<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
- --- 1934
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended June 1, 1996 Commission File No. 0-5813
Herman Miller, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-0837640
- ---------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
855 East Main Avenue
PO Box 302
Zeeland, Michigan 49464-0302
- --------------------------------- --------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (616) 654 3000
Securities registered pursuant to Section 12(b) of the Act: None
<TABLE>
<S><C>
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.20 Par Value
----------------------------
(Title of Class)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
----
The aggregate market value of the voting stock held by "nonaffiliates" of the
registrant (for this purpose only, the affiliates of the registrant have been
assumed to be the executive officers and directors of the registrant and their
associates) as of August 5, 1996, was approximately $821,824,370 (based on
$34.00 per share which was the closing sale price in the over-the-counter
market as reported by NASDAQ).
The number of shares outstanding of the registrant's common stock, as of August
5, 1996:
Common stock, $.20 par value--24,171,805 shares outstanding.
- ---------------------------- -----------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 2, 1996, are incorporated into Part III of
this report.
<PAGE> 2
PART 1
Item 1 BUSINESS
(a) General Development of Business
The company primarily is engaged in the design, manufacture, and sale of
furniture systems and furniture, and related products and services, for
offices, and, to a lesser extent, for health-care facilities and other uses.
Through research, the company seeks to define and clarify customer needs and
problems existing in its markets and to design, through innovation where
feasible, products and systems as solutions to such problems.
Herman Miller, Inc., was incorporated in Michigan in 1905. One of the company's
major plants and its corporate offices are located at 855 East Main Avenue, PO
Box 302, Zeeland, Michigan, 49464-0302, and its telephone number is (616) 654
3000. Unless otherwise noted or indicated by the context, the term "company"
includes Herman Miller, Inc., its predecessors and subsidiaries.
(b) Financial Information About Industry Segments
A dominant portion (more than 90 percent) of the company's operations is in a
single industry segment the design, manufacture, and sale of office furniture
systems and furniture, and related products and services. Accordingly, no
separate industry segment information is presented.
(c) Narrative Description of Business
The company's principal business consists of the research, design, development,
manufacture, and sale of furniture systems and furniture, and related products
and services. Most of these systems and products are coordinated in design so
that they may be used both together and interchangeably. The company's products
and services are purchased primarily for offices, and, to a lesser extent,
health-care facilities and other uses.
The company is a leader in design and development of furniture and furniture
systems. This leadership is exemplified by the innovative concepts introduced
by the company in its modular systems known as Action Office(R), Co/Struc(R),
and Ethospace(R). Action Office, the company's series of three freestanding
office partition and furnishing systems, is believed to be the first such
system to be introduced and nationally marketed and as such popularized the
"open plan" approach to office space utilization. Co/Struc is a unique system
for storing and handling materials and supplies within health-care facilities
and laboratories. Ethospace interiors is a system of movable full- and
partial-height walls, with panels and individual wall segments that
interchangeably attach to wall framework. It includes wall-attached work
surfaces and storage/display units, electrical distribution, lighting,
organizing tools, and freestanding components. The company also offers a broad
array of seating (including Aeron(TM), Equa(TM) and Ergon(R) office chairs),
storage (including Meridian filing products), and freestanding furniture
products.
The company's products are marketed worldwide by its own sales staff. These
sales persons work with dealers, the design and architectural community, as
well as directly with end users. Seeking and strengthening the various
distribution channels within the marketplace is a major focus of the company.
Independent dealerships concentrate on the sale of Herman Miller products and a
few complementary product lines of other manufacturers. Approximately 81.1
percent of the company's sales (in the fiscal year ended June 1, 1996) were
made to or through
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<PAGE> 3
independent dealers. The remaining sales (18.9 percent) were made directly
to end-users, including federal, state, and local governments, and several
major corporations.
The company's furniture systems, seating, storage, and freestanding furniture
products, and related services are used in (1) office/institution environments
including offices and related conference, lobby and lounge areas, and general
public areas including transportation terminals; (2) health/science
environments including hospitals and other health care facilities; (3)
clinical, industrial, and educational laboratories; and (4) other environments.
In the following table, sales are classified by end-user (in millions):
New Product and Industry Segment Information
During the past 12 months, the company has not made any public announcement of,
or otherwise made public information about, a new product or a new industry
segment which would require the investment of a material amount of the
company's assets or which would otherwise result in a material cost.
Raw Materials
The company's manufacturing materials are available from a significant number
of sources within the United States, Canada, Europe, and the Far East. To date,
the company has not experienced any difficulties in obtaining its raw
materials. The raw materials used are not unique to the industry nor are they
rare.
Patents, Trademarks, Licenses, Etc.
The company has approximately 157 active United States utility patents on
various components used in its products and systems and approximately 279 active
United States design patents. Many of the inventions covered by the United
States patents also have been patented in a number of foreign countries. Various
trademarks, including the name and style "Herman Miller," and the "(Trademark)"
trademark, are registered in the United States and certain foreign countries.
The company does not believe that any material part of its business is dependent
on the continued availability of any one or all of its patents or trademarks, or
that its business would be materially adversely affected by the loss of any
thereof except the "Herman Miller," "Action Office," "Aeron," "Arrio,"
"Co/Struc," "Ergon," "Equa," "Ethospace," (and "(Trademark)" trademarks.
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<PAGE> 4
Seasonal Nature of Business
The company does not consider its business to be seasonal in nature.
Working Capital Practices
The company does not believe that it or the industry in general has any special
practices or special conditions affecting working capital items that are
significant for an understanding of the company's business.
Customer Base
No single dealer accounted for more than 2.2 percent of the company's net sales
in the fiscal year ended June 1, 1996. For fiscal 1996, the largest single
end-user customer accounted for approximately 7.9 percent of the company's net
sales with the 10 largest of such customers accounting for approximately 14.5
percent of the company's sales. The company does not believe that its business
is dependent on any single or small number of customers, the loss of which
would have a materially adverse effect upon the company.
