, subject to the consent
requirements set forth in clause (ii) of the definition of "Permitted
Transferees," a Permitted Masco Subsidiary.
2.5 Right of First Refusal.
(a) Except for Transfers permitted pursuant to Section 2.4(a), Section
2.4(b) or 2.4(d), if pursuant to a bona fide third party offer a Stockholder
(other than any Institutional Stockholder) desires to Transfer (i) any HFG
Restricted Securities or (ii) any shares of Class D Common or Class D Equity
Equivalents (such transferring Stockholder under clause (i) or clause (ii), as
the case may be, a "Selling Stockholder" and such securities proposed to be so
Transferred, the "Offered Securities"), prior to any Transfer it shall give
written notice of the proposed
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Transfer (the "Notice of Intention") to the Company, each of the Institutional
Stockholders and the Masco Stockholders (such parties other than the Company to
whom notice is given, but excluding the Selling Stockholder, the "Prospective
Buyers"), specifying the type and number of Offered Securities which such
Selling Stockholder wishes to Transfer, the proposed purchase price (the "Offer
Price") therefor and all other material terms and conditions of the proposed
Transfer.
(b) For a period of thirty (30) days following its receipt of the Notice of
Intention, the Company shall have the right to purchase all or any portion of
the Offered Securities at the Offer Price and on the other terms specified in
the Notice of Intention, exercisable by delivery of an irrevocable notice (the
"Company Notice") to the Selling Stockholder, with a copy to each of the
Prospective Buyers, specifying the number of Offered Securities with respect to
which the Company is exercising its option.
(c) For a period of thirty (30) days following its receipt of the Company
Notice or, if no Company Notice is so received, for a period of sixty (60) days
following its receipt of the Notice of Intention, each of the Prospective Buyers
shall have the right to purchase at the Offer Price and on the other terms
specified in the Notice of Intention addressed to it, any or all of the Offered
Securities which the Company has elected not to purchase, Pro Rata (with respect
to the HFG Securities, the Class D Common Stock or Class D Equity Equivalents,
as the case may be) among the Prospective Buyers; provided, however, that in the
event any Prospective Buyer does not purchase any or all of its Pro Rata portion
of the Offered Securities, the other Prospective Buyers shall have the right to
purchase such portion, Pro Rata, until all of such Offered Securities are
purchased or until such other Prospective Buyers do not desire to purchase any
more Offered Securities. The right of the Prospective Buyers pursuant to this
Section 2.5(c) shall be exercisable by delivery of a notice (the "Prospective
Buyer Notice") setting forth the maximum number of Offered Securities that such
Prospective Buyer wishes to purchase, to the Selling Stockholder, the Company
and the other Prospective Buyers and shall expire if unexercised within such
30-day or 60-day period, as applicable.
(d) Notwithstanding the foregoing provisions of this Section 2.5, unless
the Selling Stockholder shall have consented to the purchase of less than all of
the Offered Securities, neither the Company nor any Prospective Buyer may
purchase any Offered Securities unless all of the Offered Securities are to be
purchased (whether by the Company or the Prospective Buyers, or any combination
thereof).
(e) If all notices required to be given pursuant to this Section 2.5 have
been duly given, and the Company and the Prospective Buyers determine not to
exercise their respective options to purchase the Offered Securities at the
Offer Price and on the other terms specified in the Notice of Intention or
determine, with the consent of the Selling Stockholder, to exercise their
options to purchase less than all of the Offered Securities, then the Selling
Stockholder shall
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have the right, for a period of ninety (90) days from the earlier of (i) the
expiration of the last applicable option period pursuant to this Section 2.5 or
(ii) the date on which such Selling Stockholder receives notice from the Company
and the Prospective Buyers that they will not exercise in whole or in part the
options granted pursuant to this Section 2.5, to sell to a third party (a "Third
Party") the Offered Securities remaining unsold under this Section 2.5 at a
price not less than the Offer Price and on other terms which shall not be
materially more favorable to the Third Party in the aggregate than those terms
set forth in the Notice of Intention; provided that prior to any such Transfer
to a Third Party, such Third Party executes and delivers to the Company a
Joinder Agreement and thereby becomes a party to this Agreement.
(f) The closing of any purchase and sale pursuant to this Section 2.5 shall
take place on such date, not later than fifteen (15) business days after the
later of delivery to the Selling Stockholder of (i) the Company Notice or (ii)
the Prospective Buyer Notice, as the parties to such purchase and sale shall
select. At the closing of such purchase and sale, the Selling Stockholder shall
deliver certificates evidencing the Offered Securities being sold duly endorsed,
or accompanied by written instruments of Transfer in form satisfactory to the
purchasers thereof, duly executed by the Selling Stockholder, free and clear of
any Liens, against delivery of the Offer Price therefor.
2.6 Involuntary Transfers.
(a) Upon the occurrence of any event which would cause any Restricted
Securities or Restricted Preferred Securities owned by a Management Stockholder
or an Additional Management Stockholder to be Transferred by Involuntary
Transfer, such Stockholder (or his or its legal representative or successor)
shall give the Company, the Masco Stockholders and the Institutional
Stockholders written notice thereof stating the terms of such Involuntary
Transfer, the identity of the transferee or proposed transferee, the price or
other consideration, if readily determinable, for which the Restricted
Securities or Restricted Preferred Securities are proposed to be or have been
Transferred and the number of Restricted Securities or Restricted Preferred
Securities which are the subject of such Transfer, and the Company shall notify
the Masco Stockholders and the Institutional Stockholders of the same. After its
receipt of such notice or, failing such receipt, after the Company otherwise
obtains actual knowledge of such a proposed or completed Involuntary Transfer,
the Company shall have the right and option to purchase (or to have any designee
purchase) all or any portion of such Restricted Securities or Restricted
Preferred Securities, which right shall be exercised by written notice given by
the Company to the transferor (or transferee following the occurrence of any
Involuntary Transfer) and to the Masco Stockholders and the Institutional
Stockholders within thirty (30) days following the later of (i) the Company's
receipt of such notice or, failing such receipt, the Company's obtaining actual
knowledge of such proposed or completed Transfer and (ii) the date of such
Involuntary Transfer.
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(b) In the event that the Company elects not to purchase all of such
Restricted Securities or Restricted Preferred Securities, then the Company shall
on or prior to the end of such thirty (30) day period, notify the Masco
Stockholders and the Institutional Stockholders thereof, such notice to identify
the Securities not purchased by the Company (the "Subject Securities"). For a
period of thirty (30) days after receipt of such notice from the Company, each
of the Masco Stockholders and the Institutional Stockholders shall have the
irrevocable right to purchase any or all of the Subject Securities, pro rata
(based on the proportion as between the Masco Stockholders and the Institutional
Stockholders or the number of shares of Restricted Securities or Restricted
Preferred Securities (as the case may be) owned by the Masco Stockholders or
Institutional Stockholders); provided, however, that in the event any Masco
Stockholder or Institutional Stockholder does not purchase any or all of its pro
rata portion of the Subject Securities, the remaining Masco Stockholders and
Institutional Stockholders shall have the right to purchase such portion pro
rata as among themselves until all of the Subject Securities are purchased or
until such persons do not desire to purchase any more Subject Securities. The
right of the Masco Stockholders and the Institutional Stockholders to purchase
Subject Securities pursuant to this Section 2.5 shall be exercisable by delivery
of a notice to the transferor (or transferee following the occurrence of any
Involuntary Transfer) setting forth the maximum number of Subject Securities
that such person wishes to purchase including any number which would be
allocated in the event that any Masco Stockholder or Institutional Stockholder
does not purchase all or any portion of its pro rata portion.
(c) Any purchase pursuant to this Section 2.6 shall be at the price and on
the terms applicable to such Involuntary Transfer; provided, however, that if
the nature of the event giving rise to such Involuntary Transfer is such that no
readily determinable consideration is to be paid for or assigned to the Transfer
of the Restricted Securities, the price to be paid by the Company, the Masco
Stockholders or the Institutional Stockholders, as the case may be, and the
applicable terms shall be the purchase price and terms applicable to a Sale
Event pursuant to Section 4.2. The closing of the purchase and sale of such
Restricted Securities or Restricted Preferred Securities pursuant to this
Section 2.6 shall be held at the place and on the date to be established by the
Company, the Masco Stockholders and/or the Institutional Stockholders, as the
case may be, which in no event shall be less than ten (10) nor more than
forty-five (45) days from the date on which the Company (or the Masco
Stockholders and/or the Institutional Stockholders, as the case may be) gives
notice of its election to purchase such Restricted Securities or Restricted
Preferred Securities. At such closing, the Stockholder (or his or its legal
representative or successor) shall deliver the certificates evidencing the
Restricted Securities or Restricted Preferred Securities to be purchased by the
Company (or the Masco Stockholders and/or the Institutional Stockholders, as the
case may be), as applicable, accompanied by stock powers, duly endorsed in
blank, or duly executed instruments of transfer, and any other documents that
are necessary to Transfer to the Company (or the Masco Stockholders and/or the
Institutional Stockholders, as the case may be) good title to such Restricted
Securities or Restricted Preferred Securities free and clear of all Liens and,
concurrently with such delivery, the Company (or the Masco Stockholders and/or
the
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Institutional Stockholders, as the case may be) shall deliver to the transferor
thereof the full amount of the purchase price therefor by certified or bank
cashier's check.
(d) Notwithstanding anything to the contrary contained herein, in the event
a purchase (or the payment of the purchase price) by the Company pursuant to
this Section 2.6 would violate or conflict with any statute, rule, injunction,
regulation, order, judgment or decree applicable to the Company or any of its
Subsidiaries or by which any of them or their respective properties may be bound
or affected or would result in any breach of, or constitute a change of control
or a default (or an event which with notice or lapse of time, or both, would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the property or assets of the Company or any of its Subsidiaries pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, license, franchise
or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of their respective properties is bound
or affected, with the prior written consent of the Institutional Stockholders,
the rights of the Company to purchase (or to have any designee purchase) the
Restricted Securities or Restricted Preferred Securities of any Stockholder
shall be suspended until the earlier of (i) the date which falls thirty (30)
days following such time as such prohibition first lapses or is waived and no
such default would be caused or (ii) the date which is one hundred eighty (180)
days after the date of the Involuntary Transfer. For the purposes of this
Section 2.6 only, the date of such lapse or waiver shall be deemed the date of
the Involuntary Transfer for purposes of the purchase and sale of Restricted
Securities pursuant to this Section 2.6. The Company shall use its reasonable
efforts to obtain a waiver of any such prohibition, but shall not be obligated
to incur any additional interest or other costs or charges or to make any
prepayment with respect to any indebtedness in connection with such efforts.
(e) Notwithstanding anything to the contrary contained in this Section 2.6,
any event giving rise to an Involuntary Transfer which is also subject to the
provisions of Article IV shall be governed by the provisions of Article IV.
2.7 Drag-Along Rights.
(a) Unless, prior to the exercise of the Drag-Along Rights set forth below,
there shall have occurred:
(A) a transaction described in clause (ii) of the definition of Change
of Control or
(B) a transaction described in clause (iii) of the definition of
Change of Control and the percentage of HFG Common Stock on a Fully-Diluted
Basis owned by the 399 Group (which for purposes of these Drag-Along Rights
does not include any "Permitted Transferee" pursuant to clauses (iii)(C)
and (D) of the definition of Permitted Transferee
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Stockholders' Agreement
(unless such Permitted Transferee is, with respect to 399, a Person
described in clauses (iii)(A) and (B) of such definition)) is at the time
of and after giving effect to such occurrence less than the percentage
thereof owned by the Masco Stockholders,
if the Institutional Stockholders (i) propose to Transfer to a third party
(which is not an Affiliate of any of such Institutional Stockholders) (the
"Acquiror") all of their Restricted Securities and Restricted Preferred
Securities, the Institutional Stockholders shall have the right to require the
Stockholders to sell or transfer all of their Restricted Securities and
Restricted Preferred Securities to such third party on the same terms; or (ii)
propose the Transfer of all or substantially all of the assets or business
(whether by merger, sale or otherwise) of the Company to any such third party,
the Institutional Stockholders shall have the right (a "Drag-Along Right") to
require (x) the Stockholders to take all action necessary or appropriate
(including without limitation replacement of the director or directors
designated by such Stockholders) in order to cause the Company to take all
action necessary or appropriate to give effect to such transaction and (y) the
Stockholders to approve such transaction in their capacity as stockholders of
the Company (a transaction described in clause (i) or (ii), a "Drag-Along
Sale"); provided that upon the consummation of any transaction resulting in a
sale or transfer of all or substantially all of the assets or business of the
Company (whether by merger, sale or otherwise) the Company will immediately
distribute all of the net proceeds of such transaction to the Stockholders, in
accordance with their respective rights and privileges.
(b) Notwithstanding the foregoing, in the event that (A) pursuant to an
exercise of the Drag-Along Rights the Company (or one or more of its
Subsidiaries) proposes to voluntarily sell all or substantially all of the
consolidated assets of the Company to a third party in a transaction and (B) the
Company intends to pay the net proceeds therefrom to its stockholders in a
distribution which is taxable as a dividend (and not pursuant to a plan of
liquidation) resulting in disparate tax treatment to the Masco Stockholders (in
relation to the Institutional Stockholders), then the Institutional Stockholders
shall only have the right to effect such transaction if the Masco Stockholders
have consented thereto (which consent shall not be unreasonably withheld or
delayed). If ten (10) days after the consent is requested, such consent is
withheld (i) it must be on the basis that the Masco Stockholders are not
reasonably satisfied, based upon information that they have received from the
Institutional Stockholders regarding the transaction, that the Masco
Stockholders would receive in such transaction no less on an after-tax basis
than they are likely to receive on an after-tax basis in an otherwise comparable
carry-over basis transaction (taking into account market conditions and the
condition of the business and assets being sold) and (ii) for a period of ten
(10) days thereafter, the Masco Stockholders and the Institutional Stockholders
shall undertake good faith negotiations to determine an appropriate resolution.
If, after such ten (10) day period, the Institutional Stockholders determine
that the Masco Stockholders have unreasonably withheld its consent, the
Institutional Stockholders shall have the right to require the Masco
Stockholders to provide promptly written advice to the Institutional
Stockholders from a disinterested nationally recognized investment banking firm
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Stockholders' Agreement
which sets forth the basis for, confirms and supports the position taken by the
Masco Stockholders in withholding their consent. If such written advice is so
furnished within ten (10) days following the request for such written advice,
the Company shall not effect the transaction.
(c) In order to exercise a Drag-Along Right, the Institutional Stockholders
shall notify each Stockholder, such notice to set forth the terms and conditions
of such proposed sale. Subject to Section 2.7(b), each such Stockholder will
take all actions reasonably requested by the Institutional Stockholders in
connection with the consummation of such sale, and within ten (10) business days
of the receipt of such notice (or such longer period of time as the
Institutional Stockholders shall designate in such notice), if such transaction
is structured as a sale of assets or a merger, such Stockholders shall approve
the transaction in their capacities as stockholders of the Company (subject to
Section 2.7(b)), and if such transaction is a sale of Restricted Securities and
Restricted Preferred Securities, such Stockholders shall cause all of their
respective Restricted Securities and Restricted Preferred Securities to be sold
to the designated purchaser on the same terms and conditions and for the same
per share consideration as the Restricted Securities and Restricted Preferred
Securities being sold by the Institutional Stockholders; provided, however, that
if any of such Restricted Securities are Equity Equivalents (or Class D Equity
Equivalents), the purchase price of such Equity Equivalents (or Class D Equity
Equivalents) shall equal the aggregate price that would be paid for the shares
of Common Stock issuable upon the exercise thereof minus the aggregate exercise
or conversion price under such Equity Equivalents (or Class D Equity
Equivalents) for such shares of Common Stock and if any Stockholders are given a
choice as to the type or amount of consideration to be received in respect of a
specific security of the Company, all Stockholders will be given the same
choice. In furtherance of, and not in limitation of the foregoing, in connection
with a Drag-Along Sale, subject to Section 2.7(b), Section 2.7(d) and Section
2.7(e) each Stockholder will (i) raise no objections against the Drag-Along Sale
or the process pursuant to which it was arranged, (ii) waive any appraisal
rights under Section 262 of the Delaware General Corporation Law and other
similar rights, and (iii) execute all documents containing such terms and
conditions as those executed by other Stockholders as reasonably directed by the
Institutional Stockholders.
(d) In a transaction effected pursuant to the exercise of the Drag-Along
Rights pursuant to this Section 2.7 in which either (x) the Class D Common is
then outstanding, or (y) it is contemplated that, as part of such transaction,
the Acquiror shall acquire from the Institutional Stockholders or their
Affiliates one or more businesses which are not owned or operated by the Company
or any of its Subsidiaries (the "Other Businesses"), then, the Masco
Stockholders may elect, upon notice to the Institutional Stockholders and the
Company, to require the Board to provide a written valuation of the Class D
Common, the assets and liabilities of the Simmons Business proposed to be sold
or otherwise transferred in the proposed Drag-Along Sale or the Other Businesses
(as the case may be) addressed to the Company from a nationally recognized
investment banking firm jointly selected by the Institutional Stockholders and
the Masco Stockholders, which selection shall be made promptly and in good faith
by such
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Stockholders. Such notice must be given within five (5) days after receipt of
the notice of exercise of Drag-Along Rights under Section 2.7(c). If the
consideration proposed to be paid to holders of the Class D Common, in respect
of the Simmons Business or in respect of the Other Businesses (as the case may
be), (A) does not exceed the valuation established by such investment banking
firm, then the Institutional Stockholders shall have the right to proceed with
such Drag-Along Sale in accordance with the provisions of this Section 2.7 or
(B) does exceed such valuation, then the Institutional Stockholders shall not
have the right to effect such Drag-Along Sale pursuant to this Section 2.7
without the consent of the Masco Stockholders. The fees and expenses of such
investment banking firm shall be treated as a transaction expense.
(e) Unless otherwise agreed by any Stockholder with respect to the
obligations of such Stockholder, all contractual indemnification and
contribution payments required to be made by any Stockholder in connection with
any Drag-Along Sale shall be limited to payments made from the proceeds of such
Drag-Along Sale set aside in an escrow account or similar arrangement, except
with respect to indemnification or contribution payments which arise from a
misrepresentation or breach by such Stockholder with respect to matters of title
to such Stockholders' securities and valid authorization by such Stockholder
with respect to the Drag-Along Sale. The amount of proceeds payable to each
Stockholder so set aside in respect of any such indemnification or contribution
payments shall be proportionate to the amount of consideration received or to be
received by such Stockholder in relation to all Stockholders. All Stockholders
will bear their pro rata share of the costs and expenses incurred in connection
with a Drag-Along Sale to the extent such costs are incurred for the benefit of
all Stockholders and are not otherwise paid by the Company or the purchaser and
so long as such costs and expenses are reimbursed solely out of the proceeds of
such Drag-Along Sale. Costs incurred by any Stockholder on its own behalf will
not be shared by any other Stockholder.
2.8 Special Right of First Offer.
(a) If Masco has made a good faith determination following consultation
with its independent accountants that (i) there is a reasonable likelihood that
it will be unable to continue the accounting treatment chosen by Masco to be
applied to the transactions contemplated hereby as a result of its holdings (or
the holdings of any other Masco Stockholder) of Restricted Securities or
Restricted Preferred Securities and (ii) after taking all commercially
reasonable steps, Masco, with the cooperation of the Company, is unable to
restructure its ownership (or the ownership of any other Masco Stockholder) of
such securities in a manner which continues such accounting treatment and is not
materially adverse to Masco (such determination, an "Accounting Determination")
then (A) Masco shall provide a notice to the Company and the Institutional
Stockholders of such determination, such notice to provide a brief summary
setting forth an explanation of the basis for the determination (except that no
summary shall be required if agreed by the Institutional Stockholders) and to
indicate that it is a notice under this Section 2.8 (a "Section 2.8 Notice") and
(B) Masco and the Masco Stockholders shall in such Section 2.8 Notice
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offer to the Company and to the Institutional Stockholders the right to purchase
that quantity of the securities of the Company as is reasonably deemed necessary
by the Masco Stockholders (subject to the adjustment referred to in the next
succeeding sentence) to avoid such accounting problem (the "Section 2.8
Securities") at a price and upon the terms set forth in such Section 2.8 Notice.
The number of Section 2.8 Securities set forth in a Section 2.8 Notice shall
initially be calculated by the Masco Stockholders assuming purchase in full by
the Company and will be automatically adjusted downward, as appropriate, to
reflect purchases to be made by the Institutional Stockholders.
(b) For a period of 20 days after receipt of such Section 2.8 Notice by
each of the Company and the Institutional Stockholders, the Company and the
Institutional Stockholders shall have the right to purchase all (but not less
than all) of the Section 2.8 Securities so offered on the terms set forth in the
Section 2.8 Notice (as may be adjusted in such Section 2.8 Notice as provided by
Section 2.8(a)); provided, that, the Company shall have a priority right to
purchase as many of such Section 2.8 Securities so offered (subject to any
adjustment under Section 2.8(a)) as it elects and the Institutional Stockholders
may purchase the remaining Section 2.8 Securities so offered not purchased by
the Company (subject to any adjustment under Section 2.8(a)), on a pro rata
basis (based upon the relative holdings of Restricted Securities among the
Institutional Stockholders). Acceptance of the offer set forth in the Section
2.8 Notice may be made at any time during such 20-day period (subject to the
priority accorded to the Company described above) by giving an irrevocable
written notice of the acceptance thereof on or prior to such 20th day to the
Masco Stockholders.
(c) The closing of any purchase and sale pursuant to this Section 2.8 shall
take place on such date, not later than thirty (30) days after the expiration of
such 20-day period, as the parties to such purchase and sale shall select. At
the closing of such purchase and sale, the Masco Stockholders shall deliver
certificates evidencing the Section 2.8 Securities being sold duly endorsed, or
accompanied by written instruments of Transfer in form satisfactory to the
purchasers thereof, duly executed by the Masco Stockholders, free and clear of
any Liens, against delivery of the purchase price therefor as set forth in the
Section 2.8 Notice.
(d) If the offers set forth in the Section 2.8 Notice are not accepted
within such period of 20 days, the Masco Stockholders may, for a period of 180
days after the date of such Section 2.8 Notice, sell its holdings of Section 2.8
Securities as to which such offers have not been accepted to a third party on
terms which are either substantially similar to the terms offered to the Company
and the Institutional Stockholders or which are more favorable to the Masco
Stockholders; provided that if the Masco Stockholders provide the Institutional
Stockholders and the Company with notice that (i) a third party has accepted
such offer within such 180-day period, (ii) a definitive agreement has been
entered into providing for the sale of the Section 2.8 Securities to such third
party, (iii) the closing of such sale was scheduled to occur within such 180-day
period, (iv) such closing has been delayed as a result of an assertion by the
Federal Trade
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Commission or United States Department of Justice or other party that such sale
will constitute a violation of antitrust laws or as a result of the waiting
period applicable to such sale under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, having not expired as of the end of such
180-day period and (v) the sale is reasonably likely to occur notwithstanding
such delay in an additional period of 60-days from the end of such 180-day
period then such 180-day period shall be extended (once only) for a period of an
additional 60-days to allow for such sale to be consummated to such third party.
Upon the acceptance of any such offer of the Masco Stockholders by a third
party, the Masco Stockholders shall notify the Company thereof, such notice to
provide details as to the identity of the third party and the terms of such
sale.
ARTICLE III
RIGHTS OF INCLUSION
3.1 Rights of Inclusion.
(a) Except for any Transfer of Restricted Securities or Restricted
Preferred Securities pursuant to clauses (i), (v) and (vi) of Section 2.4(b),
clauses (i), (iii), (iv) or (v) of Section 2.4(c), clauses (i), (iii), (iv),
(v), (vi), (vii), (viii) or (ix) of Section 2.4(d), or clauses (i), (iii), (iv),
(v), (vi) or (vii) of Section 2.4(e) (provided, that for purposes of this
exception, the term "Permitted Transferee", with respect to the 399
Stockholders, includes only Permitted Transferees of the 399 Stockholders which
are persons described in clauses (iii) (A) and (B) of the definition of
Permitted Transferee) and except for (X) any Transfer of HFG Restricted
Securities on or before the third anniversary of the Closing Date by one or more
of the Travelers Stockholders (or their Affiliates) to 399 in an amount not
exceeding the amount of HFG Common Stock on a Fully-Diluted Basis owned by the
Travelers Stockholders as of the Closing Date (subject to adjustment for any
stock dividends, stock splits, combinations, reclassifications, mergers,
consolidations and the like)(such amount, the "Travelers Amount"), (Y) any
Transfer by 399 of Restricted Preferred Securities to one or more of the
Travelers Stockholders (or their Affiliates) in an amount not exceeding $5.5
million of aggregate stated value (together with accrued and unpaid dividends
thereon) of such Restricted Preferred Securities and (Z) any Transfer by a Masco
Stockholder of Restricted Securities or Restricted Preferred Securities pursuant
to Section 2.8 to the Institutional Stockholders who have accepted an offer made
in a Section 2.8 Notice, if:
(I) the Institutional Stockholders propose to Transfer HFG Restricted
Securities; provided, that this clause (I) shall not apply if such Transfer
is a Transfer in one or a series of related transactions of HFG Restricted
Securities (A) which represent five percent (5%) or less of the HFG Common
Stock on a Fully-Diluted Basis and (B) to the extent of the portion of any
Transfers of HFG Restricted Securities by the Institutional Stockholders
otherwise excluded from the Inclusion Right as a result of the exception
set forth in clause (A) of this Section 3.1(a)(I) which, after
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giving effect to the proposed Transfer, represent, in the aggregate, not
more than ten percent (10%) of the HFG Common Stock on a Fully-Diluted
Basis; and provided, further, that this clause (I) shall not apply to, and
the percentage calculations provided for in clauses (A) and (B) above shall
not include, any Transfer(s) by one or more of the Travelers Stockholders
of HFG Restricted Securities representing not more than the Travelers
Amount (individually, or in the aggregate when taken together with all
other such Transfers) unless one or more 399 Stockholders (other than a
Travelers Stockholder) also Transferred or proposes to Transfer HFG
Restricted Securities to the transferee in such Transfer or series of
related Transfers; and provided further, that with respect to any proposed
Transfer or Transfers by a 399 Stockholder to a Permitted Transferee which
is a person described in clause (iii)(D) of the definition of Permitted
Transferee, the exception set forth in clause (A) of this Section 3.1(a)(I)
shall be calculated as if the percentage limitation contained therein were
ten percent (10%);
(II) the Institutional Stockholders propose to Transfer Restricted
Securities in a transaction that would result in a Change of Control upon
consummation thereof (other than pursuant to an exercise of a Drag-Along
Right or pursuant to clause (iv) of Section 2.4(c));
(III) the Institutional Stockholders, the Masco Stockholders, the
Additional Stockholders or the Management Stockholders propose to Transfer
Restricted Preferred Securities;
(IV) the Institutional Stockholders propose to Transfer, in one or more
transactions, shares of Class D Common or Class D Equity Equivalents
representing more than ten percent (10%) of the Class D Common on a
Fully-Diluted Basis (such Transfer under this clause (IV), a "Class D
Tag-Along Transfer"); or
(V) following a Qualifying Offering, the Masco Stockholders propose to
Transfer HFG Restricted Securities (such Transfer under this clause (V), a
"Masco Tag-Along Transfer"); provided, that this clause (V) shall not apply
if such Transfer is a Transfer in one or a series of related transactions
of HFG Restricted Securities (A) which represent five percent (5%) or less
of the HFG Common Stock on a Fully-Diluted Basis and (B) to the extent of
the portion of any Transfers of HFG Restricted Securities by the Masco
Stockholders otherwise excluded from the Inclusion Right as a result of the
exception set forth in clause (A) of this Section 3.1(a)(V) which, after
giving effect to the proposed Transfer, represent, in the aggregate, not
more than ten percent (10%) of the HFG Common Stock on a Fully-Diluted
Basis; provided, that, with respect to any proposed Transfer or
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Transfers by a Masco Stockholder effected in order to avoid an accounting
problem of the type described in Section 2.8(a) (which Transfer(s) has been
effected after an Accounting Determination has been made and notice thereof
(in the form of a Section 2.8 Notice) has been given to the Company and the
Institutional Stockholders at least five (5) days prior to each such
Transfer) the exception set forth in clause (a) of this Section 3.1(c)(V)
shall be calculated as if the percentage limitation contained therein were
ten percent (10%);
in each case to any Person (the "Buyer") (the transferor under clause (I), (II),
(III), (IV) or (V), the "Transferor" and the securities proposed to be so
transferred, the "Transferor Shares"), then, as a condition to such Transfer,
the Transferor shall cause the Buyer to include an offer (the "Article III
Offer") to each of the Stockholders holding shares of the same class (and
series) as the Transferor Shares who are not Transferors (collectively, the
"Offerees"), to sell to the Buyer, at the option of each Offeree, that number of
shares of the same class (and series) of Restricted Securities (or Restricted
Preferred Securities) as the Transferor, determined in accordance with Section
3.1(b), on the same terms and conditions as are applicable to the Transferor
Shares. (For purposes of this Section 3.1, (i) shares of all classes and series
of HFG Common Stock, together with Equity Equivalents (on an as-if-converted
basis), shall be deemed one and the same class and series of HFG Common Stock,
and (ii) shares of Series A-1 Preferred and Series A-2 Preferred shall be deemed
one and the same class and series of Restricted Preferred Securities.) The
Transferor shall provide a written notice (the "Inclusion Notice") of the
Article III Offer to each Offeree, which may accept the Article III Offer by
providing a written notice of acceptance of the Article III Offer to the
Transferor within thirty (30) days of delivery of the Inclusion Notice.
Notwithstanding the foregoing, (x) with respect to a Class D Tag-Along Transfer,
the Transferor shall only be required to cause the Buyer therefor to include an
Article III Offer to Offerees who are holders of shares of Class D Common or of
Class D Equity Equivalents, (y) with respect to Class D Tag-Along Transfers, the
Inclusion Rights provided under this Article III shall only apply to such
holders and their shares of Class D Common or Class D Equity Equivalents and (z)
with respect to Masco Tag-Along Transfers only, the term "Offerees" as used in
this Article III shall include only 399 Stockholders and the term "Pro-Rata" as
used in Section 3.1(b) shall be determined only with respect to the Masco
Stockholders and such 399 Stockholders (excluding any Permitted Transferee of a
399 Stockholder pursuant to clauses (iii)(C) and (iii)(D) of the definition of
Permitted Transferee, unless such Permitted Transfer is, with respect to 399, a
Person described in clauses (iii)(A) and (iii)(B) of such definition),
(b) Each Offeree shall have the right (an "Inclusion Right") to sell
pursuant to the Article III Offer a Pro Rata number of its shares of HFG
Restricted Securities, Restricted Securities or Restricted Preferred Securities
or Class D Common and Class D Equity Equivalents (as the case may be) as is sold
by the Transferor. Any Offeree which owns Equity Equivalents (or Class D Equity
Equivalents) may sell pursuant to the Article III Offer, in lieu of shares of
Common Stock, Equity Equivalents (or Class D Equity Equivalents) representing
that number
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of shares of Common Stock which it could sell pursuant to its Inclusion Right
and the purchase price therefor shall equal the aggregate price that would be
paid for the shares of Common Stock issuable upon the exercise, exchange or
conversion thereof minus the aggregate exercise, exchange or conversion price
under such Equity Equivalent (or Class D Equity Equivalents) for such shares of
Common Stock.
3.2 Article III Sales.
(a) Upon its exercise of an Inclusion Right, each Offeree shall, within a
reasonable period prior to the closing of such Article III Sale, deliver to the
Transferor a certificate or certificates representing the Restricted Securities
and/or Restricted Preferred Securities to be sold or otherwise disposed of
pursuant to the Article III Offer by such Offeree, free and clear of all Liens,
and a limited power-of-attorney authorizing the Transferor to sell or otherwise
dispose of such Restricted Securities and/or Restricted Preferred Securities
pursuant to the terms of the Article III Offer, provided that, in the event the
Article III Sale is not completed, such certificate(s) shall be returned
promptly upon request by the Offeree.
The Transferor shall have one hundred twenty (120) days, commencing on the
expiration of the Inclusion Rights, in which to sell or otherwise dispose of, on
behalf of itself and the Offerees, up to the number of shares of Restricted
Securities and/or Restricted Preferred Securities covered by the Article III
Offer (and the number of Transferor Shares) to the Buyer. If all such shares are
not sold to the Buyer, the Transferor, at its option, may elect to sell on
behalf of itself and the Offerees such number of shares as the Buyer will
purchase, Pro Rata among the Transferor and the Offerees, as nearly as
practicable. The material terms of such sale, including, without limitation,
price and form of consideration, shall be as set forth in the Inclusion Notice.
If at the end of such 120-day period the Transferor has not completed the sale
or other disposition of all the Transferor Shares and all the Offerees'
Restricted Securities and/or Restricted Preferred Securities (if any) proposed
to be sold, the Transferor shall return to each of the Offerees its respective
certificates, if any, representing Restricted Securities and/or Restricted
Preferred Securities which the Offerees delivered for sale or other disposition
pursuant to this Article III and which were not sold pursuant thereto and the
provisions of this Article III shall continue to be in effect.
(b) Promptly after the consummation of the sale or other disposition of the
Transferor Shares and Restricted Securities and/or Restricted Preferred
Securities of the Offerees to the Buyer pursuant to the Article III Offer, the
Transferor shall notify the Offerees thereof, and the Buyer shall pay to the
Transferor and each of the Offerees their respective portions of the sales price
of the Restricted Securities and/or Restricted Preferred Securities sold or
otherwise disposed of pursuant thereto, and shall furnish such other evidence of
the completion of such sale or other disposition and the terms thereof as may be
reasonably requested by the Offerees.
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(c) Notwithstanding anything to the contrary contained in this Article III,
except for the Transferor's obligation to return to each Offeree any
certificates representing the Offerees' Restricted Securities or Restricted
Preferred Securities, there shall be no liability on the part of the Transferor
to any Stockholder in the event that the proposed sale pursuant to this Article
III is not consummated for whatever reason. Whether a sale of HFG Restricted
Securities, Restricted Securities or Restricted Preferred Securities is effected
pursuant to this Article III by the Transferor is in the sole and absolute
discretion of the Transferor.
ARTICLE IV
REPURCHASE OF SECURITIES
4.1 Sale Event.
(a) In the event that any Management Stockholder or any Additional
Management Stockholder shall cease to be employed by (or in the case of any
non-employee ceases to be a director of) the Company or any of its Subsidiaries
for any reason, including death, permanent disability, termination for cause or
without cause, voluntary termination, retirement or otherwise (such cessation of
employment or directorship being referred to herein as a "Sale Event"), but in
each case subject to Section 4.4, such Management Stockholder (or his personal
representative) or such Additional Management Stockholder (or his personal
representative) shall promptly notify the Company, the Masco Stockholders and
the Institutional Stockholders of the applicable Sale Event and, within ninety
(90) days after the Company's receipt of such notice, the Company or, at the
option of the Company, any employee or director of the Company or any of its
subsidiaries who shall have been designated by the Board acting by Affirmative
Board Vote (a "Company Designee") may, at its option, elect to purchase the
Securities described in the next sentence of this Section 4.1(a), exercisable by
written notice (a "Purchase Notice") delivered to such Management Stockholder
(or his personal representative) or such Additional Management Stockholder (or
his personal representative) (with copies thereof to the Institutional
Stockholders and the Masco Stockholders) and, in each case, his respective
Permitted Transferees who hold Management Securities which Management Securities
are attributable to the Management Stockholder or Additional Management
Stockholder whose employment or directorship has ceased (collectively, the
"Sellers") (with a copy to the Institutional Stockholders and the Masco
Stockholders). Upon the giving of such notice, the Sellers shall be obligated to
sell to the Company or the Company Designee those Restricted Preferred
Securities and Management Securities (whether Purchased Shares, Vested Shares or
Unvested Shares) of the Sellers which are designated in the Purchase Notice;
provided, however, that in the event notice of a Sale Event is not given, a
Purchase Notice (or notice from the Institutional Stockholders and/or Masco
Stockholders as described in Section 4.1(b)) may in any event be given at any
time following a Sale Event; provided, that, unless the Sale Event occurred as a
result of a termination for Cause, any Purchased Shares which were purchased as
a Unit must be repurchased as a Unit; and provided,
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further, that notwithstanding anything in this Agreement to the contrary, the
Company, the Institutional Stockholders and the Masco Stockholders shall not be
entitled to purchase the last outstanding share of Class C Common Stock. The
time periods set forth herein and in Section 4.1(b) below shall be tolled for
the duration of any suspension period under Section 4.4 hereof and the remaining
balance of any such time period shall re-commence as of the end of any such
suspension period.
(b) To the extent the Company or any Company Designee fails to deliver a
Purchase Notice or otherwise does not purchase all of the Management Securities
then owned by the Sellers, the Institutional Stockholders and the Masco
Stockholders may, at their option, exercisable by written notice delivered to
the Sellers within fifteen (15) days after delivery of the Purchase Notice (or
one hundred (100) days after written notice from the Sellers (or any legal
representative) to the Company of the applicable Sale Event, if no Purchase
Notice is given by the Company or any Company Designee), on a pro rata basis (in
proportion to the number of shares of HFG Common Stock on a Fully-Diluted Basis
owned by the Institutional Stockholders as compared with the number of such
shares owned by the Masco Stockholders (and including on such pro rata basis
with respect to the number of Vested Shares, Unvested Shares, Purchased Shares
and Restricted Preferred Securities purchasable by each such person)) purchase
the Management Securities not so purchased by the Company which are designated
in such written notice from the Institutional Stockholders and/or the Masco
Stockholders.
4.2 Purchase Price. The purchase price for each share of Management
Securities to be purchased pursuant to Section 4.1 shall be as set forth below
(and such purchase price may be paid at the election of the Company in cash or
by a Management Note in an aggregate principal amount equal to such purchase
price):
(a) as to each Vested Share (provided that the Sale Event did not occur as
a result of a termination for Cause), the Fair Market Value thereof as of the
date of the Sale Event,
(b) as to each Unvested Share, and each Vested Share (if the Sale Event
occurred as a result of a termination for Cause), the lower of (x) the Fair
Market Value thereof as of the date of the Sale Event or (y) the Original Cost
thereof,
(c) as to each Purchased Share other than Restricted Preferred Securities
(whether or not such Purchased Share is part of a Unit), the Fair Market Value
thereof as of the date of the Sale Event, and
(d) as to each Restricted Preferred Security (whether or not such
Restricted Preferred Security is part of a Unit), the Fair Market Value thereof
together with accrued and unpaid dividends thereon as of the date of the Sale
Event.
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Notwithstanding anything to the contrary contained herein, no provision of this
Agreement shall prevent or otherwise restrict the Board acting by Affirmative
Board Vote from determining (in its discretion) (i) that the Company will
purchase Management Securities from Management Stockholders or Additional
Management Stockholders pursuant to Section 4.1 at a price per share in excess
of the purchase price specified in this Section 4.2., (ii) that in connection
with a retirement of a Management Stockholder or Additional Management
Stockholder at or after normal retirement age all or any part of such
Stockholder's Unvested Shares may be treated as Vested Shares by the Company for
purposes of this Section 4.2 or (iii) that a Management Stockholder's or
Additional Management Stockholder's Management Securities may not be repurchased
pursuant to this Article IV by the Company, the Masco Stockholders or the
Institutional Stockholders.
4.3 Closing.
(a) Subject to Section 4.4, the closing for all purchases and sales of
Management Securities provided for in this Article IV shall be held at the
principal executive offices of the Company at 10:00 a.m., local time, on the
30th day after the determination of the purchase price in respect thereof
determined in accordance with Section 4.2 or at such other date and time as
shall have been agreed to by the Board (acting by Affirmative Board Vote) and
the Seller; provided, however, that if any Seller who has become obligated to
sell Management Securities is deceased on such 30th day as aforesaid and such
deceased person's personal representative shall not have been appointed and
qualified by such date, then unless otherwise agreed to as provided above, the
closing shall be postponed until the 10th day after the appointment and
qualification of such personal representative.
(b) All Management Securities to be sold pursuant to this Article IV shall
be delivered to the purchaser at the aforesaid closing free and clear of all
Liens. The purchaser will be entitled to receive customary representations as to
title, authority and capacity to sell and to require a guaranteed signature of
the Seller, as applicable. Each Seller hereby appoints the Company as
attorney-in-fact to transfer such Management Securities on the books of the
Company in the event of a sale pursuant to this Article IV. Such Sellers shall
take all such actions as the Company or any other purchaser shall request as
necessary to vest in the Company or any other purchaser at such closing good
title to such Management Securities, free and clear of all Liens.
4.4 Postponement. Notwithstanding anything to the contrary contained
herein, in the event a purchase (or the payment of the purchase price) by the
Company pursuant to this Article IV would
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(a) violate or conflict with any statute, rule, injunction,
regulation, order, judgment or decree applicable to the Company or any of
its Subsidiaries or by which any of them or their respective properties may
be bound or affected,
(b) result in a change of control under, any breach of, or a default
(or an event which with notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
of the property or assets of the Company or any of its Subsidiaries
pursuant to any note, bond, mortgage, indenture, contract, agreement,
lease, license, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of their
respective properties is bound or affected or
(c) in the judgment of the Board, jeopardize the financial condition
of the Company or otherwise have a material adverse effect on the business,
condition (financial or otherwise), results of operations or assets or
properties of the Company,
with the prior written consent of the Institutional Stockholders, upon the
delivery by the Company of notice of suspension under this Section 4.4 to each
of the Sellers, the rights of the Company, the Institutional Stockholders and
the Masco Stockholders to purchase the Management Securities of the Sellers with
respect to whom the Sale Event has occurred pursuant to this Article IV shall be
suspended until the earlier of (I), in the case of clauses (a) or (b) above, the
date which falls thirty (30) days following such time as such prohibition first
lapses or is waived and no such default would be caused, and in the case of
clause (c) above, the date which falls thirty (30) days following such time as
the Board determines that such purchase (or payment of the purchase price) would
no longer jeopardize the financial condition of the Company or otherwise have a
material adverse effect on the business, condition (financial or otherwise),
results of operations or assets or properties of the Company or (II) the date
which is one hundred eighty (180) days after the date of such notice of
suspension. For the purposes of this Section 4.4 only, the earlier of the dates
under the preceding clause (I) or (II) shall be deemed to be the date of the
relevant Sale Event for purposes of the purchase and sale of Management
Securities pursuant to this Article IV.
ARTICLE V
CORPORATE GOVERNANCE
5.1 Board of Directors.
(a) From and after the date hereof, each of the Stockholders shall vote or
cause to be voted all of its shares of voting Common Stock (in the Series or
Class as described below), at
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any regular or special meeting of stockholders called for the purpose of filling
positions on the Board, or to execute a written consent in lieu of such a
meeting of stockholders for the purpose of filling positions on the Board, and
shall take all actions necessary, to ensure that the Board consists of seven (7)
members as follows:
(i) shares of Series A-1 Common Stock shall be voted so as to elect
two (2) individuals (individually, an "Institutional Director," and
collectively, the "Institutional Directors") to be designated by the
Institutional Stockholders for so long as the Institutional Stockholders
own (x) shares of Series A-1 Preferred or (y) at least ten percent (10%) of
the outstanding HFG Common Stock on a Fully-Diluted Basis, and thereafter
by the Nominating Committee; provided, that, at any time, and from time to
time, the Institutional Stockholders, in their sole discretion, may
determine not to designate one or both of the Institutional Directors, in
which case such Institutional Directors shall be designated by the
Nominating Committee;
(ii) two (2) individuals to be designated by vote of a majority of the
outstanding shares of Class C Common, voting separately as a class
(individually, a "Management Director," and collectively, the "Management
Directors") each of whom must be either (A) the Chief Executive Officer (or
President), the Chief Operating Officer, the Secretary, the General
Counsel, the Chief Financial Officer (or Treasurer) or the Chief Accounting
Officer of the Company, (B) a holder of Class C Common or (C) with the
consent of the Nominating Committee, any person other than the persons
described in clause (A) or clause (B),
(iii) shares of Series A-2 Common Stock shall be voted so as to elect
one (1) individual (the "Masco Director") to be designated by the Masco
Stockholders, for so long as the Masco Stockholders own (x) shares of
Series A-1 Preferred, (y) at least five percent (5%) of the outstanding HFG
Common Stock on a Fully-Diluted Basis or (z) any Senior Notes; provided,
that, at any time, and from time to time, the Masco Stockholders, in their
sole discretion, may determine not to designate the Masco Director, in
which case such Masco Director shall be designated by the Nominating
Committee; and
(iv) subject to the exercise of the Regulatory Right under Section
5.9, shares of Series A-3 Common Stock shall be voted so as to elect two
(2) individuals (each individually, a "Disinterested Director," and
collectively, the "Disinterested Directors"), each of whom is not (A) an
Affiliate of 399, (B) employed by the Company or any Subsidiary of the
Company or (C) a Stockholder or an Affiliate of any Stockholder, such
Disinterested Directors to be designated by the Nominating Committee;
provided, however, that (x) effective at the Closing, the Board shall consist of
the individuals set forth on Exhibit C hereto in the categories shown thereon
and (y) the Stockholders shall cause
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the Institutional Director, the Masco Director and the Management Directors
named thereon to be designated and elected as directors, and not to be removed
by any Stockholder without cause, until January 1, 1998 unless such person
resigns, is otherwise unable to serve or ceases to qualify as a Management
Director under Section 5.1(a)(ii)). The Nominating Committee shall consist of
one (1) Management Director, one (1) Institutional Director and one (1)
Disinterested Director (collectively, the "Nominating Committee"), and upon the
Closing the Nominating Committee shall consist of the individuals set forth on
Exhibit C hereto in the categories shown thereon. The Nominating Committee shall
act by majority vote, provided that, if for any reason there shall be less than
three (3) directors on the Nominating Committee, it shall act by the unanimous
vote of the remaining director(s) on the Nominating Committee. In the event that
the Management Stockholders do not designate any or either of the Management
Directors, the Nominating Committee will select one (1) additional Disinterested
Director who shall also serve on the Nominating Committee which will then
consist of two (2) Disinterested Directors and one (1) Institutional Director.
(b) If, prior to his election to the Board pursuant to Section 5.1(a), any
person shall be unable or unwilling to serve as a director of the Company, the
group of Stockholders or Nominating Committee who designated such person shall
be entitled to designate a replacement.
(c) If at any time any person designated as an Institutional Director,
Masco Director or any Disinterested Director is not then serving as a director
of the Company, upon the written request of the Institutional Stockholders or
the Masco Stockholders, the Stockholders shall promptly take all action
necessary or appropriate to elect individuals designated by the Institutional
Stockholders (in the case of any Institutional Director), by the Masco
Stockholders (in the case of any Masco Director) and by the Nominating Committee
(in the case of any Disinterested Director) to serve as directors from and after
the time of such request.