Backlog of Orders
As of June 1, 1996, the company's backlog of unfilled orders was $156.6
million. At June 3, 1995, the company's backlog totaled $169.8 million. It is
expected that substantially all the orders forming the backlog at June 1, 1996,
will be filled during the current fiscal year. Many orders received by the
company are filled from existing raw material inventories and are reflected in
the backlog for only a short period while other orders specify delayed
shipments and are carried in the backlog for up to one year. Accordingly, the
amount of the backlog at any particular time is not necessarily indicative of
the level of net sales for a particular succeeding period.
Government Contracts
Other than standard price reduction and other provisions contained in contracts
with the United States government, the company does not believe that any
significant portion of its business is subject to material renegotiation of
profits or termination of contracts or subcontracts at the election of various
government entities.
Competition
All aspects of the company's business are highly competitive. The principal
methods of competition utilized by the company include design, product and
service quality, speed of delivery, and product pricing. The company believes
that it is the second largest office furniture manufacturer in the United
States. However, in several of the markets served by the company, it competes
with over 400 smaller companies and with several manufacturers that have
significantly greater resources and sales. Price competition remained
relatively stable in 1994 through 1996.
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<PAGE> 5
Research, Design and Development
One of the competitive strengths of the company is its research, design and
development programs. Accordingly, the company believes that its research and
design activities are of significant importance. Through research, the company
seeks to define and clarify customer needs and problems and to design, through
innovation where feasible, products and services as solutions to these customer
needs and problems. The company utilizes both internal and independent research
and design resources. Exclusive of royalty payments, approximately $24.5
million, $31.3 million, and $26.7 million was spent by the company on design
and research activities in 1996, 1995, and 1994, respectively. Royalties are
paid to designers of the company's products as the products are sold and are
not considered research and development expenditures.
Environmental Matters
The company does not believe, based on existing facts known to management, that
existing environmental laws and regulations have had or will have any material
effects upon the capital expenditures, earnings, or competitive position of the
company. Further, the company continues to rigorously reduce, recycle, and
reuse the solid wastes generated by its manufacturing processes. Its
accomplishments and these efforts have been widely recognized.
Human Resources
The company considers another of its major competitive strengths to be its
human resources. The company stresses individual employee participation and
incentives, and believes that this emphasis has helped to attract and retain a
capable work force. The company has a human resources group to provide employee
recruitment, education and development, and compensation planning and
counseling. There have been no work stoppages or labor disputes in the
company's history, and its relations with its employees are considered good.
Approximately 628 of the company's employees are represented by collective
bargaining agents, most of whom are employees of its Integrated Metal
Technology, Inc., and Herman Miller, Limited (U.K.) subsidiaries. As such,
these subsidiaries are parties to collective bargaining agreements with these
employees.
As of June 1, 1996, the company employed 6,964 full-time and 491 part-time
employees, representing a 4.7 percent increase in full-time employees and an
20.0 percent decrease in part-time employees compared with June 3, 1995. In
addition to its employee work force, the company uses purchased labor to meet
uneven demand in its manufacturing operations. Throughout the course of the
year the use of purchased labor decreased by 17.5 percent.
(d) Information About International Operations
The company's sales in international markets primarily are made to
office/institution customers. Foreign sales mostly consist of office furniture
products such as Ethospace and Action Office systems, seating, and storage
products. The company segments its internal operations into the following major
markets: Canada, Europe, Latin America, and the Asia/Pacific region. In certain
other foreign markets, the company's products are offered through licensing of
foreign manufacturers on a royalty basis.
At the present time, the company's products sold in international markets are
manufactured by wholly owned subsidiaries in the United States, United Kingdom,
Mexico, Germany, and Italy. Sales are made through wholly owned subsidiaries in
Australia, Canada, France, Germany, Italy,
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<PAGE> 6
Japan, Mexico, the Netherlands, and the United Kingdom. The company's products
are offered in the Middle East through dealers.
In several other countries, the company licenses manufacturing and selling
rights. Historically, these licensing arrangements have not required a
significant investment of funds or personnel by the company, and, in the
aggregate, have not produced material net income for the company.
Additional information with respect to operations by geographic area appears in
the note "Segment Information" of the Notes to Consolidated Financial
Statements set forth on page 37. Fluctuating exchange rates and factors beyond
the control of the company, such as tariff and foreign economic policies, may
affect future results of international operations.
Item 2 PROPERTIES
The company owns or leases facilities which are located throughout the United
States and several foreign countries, including Australia, Canada, France,
Germany, Italy, Japan, Mexico, the Netherlands, and the United Kingdom. The
location, square footage, and use of the most significant facilities at June 1,
1996, were as follows:
<TABLE>
<CAPTION>
Location
Square
Owned Locations Footage Use
--------------- ------- -------------
<S> <C> <C>
Zeeland, Michigan 749,000 Manufacturing, Warehouse, and Office
Spring Lake, Michigan 586,700 Manufacturing, Warehouse, and Office
Holland, Michigan 355,000 Manufacturing, Distribution, and Warehouse
Rocklin, California 343,600 Manufacturing and Warehouse
Roswell, Georgia 220,000 Manufacturing and Warehouse
Holland, Michigan 216,700 Design Center
Holland, Michigan 200,000 Manufacturing and Warehouse
Grandville, Michigan 214,800 Manufacturing, Warehouse, and Office
Holland, Michigan 233,500 Manufacturing, Warehouse, and Office
Leased Locations
-------------------------
Zeeland, Michigan 393,300 Manufacturing, Warehouse, and Office
Chippenham, England, U.K. 102,100 Manufacturing and Warehouse
Stone Mountain, Georgia 84,500 Manufacturing and Warehouse
Mexico City, Mexico 59,400 Manufacturing, Warehouse, and Office
</TABLE>
The company also maintains showrooms or sales offices near most major
metropolitan areas throughout North America, Europe, the Middle East,
Asia/Pacific, and South America. The company considers its existing facilities
to be in excellent condition, efficiently utilized, well suited, and adequate
for its design, production, distribution, and selling requirements.