5.2 Removal. If (i) the Institutional Stockholders request that an
Institutional Director elected as a director be removed (with or without cause),
by written notice to the other Stockholders;
(ii) the Management Stockholders request that a Management Director elected
as a director be removed (with or without cause), by written notice to the other
Stockholders;
(iii) the Masco Stockholders request that the Masco Director elected as a
director be removed (with or without cause) by written notice to the other
Stockholders;
(iv) the Nominating Committee requests that a Disinterested Director (or an
Institutional Director or Masco Director, if the Institutional Stockholders or
Masco Stockholders, as the case may be, have determined not to designate an
Institutional Director or Masco Director, as the case may be, and the Nominating
Committee has designated such Institutional Director or
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such Masco Director) elected as a director be removed (with or without cause) by
written notice to other Stockholders, or such director ceases to qualify as a
Disinterested Director; or
(v) a Management Director ceases to qualify as a Management Director;
then in each such case, such director shall be removed and each Stockholder
agrees to vote all shares of HFG Common Stock owned by such Stockholder and
other securities over which such Stockholder has voting control to effect such
removal or to consent in writing to effect such removal upon such request;
provided, that (A) prior to January 1, 1998, the Stockholders will not take any
action to remove any director without cause, unless such director resigns, is a
Disinterested Director or such director ceases to meet the qualifications under
Section 5.1(a)(ii), in which case such director may be removed as provided in
this Section 5.2 and (B) on and after January 1, 1998, the Stockholders will not
take any action to remove any Institutional Director or Masco Director without
cause except as provided in this Section 5.2.
5.3 Vacancies. In the event that a vacancy is created on the Board at any
time by the death, disability, retirement, resignation or removal (with or
without cause) of a director, each Stockholder agrees to vote all shares of HFG
Common Stock owned by such Stockholder and other securities over which such
Stockholder has voting control for the individual designated to fill such
vacancy by whichever of the Stockholders or Nominating Committee designated
and/or approved (pursuant to Section 5.1 hereof) the director whose death,
disability, retirement, resignation or removal (with or without cause) resulted
in such vacancy on the Board in the manner set forth in Section 5.1 hereof;
provided, however, that such other individual so designated may not previously
have been a director of the Company who was removed for cause from the Board.
5.4 Weighted Board Voting.
(a) The directors on the Board shall have weighted votes which together
total 1,000 votes, with each director having a number of such votes equal to the
percentage set forth below:
(i) each Management Director will have a weighted vote of 10.5%;
(ii) the Masco Director will have a weighted vote of 15%;
(iii) each of the Institutional Directors will have a weighted vote of
24.5%, except that in the event there are more than 50 stockholders of the
Company, such weighting shall, upon notice to the Company from the
Institutional Stockholders, be shifted to 9.5% each, with a corresponding
shift in the weighting of each of the Disinterested Director's weighted
vote from 7.5% to 22.5%; thereafter the Institutional Stockholders shall
have the
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right upon notice to the Company to increase the weighting back to its
original position; and
(iv) each Disinterested Director will have a weighted vote of 7.5%
(subject to shifting as described in clause (iii) above); such weighting
shall be unaffected if one or more of the Disinterested Directors is
replaced or designated by the Institutional Stockholders pursuant to the
Regulatory Right.
(b) All actions taken by the Board shall require the vote of a majority of
the weighted votes of the Board, subject to Section 5.5. The weighted votes set
forth above in Section 5.4(a) shall not be adjusted or affected by a vacancy in
any directorship.
5.5 Special Approval Rights.
(a) In addition to any other action requiring an Affirmative Board Vote, so
long as the Institutional Stockholders have the right to designate directors
under Section 5.1(a), an Affirmative Board Vote shall be required prior to the
Company or any of its Subsidiaries entering into a Significant Transaction.
(b) So long as the Masco Stockholders have the right to designate a
director under Section 5.1(a), the affirmative vote of the Masco Director,
unless the Masco Stockholders have elected in writing not to designate the Masco
Director, shall be required prior to the Company or any of its Subsidiaries
entering into a Masco Approval Transaction.
5.6 Committees of the Board; Subsidiary Boards. For so long as the Board
shall be comprised of the individuals contemplated by Section 5.1, unless
otherwise consented to by the Institutional Stockholders and the Masco
Stockholders, the Stockholders shall take all action necessary or appropriate to
cause the Company to have an audit committee and a compensation committee of the
Board consisting of one (1) Institutional Director, one (1) Masco Director and
one (1) Disinterested Director. The Stockholders shall take all action necessary
or appropriate to cause each additional committee of the Board to have the same
number of directors and the same composition as such audit committee and
compensation committee. For so long as the Masco Stockholders and the
Institutional Stockholders, respectively, shall have the right to designate any
directors under Section 5.1(a), the Stockholders shall take all action necessary
or appropriate to cause one director designated by each of the Masco
Stockholders and the Institutional Stockholders, respectively, to be elected to
the board of directors of each Subsidiary. The Stockholders agree that they
shall take all actions necessary or appropriate to cause (i) such persons so
designated to be directors on each such Subsidiary's board of directors and (ii)
at the direction of the parties so designating each such director, the removal
or replacement of such director from any such board. The composition of the
boards of directors of such Subsidiaries of the Company shall otherwise be as
determined by the Board.
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5.7 Observer's Rights.
(a) In the event
(i) the Institutional Stockholders elect not to exercise, or are prohibited
by applicable law from exercising, their rights to designate either or both
of the Institutional Directors, or once appointed, the Institutional
Stockholders desire to remove one or both of the Institutional Directors,
the Institutional Stockholders shall have, and/or
(ii) the Masco Stockholders elect not to exercise, or are prohibited by
applicable law from exercising, their rights to designate the Masco
Director, or once appointed, the Masco Stockholders desire to remove the
Masco Director, the Masco Stockholders shall have,
the right to each have one (1) individual (each, an "Observer") attend any
meeting of the Board or any committee thereof. In addition, each of the
Institutional Stockholders and the Masco Stockholders shall have the right to
appoint an Observer to the board of directors of any Subsidiary in lieu of
designating a director thereto as provided by Section 5.6.
(b) An Observer shall not have the right to vote on any matter presented to
the board of directors or any committee thereof. The Company shall give each
Observer written notice of each meeting thereof at the same time and in the same
manner as the members of the relevant board of directors or such committee
receive notice of such meetings, and the Company shall permit each Observer to
attend as an observer at all meetings thereof; provided that in the case of
telephonic meetings, such Stockholders need receive only actual notice thereof
at the same time and in the same manner as notice is given to the directors.
(c) Each Observer shall be entitled to receive all written materials and
other information given to the directors in connection with such meetings at the
same time such materials and information are given to the directors, and each
Observer shall keep such materials and information confidential. If the Company
(or any Significant Subsidiary) proposes to take any action by written consent
in lieu of a meeting of its board of directors, the Company (or such Significant
Subsidiary) shall give written notice thereof to each Observer prior to the
effective date of such consent describing the nature and substance of such
action.
5.8 Action by Written Consent of Stockholders. The parties hereto agree
that whenever any action is proposed to be taken by Stockholders without a
meeting, the Stockholders proposing to act by such consent shall, or shall cause
the Company to, give the Institutional Stockholders and the Masco Stockholders
at least seven (7) days' prior written notice
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(or such shorter notice period as is agreed to in writing) of such proposed
action specifying the action to be taken and the purpose thereof (such notice
requirement shall be deemed satisfied by execution of such consent (i) by
Institutional Stockholders which hold in the aggregate more than fifty percent
(50%) of the shares of HFG Common Stock on a Fully-Diluted Basis held by all
Institutional Stockholders and (ii) by Masco Stockholders which hold in the
aggregate more than fifty percent (50%) of the shares of HFG Common Stock on a
Fully-Diluted Basis held by all Masco Stockholders; provided, that, unless the
Travelers Stockholders shall have received such prior written notice, then the
Institutional Stockholders referred to in clause (i) must include Travelers
Stockholders which hold in the aggregate more than fifty percent (50%) of the
HFG Common Stock on a Fully-Diluted Basis then held by the Travelers
Stockholders.
5.9 Regulatory Right. If the Institutional Stockholders determine in their
sole discretion that applicable law permits the Institutional Stockholders to
have the right to designate a majority of the directors of the Board or
directors having a majority of the weighted votes on the Board, then
notwithstanding the provisions of Section 5.1 the Institutional Stockholders
may, upon the giving of notice thereof to the Company and the Masco
Stockholders, designate each of the Disinterested Directors instead of the
Nominating Committee and take any and all other actions otherwise permitted or
required to be taken by the Nominating Committee in this Agreement or otherwise
and provided that from and after the date such notice is given the
qualifications of a Disinterested Director set forth in clauses (A) - (C) of
Section 5.1(a)(iv) shall no longer be required. Such right exercised under this
Section 5.9 is referred to as the "Regulatory Right."
5.10 Post-Qualifying Offering Board. Upon and after the occurrence of a
Qualifying Offering, for so long as the Institutional Stockholders own (x)
shares of Series A-1 Preferred, (y) Debentures or (z) at least ten percent (10%)
of the outstanding HFG Common Stock on a Fully-Diluted Basis, notwithstanding
the provisions of Section 5.1, each of the Stockholders shall vote or cause to
be voted shares of the Common Stock so as to elect (i) the maximum number of
individuals to the Board (subject to the right of the Masco Stockholders under
clause (ii) below) as may be designated by the Institutional Stockholders under
applicable law (and taking into account any independent director requirements
under the rules of any stock exchange or over-the-counter market upon which
shares of the Common Stock are listed for trading) and (ii), for so long as the
Masco Stockholders own (w) any Senior Notes, (x) any shares of Series A-1
Preferred, (y) any Debentures or (z) at least five percent (5%) of the HFG
Common Stock on a Fully-Diluted Basis, one (1) individual to the Board to be
designated by the Masco Stockholders. At the request of the persons so
designating any such director, each Stockholder agrees to take all action
necessary or appropriate (including without limitation voting all shares of HFG
Common Stock owned by such Stockholder and other securities over which such
Stockholder has voting control) to effect the removal of such director.
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ARTICLE VI
CERTAIN COVENANTS OF THE PARTIES
6.1 Registration. In the event of, and in order to facilitate, a
registration by the Company of Common Stock under the Securities Act which will
constitute a Qualifying Offering, each Stockholder shall, at a meeting convened
for the purpose of amending the Certificate of Incorporation and the By-laws of
the Company, vote (in each case as recommended by the Board):
(i) to increase the authorized shares of any or all classes or series of
the Company's Common Stock and if necessary or desirable, change the par value
of any class or series of Common Stock or change the number of issued and
outstanding shares of any class or series of Common Stock whether by stock
split, stock dividend, reclassification, combination or the like; and
(ii) to amend, modify or repeal provisions of the Certificate of
Incorporation or Bylaws of the Company (subject to the rights and privileges set
forth in the terms of the Series A-1 Preferred) to the extent such amendments,
modifications or repeals are customary and reasonably necessary in order to
facilitate a Qualifying Offering and would be effective upon the closing of such
Qualifying Offering (except that amendments, modifications and repeals which
have the primary purpose of hindering an unsolicited takeover of the Company
(e.g., fair price provisions, staggered board, poison pills and similar
provisions) are deemed not to be customary or reasonably necessary).
6.2 Management Stockholders; Additional Stockholders.
(a) The parties hereto agree that as a condition precedent to the issuance
by the Company of shares of Common Stock or of securities convertible,
exchangeable or exercisable for or into shares of Common Stock (i) to any
employee of the Company or its Subsidiaries or (ii) to any Person other than any
such employee, any Institutional Stockholder, any Masco Stockholder or any
Management Stockholder, the Company shall require such employee or other Person
to execute a Joinder Agreement and thereby enter into and become a party to this
Agreement. From and after such time, the term "Additional Management
Stockholder" shall be deemed to include such employees and the term "Additional
Stockholder" shall be deemed to include such other Person. Nothing contained
herein nor the ownership of any Restricted Securities shall confer upon any
Management Stockholder or Additional Management Stockholder the right to
employment or to remain in the employ of the Company or any of its Subsidiaries.
Notwithstanding the foregoing, to the extent approved by a majority of the
weighted votes of the Board (which shall include any members of the Board who
are Disinterested Directors) and specified in any Joinder Agreement (or
amendment thereto) pursuant to which any Additional Management Stockholder may
become a party hereto, the provisions of this
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Stockholders' Agreement
Agreement may be varied to be more or less restrictive with respect to any
Additional Management Stockholder.
(b) Concurrently with the execution and delivery of this Agreement, each of
the Management Stockholders shall execute and deliver the Voting Trust
Agreement, and unless otherwise agreed by the Company and such Additional
Management Stockholder, concurrently with the execution and delivery of a
Joinder Agreement, each of the Additional Management Stockholders shall execute
and deliver the Voting Trust Agreement, providing for the establishment of the
Voting Trust granting the Trustee thereunder the power to vote at any meeting of
stockholders, or to take action by written consent in lieu of such meeting and
to take any actions on behalf of the Management Stockholders (and Additional
Management Stockholders who become parties thereto) under this Agreement with
respect to all of the shares of Restricted Securities and Restricted Preferred
Securities held by the Management Stockholders and such Additional Management
Stockholders.
6.3 Stockholder List; Certain Notices. Upon the request of any
Institutional Stockholder or Masco Stockholder, the Company shall deliver
promptly to such Institutional Stockholder or Masco Stockholder a list setting
forth the names of all Stockholders and the number of shares of Common Stock and
Equity Equivalents owned by each Stockholder. In addition, the Company shall
give each of the Institutional Stockholders and the Masco Stockholders prior
written notice of (a) the proposed conversion of any shares of any class of
Common Stock or Equity Equivalents and (b) any proposed record transfer of
Restricted Securities or Restricted Preferred Securities, setting forth the name
of the transferee and the number and type of Restricted Securities or Restricted
Preferred Securities being so transferred.
6.4 Regulatory Compliance Cooperation.
(a) Before the Company redeems, purchases or otherwise acquires, directly or
indirectly, or converts or takes any action with respect to the voting rights
of, any shares of any class of its capital stock (excluding Management
Securities) or any securities convertible, exchangeable or exercisable for or
into any shares of any class of its capital stock (excluding Management
Securities), the Company will give written notice of such pending action to the
Institutional Stockholders and to the Masco Stockholders. Upon the written
request of any Institutional Stockholder made within seven (7) days after its
receipt of any such notice, stating that after giving effect to such action such
Institutional Stockholder would have a Regulatory Problem (as defined below),
the Company will defer taking such action for such period (not to extend beyond
forty-five (45) days after such Institutional Stockholder's receipt of the
Company's original notice) as such Institutional Stockholder requests to permit
it and its Affiliates to reduce the quantity of securities owned by them in
order to avoid the Regulatory Problem. In the event the Company or any
Institutional Stockholder is precluded from taking any action under this
Agreement within
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any allotted period of time as a consequence of this Section, such period of
time shall be extended by the number of days during which the Company or such
Institutional Stockholder is precluded from acting.
(b) In the event that any Institutional Stockholder determines in its good
faith reasonable judgment that it has a Regulatory Problem (as defined below),
the Company agrees to take all such actions as are reasonably requested by such
Institutional Stockholder in order to effectuate and facilitate any Transfer by
such Institutional Stockholder of any securities of the Company then held by
such Institutional Stockholder to any Person designated by such Institutional
Stockholder, it being understood that Transfers pursuant to this subsection
shall only be for that quantity of the securities of the Company as is
reasonably deemed necessary by such Institutional Stockholder to remedy such
Regulatory Problem, and that such Transfer is to be at the expense of such
Institutional Stockholder and be subject to all other provisions of the
Stockholders' Agreement.
(c) For purposes of this Agreement, "Regulatory Problem" means (i) the
Institutional Stockholder's investment in the Common Stock exceeds any
limitation to which it is subject, or is otherwise not permitted, under any law,
rule or regulation of any governmental authority (including any position to that
effect taken by such governmental authority), or (ii) restrictions are imposed
on the Institutional Stockholder as a result of any law, regulation, rule or
directive (whether or not having the force of law) of any governmental or
regulatory authority which, in the reasonable judgment of the Institutional
Stockholder, make it illegal or unduly burdensome for the Institutional
Stockholder to continue to hold such Common Stock.
6.5 Rights Offering.
(a) Prior to issuing any New Common Stock after the Closing (x) before the
occurrence of an underwritten public offering of HFG Common Stock registered
under the Securities Act, to any person or (y) after such offering, to any
Stockholder, the Company shall offer (the "New Common Stock Offer") each
Stockholder an opportunity to purchase in cash any or all of its Pro Rata
portion of such New Common Stock on the same terms and conditions as the New
Common Stock being offered and, if such New Common Stock is to be issued as a
part of a unit of securities, the Company shall offer each Stockholder an
opportunity to purchase any or all of its Pro Rata portion of such unit of
securities (together with the New Common Stock, the "New Common Stock Units") on
the same terms and conditions as the New Common Stock Units being offered. The
Company shall make such New Common Stock Offer by providing each Stockholder
with a notice (the "New Common Stock Notice") setting forth (i) each
Stockholder's Pro Rata portion of such New Common Stock or of such New Common
Stock Units, as the case may be, (ii) the cash consideration to be paid for each
share of New Common Stock or each New Common Stock Unit, as the case may be, and
(iii) all other material terms of such New Common Stock Offer.
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(b) In order for any Stockholder to accept the New Common Stock Offer, such
Stockholder shall give a notice of acceptance to the Company on or before twenty
(20) days following its receipt of a New Common Stock Notice (the expiration of
such twenty (20) days being referred to herein as the "Acceptance Date").
(c) Within one hundred twenty (120) days following the Acceptance Date, the
Company (i) shall issue New Common Stock or New Common Stock Units, as the case
may be, to each Stockholder who timely accepted such New Common Stock Offer upon
the terms specified in such New Common Stock Offer and (ii) may issue New Common
Stock or New Common Stock Units, as the case may be, to any other Person or
Persons in an amount not to exceed the aggregate amount offered pursuant to the
New Common Stock Offer (less the aggregate amount of shares of New Common Stock
or units of New Common Stock Units, as the case may be, issued to Stockholders
pursuant to the foregoing clause (i)) and for a price which equals or exceeds
the price per share of New Common Stock or per unit of New Common Stock Units,
as the case may be, specified in the New Common Stock Offer.
ARTICLE VII
MISCELLANEOUS
7.1 Governing Law. This Agreement shall be governed 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 that would cause the
application of the laws of any jurisdiction other than the State of New York,
except to the extent that the General Corporation Law of the State of Delaware
applies as a result of the Company being incorporated in the State of Delaware,
in which case such General Corporation Law shall apply.
7.2 Entire Agreement; Amendments. This Agreement (when read in conjunction
with the Voting Trust Agreement, each Travelers Stockholder's, 399's and each
Management Stockholder's applicable subscription agreement, the Stock Purchase
Agreements and in the case of the Masco Stockholders, those sections of the
Acquisition Agreement pertaining to the capital stock of the Company)
constitutes the entire agreement of the parties with respect to the subject
matter hereof and this Agreement may be amended, modified or supplemented only
by a written instrument duly executed by the Company, the Institutional
Stockholders and the Masco Stockholders, except that (i)(a) any amendment,
modification or supplement that materially, adversely and disproportionately
affects the Management Stockholders or the Additional Stockholders, as the case
may be, shall require the consent of the Management Stockholders or the
Additional Stockholders, respectively, and (b) any amendment, modification or
supplement that disproportionately affects less than all of the Management
Stockholders or the Additional Stockholders, as the case may be, shall require
the consent of the Management
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Stockholders or the Additional Stockholders so affected and (ii) any amendment,
modification or supplement that (x) materially, adversely and disproportionately
affects the Travelers Stockholders which then hold Restricted Securities or
Restricted Preferred Securities, or (y) adversely affects the ability of the
Travelers Stockholders to Transfer Restricted Securities or Restricted Preferred
Securities pursuant to Article III hereof, shall also require the consent of the
Travelers Stockholders holding a majority of the HFG Common Stock on a
Fully-Diluted Basis then held by the Travelers Stockholders. In the event of an
amendment, modification or supplement of this Agreement in accordance with its
terms, the Stockholders shall take all action necessary or appropriate, within
thirty (30) calendar days following such amendment, modification or supplement,
or as soon thereafter as is practicable, to cause the adoption of any amendment
to the Certificate of Incorporation and By-Laws of the Company that may be
required as a result of such amendment, modification or supplement to this
Agreement. The Stockholders and the Additional Stockholders hereby agree to vote
their shares of Restricted Securities and Restricted Preferred Securities to
approve such amendments to the Certificate of Incorporation and By-Laws of the
Company.
7.3 Term. Except as provided below in this Section 7.3, this Agreement
shall automatically and without further action terminate upon the earliest to
occur of (i) a Qualifying Offering or (ii) a Sale Transaction; provided that
upon the occurrence of a Qualifying Offering and prior to the occurrence of a
Sale Transaction, (x) the provisions of Article IV, Section 5.10, Article VII
and the prohibition on transfer by any Management Stockholder of any Unvested
Shares set forth in the second proviso to Section 2.4(a) shall continue in full
force and effect (together with related definitions), (y) the provisions of
Article III shall continue in full force and effect (together with related
definitions) with respect to Transfers of HFG Common Stock (A) by the
Institutional Stockholders until the first date as of which such Institutional
Stockholders no longer own at least twelve percent (12%) of the HFG Common Stock
on a Fully-Diluted Basis and (B) by the Masco Stockholders until the first date
as of which either the Masco Stockholders or the Institutional Stockholders no
longer own at least twelve percent (12%) of the HFG Common Stock on a
Fully-Diluted Basis and (z) the provisions of Section 2.4(g) shall continue in
full force and effect until the date determined pursuant to clause (B) of this
Section 7.3.
7.4 Certain Actions. (a) Unless otherwise expressly provided herein,
whenever any action is required under this Agreement by:
(i) the Institutional Stockholders (as a group, as opposed to the
exercise by an Institutional Stockholder of its individual rights
hereunder), it shall be by the affirmative vote of the holders of HFG
Common Stock representing more than fifty percent (50%) of the HFG Common
Stock on a Fully-Diluted Basis then held by the Institutional Stockholders
as a group, or as otherwise agreed in writing by the Institutional
Stockholders as a group (a copy of such writing to be supplied to the Masco
Stockholders by the Company or the Institutional Stockholders);
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(ii) the Masco Stockholders (as a group, as opposed to the exercise by
a Masco Stockholder of its individual rights hereunder), it shall be by the
affirmative vote of the holders of HFG Common Stock representing more than
fifty percent (50%) of the HFG Common Stock on a Fully-Diluted Basis then
held by the Masco Stockholders as a group;
(iii) the Management Stockholders (and Additional Management
Stockholders who have become parties to the Voting Trust Agreement), it
shall be by the Trustee acting in accordance with the terms of the Voting
Trust Agreement; or
(iv) the Additional Stockholders (exclusive of Additional Management
Stockholders who have become parties to the Voting Trust Agreement) (as a
group, as opposed to the exercise by an Additional Stockholder of its
individual rights hereunder), it shall be by the affirmative vote of the
holders of HFG Common Stock representing more than fifty percent (50%) of
the HFG Common Stock on a Fully-Diluted Basis then held by the Additional
Stockholders as a group.
(b) For purposes of giving: (i) a Notice of Intention pursuant to Section
2.5(a), (ii) a notice pursuant to Section 2.6(a), (iii) a notice of acceptance
of an Article III Offer pursuant to Section 3.1(a), (iv) an Inclusion Notice
pursuant to Section 3.1(a), or (v) a notice of acceptance pursuant to Section
6.5(b), the Voting Trust shall be disregarded as a "Management Stockholder" or
"Additional Management Stockholder" and the Management Stockholder or Additional
Management Stockholder which Beneficially Owns (as defined in the Voting Trust
Agreement) through the Voting Trust the Restricted Securities or Restricted
Preferred Securities as to which such notice relates shall be treated as the
holder thereof; provided, that a copy of any such notice shall be furnished to
the Trustee concurrently with the giving thereof.
7.5 Inspection. For so long as this Agreement shall remain in effect, this
Agreement shall be made available for inspection by any Stockholder at the
principal executive offices of the Company, except that the Company may elect to
maintain confidentiality over any portion of any exhibits, schedules or annexes
which show the stock ownership of any Management Stockholder or Additional
Management Stockholder.
7.6 Compliance with Regulations. Whenever a Stockholder is entitled to
purchase Restricted Securities or Restricted Preferred Securities pursuant to
the provisions of this Agreement, any closing time period specified in such
provision shall be tolled until any necessary governmental approval is received,
including without limitation approval under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, provided that such tolling period shall not exceed
sixty (60) days.
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7.7 Waiver. No waiver by any party of any term or condition of this
Agreement, in one or more instances, shall be valid unless in writing, and no
such waiver shall be deemed to be construed as a waiver of any subsequent breach
or default of the same or similar nature.
7.8 Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
permitted assigns (including without limitation transferees of Restricted
Securities and Restricted Preferred Securities); provided, however, that
(a) nothing contained herein shall be construed as granting any Stockholder
the right to Transfer any of its Restricted Securities or Restricted Preferred
Securities except in accordance with this Agreement,
(b) any Third Party which acquires Restricted Securities or Restricted
Preferred Securities in accordance with Section 2.5 (Right of First Refusal)
shall be bound by and shall have the benefit of the provisions of Sections 2.1,
2.2, 2.4 (but not 2.4(a)(i), 2.4(a)(v), 2.4(b)(i), 2.4(b)(ii) and 2.4(d)(i)),
2.5, 2.6, 2.7, Article III, Section 6.1 and Article VII, and shall be bound by
the obligations under Article V to vote securities and take other actions in
order to elect and/or remove directors designated under Article V by the
Institutional Stockholders, the Masco Stockholders, the Management Stockholders
and the Nominating Committee (but shall not have the benefit of any rights to
designate or remove any directors under Article V), to the same extent as the
transferor of such Restricted Securities or Restricted Preferred Securities, but
the remaining provisions of this Agreement shall not inure to the benefit of,
and the provisions of Article IV shall not apply to, the Restricted Securities
or Restricted Preferred Securities of, such Third Party,
(c) unless otherwise provided in the terms of the Transfer, none of the
provisions of this Agreement, other than those set forth in Sections 2.1 and 2.2
to the extent those Sections require compliance with the Securities Act,
delivery of opinions of counsel and placement of Securities Act (or state
securities laws) legends, shall apply to any Transfer of Restricted Securities
or Restricted Preferred Securities (or to the transferee thereof) subsequent to
a Transfer of those securities pursuant to Article III,
(d) none of the provisions of this Agreement shall apply to any Transfer of
Restricted Securities or Restricted Preferred Securities subsequent to a
Transfer thereof pursuant to a registered public offering made in accordance
with the Securities Act or pursuant to a Rule 144 Transaction,
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Stockholders' Agreement
(e) notwithstanding any Transfer of Restricted Securities or Restricted
Preferred Securities by any Masco Stockholder, Management Stockholder or
Additional Stockholder to an Institutional Stockholder, only the provisions of
this Agreement which are expressly applicable to Institutional Stockholders
shall be applicable to such Institutional Stockholder and to such Restricted
Securities or Restricted Preferred Securities in the hands of such Institutional
Stockholder,
(f) notwithstanding any Transfer of Restricted Securities or Restricted
Preferred Securities by any Institutional Stockholder, Management Stockholder or
Additional Stockholder to a Masco Stockholder, only the provisions of this
Agreement which are expressly applicable to such Masco Stockholder shall be
applicable to such Masco Stockholder and to such Restricted Securities or
Restricted Preferred Securities in the hands of such Masco Stockholder,
(g) notwithstanding any Transfer of Restricted Securities or Restricted
Preferred Securities by any Institutional Stockholder, Masco Stockholder or
Additional Stockholder to a Management Stockholder, only the provisions of this
Agreement which are expressly applicable to such Management Stockholder shall be
applicable to such Management Stockholder and to such Restricted Securities or
Restricted Preferred Securities in the hands of such Management Stockholder,
(h) notwithstanding any Transfer of Restricted Securities or Restricted
Preferred Securities by any Institutional Stockholder, Masco Stockholder or
Management Stockholder to an Additional Stockholder, only the provisions of this
Agreement which are expressly applicable to such Additional Stockholder shall be
applicable to such Additional Stockholder and to such Restricted Securities or
Restricted Preferred Securities in the hands of such Additional Stockholder.
7.9 Remedies. In the event of a breach by any party to this Agreement of
its obligations under this Agreement, any party injured by such breach, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages and costs (including reasonable attorneys' fees), will be
entitled to specific performance of its rights under this Agreement. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of any such provision will be inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived. Such equitable remedies and all other
remedies are cumulative and not exclusive and shall be in addition to any
remedies which any party may have under this Agreement or otherwise.
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7.10 Income Tax Withholding. Each Management Stockholder and Additional
Management Stockholder authorizes the Company to make any required withholding
from such Management Stockholder's (or Additional Management Stockholder's, as
the case may be) compensation for the payment of any and all income taxes and
other sums that may be due any governmental authority as a result of the receipt
by the Management Stockholders (or the Additional Management Stockholders, as
the case may be) of compensation income under Section 83 of the Internal Revenue
Code of 1986, as amended, or similar provisions of state or local law, if
required by applicable law, and agrees, if requested by the Company, and in lieu
of all or a portion of such withholding, to pay the Company in a lump sum such
amounts as the Company may be required to remit to any governmental authority on
behalf of the Management Stockholder (or the Additional Management Stockholder,
as the case may be) in respect of any such taxes and other sums.
7.11 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
7.12 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
7.13 Further Assurances; Subsidiaries. Each party hereto shall cooperate
and shall take such further action and shall execute and deliver such further
documents as may be reasonably requested by any other party in order to carry
out the provisions and purposes of this Agreement. Any provision herein that by
its terms requires a Subsidiary of the Company to take any action or refrain
from taking any action shall be interpreted to require the Company to cause such
Subsidiary to take such action or to refrain from taking such action,
respectively, to the fullest extent permitted by law.
7.14 Gender. Whenever the pronouns "he" or "his" are used herein they shall
also be deemed to mean "she" or "hers" or "it" or "its" whenever applicable.
Words in the singular shall be read and construed as though in the plural and
words in the plural shall be construed as though in the singular in all cases
where they would so apply.
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Stockholders' Agreement
7.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
7.16 Payment. All payments hereunder shall be made in cash (or by
Management Note, as provided by Section 4.2 hereof), or by wire transfer of
immediately available funds, except that payments of amounts of less than
$500,000 may be by an official bank check.
7.17 Notices. (a) All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission or mailed (by
registered or certified mail, return receipt requested) or by reputable
overnight courier, fee prepaid to the parties at the following addresses or
facsimile numbers:
(i) If to any Institutional Stockholder, to:
399 Venture Partners, Inc.
399 Park Avenue
New York, New York 10043
Facsimile No.: 212-888-2940
Attn: David F. Thomas
and
Greenwich Street Capital Partners, Inc.
388 Greenwich Street
New York, New York 10013
Facsimile No.: 212-816-0166
Attn: Robert Hamwee
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: 212-309-6273
Attn: Philip H. Werner
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Stockholders' Agreement
(ii) if to any Travelers Stockholder to:
[Name of Travelers Stockholder]
Greenwich Street Capital Partners, Inc.
388 Greenwich Street
New York, New York 10013
Facsimile No: 212-816-0166
Attn: Robert Hamwee
(iii) If to any Masco Stockholder, to:
MASCO Corporation
21001 Van Born Road
Taylor, Michigan 48180
Facsimile No.: 313-374-6135
Attn: President
with a copy to:
MASCO Corporation
21011 Van Born Road
Taylor, Michigan 48180
Facsimile No.: 313-374-6135
Attn: General Counsel
(iv) If to any Management Stockholder, to:
Voting Trustee
c/o FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
with a copy to:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: General Counsel
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Stockholders' Agreement
(vi) If to the Company, to:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: President
with copies to:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: General Counsel
and
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: 212-309-6273
Attn: Philip H. Werner
(v) If to any Additional Stockholder, to the address of such Person set
forth in the stock records of the Company.
(b) All such notices, requests and other communications will be deemed
delivered upon receipt. Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto (subject to
Section 7.4).
7.18 Consent to Jurisdiction and Service of Process.
EACH OF THE PARTIES HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT
MAY BE LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES
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Stockholders' Agreement
ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES
HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARTY AT THE
ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE FIFTEEN
(15) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS,
NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO
OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS AGAINST ANY
OF THE OTHER PARTIES HERETO IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS
MAY BE PERMITTED BY ANY APPLICABLE LAW.
7.19 Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY
UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE PARTIES
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
7.20 Omnibus Signature Page. The signature pages to this Agreement include
one signature page executed by the Company, the Institutional Stockholders and
the Masco
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Stockholders' Agreement
Stockholders and a series of omnibus signature pages executed by the Management
Group Members which constitute signature pages to this Agreement and to other
agreements.
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<PAGE>
Stockholders' Agreement
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
FURNISHINGS INTERNATIONAL INC.
By:_________________________________
Name:
Title:
MASCO CORPORATION
By:_________________________________
Name:
Title:
399 VENTURE PARTNERS, INC.
By:_________________________________
David F. Thomas
President
ASSOCIATED MADISON COMPANIES, INC.
By:_________________________________
Name:
Title:
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<PAGE>
Stockholders' Agreement
[Signature Page to Stockholders' Agreement]
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<PAGE>
Stockholders' Agreement
____________________________________
M. Saleem Muqaddam
____________________________________
David F. Thomas
____________________________________
Richard M. Cashin
____________________________________
Joseph M. Silvestri
NATASHA PARTNERS
By:_________________________________
Name:
Title:
ALCHEMY PARTNERS, L.P.
By:__________________________________
Name:
Title:
[Signature Page to Stockholders' Agreement]
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<PAGE>
Stockholders' Agreement
____________________________________
Stephen R. Lake
____________________________________
Charles A. Lipsey
____________________________________
Leonard S. Shane
____________________________________
H. Guy Lipscomb
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<PAGE>
Stockholders' Agreement
[Signature Page to Stockholders' Agreement]
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<PAGE>
Stockholders' Agreement
TRV EMPLOYEES FUND, L.P.
By TRV Employees Investments Inc., General Partner
By:_________________________________
Name:
Title:
GREENWICH STREET CAPITAL PARTNERS, L.P.
By Greenwich Street Investments, L.P., General Partner
By Greenwich Street Investments, Inc., General Partner
By:_________________________________
Name:
Title:
GSCP OFFSHORE FUND LTD.
By Greenwich Street Capital Partners, Inc.,
as Manager
By:_________________________________
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By:_________________________________
Name:
Title:
THE TRAVELERS LIFE AND ANNUITY COMPANY
By:_________________________________
Name:
Title:
[Signature Page to Stockholders' Agreement]
[Omnibus Signature Page Follows]
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Stockholders' Agreement
Exhibit A
Form of Joinder Agreement
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, NC 27360
Attention: Chief Executive Officer
Ladies & Gentlemen:
In consideration of the [transfer][issuance] to the undersigned of
[Describe security being transferred/issued] of FURNISHINGS INTERNATIONAL INC.,
a Delaware corporation (the "Company"), the undersigned [represents that it is a
Permitted Transferee of [Insert name of transferor] and]* agrees that, as of the
date written below, [he] [she] [it] shall become a party to[, and a Permitted
Transferee as defined in,]* that certain Stockholders' Agreement dated as of
______, __ 1996, as such agreement may have been amended, supplemented or
modified from time to time (the "Agreement"), among the Company and the persons
named therein, and [as a Permitted Transferee shall be fully bound by, and
subject to, all of the covenants, terms and conditions of the Agreement that
were applicable to the undersigned's transferor,]* [shall be fully bound by, and
subject to, the covenants, terms and conditions of the Agreement as provided
under Section 7.8 of the Agreement]** [shall be fully bound by, and subject to,
all of the covenants, terms and conditions of the Agreement,]*** as though an
original party thereto and shall be deemed a [Management Stockholder] [Masco
Stockholder] [Additional Stockholder] [Institutional Stockholder]**** for [all]*
[solely for]** [all]*** purposes thereof.
Executed as of the day of , .
SIGNATORY:_________________________
Address:___________________________
___________________________
ACKNOWLEDGED AND ACCEPTED:
FURNISHINGS INTERNATIONAL INC.
By____________________________
Name:
Title:
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<PAGE>
Stockholders' Agreement
* Include if signatory is a Permitted Transferee
** Include if signatory is a Third Party
*** Include if signatory is an Additional Stockholder
**** Include if signatory is receiving securities from a Management
Stockholder, a Masco Stockholder, an Additional Stockholder or an
Institutional Stockholder; if signatory is an Additional Stockholder
receiving securities issued by the Company insert [Additional
Stockholder]
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<PAGE>
Stockholders' Agreement
Exhibit B
Legends
1. Shares of Restricted Securities which are subject to the Voting Trust
Agreement shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
STOCKHOLDERS' AGREEMENT DATED AS OF AUGUST 5, 1996 AMONG FURNISHINGS
INTERNATIONAL INC. (THE "COMPANY") AND ITS STOCKHOLDERS AS MAY BE AMENDED FROM
TIME TO TIME AND THE VOTING TRUST AGREEMENT DATED AS OF AUGUST 5, 1996 AMONG THE
COMPANY, THE TRUSTEE NAMED THEREIN AND CERTAIN OF ITS STOCKHOLDERS AS MAY BE
AMENDED FROM TIME TO TIME, AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF (A "TRANSFER") EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT AND SUCH VOTING TRUST AGREEMENT
AND ANY TRANSFEREE OF THESE SECURITIES SHALL BE SUBJECT TO THE TERMS OF SUCH
AGREEMENTS. COPIES OF THE STOCKHOLDERS' AGREEMENT AND VOTING TRUST AGREEMENT, IN
EACH CASE AS AMENDED, ARE MAINTAINED WITH THE CORPORATE RECORDS OF THE COMPANY
AND ARE AVAILABLE FOR INSPECTION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY. A COPY OF THE VOTING TRUST AGREEMENT AS AMENDED IS ALSO ON FILE AND
AVAILABLE FOR INSPECTION AT THE COMPANY'S REGISTERED OFFICE IN THE STATE OF
DELAWARE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR STATE SECURITIES
LAWS, AND NO TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) PURSUANT TO AN EXEMPTION
THEREFROM WITH RESPECT TO WHICH THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE ACT, AS
PROVIDED BY THE TERMS OF THE STOCKHOLDERS' AGREEMENT DESCRIBED ABOVE.
THE POWERS, DESIGNATIONS, PREFERENCES, AND RELATIVE PARTICIPATING, OPTIONAL
OR OTHER SPECIAL RIGHTS, AND THE
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<PAGE>
Stockholders' Agreement
QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS
OF EACH CLASS OR SERIES OF CAPITAL STOCK OF THE COMPANY ARE SET FORTH IN THE
CERTIFICATE OF INCORPORATION. THE CORPORATION WILL FURNISH A COPY OF THE
CERTIFICATE OF INCORPORATION TO THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE
UPON REQUEST.
2. Shares of Restricted Securities not subject to the Voting Trust Agreement and
shares of Restricted Preferred Securities shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
STOCKHOLDERS' AGREEMENT DATED AS OF AUGUST 5, 1996 AMONG FURNISHINGS
INTERNATIONAL INC. (THE "COMPANY") AND ITS STOCKHOLDERS AS MAY BE AMENDED FROM
TIME TO TIME, AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF (A "TRANSFER") EXCEPT IN ACCORDANCE WITH THE PROVISIONS
THEREOF AND ANY TRANSFEREE OF THESE SECURITIES SHALL BE SUBJECT TO THE TERMS OF
SUCH AGREEMENT. COPIES OF THE STOCKHOLDERS' AGREEMENT, AS AMENDED, ARE
MAINTAINED WITH THE CORPORATE RECORDS OF THE COMPANY AND ARE AVAILABLE FOR
INSPECTION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR STATE SECURITIES
LAWS, AND NO TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) PURSUANT TO AN EXEMPTION
THEREFROM WITH RESPECT TO WHICH THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE ACT, AS
PROVIDED BY THE TERMS OF THE STOCKHOLDERS' AGREEMENT DESCRIBED ABOVE.
THE POWERS, DESIGNATIONS, PREFERENCES, AND RELATIVE PARTICIPATING, OPTIONAL
OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS OF
SUCH PREFERENCES AND/OR RIGHTS OF EACH CLASS OR SERIES OF CAPITAL STOCK OF THE
COMPANY ARE SET FORTH IN THE CERTIFICATE OF INCORPORATION. THE CORPORATION WILL
FURNISH A COPY OF THE CERTIFICATE OF INCORPORATION TO THE HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON REQUEST.
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<PAGE>
Stockholders' Agreement
3. Shares of Restricted Securities and Restricted Preferred Securities offered
and sold pursuant to Regulation S will also bear a legend substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
REGULATION S PROMULGATED UNDER THE ACT AND MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON (AS THAT TERM
IS DEFINED IN REGULATION S) UNTIL THE FORTIETH (40TH) DAY FOLLOWING COMPLETION
OF THE REGULATION S OFFERING PURSUANT TO WHICH THESE SECURITIES HAVE BEEN
ISSUED. AFTER SUCH DATE, THIS LEGEND SHALL HAVE NO FURTHER FORCE AND EFFECT.
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<PAGE>
Stockholders' Agreement
Exhibit C
Board of Directors
Institutional Directors
Richard M. Cashin, Jr.
David F. Thomas
Masco Director
John Morgan
Management Directors
Wayne B. Lyon
Robert George
Disinterested Directors
C. Sean Day
Donald Roberts
Nominating Committee
1. Richard Cashin
2. Wayne B. Lyon
3. C. Sean Day
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FURNISHINGS INTERNATIONAL INC.
REGISTRATION RIGHTS AGREEMENT
August 5, 1996
- --------------------------------------------------------------------------------
<PAGE>
Registration Rights Agreement
TABLE OF CONTENTS
Page
----
RECITALS.......................................................................1
ARTICLE I
DEFINITIONS................................................................1
1.1 Defined Terms in Stockholders' Agreement..............................1
1.2 Definitions...........................................................2
1.3 Cross-References......................................................3
ARTICLE II
DEMAND REGISTRATIONS.......................................................4
2.1 Requests for Registration.............................................4
2.2 Long-Form Registrations...............................................4
2.3 Short-Form Registrations..............................................5
2.4 Effective Registration Statement......................................5
2.5 Priority on Demand Registrations......................................6
2.6 Selection of Underwriters.............................................7
2.7 Black-Out Rights and Postponement.....................................7
ARTICLE III
PIGGYBACK REGISTRATIONS....................................................7
3.1 Right to Piggyback....................................................7
3.2 Piggyback Expenses....................................................8
3.3 Priority on Primary Registrations.....................................8
3.4 Priority on Secondary Registrations...................................8
ARTICLE IV.....................................................................9
HOLDBACK AGREEMENTS........................................................9
4.1 Holdback..............................................................9
4.2 Company Holdback......................................................9
ARTICLE V.....................................................................10
REGISTRATION PROCEDURES...................................................10
ARTICLE VI....................................................................14
REGISTRATION EXPENSES.....................................................14
6.1 Fees Generally.......................................................14
6.2 Counsel Fees.........................................................14
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<PAGE>
Registration Rights Agreement
Page
ARTICLE VII...................................................................14
UNDERWRITTEN OFFERINGS....................................................14
7.1 Demand Underwritten Offerings........................................14
7.2 Incidental Underwritten Offerings....................................15
ARTICLE VIII..................................................................15
INDEMNIFICATION...........................................................15
8.1 Indemnification by the Company.......................................15
8.2 Indemnification by a Selling Stockholder.............................17
8.3 Indemnification Procedure............................................17
8.4 Underwriting Agreement...............................................18
8.5 Contribution.........................................................18
8.6 Periodic Payments....................................................20
ARTICLE IX....................................................................20
RULE 144..................................................................20
ARTICLE X.....................................................................20
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS...............................20
ARTICLE XI....................................................................21
MISCELLANEOUS.............................................................21
11.1 No Inconsistent Agreements.........................................21
11.2 Adjustments Affecting Registrable Securities.......................21
11.3 Specific Performance...............................................21
11.4 Actions Taken; Amendments and Waivers..............................21
11.5 Successors and Assigns.............................................22
11.6 Notices............................................................23
11.7 Headings...........................................................25
11.8 Gender.............................................................25
11.9 Invalid Provisions.................................................25
11.10 Governing Law......................................................26
11.11 Consent to Jurisdiction and Service of Process.....................26
11.12 Waiver of Jury Trial...............................................27
11.13 Counterparts.......................................................27
11.14 Omnibus Signature Pages ...........................................27
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<PAGE>
Registration Rights Agreement (this "Agreement") dated as of August 5, 1996
by and among FURNISHINGS INTERNATIONAL INC., a Delaware corporation (the
"Company"), Masco Corporation, a Delaware corporation ("Masco"), 399 Venture
Partners, Inc., a Delaware corporation ("399"), TRV Employees Fund, L.P., a
Delaware limited partnership ("TRV"), Greenwich Street Capital Partners , L.P.,
a Delaware limited partnership ("Greenwich Street"), GSCP Offshore Fund Ltd., a
British Virgin Islands corporation ("GSCP"), The Travelers Insurance Company, a
Connecticut corporation ("Travelers"), The Travelers Life and Annuity Company, a
Connecticut corporation ("TLAC" and together with 399, TRV, Greenwich Street,
GSCP, Travelers and TLAC, each individually, an "Institutional Stockholders
Group Member"), and each of the individuals whose name appears on the omnibus
signature pages hereto (individually, a "Management Group Member" and
collectively, the "Management Group"). Capitalized terms are used as defined in
Article I hereto.
RECITALS
WHEREAS, the Company and Masco have entered into an Acquisition Agreement
dated as of March 29, 1996, as amended by Amendment No. 1 thereto dated as of
June 20, 1996 (as so amended and as may be further amended, supplemented or
modified from time to time, the "Acquisition Agreement"), pursuant to which the
Company is acquiring all of the issued and outstanding capital stock of the HFG
Companies (as such term is defined in the Acquisition Agreement);
WHEREAS, the Acquisition Agreement provides for the execution and delivery
of a stockholders agreement and a registration rights agreement at the closing
thereunder; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Stockholders'
Agreement among the parties hereto and dated the date hereof (as amended,
modified or supplemented from time to time, the "Stockholders' Agreement"), and
in connection therewith, the Company has agreed to provide the other parties
hereto with the registration rights set forth in this Agreement;
NOW THEREFORE, in connection with the Acquisition Agreement, the
Stockholders' Agreement and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms in Stockholders' Agreement.
Unless otherwise defined herein, defined terms used in this Agreement shall
have the meanings set forth in the Stockholders' Agreement.
<PAGE>
Registration Rights Agreement
1.2 Definitions.
The following capitalized terms, when used in this Agreement, have the
respective meanings set forth below (such definitions to be equally applicable
to both singular and plural forms of the terms defined):
"Additional Management Stockholder" means an Additional Stockholder who is
an officer, director or employee of the Company or any of its Subsidiaries.
"Additional Stockholder" means any person who has executed a Joinder
Agreement as an Additional Stockholder pursuant to Section 6.2 of the
Stockholders' Agreement, and its direct and indirect Permitted Transferees, so
long as any such Person shall hold (directly or indirectly through the Voting
Trust) Registrable Securities, and only to the extent that (i) the Company has
granted such person registration rights as a Stockholder hereunder and (ii) such
Person has executed a Registration Rights Joinder Agreement.
"Initial Public Offering" means the first time a registration statement
filed under the Securities Act with the Commission respecting an offering,
whether primary or secondary, of Common Stock of the Company (or securities
convertible, exercisable or exchangeable for or into Common Stock of the Company
or rights to acquire Common Stock of the Company or such securities), which is
underwritten on a firmly committed basis, is declared effective and the
securities so registered are issued and sold.