Item 3 PENDING LEGAL PROCEEDINGS
During the second quarter ended December 2, 1995, the company's Board of
Directors authorized management to engage in settlement discussions with
Haworth. In January 1996, the company and Haworth agreed to the terms of a
settlement.
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<PAGE> 7
The lawsuit, filed in January 1992, alleged that certain electrical products,
which the company offered, infringed two patents held by Haworth. Haworth sued
Steelcase, Inc., in 1985, claiming that Steelcase's products infringed those
same two patents. In 1989, Steelcase was held to infringe the patents, and the
matter was referred to private dispute resolution to resolve the issue of
damages. The patents at issue expired prior to December 1, 1994.
Since the date of initial claim, the company has always been advised by our
patent litigation counsel that it was more likely than not to prevail on the
merits; however, the mounting legal costs, distraction of management focus, and
the uncertainty present in any litigation made this settlement something which
the company determined is in the best interest of its shareholders.
Under the settlement agreement, Herman Miller paid Haworth $44.0 million in
cash, in exchange for a complete release. The release also covers Herman
Miller's customers and suppliers. The companies have exchanged limited
covenants not to sue, with respect to certain existing and potential patent
rights. Haworth has agreed not to sue under United States Patent 4,682,984
which refers to a construction process for making storage cabinets. In
addition, Haworth has granted a limited covenant not to sue with respect to
certain potential future patent rights on a panel construction. Haworth
received a limited covenant under three United States Patents--5,038,539;
4,685,255; and 4,876,835--all relating to one of the company's system product
lines.
The company simultaneously reached a settlement with one of its suppliers. The
supplier agreed to pay Herman Miller $11.0 million and, over the next seven
years, to rebate a percentage of its sales to Herman Miller which are in excess
of current levels. The $11.0 million, plus interest, will be paid in annual
installments over a seven-year period. Herman Miller is also exploring the
possibility of claims against other third parties.
The company recorded a net litigation settlement expense of $16.5 million,
after applying previously recorded reserves and the settlement with the
supplier, in the second quarter of fiscal 1996.
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. As a result of its audits, the GSA has asserted a refund
claim under the 1982 contract for approximately $2.7 million and has other
contracts under audit review. Management has been notified that the GSA has
referred the 1988 contract to the Justice Department for consideration of a
potential civil False Claims Act case. Management disputes the audit result for
the 1982 contract and does not expect resolution of that matter to have a
material adverse effect on the company's consolidated financial statements.
Management does not have information which would indicate a substantive basis
for a civil False Claims Act case under the 1988 contract.
The company is also involved in legal proceedings and litigation in the
ordinary course of business. In the opinion of management, the outcome of such
proceedings and litigation currently pending will not materially affect the
company's consolidated financial statements.
Item 4 SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended June 1, 1996.
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<PAGE> 8
ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to Executive Officers of the company is as
follows:
<TABLE>
<CAPTION>
Year Elected an Position with
Name Age Executive Officer the Company
- --------------------- --- ----------------- -------------------------------------------------------
<S> <C> <C> <C>
James E. Christenson 49 1989 Executive Vice President, Legal Services, and Secretary
Mark L. Groulx 40 1995 Vice President of Operations
Andrew C. McGregor 46 1988 Executive Vice President, Commercial Services
Gary S. Miller 46 1984 Senior Vice President for Design and Development
Christopher A. Norman 48 1996 President, Miller SQA, Inc.
Michael A. Volkema 40 1995 President and Chief Executive Officer
Brian C. Walker 34 1996 Executive Vice President, Chief Financial Officer, and Treasurer
</TABLE>
Except as discussed in this paragraph, each of the named officers has served
the company in an executive capacity for more than five years. Mr. Groulx was
manager of Economic Evaluation Business Control at Dow Corning Corporation.
From February 1995 to May 1995, Mr. Volkema was president and chief executive
officer of Coro, Inc. (a subsidiary of Herman Miller, Inc.), and prior to May
1993 to September 1994, was president and chairman of the board of Meridian,
Inc.(a subsidiary of Herman Miller, Inc.). Mr. Norman has served as the
president of Miller SQA for the past five years. Mr. Walker was the vice
president of finance for Herman Miller, Inc., from May 1995 to March 1996, vice
president of finance and management information systems of Milcare, Inc., from
July 1994 to May 1995, and vice president of finance for Herman Miller Europe
from December 1991 to July 1994.
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<PAGE> 9
PART II
Item 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Share Price, Earnings, and Dividends Summary
Herman Miller, Inc., common stock is quoted in the NASDAQ-National Market
System (NASDAQ-NMS Symbol: MLHR). As of August 5, 1996, there were
approximately 14,000 shareholders of the company's common stock.
<TABLE>
<CAPTION>
Market Market Market Per Per
Price Price Price Share Share
Per Share and Unaudited High Low Close Earnings Dividends
----------------------- ------ ------ ------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Year Ended June 1, 1996
First quarter 26.500 21.500 26.250 .48 .13
Second quarter 32.000 25.500 31.750 .20 (1) .13
Third quarter 34.125 27.625 32.188 .47 .13
Fourth quarter 32.250 27.531 30.875 .68 .13
Year 34.125 22.000 30.875 1.83 (1) .52
Year Ended June 3, 1995
First quarter 29.375 23.500 24.000 .32 .13
Second quarter 26.750 23.375 25.188 .06 (2) .13
Third quarter 26.500 19.750 22.500 .17 .13
Fourth quarter 25.000 19.250 21.688 (.37)(3) .13
Year 29.375 19.250 21.688 .18 (2),(3) .52
</TABLE>
(1) Includes a $16.5 million pretax charge for the patent litigation in 1996.
This charge decreased net income by $10.6 million, or $.42 per share.
(2) Includes $15.5 million of pretax charges which decreased net income by $9.6
million, or $.39 per share.
(3) Includes $28.4 million of pretax charges, including restructuring charges
of $16.4 million and other charges of $12.0 million. These charges
decreased net income by $18.5 million, or $.74 per share.
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<PAGE> 10
Item 6 SELECTED FINANCIAL DATA
REVIEW OF OPERATIONS
<TABLE>
<CAPTION>
In Thousands Except Per Share Data 1996 1995 1994 1993 1992
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net Sales $1,283,931 $1,083,050 $953,200 $855,673 $804,675
Gross Margin 434,946 378,269 337,138 298,501 277,076
Gross Margin Percent 33.9 34.9 35.4 34.9 34.4
Operating Income (1,2,3,5) 74,935 9,066 61,798 43,769 1,989
Design and Research Expense 27,472 33,682 30,151 24,513 20,725
Income (Loss) Before Income 70,096 4,039 63,473 42,354 (988)
Taxes (1,2,3,5)
Net Income (Loss) (1,2,3,4,5) 45,946 4,339 40,373 22,054 (14,145)
After-Tax Return on Net Sales 3.6 .4 4.2 2.6 (1.8)
(Percent; 1,2,3,4,5)
After-Tax Return on Average
Assets (Percent, 1,2,3,4,5) 6.8 .7 7.9 4.6 (2.9)
After-Tax Return on Average
Equity (Percent, 1,2,3,4,5) 15.4 1.5 13.9 7.8 (4.8)
Cash Flow from Operating Activities 124,458 29,861 69,764 82,588 77,000
Capital Expenditures 54,429 63,359 40,347 43,387 32,024
Depreciation and Amortization 45,009 39,732 33,207 31,600 30,473
COMMON SHARE DATA
Earnings per Share (1,2,3,4,5) 1.83 .18 1.60 .88 (.56)
Cash Dividends Declared per Share .52 .52 .52 .52 .52
Common Stock Repurchased 24,162 732 25,363 8,155 10,445
Cash Dividends Paid 13,015 12,868 13,098 13,002 13,113
Common Stock Repurchased plus
Cash Dividends Paid 37,177 13,600 38,461 21,157 23,558
Average Shares and Equivalents Outstanding 25,129 24,792 25,255 24,993 25,163
Book Value per Share at Year-End 12.26 11.57 11.73 11.36 11.14
Market Price per Share at Year-End 30.875 21.688 24.875 25.625 19.000
FINANCIAL CONDITION
Total Assets 694,911 659,012 533,746 484,342 471,268
Working Capital 115,878 39,575 50,943 62,711 66,545
Current Ratio 1.53 1.15 1.29 1.43 1.48
Interest-Bearing Debt 131,710 144,188 70,017 39,877 53,975
Long-Term Debt, less current portion 110,245 60,145 20,600 21,128 29,445
Shareholders' Equity 308,145 286,915 296,325 283,942 280,082
Total Capital 418,390 347,060 316,925 305,070 309,527
Interest-Bearing Debt
to Total Capital 29.9 33.4 19.1 12.3 16.2
Interest Expense 7,910 6,299 1,828 2,089 6,879
Interest Coverage Times (1,2,3,4,5) 9.9 1.6 35.7 21.3 .9
</TABLE>
(1) Includes a $16.5 million pretax charge for the patent litigation
settlement in 1996. This charge decreased net income by $10.6 million, or
$.42 per share.
(2) Includes $43.9 million of pretax charges, including restructuring charges
of $31.9 million, and other charges of $12.0 million in 1995. These
charges decreased net income by $28.1 million, or $1.13 per share.
(3) Includes $30.2 million of pretax charges, including restructuring charges
of $25.0 million, and other charges of $5.2 million in 1992. These charges
decreased net income by $20.6 million, or $.82 per share.
(4) Includes cumulative effect of change in accounting principle of $8.0
million after-tax expense, or $.31 per share in 1992.
(5) Includes loss on extinguishment of long-term debt of $2.7 million, or
$.11 per share in 1992.
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<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
The issues discussed in management's discussion and analysis should be read in
conjunction with the company's consolidated financial statements and the
related footnotes.
OVERVIEW
The company established new records for financial performance in fiscal 1996.
Net sales, new orders, earnings per share, and cash flows from operations were
all the highest ever recorded for a fiscal year. While the results were a
significant improvement over our recent history, they were in line with the
following financial performance targets established by the management team
during 1996:
<TABLE>
<CAPTION>
Goal 1996 Actual
------- -----------
<S> <C> <C>
- Annual sales growth 15.0% 18.5%
-------------------------------------------------------------
- Annual net income growth (1) 15.0% 74.2%
-------------------------------------------------------------
- Operating expenses as a percent of
net sales (1, 2) 25.0% 26.8%
-------------------------------------------------------------
- Interest bearing debt to total capital 30.0% 29.9%
-------------------------------------------------------------
</TABLE>
(1) Excludes a $16.5 million pre-tax charge for patent
litigation settlement in 1996 and $43.9 million of pre-tax
charges for restructuring and patent litigation costs in
1995.
(2) Management established a goal of 27.9 percent for fiscal
1996 and a long-term goal of 25.0 percent by the end of
fiscal 1998.
-------------------------------------------------------------
In the future, actual performance may fall short of these goals in some years,
but over the long term, management is committed to achieving or exceeding these
goals on average.
The 1996 financial results reflect the following key factors:
- - Increased domestic and international market share
- - Acquisitions in the U.S., Canada, and Italy
- - Cost reduction and operational improvement initiatives
- - Improved management of working capital
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<PAGE> 12
REVIEW OF OPERATIONS
DOMESTIC OPERATIONS
<TABLE>
<CAPTION>
FISCAL GROWTH FISCAL GROWTH FISCAL GROWTH
In Thousands 1996 % 1995 % 1994 %
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to
unaffiliated
customers $1,043,850 +16.7% $894,455 +10.1% $812,158 +10.6%
- ---------------------------------------------------------------------------------------
Net income $ 53,977 +643.0% $ 7,265 -82.9% $ 42,374 +38.1%
- ---------------------------------------------------------------------------------------
</TABLE>
The company has gained market share in each of the past three fiscal years. As
shown above, the company's domestic sales have grown 16.7 percent in fiscal
1996, 10.1 percent in fiscal 1995, and 10.6 percent in fiscal 1994.