"Institutional Stockholders" means each Institutional Stockholder Group
Member and their respective direct and indirect Permitted Transferees, so long
as any such Person shall hold Registrable Securities.
"Masco Stockholders" means Masco and its direct and indirect Permitted
Transferees, so long as any such Person shall hold Registrable Securities.
"Registrable Securities" means, at any time, the shares of Class A Common
(including all series thereof) and shares of Class B Common (including all
series thereof) then issued and outstanding or which are issuable upon
conversion, exercise or exchange of Equity Equivalents or the Class C Common and
any securities into which such Class A Common or Class B Common shall have been
changed or any securities resulting from any reclassification or
recapitalization of such Class A Common or Class B Common; provided, that
"Registrable Securities" shall not include any shares of Class A Common or Class
B Common obtained or transferred pursuant to an effective registration statement
under the Securities Act or in a Rule 144 Transaction, and provided, further,
that "Registrable Securities" shall not include any shares of Class A Common or
Class B Common which are held by a Person who is not a Stockholder.
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<PAGE>
Registration Rights Agreement
"Registration Rights Joinder Agreement" means a Registration Rights Joinder
Agreement in the form attached hereto as Exhibit A.
"Required Institutional Stockholders" means, as of the date of any
determination thereof, Institutional Stockholders which hold Registrable
Securities representing at such time at least a majority (by number of shares)
of the Registrable Securities, on a fully diluted basis, held by all
Institutional Stockholders.
"Required Masco Stockholders" means, as of the date of any determination
thereof, Masco Stockholders which hold Registrable Securities representing at
such time at least a majority (by number of shares) of the Registrable
Securities, on a fully diluted basis, held by all Masco Stockholders.
"Stockholders" means the Institutional Stockholders, the Masco
Stockholders, the Management Stockholders, the Additional Stockholders and any
transferee of any of the foregoing persons who has acquired Registrable
Securities in accordance with the Stockholders' Agreement and who has executed a
Registration Rights Joinder Agreement.
1.3 Cross-References.
The following defined terms, when used in this Agreement, shall have the
meaning ascribed to them in the corresponding Sections of this Agreement listed
below:
"Acquisition Agreement" -- Recitals
"Black-Out Notice" -- Section 2.7
"Company" -- Preamble
"Demand Registrations" -- Section 2.1
"Long-Form Registrations" -- Section 2.1
"Piggyback Holders" -- Section 3.1
"Piggyback Registration" -- Section 3.1
"Registration Expenses" -- Section 6.1
"Requesting Investors" -- Section 2.1
"Short-Form Registrations" -- Section 2.1
"Stockholders' Agreement" -- Recitals
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<PAGE>
Registration Rights Agreement
ARTICLE II
DEMAND REGISTRATIONS
2.1 Requests for Registration.
(a) From and after the date which is ninety one (91) days after the closing
of an Initial Public Offering, at any time each of the Required Institutional
Stockholders or the Required Masco Stockholders (the "Requesting Investors") may
request registration under the Securities Act of all or part of their
Registrable Securities (i) on Form S-1 or any similar long-form registration
("Long-Form Registrations"), and (ii) on Form S-2 or S-3 or any similar
short-form registration ("Short-Form Registrations") if the Company qualifies to
use such short form. Within ten (10) days after receipt of any such request, the
Company will give written notice of such request to all other holders of
Registrable Securities. Thereafter, the Company will use all reasonable efforts
to effect the registration under the Securities Act on the form requested by the
Requesting Investors and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein by the Stockholders within thirty (30) days after the receipt
of the Company's notice, subject to the provisions of Section 2.5. All
registrations requested pursuant to this Section 2.1 are referred to herein as
"Demand Registrations."
(b) Any Requesting Investor which requests a Demand Registration under this
Article II may, at any time prior to the effective date of the registration
statement relating to such registration, revoke such request by providing
written notice to the Company; provided, however, that notwithstanding such
revocation, such Demand Registration shall be deemed a request for purposes of
Section 2.2 unless, after consultation with the Company and any proposed
underwriter, the Requesting Investor in good faith determines that the
Registrable Securities which it has requested to be registered would not be sold
pursuant to such Demand Registration within a reasonable amount of time or at a
price acceptable to such Requesting Investor.
(c) Any request for a Demand Registration pursuant to this Article II shall
specify the number of shares of Registrable Securities proposed to be sold by
the Requesting Investor and the intended method of disposition thereof.
(d) The Required Institutional Stockholders may request that the Company
effect an Initial Public Offering and the Company shall use all reasonable
efforts to effect such Initial Public Offering within ninety (90) days after
receipt of such request.
2.2 Long-Form Registrations.
The Required Institutional Stockholders will be entitled to request
pursuant to this Article II up to three Long-Form Registrations and the Required
Masco Stockholders will be
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entitled to request pursuant to this Article II up to three Long-Form
Registrations. The Company will pay all Registration Expenses in connection with
any such Long-Form Registrations. All Long-Form Registrations (unless otherwise
requested by the relevant Requesting Investor) shall be underwritten
registrations.
2.3 Short-Form Registrations.
In addition to the Long-Form Registrations provided pursuant to Section
2.2, the Required Institutional Stockholders and Required Masco Stockholders
will each be entitled to request an unlimited number of Short-Form Registrations
in which the Company will pay all Registration Expenses. Demand Registrations
will be Short-Form Registrations whenever the Company is qualified to use any
applicable short form. Once the Company has become subject to the reporting
requirements of the Exchange Act, the Company will use its reasonable best
efforts to make Short-Form Registrations available for the sale of Registrable
Securities.
2.4 Effective Registration Statement.
No Demand Registration shall be deemed to have been effected for purposes
of Section 2.2:
(i) unless a registration statement with respect thereto has become
effective;
(ii) if, after it has become effective, any stop order, injunction or other
order or requirement of the Commission or other governmental agency or
court for any reason, affecting any of the securities covered by such
registration statement, is issued or threatened by the Commission or other
governmental agency or court;
(iii) if the Company delivers a Black-Out Notice with respect to such
requested registration;
(iv) if the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration
are not satisfied by reason of a failure by or inability of the Company to
satisfy any of such conditions, or the occurrence of an event outside the
reasonable control of the relevant Requesting Investor;
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Registration Rights Agreement
(v) the revocation notice described in the proviso to Section 2.1(b) has
been delivered by the Requesting Investor; or
(vi) if the Requesting Investor is not able to register and sell at least
ninety percent (90%) of the amount of Registrable Securities which were
requested to be included in such registration;
provided that the Company will pay all Registration Expenses in connection with
any registration if pursuant to this Section 2.4 the registration is deemed not
to have been effected.
2.5 Priority on Demand Registrations.
(a) The Company will not include in any Demand Registration any securities
which are not Registrable Securities without the written consent of the Required
Institutional Stockholders (if the Required Institutional Stockholders have
requested such Demand Registration) or the Required Masco Stockholders (if the
Required Masco Stockholders have requested such Demand Registration).
(b) If the Requesting Investors and other holders of Registrable Securities
request Registrable Securities to be included in a Demand Registration which is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities requested to
be included exceeds the number of Registrable Securities which can be sold in
such offering within a price range acceptable to the Required Institutional
Stockholders (if the Required Institutional Stockholders have requested the
Demand Registration) or the Required Masco Stockholders (if the Required Masco
Stockholders have requested the Demand Registration), the Company will include
any securities to be sold in such Demand Registration in the following order:
(i) first, the Registrable Securities owned by the Requesting Investors; (ii)
second, the Registrable Securities requested to be included in such registration
by other Stockholders, provided, that if the managing underwriters determine in
good faith that a lower number of Registrable Securities should be included,
then only that lower number of Registrable Securities requested to be included
by other Stockholders shall be included in such registration, and the other
Stockholders shall participate in the registration pro rata based upon their
total ownership, on a fully diluted basis, of Registrable Securities, provided,
further, that if the managing underwriters determine in good faith that a lower
number of Registrable Securities held by Management Stockholders and/or
Additional Management Stockholders than such pro rata portion should be
included, then such lower number shall be included and, as a result thereof, a
greater number of Registrable Securities owned by the other Stockholders may be
sold; (iii) third, the securities the Company proposes to sell and (iv) fourth,
any securities other than Registrable Securities to be sold by persons other
than the Company included pursuant to Section 2.5(a) hereof. Any Person other
than Stockholders including any securities in such
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registration pursuant to Article II hereof must pay its share of the
Registration Expenses as provided in Article VI hereof.
2.6 Selection of Underwriters.
The Requesting Investors will have the right to select the underwriters and
the managing underwriter to administer any Demand Registration (which
underwriters and managing underwriter shall be reasonably acceptable to the
Company).
2.7 Black-Out Rights and Postponement.
(a) The Company shall not be required to provide a Demand Registration if
the Company, within the 90-day period preceding the date of a request for a
Demand Registration, has effected a registration of securities in which the
Requesting Investors were entitled to participate to the fullest extent pursuant
to Demand Registration rights under Article II hereof or Piggyback Registration
rights under Article III hereof.
(b) The Company may, upon written notice (a "Black-Out Notice") to the
Requesting Investor requesting a Demand Registration, require such Requesting
Investor to withdraw such Demand Registration upon the good faith determination
by the Company that such postponement is necessary (i) to avoid disclosure of
material non-public information or (ii) as a result of a pending material
financing or acquisition transaction, and in each case, each of the Required
Institutional Stockholders and the Required Masco Stockholders may not request
another Demand Registration for a period of up to sixty (60) days, as specified
by the Company in such Black-Out Notice. The Company may only give a Black-Out
Notice where the giving of such notice has been specifically approved by the
Company's Board of Directors. Upon receipt of a Black-Out Notice, the Demand
Registration shall be deemed to be rescinded and retracted and shall not be
counted as a Demand Registration for any purpose. The Company may not deliver
more than one Black-Out Notice in any twelve-month period.
ARTICLE III
PIGGYBACK REGISTRATIONS
3.1 Right to Piggyback.
Whenever the Company proposes (other than pursuant to a Demand Registration
or an Initial Public Offering (unless otherwise agreed by the Company)) to
register any of its equity securities under the Securities Act (whether for the
Company's own account (other than on Forms S-4 or S-8 or any successor forms),
or for the account of any other Person)(a "Piggyback Registration"), the Company
will give prompt written notice to all Institutional Stockholders,
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Registration Rights Agreement
Masco Stockholders, Management Stockholders and Additional Stockholders (the
"Piggyback Holders") of its intention to effect such a registration, and such
notice shall offer the Piggyback Holders the opportunity to register on the same
terms and conditions such number of shares of Registrable Securities as such
Piggyback Holder may request. The Company will include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 30 days after the receipt by such
Piggyback Holder of the Company's notice, subject to the provisions of Sections
3.3 and 3.4.
3.2 Piggyback Expenses.
The Registration Expenses of the holders of Registrable Securities will be
paid by the Company in all Piggyback Registrations.
3.3 Priority on Primary Registrations.
If a Piggyback Registration is an underwritten primary registration on
behalf of the Company, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration are such that the success of the offering would be
materially and adversely affected, the Company will include any securities to be
sold in such registration in the following order: (i) first, the securities the
Company proposes to sell, (ii) second, the Registrable Securities requested to
be included in such registration by the Piggyback Holders, provided that, if the
managing underwriters in good faith determine that a lower number of Registrable
Securities should be included, then the Company shall be required to include in
such registration only that lower number of Registrable Securities, and the
Piggyback Holders shall participate in the registration pro rata based upon
their total ownership, on a fully diluted basis, of Registrable Securities,
provided, further, that if the managing underwriters determine in good faith
that a lower number of Registrable Securities held by Management Stockholders
and/or Additional Management Stockholders than such pro rata portion should be
included, then such lower number shall be included and, as a result thereof, a
greater number of Registrable Securities owned by the other Stockholders shall
be included and (iii) third, other securities requested to be included in such
registration.
3.4 Priority on Secondary Registrations.
If a Piggyback Registration is an underwritten secondary registration on
behalf of holders of the Company's securities and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration are such that the success of the
offering would be materially and adversely affected, the Company will include
any securities to be sold in such registration in the following order: (i)
first, the securities of such holders, (ii) second, the Registrable Securities
requested to be included in such registration by the Piggyback Holders pursuant
to Section 3.1 hereof, provided that, if the
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Registration Rights Agreement
managing underwriters in good faith determine that a lower number of Registrable
Securities should be included, then the Company shall be required to include in
such registration only that lower number of Registrable Securities, and the
Piggyback Holders shall participate in the registration pro rata based upon
their total ownership, on a fully diluted basis, of Registrable Securities,
provided, further, that if the managing underwriters determine in good faith
that a lower number of Registrable Securities held by Management Stockholders
and/or Additional Management Stockholders than such pro rata portion should be
included, then such lower number shall be included and, as a result thereof, a
greater number of Registrable Securities owned by the other Stockholders may be
sold and (iii) third, other securities requested to be included in such
registration.
ARTICLE IV
HOLDBACK AGREEMENTS
4.1 Holdback.
Each holder of Registrable Securities agrees not to effect any public sale
or distribution of Registrable Securities, or any securities convertible,
exchangeable or exercisable for or into such securities, during the seven days
prior to, and the 90-day period beginning on, the effective date of an Initial
Public Offering or any underwritten Demand Registration or any underwritten
Piggyback Registration in which such holder had an opportunity to participate
without cutback under Article III hereof (in each case except as part of such
underwritten registration), unless the managing underwriters of the registered
public offering otherwise agree.
4.2 Company Holdback.
The Company agrees (i) not to effect any public sale or distribution of its
equity securities, or any securities convertible, exchangeable or exercisable
for or into such securities, during the fourteen (14) days prior to, and during
the 90-day period beginning on, the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which holders of
Registrable Securities are selling stockholders (except as part of such
underwritten registration or pursuant to registrations on Forms S-4 or S-8 or
any successor form), unless the managing underwriters of such underwritten
Demand Registration or underwritten Piggyback Registration otherwise agree, and
(ii) to use all reasonable efforts to cause each holder of at least five percent
(5%) (on a fully-diluted basis) of its equity securities (excluding shares of
the Class D Common), or any securities convertible, exchangeable or exercisable
for or into such securities, to agree not to effect any public sale or
distribution of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the managing
underwriters of such underwritten Demand Registration or underwritten Piggyback
Registration otherwise agree.
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Registration Rights Agreement
ARTICLE V
REGISTRATION PROCEDURES
Whenever the Stockholders have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company will use all reasonable
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof, and pursuant
thereto the Company will as expeditiously as possible (or, in the case of clause
(p) below, will not):
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Securities (such registration statement to include
all information which the holders of the Registrable Securities to be registered
thereby shall reasonably request) and use all reasonable efforts to cause such
registration statement to become effective, provided that as promptly as
practicable before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will (i) furnish to counsel
selected by the holders of a majority (by number of shares) of the Registrable
Securities covered by such registration statement (and, if the Required Masco
Stockholder has requested inclusion of any Registrable Securities pursuant to
Article II or Article III, to counsel for the Required Masco Stockholder) copies
of all such documents proposed to be filed, and the Company shall not file any
such documents to which such counsel shall have reasonably objected on the
grounds that such document does not comply in all material respects with the
requirements of the Securities Act, and (ii) notify each holder of Registrable
Securities covered by such registration statement of (x) any request by the
Commission to amend such registration statement or amend or supplement any
prospectus, or (y) any stop order issued or threatened by the Commission, and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered;
(b) (i) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until all Registrable Securities covered by such Registration Statement are sold
in accordance with the intended plan of distribution set forth in such
Registration Statement and (ii) comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) of conformed copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus and, in each case, including all exhibits
thereto and documents incorporated by reference therein) and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
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Registration Rights Agreement
(d) use its best efforts to register or qualify such Registrable Securities
under such other securities or blue sky laws of such jurisdictions as any seller
thereof shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect and do any
and all other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller, provided, however, that the Company
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this clause (d),
(ii) subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;
(e) furnish to each seller of Registrable Securities a signed copy,
addressed to such seller (and the underwriters, if any) of an opinion of counsel
for the Company or special counsel to the selling stockholders, dated the
effective date of such registration statement (and, if such registration
statement includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), reasonably satisfactory in form and
substance to such seller, covering substantially the same matters with respect
to such registration statement (and the prospectus included therein) as are
customarily covered in opinions of issuer's counsel delivered to the
underwriters in underwritten public offerings, and such other legal matters as
the seller (or the underwriters, if any) may reasonably request;
(f) notify each seller of Registrable Securities, at a time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of any event known to the Company as a result of which
the prospectus included in such registration statement, as then in effect,
contains an untrue statement of a material fact or omits to state any fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, and, at the
request of any such seller, the Company will prepare and furnish such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made and in the event the
Company shall give such notice, the Company shall extend the period during which
such registration statement shall be maintained effective by the number of days
during the period from and including the date of the giving of such notice to
such seller to the date when the Company made available to such seller an
appropriately amended or supplemented prospectus;
(g) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and
to enter into such customary agreements as may be required in furtherance
thereof, including without limitation listing applications and indemnification
agreements in customary form;
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(h) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(i) enter into such customary arrangements and take all such other actions
as the holders of a majority (by number of shares) of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Registrable Securities (including without
limitation use its best efforts to effect a stock split or a combination of
shares);
(j) make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(k) subject to other provisions hereof, use all reasonable efforts to cause
such Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities
or self-regulatory organizations as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities;
(l) use all reasonable efforts to obtain a "comfort" letter, dated the
effective date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants who have
certified the Company's financial statements, addressed to each seller, and to
the underwriters, if any, covering substantially the same matters with respect
to such registration statement (and the prospectus included therein) and with
respect to events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and such other financial matters as
such seller (or the underwriters, if any) may reasonably request;
(m) otherwise use all reasonable efforts to comply with all applicable
rules and regulations of the Commission and make available to its security
holders, in each case as soon as practicable, an earnings statement covering a
period of at least twelve months, beginning with the first month after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(n) permit any holder of Registrable Securities, which holder, in the sole
judgment, exercised in good faith, of such holder might be deemed to be a
controlling person of
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the Company (within the meaning of the Securities Act or the Exchange Act) to
participate in the preparation of any registration statement covering such
holder's Registrable Securities and to include therein material, furnished to
the Company in writing, which in the reasonable judgment of such holder should
be included and which is reasonably acceptable to the Company;
(o) use all reasonable efforts to obtain the lifting at the earliest
possible time of any stop order suspending the effectiveness of any registration
statement or of any order preventing or suspending the use of any preliminary
prospectus;
(p) at any time file or make any amendment to a registration statement, or
any amendment of or supplement to a prospectus (including amendments of the
documents incorporated by reference into the prospectus), of which each seller
of Registrable Securities or the managing underwriters shall not have previously
been advised and furnished a copy or to which the sellers of Registrable
Securities, the managing underwriters, or counsel for such sellers or for the
underwriters shall reasonably object;
(q) make such representations and warranties (subject to appropriate
disclosure schedule exceptions) to sellers of Registrable Securities and the
underwriters, if any, in form, substance and scope as are customarily made by
issuers to underwriters and selling holders, as the case may be, in underwritten
public offerings of substantially the same type; and
(r) if any proposed registration statement refers to any seller by name or
otherwise as the holder of any securities of the Company then (whether or not
such seller is or might be deemed to be a controlling person of the Company),
(i) the Company shall be required at the request of such seller to insert
therein language, in form and substance reasonably satisfactory to such seller,
the Company and the managing underwriters, to the effect that the holding by
such seller of such securities is not to be construed as a recommendation by
such seller of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such seller will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such seller by name or otherwise is not required by the
Securities Act, any similar Federal or state statute, or any rule or regulation
of any other regulatory body having jurisdiction over the offering, then in
force, the Company shall be required at the request of such seller to delete the
reference to such seller.
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ARTICLE VI
REGISTRATION EXPENSES
6.1 Fees Generally.
All expenses incident to the Company's performance of or compliance with
this Agreement, including without limitation internal expenses (including
without limitation all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance, the expenses and fees
for listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed, all registration and
filing fees, fees and expenses of compliance with securities or blue sky laws
(including without limitation reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for the Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses") shall be borne
by the Company, except that each Stockholder shall pay any underwriting fees,
discounts or commissions attributable to the sale of its Registrable Securities.
6.2 Counsel Fees.
In connection with each Demand Registration, the Company will reimburse the
Requesting Investor for such Demand Registration for the reasonable fees and
disbursements of one counsel chosen by the relevant Requesting Investor.
ARTICLE VII UNDERWRITTEN OFFERINGS
7.1 Demand Underwritten Offerings.
If requested by the underwriters for any underwritten offerings of
Registrable Securities pursuant to a Demand Registration, the Company will enter
into an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to the Requesting Investor
requesting such Demand Registration and the underwriters, and to contain such
representations and warranties by the Company and such other terms as are
generally included in agreements of this type, including without limitation
indemnities customarily included in such agreements. The holders of the
Registrable Securities will cooperate in good faith with the Company in the
negotiation of the underwriting agreement. The holders of Registrable Securities
to be distributed by such underwriters may be parties to
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such underwriting agreement and may, at their option, require that any or all of
the representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such holders of Registrable Securities and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. The Company shall cooperate with any such
holder of Registrable Securities in order to limit any representations or
warranties to, or agreements with, the Company or the underwriters to be made by
such holder only to those representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by applicable law.
7.2 Incidental Underwritten Offerings.
If the Company at any time proposes to register any of its securities under
the Securities Act as contemplated by Article III of this Agreement and such
securities are to be distributed by or through one or more underwriters, the
Company will, if requested by any holder of Registrable Securities as provided
in Article III of this Agreement, arrange for such underwriters to include all
the Registrable Securities to be offered and sold by such holder, subject to the
limitations set forth in Article III hereof, among the securities to be
distributed by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters, and may, at their option, require
that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. The
Company shall cooperate with any such holder of Registrable Securities in order
to limit any representations or warranties to, or agreements with, the Company
or the underwriters to be made by such holder only to those representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by applicable law.
ARTICLE VIII INDEMNIFICATION
8.1 Indemnification by the Company.
The Company agrees to indemnify and hold harmless, to the fullest extent
permitted by law, each of the holders of any Registrable Securities covered by
such registration statement, each other Person, if any, who controls such holder
within the meaning of the
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Securities Act or the Exchange Act, and each of their respective directors,
general partners and officers, as follows:
(i) against any and all loss, liability, claim, damage or expense arising
out of or based upon an untrue statement or alleged untrue statement of a
material fact contained in any registration statement (or any amendment or
supplement thereto), including all documents incorporated therein by
reference, or in any preliminary prospectus or prospectus (or any amendment
or supplement thereto) or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense to the
extent of the aggregate amount paid in settlement of any litigation,
investigation or proceeding by any governmental agency or body, commenced
or threatened, or of any claim whatsoever based upon any such untrue
statement or omission or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of the Company; and
(iii) against any and all expense incurred by them in connection with
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission or any such alleged untrue statement or omission, to the extent
that any such expense is not paid under clause (i) or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such holder expressly for use in the preparation of any registration statement
(or any amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or prospectus (or any
amendment or supplement thereto); and provided, further, that the Company will
not be liable to any holder under the indemnity agreement in this Section 8.1,
with respect to any preliminary prospectus or the final prospectus or the final
prospectus as amended or supplemented, as the case may be, to the extent that
any such loss, liability, claim, damage or expense of such controlling Person or
holder results from the fact that such holder sold Registrable Securities to a
Person to whom there
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Registration Rights Agreement
was not sent or given, at or prior to the written confirmation of such sale, a
copy of the final prospectus or of the final prospectus as then amended or
supplemented, whichever is most recent, if the Company has previously and timely
furnished copies thereof to such holder. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
holder or any such director, officer, general partner, or other controlling
person and shall survive the transfer of such securities by such seller.
8.2 Indemnification by a Selling Stockholder.
In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder agrees to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
Section 8.1 of this Agreement), to the extent permitted by law, the Company and
its directors, officers and controlling Persons, and their respective directors,
officers and general partners, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information that relates only to such holder or the plan of distribution that is
expressly furnished to the Company by or on behalf of such holder for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company,
or such holder, as the case may be, or any of their respective directors,
officers, controlling Persons or general partners and shall survive the transfer
of such securities by such holder. With respect to each claim pursuant to this
Section 8.2, each holder's maximum liability under this Section shall be limited
to an amount equal to the net proceeds actually received by such holder (after
deducting any underwriting discount and expenses) from the sale of Registrable
Securities being sold pursuant to such registration statement or prospectus by
such holder.
8.3 Indemnification Procedure.
Promptly after receipt by an indemnified party hereunder of written notice
of the commencement of any action or proceeding involving a claim referred to in
Section 8.1 or Section 8.2 of this Agreement, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under Section 8.1 or Section
8.2 of this Agreement except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably
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Registration Rights Agreement
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal fees and expenses subsequently incurred by the latter in connection
with the defense thereof, unless in such indemnified party's reasonable judgment
an actual or potential conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, in which case the
indemnifying party shall not be liable for the fees and expenses of (i) more
than one counsel (in addition to any local counsel) for all holders of
Registrable Securities, selected by a majority (by number of shares) of the
holders of Registrable Securities, or (ii) more than one counsel (in addition to
any local counsel) for the Company in connection with any one action or separate
but similar or related actions. An indemnifying party who is not entitled to
(pursuant to an immediately preceding sentence), or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel (in addition to any local counsel) for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party an actual or potential conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels. The indemnifying party will not, without the prior written consent of
each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any Person who controls such indemnified party is a party
to such claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit or proceeding. Notwithstanding
anything to the contrary set forth herein, and without limiting any of the
rights set forth above, in any event any party will have the right to retain, at
its own expense, counsel with respect to the defense of a claim.
8.4 Underwriting Agreement.
The Company and each holder of Registrable Securities requesting
registration shall provide for the foregoing indemnity (with appropriate
modifications) in any underwriting agreement with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority.
8.5 Contribution.
If the indemnification provided for in Sections 8.1 and 8.2 of this
Agreement is unavailable to hold harmless an indemnified party under such
Sections, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in Section 8.1 or Section 8.2 of this Agreement in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one
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Registration Rights Agreement
hand, and the indemnified party on the other, in connection with statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations, including
without limitation the relative benefits received by each party from the
offering of the securities covered by such registration statement, the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted and the opportunity to correct and prevent any
statement or omission. The relative fault 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 indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 8.5 were to be determined by pro rata or per capita allocation (even if
the underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in the first and second sentences of this Section 8.5. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this Section 8.5 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim (which shall be limited as provided in Section 8.3 of this Agreement if
the indemnifying party has assumed the defense of any such action in accordance
with the provisions thereof) which is the subject of this Section 8.5. Promptly
after receipt by an indemnified party under this Section 8.5 of notice of the
commencement of any action against such party in respect of which a claim for
contribution may be made against an indemnifying party under this Section 8.5,
such indemnified party shall notify the indemnifying party in writing of the
commencement thereof if the notice specified in Section 8.3 of this Agreement
has not been given with respect to such action; provided that the omission to so
notify the indemnifying party shall not relieve the indemnifying party from any
liability which it may otherwise have to any indemnified party under this
Section 8.5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. The Company and each holder of
Registrable Securities agrees with each other and the underwriters of the
Registrable Securities, if requested by such underwriters, that (i) the
underwriters' portion of such contribution shall not exceed the underwriting
discount and (ii) that the amount of such contribution shall not exceed an
amount equal to the net proceeds actually received by such indemnifying party
from the sale of Registrable Securities in the offering to which the losses,
liabilities, claims, damages or expenses of the indemnified parties relate. 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.
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Registration Rights Agreement
8.6 Periodic Payments.
The indemnification required by this Article VIII shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred.
ARTICLE IX
RULE 144
If the Company shall have filed a registration statement pursuant to the
requirements of Section 12 of the Exchange Act or a registration statement
pursuant to the requirements of the Securities Act, the Company covenants that
it will file the reports required to be filed by it under the Securities Act and
the Exchange Act (or, if the Company is not required to file such reports, it
will, upon the request of any holder of Registrable Securities, make publicly
available other information), and it will take such further action as any holder
of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell shares of Registrable Securities
without registration under the Securities Act in compliance with (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
ARTICLE X
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any underwritten registration hereunder unless
such Person (i) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements, escrow
agreements and other documents reasonably required under the terms of such
underwriting arrangements and consistent with the provisions of this Agreement.
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Registration Rights Agreement
ARTICLE XI
MISCELLANEOUS
11.1 No Inconsistent Agreements.
The Company will not hereafter enter into any agreement which is
inconsistent with, or would otherwise restrict the performance by the Company
of, its obligations hereunder.
11.2 Adjustments Affecting Registrable Securities.
The Company will not take any action, or fail to take any action which it
may properly take, with respect to its securities which would adversely affect
the ability of the holders of Registrable Securities to include Registrable
Securities in a registration undertaken pursuant to this Agreement or which, to
the extent within its control, would adversely affect the marketability of such
Registrable Securities in any such registration (including without limitation
effecting a stock split or a combination of shares).
11.3 Specific Performance.
The parties hereto agree that irreparable damage would occur in the event
any provision of this Agreement was not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity; provided,
however, that each of the parties agrees to provide other parties with written
notice at least two business days prior to filing any motion or other pleading
seeking a temporary restraining order, a temporary or permanent injunction,
specific performance, or any other equitable remedy and to give other parties
and their counsel a reasonable opportunity to attend and participate in any
judicial or administrative hearing or other proceeding held to adjudicate or
rule upon any such motion or pleading.
11.4 Actions Taken; Amendments and Waivers.
(a) Whenever any action is required under this Agreement to be taken by, or
any vote or consent is required of,
(i) the Management Stockholders (and Additional Management Stockholders who
have become parties to the Voting Trust Agreement) (as a group as opposed
to the exercise by a Management Stockholder or Additional Management
Stockholder as the case may be, of his individual rights hereunder,
including without limitation the exercise of his individual rights
hereunder), such action, vote or consent shall be taken or given by the
Trustee under the Voting Trust
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Registration Rights Agreement
Agreement acting in accordance with the terms of the Voting Trust
Agreement; or
(ii) the Additional Stockholders (exclusive of Additional Management
Stockholders who have become parties to the Voting Trust Agreement) (as a
group as opposed to the exercise by an Additional Stockholder of his
individual rights hereunder), unless otherwise agreed by the Company and
the Additional Stockholders, such action, vote or consent shall be taken by
or in accordance with the affirmative vote of the holders of a majority (by
number of shares) of the Registrable Securities held by the Additional
Stockholders.
(b) Except as otherwise provided herein, no modification, amendment or
waiver of any provision of this Agreement will be effective against the Company
or any holder of Registrable Securities, unless such modification, amendment or
waiver is approved in writing by the Company, the Required Institutional
Stockholders, the Required Masco Stockholders and, in the event that the rights
and obligations of the Management Stockholders and/or the Additional
Stockholders are adversely affected thereby, the approval of the Management
Stockholders and/or the Additional Stockholders, as the case may be. The failure
of any party to enforce any of the provisions of this Agreement will in no way
be construed as a waiver of such provisions and will not affect the right of
such party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
11.5 Successors and Assigns.
All covenants and agreements in this Agreement by or on behalf of any of
the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not; in
addition, whether or not any express assignment has been made, the provisions of
this Agreement which are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any subsequent
holder of Registrable Securities, except to the extent reserved to or by the
transferor in connection with any such transfer; provided, that the benefits of
this Agreement shall inure to and be enforceable by any transferee of
Registrable Securities so long as such transferee shall have acquired such
securities in accordance with the terms of the Stockholders' Agreement and shall
have executed a Registration Rights Joinder Agreement.
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Registration Rights Agreement
11.6 Notices.
(a) All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
against written receipt or by facsimile transmission or mailed (by registered or
certified mail, return receipt requested) or by reputable overnight courier, fee
prepaid to the parties at the following addresses or facsimile numbers:
(i) If to any Institutional Stockholder, to:
399 Venture Partners, Inc.
399 Park Avenue
New York, New York 10043
Facsimile No.: 212-888-2940
Attn: David F. Thomas
and
Greenwich Street Capital Partners, Inc.
338 Greenwich Street
New York, New York 10013
Facsimile No.: 212-816-0166
Attn: General Counsel
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: 212-309-6273
Attn: Philip H. Werner
(ii) if to any Travelers Stockholder, to:
[Name of Travelers Stockholder]
c/o Greenwich Street Capital Partners, Inc.
338 Greenwich Street
New York, New York 10013
Facsimile No.: 212-816-0166
Attn: General Counsel
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<PAGE>
Registration Rights Agreement
(iii) If to any Masco Stockholder, to:
MASCO Corporation
21001 Van Born Road
Taylor, Michigan 48180
Facsimile No.: 313-274-6135
Attn: President
with a copy to:
MASCO Corporation
21011 Van Born Road
Taylor, Michigan 48180
Facsimile No.: 313-274-6135
Attn: General Counsel
(iv) If to any Management Stockholder, to:
Voting Trustee
c/o FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: President
with a copy to:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: General Counsel
(v) If to the Company, to:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: President
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<PAGE>
Registration Rights Agreement
with copies to:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: General Counsel
and
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: 212-309-6273
Attn: Philip H. Werner
(vi) If to any Additional Stockholder, to the address of such Person set
forth in the stock records of the Company.
(b) All such notices, requests and other communications will be deemed
delivered upon receipt. Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other parties hereto.
11.7 Headings.
The headings used in this Agreement have been inserted for convenience of
reference only and do not affect the provisions hereof.
11.8 Gender.
Whenever the pronouns "he" or "his" are used herein they shall also be
deemed to mean "she" or "hers" or "it" or "its" whenever applicable. Words in
the singular shall be read and construed as though in the plural and words in
the plural shall be construed as though in the singular in all cases where they
would so apply.
11.9 Invalid Provisions.
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or obligations
of any party hereto under this Agreement will not be materially and adversely
affected thereby, (i) such provision will be fully
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Registration Rights Agreement
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
11.10 Governing Law.
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York without giving effect to any choice 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.
11.11 Consent to Jurisdiction and Service of Process.
EACH OF THE PARTIES HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT
MAY BE LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARTY AT THE
ADDRESS SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE FIFTEEN
(15) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS,
NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO
OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS AGAINST ANY
OF THE OTHER PARTIES HERETO IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS
MAY BE PERMITTED BY ANY APPLICABLE LAW.
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Registration Rights Agreement
11.12 Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY
UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE PARTIES
HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.13 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
11.14 Omnibus Signature Pages.
The signature pages to this Agreement include one signature page executed
by the Company, Masco, 399 and AMC and a series of Omnibus Signature Pages
executed by the Management Group Members which constitute signature pages to
this Agreement and to other agreements.
[Remainder of Page Intentionally Left Blank]
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Registration Rights Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
FURNISHINGS INTERNATIONAL INC.
By________________________________
Robert L. George
Executive Vice President
MASCO CORPORATION
By________________________________
Name:
Title:
399 VENTURE PARTNERS, INC.
By________________________________
David F. Thomas
President
ASSOCIATED MADISON COMPANIES, INC.
By________________________________
Name:
Title:
TRV EMPLOYEES FUND, L.P.
By TRV Employees Investments Inc., General Partner
By________________________________
Name:
Title:
[Signature Page to Registration Rights Agreement]
<PAGE>
Registration Rights Agreement
GREENWICH STREET CAPITAL PARTNERS, L.P.
By Greenwich Street Investments, L.P., General Partner
By Greenwich Street Investments, Inc., General Partner
By__________________________________
Name:
Title:
GSCP OFFSHORE FUND LTD.
By Greenwich Street Capital Partners, Inc.,
as Manager
By__________________________________
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By__________________________________
Name:
Title:
THE TRAVELERS LIFE AND ANNUITY COMPANY
By__________________________________
Name:
Title:
[Signature Page to Registration Rights Agreement]
[Omnibus Signature Page follows]
MANAGEMENT AGREEMENT
Management Agreement dated as of August 5, 1996 between FURNISHINGS
INTERNATIONAL INC., a Delaware corporation ("Holdings") and LIFESTYLE
FURNISHINGS INTERNATIONAL LTD., a Delaware corporation ("LFI").
RECITALS
WHEREAS, Holdings is the parent corporation and owner of all the
outstanding capital stock of LFI; and
WHEREAS, LFI desires that Holdings provide, and Holdings is willing
to provide, services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1.
(a) Commencing on the date hereof and during the term of this
Agreement, Holdings shall provide to LFI and its subsidiaries, as may be
reasonably requested by LFI, management and similar services, including, but not
limited to, executive management, corporate support, administrative, data
processing, human resources, legal, environmental, audit, treasury and tax
services (the "LFI Services"). It is understood and agreed that Holdings may
fulfill its obligations hereunder by contracting with third parties, including
Masco Corporation ("Masco") pursuant to that certain Transitional Services
Agreement entered into by Holdings and Masco on the date hereof. At any time on
30 days' notice, LFI may reduce, on a temporary or permanent basis, the scope of
services to be provided by Holdings hereunder; provided, however, that LFI may
not decline services that Holdings has contracted for with third parties to the
extent Holdings would remain liable to pay for such services.
(b) It is understood and agreed that LFI and its subsidiaries will
directly benefit from savings and efficiencies derived from the management and
operations of Holdings and from the management and financial support provided by
Holdings' stockholders and resulting from Holdings' corporate structure (the
"Additional Services"). LFI and its subsidiaries shall therefore be responsible
for payment of their allocable share of Holdings' overhead and general operating
costs; such costs to be allocated among LFI and its subsidiaries, other
subsidiaries of Holdings and Holdings operating divisions based upon net sales
of each.
<PAGE>
Management Agreement
Section 2. Fees.
(a) During the term hereof, LFI will pay Holdings a fee for the LFI
Services and the Additional Services provided under Section 1 hereof equal to
Holdings' actual cost of providing such services. Holdings will invoice LFI for
services rendered within 10 business days of the end of each calendar quarter,
and such fees will be due and payable within 30 days of receipt of invoice.
Notwithstanding the foregoing, out-of-pocket costs incurred by Holdings in
connection with the provision of services hereunder will upon the request of
Holdings be paid directly and promptly by LFI or its subsidiaries to the
relevant third parties. To the extent practicable, Holdings will invoice and
request direct payment to third parties separately with respect to services
provided to LFI Receivables Corporation (the "Receivables Subsidiary").
(b) To the extent that Holdings provides services for subsidiaries
of Holdings other than LFI and its subsidiaries, neither LFI nor any of its
subsidiaries will be required to pay Holdings a fee for these services.
(c) If at any time a payment required to be made to Holdings by LFI
hereunder (or any portion thereof) is not permitted by the terms of the
Indenture, dated as of August 5, 1996, respecting LFI's 10 7/8% Senior
Subordinated Notes (the "Indenture"), LFI's obligation to pay such amount shall
be deferred, without interest, until such time as such payment shall no longer
be so restricted by the Indenture.
Section 3. Term. This Agreement shall continue in effect until
December 31, 1997, and shall thereafter be renewed automatically for successive
one-year periods unless (i) either party gives the other notice of termination
on or prior to December 1 of any year, such notice to be effective on December
31 of such year, or (ii) the parties mutually agree to terminate this agreement.
Section 4. Indemnification.
(a) It is understood and agreed that in no event will Holdings or
any of its subsidiaries, affiliates, stockholders, directors, officers,
employees and agents (collectively, "Affiliates and Representatives") be liable
to LFI and its subsidiaries, their respective Affiliates and Representatives and
their respective financing parties for any loss incurred by any of such persons
resulting from the services provided by Holdings hereunder or otherwise relating
in any way to this Agreement, except for any such loss resulting from gross
negligence, willful misfeasance or bad faith. It is understood and agreed that
in no event will Holdings or its Affiliates or Representatives be liable
hereunder for any lost profits or any exemplary, punitive, consequential or
other similar damages.
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<PAGE>
Management Agreement
(b) LFI agrees to indemnify and hold harmless Holdings and its
Affiliates and Representatives for any and all losses, damages, costs, expenses
(including reasonable attorney's fees and expenses), penalties and liabilities
(whether or not arising from the negligence, but excluding the gross negligence,
willful misfeasance or bad faith of Holdings or its Affiliates or
Representatives) with respect to all liabilities, duties and obligations of any
kind whatsoever of Holdings or its Affiliates or Representatives resulting from
the services to be provided pursuant to this Agreement or otherwise relating in
any way to this Agreement. At the request of Holdings, LFI shall cause each of
its insurance carriers providing property, liability or worker's compensation
insurance to LFI and its subsidiaries to waive any rights of subrogation against
Holdings and its Affiliates and Representatives.
Section 5. Independent Contractor; No Partnership.
(a) Holdings shall select the Holdings employees to provide services
hereunder, and such individuals shall not be deemed to be employees of LFI or
any of its subsidiaries as a result of their providing services hereunder. All
work performed hereunder by Holdings (or by third parties, including Masco, on
Holdings' behalf) shall be performed by Holdings or such other persons as an
independent contractor.
(b) Notwithstanding anything herein to the contrary, no partnership
or joint venture has been created in or by this Agreement or as a result of the
provision of services hereunder.
Section 6. Assignment; Amendment.
(a) This Agreement shall not be assignable by either party without
the express prior written consent of the other party.
(b) This Agreement may be amended only by an instrument in writing
executed by the parties hereto.
Section 7. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of North Carolina
without giving effect to any choice or conflict of law provision or rule
(whether of the State of North Carolina or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
North Carolina.
Section 8. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
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<PAGE>
Management Agreement
Section 9. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
Management Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
FURNISHINGS INTERNATIONAL INC.
By____________________________
Name:
Title:
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
By____________________________
Name:
Title:
[Signature Page to Management Agreement]
August 5, 1996
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT (the "Agreement"), dated as of the 5th
day of August, 1996, by and between FURNISHINGS INTERNATIONAL INC., a Delaware
corporation (referred to below as "Parent"), Simmons Upholstered Furniture
Corporation, a Delaware corporation ("Simmons"), Lifestyle Furnishings
International Ltd., a Delaware corporation ("LFI"), and LFI Receivables
Corporation, a Delaware corporation ("Receivables Corporation"; and together
with Simmons and LFI each, a "Subsidiary," and collectively, the
"Subsidiaries").
W I T N E S S E T H
WHEREAS, Parent is the common parent corporation of an affiliated
group of corporations within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended (referred to below as the "Code"); and
WHEREAS, such affiliated group proposes to file consolidated federal
income tax returns; and
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<PAGE>
WHEREAS, Parent and each Subsidiary wish to enter into this
Agreement to set forth their understanding as to certain matters pertaining to
their federal income tax liabilities; and
WHEREAS, the Credit Agreement dated as of the date hereof among
Parent, LFI, the subsidiary borrowers named therein, the lenders named therein
and Chemical Bank and Chemical Bank Delaware (the "Credit Agreement"), requires
the Parent and each Subsidiary to enter into this Agreement as a condition for
the effectiveness of said Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements set forth below and for other consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties, intending
to be legally bound, agree as follows:
1. Definitions
For purposes of this Agreement, the terms set forth below
shall have the following meanings:
(a) Parent Group - All corporations (whether or not presently
in existence) included, from time to time, in the consolidated federal income
tax return filed by Parent.
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<PAGE>
(b) Subsidiary Group - Subsidiary and all corporations
(whether or not presently in existence) that, at the pertinent time, would be
entitled or required to join with Subsidiary in filing consolidated federal
income tax returns if Subsidiary were a common parent corporation and were not a
member of the Parent Group. Those corporations presently included in each
Subsidiary Group are listed on Schedule 1, attached to this Agreement. For this
purpose, the Subsidiary Group with LFI as its parent shall not include
Receivables Corporation.
(c) Truncated Group - All corporations included in the Parent
Group that are not members of any Subsidiary Group.
(d) Parent Group Tax Liability - The consolidated federal
income tax liability (including any associated penalties) of the Parent Group
for any taxable year for which the Parent Group files a consolidated federal
income tax return. Such liability shall, in no event, be deemed to be less than
zero.
(e) Subsidiary Group Tax Liability - The federal income tax
liability (including any associated penalties), determined at the end of the
taxable year, of the Subsidiary Group, computed as if each Subsidiary Group were
not part of the Parent Group, but rather a separate affiliated group of
corporations filing a consolidated federal income tax return
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<PAGE>
pursuant to Section 1502 of the Code. This computation shall be made without
regard to any carryovers of any member of each Subsidiary Group, unless those
carryovers were absorbed in computing the Parent Group Tax Liability for the
year. Such liability shall, in no event, be deemed to be less than zero. The
annual computation of each Subsidiary Group Tax Liability shall be determined
for purposes of this Agreement in accordance with the following principles:
(1) The income, deductions, credits, carryovers, and
other tax attributes of the Subsidiary Group shall be determined in
accordance with all elections actually made (or deemed made by operation
of law) by each member of the Subsidiary Group for purposes of computing
the Parent Group Tax Liability.
(2) If any transaction between any member of the
Subsidiary Group and any member of the Truncated Group constitutes an
intercompany transaction (as that term is defined in Section 1.1502-13 of
the Treasury Regulations) between members of the Parent Group, then that
member of the Subsidiary Group (or any other member of the Subsidiary
Group that inherits any portion of the deferred gain or loss of that
corporation pursuant to Section 1.1502-13(c)(6) of
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<PAGE>
the Treasury Regulations) shall take into account the tax attributes
associated with the transaction at the time and in the manner it takes
those tax attributes into account for purposes of the Parent Group's
consolidated tax return.
(3) The income, deductions, credits, carryovers, and
other tax attributes relating to the Simmons Business, as such term is
defined in the Certificate of Incorporation of Parent, shall be deemed
included in the Subsidiary Group which includes Simmons, and shall not be
included in any other Subsidiary Group.
(4) The Subsidiary Group Tax Liability, for each
Subsidiary Group other than the Subsidiary Group including Simmons, is
limited by the percentage of the Parent Group Tax Liability (excluding,
for purposes of this calculation, the income, deductions, credits,
carryovers, and other tax attributes associated with Simmons) which the
tax of such Subsidiary Group if computed on a separate return would bear
to the total amount of the taxes for all Subsidiary Groups (other than the
Subsidiary Group including Simmons) and the Truncated Group so computed.
(f) Truncated Group Tax Liability - The federal income tax
liability (including any associated penalties),
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<PAGE>
determined at the end of the taxable year, of the Parent Group, computed as if
each Subsidiary Group were not part of the Parent Group. This computation shall
be made without regard to any carryovers of any member of the Truncated Group
unless those carryovers were absorbed in computing the Parent Group Tax
Liability for the year. Such liability shall, in no event, be deemed to be less
than zero. The annual computation of the Truncated Group Tax Liability shall be
determined for purposes of this Agreement in accordance with the following
principles:
(1) The income, deductions, credits, carryovers, and
other tax attributes of the Truncated Group shall be determined in
accordance with all elections made (or deemed made by operation of law) by
each member of the Truncated Group for purposes of computing the Parent
Group Tax Liability.
(2) If any transaction between any member of any
Subsidiary Group and any member of the Truncated Group constitutes an
intercompany transaction (as that term is defined in Section 1.1502-13 of
the Treasury Regulations) between members of the Parent Group, then that
member of the Truncated Group (or any other member of the Truncated Group
that inherits any portion of the deferred gain or loss of
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<PAGE>
that corporation pursuant to Section 1.1502-13(c)(6) of the Treasury
Regulations) shall take into account the tax attributes associated with
the transaction at the time and in the manner it takes those attributes
into account for purposes of the Parent Group's consolidated federal
income tax return.