Comparatively, the Business and Institutional Furniture Manufacturers
Association ("BIFMA"), the office furniture trade association, reported that
United States industry sales increased approximately 4.8 percent, 9.2 percent,
and 6.9 percent in the past three fiscal years.
A key business strategy and capability has been, and continues to be, new
product design and development. The fiscal 1996 sales reflect a complete
renewal of our seating product lines. This renewal included updating our
Equa(R) and Ergon(R) product lines and adding two new award-winning products,
Aeron(R) and Ambi(R) seating. We believe that we now have the strongest work
chair product offering in the industry. The new seating products coupled
with unit volume growth in our core systems and filing product lines enabled us
to significantly increase sales in 1996 with very little change in net prices.
During 1996, we implemented a new management and business structure to enable
us to focus on two broad customer categories: those with complex needs and
those who seek value and convenience. Management believes that developing
unique capabilities to serve these two customer segments will enable the
company to grow at a faster rate than the industry.
A key component of the strategy is the development of a service business. Our
service capabilities will be primarily focused on furniture and transition
management. Our newest venture, Coro, Inc., will lead much of this initiative.
During 1996, Coro completed the acquisition of several of our privately owned
U.S. dealers. These dealers, along with privately owned dealers certified by
Coro, will be the foundation of a network of local service organizations. Each
of the transactions was immaterial on an individual basis; however, excluding
acquisitions, our domestic sales increase would have been 13.7 percent.
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<PAGE> 13
INTERNATIONAL OPERATIONS AND EXPORTS FROM THE UNITED STATES
<TABLE>
<CAPTION>
FISCAL GROWTH FISCAL GROWTH FISCAL GROWTH
In Thousands 1996 % 1995 % 1994 %
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to
affiliated
customers $240,081 +27.3% $188,595 +33.7% $141,042 +16.1%
- ---------------------------------------------------------------------------
Net income (loss) ($8,031) -174.5% ($2,926) -46.2% ($2,001) +76.8%
- ---------------------------------------------------------------------------
</TABLE>
The year-over-year growth in sales from the company's international operations
and exports from the United States was primarily due to strong growth in the
United Kingdom and the impact of acquisitions in Italy and Canada at the end of
1995. Excluding the acquisitions, net sales increased 9.2 percent. The
increase in fiscal 1995 included $26.0 million attributable to acquisitions in
Germany and Mexico. Excluding the impact of acquisitions, net sales increased
15.3 percent in 1995. The remaining increases in 1995 and 1994 were primarily
due to higher unit volume.
Industry measures for international market growth are either not as
comprehensive as BIFMA's measures for the United States market or are not
available so as to permit meaningful comparisons. However, based on anecdotal
evidence, management believes the company increased its market share in the
international market in each of the three years.
Despite the significant increases in sales in each of the past three
years, the company's international operations have continued to lose money. In
1996, the net loss increased to $8.0 million from $2.9 million in 1995 and $2.0
million in 1994. The current year loss includes pre-tax charges for the
discontinuation of two product lines in Europe ($1.6 million) and provisions
for unrealizable barter receivables in Mexico ($2.5 million). In addition, the
company recorded a charge of approximately $1.0 million to reserve deferred
tax assets associated with its Mexican operations.
While overall results of international operations and exports from the United
States were disappointing, we have continued to make progress in selected
markets. Our operating results improved in the United Kingdom, Canada, and Asia
Pacific. This is the second consecutive year in which we have been profitable
in the United Kingdom after three years of losses. The progress made in these
markets was offset by increased losses in Mexico and Italy. The poor economic
conditions in Mexico resulted in a year-over-year net sales decline of 44.0
percent. Management has taken steps to reduce operating expenses in Mexico;
however, the company has not been able to realign it resource levels at the
same rate as sales have declined. The company has not been able to leverage the
product capabilities of Herman Miller Italia in other European markets as it
had planned. Therefore, we have fallen short of management's sales volume
goals, resulting in a net loss for this operation.
Management believes the capability to serve customers around the world is an
essential component of the company's strategy. During 1996, the management team
focused its efforts on improving the results of its domestic business, which
included cost reduction and containment measures, operational improvements, and
development of a new strategic direction. Establishing a strategy and action
plan for our international operations that will improve profitability and
provide for an adequate return on our investments is management's top priority
for fiscal 1997.
-13-
<PAGE> 14
COST REDUCTION AND OPERATIONAL IMPROVEMENT INITIATIVES
<TABLE>
<CAPTION>
1996 1996 (1) 1995 1995 (2) 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross margin 33.9% 33.9% 34.9% 34.9% 35.4%
- ---------------------------------------------------------------------------------------------------
Operating expenses 28.0% 26.8% 34.1% 30.0% 28.9%
- ---------------------------------------------------------------------------------------------------
Operating income 5.8% 7.1% .8% 4.9% 6.5%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes $16.5 million pre-tax charge for settlement of alleged patent
infringement.
(2) Excludes $31.9 million pre-tax charge for restructuring and $12.0 million
pre-tax charge for patent litigation costs.
In fiscal 1995, the company implemented two restructuring initiatives and
recorded $31.9 million in pre-tax restructuring charges. The first initiative
reconfigured the company's manufacturing and logistical operations. The
reconfiguration enabled the company to develop the capability to process and
direct ship customer orders in their entirety, rather than in stages, which
requires additional warehousing and transportation between stages. The
manufacturing changes also included transferring production of the company's
wood casegoods product line to Geiger International and closing our
manufacturing facility in North Carolina.
Management estimates that, in the fourth quarter of 1996, 44.0 percent of the
company's domestic sales were shipped directly to the customer compared with
24.0 percent in fiscal 1995. The manufacturing and logistical changes and
improved performance in meeting required delivery dates were the key reasons
the company was able to reduce the days sales outstanding in the sum of
accounts receivable and inventory to 75.6 days compared with 91.2 days and 80.9
days at the end of 1995 and 1994, respectively. In addition, the manufacturing
improvements have enabled the company to reduce the time required between the
receipt of a customer's order and the shipment of the product. This has enabled
us to respond more quickly to changes in demand.