(3) The income, deductions, credits, carryovers, and
other tax attributes relating to the Simmons Business, as such term is
defined in the Certificate of Incorporation of Parent, shall be deemed
included in the Subsidiary Group which includes Simmons, and shall not be
included in the Truncated Group Tax Liability.
(4) The Truncated Group Tax Liability is limited by the
percentage of the total tax which the tax of such Truncated Group if
computed on a separate return would bear to the total amount of the taxes
for all Subsidiary Groups and the Truncated Group so computed.
2. Payments With Respect to Tax Benefits and Burdens
(a) As long as the Parent owns sufficient stock
of any Subsidiary or corporation included in a Subsidiary Group entitling the
Parent to include such Subsidiary or corporation included in a Subsidiary Group
in a consolidated federal income
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<PAGE>
tax return, the Parent and such Subsidiary shall join in the filing of
consolidated federal income tax returns with the Parent Group and agree to
furnish all information, execute all consents, elections and other documents and
take such actions as may be necessary or appropriate to prepare and file such
returns.
(b) If a consolidated federal income tax return filed by the
Parent Group for a taxable year evidences a liability for federal income taxes
for such year, the total liability as shown on such return shall be payable in
full by Parent.
(c) For any taxable year during which income, loss, or credit
against federal income tax of any Subsidiary or any other member of the
Subsidiary Group is includible in computing the Parent Group Tax Liability, each
Subsidiary shall pay to Parent an amount equal to its Subsidiary Group Tax
Liability, if any. This amount shall be paid before five days following the
earlier of (i) the date on which the Parent Group's consolidated federal income
tax return is filed or (ii) the date, following the close of such taxable year,
on which Parent notifies Subsidiary of Parent's final determination of the
Subsidiary Group Tax Liability.
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<PAGE>
(d) For any taxable year during which income, loss, or credit
against federal income tax of any Subsidiary or any other member of the
Subsidiary Group is includible in computing the Parent Group Tax Liability,
Parent shall pay to each Subsidiary, pro rata as to each Subsidiary's loss or
credit, if any, in computing the Parent Group Tax Liability an amount equal to
the excess, if any, of the aggregate of the Truncated Group Tax Liability and
the Subsidiary Group Tax Liability for the taxable year over the Parent Group
Tax Liability for the taxable year. This payment shall be made within 30 days
after the Parent Group's consolidated return for a taxable year is filed.
(e) Each Subsidiary shall pay to Parent on or before each due
date for payments of estimated tax as provided in Section 6655 of the Code an
amount equal to the minimum payment of estimated tax that would have been
payable by its Subsidiary Group without incurring the penalty imposed by Section
6655 of the Code if the Subsidiary Group were filing a consolidated federal
income tax return apart from the other members of the Parent Group and had filed
such a consolidated return for at least the two preceding taxable years. Any
estimated tax payments made by Subsidiary to Parent under this paragraph 2(e)
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<PAGE>
for any taxable year shall be applied to reduce the amount, if any, owing by
Subsidiary to Parent under paragraph 2(b) for that year. If the sum of the
payments made by any Subsidiary under this paragraph 2(e) for any taxable year
exceeds the amount owing by such Subsidiary to Parent under paragraph 2(b) for
that taxable year, Parent shall repay the excess to such Subsidiary within 10
days after the Parent Group's consolidated federal income return for that year
is filed.
3. Carrybacks.
(a) In the event that the Parent Group incurs a consolidated
net operating loss (as that term is defined in Section 1.1502-21(f) of the
Treasury Regulations) or a credit against federal income tax for any taxable
year and that consolidated net operating loss or tax credit is carried back to
and absorbed in a prior taxable year of Parent or any member of the Parent
Group, then the Parent Group Tax Liability, each Subsidiary Group Tax Liability,
and the Truncated Group Tax Liability for the prior taxable year shall be
recomputed accordingly, and the amount of the liabilities determined under
paragraph 2 of this Agreement shall be adjusted to conform to those
recomputations.
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<PAGE>
(b) Parent shall be responsible for carrying out any
recomputations required by paragraph 3(a) and shall promptly send each
Subsidiary notification of any conforming adjustment of affected liabilities
under paragraph 2 of this Agreement. Within 10 days following the mailing of
that notice, Subsidiary shall pay Parent or Parent shall pay Subsidiary, as the
case may be, the amount of any increased liabilities under paragraph 2 of this
Agreement, as reflected in the notice.
(c) This Agreement shall have no application to the carryback
of a net operating loss or credit from a separate return year (within the
meaning of Section 1.1502-1(e) of the Treasury Regulations) of any Subsidiary or
another affiliated group of which Subsidiary is a member, as the case may be, to
any taxable year of the Parent Group.
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<PAGE>
4. State and Local Taxes.
In the event any Subsidiary or a corporation included in a
Subsidiary Group is included in a joint, combined, consolidated or unitary state
or local income or franchise tax return with any member of the Parent Group
(other than another corporation in such Subsidiary Group), such Subsidiary shall
make payments to the Parent, and the Parent shall make payments to such
Subsidiary, on a state by state basis in a manner consistent with the approach
provided by paragraphs 2, 3 and 5 hereof. Each Subsidiary hereby consents to be
included in such joint, combined, consolidated or unitary returns as the Parent
in its discretion deems advisable. Payments made pursuant to this paragraph will
be deemed deductible pursuant to Section 164 of the Code for purposes of
computing the tax liabilities of the Subsidiary and the Parent as though they
were not filing a consolidated income tax return pursuant to paragraphs 2 and 3
hereof.
5. Subsequent Adjustments.
(a) If the Parent Group Tax Liability for a taxable year is
changed or adjusted for any reason other than the carryback of a net operating
loss or credit governed by paragraph 3 of this Agreement (including, but not
limited to, the filing of
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<PAGE>
an amended return or claim for refund or an examination by the Internal Revenue
Service), then each Subsidiary Group Tax Liability and the Truncated Group Tax
Liability for such taxable year shall be recomputed accordingly, and the amount
of the liabilities determined under paragraph 2 of this Agreement shall be
adjusted to conform to those recomputations.
(b) Whenever any payment is due on account of a recomputation
pursuant to paragraph 5(a), an additional liability (referred to in this
Agreement as "Associated Interest") shall be determined to reflect the interest
cost or benefit associated with that recomputation and consequent adjustment to
liabilities under paragraph 2 of this Agreement. The liability for Associated
Interest shall be computed by applying the applicable rates of interest under
the rules prescribed by the Code and Treasury Regulations for the periods in
question to the adjusted liabilities under paragraph 2 of the Agreement. The
applicable rates of interest shall be determined as follows:
(1) In the case of an increase in an amount due under
paragraph 2(b) or a decrease in an amount due under paragraph 2(c), the
applicable rate shall be: (i) the rate (or rates) charged by the Internal
Revenue Service with respect to underpayments of income tax, to the extent
that
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<PAGE>
the recomputation of any Subsidiary Group Tax Liability for the taxable
year of the adjustment served to create or increase an actual Parent Group
Tax Liability for the taxable year; and (ii) the rate paid by the Internal
Revenue Service on overpayments of income tax, to the extent that the
recomputation of any Subsidiary Group Tax Liability served to reduce or
eliminate a refund that the Parent Group would have been entitled to
receive if the Parent Group had consisted only of the members of the
Truncated Group in the taxable year for which the adjustment is made.
(2) In the case of a decrease in an amount due under
paragraph 2(b) or an increase in an amount due under paragraph 2(c), the
applicable rate shall be the rate (or rates) paid by the Internal Revenue
Service with respect to overpayments of income tax.
(c) Parent shall be responsible for carrying out any
recomputations required by paragraph 5(a) of this Agreement and for the
computation of Associated Interest required by paragraph 5(b) of this Agreement
and shall promptly send each Subsidiary written notification of both. Within 10
days following the mailing of that notice, Subsidiary shall pay Parent or Parent
shall pay Subsidiary, as the case may be, the amount of
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<PAGE>
any increased liabilities under paragraph 2 of the Agreement and any Associated
Interest computed under section 5(b) of this Agreement, as reflected in the
notice.
(d) The provisions of this paragraph 5, together with those
provisions of paragraph 2 that may be invoked under this paragraph 5 from time
to time, shall remain in effect notwithstanding that Subsidiary may have ceased
to be a member of the affiliated group of corporations of which Parent is the
common parent.
6. Interest.
If any payment required to be made pursuant to paragraph 2, 3,
4, or 5 of this Agreement is not made within the time periods specified in those
paragraphs, the delinquent payment shall bear interest from its due date until
the date of actual payment at the rate (or rates) charged by the Internal
Revenue Service on underpayments of tax for the periods in question.
7. Effective Date.
This Agreement shall be effective for taxable years of the
Parent Group beginning after August 5, 1996.
8. Miscellaneous Provisions.
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<PAGE>
(a) This Agreement contains the entire understanding of the
parties with respect to the subject matter of this Agreement, except that
nothing contained in this Agreement shall be construed to prevent Parent from
entering into tax benefit compensation agreements with members of the Parent
Group that are not also members of any Subsidiary Group or to prevent any
Subsidiary from entering into similar agreements with members of its Subsidiary
Group. No alteration, amendment, or modification of any of the terms of this
Agreement shall be valid unless made by an instrument signed in writing by an
authorized officer of each party.
(b) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any conflicts of
law rule which might result in the application of the laws of any other
jurisdiction).
(c) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) All notices and other communications hereunder shall be
deemed to have been duly given if delivered by hand or mailed by certified or
registered mail, postage prepaid:
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<PAGE>
(i) if to Parent, to:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: General Counsel
(ii) if to LFI, to:
LIFESTYLE FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: General Counsel
(iii) if to Receivables Corporation, to:
LFI RECEIVABLES CORPORATION
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: General Counsel
(iv) if to Simmons, to:
SIMMONS UPHOLSTERED FURNITURE CORPORATION
1314 Hanley Industrial Court
St. Louis, Missouri 63144
Facsimile No.: (314) 968-1818
Attn: President
(e) The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not constitute a part of the Agreement.
[Remaining Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be affixed hereto, all
as of the date and year first above written.
FURNISHINGS INTERNATIONAL INC.
By:_______________________________
Name:
Title:
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
By:_______________________________
Name:
LFI RECEIVABLES CORPORATION
By:_______________________________
Name:
Title:
[Signature Page to Tax Sharing Agreement]
<PAGE>
LIFESTYLE HOLDINGS LTD.
By________________________________
Douglas C. Barnard
Secretary
LFI SERVICING CORPORATION
By________________________________
Douglas C. Barnard
Secretary
SIMMONS UPHOLSTERED FURNITURE CORPORATION
By________________________________
Robert L. George
Executive Vice President
<PAGE>
SCHEDULE 1
Corporations Included in Each
Subsidiary Group
Subsidiary Group Including Simmons
Simmons Upholstered Furniture Corporation
Subsidiary Group Including Receivables Corporation
LFI Receivables Corporation
LFI Servicing Corporation
Subsidiary Group including LFI
Lifestyle Furnishings International Ltd.
Lifestyle Holdings Ltd.
Ametex Fabrics, Inc.
The Berkline Corporation
Dixie Furniture Company, Incorporated
Drexel Heritage Furnishings Inc.
D-H Retail Space, Inc.
Drexel Heritage Advertising, Inc.
Drexel Heritage Home Inspiration, Inc.
Frederick Edward, Inc.
Henredon Furniture Industries, Inc.
Henredon Transportation Co.
Henry Link Corporation
Interior Fabric Design, Inc.
Intro Europe, Inc.
La Barge, Inc.
Lexington Furniture Industries, Inc.
Lineage Services Incorporated
Link-Taylor Corporation
Maitland-Smith, Inc.
Marbro Lamp Company
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<PAGE>
Ramm, Son & Crocker, Inc.
Robert Allen Fabrics, Inc.
Robert Allen Fabrics of N.Y., Inc.
Sunbury Textile Mills, Inc.
Universal Furniture Limited
Universal Furniture Industries, Inc.
Blue Mountain Trucking Corporation
Custom Truck Tires, Inc.
Young-Hinkle Corporation
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TRANSITIONAL SERVICES AGREEMENT
Transitional Services Agreement dated as of July 16, 1996 between
MASCO Corporation, a Delaware corporation ("Masco"), and FURNISHINGS
INTERNATIONAL INC., a Delaware corporation (the "Buyer").
RECITALS
WHEREAS, Masco and the Buyer are parties to an Acquisition Agreement
dated as of March 29, 1996 (as may be amended, modified or supplemented from
time to time, the "Acquisition Agreement"), pursuant to which the Buyer is
acquiring from Masco all of the outstanding capital stock of the HFG Companies
(as defined in the Acquisition Agreement); and
WHEREAS, the Buyer desires that Masco provide, and Masco is willing
to provide, either directly or through its subsidiaries, certain services on the
terms and conditions hereinafter set forth, all as contemplated by Section 5(k)
of the Acquisition Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Services Provided.
(a) Commencing on the Closing Date (as defined in the Acquisition
Agreement) and during the term of this Agreement, Masco shall provide to the HFG
Companies and their Subsidiaries (as defined in the Acquisition Agreement)
corporate support staff and administrative services as described in Section 1(b)
hereof (inclusive of those services set forth on Annex A), provided that Masco
shall not be obligated to provide any services which would be in contravention
of law, and provided further that Masco shall not be obligated to provide any
legal or litigation support services. Masco shall furnish such services at the
reasonable request of the Buyer, consistent with past practice and with Masco's
requirement to provide services for its own businesses and without obligating
Masco to hire additional employees to provide such services to the HFG Companies
and their subsidiaries.
(b) The services to be provided hereunder shall be consistent in
kind, quality and amount with those customarily provided to Masco's own business
units and with those that Masco has provided to the businesses that Masco is
transferring to the Buyer in the Ordinary Course of Business (as defined in the
Acquisition Agreement) prior to the date hereof. Travel, lodging and similar
costs and expenses of Masco employees performing services hereunder shall
<PAGE>
Transitional Services Agreement
be borne by Masco. Research and development services provided by Masco shall be
subject to the additional provisions set forth in the Research and Development
Undertaking attached hereto as Annex B.
Section 2. Fees.
(a) During the term hereof, the Buyer will pay Masco a fee for the
services provided under Section 1 hereof, irrespective of the HFG Companies' and
their Subsidiaries' actual use thereof, equal to $500,000 per calendar month,
subject to adjustment under Section 2(c) hereof (as adjusted, the "Monthly
Rate"), commencing as of the Closing (as defined in the Acquisition Agreement)
and continuing until the earlier of expiration of the term or the effective date
of a termination of the term under Section 3 hereof, except:
(i) with respect to the calendar month in which the Closing
occurs, the fee payable hereunder for such calendar month shall be
the product of (x) the Monthly Rate then in effect divided by the
number of days in such month times (y) the number of days from and
including the Closing Date to and including the last day of such
calendar month and
(ii) if (A) the Closing has occurred, (B) the term of this
Agreement is terminated pursuant to Section 3 hereof and (C) the
effective date of such termination is a day other than the last day
of a calendar month, the fee payable hereunder for such calendar
month shall be the product of (x) the Monthly Rate then in effect
divided by the number of days in such month times (y) the number of
days in such calendar month which have elapsed prior to and
including the effective date of termination.
After the Closing Date, such fee shall be payable monthly in arrears within 30
days after the end of each calendar month (commencing with the calendar month in
which the Closing occurs) during the term hereof.
(b)
(i) Masco will have the right to retain third parties to
provide services on behalf of the HFG Companies and their
Subsidiaries from time to time, in accordance with Masco's customary
practice in the Ordinary Course of Business prior to the date of
this Agreement. The use by Masco of any such third party will not be
subject to approval by the Buyer; provided that if requested by the
Buyer,
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<PAGE>
Transitional Services Agreement
Masco will keep the Buyer advised from time to time regarding any
significant use of such third parties and the cost of such use.
(ii) Masco shall be required to retain such third parties if
services to which the Buyer is entitled as described in Section 1(b)
hereof are requested by the Buyer and Masco has elected not to
employ or hire additional personnel to perform such services.
(iii) The Buyer shall be responsible for the payment of any
fees and expenses of third parties retained by Masco; provided that
the Buyer will not be responsible (and Masco will be responsible)
for the fees and expenses of any such third party which is retained
by Masco to provide services hereunder to the extent that (x) Masco
has itself provided such services to the businesses that Masco is
transferring to the Buyer in the Ordinary Course of Business prior
to the date of this Agreement and (y) the services provided by Masco
hereunder, together with the services provided by any such third
parties so retained, are not greater in kind, quality or amount than
those Masco has provided to the businesses that Masco is
transferring to the Buyer in the Ordinary Course of Business prior
to the date of this Agreement.
(c) If after the Closing Date, the Buyer or its subsidiaries employ
any personnel (whether or not such personnel have previously been employed by
Masco or its affiliates) to provide services to the Buyer and its subsidiaries
that have previously been provided by Masco pursuant to this Agreement, then to
the extent that such employment of personnel by the Buyer or its subsidiaries
results in a reduction in the services provided by Masco pursuant to this
Agreement, upon the effective date of each such employment the Monthly Rate
shall be appropriately adjusted downward to take into account the salary and
benefits of such employee paid by the Buyer or its subsidiaries and the services
formerly provided by Masco hereunder (which services are no longer required to
be provided by Masco as a result of such employment). The Buyer and Masco shall
negotiate each such adjustment in good faith. If any such adjustment is
effective during a calendar month in which the fee is being prorated on a daily
basis under clauses (i) or (ii) of Section 2(a), appropriate adjustments shall
be made to such pro-ration.
Section 3. Term.
(a) This Agreement shall continue in effect until April 30, 1997,
unless terminated in accordance with Section 3(b) or Section 3(d) below,
provided that if the Buyer desires a continuation of the term of this Agreement
beyond April 30, 1997 and the Buyer notifies Masco thereof on or before January
1, 1997, Masco agrees to negotiate with the Buyer in good faith as to the scope
and duration of services to be provided and as to appropriate fees therefor
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<PAGE>
Transitional Services Agreement
based upon the cost to Masco of the provision of such services (including
overhead and other allocated costs).
(b) The Buyer may terminate this Agreement for any reason at any
time upon at least 90 days' prior written notice to Masco. Upon termination of
this Agreement pursuant to this Section 3(b), the fees payable under Section 2
hereof shall be payable only through the effective date of termination.
(c) Upon termination of this Agreement (other than an automatic
termination under Section 3(d) hereof), or upon expiration of the term hereof,
Masco shall retain all books and records, or copies thereof, pertaining to the
business of the Buyer and its subsidiaries used or generated in the course of
the provision of services hereunder. Thereafter Masco will have the right to
dispose of such books and records, but will not do so unless it has given the
Buyer at least 90 days' prior notice of such disposition and the reasonable
opportunity, to the extent practicable, to have such books and records copied or
delivered to the Buyer at the Buyer's expense. If requested by the Buyer, Masco
will afford the Buyer reasonable access to such books and records during normal
business hours at the Buyer's expense and will permit the Buyer at its expense
to copy or to take original copies of such books and records to the extent such
books and records pertain solely to the Buyer's (and its subsidiaries')
businesses and to copy such books and records to the extent such books and
records pertain to the Buyers' (or any of its subsidiaries') businesses only in
part.
(d) If the Acquisition Agreement is terminated in accordance with
its terms, this Agreement shall thereupon terminate automatically without action
by either party hereto and shall be null and void, and no party hereto shall
thereafter have any liability hereunder, including without limitation any
obligation to pay a fee under Section 2 hereof.
Section 4. Indemnification.
(a) It is understood and agreed that in no event will Masco or any
of its subsidiaries, affiliates, directors, officers, employees and agents
(collectively, "Affiliates and Representatives") be liable to any of the Buyer,
the HFG Companies, their respective Affiliates and Representatives and their
respective financing parties for any loss incurred by any of such persons
resulting from the services provided by Masco hereunder (or otherwise provided
by Masco) or otherwise relating in any way to this Agreement, subject to the
obligation of Masco to pay third party fees and expenses set forth in the
proviso to Section 2(b)(iii) hereof, and except for any such loss resulting from
gross negligence, willful misfeasance or bad faith and subject to Section 4(c)
below. It is understood and agreed that in no event will Masco or its Affiliates
or Representatives be liable hereunder for any consequential damages for lost
profits or any exemplary or punitive damages.
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Transitional Services Agreement
(b) Subject to Section 4(c) below, the Buyer agrees to indemnify and
hold harmless Masco and its Affiliates and Representatives for any and all
losses, damages, costs, expenses (including reasonable attorney's fees and
expenses), penalties and liabilities (whether or not arising from the
negligence, but excluding the gross negligence, willful misfeasance or bad faith
of Masco or its Affiliates or Representatives) with respect to all liabilities,
duties and obligations of any kind whatsoever of Masco or its Affiliates or
Representatives resulting from the services to be provided pursuant to this
Agreement (or otherwise provided by Masco) or otherwise relating in any way to
this Agreement. The Buyer will either (I) cause each of its insurance carriers
providing property, liability or worker's compensation insurance as to the
Buyer, the HFG Companies and their Subsidiaries to waive any rights of
subrogation against Masco and its Affiliates and Representatives or (II) hold
Masco and its Affiliates and Representatives harmless from and against any claim
asserted by any such insurance carrier through rights of subrogation, absent bad
faith on the part of Masco.
(c) The Parties hereto agree that (i) nothing herein will, or may be
deemed to, restrict the ability of the Buyer to bring any action compelling
performance of or compliance with the terms of this Agreement or any action
asserting breach of this Agreement and (ii) nothing contained herein will, or
may be deemed to, impair or otherwise limit the rights and remedies available to
Masco, the Buyer and the Indemnified Buyer Parties (as defined in the
Acquisition Agreement) under the Acquisition Agreement.
Section 5. Independent Contractor; No Partnership.
(a) Masco shall select the Masco employees to provide services
hereunder on a basis consistent with past practice, and such individuals shall
not be deemed to be employees of the Buyer or any of its subsidiaries. All work
performed hereunder by Masco shall be performed by Masco as an independent
contractor.
(b) Notwithstanding anything herein to the contrary, no partnership
or joint venture has been created in or by this Agreement or as a result of the
provision of services hereunder.
Section 6. Assignment; Amendment; Non-Exclusive.
(a) This Agreement shall not be assignable by either party without
the express prior written consent of the other party.
(b) This Agreement may be amended only by an instrument in writing
or executed by the parties hereto. This Agreement does not amend, modify or
supersede the Acquisition Agreement in any way.
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<PAGE>
Transitional Services Agreement
(c) Without in any way limiting the obligations of the parties under
this Agreement, Masco agrees that the Buyer may enter into agreements with other
parties for the provision of any services provided by Masco hereunder.
Section 7. Notices. All notices and other written communications
hereunder shall be in writing and shall be given in accordance with the
provisions of the Acquisition Agreement.
Section 8. Specific Performance. The parties hereto agree that
irreparable damage will occur if any provision of this Agreement is not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity; provided, however, that each of the parties agrees to
provide the other with written notice at least two business days prior to filing
any motion or other pleading seeking a temporary restraining order, a temporary
or permanent injunction, specific performance, or any other equitable remedy and
to give the other and its counsel a reasonable opportunity to attend and
participate in any judicial or administrative hearing or other proceeding held
to adjudicate or rule upon any such motion or pleading.
Section 9. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice 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.
Section 10. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
Section 11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 12. Waiver of Jury Trial. EACH OF MASCO AND THE BUYER HEREBY
WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS BETWEEN MASCO AND THE BUYER
CONTEMPLATED HEREBY OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
HEREOF. THIS WAIVER IS IRREVOCABLE AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT. IN
THE EVENT OF LITIGATION,
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Transitional Services Agreement
THIS AGREEMENT MAY BE FILED WITH THE COURT AS A WRITTEN CONSENT TO A TRIAL
WITHOUT A JURY.
Section 13. Annexes. The Annexes to this Agreement are deemed a part
of this Agreement and are subject to all of the provisions herein (including
without limitation Section 4(c) hereof).
[Remainder of Page Intentionally Left Blank]
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Transitional Services Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
FURNISHINGS INTERNATIONAL INC.
By___________________________
Name:
Title:
MASCO CORPORATION
By___________________________
Name:
Title:
[Signature Page to Transitional Services Agreement]
<PAGE>
Transitional Services Agreement
ANNEX A
CORPORATE SERVICES TO BE PROVIDED
Accounting
Treasury
Tax
Corporate Development
Data Processing
Research and Development (See Annex B)
Human Resources and Employee Benefit Management
Intellectual Property Data Services
Market Research
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Transitional Services Agreement
ANNEX B
RESEARCH AND DEVELOPMENT UNDERTAKING
I. Research and Development Program
1.01 Masco shall provide to the Buyer and its subsidiaries such
research and development services as have heretofore been provided to the
businesses Masco is transferring to the Buyer pursuant to the Acquisition
Agreement.
II. Confidential Relationship
2.01 It is acknowledged that in furtherance of the performance by
Masco of the research and development services to be performed under this Annex,
Masco and the Buyer, during the term of this Annex, may be exposed to and become
privy to and will generate various confidential or secret information
proprietary to the other, which confidential information may include, but is not
limited to, technical information and know-how concerning products,
developments, new product plans, equipment, drawings, specifications, models,
prototypes, ideas, designs, software, processes, methods, research, sales and
customers and information relating to the management, operation or planning of
the other, and the fact that the other is interested in certain projects or
technology (collectively hereinafter referred to as "Confidential Information").
Confidential Information shall be limited to information disclosed by one party
to the other party in writing and designated as confidential, exclusive of any
information which:
(1) was in the possession of the receiving party prior to receipt
thereof; provided, however, that Confidential Information
transferred to Buyer to the extent it relates exclusively to
such businesses as part of the transfer of businesses by Masco
to Buyer shall not be considered information "in the
possession of Masco prior to the receipt thereof" when
received by Masco under this Annex;
(2) is or becomes available to the public through no fault of the
receiving party;
(3) is obtained by the receiving party in good faith without
obligation of non-disclosure from a third party who has a
right to disclose the same; or
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Transitional Services Agreement
(4) is developed by the receiving party independently of receipt
of such information from the disclosing party.
2.02 Masco and the Buyer shall hold and maintain the Confidential
Information of the other in confidence. Masco and the Buyer shall not without
the written consent of the disclosing party, except as specifically provided
herein or as required by law, disclose to any third party any Confidential
Information of the disclosing party prior to the later of (a) the third
anniversary of the date such Confidential Information is disclosed by the
disclosing party to the receiving party or (b) such other date as may be
designated in writing by the disclosing party any time prior to such third
anniversary.
2.03 Masco, to the extent required for the furtherance of the
research and development services for the Buyer contemplated by this Annex, may
disclose Confidential Information of the Buyer to any engineering or equipment
manufacturing or consulting firm so long as Masco provides a copy of the
confidentiality obligations set forth in this Annex to such firm and requires
such firm to comply with such confidentiality obligations.
III. Reports
3.01 Masco will keep the Buyer generally informed of the work
performed and the results achieved under the research and development services
provided by Masco to the Buyer. Interim reports will be provided to the business
units of the Buyer upon their request.
3.02 Monies for purchasing materials and other property utilized in
the research and development services shall be provided by the Buyer.
IV. Inventions and Patents
4.01 Title to each invention, design, improvement or other
patentable subject matter and to patent applications and patents thereon, made
during performance of research and development services by Masco under the
Transitional Services Agreement that are performed at the specific request of
the Buyer (hereinafter "Buyer Originated Inventions") shall reside in the Buyer.
Masco, its subsidiaries and, upon Masco's request, its affiliates, are hereby
granted an unlimited, royalty-free, irrevocable, non-exclusive license, but not
the right to grant sub-licenses, under each Buyer Originated Invention, and all
patent applications and patents thereon, to manufacture, use and sell any
process, machine, manufacture or composition of matter and improvements thereof,
incorporating such Buyer Originated Invention.
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Transitional Services Agreement
4.02 Title to each invention or improvement and to patent
applications and patents thereof, made during performance of research and
development services by Masco and not described in Section 4.01 above shall
reside in Masco. Nothing in this Annex shall be construed as a grant to the
Buyer by Masco, by implication, estoppel or otherwise, of a license or other
right to use any Masco patent, trademark, tradename, Confidential Information or
other proprietary right not specifically granted to the Buyer.
4.03 Notwithstanding any non-disclosure provisions of this Annex,
Masco shall, if requested by the Buyer or any business unit of the Buyer, and
after notifying the Buyer, prepare, file, prosecute and maintain, or have
prepared, filed, prosecuted and maintained, patent applications to protect any
inventions of Buyer, including without limitation those inventions described in
paragraph 4.01 above, in any and all countries. The out-of-pocket expenses of
monitoring the preparation, filing and maintaining of such patent applications
and patents thereon paid to third parties (including without limitation all
government fees, annuities, and taxes and any monies paid to third parties)
shall be borne by the Buyer.
4.04 Each party will execute, acknowledge and deliver to the other
party all lawful papers which, in the opinion of the other party's counsel, are
necessary or desirable to vest or perfect title if required and in accordance
with paragraphs 4.01 and 4.02, as directed by the other party and its successors
and assigns, including without limitation applications for divisions of pending
applications, applications for reissue of patents and specific assignments of
applications and patents, and all rights under the International Convention for
the Protection of Industrial Property.
4.05 The Buyer agrees to assert no rights, claims or entitlements
against Masco, its suppliers, its customers, or its successors, assigns or
nominees, whether arising out of patents, trade secrets or otherwise, based on
non-substantial use by Masco of Confidential Information of the Buyer acquired
by Masco in the performance of the research and development services or based on
the use of Confidential Information of the Buyer in existence at the time the
Transitional Services Agreement of which this Annex is a part is signed;
provided, however, that any use which causes substantial harm to the Buyer shall
not be deemed a non-substantial use.
V. Infringement and Indemnification
5.01 The Buyer agrees to indemnify and hold harmless Masco and the
Seller Indemnified Parties (as defined in the Acquisition Agreement) for any and
all losses, damages, costs, expenses (including reasonable attorney's fees and
expenses), penalties and liabilities arising from any third party claim of
patent, trademark or copyright infringement, unfair competition or
misappropriation of proprietary, confidential or trade secret information to
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Transitional Services Agreement
the extent such claim is based solely on Confidential Information of the Buyer
or its subsidiaries or on the specification and other materials provided by the
Buyer or its subsidiaries to Masco.
5.02 Masco agrees to indemnify and hold harmless the Buyer and the
Buyer Indemnified Parties (as defined in the Acquisition Agreement) for any and
all losses, damages, costs, expenses (including reasonable attorney's fees and
expenses), penalties, and liabilities arising from any third party claim of
patent, trademark or copyright infringement, unfair competition or
misappropriation of proprietary, confidential or trade secret information to the
extent such claim is based solely on Confidential Information of Masco or its
subsidiaries or on the specifications and other materials used by Masco other
than those provided by the Buyer or its subsidiaries.
5.03 Masco and the Buyer agree to notify each other promptly of any
claim brought by a third party that comes under either paragraphs 5.01 or 5.02
and agree that Masco shall promptly undertake reasonable efforts to obtain a
discontinuance of such claim and, if not successful, Masco shall consult with
the Buyer. If the third party claim becomes the subject of a court action, the
party against whom the action is brought shall select defense counsel (in
consultation with the other party), and damages, costs, expenses and attorney's
fees will be borne as stated in paragraphs 5.01 and 5.02.
5.04 Subject to the approval of the Buyer, which shall not be
unreasonably withheld, Masco shall have the right, at its expense, to bring suit
against any infringer of a patent directed to a Buyer Originated Invention
licensed by Masco when the act of infringement by the third party competes in
the marketplace with a business line of Masco and does not compete in the
marketplace with a business line of Buyer.
5.05 Masco and the Buyer each agree to cooperate fully with the
other and furnish any evidence in its possession bearing on the issues involved
in any court action brought against Masco or the Buyer described in paragraphs
5.01 and 5.02 and in any infringement action brought by Masco pursuant to
paragraph 5.04.
5.06 Any infringement action brought pursuant to paragraph 5.04
shall be either in the name of Masco, or in the name of the Buyer, or jointly by
Masco and the Buyer, as may be required by the law of the forum. For this
purpose, Masco and the Buyer agree to execute such legal papers necessary for
the prosecution of such action. In any such action, both Masco and the Buyer
shall be entitled to recoup their expenses, costs and attorney's fees from any
recoveries in such action.
VI. Termination
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Transitional Services Agreement
6.01 This Annex shall terminate simultaneously with termination of
the Corporate Services Agreement unless terminated earlier or extended by
agreement of the parties. Paragraphs 2.01, 2.02, 2.03, 4.01, 4.02, 4.03, 4.04,
4.05, 5.01, 5.02, 5.03, 5.04, 5.05 and 5.06 shall survive termination of this
Annex.
THE SECURITY REPRESENTED BY THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1993, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND
MAY NOT BE RESOLD OR TRANSFERRED, IN WHOLE OR IN PART, UNLESS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
ALL APPLICABLE STATE SECURITIES LAWS.
FURNISHINGS INTERNATIONAL INC.
12% Senior Note Due 2008
August 5, 1996 $285,000,000.00
New York, New York No. 1
FOR VALUE RECEIVED, FURNISHINGS INTERNATIONAL INC., a Delaware corporation
(the "Company"), promises to pay to Masco Corporation, a Delaware corporation
("Masco" or the "Lender"), or its registered assigns, the principal sum of TWO
HUNDRED EIGHTY- FIVE MILLION DOLLARS ($255,000,000.00), as such sum may be
increased in accordance with the provisions of Section 3(a) below and decreased
by prepayments made pursuant to Section 4 below, on August 5, 2008 (the
"Maturity Date") in accordance with the provisions of this Note.
This Note is the promissory note required to be issued pursuant to Section
2 (b of the Acquisition Agreement dated as of March 29, 1996, among the Company
and the Lender, as amended by Amendment No. 1 thereto dated as of June 21, 1996
and Amendment No. 2 thereto dated as of the Issue Date (as such Acquisition
Agreement may be further amended supplemented or otherwise modified from time to
time, the Acquisition Agreement"). This Note, any notes issued pursuant to
Section 3 below, any Exchange Notes or Public Notes (in each case as defined in
the Registration Rights Agreement) issued pursuant to Article II or Section 9.4
or 9.5 of the Registration Rights Agreement, any notes issued in payment of
interest on this Note, on any note issued pursuant to Section 3 below or on any
such Exchange Note or Public Note (or on any notes so issued in payment of
interest), and any notes issued upon registration of transfer or exchange of
this Note or any of the aforementioned Exchange Notes, Public Notes or other
notes, are collectively referred to herein as the "Notes".
1. Interest; Default Interest. (a) Interest will accrue on the unpaid
principal amount of this Note during the period from and including the date
hereof to but excluding the
<PAGE>
Maturity Date at the rate of 12% per annum (computed on the basis of a 360-day
year consisting of twelve 30-day months). The Company will pay interest in
arrears on June 15 and December 15 of each year, beginning December 15, 1996,
and on the Maturity Date.
(b) If the Company shall default in the payment of any principal of or
interest on this Note when due (whether upon the Maturity Date or any scheduled
interest payment date, by acceleration or otherwise), the Company agrees to pay,
to the extent permitted by law, interest on demand from time to time on such
defaulted amount to but excluding the date of actual payment at the rate of 14%
per annum (computed on the basis of a 360-day year consisting of twelve 30-day
months).
2. Method of Payment. (a) The Company will pay the interest on this Note
provided for in Section 1 above (i) in the case of interest which accrues
pursuant to Section 1(a) above, to the person who is the registered holder of
this Note (the "Holder") at the close of business on June 1 or December 1 next
preceding the applicable interest payment date, notwithstanding any cancellation
of this Note after the record date and on or before such interest payment date,
and (b) in the case of interest which accrues pursuant to Section 1(b) above, to
the Holder as of the close of business on the date on which the payment of such
interest is demanded. Subject to paragraph (b) below, the Company will pay the
principal of and interest on this Note, and all other amounts (if any) required
to be paid by it under this Note, in money of the United States that at the time
of payment is legal tender for payment of public and private debts. The Company
may pay principal, interest and any such other amount by check payable in such
money and may mail an interest check to the Holder's registered address. If the
outstanding principal amount of this Note is at least $2,500,000 and the Holder
so requests, the Company shall make all payments of principal of and interest on
this Note, and all other payments (if any) required to be made by it under this
Note, by wire transfer of immediately available funds to the account specified
by the Holder in a written notice to the Company delivered at least three
Business Days prior to the relevant payment date.
If the due date for any payment in respect of this Note is not a Business
Day, such payment shall be made on the next succeeding Business Day and no
interest shall accrue on such payment for the intervening period.
(b) The Company may and, to the extent that (i) the provisions of Section 7
below, or of any agreement or instrument evidencing or relating to any Senior
Indebtedness, then prohibit (including by means of a financial or negative
covenant) the payment of interest on the Notes in cash or (ii) the Relevant
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Subsidiaries are then prohibited (including by means of a financial or negative
covenant) from paying cash dividends to the Company for the purpose of paying
such interest by reason of the provisions of the agreements and instruments
evidencing or relating to Indebtedness of such subsidiaries or by reason of any
applicable law, rule, regulation, judgment, order or decree, the Company shall,
on each interest payment date occurring prior to December 15, 2004, in lieu of
the payment in whole or in part of interest in cash on this Note, pay interest
on this Note through the issuance of additional Notes of like tenor (the
"Secondary Notes") in an aggregate principal amount equal to the amount of
interest that would be payable with respect to this Note if such interest were
paid in cash. Notwithstanding the immediately preceding sentence, on each
interest payment date occurring on or after December 15, 2001 but prior to
December 15, 2004, to the extent that (x) the provisions of Section 7 below and
the agreements and instruments evidencing or relating to any Senior Indebtedness
do not then prohibit (including by means of a financial or negative covenant)
the payment of interest on the Notes in cash and (y) the Relevant Subsidiaries
are not then prohibited (including by means of a financial or negative covenant)
from paying cash dividends to the Company for the purpose of paying such
interest by reason of the provisions of the agreements and instruments
evidencing or relating to Indebtedness of such subsidiaries or by reason of any
applicable law, rule, regulation, judgment, order or decree, the Company shall
pay interest on the Notes in cash in the amount at least equal to the amount by
which (A) the lesser of (I) the Excess Cash Flow for the fiscal year of the
Company immediately preceding the fiscal year in which such interest payment
date occurs and (II) if, as of the end of such immediately preceding fiscal
year, any Bank Indebtedness (or commitment to extend credit constituting Bank
Indebtedness) is outstanding, the amount, if any, by which (1) the "Excess Cash
Flow" (as defined in the Credit Agreement or any successor agreement or
instrument in effect on the date of the prepayment referred to in clause (2)
below (or, if earlier, such interest payment date) evidencing or relating to
Bank Indebtedness) for such immediately preceding fiscal year exceeds (2) the
aggregate principal amount of Bank Indebtedness required to be prepaid during
the fiscal year in which such interest payment date occurs in respect of such
"Excess Cash Flow, " exceeds (B) the aggregate amount of cash interest
previously paid on the Notes during the fiscal year in which such interest
payment date occurs. All interest on the Notes payable on or after December 15,
2004 shall be paid in cash.
(c) In the event that Secondary Notes are issued by the Company in lieu of
interest paid in cash, the Company shall deliver to the Holder (or any prior
registered holder of this Note entitled thereto under Section 2(a)), on the
relevant
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<PAGE>
interest payment date, Secondary Notes, dated the date of such interest payment
date, in an aggregate principal amount equal to the amount of cash interest not
paid on this Note on such interest payment date. In the event that, on any
interest payment date, the Company pays in cash part (but less than all) of the
interest then due on the Notes, the payment of such cash interest will be made
pro rata among the registered holders of the Notes (or any prior registered
holders of Notes entitled thereto under Section 2(a)) on the basis of the
outstanding principal amount of the Notes held by each such holder (or prior
holder) on the record date for the payment of such interest.
(d) In the case of each interest payment date occurring on or after
December 15, 2001 but prior to December 15, 2004, the Company shall deliver to
the registered holders of the Notes (or any prior registered holders of Notes
entitled to receive interest on such interest payment date pursuant to Section
2(a)), at least 10 Business Days prior to such interest payment date, a written
notice setting forth the amount of interest that will be paid on the Notes in
cash on such interest payment date. Such notice shall also set forth (i) a brief
summary of the Company's calculation of the Annual Amount applicable to such
interest payment date and (ii) the aggregate amount of cash interest previously
paid on the Notes during the fiscal year in which such interest payment date
occurs. Once delivered, such notice shall be irrevocable, unless the Company's
Board of Directors determines that (x) an error has been made in the calculation
of any amount set forth in such notice or (y) an event has occurred on or after
the date of such notice which would reduce the amount of cash interest required
to be paid by the Company pursuant to Section 2(b) On such interest payment
date.
3. Increase in Principal Amount. (a) In the event that the aggregate
outstanding principle amount Of the Notes is required to be increased pursuant
to Section 2(f)(ii) of the Acquisition Agreement, the Company will give written
notice of such increase to the Holder (if other than the Lender or any of its
Affiliates) within five Business Days after the date (the "Determination Date")
on which Adjusted Net Investment and Advances (as defined in the Acquisition
Agreement) is finally determined pursuant to Section 2(e) of the Acquisition
Agreement. From and after the Determination Date, the portion of the aggregate
principal amount of the Notes represented by such increase (the "Increased
Amount") shall be deemed to have been outstanding effective as of the Issue Date
for all purposes hereunder; provided, however, that the failure to pay interest
in respect of the Increased Amount on any interest payment date occurring prior
to the Determination Date shall not constitute a Default or an Event of Default
hereunder, so long as such interest is paid, in any manner permitted by Section
2, within 10
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Business Days after the Determination Date (it being understood that any
Secondary Notes issued to pay interest due in respect of the Increased Amount on
any such interest payment date shall be deemed to have been outstanding
effective as of such interest payment date and shall be dated the date of such
interest payment date). The Increased Amount shall be allocated solely to the
Lender, regardless of whether the Lender is then a registered holder of Notes.
Within 10 Business Days after the Determination Date, (i) if the Lender is a
registered holder of Notes as of the Determination Date, such Notes shall be
surrendered to the Company and cancelled in exchange for new Notes of like tenor
issued by the Company reflecting the Increased Amount or (ii) if the Lender is
not a registered holder of Notes as of the Determination Date, the Company shall
issue to the Lender a new Note of like tenor, dated the Issue Date, in an
original principal amount equal to the Increased Amount. Notwithstanding
anything in the Notes to the contrary, Section 2(b) of the Notes shall apply to
all interest payable in respect of the Increased Amount.
(b) In the event that from time to time the Company is obligated to issue a
promissory note to the Lender pursuant to Section 12(r) of the Acquisition
Agreement, then in satisfaction of such obligation (and whether or not the
Lender is a registered holder of Notes on the date on which the obligation to
issue such promissory note arises under such Section 12(r) (the "Indemnification
Issue Date")), the Company shall issue to the Lender, within 10 Business Days
after the date on which the obligation to issue such promissory note is finally
determined pursuant to such Section 12(r), a new Note of like tenor, dated the
Indemnification Issue Date, in an original principal amount determined in
accordance with such Section 12(r). From and after the date of such final
determination, the Note issued in respect thereof shall be deemed to have been
outstanding effective as of the related Indemnification Issue Date for all
purposes hereunder; provided, however, that the failure to pay interest in
respect of such Note on any relevant interest payment date occurring prior to
the date of such final determination shall not constitute a Default or an Event
of Default hereunder, so long as such interest is paid, in any manner permitted
by Section 2, within 10 Business Days after the date of such final determination
(it being understood that any Secondary Notes issued to pay interest due in
respect of such Note on any such interest payment date shall be deemed to have
been outstanding effective as of such interest payment date and shall be dated
the date of such interest payment date).
4 . Mandatory and Optional Prepayments; Change of Control Offer. (a)
Mandatory Prepayments. On each of December 15, 2006 (or February 5, 2007, if any
principal, interest or other amount payable in respect of the LFI Notes
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<PAGE>
remains unpaid on December 15, 2006), June 15, 2007 and December 15, 2007, the
Company shall prepay principal of the Notes in an amount equal to 25% of the
outstanding aggregate principal amount of the Notes as of the close of business
on December 14, 2006 (or, if any principal, interest or other amount payable in
respect of the LFI Notes remains unpaid on December 15, 2006, as of the close of
business on February 4, 2007); provided, however, that the aggregate principal
amount of Notes which the Company is required to prepay on each such mandatory
prepayment date shall be reduced pro rata by an aggregate amount equal to the
amount of each prepayment or purchase of Notes made pursuant to Section 4(b) or
4(c) on or after the first such mandatory prepayment date. Each prepayment of
Notes pursuant to this Section 4(a) shall be made at a price equal to 100% of
the principal amount of the Notes being prepaid, plus accrued but unpaid
interest thereon to (but excluding) the prepayment date.
(b) Optional Prepayments. The Company, at its option, may prepay all or a
portion of the outstanding principal amount of the Notes at any time and from
time to time, in each case at a purchase price equal to 100% of the principal
amount of the Notes being prepaid plus accrued but unpaid interest thereon to
(but excluding) the prepayment date.
(c) Change of Control Offer. (i) Upon the occurrence of a Change of
Control, the Company shall, in accordance with paragraph (ii) below, notify the
Holder and each other registered holder of Notes of the occurrence of such
Change of Control, and accompanying such notice shall be an offer to purchase
the Notes (a "Change of Control Offer") at a purchase price equal to 100% of
the principal amount thereof, plus accrued but unpaid interest thereon to (but
excluding) the date of purchase.
(ii) Within 30 days following any Change of Control, the Company shall
mail a notice to the Holder and each other registered holder of Notes stating,
among other things: (l) that a Change of Control has occurred and a Change of
Control Offer is being made pursuant to this Section 4(c) and that all Notes (or
portions thereof) timely tendered will be accepted for payment; (2) the purchase
price and the purchase date (the "Change of Control Payment Date"), which shall
be, subject to any contrary requirements of applicable law, no earlier than 30
days nor later than 60 days from the date such notice is mailed; (3) that any
Note (or portion thereof) paid on the Change of Control Payment Date pursuant to
the Change of Control Offer shall cease to accrue interest from and after the
Change of Control Payment Date; (4) that any Note (or portion thereof) not
tendered will continue to accrue interest; (5) a description of the transaction
or transactions constituting the Change Of Control; (6) that the
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Holder or any other registered holder of Notes accepting the offer to have its
Notes purchased pursuant to the Change of Control Offer will be required to
surrender such Notes (or portions thereof) to the Company prior to the close of
business on the Business Day immediately preceding the Change of Control Payment
Date; (7) that the Holder or any other registered holder of Notes will be
entitled to withdraw its acceptance if the Company receives, not later than the
close of business on the third Business Day preceding the Change of Control
Payment Date, written notice setting forth the name of the Holder or such other
holder, the principal amount of the Notes (or portions thereof) delivered for
purchase by the Holder or such other holder, and a statement that the Holder or
such other holder is withdrawing its election to have such Notes (or portions
thereof) purchased; (8) that registered holders whose Notes are being purchased
only in part will be issued new Notes equal in aggregate principal amount to the
unpurchased portion of the Notes surrendered; and (9) any other procedures that
the Holder and the other registered holders of Notes must follow to accept the
Change of Control Offer or effect withdrawal of such acceptance.
(iii) On the Change of Control Payment Date, the Company shall accept
for payment the Notes (or portions thereof) properly tendered (and not
withdrawn) pursuant to the Change of Control Offer (which Notes (or the tendered
portions thereof) shall become due and payable on the Change of Control Payment
Date) and shall pay, to the Holder and each other registered holder of Notes
entitled thereto, the purchase price of the Notes (or portions thereof) so
tendered by the Holder or such other holder, plus accrued but unpaid interest
thereon to (but excluding) the Change of Control Payment Date. The Holder and
each other registered holder of Notes electing to have a Note (or portion
thereof) purchased pursuant to the Change of Control Offer will be required to
surrender such Note to the Company not later than the close of business on the
Business Day immediately preceding the Change of Control Payment Date. The
Holder and each other registered holder of Notes will be entitled to withdraw
its election if the Company receives, not later than the close of business on
the third Business Day preceding the Change of Control Payment Date, written
notice setting forth the name of the Holder or such other holder, the principal
amount of Notes (or portions thereof) delivered for purchase by the Holder or
such other holder and a statement that the Holder or such other holder is
withdrawing its election to have such Notes (or portions thereof) purchased.
(iv) the Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the purchase of Notes (or portions thereof)
pursuant to this Section 4(c). To the extent that the provisions
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of any securities laws or regulations conflict with provisions of this Section
4(c), the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4(c) by virtue thereof .
(d) Miscellaneous Provisions. In the event that the Company prepays
less than all the outstanding principal amount of a Note pursuant to Section
4(a) or 4(b), or purchases a portion (but less than all) of a Note pursuant to a
Change of Control Offer, the Company shall deliver to the registered holder
thereof upon such prepayment or purchase a replacement Note of like tenor
representing the remaining outstanding principal amount of such Note. Any
prepayment of less than all of the outstanding principal amount of the Notes
pursuant to Section 4(a) or 4(b) will be made pro rata among the registered
holders of the Notes on the basis of the outstanding principal amount of the
Notes then held by each such holder. From and after the date of any prepayment
or purchase of this Note pursuant to this Section 4, interest shall cease to
accrue on the portion of this Note so prepaid or purchased.
(e) Notice of Prepayment. Notice of any prepayment of this Note
pursuant to Section 4(b) above will be delivered at least 15 days but not more
than 60 days before the prepayment date to the Holder at the address specified
in (or pursuant to) Section 16, and shall be irrevocable.
5. Repayment. The Company will repay this Note on the Maturity Date at 100%
of the then outstanding principal amount of this Note plus accrued but unpaid
interest thereon to (but excluding) such date.
6. Certain Covenants. The Company covenants and agrees with the Holder and
each other registered holder of Notes from time to time that, until the
outstanding principal of, and the accrued but unpaid interest on, each Note
shall have been paid in full:
6.1 Indebtedness. The Company will not issue, assume, Guarantee, become
liable for or otherwise incur any Indebtedness, other than:
(a) Indebtedness represented by Bank Indebtedness or Guarantees by the
Company of Bank Indebtedness;
(b) Indebtedness represented by Guarantees by the Company of, or
letters of credit or other credit support issued or provided in support of,
Indebtedness of a subsidiary of the Company (other than Bank Indebtedness
and Indebtedness of the Receivables Subsidiary); provided,
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however, that in the case of a Guarantee of, or letter of credit or other
credit support relating to, Indebtedness of Simmons, the recourse against
the Company under such Guarantee, letter of credit or other credit support
shall be limited to a pledge of all or any part of the Capital Stock of
Simmons and the Class D Common Stock;
(c) Indebtedness of a Relevant Subsidiary assumed by the Company upon
the consolidation or merger of such Relevant Subsidiary with or into the
Company or the transfer of all or part of the properties and assets of such
Relevant Subsidiary to the Company, provided that such Indebtedness was not
incurred by such Relevant Subsidiary in anticipation of such consolidation,
merger or transfer;
(d) Indebtedness represented by the Notes (including any Notes issued
pursuant to Sections 2 and 3 above or pursuant to Article II and Sections
9.4 and 9.5 of the Registration Rights Agreement);
(e) Indebtedness represented by the Debentures and any Refinancing
Indebtedness incurred in respect of Debentures in connection with any
purchase or redemption of such Debentures permitted by clause (iv) of
Section 6.2(b);
(f) Indebtedness consisting of Subordinated Obligations issued by the
Company, in lieu of the payment of cash, to purchase or redeem shares of
Capital Stock (or options or warrants in respect of such shares) of the
Company or any Relevant Subsidiary (including related stock appreciation
rights or similar securities) held by any current or former director,
officer or employee of the Company or any subsidiary thereof (or permitted
transferees of such current or former director, officer or employee) upon
any such person's death, disability, retirement or termination of
employment or pursuant to the terms of any agreements (including employment
agreements) or plans (or amendments thereto), approved by the Company's or
a Relevant Subsidiary's Board of Directors (as applicable), under which any
such person may purchase and sell, or is granted options to purchase and
sell, any of the securities referred to in this clause (f) (any such
purchase or redemption by the Company, an "Employee Stock Redemption");
(g) Indebtedness of the Company owing to and held by any Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of
any Capital Stock or any other event which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of any such Indebtedness (except to a Wholly Owned Subsidiary)
will be deemed, in each case, to
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constitute an incurrence of such Indebtedness by the Company not permitted
by this clause (g);
(h) Indebtedness of the Company (A) in respect of performance bonds,
bankers' acceptances, letters of credit, surety or appeal bonds and similar
obligations, in each case provided by the Company in the ordinary course of
its business (including those incurred to secure health, safety and
environmental obligations in the ordinary course of business) but which do
not secure other Indebtedness, and (B) in respect of interest rate
protection agreements, foreign currency exchange agreements and any other
interest or exchange rate hedging arrangements that are designed to protect
the Company against fluctuations in interest rates or currency exchange
rates and not for the purposes of speculation;
(i) Indebtedness of the Company, to the extent the net proceeds
thereof are immediately used after the incurrence thereof to purchase Notes
tendered in an offer to purchase made as a result of a Change of Control;
(j) Indebtedness of the Company arising from agreements (including the
Acquisition Agreement) providing for indemnification, adjustment of
purchase price or similar obligations, in any case (other than in the case
of the Acquisition Agreement) incurred in connection with the disposition
of any business or assets of the Company or any subsidiary thereof or the
disposition of any Capital Stock of any subsidiary of the Company (in each
case other than Guarantees of Indebtedness incurred by any person acquiring
all or any portion of such business, assets or Capital Stock for the
purpose of financing such acquisition), in a principal amount not to exceed
the gross proceeds actually received by the Company or any subsidiary
thereof in connection with such disposition;
(k) Indebtedness of the Company owed to (including obligations in
respect of letters of credit for the benefit of) any person in connection
with worker's compensation, health, disability, or other employee benefits
or property, casualty or liability insurance provided by such person to the
Company or any subsidiary thereof, pursuant to reimbursement or
indemnification obligations to such person, in each case incurred in the
ordinary course of business;
(l) Any Refinancing Indebtedness incurred in respect of any
Indebtedness under clauses (c), (d), (i) and (l) of this Section 6.1;
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(m) Indebtedness of the Company in an aggregate principal amount at
any time outstanding not in excess of $20 million; and
(n) Indebtedness incurred pursuant to any Permitted Receivables
Financing in respect of receivables sold by the Company to a Receivables
Subsidiary.
provided, however, that the aggregate principal amount of Indebtedness incurred
by the Company pursuant to clauses (c), (l) (but only in the case of any
Refinancing Indebtedness incurred to refinance Indebtedness under clause (c)
above) and (m) above shall not exceed $20 million at any time outstanding.
6.2 Restricted Payments. (a) The Company shall not (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) except dividends or distributions payable
solely in its Capital Stock (other than Disqualified Stock), (ii) purchase,
redeem, retire or otherwise acquire for value any Capital Stock of the Company
held by persons other than the Relevant Subsidiaries, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) make any Investment
(other than a Permitted Investment) in any person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a "Restricted Payment").
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated Obligations
of the Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Relevant Subsidiary or an
employee stock ownership plan or other trust established by the Company or any
of its subsidiaries to the extent the purchase by such plan or trust is financed
by Indebtedness of such plan or trust and for which the Company or a Relevant
Subsidiary is liable, directly or indirectly, as a guarantor or otherwise
(including by the making of cash contributions to such plan or trust which are
used to pay interest or principal on such Indebtedness));
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(ii) any purchase or redemption of Subordinated Obligations of the Company
made by exchange for, or out of the proceeds of the substantially concurrent
sale of, Refinancing Indebtedness incurred to refinance Indebtedness under
clause (i) of Section 6.1;
(iii) the issuance of Debentures in exchange for shares of Restricted
Preferred Securities in accordance with the Company's articles of incorporation;
(iv) upon the occurrence of a Change of Control and within 60 days after
the completion of the related Change of Control Offer (including the purchase of
all Notes properly tendered), any purchase or redemption of Subordinated
Obligations required pursuant to the terms thereof as a result of such Change of
Control;
(v) at any time and from time to time prior to the first anniversary of the
Issue Date, any purchase, redemption or other acquisition for value of shares of
the Company's Capital Stock pursuant to the terms of the Call Agreement as in
effect on the Issue Date;
(vi) Employee Stock Redemptions, in each case regardless of whether the
Company pays cash or issues notes in connection therewith, and any payment of
principal or interest on, or any purchase or redemption of, any such notes;
provided, however, that the aggregate amount (net of purchases of the Company's
or any Relevant Subsidiary's Capital Stock by officers, directors and employees
of the Company and its subsidiaries) of (A) Employee Stock Redemptions made in
cash and (B) cash payments to pay principal of, or interest on, or to purchase
or redeem, any such notes shall not exceed as of any date the product of (x)
$6.0 million and (y) the number of years (or fractions thereof) elapsed since
the Issue Date; and
(vii) any dividend or distribution in respect of the Class D Common Stock,
or any purchase or redemption of Class D Common Stock, that consists of or is
directly funded by (x) a distribution in kind of the common stock of Simmons,
(y) distributions (including distributions of assets) made in respect of the
Capital Stock of Simmons held by the Company or (z) proceeds from the sale of
Capital Stock or assets of Simmons.
6.3 Transactions with Affiliates. (a) The Company will not, and will not
permit any Relevant Subsidiary to, directly or indirectly, enter into or conduct
any transaction (including the purchase, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate of the Company on terms (i)
that are less favorable to the Company or such Relevant Subsidiary, as the case
may be, than those that
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could be obtained at the time of such transaction in arm's-length dealings with
a person who is not such an Affiliate and (ii) that, in the event such
transaction involves an aggregate amount in excess of $2.5 million, are not
evidenced by a written agreement, instrument or other document and have not been
approved by a majority of the members of the Company's Board of Directors
having no personal economic stake in such transaction.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment (other than Permitted Investments) permitted to be made
pursuant to Section 6.2, (ii) any Permitted Investment, other than Permitted
Investments in Simmons, in 399 or in any Affiliate of 399, (iii) any Permitted
Investment in Simmons described in clause (i) of the definition of "Permitted
Investment" in Section 12.1, (iv) fees, compensation or employee benefits paid
to, and any indemnity provided for the benefit of, current or former directors,
officers or employees of the Company or any subsidiary of the Company in the
ordinary course of business, (v) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved by
the Company's Board of Directors, (vi) Employee Stock Redemptions, including any
payment of principal of or interest on, or any purchase or redemption of, any
note issued in connection therewith, (vii) transactions pursuant to agreements
entered into or in effect on the Issue Date (including the Transitional Services
Agreement between the Lender and the Company), together with amendments thereto
entered into after the Issue Date, provided that the terms of any such amendment
are not, in the aggregate, materially less favorable to the Company or such
Relevant Subsidiary than the terms of such agreement prior to such amendment,
(viii) loans or advances to officers, directors or employees (of the Company or
any subsidiary thereof) that are Affiliates of the Company made in the ordinary
course of business, but in any event not to exceed $2.5 million in the aggregate
outstanding at any one time, or (ix) any transaction between the Company and a
Relevant Subsidiary or between Relevant Subsidiaries (so long as the other
stockholders of any participating Relevant Subsidiaries which are not direct or
indirect wholly owned subsidiaries of the Company are not themselves Affiliates
of the company).
6.4 Liens. The Company will not, directly or indirectly, create or permit
to exist any Lien on any of its property or assets (including Capital Stock),
whether owned on the Issue Date or thereafter acquired, securing any
Indebtedness of the Company other than Indebtedness permitted by Section 6.1
(excluding any such permitted Indebtedness incurred pursuant to clause (e), (f),
(g) or (i) of Section 6.1 and Refinancing Indebtedness incurred in respect of
the Notes or in respect of
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Indebtedness incurred pursuant to such clause (e), (f), (g) or (i)), unless
contemporaneously therewith effective provision is made to secure the Notes
equally and ratably with (or on a senior basis to, in the case of Indebtedness
subordinated in right of payment to the Notes) such Indebtedness for so long as
such Indebtedness is so secured.
6.5 Mergers, Consolidations, etc. The Company will not consolidate with or
merge with or into, or convey, transfer or lease all or substantially all its
assets to, any person, unless: (a) the resulting, surviving or transferee person
(the "Successor Company") will be a corporation organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) will expressly assume,
by a written instrument in form satisfactory to the registered holders of a
majority of the then outstanding principal amount of the Notes, all the
obligations of the Company under the Notes; (b) immediately after giving effect
to such transaction (and treating any Indebtedness which becomes an obligation
of the Successor Company as a result of such transaction as having been incurred
by the Successor Company at the time of such transaction), no Default will have
occurred and be continuing; (c) immediately after giving effect to such
transaction, the Successor Company shall have Consolidated Net Worth in an
amount which is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; and (d) the Company will have delivered
to the Holder and each other registered holder of Notes an officers' certificate
and an opinion of counsel, each stating that such transaction complies with this
Section 6.5.
The foregoing paragraph will not prohibit the Company from conveying or
transferring Capital Stock of Simmons. Notwithstanding the foregoing clauses
(b), (c) and (d), any Relevant Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company.
The Successor Company shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Notes , but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets shall not be released from the obligation to pay
the principal of and interest on the Notes.
6.6 Certain Amendments. The Company will not permit any amendment or other
modification of the Credit Agreement (including Sections 2.13(c) and 6.08(b) (v)
thereof) to the extent that the effect of such amendment or other modification
is to prohibit the Company, in the absence of a default or event of default
under the Credit Agreement, from prepaying Notes at its option with up to 60% of
the Net Cash Proceeds (as defined in the
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Credit Agreement as in effect on the Issue Date) of any public offering of the
Company's Common Stock.
6.7 Existence. Except as otherwise permitted by Section 6.5, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (charter and statutory) and franchises;
provided, however, that the Company shall not be required to preserve or keep in
full force and effect any such right or franchise if the Company's Board of
Directors (or any duly authorized committee thereof) shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the holders of Notes.
6.8 Financial Statements and Other Retorts. The Company will furnish to the
Holder and to each other registered holder of Notes:
(a) within 90 days after the end of each fiscal year, its consolidated
balance sheet and related statements of income, stockholders' equity and cash
flows showing the consolidated financial condition of the Company and its
consolidated subsidiaries as of the close of such fiscal year and the
consolidated results of its operations and the operations of such subsidiaries
during such year (and showing, on a comparative basis commencing with the fiscal
year ending December 31, 1998, the corresponding figures for the preceding
fiscal year), all audited by Ernst & Young LLP, Coopers and Lybrand LLP or other
independent public accountants of recognized national standing and accompanied
by an opinion of such accountants to the effect that such consolidated financial
statements fairly present in all material respects the financial condition and
results of operations of the Company and its consolidated subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal quarters
of each fiscal year, its unaudited consolidated balance sheet and related
statements of income, stockholders' equity and cash flows showing the
consolidated financial condition of the Company and its consolidated
subsidiaries as of the close of such fiscal quarter and the consolidated results
of its operations and the operations of such subsidiaries during such fiscal
quarter and the then elapsed portion of the fiscal year (and showing, on a
comparative basis commencing with the fiscal quarter ending March 31, 1998, such
information as of and for the corresponding dates and periods of the preceding
fiscal year), all certified by the principal financial officer of the Company as
fairly presenting in all material respects the financial condition and results
of operations of the Company and its consolidated subsidiaries on a
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consolidated basis in accordance with GAAP (except for the absence of footnote
disclosure) consistently applied, subject to year-end audit adjustments;
(c) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Company or any of the Relevant Subsidiaries with the Securities and Exchange
Commission, or with any national securities exchange, or distributed to its
shareholders generally, as the case may be; and
(d) promptly after (and, in any event, no later than 10 Business Days
after) the chief executive officer, the president or the principal financial
officer of the Company obtains knowledge thereof, written notice of any Event of
Default or Default, specifying the nature and extent thereof and the corrective
action (if any) taken or proposed to be taken with respect thereto.
6.9 Officers' Certificates as to Defaults. The Company will deliver to the
Holder and each other registered holder of Notes, within 90 days after the end
of each fiscal year of the Company ending after the date hereof, an officers'
certificate (signed by the president, the principal financial officer or any
vice president of the Company and by the secretary or any assistant secretary of
the Company), stating whether or not to the knowledge of the signers thereof the
Company is in default in the performance and observance of any of its covenants
and agreements contained in the Notes (without regard to any period of grace or
requirement of notice provided hereunder) and, if the Company shall be in
default, specifying all such defaults of which the signers have knowledge and
the nature and status thereof .
7. Subordination.
7.1 Notes Subordinated to Senior Indebtedness. The Company, for itself and
its successors, and the Lender, for itself and its successors and assigns by its
acceptance of this Note, agree that the payment by the Company of the principal
of and interest on the Notes and all other amounts owed in respect of the Notes,
both before and after the commencement of a bankruptcy or similar proceeding
(collectively, the "Note Obligations"), is subordinated, to the extent and in
the manner provided in this Section 7, to the prior payment in full in cash of
all amounts payable under or in respect of the Senior Indebtedness.
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The provisions of this Section 7 are for the benefit of the holders of the
Senior Indebtedness, and such holders are made beneficiaries of this Section 7
and may enforce its provisions.
7.2 No Payment on Notes in Certain Circumstances.
(a) Subject to Section 7.9, prior to the payment in full in cash of
all amounts payable under or in respect of the Senior Indebtedness, no payment
(whether of cash, properties or securities) will be made by the Company on
account of principal of or interest on the Notes or any other amount owed in
respect of the Notes, or to redeem, retire, purchase, deposit moneys for
defeasance of or otherwise acquire any Notes for value, and the Company shall
not segregate and hold separate for the benefit of the Lender or any other
holder of Notes, money for any such payment, if (i) there shall have occurred
and be continuing (x) any default in the payment when due of any amount
constituting Senior Indebtedness (whether principal, interest or otherwise, and
whether due on the scheduled payment date, a date fixed for prepayment or
otherwise) or (y) any other default under any agreement or instrument evidencing
or relating to any Senior Indebtedness that has resulted in, or would permit the
holders of any Senior Indebtedness to cause (subject to any applicable notice
requirement or grace period), the acceleration of any Senior Indebtedness or
(ii) immediately after giving effect thereto, such payment would result in a
default described in clause (i) above.
(b) If any payment or distribution of assets of the Company is
received by the Lender or any other holder of Notes in respect of principal of,
interest on or any other amount owed in respect of the Notes at a time when the
payment or distribution should not have been made because of paragraph (a)
above, such payment or distribution (subject to the provisions of Section 7.9)
will be received and held in trust for the benefit of, and will be paid over to,
the holders of the Senior Indebtedness or their representatives (pro rata as to
each of such holders on the basis of the respective unpaid amounts of Senior
Indebtedness held by them) for application to the payment of the Senior
Indebtedness until all Senior Indebtedness has been paid in full in cash, after
giving effect to any concurrent payment to the holders of the Senior
Indebtedness.
7.3 Notes Subordinated to Prior Payment of All Senior Indebtedness upon
Dissolution, Liquidation or Reorganization. Subject to Section 7.9, in the event
of (i) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization, adjustment, composition or other similar case or
proceeding, relative to the Company or to its creditors, as such, or to its
assets, (ii) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and
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whether or not involving insolvency or bankruptcy, or (iii) any assignment for
the benefit of creditors or any other marshalling of assets and liabilities of
the Company (collectively, "Bankruptcy Events"), then in any such event:
(a) the holders of the Senior Indebtedness will first be entitled to
receive payment in full in cash of the principal and interest due on the Senior
Indebtedness and all other amounts payable under or in respect of the Senior
Indebtedness before the Lender and the other holders of Notes are entitled to
receive any payment on account of the principal of or interest on, or any other
amount owed in respect of, the Notes;
(b) any payment or distribution of assets of the Company of any kind
or character (whether in cash, property or securities) to which the Lender and
the other holders of Notes would be entitled except for the provisions of this
Section 7.3 will be paid by the person making such payment or distribution
(whether a trustee in bankruptcy, a receiver, custodian or liquidating trustee
or otherwise) directly to the holders of the Senior Indebtedness or their
representatives to the extent necessary to make payment in full in cash of all
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment to the holders of the Senior Indebtedness; and
(c) if, notwithstanding the foregoing, any payment or distribution of
assets of the Company of any kind or character (whether in cash, property or
securities) is received by the Lender or any other holder of Notes on account of
the principal of or interest on, or any other amount owed in respect of, the
Notes before the Senior Indebtedness is paid in full in cash, such payment or
distribution will be received and held in trust for the benefit of, and will be
paid over to, the holders of the Senior Indebtedness or their representatives
(pro rata as to each of such holders on the basis of the respective unpaid
amounts of Senior Indebtedness held by them) for application to the payment of
the Senior Indebtedness until all Senior Indebtedness has been paid in full in
cash, after giving effect to any concurrent payment to the holders of the Senior
Indebtedness.
The Company will give prompt written notice to the Holder and each other
registered holder of Notes of any dissolution, winding up, liquidation or
reorganization of the Company or any assignment for the benefit of the Company's
creditors.
(d) Any holder of Senior Indebtedness shall have the right to request
the Holder to file and, in the event the Holder fails to do so within 10 days,
is hereby authorized to file a proper claim or proof of debt in the form
required in any
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Bankruptcy Event for and on behalf of the Holder or any other holder of this
Note, to accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the Note Obligations in an amount
not in excess of the aggregate amount of Senior Indebtedness then unpaid, and to
take such other action as may be reasonably necessary to effectuate the
foregoing. The Holder and any other holder of this Note shall provide to such
holder of Senior Indebtedness all information and documents reasonably necessary
to present claims or seek enforcement as aforesaid. The Holder of this Note
shall retain the right in respect of this Note to vote to accept or reject any
plan of partial or complete liquidation, reorganization, arrangement,
composition or extension; provided, however , that neither the Lender nor any
other holder of this Note shall take any action or vote in any way so as to
contest the enforceability of this Section 7, any Senior Indebtedness or any
other agreement or instrument with or for the benefit of any holder of any
Senior Indebtedness (in its capacity as such).
7.4 Acceleration of Payment of Notes. If an Event of Default (other than an
Event of Default occurring pursuant to clause (i) (but only in the case of a
failure to pay principal), (iv) or (v) of Section 11 (a)) shall have occurred
and be continuing at any time that any Senior Indebtedness is outstanding, the
registered holders of the Notes electing to accelerate the Notes pursuant to
Section 11(b) shall give the holders of the Senior Debt (or their
representatives) at least 10 days' prior written notice before accelerating the
Notes, which notice shall state that it is a "Notice of Intent to Accelerate."
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify the holders of the Senior Indebtedness (or their
representatives) of the acceleration.
Prior to the payment in full in cash of all amounts payable under or in respect
of the Senior Indebtedness, any amount received by the Lender or any other
holder of this Note in respect of any Note Obligation as a result of any
acceleration of this Note or any other exercise of remedies in respect of this
Note shall be paid to the holders of Senior Indebtedness in accordance with the
provisions of this Section 7.
7.5 Holders to be Subrogated to Rights of Holders of Senior Indebtedness.
Upon the payment in full in cash of all Senior Indebtedness, the Holder and the
other registered holders of Notes will be subrogated to the rights of the
holders of the Senior Indebtedness to receive payments and distributions of
assets of the Company applicable to the Senior Indebtedness until all amounts
owing in respect of the Notes have been paid in full, and for the purpose of
such subrogation, no payments or distributions to the holders of the Senior
Indebtedness by or on
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behalf of the Company or by or on behalf of the Lender or any other holder of
Notes by virtue of this Section 7 which otherwise would have been made to the
Holder or any other holder of Notes will, as between the Company, on the one
hand, and the Holder and the other registered holders of Notes, on the other
hand, be deemed to be payment by the Company to or on account of the Senior
Indebtedness, it being understood that the provisions of this Section 7 are, and
are intended to be, solely for the purpose of defining the relative rights of
the Holder and the other holders of Notes, on the one hand, and the holders of
the Senior Indebtedness, on the other hand.
7.6 Obligations of the Company Unconditional. Nothing contained in this
Note is intended to or will impair, as between the Company and the Holder, the
obligations of the Company, which are absolute and unconditional, to pay to the
Holder the principal of and interest on this Note as and when they become due
and payable in accordance with the terms hereof, or is intended to or will
affect the relative rights of the Holder and the other registered holders of
Notes, on the one hand, and the other creditors of the Company (other than the
holders of the Senior Indebtedness) , on the other hand, nor, except as provided
in this Section 7, will anything herein prevent the Holder and the other
registered holders of Notes from exercising all remedies otherwise permitted by
applicable law upon an Event of Default, subject to the rights, if any, under
this Section 7 of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
7.7 Subordination Rights Not Impaired by Acts or Omissions of the Company
or Holders of Senior Indebtedness. No right of any present or future holders of
any Senior Indebtedness to enforce subordination, as provided herein, will at
any time or in any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any act or failure to act on the part of any such
holder, or by any noncompliance by the Company with the terms of this Note,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with. The holders of the Senior Indebtedness may increase, extend,
renew, amend, waive or otherwise modify the terms of the Senior Indebtedness or
any security therefor and release, sell or exchange such security and otherwise
deal freely with the Company, all without releasing or otherwise impairing the
rights of such holders hereunder.
7.8 Reinstatement. The provisions of this Section 7 shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Senior Indebtedness is rescinded or must otherwise be returned by any
holder of
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Senior Indebtedness upon the occurrence of a Bankruptcy Event, all as though
such payment had not been made.
7.9 Issuance of Additional Notes Not Prohibited. Notwithstanding anything
in this Section 7 to the contrary, nothing in this Section 7 shall prohibit the
Company from issuing, or the Lender, the Holder or any other registered holder
of Notes (as applicable) from receiving and retaining, (a) Secondary Notes
issued on any interest payment date to pay interest on the Notes in lieu of the
payment in whole or in part of such interest in cash, (b) any Note issued
pursuant to Section 3 or (c) any Exchange Note or Public Note (in each case as
defined in the Registration Rights Agreement) issued in exchange for one or more
other Notes pursuant to Article II or section 9.4 or 9.5 of the Registration
Rights Agreement; provided, however, that each such Secondary Note, Note,
Exchange Note or Public Note (and, in the case of an Exchange Note or a Public
Note, the indenture relating thereto) shall contain provisions substantially
identical to this Section 7.
7.10 Amendment. Any amendment, waiver or other modification of the
provisions of this Section 7 shall not be effective against any holder of Senior
Indebtedness without such holder's consent.
7.11 Remedies. The holders of Senior Indebtedness shall be entitled to
enforce their rights under this Section 7 specifically, to recover damages by
reason of any breach of any provision of this Section 7 and to exercise all
other rights existing in their favor. The Lender and each other holder of Notes
acknowledges and agrees that money damages may not be an adequate remedy for any
breach of the provisions of this Section 7 and that any holder of Senior
Indebtedness may apply to any court of competent jurisdiction for specific
performance and injunctive relief in order to enforce and prevent any violation
of the provisions of this Section 7.
8. Registered Holder Deemed Owner. The company may treat the Holder as the
owner of this Note for all Purposes hereof.
9. Transfers; Note Register; Replacement of Notes.
9.1 Transfers. (a) This Note shall not be sold, assigned, pledged,
hypothecated or otherwise transferred, in whole or in part, except as provided
in paragraphs (b) and (c) below and except for transfers by will or applicable
laws of descent.
(b) After the earlier of (i) a Qualifying Offering and (ii) August 5, 1998,
the Holder may either (x) sell or assign
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this Note, in whole or in part, to any person, or (y) pledge this Note in a bona
fide financing transaction to a commercial bank or other lending institution
that agrees in writing to be bound by the provisions of this Section 9;
provided, however, that the Holder shall not make any such sale, assignment or
pledge unless (A) the ratio of (1) Consolidated EBITDA minus Capital
Expenditures to (2) Consolidated Interest Expense, in each case for the four
most recent fiscal quarters of the Relevant Subsidiaries ending at least 45 days
prior to the date of such sale, assignment or pledge, is at least 2.5 to 1 and
(B) the ratio of (1) Total Debt as of the end of such four-quarter period to (2)
Consolidated EBITDA for such four-quarter Period is not more than 3.1 to 1.
For purposes of this Section 9.1(b), "Consolidated EBITDA," "Capital
Expenditures" and "Total Debt" shall be calculated on a consolidated (or, if
necessary to include all the Relevant Subsidiaries, a combined) basis solely
with respect to the Relevant Subsidiaries, and shall not reflect any financial
data to the extent pertaining solely to the Company.
(c) Prior to any sale, assignment or pledge of this Note pursuant to
paragraph (b) above, the Holder shall give at least 15 days' prior written
notice to the Company of the Holder's intention to effect such transfer. Each
such notice shall describe the manner and circumstances of the proposed transfer
and (except in the case of any pledge pursuant to clause (y) of such paragraph
(b)) shall indicate the exemption under the Securities Act pursuant to which the
proposed transfer of this Note may be effected without registration under the
Securities Act. Every Note surrendered for registration of transfer shall be
duly endorsed, or shall be accompanied by a written instrument of transfer duly
executed, by the registered holder of such Note. The Note issued upon such
transfer shall bear the restrictive legend set forth in paragraph (d) below.
(d) Each Note that is not an Exchange Note or a Public Note (in each case
as defined in the Registration Rights Agreement) will be stamped or otherwise
imprinted with a legend in capital letters and otherwise in substantially the
following form:
"THE SECURITY REPRESENTED BY THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND
MAY NOT BE RESOLD OR TRANSFERRED, IN WHOLE OR IN PART, UNLESS REGISTERED OR
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
ALL APPLICABLE STATE SECURITIES LAWS."
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9.2 Note Register; Replacement of Notes.
(a) The Company shall keep a register in which provisions shall be made for
the registration of transfers and exchanges of Notes. The register shall be kept
at the chief executive office of the Company. Upon surrender for registration of
transfer of any Note at the chief executive office of the Company (and provided
that such transfer is effected in compliance with Section 9.1), the Company
shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Notes of like tenor for a like aggregate principal
amount of Notes. At the option of any registered holder of Notes, its Notes may
be exchanged for other Notes of like tenor of any authorized denominations and
of a like aggregate principal amount, upon surrender of the Notes to be
exchanged at the chief executive office of the Company. Each new Note issued
upon transfer or exchange shall be in a principal amount of at least $500,000
and dated the date to which interest on the Notes surrendered shall have been
paid. All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company evidencing the same respective
obligations, and entitled to the same benefits, as the Notes surrendered upon
such registration of transfer or exchange. The Company shall make a notation on
each new Note of the amount of all payments of principal previously made on the
old Notes with respect to which such new Note is issued and the date to which
interest accrued on such old Note has been paid, and shall stamp or otherwise
imprint on each new Note that is not an Exchange Note or a Public Note (in each
case as defined in the Registration Rights Agreement) the restrictive legend set
forth in Section 9.1(d).
(b) Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Note and, in the case of any such loss,
theft or destruction, upon delivery of an indemnity agreement satisfactory to
the Company, or in the case of any such mutilation, upon surrender of such Note
(which surrendered Note shall be cancelled by the Company), the Company will,
without charge, issue a new Note of like tenor in lieu of such lost, stolen,
destroyed or mutilated Note as if the lost, stolen, destroyed or mutilated Note
were then surrendered for exchange.
10. Amendments and Waivers. The terms of the Notes may not be amended by
the Company without the consent of the registered holders of a majority of the
then outstanding principal amount of the Notes, and any existing default may be
waived only with the consent of the registered holders of a majority of the then
outstanding principal amount of the Notes; provided, however, that without the
consent of the Holder, the interest rate on this Note may not be reduced, the
principal
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amount of this Note may not be reduced, the Maturity Date may not be changed to
a later date and Sections 4(a), 4(c), 4(d) and 7 and this Section 10 may not be
amended.
11. Defaults and Remedies. (a) An "Event of Default" shall occur if:
(i) the Company defaults in the payment of any principal of or interest on
any Note when the same becomes due and payable (whether on the Maturity
Date, a date fixed for the prepayment or repurchase of such Note pursuant
to Section 4 or otherwise), and the default continues for a period of 10
days;
(ii) there is a default in the performance, or a breach, of any covenant or
agreement of the Company contained in the Notes (other than a default
specified in clause (i) above) and continuance of such default or breach
for a period of 80 days after there shall have been given, to the Company
by the registered holders of at least 25% of the then outstanding principal
amount of the Notes, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default";
(iii) there is a default under any Bank Indebtedness, the Indebtedness
represented by the LFI Notes or any other Indebtedness for borrowed money
of the Company or any Relevant Subsidiary, or under any agreement or
instrument under which there may be issued or by which there may be secured
or evidenced any such Indebtedness, which default shall have resulted in an
aggregate outstanding principal amount greater than $75 million of such
Indebtedness becoming or being accelerated and declared due and payable
prior to the date on which it would otherwise have become due and payable,
or a failure to pay any such Indebtedness in an aggregate outstanding
principal amount greater than $75 million at maturity, in each case without
such Indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 10 days after there shall have
been given, to the Company by the registered holders of at least 25% of the
then outstanding principal amount of the Notes, a written notice specifying
such default or failure and requiring the Company to cause such
Indebtedness to be discharged or such acceleration to be rescinded or
annulled, as the case may be, and stating that such notice is a "Notice of
Default";
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(iv) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case;
(B) appoints a Custodian of the Company or for all or any substantial
part of its property; or
(C) orders the liquidation of the Company;
and, in each case, the order or decree remains unstayed and in effect for
60 days; or
(v) the Company, pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property; or
(D) makes a general assignment for the benefit of its creditors.
The term "Bankruptcy Law" means Title 11 of the United States Code and any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
(b) If an Event of Default (other than an Event of Default specified
in clause (iv) or (v) of Section 11(a)) occurs and is continuing, the registered
holders of a majority of the then outstanding principal amount of the Notes, by
five Business Days' prior written notice to the Company, may, subject to Section
7, declare the unpaid principal of and accrued interest on all the Notes to be
due and payable. If such Event of Default is not cured or waived within such
five Business Days, such acceleration shall become effective upon the expiration
of such five-Business Day period, and such unpaid principal and interest shall,
subject to Section 7 hereof, thereupon become and be immediately due and
payable. If an Event of Default specified in clause (iv) or (v) of Section 11(a)
occurs, the unpaid principal of and accrued interest on all the Notes shall,
subject to Section 7 hereof, forthwith become and be immediately due and payable
without any declaration or other act on the part of any
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registered holder of Notes. The registered holders of a majority of the then
outstanding principal amount of the Notes may rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and all existing Events of Default have been cured or waived except nonpayment
of principal, interest or any other amount that has become due solely because of
the acceleration.
(c) In the case of an Event of Default resulting from the failure to
pay any principal of or interest on any Note, or from a default in the
performance, or breach, of any other agreement or covenant of the Company
contained in the Notes, the Company agrees to pay to the registered holders of
the Notes, in addition to any interest otherwise required pursuant to Section
1(b), such further amount as shall be required to cover any and all reasonable
out-of-pocket costs and expenses of enforcement and collection, including
reasonable attorneys' fees and expenses.
(d) Subject to any applicable requirement under Section 7.4 to give
prior written notice before accelerating the Notes, if an Event of Default
occurs and is continuing, the registered holders of a majority of the then
outstanding principal amount of the Notes may pursue any available remedy to
collect the unpaid principal of and interest on the Notes or to enforce the
performance of any provision of the Notes. The holders of a majority of the then
outstanding principal amount of the Notes may direct the time, method and place
of conducting any proceeding for any remedy then available to any holder of
Notes.
12. Definitions.
12.1 Defined Terms. As used in the Notes, the following terms shall have
the respective meanings set forth below:
"Acquisition Agreement" has the meaning specified in the forepart of this
Note.
"Additional Management Stockholder" means an Additional Stockholder who is
an employee, officer or director of the Company or any of its subsidiaries.
"Additional Stockholder" means any person (other than an Institutional
Stockholder, Masco Stockholder or Management Stockholder), to whom the Company
issues Restricted Securities or Restricted Preferred Securities after the Issue
Date, other than pursuant to a public offering registered under the Securities
Act, In each case who has executed a joinder agreement as an Additional
Stockholder pursuant to Section 6.2 of the Stockholders Agreement (or any
successor provision), and its
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direct and indirect Permitted Transferees, so long as any such person shall hold
(directly or indirectly through the Voting Trust) Restricted Securities or
Restricted Preferred Securities.
"Affiliate" means, with respect to any person, any other person that
Controls, is Controlled by or is under common Control with such person. For
purposes of the definition of the term "Permitted Transferees," employees,
officers and directors of 399 and its Affiliates shall be "Affiliates" of 399.
"Associate" means, with respect to any person, (i) any trust or other
estate in which such person has a substantial beneficial interest or as to which
such person serves as trustee or in a similar fiduciary capacity and (ii) any
relative or spouse of such person, or any relative of such spouse, who has the
same home as such person.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
scheduled redemption or similar payment with respect to such Preferred Stock
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the Credit Agreement and any increase, extension, renewal, refinancing or
replacement thereof or of any subsequent Bank Indebtedness, including principal,
premium (if any), interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Company
whether or not a claim for post-filing interest is allowed in such proceeding),
fees, charges, expenses, reimbursement obligations, guarantees and all other
amounts payable thereunder or in respect thereof.
"Bankruptcy Events" has the meaning specified in Section 7.3.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banking institutions in New York State are authorized or required by law
to close.
"Call" means the right of the Company to purchase Restricted Securities and
Restricted Preferred Securities from 399 Stockholders pursuant to the Call
Agreement.
"Call Agreement" means the Call Agreement dated as of the Issue Date,
between 399 and the Company, as the same may be amended, supplemented or
otherwise modified from time to time.
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"Capital Expenditures" means, for any period, without duplication, the sum
of (a) the aggregate of all expenditures (whether paid in cash or other
consideration) by the Company and the Relevant Subsidiaries during such period
that, in accordance with GAAP, are or should be included in "additions to
property, plant or equipment" or similar items reflected in the consolidated
statement of cash flows of the Company and the Relevant Subsidiaries for such
period and (b) to the extent not covered by clause (a) above, the aggregate of
all expenditures by the Company and the Relevant Subsidiaries to acquire by
purchase or otherwise the business, property or fixed assets of, or stock or
other evidence of beneficial ownership of, any person (it being understood that
this clause (b) does not include any Investment in a person that is not a
subsidiary at the time of such Investment and that will not become a subsidiary
as a result of such Investment); provided, however, that Capital Expenditures
shall not include (i) Expenditures relating to the development, purchase or
acquisition of sample fabric books, (ii) in the case of clause (b) above, the
portion of such expenditures allocable in accordance with GAAP to net current
assets, (iii) expenditures of proceeds of insurance settlements, condemnation
awards and other settlements in respect of lost, destroyed, damaged or condemned
assets, equipment or other property to the extent such expenditures are made to
replace or repair such lost, destroyed, damaged or condemned assets, equipment
or other property or otherwise to acquire assets or properties useful in the
business of the Company or any of the Relevant Subsidiaries within 12 months of
receipt of such proceeds or (iv) with respect to any person, expenditures that
are accounted for as capital expenditures of such person and that actually are
paid for by a third party and for which neither such person nor any subsidiary
of such person has provided or is required to provide or incur directly or
indirectly, any consideration or obligation to such third party.
"Capital Lease Obligation" of any person means an obligation of such person
that is required to be classified and accounted for as a capital lease for
financial reporting purposes in accordance with GAAP, and the amount of such
obligation shall be the capitalized amount thereof determined in accordance with
GAAP.
"Capital Stock" of any person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
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"Change of Control" means the occurrence of
(i) a sale in one or more transactions of more than 66 2/3% of the
consolidated assets of the Company and its Control Subsidiaries,
(ii) any transaction as a result of which the 399 Stockholders cease
to own at least 10% of the HFG Common Stock on a Fully-Diluted Basis,
(iii) any transaction as a result of which any person other than an
Institutional Stockholder, a Masco Stockholder or a Management Stockholder
(or any group consisting of such persons who (x) shall have agreed in
writing (other than pursuant to the Stockholders' Agreement) to act as a
group with respect to the acquisition or voting of securities of the
Company or the power to designate and elect members of the Company's Board
of Directors, with a copy of such agreement having been provided to the
Company, (y) shall have advised the Company that such group is acting as a
group with respect to the acquisition or voting of securities of the
Company or the power to designate and elect members of the Company's Board
Of Directors, or (z) in connection with the purchase of securities of the
Company, shall have filed or notified the Company that it will file, as a
group, a Schedule 13D or 13G under the Exchange Act) has the power to
designate and elect members of the Company's Board of Directors with
weighted votes Constituting a majority of the weighted votes on such Board
(or, if no such weighting is then in effect, the power to designate and
elect a majority of the members of such Board), excluding, however, any
such person or group that would not have held such power if it had not
acquired from a Masco Stockholder securities of the Company having rights
and privileges conferring such power, other than by a transfer from a Masco
Stockholder through the exercise of "Rights of Inclusion" under Article III
of the Stockholders' Agreement in connection with a transfer by the 399
Stockholders, provided, that no Change of Control under the circumstances
set forth in this clause (iii) shall be deemed to have occurred under any
circumstances solely as a result of the acquisition by any such person or
group of the right to designate and elect the Management Directors and the
Masco Director, or
(iv) the 399 Stockholders (x) have sold in one or more transactions to
persons other than their Permitted Transferees in excess of 66 2/3% of the
HFG Common Stock, on a Fully-Diluted Basis (excluding HFG Common Stock
which is subject to transfer by 399 Stockholders to the Company pursuant to
the Call), owned by the 399 Stockholders on the
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Issue Date (subject to adjustment for any stock dividends, stock splits,
combinations, reclassifications, mergers, consolidations and the like) and
(y) following such sales, the percentage of HFG Common Stock on a
Fully-Diluted Basis owned by the 399 Stockholders on the date of the last
of such sales is less than the percentage thereof owned by the Masco
Stockholders on the date of the last of such sales.
For purposes of this definition of Change of Control, the terms "399
Stockholders" and "Permitted Transferees" do not include any Permitted
Transferee of a 399 Stockholder pursuant to clauses (iii)(C) and (iii)(D) of
the definition of Permitted Transferee (unless such Permitted Transferee is,
with respect to 399, a person described in clauses (iii)(A) and (iii)(B) of
such definition) .
"Change of Control Offer" has the meaning specified in Section 4(c).
"Change of Control Payment Date" has the meaning specified in Section 4(c).
"Class A Common" means the Company's Class A Common Stock, par value $.01
per share, consisting of four series of Class A Common Stock, the Series A-1
Common Stock, the Series A-2 Common Stock, the Series A-3 Common Stock and the
Series I Common Stock, and any securities into which such Class A Common shall
have been changed or any securities resulting from any reclassification or
recapitalization of such Class A Common.
"Class B Common" means the Company's Class B Common Stock, par value $.01
per share, consisting of four series of Class B Common Stock, the Series B-1
Common Stock, the Series B-2 Common Stock, the Series B-3 Common Stock and the
Series II Common Stock, and any securities into which such Class B Common shall
have been changed or any securities resulting from any reclassification or
recapitalization of such Class B Common.
"Class C Common" means the Company's Class C Common Stock, par value $.01
per share, and any securities into which such Class C Common, shall have been
changed or any securities resulting from any reclassification or
recapitalization of such Class C Common.
"Class D Common" means the Company's Class D Common Stock, par value $.01
per share, and any securities into which such Class D Common shall have been
changed or any securities resulting from any reclassification or
recapitalization of such Class D Common.
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"Class D Equity Equivalents" means securities exercisable, convertible or
exchangeable for or into Class D Common.
"Common Stock" means the Class A Common, the Class B Common, the Class C
Common and the Class D Common, any securities into which the Class A Common, the
Class B Common, the Class C Common or the Class D Common shall have been
changed, and all other securities of any class or classes (however designated)
of the Company, the holders of which have the right, without limitation as to
amount, after payment on any securities entitled to a preference on dividends or
other distributions upon any dissolution, liquidation or winding-up, either to
all or to a share of the balance of payments upon such dissolution, liquidation
or winding-up.
"Company" has the meaning specified in the forepart of this Note.
"Consolidated Current Assets" means, at any date of determination, all
assets (other than cash and cash-equivalents) that would, in accordance with
GAAP, be classified on a consolidated balance sheet of the Company and the
Relevant Subsidiaries as current assets at such date of determination.
"Consolidated Current Liabilities" means at any date of determination, all
liabilities (other than the current portion of long-term Indebtedness) that
would, in accordance with GAAP, be classified on a consolidated balance sheet of
the Company and the Relevant Subsidiaries as current liabilities at such date of
determination.
"Consolidated EBITDA" means, for any period, the Consolidated Net Income
for such period, plus, without duplication, to the extent deducted in computing
Consolidated Net Income, the sum of (a) income tax expense, (b) interest expense
(including interest-equivalent costs associated with any Permitted Receivables
Financing, whether accounted for as interest expense or loss on the sale of
receivables), (c) depreciation and amortization expense, including amortization
of sample fabric books, (d) any extraordinary losses, (e) any non-cash charges
or non-cash losses and (f) cash restructuring charges minus, without
duplication, to the extent added in computing such Consolidated Net Income, (i)
interest income, (ii) any extraordinary gains and (iii) any non-cash income or
non-cash gains, all as determined on a consolidated basis with respect to the
Company and the Relevant Subsidiaries in accordance with GAAP. Notwithstanding
anything in the Notes to the contrary, the aggregate amount of cash
restructuring charges added back to Consolidated Net Income in the determination
of Consolidated
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EBITDA for any twelve-month (or shorter) period shall not exceed $3,500,000.
"Consolidated Interest Expense" means, for any period, the gross interest
expense accrued or paid by the Relevant Subsidiaries during such period, as
determined on a consolidated (or, if necessary to include all the Relevant
Subsidiaries, a combined) basis in accordance with GAAP, plus
interest-equivalent costs associated with any Permitted Receivables Financing
for such period, whether accounted for as interest expense or loss on the sale
of receivables; provided, however, that "Consolidated Interest Expense" shall
not include (i) expenses relating to the transactions contemplated by the Credit
Agreement or the Acquisition Agreement or amortization thereof and (ii)
penalties and premiums associated with any prepayment of Indebtedness.