Management also believes the reconfiguration significantly reduced the
company's fixed manufacturing overhead. However, the benefits of the
improvements were offset by unfavorable changes in discounts given to
customers. Gross margins declined to 33.9 percent in 1996, from 34.9 percent in
1995 and 35.4 percent in 1994. Gross margins have been relatively stable for
the past five quarters (refer to table below). The year-over-year decline was
primarily attributable to a decline in the third quarter of 1995, as a result
of a 3.5 percent increase in raw material prices. Raw material prices were
stable or declined slightly in fiscal 1996. Management expects gross margins to
be at or near 34 percent for fiscal 1997.
HISTORIC GROSS MARGIN TRENDLINE
1st Quarter 1995 36.0%
- ---------------------------
2nd Quarter 1995 35.6%
- ---------------------------
3rd Quarter 1995 34.2%
- ---------------------------
4th Quarter 1995 34.0%
- ---------------------------
1st Quarter 1996 34.2%
- ---------------------------
2nd Quarter 1996 34.0%
- ---------------------------
3rd Quarter 1996 33.1%
- ---------------------------
4th Quarter 1996 34.0%
- ---------------------------
-14-
<PAGE> 15
The second restructuring initiative was the first step toward management's plan
to reduce the company's operating expenses to 25.0 percent of sales by the end
of fiscal 1998. The restructuring included reductions in administrative and
staff employment, elimination of nonessential consulting contracts and other
programs, and the discontinuation of a product development program at the
company's health-care subsidiary, Milcare. Selling, general, and administrative
expenses increased $18.2 million from $325.3 million in 1995, to $343.5 million
in 1996. The increase is primarily attributable to acquisitions and new ventures
($16.3 million), a 3.5 percent year-over-year increase in compensation and
benefits, increases in compensation costs that vary with profitability and sales
and the pre-tax charges recorded in Mexico for barter receivables. Management
will strive to obtain future reductions in operating expenses through stringent
cost containment, changes to systemic business process, and improvements in
international operations.
DESIGN AND RESEARCH EXPENDITURES
Design and research expenses $27.5 million in 1996, compared with $33.7 million
in 1995 and $30.2 million in 1994. As a percentage of net sales, design and
research expenses were 2.1 percent in 1996, 3.1 percent in 1995, and 3.2
percent in 1994. This percentage compares with an industry-wide rate of
approximately 1.5 percent of net sales. As previously stated, the company
considers its research and design capabilities to be a key component of the
company's strategy. In June of 1996, the company introduced three new product
lines at the industry's premier trade show, NeoCon. Herman Miller North America
introduced Arrio(TM) freestanding systems furniture, which integrates with the
company's Action Office(R) and Ethospace(R) system product lines. Miller SQA
introduced a new system product, the Q (TM) System, and a new stackable seating
product, the Limerick(TM) chair. Arrio furniture and Q System were judged best
new products in their respective product categories, and the Limerick was
runner-up in its category. The 1995 and 1994 expenditures reflect the company's
significant investments in its seating product lines, product development
programs for the European market, and the discontinued product development
program at Milcare.
PATENT LITIGATION SETTLEMENT AND OTHER CONTINGENCIES
On January 7, 1992, Haworth, Inc. ("Haworth") filed a lawsuit against the
company, alleging that the electrical systems used in creation of the company's
products infringed one or more of Haworth's patents. The lawsuit against the
company followed a lawsuit filed by Haworth in 1985 against Steelcase, Inc.,
the industry's leader in market share, alleging violation of the same two
patents. In 1989, Steelcase was held to infringe the patents and the matter was
returned to private dispute resolution. The patents at issue expired prior to
December 1, 1994.
During the second quarter ended December 2, 1995, the company's Board of
Directors authorized management to engage in settlement discussions with
Haworth. In January 1996, the company and Haworth agreed to terms of a
settlement. The company continues to believe, based upon written opinion of
counsel, that its products do not infringe Haworth's patents and the company
would, more likely than not, have prevailed on the merits. However, based on
the mounting legal costs, distraction of management focus, and the uncertainty
present in any litigation, we concluded settlement was in the best interest of
our shareholders. The settlement included a one time cash payment of $44.0
million in exchange for a complete release. The companies also exchanged
limited covenants not to sue with respect to certain existing and potential
patent designs.
-15-
<PAGE> 16
The company simultaneously reached a settlement with one of its suppliers. The
supplier agreed to pay the company $11.0 million and, over the next seven
years, to rebate a percentage of its sales to Herman Miller which are in excess
of current levels.
The company recorded a net litigation settlement expense of $16.5 million after
applying previously recorded reserves and the settlement with the supplier.
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. As a result of its audits, the GSA has asserted a refund
claim under the 1982 contract for approximately $2.7 million and has other
contracts under audit review. Management has been notified that the GSA has
referred the 1988 contract to the Justice Department for consideration of a
potential civil False Claims Act case. Management disputes the audit result for
the 1982 contract and does not expect resolution of that matter to have a
material adverse effect on the company's consolidated financial statements.
Management does not have information which would indicate a substantive basis
for a civil False Claims Act case under the 1988 contract.
The company is not aware of any other litigation or threatened litigation which
would have a material impact on the company's financial position.
INCOME TAXES
The company's effective tax rate was 34.5 percent in 1996, compared to a
benefit of 7.4 percent in 1995 and 36.4 percent in 1994. The net tax benefit in
1995 was due to relatively small pre-tax earnings in domestic operations as a
result of the restructuring initiatives and poor operating results. In
addition, the company generated a net tax benefit from its corporate-owned life
insurance program and, to a lesser extent, improved operating results in the
United Kingdom and Japan allowed net operating loss carryforwards to be used.