"Consolidated Net Income" means, for any period, net income or loss of the
Company and the Relevant Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, provided that there shall be
excluded (a) the net income (or loss) of any person in which any other person
(other than the Company, any wholly owned Relevant Subsidiary or any director
holding qualifying shares or any nominee holding shares for the indirect benefit
of the Company in compliance with applicable law) has an equity interest, except
that (i) the Company's or such Relevant Subsidiary's equity in the net income of
any such person shall be included in determining Consolidated Net Income to the
extent of the amount of dividends, other distributions or payments in respect of
loans actually paid to the Company or any of the Relevant Subsidiaries, as the
case may be, by such person during such period, provided that if the ownership
of such equity interest by such other person is required by local ownership laws
in any foreign country, the Company's or such Relevant Subsidiary's equity in
the net income of any such person shall be included in determining Consolidated
Net Income to the extent that cash could have been distributed by such person
during such period to the Company or such Relevant Subsidiary, as the case may
be, as a dividend, and (ii) the Company's or any Relevant Subsidiary's equity in
a net loss of any such person for such period shall be included in determining
Consolidated Net Income, (b) the net income (or loss) of any person for any
period prior to the date it becomes a Relevant Subsidiary or is merged into or
consolidated with the Company or any of the Relevant Subsidiaries or the date
that person's assets are acquired by the Company or any of the Relevant
Subsidiaries and (c) any after tax gains or losses attributable to sales of
assets out of the ordinary course of business.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Relevant Subsidiaries, determined on a
consolidated basis, as of the end
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of the most recent fiscal quarter of the Company ending at least 45 days prior
to the taking of any action for the purpose of which the determination is being
made, as (i) the par or stated value of all outstanding Capital Stock of the
Company plus (ii) paid-in capital or capital surplus relating to such Capital
Stock plus (iii) any retained earnings or earned surplus minus (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Consolidated Working Capital" means, at any date of determination,
Consolidated Current Assets at such date of determination minus Consolidated
Current Liabilities at such date of determination.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Control Subsidiary" means, with respect to any person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of 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 that person or one or more of the other Control Subsidiaries of
that person or a combination thereof, or (ii) if a partnership, association or
other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or Controlled, directly or indirectly, by
that person or one or more Control Subsidiaries of that person or a combination
thereof. For purposes hereof, a person or persons shall be deemed to have a
majority ownership interest in a partnership, association or other business
entity if such person or persons shall be allocated a majority of partnership,
association or other business entity gains or losses or shall be or Control the
managing director or general partner of such partnership, association or other
business entity.
"Credit Agreement" means the Credit Agreement dated as of August 5, 1996,
among the Company, LFI and the other borrowers party thereto from time to time,
the lenders party thereto from time to time and The Chase Manhattan Bank, a New
York banking corporation, as administrative agent and collateral agent, and
Chase Manhattan Bank Delaware, as issuing bank, as the same may be amended,
supplemented or otherwise modified from time to time.
"Debentures" means the Company's Junior Subordinated Debentures issued from
time to time after the Issue Date in
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exchange for shares of the Restricted Preferred Securities or in payment of
interest on any such Junior Subordinated Debentures (including those so issued
in payment of interest).
"Default" means any event or condition that, upon notice, lapse of time or
both would constitute an Event of Default.
"Determination Date" has the meaning specified in Section 3(a).
"Disqualified Stock" means, with respect to any person, any capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible into or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to 91 days after
the Stated Maturity of the Notes. Disqualified Stork shall not include any
Capital Stock that is not otherwise Disqualified Stock if by its terms the
holders thereof have the right to require the issuer to repurchase such stock
upon a Change of Control (or upon events substantially similar to a Change Of
Control).
"Employee Stock Redemption" has the meaning specified in Section 6.1.
"Equity Equivalents" means securities exercisable, convertible or
exchangeable for or into HFG Common Stock, including without limitation the
Series B Preferred and the Series C Preferred.
"Event of Default" has the meaning specified in Section 11(a).
"Excess Cash Flow" means, for any fiscal year, the Consolidated EBITDA of
the Company and Relevant Subsidiaries on a consolidated basis for such fiscal
year, minus, without duplication, (a) cash interest paid during such Fiscal year
(including interest-equivalent costs during such fiscal year that are associated
with any Permitted Receivables Financing, whether accounted for as interest
expense or loss on the sale of receivables), (b) scheduled principal repayments
of Total Debt made during such year, (c) voluntary prepayments of Total Debt of
the Relevant Subsidiaries during such fiscal year, (d) Capital Expenditures by
the Company and the Relevant Subsidiaries on a consolidated basis during such
fiscal year that are paid in cash, except to the extent that such Capital
Expenditures are prohibited by Section 6.2, (e) taxes paid in cash by the
Company
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and the Relevant Subsidiaries on a consolidated basis during such fiscal year,
(f) the portion (if any) of such Consolidated EBITDA which (in the reasonable
judgment of the Company's Board of Directors) is required to be retained For use
in the business of the Relevant Subsidiaries (including (i) to make Capital
Expenditures and (ii) to pay interest on Indebtedness of any Relevant Subsidiary
and to repay or prepay any outstanding Indebtedness of any Relevant Subsidiary),
(g) cash payments made by the Company to Simmons pursuant to the Tax Sharing
Agreement during such fiscal year, (h) an amount equal to any increase in
Consolidated Working Capital during such fiscal year, (i) capital expenditures
in cash relating to the development, purchase or acquisition of sample fabric
books during such fiscal year, (j) restructuring charges paid in cash during
such fiscal year to the extent included in determining Consolidated EBITDA, (k)
any increase in Investments in customers, suppliers and Joint Ventures during
such fiscal year and (l) to the extent included in Consolidated EBITDA, all
non-cash payments received by the Company and the Relevant Subsidiaries on a
consolidated basis during such fiscal year, plus, without duplication, (i) an
amount equal to any decrease in Consolidated Working Capital during such fiscal
year, (ii) interest income received in cash during such fiscal year, (iii) any
decrease in Investments in customers, suppliers and Joint Ventures during such
fiscal year, (iv) the proceeds of any Capital Lease Obligations, purchase money
Indebtedness and other Indebtedness (to the extent permitted under Section 6.1,
in the case of Indebtedness of the Company), in each case to the extent used to
finance Capital Expenditures during such fiscal year, (v) to the extent deducted
in determining Consolidated EBITDA, all non-cash payments made by the Company
and the Relevant Subsidiaries on a consolidated basis during such fiscal year
and (vi) the portion (if any) of the Consolidated EBITDA for the immediately
preceding fiscal year which has been subtracted pursuant to clause (f) above in
determining Excess Cash Flow for such immediately preceding fiscal year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations of the Securities and Exchange
Commission thereunder.
"Fully-Diluted Basis" means, (A) with respect to the calculation of the
number of shares of HFG Common Stock, (i) all shares of HFG Common Stock
outstanding at the time of determination and (ii) all shares of HFG Common Stock
issuable upon the exercise, conversion or exchange of Equity Equivalents and (B)
with respect to the calculation of the number of shares of Class D Common, (i)
all shares of Class D Common outstanding at the time of determination and (ii)
all shares of Class D Common issuable upon the exercise, conversion or exchange
of Class D Equity Equivalents.
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"GAAP" means generally accepted accounting principles applied on a
consistent basis. All accounting terms shall be interpreted, and all accounting
determinations under the Notes shall be made, in accordance with Section 12.2.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however. that the
term in quotes "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business. The amount of any Guarantee of any
guaranteeing person shall be deemed to be the lowest of (i) an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Guarantee is made and (ii) the maximum amount for which such guaranteeing
person may be liable pursuant to the terms of the instrument embodying such
Guarantee, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee shall be such guaranteeing person' s maximum
reasonably anticipated liability in respect thereof as determined by the Company
in good faith.
"Guaranty" means the Holdings Guarantee Agreement, dated the Issue Date,
made by the Company in favor of the collateral agent for the lenders under the
Credit Agreement, as the same may be amended, supplemented or Otherwise modified
from time to time.
"HFG Common Stock" means the Common Stock, but excluding the Class D
Common.
"HFG Restricted Securities" means the Restricted Securities, but excluding
the Class D Common and Class D Equity Equivalents.
"Holder" has the meaning specified in Section 2(a).
"Increased Amount" has the meaning specified in Section 3(a).
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"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, Debentures, notes or similar instruments, (c) all
obligations of such person upon which interest charges are customarily paid
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (d) all obligations of such person under
conditional sale or other title retention agreements relating to property or
assets purchased by such person, (e) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable and accrued obligations incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, provided that the amount of such
Indebtedness of such person shall be the lesser of (i) the fair market value of
such property on the date of determination and (ii) the outstanding principal
amount of such Indebtedness of such other person on the Date of determination,
(g) all Guarantees by such person of Indebtedness of others, (h) all Capital
Lease Obligations of such person, (i) all obligations of such person in respect
of interest rate protection agreements, foreign currency exchange agreements or
other interest .or exchange rate hedging arrangements and (j) all obligations of
such person as an account party in respect of letters of credit and bankers'
acceptances. The Indebtedness of any person shall include the Indebtedness of
any partnership in which such person is a general partner, other than to The
extent that the instrument or agreement evidencing such Indebtedness expressly
limits the liability of such person in respect thereof.
"Indemnification Issue Date" has the meaning specified in Section 3 (b).
"Institutional Directors" means any member of the Company's Board of
Directors designated and elected pursuant to Section 5.1(a)(i) of the
Stockholders' Agreement (or any successor provision).
"Institutional Stockholder Group Members" means, collectively, 399,
Associated Madison Companies, Inc., a Delaware corporation, TRV Employees Fund,
L.P., a Delaware limited partnership, Greenwich Street Capital, L.P., a Delaware
limited partnership, GSCP Offshore Fund Ltd., a British Virgin Islands
Corporation, The Travelers Insurance Company, a Connecticut corporation, and The
Travelers Life and Annuity Company, a Connecticut corporation.
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"Institutional Stockholders" means each Institutional Stockholder Group
Member and their respective direct and indirect Permitted Transferees, so long
as any such person shall hold Restricted Securities or Restricted Preferred
Securities.
"Investment" in any person means any advance or loan (other than advances
or loans to customers or suppliers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the person making such
advance or loan) or other extension of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (including by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by, such person.
"Issue Date" means August 5, 1996.
"Joint Venture" means any person of which securities or other ownership
interests representing at least 20% but no greater than 50% of the equity or
ordinary voting power are owned, Controlled or held by the Company or any
Relevant Subsidiary.
"Lender" has the meaning specified in the forepart of this Note.
"LFI" means Lifestyle Furnishings International Ltd., a Delaware
corporation, and its successors.
"LFI Notes" means the 10.875% Senior Subordinated Notes due 2006 issued by
LFI on the Issue Date and shall include any substantially identical notes
subsequently issued in exchange therefor pursuant to the terms of the indenture
governing such Senior Subordinated Notes.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Management Director" means any member of the Company's Board of Directors
designated and elected pursuant to Section 5.1(a) (ii) of the Stockholders'
Agreement (or any successor provision).
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"Management Group" means, collectively, the individuals whose names appear
on the omnibus signature pages to the Stockholders' Agreement.
"Management Stockholders" means the Management Group and their respective
direct and indirect Permitted Transferees, so long as any such person shall hold
(directly or indirectly through the Voting Trust) Restricted Securities or
Restricted Preferred Securities.
"Masco Director" means any member of the Company's Board of Directors
designated and elected pursuant to Section 5.1(a) (iii) of the Stockholders'
Agreement (or any successor provision).
"Masco Stockholders" means Masco and its direct and indirect Permitted
Transferees, so long as any such person shall hold Restricted Securities,
Restricted Preferred Securities or Debentures.
"Maturity Date" has the meaning specified in the forepart of this Note.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Note Obligations" has the meaning specified in Section 7.1.
"Notes" has the meaning specified in the forepart of this Note.
"Permitted Investment" means an Investment by the Company in: (i) Simmons,
to the extent that such Investment is either (x) existing on the Issue Date or
(y) directly funded by a contemporaneous capital contribution from a stockholder
of the Company in connection with a purchase of Class D Common Stock by such
stockholder; (ii) a Relevant Subsidiary or a person which will, upon the making
of such Investment, become a Relevant Subsidiary; provided, however, that the
primary business of such person is a Related Business; (iii) another person if
as a result of such Investment such other person is merged or consolidated with
or into, or transfers or conveys all or substantially all its assets to, the
Company or a Relevant Subsidiary; provided, however, that such person's primary
business is a Related Business; (iv) Temporary Cash Investments; (v) receivables
owing to the Company, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company deems reasonable under the circumstances; (vi) payroll, travel and
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similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vii) loans or advances to employees made in
the ordinary course of business and not exceeding $6.0 million in the aggregate
outstanding at any one time; (viii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any subsidiary thereof or in satisfaction of judgments; (ix)
Investments in property or assets to be used in (or in Relevant Subsidiaries and
any entity that, as a result of such Investment, is a Relevant Subsidiary
engaged in) a Related Business; (x) securities or other property received as
consideration in sales of assets; (xi) Guarantees which are permitted to be
incurred under Section 6.1; (xii) Investments existing and held by the Company
on the Issue Date (after giving effect to the transactions contemplated by the
Acquisition Agreement to occur on the Issue Date) and set forth on Schedule
6.04(l) to the Credit Agreement (as in effect on the Issue Date) and renewals,
extensions and replacements thereof, provided that the amount of any such
renewed, replaced or extended Investment shall not exceed the amount of the
Investment being renewed, replaced or extended; or (xiii) other Investments of
any type, provided that the outstanding amount of Investments made after the
Issue Date in reliance on this clause (xiii) may not at any time exceed $10
million in the aggregate.
"Permitted Receivables Financing" means (a) the Bridge Receivables
Financing (as defined in the Credit Agreement) and (b) any subsequent financing
secured substantially by receivables (and related assets) originated by the
Company or any Relevant Subsidiary in any amount, provided that (i) any such
subsequent receivables financing has a later or equal final maturity and a
longer or equal weighted average life than the Bridge Receivables Financing,
(ii) sales of receivables to any Receivables Subsidiary are made at fair market
value (as determined in good faith by the Company's or LFI's Board of
Directors), (iii) the interest rate applicable to such subsequent receivables
financing shall be a market interest rate (as determined in good faith by the
Company's or LFI's Board of Directors) as of the time such financing is entered
into, (iv) such financing is non-recourse to the Company except to a limited
extent customary for such financings and (v) the covenants, events of default
and other provisions thereof, collectively, shall be market terms (as determined
in good faith by the Company' s or LFI' s Board of Directors).
"Permitted Transferee" means:
(i) with respect to any Stockholder who is a natural person, the
spouse or any lineal descendant
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(including by adoption and stepchildren) of such Stockholder, or any trust
of which such Stockholder is the trustee and which is established solely
for the benefit of any of the foregoing individuals and whose terms are not
inconsistent with the terms of the Stockholders' Agreement, or any
partnership, all of the general partner(s) and limited partner(s) (if any)
of which are one or more persons identified in this clause (i) (or any
other trust or partnership established by any such Stockholder to the
extent approved in writing by the Company (acting with the approval of the
Company's Board of Directors, including the consent of the Masco Director
and the Institutional Directors));
(ii) with respect to a Masco Stockholder, (x) any direct or indirect
Control Subsidiary of Masco (including any such Control Subsidiary which
ceases to be a Control Subsidiary of Masco after the Issue Date) unless
such Control Subsidiary or former Control Subsidiary does not qualify as
(A) a "Permitted Transferee" of Masco, under the more restrictive of the
definitions of such term with respect to Masco ("Permitted Transferee
Definitions"), under the Credit Agreement (as in effect on the Issue Date)
and the indenture pertaining to the LFI Notes (as in effect on the Issue
Date), or (B) in the event that the agreements referred to in clause (A)
above are no longer in effect, a "Permitted Transferee" of Masco under the
most restrictive Permitted Transferee Definition in any other material
agreement or instrument evidencing indebtedness for borrowed money of the
Company or any of its Significant Subsidiaries, which Permitted Transferee
Definition is no more restrictive in scope with respect to "Permitted
Transferees" of Masco than the more restrictive of the Permitted Transferee
Definitions referred to in clause (A) above, and (y) subject to the prior
written consent of the Institutional Stockholders (which consent shall be
in their sole discretion), any corporation (I) in which Masco owns shares
of capital stock representing at least 19% of the total ordinary voting
power of such corporation and (II) which is "controlled" (within the
meaning under Rule 12b-2 of the regulations under the Exchange Act) by
Masco;
(iii) with respect to the Institutional Stockholders, (A) any
Associate or Affiliate of any such Institutional Stockholder and any
officer, director or employee of any Institutional Stockholder or of any
such Associate or Affiliate, (B) any spouse or lineal descendant (including
by adoption and
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stepchildren) of the officers, directors and employees referred to in
clause (A) above, and any trust (where a majority in interest of the
beneficiaries thereof are any of the persons described in this clause (B)
and in clause (A) above), corporation or partnership (where a majority in
interest of the stockholders or limited partners, or where the managing
general partner, is one of more of the persons described in clause (A)
above), (C) any other Institutional Stockholder or (D) if, after taking
commercially reasonable steps, with the cooperation of the Company, such
Institutional Stockholder is unable to restructure its ownership of the
Company's securities in a manner which avoids a Regulatory Problem and
which is not materially adverse to such Institutional Stockholder, upon the
giving of notice to the Company and the Masco Stockholders that the
Institutional Stockholders have determined that such Regulatory Problem may
not be avoided, then to any third party to avoid such Regulatory Problem;
(iv) with respect to any Additional Stockholder who is not a natural
person, any Affiliate of such Additional Stockholder; and
(v) with respect to any Management Stockholder and any Additional
Management Stockholder, the Voting Trust established pursuant to the Voting
Trust Agreement.
"person" means an individual, partnership, corporation, trust,
unincorporated organization joint venture, government (or agency or political
subdivision thereof) or any other entity of any kind.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Qualifying Offers" means the consummation by the Company of an
underwritten primary or secondary public offering of HFG Common Stock pursuant
to an effective registration statement under the Securities Act, covering the
offer and sale of the HFG Common Stock (a) which (taken together with all
similar previous public offerings) raises at least $100,000,000 of aggregate net
proceeds to the Company (after underwriters' fees, commissions and discounts and
offering expenses) and (ii) as a result of which, at that time, at least 25% of
the HFG
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Common Stock on a Fully-Diluted Basis has been sold to the public.
"Receivables Subsidiary" means LFI Receivables Corporation or any successor
thereto or other entity formed solely for purposes of a Permitted Receivables
Financing.
"Refinancing Indebtedness" means Indebtedness that is incurred to refund,
refinance, replace, renew, repay, purchase, redeem or extend (including pursuant
to any defeasance or discharge mechanism) (collectively, "refinances," and
"refinanced" and "refinancing" shall have a correlative meaning) any other
Indebtedness, including Indebtedness that refinances Refinancing Indebtedness;
provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being refinanced, (ii)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced, (iii) such Refinancing Indebtedness is
incurred in an aggregate principal amount (or, if issued with original issue
discount, an aggregate issue price) that is equal to or less than the aggregate
principal amount (or, if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced plus an
amount necessary to pay any fees and expenses, including premiums, relating to
such refinancing and (iv) if the Indebtedness being refinanced is subordinated
in right of payment to the Notes, such Refinancing Indebtedness is subordinated
in right of payment to the Notes to at least the same extent as the Indebtedness
being refinanced.
"Registration Rights Agreement" has the meaning specified in Section 15.
"Regulatory Problem" means (i) the Institutional Stockholder's investment
in the Common Stock exceeds any limitation to which it is subject, or is
otherwise not permitted, under any law, rule or regulation of any governmental
authority (including any position to that effect taken by such governmental
authority), or (ii) restrictions are imposed on the Institutional Stockholder as
a result of any law, regulation, rule or directive (whether or not having the
force of law) of any governmental or regulatory authority which, in the
reasonable judgment of the Institutional Stockholder, make it illegal or unduly
burdensome for the Institutional Stockholder to continue to hold such Common
Stock.
"Related Business" means any business of the Company and the Relevant
Subsidiaries as conducted on the Issue Date and business related, ancillary or
complementary thereto.
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"Relevant Subsidiary" means any subsidiary of the Company, other than
Simmons.
"Restricted Payment" has the meaning specified in Section 6.2(a)
"Restricted Preferred Securities" means the Series A-l Preferred and the
Series A-2 Preferred.
"Restricted Securities" means the Common Stock, the Class D Equity
Equivalents, the Equity Equivalents and any securities issued with respect
thereto as a result of any stock dividend, stock split, reclassification,
recapitalization, reorganization, merger, consolidation or similar event or upon
the conversion, exchange or exercise thereof.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc., and its successors.
"Secondary Notes" has the meaning specified in Section 2(b).
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Senior Indebtedness" of the Company means (i) the Bank Indebtedness, to
the extent that any of the Bank Indebtedness is a direct obligation of the
Company, and (ii) the "Obligations," as such term is defined in the Guaranty or
in any other written Guarantee of Bank Indebtedness (provided that the
definition of "Obligations" in such other written Guarantee shall be
substantially the same (without regard to amounts) as the definition of
"Obligations" in the Guaranty) entered into by the Company on or after the Issue
Date, in each case including any interest accruing thereon on or after the
filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not a claim for post-filing interest is allowed in such
proceeding; provided, however, that Senior Indebtedness shall not include any
portion of the Bank Indebtedness (in the case of clause (i) above) or such
"Obligations" (in the case of clause (ii) above) that, at or promptly following
the time of the incurrence thereof, is not secured by a Lien on all or
substantially all of the Company's properties and assets (including Capital
Stock).
"Series A-1 Preferred" means the Company's Series A-1 Preferred Stock, par
value $.01 per share, and any securities (other than the Debentures) into which
such Series A-1 Preferred shall have been changed or any securities resulting
from any
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reclassification or recapitalization of such Series A-l Preferred.
"Series A-2 Preferred" means the Company's Series A-2 Preferred Stock, par
value $.0l per share, and any securities (other than the Debentures) into which
such Series A-2 Preferred shall have been changed or any securities resulting
from any reclassification or recapitalization of such Series A-2 preferred.
"Series B Preferred" means the Company's Series B Convertible Preferred
Stock, par value $.01 per share, and any securities into which such Series B
Preferred shall have been changed or any securities resulting from any
reclassification or recapitalization of such Series B preferred.
"Series C Preferred" means the Company's Series C Convertible Preferred
Stock, par value $.01 per share, and any securities into which such Series C
preferred shall have been changed or any securities resulting from any
reclassification or recapitalization of such Series C Preferred.
"Significant Subsidiaries" means those Control Subsidiaries of the Company
which constitute a "Significant Subsidiary" as defined in Regulation S-X
promulgated by the Securities and Exchange Commission under the Securities Act,
as such Regulation is in effect on the Issue Date.
"Simmons" means Simmons Upholstered Furniture Corporation, a Delaware
corporation, and its successors (other than a Relevant Subsidiary into which it
merges or to which it transfers all or substantially all its assets) and
subsidiaries.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase or
redemption of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Stockholders" means each of the Institutional Stockholders, the Masco
Stockholders, the Management Stockholders and the Additional Stockholders.
"Stockholders' Agreement" means the Stockholders' Agreement dated as of the
Issue Date, among the Company, Masco, the Institutional Stockholders and the
Management Stockholders,
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<PAGE>
as such agreement may be amended, supplemented or otherwise modified from time
to time.
"Subordinated Obligation" means any Indebtedness of the Company outstanding
from time to time which is subordinate or junior in right of payment to the
Notes pursuant to a written agreement or instrument entered into or accepted by
the holders of such Indebtedness.
"subsidiary" means, with respect to any person (herein referred to as the
"parent"), any corporation, partnership, association or other business entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or more than 50% of
the general partnership interests are, at the time any determination is being
made, owned, controlled or held, or (b) that is, at the time any determination
is made, otherwise Controlled, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent, provided
that the term "subsidiary," when used in respect of the Company or any of its
subsidiaries, shall not include any foreign joint venture in which the Company
or any Relevant Subsidiaries owns less than or equal to 50% of the equity
interest in such joint venture.
"Successor Company" has the meaning specified in Section 6.5.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of the
Issue Date, among the Company, LFI, the Receivables Subsidiary and Simmons, as
the same may be amended, supplemented or otherwise modified, renewed or replaced
from time to time.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations (x) of the United States of America or any agency thereof
or obligations Guaranteed by the United States of America or any agency thereof
or (y) of any foreign country recognized by the United States of America rated
at least "A" by S&P or "A-1" by Moody's; (ii) investments in time deposit
accounts, certificates of deposit and money market deposits maturing within 365
days of the date of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having capital
and surplus in excess of $250.0 million ( or the foreign currency equivalent
thereof) and whose long-term debt is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized rating agency; (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (i)
-46-
<PAGE>
above entered into with a bank or trust company meeting the qualifications
described in clause (ii) above; (iv) investments in commercial paper, maturing
not more than 365 days after the date of acquisition, issued by a corporation
(other than an Affiliate of the Company) organized and in existence under the
laws of the United States of America or any foreign country recognized by the
United States of America with a rating at the time as of which any investment
therein is made of "P-l" (or higher) according to Moody's or "A-1" (or higher)
according to S&P; (v) investments in securities maturing within 365 days of the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A-l" by Moody's;
(vi) any money market deposit accounts issued or offered by a domestic
commercial bank or a commercial bank organized and located in a country
recognized by the United States of America, in each case, having capital and
surplus in excess of $250.0 million (or the foreign currency equivalent
thereof), or investments in money market funds complying with the risk limiting
conditions of Rule 2a-7 (or any successor rule) of the Securities and Exchange
Commission under the Investment Company Act Of 1940, as amended; and (vii)
similar investments approved by the Company's Board of Directors in the
ordinary course of business.
"399" means 399 Venture Partners, Inc., a Delaware corporation.
"399 Stockholders" means 399 and each of its respective direct and indirect
Permitted Transferees, so long as any such person shall hold Restricted
Securities or Restricted Preferred Securities.
"Total Debt" means, at any time, all Indebtedness of the Company and the
Relevant Subsidiaries of the type referred to in clauses (a), (b), (c), (e), (h)
and (j) (provided that obligations in respect of letters of credit shall not be
included in Total Debt, except to the extent of any unreimbursed drawings
thereunder) of the definition of the term "Indebtedness."
"Voting Trust" means the Voting Trust created under the Voting Trust
Agreement.
"Voting Trust Agreement" means the Voting Trust Agreement dated as of the
Issue Date, by and among the Company, the Management Stockholders named therein
and the trustee named therein, as such agreement may be amended, supplemented or
otherwise modified from time to time.
"Wholly Owned Subsidiary" means a Relevant Subsidiary all the Capital Stock
of which (other than directors' qualifying
-47-
<PAGE>
shares and, to the extent required by local ownership laws in foreign countries,
shares owned by foreign shareholders) is owned by the Company or one or more
other wholly Owned Subsidiaries (including shares held of record by a nominee
for the benefit of the Company or another Wholly Owned Subsidiary).
12.2 Terms Generally. The definitions in Section 12.1 shall apply equally
to both the singular and plural forms of the terms defined. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time, provided, however, that for purposes of determining
compliance with the covenants and agreements contained in Sections 2(b), 6.1,
6.2, 6.3, 6.4, 6.5 and 9.1(b), all accounting terms herein shall be interpreted
and all accounting determinations hereunder shall be made in accordance with
GAAP as in effect on the Issue Date.
13. No Recourse Against Others. A director, officer, employee or
stockholder of the Company, as such, shall not have any liability for any
obligations of the Company under this Note or for any claim based on, in respect
of or by reason of such obligations or their creation. The Lender and each other
holder hereof, by accepting this Note, waives and releases all such liability.
The waiver and release set forth in this Section 13 are part of the
consideration for the issuance of this Note.
14. No Offset. Notwithstanding anything to the contrary in any Note or in
the Acquisition Agreement, the Lender shall not be entitled to satisfy or
otherwise discharge any of its payment obligations owed to the Company or any
Relevant Subsidiary (whether arising under the Acquisition Agreement or
otherwise) by means of an offset against the Company's Obligations under any
Note.
15. Registration Rights Agreement. The Company and the Lender have entered
into a Registration Rights Agreement dated as of the Issue Date, relating to the
Notes (as the same may be amended, supplemented or otherwise modified from time
to time, the "Registration Rights Agreement"). The Holder, by its acceptance of
this Note, agrees that it is subject to and bound by the terms and provisions of
the Registration Rights Agreement as if it were a party thereto.
16. Notices. All notices and other communications delivered pursuant to the
Notes shall be in writing and (together with all payments of interest on this
Note made by the issuance of Secondary Notes and all payments of principal and
interest on this Note made by check) shall be delivered by hand, by express
courier service, by registered or certified mail, return receipt
48-
<PAGE>
requested, postage prepaid, by first-class mail or by telecopy, addressed, (a)
if to the Holder, at the following address or at such other address as the
Holder shall have furnished to the Company in writing:
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Facsimile No.: 313-374-6135
Attn: President
with a copy to:
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Facsimile No.: 313-374-6135
Attn: General Counsel
or (b) if to the Company, at the following address or at such other address as
the Company shall have furnished to the Holder in writing:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No. : 910-476-4551
Attn: President
with copies to:
FURNISHINGS INTERNATIONAL INC.
1300 National Highway
Thomasville, North Carolina 27360
Facsimile No.: 910-476-4551
Attn: General Counsel
and
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: 212-309-6273
Attn: Philip H. Werner
Any notice so addressed and mailed or delivered shall be deemed to be given
(i) one Business Day after being consigned to an express courier service, (ii)
five Business Days after being mailed by registered, certified or first-class
mail, (iii) on the same Business Day, if delivered by hand and (iv) when
received, if delivered by telecopy. -49-
<PAGE>
17. Headings; Certain Conventions. The headings of the various Sections of
this Note are for convenience of reference only and shall not define, limit or
otherwise affect any of the terms or provisions hereof. Unless the context
otherwise expressly requires, all references herein to Sections are to Sections
of this Note. The words "herein," "hereunder" and "hereof" and words of similar
import refer to this Note as a whole and not to any particular Section or
provision.
18. Governing Law. The construction, validity and interpretation of this
Note shall 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.
IN WITNESS WHEREOF, the Company has executed and delivered this Note as of
the date first above written.
FURNISHINGS INTERNATIONAL INC.
By: /s/ Robert L. George
------------------------
Name: Robert L. George
Title: Executive Vice President
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LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
$200,000,000
10-7/8% Senior Subordinated Notes due 2006
PURCHASE AGREEMENT
July 31, 1996
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
World Financial Center
North Tower
New York, New York 10281
Dear Sirs:
Lifestyle Furnishings International Ltd., a Delaware corporation
(the "Company"), proposes to issue and sell $200,000,000 principal amount of its
10-7/8% Senior Subordinated Notes due 2006 (the "Notes") to be unconditionally
guaranteed on a senior subordinated basis (the "Guarantees" and together with
the Notes, the "Securities") by certain entities listed on Schedule I hereto
that will be subsidiaries of the Company upon the consummation of the
Transactions and will then become parties hereto as provided by Section 5(y)
herein and Lifestyle Holdings Ltd. ("LHL") (collectively, the "Guarantors"). The
Securities are to be issued pursuant to an Indenture substantially in the form
of Exhibit A hereto to be dated as of the Closing Date (as defined in Section 3
hereof) (the "Indenture"), among the Company, the Guarantors and IBJ Schroder
Bank & Trust Company, as trustee (the "Trustee"). The Company and the
Guarantors, as provided by Section 5(y) herein (and in the case of LHL as a
party
<PAGE>
2
hereto), hereby confirm the agreement with Chase Securities Inc. ("CSI") and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (together with CSI, the
"Initial Purchasers") with respect to the sale of the Securities.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated June 4, 1996 and a preliminary
offering memorandum dated July 19, 1996 (such preliminary offering memoranda
being collectively hereinafter referred to as the "preliminary offering
memorandum"), and an offering memorandum dated July 31, 1996 (such offering
memorandum, in the form first furnished to the Initial Purchasers for use in
connection with the offering of the Securities, being hereinafter referred to as
the "Offering Memorandum"), setting forth information regarding the Company, the
Guarantors and the Securities. The Company and the Guarantors, jointly and
severally, hereby confirm that they have authorized the use of the preliminary
offering memorandum and the Offering Memorandum in connection with the offering
and sale of the Securities.
Holders (including subsequent transferees) of the Securities will
have the registration rights set forth in the Exchange and Registration Rights
Agreement (the "Registration Rights Agreement"), to be dated the Closing Date,
in substantially the form of Exhibit B hereto. Pursuant to the Registration
Rights Agreement, the Company and the Guarantors will agree to file with the
Securities and Exchange Commission (the "Commission") (i) a registration
statement under the Securities Act (the "Exchange Offer Registration Statement")
registering an issue of a series of senior subordinated notes unconditionally
guaranteed on a senior subordinated basis by the Guarantors (the "Exchange
Securities") identical in all material respects to the Securities (except that
the Exchange Securities will not contain terms with respect to transfer
restrictions) to be offered in exchange for the
<PAGE>
3
Securities (the "Exchange Offer") and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the "Shelf
Registration Statement").
Capitalized terms used herein without definition have the respective
meanings specified therefor in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Company and the
Guarantors. The Company and the Guarantors jointly and severally represent and
warrant to and agree with each of the Initial Purchasers as of the date hereof
and as of the Closing Date that (except as disclosed in the Offering
Memorandum):
(a) Each of the preliminary offering memorandum and the Offering
Memorandum, as of its respective date, contains all the information that,
if requested by a prospective purchaser, would be required to be provided
pursuant to Rule 144A(d)(4) under the Securities Act. The Offering
Memorandum does not, and at the Closing Date, the Offering Memorandum and
any amendment or supplement thereto will not, contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and, the
preliminary offering memorandum, as of its date, did not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The preceding
sentence does not apply to information contained in or omitted from the
preliminary offering memorandum or the Offering Memorandum (or any
supplement or amendment thereto) in reliance upon and in conformity with
written information relating to either Initial Purchaser furnished to the
Company by or on behalf of either
<PAGE>
4
Initial Purchaser specifically for use therein (the "Initial Purchasers'
Information"). The parties acknowledge and agree that the Initial
Purchasers' Information consists solely of the last paragraph of text on
the cover page of the Offering Memorandum and the third, fourth and sixth
paragraphs under the caption "Plan of Distribution" in the Offering
Memorandum.
(b) Each of the Company, Furnishings International Inc. ("Holdings")
and the Subsidiaries (each of the foregoing a "Furnishings Group Member"
and collectively the "Furnishings Group") has been duly incorporated or
organized and is validly existing as a corporation in good standing (if
applicable) under the laws of its jurisdiction of incorporation, except in
the case of Subsidiaries incorporated or organized outside of the United
States, where the failure to be so incorporated or organized and validly
existing in good standing would not have, singularly or in the aggregate,
a material adverse effect on the condition (financial or otherwise),
results of operations or business of the Company and the Subsidiaries
taken as a whole, as constituted after giving effect to the Transactions
(a "Material Adverse Effect"), is duly qualified to do business and is in
good standing as a foreign corporation or otherwise in each jurisdiction
in which its ownership or lease of property or the conduct of its
businesses requires such qualification, except where the failure to so
qualify would not have a Material Adverse Effect, and has all corporate
power and authority necessary to own or hold its respective properties and
to conduct the businesses in which it is engaged as described in the
Offering Memorandum, except in the case of Subsidiaries incorporated or
organized outside of the United States, where the failure to have such
corporate power and authority would not have a Material Adverse Effect.
The term "Subsidiary" means each person of which a majority of the voting
equity securities of other interests will be owned, directly
<PAGE>
5
or indirectly, by the Company upon the consummation of the Transactions.
(c) Each of Holdings and the Company has an authorized
capitalization as set forth in the Offering Memorandum. All of the issued
shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable, and are owned
by Holdings free and clear of any Lien (other than any Lien on such
capital stock pursuant to the Senior Bank Facilities). The capital stock
of Holdings conforms to the description thereof contained in the Offering
Memorandum. The description of the capital stock of the Company contained
in the Offering Memorandum is accurate. Schedule II attached hereto sets
forth as of the Closing Date (after giving effect to the Transactions) a
list of all Subsidiaries of the Company and the percentage ownership of
the Company. The shares of capital stock or other ownership interests of
the Company or a Subsidiary so indicated on Schedule II, upon the
consummation of the Transactions, will be validly authorized and issued
and will be fully paid and nonassessable, and the Company will own
directly or through Subsidiaries, its ownership percentage of such
Subsidiaries free and clear of any Lien (other than any Lien on such
capital stock pursuant to the Senior Bank Facilities).
(d) This Agreement has been duly authorized and validly executed and
delivered by the Company and each of the Guarantors. The Acquisition
Agreement has been duly authorized and validly executed and delivered by
Holdings. At the Closing Date the Indenture will conform in all respects
to the requirements of the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder. The Indenture,
the Registration Rights Agreement and the Tax Sharing Agreement, when
executed and delivered, will have been duly authorized
<PAGE>
6
by the Company and each of the Subsidiaries which is a party thereto. The
Acquisition Agreement constitutes, and each of the Indenture, the
Registration Rights Agreement and the Tax Sharing Agreement, when duly
executed and delivered in accordance with their respective terms by each
of the parties thereto will constitute, a valid and legally binding
agreement of each Furnishings Group Member which is a party thereto,
enforceable against each Furnishings Group Member which is a party thereto
in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
and similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity).
(e) On the Closing Date, the Notes will have been duly authorized by
the Company, the Guarantees will have been duly authorized by the
Guarantors and the Securities, the Indenture, the Registration Rights
Agreement and the Tax Sharing Agreement will have been duly executed by
the Company and each of the Subsidiaries which is a party thereto and will
conform in all material respects to the descriptions thereof contained in
the Offering Memorandum. Upon execution and delivery of the Indenture, and
when the Notes are issued, authenticated and delivered in accordance with
the Indenture and paid for in accordance with the terms of this Agreement,
the Notes will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
and similar laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether enforcement is sought
in a proceeding at law or in equity). Upon execution and delivery of the
Indenture, and when the Securities are issued, authenticated and
<PAGE>
7
delivered in accordance with the terms of this Agreement, the Guarantees
will constitute valid and legally binding obligations of the Guarantors
enforceable against the Guarantors in accordance with their terms subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(f) The execution, delivery and performance of the Indenture, the
Securities, the Registration Rights Agreement, the Tax Sharing Agreement,
the Acquisition Agreement and this Agreement by each Furnishings Group
Member which is a party thereto, the consummation of the Transactions and
the other transactions contemplated hereby and thereby, and the
fulfillment of the terms hereof or thereof, will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or, except as contemplated by the Senior Bank
Facilities, result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of any Furnishings Group Member
pursuant to, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which any Furnishings Group Member is a
party or by which any Furnishings Group Member is bound or to which any of
the property or assets of any Furnishings Group Member is subject, nor
will such actions result in any violation of the provisions of the
charter, partnership agreement, by-laws or other constituent documents, as
applicable, of any Furnishings Group Member or any statute or any
judgment, order, decree, rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over any Furnishings Group
Member or any of its properties or assets, except for any such conflict,
breach, violation, default, lien, charge or encumbrance that would not
have a Material Adverse
<PAGE>
8
Effect; the holders of the Securities will not be subject to personal
liability for obligations of the Company or any Guarantor by reason of
being such holders; and no consent, approval, authorization or order of,
or filing or registration with, any such court or arbitrator or
governmental agency or body under any such statute, judgment, order,
decree, rule or regulation is required for the execution, delivery and
performance of the Indenture, the Securities, the Registration Rights
Agreement, the Tax Sharing Agreement, the Acquisition Agreement or this
Agreement by any Furnishings Group Member or the consummation of the
Transactions and the other transactions contemplated hereby and thereby
which shall not have been obtained or made prior to the Closing Date
(other than such consents, approvals, authorizations or orders of, or
filings or registrations with, the Commission or any state securities
regulatory authorities as may be required to be obtained or made pursuant
to the Registration Rights Agreement).
(g) Coopers & Lybrand LLP are independent public accountants with
respect to the Company (and, to the knowledge of the Company, with respect
to Masco) as required by the Securities Act and the rules and regulations
thereunder for financial statements included in a definitive prospectus
forming part of a registration statement on Form S-1 under the Securities
Act. The historical combined financial statements of the Masco Home
Furnishings Group (including the related notes) included in the
preliminary offering memorandum and the Offering Memorandum comply in all
material respects with the requirements applicable to a Registration
Statement on Form S-1 and have been prepared, and fairly present in all
material respects, the combined financial position of the Masco Home
Furnishings Group at the respective dates indicated and the results of its
operations and its cash flows for the respective periods indicated, in
accordance with generally accepted accounting principles consistently
<PAGE>
9
applied throughout such periods except for changes in accounting required
or permitted by generally accepted accounting principles and disclosed in
such financial statements; and the financial information and financial
data set forth in the Offering Memorandum under the captions
"Summary--Summary Historical and Pro Forma Financial Information,"
"Capitalization," "Selected Historical and Pro Forma Financial
Information," "Unaudited Pro Forma Financial Information" and
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" are derived from the accounting records of the Masco
Home Furnishings Group, and fairly present in all material respects the
data purported to be shown. The pro forma financial statements contained
in the preliminary offering memorandum and the Offering Memorandum have
been pre pared on a basis consistent with such historical state ments,
except for the pro forma adjustments specified therein, include all
material adjustments to the historical financial data required by Rule
11-02 of Regulation S-X to reflect the Transactions as described in the
Offering Memorandum, and give effect to assump tions made on a reasonable
basis and present fairly the historical and proposed transactions
contemplated by the preliminary offering memorandum, the Offering
Memorandum and this Agreement. The other historical financial and
statistical information and data included in the preliminary offering
memorandum and the Offering Memorandum are, in all material respects,
accurately presented.
(h) There are no pending actions or suits or judicial, arbitral,
rule-making or other administrative or other proceedings to which any
Furnishings Group Member is a party or of which any property or assets of
any Furnishings Group Member is the subject which, singularly or in the
aggregate, are reasonably likely to have a Material Adverse Effect; and to
the best of the Company's and each Guarantor's knowledge, no such
<PAGE>
10
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(i) No action has been taken and no statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency or
body which prevents the issuance of the Securities or suspends the sale of
the Securities in any jurisdiction; no injunction, restraining order or
order of any nature by a federal or state court of competent jurisdiction
has been issued with respect to the Company or any of the Guarantors which
would prevent or suspend the issuance or sale of the Securities, or the
use of the preliminary offering memorandum or the Offering Memorandum in
any jurisdiction; no action, suit or proceeding is pending against or, to
the best of the Company's and each Guarantor's knowledge, threatened
against or affecting any Furnishings Group Member before any court or
arbitrator or any governmental body, agency or official, domestic or
foreign, which could reasonably be expected to interfere with or
materially adversely affect the issuance of the Securities or in any
manner draw into question the validity thereof or in any manner draw into
question the validity of the Indenture, the Securities, the Registration
Rights Agreement, the Tax Sharing Agreement, the Acquisition Agreement or
this Agreement or any action taken or to be taken pursuant hereto or
thereto.
(j) No Furnishings Group Member is, or after the consummation of the
Transactions will be (i) in violation of its charter, partnership
agreement, by-laws or other constituent documents, as applicable, (ii) in
default in any 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 material
agreement or instrument to which it is a party or by which it is
<PAGE>
11
bound or to which any of its property or assets is subject and (iii) in
violation in any respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject, except any violation or default under clause (ii) or (iii), that
would not have a Material Adverse Effect.
(k) Each Furnishings Group Member possesses, and after the
consummation of the Transactions will possess, all material licenses,
certificates, authorizations and permits issued by, and has made, and
after the consummation of the Transactions will have made, all
declarations and filings with, the appropriate state, federal or foreign
regulatory agencies or bodies which are necessary for the ownership of its
respective properties or the conduct of its respective businesses as
described in the Offering Memorandum, except where the failure to possess
or make the same would not have, singularly or in the aggregate, a
Material Adverse Effect, and no Furnishings Group Member has received
notification of any revocation or modification of any such license,
authorization or permit and has no reason to believe that any such
license, certificate, authorization or permit will not be renewed, except
where such revocation, modification or non-renewal would not have,
singularly or in the aggregate, a Material Adverse Effect.
(l) All material Tax Returns (as defined below) required to be filed
by or with respect to any Furnishings Group Member in any jurisdiction
have been filed, other than those filings being contested in good faith,
and all material Taxes (as defined below), including withholding taxes,
penalties and interest, assessments, fees and other charges due or claimed
to be due from such entities have been paid, other than those being
contested in good faith and for which adequate reserves have been provided
or those currently
<PAGE>
12
payable without penalty or interest. To the best of the Company's and each
Guarantor's knowledge, all Tax Returns filed by or with respect to any
Furnishings Group Member prior to the date hereof were complete and
accurate, except such as could not reasonably be expected to result,
singularly or in the aggregate, in a Material Adverse Effect. Except such
as could not reasonably be expected to result, singularly or in the
aggregate, in a Material Adverse Effect, no claim for assessment or
collection of Taxes is presently being asserted against or with respect to
any Furnishings Group Member and no Furnishings Group Member is a party to
any pending action, proceeding or investigation by any governmental
authority for the assessment or collection of Taxes (as defined below),
nor does the Company have knowledge of any such threatened action,
proceeding or investigation. Except as set forth on the schedules to the
Acquisition Agreement, no waivers of statutes of limitation in respect of
any material Tax Returns have been given by or with respect to or
requested of any Furnishings Group Member nor has any Furnishings Group
Member (or any party on its behalf) agreed to any extension of time with
respect to a Tax assessment or deficiency. No material claim by any
authority in a jurisdiction where any Furnishings Group Member does not
currently file a Tax Return or regarding Taxes with respect to which no
Tax Return is required to be filed in such jurisdiction is pending to the
effect that any Furnishings Group Member is or may be subject to taxation
by that jurisdiction. No Liens are presently imposed upon or asserted
against or with respect to any assets of any Furnishings Group Member as a
result of or in connection with any failure, or alleged failure, to pay
any Tax, except such as could not reasonably be expected to result,
singularly or in the aggregate, in a Material Adverse Effect. Except as
provided in the Tax Sharing Agreement and for refunds to Masco for periods
prior to the Closing Date, as of the Closing Date, neither the Company nor
any Subsidiary will have any agreement, whether or not
<PAGE>
13
written, providing for the payment of Tax liabilities or entitlements to
refunds with any other party. To the best of the Company's and each
Guarantor's knowledge, each Furnishings Group Member has withheld and paid
all Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third
party with respect to the business of such Furnishings Group Member,
except where the failure to so withhold or pay would not, singularly or in
the aggregate, have a Material Adverse Effect. For purposes of this
Agreement, the terms "Tax" and "Taxes" shall mean all federal, state,
local or foreign income, payroll, employee withholding, unemployment
insurance, social security, sales use, service use, leasing use, excise,
franchise, gross receipts, value added, alternative or add-on minimum,
estimated, occupation, real and personal property, stamp, transfer,
workers' compensation, severance, windfall profits, environmental
(including taxes under Section 59A of the Internal Revenue Code of 1986,
as amended (the "Code")), or other tax of the same or of a similar nature,
including any interest, penalty, or addition thereto, whether disputed or
not. The term "Tax Return" means any return, declaration, report, form,
claim for refund, or information return or statement relating to Taxes or
income subject to taxation, or any amendment thereto, and including any
schedule or attachment thereto.
(m) No Furnishings Group Member is, or after the consummation of the
Transactions will be (a) an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and the rules and
regulations of the Commission thereunder or (b) a "holding company" or a
"subsidiary company" of a holding company, or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
<PAGE>
14
(n) The Furnishings Group Members maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(o) The Company and the Subsidiaries will maintain insurance
covering their properties, operations, personnel and business, which
insurance is in amounts and insures against such losses and risks, as the
Company has reasonably concluded is sufficient, based on its experience
and industry practice.
(p) There are no securities of the Company or any Guarantor
registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or listed on a national securities exchange or quoted in
a U.S. automated inter-dealer quotation system. The Company and each
Guarantor has been advised that the Securities have been designated as
PORTAL securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. (the "NASD").
(q) None of the proceeds of the sale of the Securities will be used,
directly or indirectly, for the purpose of purchasing or carrying any
"margin security" as that term is defined in Regulations G and U of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any margin
<PAGE>
15
security or for any other purpose which might cause any of the Securities
to be considered a "purpose credit" within the meanings of Regulation G,
T, U or X of the Federal Reserve System.
(r) Other than this Agreement (and the engagement letter between
Holdings and CSI dated March 29, 1996), neither the Company nor any
Guarantor is a party to any contract, agreement or understanding with any
person that would give rise to a valid claim against the Company, any
Guarantor or either Initial Purchaser for a brokerage commission, finder's
fee or like payment in connection with the sale of the Securities.
(s) The Furnishings Group Members own or possess, and after the
consummation of the Transactions will own or will possess, adequate rights
to use all material patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses and know-how (including trade secrets and other
unpatented or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of its business
substantially as presently conducted and the Company has no reason to
believe that the conduct of the business of the Company and its
Subsidiaries will conflict with any such rights of others which might
reasonably be expected to have a Material Adverse Effect, and has not
received any notice of any claim of conflict with any such rights of
others which might reasonably be expected to have a Material Adverse
Effect.
(t) Each Furnishings Group Member has, and after the consummation of
the Transactions will have, good and marketable title in fee simple to, or
has, and after the consummation of the Transactions will have, valid
rights to lease or otherwise use, all items of real or personal property
which are material to the business of the Company and its Subsidiaries, in
each
<PAGE>
16
case free and clear of all liens, encumbrances, claims and defects, and
imperfections of title, that may have a Material Adverse Effect (other
than as contemplated by the Senior Bank Facilities).
(u) No labor disturbance or dispute by the employees of any
Furnishings Group Member exists or, to the best of the Company's and each
Guarantor's knowledge, is threatened, in either case which might
reasonably be expected to have a Material Adverse Effect.
(v) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Code) or "accumulated funding deficiency" (as defined in
Section 302 of ERISA) or any of the events set forth in Section 4043 of
ERISA (other than events with respect to which the 30-day notice
requirement under Section 4043 of ERISA has been waived) has, or after the
consummation of the Transactions will have, occurred with respect to any
employee benefit plan maintained by any Furnishings Group Member or any
other person or entity that, together with any Furnishings Group Member,
is treated as a single employer under Section 414 of the Code (each, an
"ERISA Affiliate"); each employee benefit plan maintained by any ERISA
Affiliate is, and after the consummation of the Transactions will be, in
compliance in all material respects with applicable laws, including ERISA
and the Code; no ERISA Affiliate has incurred and no ERISA Affiliate
expects to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any "pension plan" (as defined in
ERISA); and each "pension plan" maintained by any ERISA Affiliate has
received a favorable determination letter from the Internal Revenue
Service with respect to its qualification under Section 401(a) of the Code
and nothing has occurred,
<PAGE>
17
whether by action or by failure to act, which might reasonably be expected
to cause the loss of such qualification, except with respect to each item
specified in this paragraph (v), as would not have a Material Adverse
Effect.
(w) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of
toxic or other wastes or other hazardous substances by, due to, or caused
by any Furnishings Group Member (or, to the best of the Company's and any
Guarantor's knowledge, any other entity for whose acts or omissions any
Furnishings Group Member is or may reasonably be expected to be liable)
upon any of the property now or previously owned or leased by any
Furnishings Group Member, or upon any other property, (i) in violation of
any applicable statute or any ordinance, rule, regulation, order,
judgment, decree or permit or (ii) which would, under any applicable
statute or any ordinance, rule (including rule of common law), regulation,
order, judgment, decree or permit, give rise to any liability, except in
the case of both clauses (i) and (ii) for any violation or liability which
could not reasonably be expected to result in, singularly or in the
aggregate with all such violations and liabilities, a Material Adverse
Effect; there has been no disposal, discharge, emission or other release
of any kind onto such property or into the environment surrounding such
property of any toxic or other wastes or other hazardous substances with
respect to which the Company or any Guarantor has knowledge, except for
any such disposal, discharge, emission or other release of any kind which
could not reasonably be expected to result in, singularly or in the
aggregate with all such disposals, discharges, emissions and other
releases, a Material Adverse Effect.
(x) None of the Company, any Guarantor, nor any affiliate (as such
term is defined in Rule 501(b) under
<PAGE>
18
the Securities Act) of either of them has, directly or through any agent,
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any "security" (as defined in the Securities Act), such that
any such offer or sale is or will be integrated with the sale of the
Securities in a manner that would require the registration of the
Securities under the Securities Act.
(y) None of the Company, any Guarantor, any affiliate (as such term
is defined in Rule 501(b) under the Securities Act) of any of them nor to
the Company's knowledge, any other person acting on its or their behalf
(excluding the Initial Purchasers, their respective affiliates, officers,
directors, employees, agents and representatives) has engaged, in
connection with the offering of the Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act.
(z) Assuming the accuracy of the Initial Purchasers' representations
in Section 2 hereof and its compliance with the agreements set forth
therein, it is not necessary, in connection with the issuance and sale of
the Securities and the offer, resale and delivery of the Securities in the
manner contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or to qualify the
Indenture under the Trust Indenture Act.
(aa) Holdings, the Company and each Guarantor immediately after the
Closing Date (after giving effect to the Transactions) will be Solvent. As
used in this paragraph (aa), the term "Solvent" means, with respect to a
particular date, that on such date (A) the present fair market value (or
fair salable value) of the assets of such entity is not less than the
total amount required to pay the probable liabilities of such entity on
its total existing debts and liabilities (including contingent
liabilities) as they become absolute and
<PAGE>
19
matured, (B) such entity is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations and commitments as
they mature and become due in the normal course of business, (C) assuming
the sale of the Securities as contemplated by this Agreement and as
described in the Offering Memorandum, such entity is not incurring debts
or liabilities beyond its ability to pay as such debts and liabilities
mature, and (D) such entity is not engaged in any business or transaction,
and is not about to engage in any business or transaction, for which its
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such
person is engaged. In computing the amount of such contingent liabilities
at any time, it is intended that such liabilities will be computed at the
amount that, in light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an
actual or matured liability.
(bb) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(cc) Neither the Company nor any Guarantor has taken, nor will it
take, directly or indirectly, any action prohibited by Rule 10b-6 under
the Exchange Act in connection with the offering of the Securities.
(dd) Except as described in the Offering Memorandum, there are no
outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings for
the sale or issuance of, any shares of capital stock of or other equity
interest in any Furnishings Group Member.
(ee) Since the date as of which information is given in the Offering
Memorandum, except as otherwise
<PAGE>
20
stated therein, (A) there has been no material adverse change or, to the
knowledge of the Company, any development involving a prospective material
adverse change in the condition, financial or otherwise, results of
operation, business or prospects of the Company and the Subsidiaries,
taken as a whole, whether or not arising in the ordinary course of
business, (B) there have been no transactions entered into by any
Furnishings Group Member, other than those in the ordinary course of
business, which are material with respect to the Company or the
Subsidiaries, and (C) there has been no dividend or distribution of any
kind declared, paid or made by any Furnishings Group Member on any class
of its capital stock.
(ff) The only entity to which the Masco Home Furnishings Group sold
more than $15 million of goods and inventory in 1995 which will be an
affiliate (as such term is defined in Rule 501(b) under the Securities
Act) immediately upon the consummation of the Transactions was Levitz
Furniture Corporation.
2. Purchase by the Initial Purchasers. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
each of the Initial Purchasers, severally and not jointly, and the Initial
Purchasers, severally and not jointly, agree to purchase from the Company, the
principal amount of Securities set forth opposite the name of such Initial
Purchaser in Schedule III hereto at a purchase price equal to 97.0% of the
principal amount thereof, plus accrued interest, if any, from August 5, 1996 to
the Closing Date. If payment of the purchase price on the Closing Date is made
in immediately available funds, the Initial Purchasers shall be entitled to
deduct from such purchase price the costs, if any (calculated at the Federal
Funds Effective Rate as in effect at 12:00 P.M., New York City time, on the
business day prior to the Closing Date), of obtaining immediately available
funds for delivery on the Closing Date.
<PAGE>
21
The Initial Purchasers have advised the Company and each Guarantor
that it is their intention, as promptly as it deems appropriate after the
Company shall have furnished the Initial Purchasers with copies of the Offering
Memorandum, to resell the Securities pursuant to the procedures and upon the
terms set forth in the Offering Memorandum, including not to solicit any offer
to buy or offer to sell the Securities by means of any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act. Each Initial Purchaser, severally
and not jointly, represents, warrants and agrees with the Company and each
Guarantor that it has solicited and will solicit offers for Securities only
from, and will offer Securities only to, persons that it reasonably believes to
be (i) QIBs or (ii) other Institutional Accredited Investors. Each Initial
Purchaser represents and warrants that it is either a QIB or an Institutional
Accredited Investor, in either case with such knowledge and experience in
financial and business matters as are necessary to evaluate the merits and risks
of an investment in the Securities, and is acquiring its interest in the
Securities not with a view to the distribution or resale thereof, except resales
in compliance with the registration requirements or exemption provisions of the
Securities Act and that neither it, nor anyone acting on its behalf, has offered
or will offer the Securities so as to bring the issuance and sale of the
Securities within the provisions of Section 5 of the Securities Act. The Company
and each Guarantor acknowledge and agree that the Initial Purchasers may sell
Securities to any affiliate of an Initial Purchaser and that any such affiliate
may sell Securities purchased by it to an Initial Purchaser. The Initial
Purchasers agree that, prior to or simultaneously with the confirmation of sale
by the Initial Purchasers to any purchaser of any of the Securities purchased by
the Initial Purchasers from the Company pursuant hereto, the Initial Purchasers
shall furnish to that purchaser a copy of the Offering Memorandum (and any
amendment thereof or supplement thereto that the
<PAGE>
22
Company shall have furnished to the Initial Purchasers prior to the date of such
confirmation of sale). In addition to the foregoing, each Initial Purchaser
agrees and understands that the Company and each Guarantor and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Sections
5(c), (e), (f), (g), (h) and (i) hereof and the statement to be delivered to the
Initial Purchasers pursuant to Section 5(d) hereof, counsel to the Company, each
Guarantor and to the Initial Purchasers, respectively, may rely upon the
accuracy and truth of the foregoing representations, warranties and covenants in
this Section 2 and the Initial Purchasers, the Company and each Guarantor hereby
consents to such reliance.
3. Delivery of and Payment for the Securities. Delivery of and
payment for the Securities shall be made at the office of Cravath, Swaine &
Moore ("CS&M"), New York, New York, or at such other place as shall be agreed
upon by the Initial Purchasers and the Company, at 10:00 A.M., New York City
time, on August 5, 1996, or at such other date or time, not later than seven
full business days thereafter, as shall be agreed upon by the Initial Purchasers
and the Company (such date and time being referred to herein as the "Closing
Date"). On the Closing Date, the Company shall deliver or cause to be delivered
to CSI for the account of each Initial Purchaser certificates for the Securities
against payment to or upon the order of the Company of the purchase price by
wire or book-entry transfer of immediately available funds. Upon delivery, the
Securities shall be in global form, in such denominations and registered in such
names, or otherwise, as CSI on behalf of the Initial Purchasers shall have
requested in writing not less than two full business days prior to the Closing
Date. The Company shall make the certificates for the Securities available for
inspection by CSI on behalf of the Initial Purchasers in New York, New York, not
later than one full business day prior to the Closing Date.
<PAGE>
23
4. Further Agreements of the Company and the Guarantors. The Company
and the Guarantors jointly and severally agree with each of the Initial
Purchasers:
(a) Prior to the completion of the distribution of the Securities,
to advise the Initial Purchasers promptly and, if requested, confirm such
advice in writing, of the happening of any event which 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 (as amended or supplemented from time to time) in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading and not to effect such amendment or
supplementation without the consent of the Initial Purchasers, which
consent shall not be unreasonably withheld; to advise the Initial
Purchasers promptly of any order preventing or suspending the use of the
preliminary offering memorandum or the Offering Memorandum, of any
suspension of the qualification of the Securities for offering or sale in
any jurisdiction and of the initiation or threatening of any proceeding
for any such purpose; and to use best efforts to prevent the issuance of
any such order preventing or suspending the use of the preliminary
offering memorandum or the Offering Memorandum or suspending any such
qualification and, if any such suspension is issued, to use best efforts
to obtain the lifting thereof at the earliest possible time;
(b) to furnish promptly to each Initial Purchaser and counsel for
the Initial Purchasers, without charge, as many copies of the preliminary
offering memorandum and the Offering Memorandum (and of any amendments or
supplements thereto) as may be reasonably requested; to furnish to the
Initial Purchasers on the Closing Date three copies of the independent
accountants' report included in the Offering Memorandum signed by the
accountants rendering such report; and the Company and
<PAGE>
24
the Guarantors hereby consent to the use of the preliminary offering
memorandum and the Offering Memorandum, and any amendments and supplements
thereto, in connection with resales of the Securities;
(c) if the delivery of the Offering Memorandum is required at any
time in connection with the sale of the Securities and if at such time any
events shall have occurred as a result of which the Offering Memorandum as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made when the Offering Memorandum is delivered, not misleading,
or if for any other reason it shall be necessary at such time to amend or
supplement the Offering Memorandum in order to comply with any law, to
notify the Initial Purchasers immediately thereof, and to promptly prepare
and furnish to the Initial Purchasers an amended Offering Memorandum or a
supplement to the Offering Memorandum which will correct such statement or
omission or effect such compliance. The Initial Purchasers' delivery of
any such amendment or supplement shall not constitute a waiver of any of
the conditions set forth in Section 5 hereof;
(d) during the two-year period following the Closing Date, provided
that any of the Securities or the Exchange Securities are outstanding, to
furnish to the Initial Purchasers all annual, quarterly and current
reports filed by the Company or any Guarantor with the Commission pursuant
to Section 13 or 15(d) under the Exchange Act or any rule or regulation of
the Commission thereunder;
(e) for so long as and at any time that it is not subject to Section
13 or 15(d) of the Exchange Act, upon request of any holder of the
Securities, to furnish to such holder, and to any prospective
<PAGE>
25
purchaser or purchasers of the Securities designated by such holder,
information satisfying the requirements of subsection (d)(4) of Rule 144A
under the Securities Act. This covenant is intended to be for the benefit
of the holders from time to time of the Securities, and prospective
purchasers of the Securities designated by such holders;
(f) to use the proceeds from the sale of the Securities in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds";
(g) to assist the Initial Purchasers in arranging to cause the
Securities to be designated as PORTAL securities in accordance with the
rules and regulations of the NASD;
(h) in connection with the offering of the Securities, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
(i) except following the effectiveness of the Exchange Offer or
Shelf Registration Statement, as the case may be, to not, and use
reasonable efforts to ensure that no affiliate (as such term is defined in
Rule 501(b) under the Securities Act) of the Company will, and not
authorize or knowingly permit any person acting on its or their behalf to,
solicit any offer to buy or offer to sell the Securities by means of any
form of general solicitation or general advertising (as such terms are
used in Regulation D under the Securities Act) or in any manner involving
a public offering within the meaning of Section 4(2) of the Securities
Act;
(j) to not, and use reasonable efforts to ensure that no affiliate
(as such term is defined in Rule 501(b) under the Securities Act) of the
Company will, offer, sell or solicit offers to buy or otherwise
<PAGE>
26
negotiate in respect of any "security" (as defined in the Securities Act)
which could be integrated with the sale of the Securities in a manner that
would require the registration of the Securities under the Securities Act;
(k) to not, so long as the Securities are outstanding, be or become
an open-end investment company, unit investment trust or face-amount
certificate company that is or is required to be registered under Section
8 of the Investment Company Act, and to not be or become a closed-end
investment company required to be registered, but not registered,
thereunder;
(l) to cause each Note to bear the legend set forth in the form of
Note attached as Exhibit A to the Indenture until such legend shall no
longer be necessary or advisable because the Notes are no longer subject
to the restrictions on transfer described therein;
(m) to use its best efforts from time to time at the Initial
Purchasers' reasonable request to qualify the Securities for offering and
sale under the securities laws of such jurisdictions in the United States
and Canada as the Initial Purchasers may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution
of the Securities; provided, however, that in connection therewith neither
the Company nor any Guarantor shall be required to qualify as a foreign
corporation or partnership, as the case may be, or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (m) or to file a general consent to service
of process in any jurisdiction where it is not so qualified or so subject
or to subject itself to taxation in any jurisdiction if it is not
otherwise so subject. The Company and the
<PAGE>
27
Guarantors will promptly advise the Initial Purchasers of the receipt by
the Company or the Guarantors of any notification with respect to the
suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose;
(n) to comply with all agreements set forth in the representation
letters of the Company to The Depository Trust Company relating to the
approval of the Securities for "book-entry" transfer;
(o) for a period of 180 days from the date of the Offering
Memorandum, to not offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement for,
or announce any offer, sale, contract for sale of or other disposition of
any debt securities issued or guaranteed by the Company or any Guarantor
(other than the Securities or the Exchange Securities) without the prior
written consent of CSI, which consent shall not be unreasonably withheld.
Neither the Company nor any Guarantor will at any time offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, contract or
disposition would cause the exemption afforded by Section 4(2) of the
Securities Act to cease to be applicable to the offer and sale of the
Securities as contemplated by this Agreement and the Offering Memorandum;
(p) other than as contemplated by the Registration Rights Agreement,
until the Initial Purchasers shall have notified the Company of the
completion of the resale of the Securities (and the Initial Purchasers
covenant to so notify), neither the Company, the Guarantors nor any of its
affiliated purchasers (as defined in Rule 10b-6 under the Exchange Act),
either alone or with one or more other persons, will bid for or purchase,
for any account in which it or any of its
<PAGE>
28
affiliated purchasers has a beneficial interest, any Securities, or
attempt to induce any person to purchase any Securities; and neither it
nor any of its affiliated purchasers will make bids or purchases for the
purpose of creating actual, or apparent, active trading in or of raising
the price of the Securities;
(q) during the period from the Closing Date until three years after
the Closing Date, without the prior written consent of the Initial
Purchasers, to not, and not permit any of its Subsidiaries and, to the
extent reasonably within its control, any of its affiliates (as defined in
Rule 144 under the Securities Act) which are not Subsidiaries to, resell
any of the Securities that have been reacquired by them, except for
Securities purchased by the Company or any of its affiliates and resold in
a transaction registered under the Securities Act; and
(r) prior to the Closing Date, to not issue any press release or
other communication directly or indirectly or hold any press conference
with respect to the Company's financial condition, earnings, or business
prospects, without the prior written consent of the Initial Purchasers,
unless in the judgment of the Company and its counsel, and after
notification to the Initial Purchasers, such press release or
communication is required by law or failure to issue such press release
would have a Material Adverse Effect.
5. Conditions of Initial Purchasers' Obligations. The respective
obligations of the Initial Purchasers hereunder are subject (i) in the case of
representations and warranties qualified as to materiality, to the accuracy of
and compliance with such representations and warranties, when made and on the
Closing Date, in all respects, and in the case of representations and warranties
not qualified as to materiality, to the accuracy of and compliance with such
representations and warranties, when made and on the Closing
<PAGE>
29
Date, in all material respects taken as a whole, on the part of the Company and
each Guarantor contained herein, (ii) to the accuracy of the statements of
officers of the Company and the Guarantors (as applicable) made in any
certificates pursuant to the provisions hereof, (iii) to the performance by the
Company and each Guarantor of its respective obligations hereunder, and (iv) to
each of the following additional terms and conditions:
(a) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers as promptly as practicable on or
following the date following the date of this Agreement or at such other
date and time as to which the Initial Purchasers may agree; and no stop
order suspending the sale of the Securities in any jurisdiction shall have
been issued and no proceeding for that purpose shall have been commenced
or shall be pending or threatened.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of the Securities, the Indenture, the
Registration Rights Agreement, the Tax Sharing Agreement, the Acquisition
Agreement, this Agreement and the Offering Memorandum, and all other legal
matters relating to this Agreement and the transactions contemplated
hereby shall be satisfactory in all material respects to the Initial
Purchasers, and the Company and the Guarantors each shall have furnished
to the Initial Purchasers all documents and information that it or its
counsel may reasonably request to enable them to pass upon such matters.
(c) Morgan, Lewis & Bockius LLP ("ML&B") shall have furnished to the
Initial Purchasers its written opinion, as counsel to the Company and the
Guarantors, addressed to the Initial Purchasers and dated the Closing
Date, in form and substance reasonably satisfactory to the Initial
Purchasers, to the effect that:
<PAGE>
30
(i) each of the Company, LHL, the Receivables Subsidiary, the
Master Servicer, Ametex Fabrics, Inc., D-H Retail Space, Inc., Dixie
Furniture Company, Inc., Drexel Heritage Advertising Inc., Henry
Link Corporation, Interior Fabric Design, Inc., Link-Taylor
Corporation, Ramm, Son & Crocker, Inc., Robert Allen Fabrics of
N.Y., Inc., Universal Furniture Industries, Inc. and Young-Hinkel
Corporation has been duly incorporated, and each such corporation
and Sunbury Textile Mills, Inc. is validly existing as a corporation
in good standing under the laws of its state of incorporation and
has all corporate power and authority necessary to own or hold its
respective properties and to conduct the businesses in which it is
engaged as described in the Offering Memorandum;
(ii) each of the Company and the Subsidiaries (other than The
Berkline Corporation, Drexel Heritage Furnishings Inc., Henredon
Furniture Industries, Inc., Lexington Furniture Industries, Inc.,
Maitland-Smith, Inc., Robert Allen Fabrics, Inc. and Universal
Furniture Limited) is duly qualified to do business and is in good
standing as a foreign corporation or otherwise in each of the states
listed under the name of the Company and each Subsidiary in Schedule
IV hereto;
(iii) the Company's authorized capitalization is as set forth
in the Offering Memorandum; the description of the capital stock of
the Company contained in the Offering Memorandum is accurate; the
outstanding shares of capital stock of the Company are validly
authorized and issued and are fully paid and nonassessable, and are
owned by Holdings free and clear of any Lien (other than any Lien on
such capital stock pursuant to the Senior Bank Facilities); all of
the outstanding shares of capital stock of LHL, the Receivables
<PAGE>
31
Subsidiary and the Master Servicer are validly authorized and issued
and will be fully paid and nonassessable, and are owned by the
Company directly or through Subsidiaries, free and clear of any Lien
(except in the case of LHL, for the Lien on such capital stock
pursuant to the Senior Bank Facilities);
(iv) the summaries in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts, including without
limitation, the Indenture, the Securities and the Registration
Rights Agreement, accurately describe in all material respects the
provisions purported to be so summarized; the statements in the
Offering Memorandum under the caption "Certain Federal Income Tax
Considerations" to the extent that they constitute matters of law or
regulation or legal conclusions, have been reviewed by them and
fairly summarize the matters described therein in all material
respects;
(v) the Indenture conforms as to form in all material respects
with the requirements of the Trust Indenture Act and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder;
(vi) neither the Company nor any Subsidiary is, before or
after the consummation of the Transactions (A) an "investment
company" or a company "controlled" by an investment company within
the meaning of the Investment Company Act and the rules and
regulations of the Commission thereunder, without taking account of
any exemption under the Investment Company Act arising out of the
number of holders of the Company's securities, or (B) a "holding
company" or a "subsidiary company" of a holding company, or an
"affiliate" thereof within the meaning of the
<PAGE>
32
Public Utility Holding Company Act of 1935, as amended;
(vii) the Company, LHL, Ametex Fabrics, Inc., The Berkline
Corporation, D-H Retail Space, Inc., Drexel Heritage Advertising,
Inc., Drexel Heritage Furnishings Inc., Interior Fabric Design,
Inc., Ramm, Son & Crocker, Inc., Robert Allen Fabrics, Inc., Robert
Allen Fabrics of N.Y., Inc., Sunbury Textile Mills, Inc., Universal
Furniture Industries, Inc., and Universal Furniture Limited (each of
the foregoing a "NY-D Group Member") has full corporate right, power
and authority to execute and deliver the Indenture, the Securities,
the Registration Rights Agreement, the Tax Sharing Agreement and
this Agreement and to perform its respective obligations hereunder
and thereunder; and all corporate action required to be taken by
each NY-D Group Member for the due and proper authorization,
execution and delivery of the Indenture, the Securities, the
Registration Rights Agreement, the Tax Sharing Agreement and this
Agreement and the consummation of the Transactions and the other
transactions contemplated hereby and thereby have been duly and
validly taken;
(viii) each of this Agreement, the Tax Sharing Agreement and
the Registration Rights Agreement has been duly authorized, executed
and delivered by each NY-D Group Member which is a party thereto,
and (assuming due authorization, execution and delivery thereof by
each other party thereto) each constitutes a valid and legally
binding agreement, enforceable against the Company and each
Guarantor which is a party thereto in accordance with its terms
subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws affecting
creditors' rights and remedies generally and to general principles
of equity (regardless of
<PAGE>
33
whether enforcement is sought in a proceeding at law or in equity)
and except to the extent that indemnification or contribution
provisions may be unenforceable;
(ix) the Indenture has been duly authorized, executed and
delivered by each NY-D Group Member and (assuming due authorization,
execution and delivery thereof by each other Guarantor and the
Trustee) constitutes a valid and legally binding agreement,
enforceable against the Company and each Guarantor in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity); the Securities are in the form
contemplated by the Indenture and have been duly authorized and
executed by the Company and, upon the due authentication and
delivery thereof by the Trustee pursuant to the Indenture, will be
duly and validly issued and outstanding and will constitute valid
and legally binding obligations entitled to the benefits of the
Indenture and enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in
equity);
(x) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement, the Tax Sharing
Agreement and this Agreement, the consummation of the Transactions
and the other transactions contemplated hereby and thereby, and the
<PAGE>
34
fulfillment of the terms hereof or thereof, do not conflict with or
result in a breach or violation of any of the terms or provisions
of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets (other than any Lien pursuant to the Senior Bank Facilities)
of (i) the Company, the Receivables Subsidiary, the Master Servicer
or LHL (each of the foregoing a "Special Corporation") pursuant to
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which any Special Corporation is a party
or by which any Special Corporation is bound or to which any of the
property or assets of any Special Corporation is bound and (ii) any
Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument entered into on the
Closing Date as part of the Transactions, except for any violation,
lien, charge or encumbrance that does not have a Material Adverse
Effect, nor will such actions result in any violation of the
provisions of the charter or by-laws of any NY-D Group Member or any
Federal or New York statute or the Delaware General Corporation Act,
or any judgment, order, decree, rule or regulation known to counsel
of any federal or state court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries or any of
its properties or assets, except for such violations which would not
have a Material Adverse Effect; the holders of the Securities will
not be subject to personal liability for obligations of the Company
or any Guarantor by reason of being such holders; and no consent,
approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required under any
such statute, judgment, order, decree, rule or regulation for the
execution, delivery and
<PAGE>
35
performance of the Indenture, the Securities or the Registration
Rights Agreement, the Tax Sharing Agreement or the consummation of
the Transactions and the other transactions contemplated hereby and
thereby which shall not have been obtained or made prior to the
Closing Date except, with respect to the Exchange Offer and Exchange
Securities, filings or registration under the Securities Act or the
Exchange Act or the rules and regulations of the Commission
promulgated thereunder or the by-laws of the NASD and except any
filings, consents, approvals, authorizations, orders or
registrations the failure to so obtain or make would not have a
material adverse effect on the ability of the Company or any
Guarantor to consummate the offering of the Securities and the other
transactions required to be consummated herewith and thereby;
provided, however, that the foregoing may exclude state securities
or Blue Sky laws;
(xi) neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Securities will violate Regulation G, T, U or X of
the Federal Reserve Board;
(xii) to the knowledge of counsel, there is no pending or
threatened action or suit or judicial, or other administrative
proceeding to which the Company or any of the Guarantors is a party
or of which any material property or assets of the Company or
Guarantors is the subject that, singly or in the aggregate, (A)
questions the validity of this Agreement, the Registration Rights
Agreement, the Tax Sharing Agreement or the Indenture or any action
taken or to be taken pursuant hereto or thereto, or (B) in the case
of a Special Corporation, if determined adversely to the
<PAGE>
36
applicable Special Corporation, is reasonably likely to have a
Material Adverse Effect; and
(xiii) assuming the accuracy of the representations,
warranties and agreements of the Company and each of the Guarantors
contained in paragraphs (x), (y) and (z) of Section 1 of this
Agreement and of the Initial Purchasers in Section 2 of this
Agreement, the issuance and sale of the Securities and the offer,
resale and delivery of the Securities in the manner contemplated in
the Offering Memorandum and this Agreement, are exempt from the
registration requirements of the Securities Act and it is not
necessary to qualify the Indenture under the Trust Indenture Act;
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or the Subsidiaries and public
officials which are furnished to the Initial Purchasers.
(d) ML&B shall state that they have participated in conferences with
representatives of the Company and the Guarantors, representatives of the
independent auditors of the Company and the Guarantors and representatives
of the Initial Purchasers, at which conferences the contents of the
Offering Memorandum, any amendment thereof and supplement thereto and
related matters were discussed, and, although such counsel assume no
responsibility for the factual accuracy or completeness of the Offering
Memorandum, any amendment thereof or supplement thereto (except as
expressly provided above), nothing has come to the attention of such
counsel to cause such counsel to believe that the Offering Memorandum or
any amendment thereof or supplement thereto (except for financial
statements and schedules and other financial and statistical data included
therein, as to which no statement or opinion shall be given) contains any
<PAGE>
37
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(e) John R. Leekley, General Counsel of Masco shall have furnished
to the Initial Purchasers his written opinion addressed to the Initial
Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, to the effect that:
(i) each of The Berkline Corporation, Drexel Heritage
Furnishings Inc., Henredon Furniture Industries, Inc., Lexington
Furniture Industries, Inc., Maitland-Smith, Inc., Robert Allen
Fabrics, Inc. and Universal Furniture Limited (each of the foregoing
a "Specified Subsidiary") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
state of incorporation and has all corporate power and authority
necessary to own or hold its respective properties and to conduct
the businesses in which it is engaged as described in the Offering
Memorandum;
(ii) each Specified Subsidiary is duly qualified to do
business and is in good standing as a foreign corporation or
otherwise in each of the states listed under the name of each
Specified Subsidiary in Schedule V hereto;
(iii) all of the outstanding shares of capital stock of each
Specified Subsidiary are validly authorized and issued and will be
fully paid and nonassessable (other than as provided by Section 630
of the New York Business Corporation Law in the case of Drexel
Heritage Furnishings, Inc.), and are owned by the Company directly
or through Subsidiaries, free and clear of any Lien
<PAGE>
38
(other than any Lien on such capital stock pursuant to the Senior
Bank Facilities);
(iv) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement and this
Agreement, the consummation of the Transactions and the other
transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof or thereof, do not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of
any of the Specified Subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which any Specified Subsidiary is a party or by which
any Specified Subsidiary is bound or to which any of the property or
assets of any Specified Subsidiary is subject, except for any
violation, lien, charge or encumbrance that does not have a Material
Adverse Effect; and
(v) to the knowledge of counsel there is no pending or
threatened action or suit or judicial, or other administrative
proceeding to which any Subsidiary (other than the Receivables
Subsidiary, the Master Servicer or LHL) is a party or of which any
material property or assets of any Subsidiary (other than the
Receivables Subsidiary, the Master Servicer or LHL) is the subject
that, singly or in the aggregate, if determined adversely to any of
such Subsidiaries is reasonably likely to have a Material Adverse
Effect.
In rendering such opinion, such counsel may rely on local
counsel and, as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the Company or the
<PAGE>
39
Subsidiaries and public officials which are furnished to the Initial
Purchasers.
(f) Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P. shall have
furnished to the Initial Purchasers its written opinion, as special
counsel to the Company and the Guarantors, addressed to the Initial
Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, to the effect that:
(i) each of Drexel Heritage Home Inspirations, Inc., Henredon
Transportation Company and Intro Europe, Inc. (each of the foregoing
a "NC Specified Subsidiary") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
North Carolina and has all corporate power and authority necessary
to own or hold its respective properties and to conduct the
businesses in which it is engaged as described in the Offering
Memorandum;
(ii) Each NC Specified Subsidiary, Henredon Furniture
Industries, Inc., Lexington Furniture Industries, Inc. and
Maitland-Smith, Inc. (each of the foregoing a "NC Group Member") has
full corporate right, power and authority to execute and deliver the
Indenture, the Securities, the Registration Rights Agreement and
this Agreement and to perform its respective obligations hereunder
and thereunder; and all corporate action required to be taken by
each NC Group Member for the due and proper authorization, execution
and delivery of the Indenture, the Securities, the Registration
Rights Agreement and this Agreement and the consummation of the
Transactions and the other transactions contemplated hereby and
thereby have been duly and validly taken;
<PAGE>
40
(iii) each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by each
NC Group Member and each constitutes a valid and legally binding
agreement;
(iv) the Indenture has been duly authorized, executed and
delivered by each NC Group Member and (assuming due authorization,
execution and delivery thereof by the Company, each other Guarantor
and the Trustee) constitutes a valid and legally binding agreement;
and
(v) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement and this
Agreement, the consummation of the Transactions and the other
transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof or thereof, will not result in any violation of the
provisions of the charter or by-laws of any NC Group Member or any
North Carolina statute, or any judgement, order, decree, rule or
regulation known to counsel of any state court or governmental
agency or body having jurisdiction over any NC Group Member or any
of its property or assets, except for such violations which would
not have a Material Adverse Effect;
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or the Subsidiaries and public
officials which are furnished to the Initial Purchasers.
(g) Holland, Ray & Upchurch shall have furnished to the Initial
Purchasers its written opinion, as special counsel to the Company and the
Guarantors, addressed to the Initial Purchasers and dated the Closing
Date, in form and substance reasonably
<PAGE>
41
satisfactory to the Initial Purchasers, to the effect that:
(i) each of Blue Mountain Trucking Corporation and Custom
Truck Tires, Inc. (each of the foregoing a "MS Specified
Subsidiary") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Mississippi, and has
all corporate power and authority necessary to own or hold its
respective properties and to conduct the businesses in which it is
engaged as described in the Offering Memorandum;
(ii) Each MS Specified Subsidiary has full corporate right,
power and authority to execute and deliver the Indenture, the
Securities, the Registration Rights Agreement and this Agreement and
to perform its respective obligations hereunder and thereunder; and
all corporate action required to be taken by MS Specified Subsidiary
for the due and proper authorization, execution and delivery of the
Indenture, the Securities, the Registration Rights Agreement and
this Agreement and the consummation of the Transactions and the
other transactions contemplated hereby and thereby have been duly
and validly taken;
(iii) each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by each
MS Specified Subsidiary and each constitutes a valid and legally
binding agreement;
(iv) the Indenture has been duly authorized, executed and
delivered by each MS Specified Subsidiary and (assuming due
authorization, execution and delivery thereof by the Company, each
other Guarantor and the Trustee) constitutes a valid and legally
binding agreement; and
<PAGE>
42
(v) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement and this
Agreement, the consummation of the Transactions and the other
transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof or thereof, will not result in any violation of the
provisions of the charter or by-laws of any MS Specified Subsidiary
or any Mississippi statute, or any judgment, order, decree, rule or
regulation known to counsel of any state court or governmental
agency or body having jurisdiction over any MS Specified Subsidiary
or any of its property or assets, except for such violations which
would not have a Material Adverse Effect;
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or the Subsidiaries and public
officials which are furnished to the Initial Purchasers.
(h) Raymond & Prokop P.C. shall have furnished to the Initial
Purchasers its written opinion, as special counsel to the Company and the
Guarantors, addressed to the Initial Purchasers and dated the Closing
Date, in form and substance reasonably satisfactory to the Initial
Purchasers, to the effect that:
(i) La Barge, Inc. has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
Michigan and has all corporate power and authority necessary to own
or hold its respective properties and to conduct the businesses in
which it is engaged as described in the Offering Memorandum;
(ii) La Barge, Inc. has full corporate right, power and
authority to execute and deliver the Indenture, the Securities, the
Registration Rights
<PAGE>
43
Agreement and this Agreement and to perform its respective
obligations hereunder and thereunder; and all corporate action
required to be taken by La Barge, Inc. for the due and proper
authorization, execution and delivery of the Indenture, the
Securities, the Registration Rights Agreement and this Agreement and
the consummation of the Transactions and the other transactions
contemplated hereby and thereby have been duly and validly taken;
(iii) each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by La
Barge, Inc. and each constitutes a valid and legally binding
agreement.
(iv) the Indenture has been duly authorized, executed and
delivered by La Barge, Inc. and (assuming due authorization,
execution and delivery thereof by the Company, each other Guarantor
and the Trustee) constitutes a valid and legally binding agreement;
and
(v) the execution, delivery and performance of the Indenture,
the Securities, the Registration Rights Agreement and this
Agreement, the consummation of the Transactions and the other
transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof or thereof, will not result in any violation of the
provisions of the charter or by-laws of La Barge, Inc., or any
Michigan statute, or any judgment, order, decree, rule or regulation
known to counsel of any state court or governmental agency or body
having jurisdiction over La Barge, Inc. or any of its property or
assets, except for such violations which would not have a Material
Adverse Effect;
<PAGE>
44
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company or the Subsidiaries and public
officials which are furnished to the Initial Purchasers.
(i) The Initial Purchasers shall have received from CS&M, counsel
for the Initial Purchasers, such opinion or opinions, dated the Closing
Date, with respect to such matters as the Initial Purchasers may
reasonably require, and the Company and the Guarantors shall have
furnished to such counsel such documents as they request for enabling them
to pass upon such matters;
(j) The Company shall have furnished to the Initial Purchasers a
letter of Coopers & Lybrand LLP, dated the date hereof, in form and
substance satisfactory to the Initial Purchasers, to the effect that:
(i) they are independent certified public accountants with respect
to the Company and Masco within the meaning of Rule 101 of the American
Institute of Certified Public Accountants' Code of Professional Conduct
and its interpretations and rulings;
(ii) based upon a reading of the latest unaudited combined financial
statements made available by Masco for the Home Furnishings Group, the
procedures of the American Institute of Certified Public Accountants for a
review of interim financial information as described in Statement of
Auditing Standards No. 71, reading of minutes and inquiries of certain
officials of the Home Furnishings Group and Masco who have responsibility
for financial and accounting matters and certain other limited procedures
requested by the Initial Purchasers and described in detail in such
letter, nothing has come to their attention that causes them to believe
<PAGE>
45
that (A) any unaudited combined financial statements included or
incorporated in the Offering Memorandum do not comply in form in all
material respects with applicable accounting requirements or (B) any
material modifications should be made to the unaudited combined financial
statements included in the Offering Memorandum for them to be in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited combined financial
statements included in the Offering Memorandum;
(iii) based upon the procedures detailed in such letter with respect
to the period subsequent to the date of the last available balance sheet,
including reading of minutes and inquiries of certain officials of the
Masco Home Furnishings Group and Masco who have responsibility for
financial and accounting matters, nothing has come to their attention that
causes them to believe that (A) at a specified date not more than five
business days prior to the date of the letter, there was any decrease in
net investment and advances, increase in long-term debt or decrease in net
current assets as compared with the amounts shown in the June 30, 1996,
unaudited combined balance sheet included in the Offering Memorandum or
(B) for the period from June 30, 1996, to a specified date not more than
five business days prior to the date of the letter, there were any
decreases, as compared with the corresponding period in the preceding
year, in net sales, gross profit or net income, except in all instances
for changes, increases or decreases that the Offering Memorandum discloses
have occurred or which are set forth in such letter, in which case the
letter shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed necessary by
the Initial Purchasers;
(iv) they have performed certain other specified procedures as a
result of which they determined that
<PAGE>
46
certain information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical information
derived from the general accounting records of the Home Furnishings Group)
set forth in the Offering Memorandum agrees with the accounting records of
the Masco Home Furnishings Group, excluding any questions of legal
interpretation; and
(v) on the basis of a reading of the unaudited pro forma financial
statements included in the Offering Memorandum (the "pro forma financial
statements"); carrying out certain specified procedures; reading of
minutes and inquiries of certain officials of the Masco Home Furnishings
Group who have responsibility for financial and accounting matters; and
proving the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the pro forma financial
statements, nothing came to their attention which caused them to believe
that the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements.
(k) The Company shall have furnished to the Initial Purchasers a
letter (the "bring-down letter") of Coopers & Lybrand, LLP, addressed to
the Initial Purchasers and dated the Closing Date confirming, 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 two days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by its letter delivered to the
Initial Purchasers concurrently with the execution of this Agreement and
described in paragraph (j).
<PAGE>
47
(l) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, signed by its chief executive officer
and its chief financial officer stating that (A) such officers have
carefully examined the Offering Memorandum, (B) in their opinion, 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, in light of
the circumstances under which they were made, not misleading and since its
date, no event has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum so that the Offering
Memorandum as of the Closing Date would not include any untrue statement
of a material fact or would not omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and (C) as of
the Closing Date, to such officers' knowledge, the representations and
warranties of the Company and the Guarantors in this Agreement that are
qualified as to materiality are true and correct and the representations
and warranties of the Company and the Guarantors in this Agreement not
qualified as to materiality are true and correct in all material respects,
taken as a whole, each of the Company and the Subsidiaries has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and
subsequent to the date of the most recent financial statements in the
Offering Memorandum, there has been no event or development, which in such
officers' judgement, can reasonably be expected to result in a Material
Adverse Effect.
(m) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto),
<PAGE>
48
there has occurred no event or development that can reasonably be expected
to result in a Material Adverse Effect or the letter referred to in
paragraph (k) of this Section does not confirm in all material respects
the letter referred to in paragraph (j), the effect of which, in any such
case described above, is, in the reasonable judgment of the Initial
Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or delivery of the Securities on
the terms and in the manner contemplated in the Offering Memorandum
(exclusive of any amendment or supplement).
(n) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance or sale of the Securities; and no injunction, restraining order
or order of any other nature by a Federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance or sale of the Securities.
(o) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Securities
or any of the Company's or any Guarantor's other debt securities or
preferred stock by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the Securities Act, and (ii) no such organization
shall have publicly announced that it has under surveillance or review
(other than an announcement with positive implications of a possible
upgrading), its rating of the Securities or any of the Company's or any
Guarantor's other debt securities or preferred stock.
(p) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the
<PAGE>
49
following: (i) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the over-the-counter market shall
have been suspended or limited, or minimum prices shall have been
established on either of such exchanges or such market by the Commission,
by such exchange or by any other regulatory body or governmental authority
having jurisdiction, or trading in securities of the Company or any
Guarantor on any exchange or in the over-the-counter market shall have
been suspended or (ii) any moratorium on commercial banking activities
shall have been declared by Federal or New York State authorities or (iii)
an outbreak or escalation of hostilities or a declaration by the United
States of a national emergency or war or such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the judgment of the Initial Purchasers,
impracticable or inadvisable to proceed with the offering or the delivery
of the Securities on the terms and in the manner contemplated in the
Offering Memorandum.
(q) The Company and each of the Guarantors shall have executed and
delivered the Registration Rights Agreement.
(r) The Securities shall have been approved by the NASD for trading
in the PORTAL market.
(s) The Indenture shall have been duly executed and delivered by the
Company, each of the Guarantors and the Trustee and the Securities shall
have been duly executed and delivered by the Company and each of the
Guarantors and duly authenticated by the Trustee.
(t) If any event shall have occurred that requires the Company under
Section 4(c) hereof to prepare an amendment or supplement to the Offering
<PAGE>
50
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof delivered to the Initial Purchasers.
(u) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the
Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial Purchasers
would materially impair the ability of the Initial Purchasers to purchase,
hold or effect resales of the Securities as contemplated hereby.
(v) The Company shall have furnished to the Initial Purchasers a
copy of a solvency letter in form and substance and from Houlihan, Lokey,
Howard & Zukin, Inc., or another independent evaluation firm satisfactory
to the Initial Purchasers.
(w) (i) the Acquisition Agreement and the Tax Sharing Agreement
shall have been executed and delivered by the parties thereto and shall be
in full force and effect and (ii) the Initial Purchasers shall be
satisfied that the Transactions shall have been consummated or will be
consummated simultaneously with the offering of the Securities on the
terms described in the Offering Memorandum.
(x) Each of the Guarantors shall have executed the letter
substantially in the form of Exhibit C hereto confirming its agreement to
become a party to and be bound by this Agreement as if signed by it on the
date hereof and the Guarantors shall have delivered such letter to each of
the other parties hereto.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be
<PAGE>
51
deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers hereunder may be
terminated by the Initial Purchasers, in their absolute discretion, by notice
given to and received by the Company prior to delivery of and payment for the
Securities if, prior to that time, any of the conditions precedent set forth in
Section 5 shall have not been satisfied when required or waived.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchaser may make arrangements for the
purchase of such Securities by other persons satisfactory to the Company but if
no such arrangements are made within 36 hours after such default, this Agreement
shall terminate without liability on the part of the non-defaulting Initial
Purchaser or the Company except that the Company will continue to be liable for
the payment of expenses to the extent set forth in Sections 8 and 12 except that
the provisions of Sections 9 and 10 shall not terminate and shall remain in
effect. As used in this Agreement, the term "Initial Purchaser" includes, for
all purposes of this Agreement unless the context otherwise requires, any party
not listed in Schedule III hereto who, pursuant to this Section 7, purchases
Securities which a defaulting Initial Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Company or the non-defaulting
Initial Purchaser for damages caused by its default. If other persons are
obligated or agree to purchase the Securities of a defaulting Initial Purchaser,
either the non-defaulting Initial Purchaser or the Company may postpone the
Closing Date for up to seven full business days in order to effect
<PAGE>
52
any changes that in the opinion of counsel for the Company or counsel for the
Initial Purchasers may be necessary in the Offering Memorandum or in any other
document or arrangement, and the Company agrees to promptly make any amendment
or supplement to the Offering Memorandum that effects any such changes.
8. Reimbursement of Initial Purchasers' Expenses. If this Agreement
is terminated pursuant to Section 6 or if for any reason the purchase of the
Securities by the Initial Purchasers is not consummated, the Company shall
remain responsible (except to a defaulting Initial Purchaser) for the expenses
to be paid or reimbursed by it pursuant to Section 12 and the respective
obligations of the Company and the Initial Purchasers pursuant to Sections 9 and
10 shall remain in effect. If the purchase of the Securities by the Initial
Purchasers is not consummated because any condition to the obligations of the
Initial Purchasers set forth in Section 5 hereof is not satisfied or because of
any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by the Initial Purchasers, the Company will reimburse the Initial
Purchasers upon demand for all reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with this Agreement and the proposed purchase and sale of the
Securities.