The 1996 effective tax rate reflects the improved operating performance in the
company's domestic operations. The 1996 effective tax rate was benefited by the
completion of a sale and leaseback of the company's Roswell, Georgia, facility
and the sale of excess land to its captive insurance company. The completion of
these transactions resulted in the recognition of certain deferred tax assets
that were reserved for in previous periods. The 1994 effective tax rate is more
indicative of the company's historical effective tax rate. Management expects
its effective tax rate for 1997 to be in the range of 36 to 38 percent.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW AND DEBT FINANCING
<TABLE>
<CAPTION>
Dollars In Thousands 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 57,053 $16,488 $22,701
- ------------------------------------------------------------------
Cash from operating activities $124,458 $29,861 $69,764
- ------------------------------------------------------------------
Days sales in accounts receivable and
inventory 75.6 91.2 80.9
- ------------------------------------------------------------------
Capital expenditures $54,429 $63,359 $40,347
- ------------------------------------------------------------------
Interest-bearing debt to total capital 29.9% 33.4% 19.1%
</TABLE>
-16-
<PAGE> 17
The improved cash flow from operations reflects the company's increased
profitability and a reduction in the cash used for working capital items,
offset by the settlement of patent litigation. As previously mentioned, the
working capital improvements are a result of the manufacturing and logistical
reconfiguration implemented over the last 18 months and other operational
improvements.
The 1996 capital expenditures were primarily spent for new facilities at two of
the company's fastest growing subsidiaries, Meridian and Miller SQA, new
product development, and machinery and equipment to improve operational
performance and expand capacity. The expenditures for capacity were primarily
for the new seating product lines.
Management expects capital expenditures to increase to $65 to $75 million in
1997. The largest capital expenditures planned for fiscal 1997 are the
completion of the Meridian facility, new product development, and investments
in information systems. Management believes the investments in information
technology will enable us to reach our long-term cost structure and operational
performance goals and network our service organizations and independent
dealers.
During fiscal 1996, the company began to redeploy cash invested in
nonproductive or nonessential assets. This effort includes a review of all our
facilities, land, and operating assets. We outsourced our assembly operation in
Japan and completed the sale of land and a building in Gotemba, Japan. We also
completed the sale of a facility in Irvine, California, which was being held
for investment purposes and had been leased to a third party. Lastly, we
outsourced our corporate flight operations, which enabled us to sell our
corporate jet and the facility it required. In total these transactions,
coupled with less significant transactions, resulted in a positive cash flow of
$13.5 million. We are in the process of evaluating several other changes which
would provide positive cash flow and reduce operating costs.
As previously discussed, in fiscal 1996, the company purchased various
privately owned United States dealers as part of our service strategy. These
local service organizations were acquired for approximately $11.7 million. The
consideration included 212,662 shares of Herman Miller common stock and
approximately $5.3 million in cash. The company expects to invest approximately
$20 million in acquiring additional local and regional service operations in
fiscal 1997.
During the third quarter of fiscal 1996, the company obtained $100.0 million of
long-term, fixed-rate debt financing with seven insurance companies. The
agreements vary in length from five to twelve years, and the first repayments
begin in 2000. The rate of interest ranges from 6.08 percent to 6.52 percent.
Prior to this transaction, all of the company's debt was variable rate,
pursuant to the company's revolving credit facilities. Management was not
comfortable with the heavy reliance on variable-rate debt and its committed
credit facilities. The proceeds from the private placement were used to reduce
outstanding balances on the company's long-term revolving credit agreements and
various uncommitted credit lines, restoring their availability. Total debt was
reduced from $144.2 million at the end of 1995 to $131.7 million at the end of
1996. In fiscal 1996, the company was able to fund its capital expenditures,
dividends, and common stock repurchases from cash flow from operating
activities.
At the end of fiscal 1996, the company's cash and cash equivalents were
significantly higher than previous periods. The increased cash and cash
equivalents reflect completion of the sale and leaseback of the company's
Roswell, Georgia, facility near the end of the fiscal year and outstanding cash
flow from operating activities in the fourth quarter. The company intends to
use
-17-
<PAGE> 18
the cash and cash equivalents to repurchae shares of the company's common
stock, fund acquisitions related to the service strategy, and fund future
capital expenditures. Management believes the cash and cash equivalents,
combined with cash flow from operating activities, will be adequate to fund
operations, capital expenditures, acquisitions, and dividends. If necessary,
the company has $106.0 million in available committed credit facilities and
$56.7 million informal credit lines.
Management has established a target capital structure with a
debt-to-total-capital ratio of 30 to 35 percent. Cash in excess of
requirements for capital expenditures, acquisitions, and dividends will be used
to fund the repurchase of the company's common stock subject to market
conditions.
COMMON STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Dollars in Thousands 1996 1995 1994
<S> <C> <C> <C>
Shares acquired 860,395 34,200 928,800
- -------------------------------------------------------------------------------
Cost of shares acquired $ 25,101 $ 732 $ 25,363
- -------------------------------------------------------------------------------
Cost per share acquired $ 29.17 $ 21.40 $ 27.31
- -------------------------------------------------------------------------------
Shares issued 731,773 260,613 548,876
- -------------------------------------------------------------------------------
Cost of shares issued $ 25.90 $ 21.49 $ 22.82
- -------------------------------------------------------------------------------
Dividends paid $ 12,999 $ 12,869 $ 13,043
- -------------------------------------------------------------------------------
Dividends per share $ .52 $ .52 $ .52
- -------------------------------------------------------------------------------
</TABLE>
The Board of Directors first authorized the company to repurchase its common
stock in 1984 and has periodically renewed it authorization. In addition to the
shares repurchased during fiscal 1996, we repurchased 464,600 shares in the
first month of fiscal 1997. We have now repurchased 1,318,291 shares pursuant
to the 2.0 million share authorization approved by the Board of Directors in
May 1994. All of the share repurchases were made in the open market on an
unsolicited basis. Management and the Board of Directors believe the share
repurchase program is an excellent means of returning value to our shareholders
and preventing dilution from employee ownership programs. As a result, at the
July 1996 Board of Directors' meeting, the Board authorized the company to
repurchase an additional 2.0 million shares.