9. Indemnification. (a) Each of the Company and the Guarantors,
jointly and severally, shall indemnify and hold harmless the Initial Purchasers,
their affiliates, and their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls any Initial
Purchaser within the meaning of the Securities Act or the Exchange Act
(collectively referred to for the purposes of this Section 9 and Section 10 as
an Initial Purchaser), against any loss, claim, damage, expense or liability,
joint or several, or any action in respect thereof, to which an Initial
Purchaser may become subject, whether commenced or threatened and under the
Securities Act
<PAGE>
53
or the Exchange Act or other Federal or state statutory law or regulation, at
common law 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 any material fact contained in the preliminary offering memorandum
or the Offering Memorandum or in any amendment or supplement thereto or any
information provided by the Company pursuant to Section 4(e) or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and shall reimburse
each Initial Purchaser for any legal or other expenses reasonably incurred by
that Initial Purchaser (upon presentation of a statement or statements therefor
in reasonable detail) in connection with investigating or preparing to defend or
defending against or appearing as a third party witness in connection with any
such loss, claim, damage, liability, expense or action as such expenses are
incurred; provided, however, that neither the Company nor any Guarantor shall 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 such untrue statement or
alleged untrue statement or omission or alleged omission from any of such
documents in reliance upon and in conformity with the Initial Purchasers'
Information; and provided further that with respect to any such untrue statement
or omission made in the preliminary offering memorandum, the indemnity agreement
contained in this Section 9(a) shall not enure to the benefit of any such
Initial Purchaser from whom the person asserting any such losses, claims,
damages or liabilities purchased the Securities concerned if, to the extent that
such sale was an initial resale by such Initial Purchaser and any such loss,
claim, damage or liability of such Initial Purchaser is a result of the fact
that both (A) a copy of the Offering Memorandum was not sent or given to such
person at or prior to the written confirmation of the sale of such Securities to
such person, and (B) the untrue statement or omission in the preliminary
offering memorandum was corrected in the
<PAGE>
54
Offering Memorandum unless, in either case, such failure to deliver the Offering
Memorandum was a result of noncompliance by the Company or any Guarantor with
Section 4(c).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless each of the Company and the Guarantors, each of
their affiliates, each of their officers, directors, employees, representatives,
and agents and each person, if any, who controls the Company or any Guarantor
within the meaning of the Securities Act (collectively referred to for the
purposes of this Section 9 and Section 10 as the Company), to the same extent as
the foregoing indemnity from the Company to each Initial Purchaser, against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company may become subject, under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation at common law
or otherwise, insofar as such loss, claim, damage, expense, liability or action
arises out of or is based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the preliminary offering memorandum or
the Offering Memorandum or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, 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 the Initial
Purchasers' Information, and shall reimburse the Company for any legal or other
expenses reasonably incurred (upon presentation of a statement or statements
therefor in reasonable detail) by the Company or any Guarantor in connection
with investigating or preparing to defend or defending against or appearing as
third party witness in connection with any such loss, claim, damage, liability,
expense or action as such expenses are incurred.
<PAGE>
55
(c) Promptly after receipt by an indemnified party under this
Section 9 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 pursuant to Section 9(a) or 9(b), 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 9 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 9. 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 9 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, that an indemnified party will have the right to employ its own counsel
in any such action, but the fees, expenses and other charges of such counsel
will be at the expense of such indemnified party unless (1) the employment of
counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based on
advice of counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based on
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in
<PAGE>
56
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm of attorneys (in addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 9(a) and 9(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall 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 its written
consent 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. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
The obligations of the Company and the Initial Purchasers in this
Section 9 and in Section 10 are in addition to any other liability which the
Company or the Initial Purchasers, as the case may be, may otherwise have,
<PAGE>
57
including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
10. Contribution. If the indemnification provided for in Section 9
is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), 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 Company on the one hand and the
Initial Purchasers on the other from the offering of the Securities 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 Company and
the Guarantors on the one hand and the Initial Purchasers 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 Company on the
one hand and the Initial Purchasers 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 Securities purchased under this Agreement (before deducting
expenses) received by or on behalf of the Company bear to the total discounts
received by the Initial Purchasers with respect to the Securities purchased
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, 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 the Company or any Guarantor or information supplied by the Company
or any Guarantor on the one hand or to the Initial Purchasers' Information on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct
<PAGE>
58
or prevent such untrue statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 10 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 10 shall be deemed to include, for
purposes of this Section 10, 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 10, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities purchased from the Company by it
were offered to investors less the amount of any damages which such 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. The Initial Purchasers' obligations
to contribute as provided in this Section 10 are several in proportion to their
respective purchase obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement shall
enure to the benefit of and be binding upon the Initial Purchasers, the Company,
upon execution and delivery of a letter in the form of Exhibit C hereto, each of
the Guarantors and their respective successors. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers, their affiliates and the Company
and each of the Guarantors and, in each case, their respective successors and
the controlling persons and officers and directors referred to in Sections 9 and
10 and their heirs and legal representatives, any legal or
<PAGE>
59
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
12. Expenses. The Company and the Guarantors jointly and severally
agree to pay (a) the costs incident to the authorization, issuance, sale,
preparation and delivery of the Securities and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and distribution
of any preliminary offering memorandum, the Offering Memorandum and any
amendments and supplements thereto; (c) the costs of reproducing and
distributing this Agreement, the Registration Rights Agreement and the
Indenture; (d) the preparation, issuance and delivery of the certificates for
the Securities to the Initial Purchasers; (e) the fees and expenses of
qualifying the Securities under the securities laws of the several jurisdictions
as provided in Section 4(m) and of preparing, printing and distributing Blue Sky
Memoranda (including related reasonable fees and expenses of CS&M); (f) any fees
charged by securities rating services for rating the Securities; (g) all fees
and expenses of the Trustee; (h) all costs incident to and fees and expenses of
the inclusion of the Securities on the PORTAL system and the approval of the
Securities for book-entry transfer by The Depository Trust Company; and (i) all
other costs and expenses incident to the performance of the obligations of the
Company and each of the Guarantors under this Agreement; provided, however,
that, except as otherwise provided in this Section 12 and in Section 8, the
Initial Purchasers shall pay their own costs and expenses, including the costs
and expenses of its counsel, any transfer taxes on the Securities which it may
sell and the expenses of advertising any offering of the Securities made by the
Initial Purchasers.
13. Survival. The respective indemnities, rights of contribution,
representations, warranties, agreements and statements made by or on behalf of
the Company, each of the Guarantors and the Initial Purchasers and any of their
respective affiliates, representatives, officers, directors or controlling
persons contained in this Agreement or in any
<PAGE>
60
certificate delivered pursuant to this Agreement, shall survive the delivery of
and payment for the Securities and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation or statement as to the results thereof made by or on behalf of any
of them or any person controlling any of them.
14. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to Chase Securities Inc., 270 Park
Avenue, 4th floor, New York, New York 10017, Attention: Mr. Stephen
Eichenberger;
(b) if to the Company or any Guarantor, shall be delivered or sent
by mail, telex or facsimile transmission, prior to the Closing Date, c/o
Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178,
fax: (212) 309-6273, Attention: Philip H. Werner, on or after the Closing
Date, to the address of the Company set forth in the Offering Memorandum,
Attention: General Counsel;
provided, however, that any notice to an Initial Purchaser pursuant to Section
9(c) shall be delivered or sent by mail, telex or facsimile transmission to such
Initial Purchaser at its address set forth on the signature page hereof.
Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof.
15. Business Day. For purposes of this Agreement, "business day"
means any day on which the New York Stock Exchange, Inc. is open for trading.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
<PAGE>
61
17. Counterparts. This Agreement may be executed in any number of
counterparts (which may include counterparts delivered by telecopier), each of
which shall 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.
If the foregoing is in accordance with your understanding of the
agreement between the Company and the
<PAGE>
62
Initial Purchasers, kindly indicate your acceptance in the space provided for
that purpose below.
Very truly yours,
LIFESTYLE FURNISHINGS INTERNATIONAL
LTD.,
by_______________________________
Name:
Title:
LIFESTYLE HOLDINGS LTD.,
by_______________________________
Name:
Title:
Accepted:
CHASE SECURITIES INC.
by_______________________________
Authorized Signatory
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
by_______________________________
Authorized Signatory
Address for Notices:
CHASE SECURITIES INC.
One Chase Plaza, 25th floor
<PAGE>
63
New York, New York 10081
Attention: Legal Department
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
World Financial Center
North Tower
New York, New York 10281
Attention: Wood Steinberg
<PAGE>
64
SCHEDULE I
Ametex Fabrics, Inc., a Delaware corporation
The Berkline Corporation, a Delaware corporation
Blue Mountain Trucking Corporation, a Mississippi
corporation
Custom Truck Tires, Inc., a Mississippi corporation
D-H Retail Space, Inc., a Delaware corporation
Drexel Heritage Advertising, Inc., a Delaware corporation
Drexel Heritage Furnishings Inc., a New York corporation
Drexel Heritage Home Inspirations, Inc., a North Carolina
corporation
Henredon Furniture Industries, Inc., a North Carolina
corporation
Henredon Transportation Company, a North Carolina
corporation
Interior Fabric Design, Inc., a New York corporation
Intro Europe, Inc., a North Carolina corporation
La Barge, Inc., a Michigan corporation
Lexington Furniture Industries, Inc., a North Carolina
corporation
Maitland-Smith, Inc., a North Carolina corporation
Marbro Lamp Company, a California corporation
Ramm, Son & Crocker, Inc., a New York corporation
Robert Allen Fabrics, Inc., a Delaware corporation
Robert Allen Fabrics of N.Y. Inc., a Delaware corporation
Sunbury Textile Mills, Inc., a Delaware corporation
Universal Furniture Industries, Inc., a Delaware corporation
Universal Furniture Limited, a Delaware corporation
<PAGE>
65
SCHEDULE III
Principal
Amount of
Initial Purchaser Subordinated Notes
----------------- ------------------
Chase Securities Inc. $120,000,000
Merrill Lynch, Pierce $ 80,000,000
Fenner & Smith Incorporated
Total $200,000,000
<PAGE>
66
EXHIBIT C
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
World Financial Center
North Tower
New York, New York 10281
Ladies and Gentlemen:
Pursuant to Section 5(y) of the Purchase Agreement referred to
below, this will confirm each of the undersigned's accession to such Purchase
Agreement and that each of the undersigned are hereby a party to and shall be
bound by the Purchase Agreement dated July 31, 1996, among each of you,
Lifestyle Furnishings International Ltd. and Lifestyle Holdings Ltd., with the
same force and effect as if each of the undersigned had signed the Purchase
Agreement on such date
Very truly yours,
AMETEX FABRICS, INC.,
by______________________________
Name:
Title:
<PAGE>
67
THE BERKLINE CORPORATION,
by__________________________
Name:
Title:
BLUE MOUNTAIN TRUCKING
CORPORATION,
by__________________________
Name:
Title:
CUSTOM TRUCK TIRES, INC.,
by__________________________
Name:
Title:
D-H RETAIL SPACE, INC.,
by__________________________
Name:
Title:
<PAGE>
68
DREXEL HERITAGE ADVERTISING,
INC.,
by__________________________
Name:
Title:
DREXEL HERITAGE FURNISHINGS
INC.,
by__________________________
Name:
Title:
DREXEL HERITAGE HOME
INSPIRATIONS, INC.,
by__________________________
Name:
Title:
HENREDON FURNITURE INDUSTRIES,
INC.,
by__________________________
Name:
Title:
<PAGE>
69
HENREDON TRANSPORTATION
COMPANY,
by__________________________
Name:
Title:
INTERIOR FABRIC DESIGN, INC.,
by__________________________
Name:
Title:
INTRO EUROPE, INC.,
by__________________________
Name:
Title:
LA BARGE, INC.,
by__________________________
Name:
Title:
<PAGE>
70
LEXINGTON FURNITURE
INDUSTRIES, INC.,
by__________________________
Name:
Title:
MAITLAND-SMITH, INC.,
by__________________________
Name:
Title:
MARBRO LAMP COMPANY,
by__________________________
Name:
Title:
RAMM, SON & CROCKER, INC.,
by__________________________
Name:
Title:
ROBERT ALLEN FABRICS, INC.,
by__________________________
Name:
Title:
<PAGE>
71
ROBERT ALLEN FABRICS OF N.Y.,
INC.,
by__________________________
Name:
Title:
SUNBURY TEXTILE MILLS, INC.,
by__________________________
Name:
Title:
UNIVERSAL FURNITURE
INDUSTRIES, INC.,
by__________________________
Name:
Title:
UNIVERSAL FURNITURE LIMITED,
by__________________________
Name:
Title:
EXHIBIT 12
MASCO HOME FURNISHINGS GROUP
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------
PRO FORMA
DECEMBER 31, -----------------------
------------------------------------------ JUNE 30, DECEMBER 31, JUNE 30,
1991 1992 1993 1994 1995 1996 1995 1996
------ ------ ------ ------ ------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS BEFORE INCOME
TAXES AND FIXED CHARGES:
Income (loss) before
income taxes............. $(53.4) $(23.9) $(16.7) $(16.3) $(11.8) $ 2.3 $ 53.6 $ 26.2
Deduct/add equity in
undistributed (earnings)
loss of
fifty-percent-or-less
owned companies......... 0.1 -- (0.1) 1.8 1.5 0.7 1.5 0.7
Add interest on
indebtedness............. 86.0 84.1 82.7 87.1 94.8 44.5 65.6 32.4
Add one-quarter rentals... 3.6 5.4 5.5 4.8 5.4 2.6 5.4 2.6
------ ------ ------ ------ ------ -------- ------------ --------
Earnings before income
taxes and fixed
charges............. $ 36.3 $ 65.6 $ 71.4 $ 77.4 $ 89.9 $ 50.1 $126.1 $ 61.9
------ ------ ------ ------ ------ -------- ------------ --------
------ ------ ------ ------ ------ -------- ------------ --------
FIXED CHARGES:
Interest on indebtedness.. $ 88.6 $ 84.7 $ 83.5 $ 88.2 $ 95.9 $ 45.0 $ 66.7 $ 32.9
One-quarter rentals....... 3.6 5.4 5.5 4.8 5.4 2.6 5.4 2.6
------ ------ ------ ------ ------ -------- ------------ --------
$ 92.2 $ 90.1 $ 89.0 $ 93.0 $101.3 $ 47.6 $ 72.1 $ 35.5
Ratio of earnings to fixed
charges.................. (a) (a) (a) (a) (a) 1.1 1.8 1.7
</TABLE>
- -------------------
(a) Earnings were insufficient to cover fixed charges by $55.9, $24.5, $17.6,
$15.6 and $11.4 for the years ended December 31, 1991 through 1995,
respectively.
EXHIBIT 21
----------
SUBSIDIARIES OF THE COMPANY
---------------------------
LIFESTYLE HOLDINGS LTD. (DE)
Ametex Fabrics, Inc. (DE)
Ametex U.K. Limited (United Kingdom)
Ametex Sarl (France)
Green & Kirk Limited (United Kingdom)
Herbert Green (Silsden) Ltd. (United Kingdom)
The Berkline Corporation (DE)
Berkline, Inc. (Quebec)
Drexel Heritage Furnishing Incorporated (NY)
D-H Retail Space Inc. (DE)
Drexel Heritage Advertising, Inc. (DE)
Drexel Heritage Home Inspirations, Inc. (NC)
Hanhill (Great Britain) Limited (England)
Henredon Furniture Industries, Inc. (NC)
Henredon Transportation Co. (NC)
Maitland-Smith Fine Furnishings Ltd. (Hong Kong)
P.T. Maitland-Smith Indonesia (Indonesia)
Interior Fabric Design, Inc. (NY)
Intro Europe, Inc. (NC)
LaBarge, Inc. (MI)
Lexington Furniture Industries, Inc. (NC)
LFI Receivables Corporation (DE)
LFI Servicing Corporation (DE)
Maitland-Smith, Inc. (NC)
Maitland-Smith Asia Holdings Limited (Vanuatu)
Cebu Agency Limited (Hong Kong)
Cebu Agency Ltd. - Cebu Branch (Philippines)
Design Agency Limited (Hong Kong)
Design Agency Ltd. - Cebu Branch (Philippines)
Maitland-Smith Ltd. (Hong Kong)
Maitland-Smith Cebu Inc. (Philippines)
Maitland-Smith Pacific Ltd. (Vanuatu)
Maitland-Smith Philippines, Inc. (Philippines)
Mandaue Holdings Incorporated (Philippines)
Perabut Bermutu (L) Bhd. (Labuan)
Marbro Lamp Company (CA)
Ramm, Son & Crocker, Limited (England)
Ramm, Son & Crocker, Inc. (NY)
Robert Allen Fabrics, Inc. (DE)
<PAGE>
Robert Allen Fabrics (Canada) Ltd. (Canada)
Robert Allen Fabrics of N.Y., Inc. (DE)
Sunbury Textile Mills, Inc. (DE)
Universal Furniture Limited (DE)
Universal Furniture Industries, Inc. (DE)
Blue Mountain Trucking Corporation (MS)
Custom Truck Tires, Inc. (MS)
Benchcraft (UK) Limited (United Kingdom)
Del Mar Furniture Industries (Singapore) Pte. Ltd. (Singapore)
H.K.T. (Malaysia) Sdn. Bhd. (Malaysia)
Hong Kong Teakwood Works Limited (Hong Kong)
Hong Kong Teakwood Works (Singapore) Pte. Ltd. (Singapore)
Hong Kong Teakwood Works (Taiwan) Limited (Taiwan)
Log and Lumber Products (Singapore) Pte. Ltd. (Singapore)
Rigel Enterprises Limited (Hong Kong)
Shin Shin Wood Products Co. Ltd. (Taiwan)
Sterling Home Furnishings (Singapore) Pte. Ltd. (Singapore)
Sterling Home Furnishings (Taiwan) Ltd. (Taiwan)
Sterling Home Furnishings (Thailand) Ltd. (Thailand)
Syarikat Malaysia Wood Industries Sdn. Bhd. (Malaysia)
Teakwood Property Development Ltd. (Hong Kong)
Teakwood (U.K.) Ltd. (United Kingdom)
Pilliod (U.K.) Limited (United Kingdom)
Universal Furniture Industries (U.K.) Ltd. (United Kingdom)
Universal Furniture Industries (Australia) Pty Ltd. (Australia)
Universal Furniture Industries (D) GmbH (Germany)
Universal Furniture Industries (Scandinavia) AB (Sweden)
Universal Furniture (Japan) Ltd. (Japan)
Universal Furniture (Taiwan) Co. Ltd. (Taiwan)
Universal Furniture (Thailand) Co. Ltd. (Thailand)
Universal Furniture Industries (Malaysia) Sdn. Bhd. (Malaysia)
Universal Furniture (Europe) AB (Sweden)
Universal Woodfloor (Europe) GmbH (Germany)
UFL Management Services Pte. Ltd. (Singapore)
World Wide Furniture Sales, Inc. (British Virgin Islands)
Xin Jia Po Huan Mei Furniture Ltd. (Hong Kong)
Universal Furniture (Tianjin) Co. Ltd. (China)
Universal Furniture (Guangzhou) Co. Ltd. (China)
Universal Furniture (Xian) Co. Ltd. (China)
Universal Furniture (Fuzhou) Co. Ltd. (China)
Dixie Furniture Company Incorporated (DE)
Henry Link Corporation (DE)
Link Taylor Corporation (DE)
Young-Hinkle Corporation (DE)
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
our reports dated March 1, 1996, except for the last Note for which the date is
August 5, 1996, on our audits of the financial statements and financial
statement schedule of the Masco Home Furnishings Group. We also consent to the
reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Detroit, Michigan
September 12, 1996
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated August 5, 1996, on our audit of the balance sheet of Lifestyle
Furnishings International Ltd. We also consent to the reference to our firm
under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Greensboro, North Carolina
September 12, 1996
EXHIBIT 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305 (B) (2)
-------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
ONE STATE STREET, NEW YORK, NEW YORK 10004
(Address of principal executive offices) (Zip code)
</TABLE>
MAX VOLMAR, VICE PRESIDENT
IBJ SCHRODER BANK & TRUST COMPANY
ONE STATE STREET
NEW YORK, NEW YORK 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
(Exact name of obligor as specified in its charter)
DELAWARE 56-1977928
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 NATIONAL HIGHWAY 27360
THOMASVILLE, NC (Zip code)
(Address of principal executive office)
10- 7/8% Senior Subordinated Notes due 2006
(Title of 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.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities
of the trustee:
AS OF SEPTEMBER 11, 1996
- ----------------------------------------------------------------------------
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
- -------------------------- -------------------
Not Applicable
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following
information:
(a) Title of the securities outstanding under each such other indenture
Not Applicable
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310 (b) (1) of
the Act arises as a result of the trusteeship under any such other
indenture, including a statement as to how the indenture securities will
rank as compared with the securities issued under such other indenture.
Not Applicable
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the nature of
each such connection.
Not Applicable
1
<PAGE>
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner, and
executive officer of the obligor:
AS OF SEPTEMBER 11, 1996
- --------------------------------------------------------------------------------
COL. D
COL. C PERCENT OF VOTING
COL. A COL. B AMOUNT OWNED SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS BENEFICIALLY AMOUNT GIVEN IN COL. C
- ----------------- --------------- ------------- --------------------------
- ----------------- --------------- ------------- --------------------------
Not Applicable
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner and executive officer of each such underwriter:
AS OF SEPTEMBER 11, 1996
- --------------------------------------------------------------------------------
COL. D
COL. C PERCENT OF VOTING
COL. A COL. B AMOUNT OWNED SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS BENEFICIALLY AMOUNT GIVEN IN COL. C
- ----------------- --------------- ------------- --------------------------
- ----------------- --------------- ------------- --------------------------
Not Applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by
the trustee:
AS OF SEPTEMBER 11, 1996
- --------------------------------------------------------------------------------
COL. C
AMOUNT OWNED
BENEFICIALLY
OR HELD AS
COLLATERAL COL. D
SECURITY FOR PERCENT OF VOTING
COL. A COL. B OBLIGATIONS SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS IN DEFAULT AMOUNT GIVEN IN COL. C
- ----------------- --------------- ------------- --------------------------
- ----------------- --------------- ------------- --------------------------
Not Applicable
2
<PAGE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of such
underwriter any of which are so owned or held by the trustee:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 11, 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
COL. C
AMOUNT OWNED COL. D
COL. A BENEFICIALLY OR HELD AS PERCENT OF VOTING
NAME OF COL. B COLLATERAL SECURITY FOR SECURITIES REPRESENTED BY
OWNER TITLE OF CLASS OBLIGATIONS IN DEFAULT AMOUNT GIVEN IN COL. C
- ---------- --------------- ------------------------ --------------------------
- ---------- --------------- ------------------------ --------------------------
Not Applicable
</TABLE>
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITYHOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge
of the trustee (1) owns 10 percent or more of the voting securities of the
obligor or (2) is an affiliate, other than a subsidiary, of the obligor,
furnish the following information as to the voting securities of such
person:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 11, 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
COL. C
AMOUNT OWNED COL. D
COL. A BENEFICIALLY OR HELD AS PERCENT OF VOTING
NAME OF COL. B COLLATERAL SECURITY FOR SECURITIES REPRESENTED BY
OWNER TITLE OF CLASS OBLIGATIONS IN DEFAULT AMOUNT GIVEN IN COL. C
- ---------- --------------- ------------------------ --------------------------
- ---------- --------------- ------------------------ --------------------------
Not Applicable
</TABLE>
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of
the trustee, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of securities of
such any of which are so owned or held by the trustee:
AS OF SEPTEMBER 11, 1996
- ----------------------------------------------------
COL. A
NATURE OF COL. B COL. C
INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE
- ---------------- ------------------- ---------
- ---------------- ------------------- ---------
Not Applicable
3
<PAGE>
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 11, 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
COL. C
AMOUNT OWNED COL. D
COL. A BENEFICIALLY OR HELD AS PERCENT OF VOTING
NAME OF COL. B COLLATERAL SECURITY FOR SECURITIES REPRESENTED BY
OWNER TITLE OF CLASS OBLIGATIONS IN DEFAULT AMOUNT GIVEN IN COL. C
- ---------- --------------- ------------------------ --------------------------
- ---------- --------------- ------------------------ --------------------------
Not Applicable
</TABLE>
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such default.
Not Applicable
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there
has been a default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such default.
Not Applicable
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not Applicable
ITEM 15. FOREIGN TRUSTEES.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
Not Applicable
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
<TABLE>
<S> <C>
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as amended to date. (See
Exhibit 1A to Form T-1, Securities and Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the Trustee to Commence Business (Included
in Exhibit I above).
*3. A copy of the Authorization of the Trustee, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the Trustee, as amended to date (See Exhibit 4 to
Form T-1, Securities and Exchange Commission File No. 22-19146).
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
5. A copy of each Indenture referred to in Item 4, if the Obligor is in default. Not
Applicable.
6. The consent of the United States institutional trustee required by Section 321(b) of
the Act.
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.
</TABLE>
- ------------
* The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the copy
of the Exhibit heretofore filed with the Securities and Exchange Commission,
to which there have been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base responsive answers to Item 2, the answer to said
Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated in
Item 13, the obligor is not in default under any indenture under which the
applicant is trustee.
5
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, IBJ Schroder Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 11th day of September, 1996.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ MAX VOLMAR
--------------------------
Max Volmar
Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the proposed issue of Lifestyle Furnishings
International Ltd., we hereby consent that reports of examinations by Federal,
State, Territorial, or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By /s/ MAX VOLMAR
...................................
Max Volmar
Vice President
Dated: September 11, 1996
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<S> <C> <C>
ASSETS
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin.......... $ 39,834
Interest-bearing balances................................... $ 236,748
Securities: Held to Maturity.................................. $ 173,034
Available-for-sale............................................ $ 35,882
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries and in IBFs:
Federal Funds sold.......................................... $ 36,968
Securities purchased under agreements to resell............. $ -0-
Loans and lease financing receivables:
Loans and leases, net of unearned income.................... $1,668,191
LESS: Allowance for loan and lease losses................... $ 54,288
LESS: Allocated transfer risk reserve....................... $ -0-
Loans and leases, net of unearned income, allowance, and
reserve.................................................... $1,613,903
Assets held in trading accounts............................... $ 500
Premises and fixed assets..................................... $ 7,413
Other real estate owned....................................... $ 397
Investments in unconsolidated subsidiaries and associated
companies.................................................... $ -0-
Customers' liability to this bank on acceptances
outstanding.................................................. $ 223
Intangible assets............................................. $ -0-
Other assets.................................................. $ 55,007
TOTAL ASSETS............................................ $2,199,909
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<S> <C> <C>
LIABILITIES
Deposits:
In domestic offices......................................... $ 652,676
Noninterest-bearing....................................... $ 278,082
Interest-bearing.......................................... $ 374,594
In foreign offices, Edge and Agreement subsidiaries, and
IBFs....................................................... $ 893,475
Noninterest-bearing....................................... $ 15,577
Interest-bearing.......................................... $ 877,898
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs:
Federal Funds purchased..................................... $ 212,000
Securities sold under agreements to repurchase.............. $ -0-
Demand notes issued to the U.S. Treasury...................... $ 48,606
Trading Liabilities........................................... $ 293
Other borrowed money:
a) With original maturity of one year or less............... $ 102,049
b) With original maturity of more than one year............. $ 3,000
Mortgage indebtedness and obligations under capitalized
leases....................................................... $ -0-
Bank's liability on acceptances executed and outstanding...... $ 223
Subordinated notes and debentures............................. $ -0-
Other liabilities............................................. $ 74,608
TOTAL LIABILITIES....................................... $1,986,930
Limited life preferred stock and related surplus.............. $ -0-
EQUITY CAPITAL
Perpetual preferred stock..................................... $ -0-
Common Stock.................................................. $ 29,649
Surplus....................................................... $ 217,008
Undivided profits and capital reserves........................ $ (34,414)
Plus: Net unrealized gains (losses) on marketable equity
securities................................................... $ 736
Cumulative foreign currency translation adjustments........... $ -0-
TOTAL EQUITY CAPITAL.................................... $ 212,979
TOTAL LIABILITIES AND EQUITY CAPITAL.................... $2,199,909
</TABLE>
3
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
FINANCIAL STATEMENTS FOR YEARS 1994 & 1995 AND FROM THE UNAUDITED COMBINED
FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1994
<PERIOD-END> JUN-30-1996 DEC-31-1995 DEC-31-1994
<CASH> 12,050 17,310 24,710
<SECURITIES> 0 0 0
<RECEIVABLES> 335,450 334,420 317,610
<ALLOWANCES> 9,700 9,000 7,700
<INVENTORY> 568,160 559,940 570,330
<CURRENT-ASSETS> 957,990 955,100 964,300
<PP&E> 757,200 746,380 703,730
<DEPRECIATION> 278,730 262,280 237,330
<TOTAL-ASSETS> 1,893,600 1,912,970 1,919,080
<CURRENT-LIABILITIES> 217,720 205,150 194,440
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 1,600,100 1,630,100 1,644,710
<TOTAL-LIABILITY-AND-EQUITY> 1,893,600 1,912,970 1,919,080
<SALES> 981,120 1,992,610 1,897,480
<TOTAL-REVENUES> 981,120 1,992,610 1,897,480
<CGS> 741,960 1,500,990 1,434,030
<TOTAL-COSTS> 741,960 1,500,990 1,434,030
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 43,730 92,470 84,840
<INCOME-PRETAX> 2,330 (11,800) (16,270)
<INCOME-TAX> 4,930 6,090 6,560
<INCOME-CONTINUING> (2,600) (17,890) (22,830)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 0 0 0
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1996,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 7/8% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
FOR INFORMATION BY TELEPHONE: (212) 858-2103
<TABLE>
<CAPTION>
By Registered or Certified Mail: By Hand or Overnight Courier:
- ------------------------------------------ ------------------------------------------
<S> <C>
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attention: Securities Processing Window,
Attention: Reorganization Operations Subcellar One (SC-1)
Department
By Facsimile: (212) 858-2611
Confirm by telephone:
(212) 858-2103
(Originals of all documents sent by facsimile should be send
promptly by registered or certified mail, by hand or by overnight courier)
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
The undersigned acknowledges receipt of the Prospectus dated , 1996 (the
"Prospectus") of LIFESTYLE FURNISHINGS INTERNATIONAL LTD. (the "Company") and
this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 10 7/8% Senior Subordinated Notes due 2006 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus is a part, for each $1,000 principal amount of its outstanding 10
7/8% Senior Subordinated Notes due 2006 (the "Old Notes"), of which $200,000,000
principal amount is outstanding, upon the terms and conditions set forth in the
Prospectus. Other capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
<PAGE>
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Interest on the New Notes will accrue from the last interest payment
date on which interest was paid on the Old Notes surrendered in exchange
therefor or, if no interest has been paid on the Old Notes, from the date of
original issue of the Old Notes. Holders of Old Notes accepted for exchange will
be deemed to have waived the right to receive any other payments or accrued
interest on the Old Notes. The Company reserves the right, at any time or from
time to time, to extend the Exchange Offer at its discretion, in which event the
term "Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. The Company shall notify holders of the Old Notes of any
extension by means of a press release or other public announcement prior to 9:00
A.M., New York City time, on the next business day after the previously
scheduled Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Old Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer--Procedures for Tendering" by any financial institution that is a
participant in DTC and whose name appears on a security position listing as the
owner of Old Notes; or (iii) tender of Old Notes is to be made according to the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery." DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE
DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
Holder; or (ii) whose Old Notes are held of record by DTC who desires to deliver
such old Notes by book-entry transfer at DTC. The undersigned has completed,
executed and delivered this Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the Exchange Offer.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 11 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<CAPTION>
DESCRIPTION OF 10 7/8% SENIOR SUBORDINATED NOTES DUE 2006 (OLD NOTES)
AGGREGATE
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
NAME(S) AND ADDRESS(ES) OF REPRESENTED TENDERED (IF
REGISTERED HOLDER(S) CERTIFICATE BY LESS
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) THAN ALL)**
<S> <C> <C> <C>
Total
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)." If the space provided
above is inadequate, list the certificate numbers and principal amounts on
a separate signed schedule and affix the list to this Letter of
Transmittal. The minimum permitted tender is $1,000 in principal amount of
Old Notes. All other tenders must be integral multiples of $1,000.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for exchange, or New Notes issued in exchange for Old
Notes accepted for exchange, are to be issued in the name of someone other than
the undersigned, or if the Old Notes tendered by book-entry transfer that are
not accepted for exchange are to be credited to an account maintained by DTC.
Issue certificate(s) to:
Name............................................................................
(PLEASE PRINT)
Address.........................................................................
................................................................................
(INCLUDE ZIP CODE)
................................................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for exchange, or New Notes issued in exchange for Old
Notes accepted for exchange, are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown above.
Mail to:
Name............................................................................
(PLEASE PRINT)
Address.........................................................................
................................................................................
(INCLUDE ZIP CODE)
................................................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:..............................................
DTC Book-Entry Account No.:.................................................
Transaction Code No.:.......................................................
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s):............................................
Window Ticket Number (if any):..............................................
Date of Execution of Notice of Guaranteed Delivery:.........................
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number: ..................... Transaction Code Number:.............
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:.......................................................................
Address:....................................................................
....................................................................
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Old Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Old Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company and as Trustee under the Indenture for the Old
Notes and New Notes) with respect to the tendered Old Notes with full power of
substitution to (i) deliver certificates for such Old Notes to the Company, or
transfer ownership of such Old Notes on the account books maintained by DTC and
deliver all accompanying evidence of transfer and authenticity to, or upon the
order of, the Company and (ii) present such Old Notes for transfer on the books
of the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
subject to the conditions of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the Holder receiving such New Notes, whether or not such person is
the Holder, that neither the Holder nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such New
Notes and that neither the Holder nor any such other person is an "affiliate,"
as defined in Rule 405 under the Securities Act, of the Company or any of its
subsidiaries.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the New Notes issued in exchange for the Old Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangements with any person to participate in the distribution of such New
Notes. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Notes
tendered hereby. All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns, trustees in bankruptcy or other legal
representatives of the undersigned. This tender may be withdrawn only in
accordance with the procedures set forth in "The Exchange Offer--Withdrawal
Rights" section of the Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except as noted below with respect to tenders through DTC),
without expense, to the undersigned at the address shown below or at a different
address as may be indicated under "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
<PAGE>
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged in the name(s) of the undersigned (or in either such event in the case
of the Old Notes tendered by DTC, by credit to the undersigned's account, at
DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and any certificates for Old
Notes not tendered or not exchanged (and accompanying documents, as appropriate)
to the undersigned at the address shown below the undersigned's signature(s),
unless, in either event, tender is being made through DTC. In the event that
both "Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and return any Old Notes not
tendered or not exchanged in the name(s) of, and send said certificates to, the
person(s) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Payment Instructions" and "Special Delivery
Instructions" to transfer any Old Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i) whose Old
Notes are not immediately available or (ii) who cannot deliver their Old Notes,
this Letter of Transmittal or any other documents required hereby to the
Exchange Agent, or cannot complete the procedure for book-entry transfer, prior
to the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of the Letter of Transmittal printed below.
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X
............................................. ............................
DATE
............................................. ............................
SIGNATURE(S) OF REGISTERED HOLDER(S) DATE
OR AUTHORIZED SIGNATORY
Area Code and Telephone Number:.............
</TABLE>
The above lines must be signed by the registered Holder(s) of
Old Notes as their name(s) appear(s) on the Old Notes or, if the
Old Notes are tendered by a participant in DTC, as such
participant's name appears on a security position listing as the
owner of Old Notes, or by person(s) authorized to become
registered Holder(s) by a properly completed bond power from the
registered Holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of
Transmittal relates are held of record by two or more joint
Holders, then all such Holders must sign this Letter of
Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or
representative capacity, such person must (i) set forth his or her
full title below and (ii) unless waived by the Company, submit
evidence satisfactory to the Company of such person's authority as
to act. See Instruction 4 regarding the completion of this Letter
of Transmittal printed below.
<TABLE>
<S> <C>
Name(s): .......................................................................
(PLEASE PRINT)
Capacity: .......................................................................
Address: .......................................................................
(INCLUDE ZIP CODE)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
.......................................................................
(AUTHORIZED SIGNATURE)
.......................................................................
(TITLE)
.......................................................................
(NAME OF FIRM)
.......................................................................
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA
CODE) OF FIRM)
Dated:..........................................................., 1996
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This
Letter of Transmittal is to be completed by noteholders, either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile hereof) and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at the address set
forth herein on or prior to the Expiration Date, or the tendering holder must
comply with the guaranteed delivery procedures set forth below. Old Notes
tendered hereby must be in denominations of principal amount that are integral
multiples of $1,000.
Noteholders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution
(as defined in Instruction 4 below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Notes,
or a Book-Entry Confirmation, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter of Transmittal, must be received by
the Exchange Agent within five NYSE trading days after the date of execution of
the Notice of Guaranteed Delivery.
The method of delivery of this Letter of Transmittal, the Old Notes and all
other required documents is at the election and risk of the tendering holders,
but the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Old Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit the
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offer" section in the Prospectus.
2. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. Any beneficial holder of Old Notes who is not the registered
holder and who wishes to tender should arrange with the registered holder to
execute and deliver this Letter of Transmittal on his or her behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
or her Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such holder's name or obtain a properly completed bond power
form the registered holder.
<PAGE>
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering holder should fill in the principal amount tendered
in the fourth column of the box entitled "Description of 10 7/8% Senior
Subordinated Notes due 2006 (Old Notes)" above. The entire principal amount of
Old Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old Notes is
not tendered, then Old Notes for the principal amount of Old Notes not tendered
and a certificate or certificates representing New Notes issued in exchange for
any Old Notes 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 of Transmittal, promptly after the Old Notes are accepted
for exchange.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; POWERS OF ATTORNEY AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder of the Old Notes tendered hereby, the signature must
correspond exactly with the name as written on the face of the certificates
without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the registered holder or
holders of the Old Notes specified herein and tendered hereby, no endorsements
of certificates or separate powers of attorney are required. If, however, the
New Notes are to be issued, or any untendered Old Notes are to be reissued, to a
person other than the registered holder, then endorsements of any certificates
transmitted hereby or separate powers of attorney are required. Signatures on
such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names on the registered
holder or holders appear(s) on the certificate(s) and signatures on such
certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
Endorsements on certificates for Old Notes or signatures on powers of
attorney required by this Instruction 4 must be guaranteed by an eligible
guarantor institution that is a member or participant in the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Program, the Stock Exchange Medallion Program, or by an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended (collectively "Eligible Institutions").
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Old Notes are tendered (i) by a registered holder of Old
Notes (which term, for purposes of the Exchange Offer, includes any participant
in the Book-Entry Transfer Facility system whose name appears on a security
position listing as the holder of such Old Notes) who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
this Letter of Transmittal, or (ii) for the account of an Eligible Institution.
<PAGE>
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal of Transmittal (or in the case of
tender of Old Notes through DTC, if different from DTC). In the case of issuance
in a different name, the taxpayer identification or social security number of
the person named must also be indicated. Noteholders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such noteholder may
designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name and address of the person signing this
Letter of Transmittal.
6. TAX IDENTIFICATION NUMBER. United States federal income tax law may
require that a holder whose offered Old Notes are accepted for exchange provide
the Company (as payer) with his, her or its correct Taxpayer Identification
Number ("TIN"), which, in the case of an exchanging holder who is an individual,
is his or her social security number. If the Company is not provided with the
correct TIN or an adequate basis for exemption, such holder may be subject to a
$50 penalty imposed by the Internal Revenue Service (the "IRS"), and payments
made with respect to the Notes may be subject to backup withholding at a 31%
rate. If withholding results in an overpayment of taxes, a refund may be
obtained. Exempt holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
See the enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9."
To prevent backup withholding, each exchanging holder should provide his,
her or its correct TIN by completing the Substitute Form W-9 enclosed herewith,
certifying that the TIN provided is correct and as to certain other matters. If
a foreign individual qualifies as an exempt recipient, such holder should submit
a Form W-8 signed under penalty of perjury attesting to such exempt status. Such
forms may be obtained from the Exchange Agent. If the Old Notes are in more than
one name or are not in the name of the actual owner, consult the Substitute Form
W-9 for information on which TIN to report.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or on any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter of Transmittal, shall waive any right to receive notice
of the acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
10. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance for additional copies of the Prospectus, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be directed to the Exchange Agent at
the address specified in the Prospectus.
<PAGE>
(DO NOT WRITE IN THE SPACE BELOW)
<TABLE>
<S> <C> <C> <C>
CERTIFICATE OLD NOTES OLD NOTES
SURRENDERED TENDERED ACCEPTED
</TABLE>
Delivery Prepared by
- -------------------------------- Checked By ------------- Date --------------
<PAGE>
<TABLE>
<C> <S> <C>
PAYER'S NAME: LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
SUBSTITUTE Name (if joint names, list first and circle the name of the person or
FORM W-9 entity whose number you enter in Part 1 below. See instructions if your
name has changed.)
DEPARTMENT OF THE TREASURY Address
INTERNAL REVENUE SERVICE
City, state and ZIP code
List account number(s) here (optional)
PART 1--PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION Social security
NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY number
SIGNING AND DATING BELOW. or TIN
Part 2--Check the box if you are NOT subject to backup withholding 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, (2) the
Internal Revenue Service has notified you that you are no longer subject to
backup withholding or (3) you are exempt from backup withholding. / /
Payer's Request for TIN CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I PART 3--
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM AWAITING
IS TRUE, CORRECT AND COMPLETE. TIN / /
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 NOTES. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OR SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------ ----------------------------------------------------
GIVE THE GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF-- FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------ ----------------------------------------------------
<C> <S> <C> <C> <C> <C>
1. An individual's The individual 9. A valid trust, estate The legal entity (do
account or pension trust not furnish the
identifying number of
2. Two or more The actual owner of the personal
individuals (joint the account or, if representative or
account) combined funds, any trustee unless the
one of the legal entity itself is
individuals(1) not designated in the
account title.)(5)
3. Husband and wife The actual owner of
(joint account) the account or, if
joint funds, either
person(1) 10. Corporate account The corporation
4. Custodian account of The minor(2) 11. Religious, The organization
a minor (Uniform Gift charitable, or
to Minors Act) educational
organization account
5. Adult and minor The adult or, if the
(joint account) minor is the only 12. Partnership account The partnership
contributor, the held in the name of
minor(1) the business
6. Account in the name The ward, minor, or 13. Association, club, or The organization
of guardian or incompetent person(3) other tax-exempt
committee for a organization
designated ward,
minor or incompetent
person 14. A broker or The broker or nominee
registered nominee
7. A The usual revocable
savings trust 15. Account with the The public entity
account (grantor is Department of
also trustee) Agriculture in the
name of a public
B So-called trust The grantor-trustee(1) entity (such as a
account that is not The actual owner(1) State or local
a legal and valid government, school
trust under State district, or prison)
law that receives
agricultural program
8. Sole proprietorship The owner(4) payments
account
- ------------------------------------------------ ----------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
.. A corporation.
.. A financial institution.
.. An organization exempt from tax under section 501(a), or an individual
retirement plan.
.. The United States or any agency or instrumentality thereof.
.. A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
.. A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
.. An international organization or any agency, or instru mentality thereof.
.. A registered dealer in securities or commodities reg istered in the U.S. or a
possession of the U.S.
.. A real estate investment trust.
.. A common trust fund operated by a bank under sec tion 584(a).
.. An exempt charitable remainder trust, or a non- exempt trust described in
section 4947(a)(1).
.. An entity registered at all times under the Investment Company Act of 1940.
.. A foreign central bank of issue.
Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report for payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
10 7/8% SENIOR SUBORDINATED NOTES DUE 2006
OF
LIFESTYLE FURNISHINGS INTERNATIONAL LTD.
As set forth in the Prospectus dated , 1996 (the "Prospectus"), of LIFESTYLE
FURNISHINGS INTERNATIONAL LTD. (the "Company") and in the accompanying Letter of
Transmittal and instructions thereto (the "Letter of Transmittal"), this form or
one substantially equivalent hereto must be used to accept the Company's
Exchange Offer (the "Exchange Offer") to exchange all of its outstanding 10 7/8%
Senior Subordinated Notes due 2006 (the "Old Notes") for is 10 7/8% Senior
Subordinated Notes due 2006, which have been registered under the Securities Act
of 1933, as amended, if certificates for the Old Notes are not immediately
available or if the Old Notes, the Letter of Transmittal or any other documents
required thereby cannot be delivered to the Exchange Agent, or the procedure for
book-entry transfer cannot be completed, prior to 5:00 P.M., New York City time,
on the Expiration Date (as defined in the Prospectus). This form may be
delivered by an Eligible Institution by hand or transmitted by facsimile
transmission, overnight courier or mail to the Exchange Agent as set forth
below. Capitalized terms used but not defined herein have the meaning given to
them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To: IBJ Schroder Bank & Trust Company, the Exchange Agent
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By Registered or Certified Mail: By Hand or Overnight Courier:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attention: Securities Processing Window,
Attention: Reorganization Operations Subcellar One (SC-1)
Department
</TABLE>
By Facsimile:
(212) 858-2611
Confirm by telephone:
(212) 858-2103
(Originals of all documents sent by facsimile should be sent promptly
by registered or certified mail, by hand, or by overnight courier)
For Information by Telephone: (212) 858-2103
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Old Notes 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 Letter
of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to LIFESTYLE FURNISHINGS INTERNATIONAL LTD.,
a Delaware corporation (the "Company"), upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, Old Notes pursuant to the guaranteed delivery procedures
set forth in Instruction 1 of the Letter of Transmittal.
The undersigned understands that tenders of Old Notes will be accepted only
in principal amounts that are integral multiples of $1,000. The undersigned
understands that tenders of Old Notes pursuant to the Exchange Offer may not be
withdrawn after 5:00 p.m., New York City time on the business day prior to the
Expiration Date. Tenders of Old Notes may also be withdrawn if the Exchange
Offer is terminated without any Old Notes being purchased thereunder or as
otherwise provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
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Certificate No(s). for Old Notes (if Name(s) of Record Holder(s)
available)
............................................ ...........................................
............................................ ...........................................
PLEASE PRINT OR TYPE
Principal Amount of Old Notes Address....................................
............................................ ...........................................
Area Code and Tel. No......................
Signature(s)...............................
...........................................
Dated:.....................................
If Old Notes will be delivered by
book-entry transfer at the Depository Trust
Company, Depository Account No:............
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for
Old Notes or on a security position listing as the owner of Old Notes, or by
person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es)
Name(s): ......................................................................
......................................................................
Capacity: .....................................................................
Address(es):....................................................................
.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member or participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program, the
Stock Exchange Medallion Program, or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), hereby (a) represents that the above named
person(s) "own(s)" the Old Notes tendered hereby within the meaning of Rule
14e-4 under the Exchange Act, (b) represents that such tender of Old Notes
complies with Rule 14e under the Exchange Act and (c) guarantees that delivery
to the Exchange Agent of certificates for the Old Notes tendered hereby, in
proper form for transfer (or confirmation of the book-entry transfer of such Old
Notes into the Exchange Agent's Account at the Depository Trust Company,
pursuant to the procedures for book-entry transfer set forth in the Prospectus),
with delivery of a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) with any required signatures and any
other required documents, will be received by the Exchange Agent at one of its
addresses set forth above within five business days after the Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET
FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
<PAGE>
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Name of Firm............................... ...........................................
AUTHORIZED SIGNATURE
Address.................................... Name.......................................
PLEASE PRINT OR TYPE
............................................ Title......................................
Zip Code
Area Code and Tel. No...................... Date.......................................
Dated:.............................. , 1996 ...........................................
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS FORM; OLD NOTES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT
WITHIN FIVE BUSINESS DAYS AFTER THE EXPIRATION DATE.
2