ECONOMIC VALUE ADDED
A primary objective of the company is to increase the value of a shareholder's
stake in the company. To aid and support the accomplishment of that objective,
the company has created and installed a performance measurement and
compensation system called "Economic Valued Added" (EVA(R)). EVA is an internal
measurement of operating and financial performance that extensive independent
market research has shown more closely correlates with shareholder value than
any other performance measure. Simply put, EVA is what remains of profits after
taxes once a charge for the capital employed in the business is deducted. As an
operating discipline, the main advantage of EVA is that it focuses management's
attention on the balance sheet as well as the income statement.
Herman Miller is effectively in competing for scarce capital resources.
Management's task is to put this scarce resource to work and earn the best
possible return for our shareholders. This means investing in projects that
earn a return greater than the cost of sourcing the funds from our investors.
As long as the company is making investments that earn a return higher than the
cost of capital, then the company's investors should earn a return in excess of
their expectations and the company's stock is likely to command a premium in
the market place.
-18-
<PAGE> 19
The conventional accounting model is not always the best reflection of economic
profit and our long-term value, yet the research indicates long-term value is
most important to shareholders and the market. Herman Miller will obviously
continue to report financial results in accordance with generally accepted
accounting principles, but we also expect to report our progress in generating
economic profit. The table that follows summarizes the company's economic
profit or fiscal 1996 and approximates the amounts for the two previous years.
A critical feature of the new EVA measurement system is linking it to incentive
compensation. In fiscal 1997, the incentive compensation plans of corporate
officers, vice presidents, and directors at each of the business units will be
linked to the EVA concept. Under the terms of the EVA plan, focus is shifted
from budget performance to long-term continuous improvements in shareholder
value. The EVA target is raised each year by an improvement factor, so that
increasingly higher EVA targets must be attained in order to earn the same level
of incentive pay. The improvement is set by the Board of Directors for a period
of three years. During fiscal 1997, the company will begin to train all of its
employee owners in the EVA concept and will develop decision tools and incentive
plans which are aligned with our overall EVA goals.
Calculation of Economic Value Added
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
In Thousands 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Operating income $74,935 $9,066 $61,798
- ---------------------------------------------------------------------------
Adjust for:
- ---------------------------------------------------------------------------
Patent litigation and restructuring 16,535 43,900 --
- ---------------------------------------------------------------------------
Interest expense on noncapitalized leases(1) 4,316 4,215 4,120
- ---------------------------------------------------------------------------
Goodwill amortization 4,115 1,272 3,503
- ---------------------------------------------------------------------------
Other 3,071 1,121 300
- ---------------------------------------------------------------------------
Increase (decrease) in reserves 6,548 506 2,127
- ---------------------------------------------------------------------------
Capitalized design and research 1,984 3,450 2,370
-------- --------- --------
- ---------------------------------------------------------------------------
Adjusted operating profit 111,504 63,530 74,218
- ---------------------------------------------------------------------------
Cash taxes(2) (34,561) (18,317) (26,221)
-------- --------- --------
- ---------------------------------------------------------------------------
Adjusted operating profit after taxes 76,943 45,213 47,997
- ---------------------------------------------------------------------------
Weighted average capital employed(3) 605,438 532,760 445,593
- ---------------------------------------------------------------------------
Weighted average cost of capital(4) 11% 11% 11%
-------- --------- --------
- ---------------------------------------------------------------------------
Cost of capital 66,598 58,604 49,015
-------- --------- --------
- ---------------------------------------------------------------------------
Economic value added $10,345 ($13,391) ($1,018)
-------- --------- --------
- ---------------------------------------------------------------------------
</TABLE>
(1) Imputed interest as if the total non-cancelable leases payments were
capitalized.
(2) The reported current tax provision is adjusted for the statutory tax
impact of interest income and expense.
(3) Total assets less non-interest bearing liabilities plus the LIFO,
doubtful accounts and Notes receivable reserves, amortized goodwill,
patent litigation costs and settlement, restructuring costs and
capitalized design and research expense. Design and research is
capitalized and amortized over 5 years.
(4) Management's estimate of the weighted average of the minimum equity and
debt returns required by the providers of capital.
(R)EVA is a registered trademark of Stern, Stewart & Co.
-19-
<PAGE> 20
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Quarterly Financial Data
Summary of the quarterly operating results on a consolidated basis.
<TABLE>
<CAPTION>
June 1, 1996; June 3, 1995; May 28, 1994
In Thousands Except Per Share Data First Second Third Fourth
and Unaudited Quarter Quarter Quarter Quarter
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
1996 Net sales $301,088 $328,393 $312,915 $341,535
Gross margin 102,879 112,653 103,415 115,999
Net income 12,014 4,955(1) 11,900 17,077
Net income per share $ .48 $ .20(1) $ .47 $ .68
1995 Net sales $252,831 $279,077 $259,950 $291,192
Gross margin 91,011 99,358 88,881 99,019
Net income 7,937 1,443(2) 4,259 (9,300)(3)
Net income per share $ .32 $ .06(2) $ .17 $ (.37)(3)
1994 Net sales $221,566 $241,822 $241,949 $247,863
Gross margin 76,323 84,330 84,158 92,327
Net income 7,474 11,183 11,181 10,535
Net income per share $ .30 $ .44 $ .44 $ .42
</TABLE>
(1) Includes a $16.5 million pretax charge for patent litigation settlement in
1996. This decreased net income by $10.6 million, or $.42 per share.
(2) Includes $15.5 million of pretax charges which decreased net income by $9.6
million, or $.39 per share.
(3) Included $28.4 million of pretax charges, including restructuring charges
of $16.4 million and other charges of $12.0 million. These charges
decreased net income by $18.5 million, or $.74 per share.
-20-
<PAGE> 21
Consolidated Statements of Income
<TABLE>
<CAPTION>
June 1, 1996; June 3, 1995; and May 28, 1994 1996 1995 1994
---- ---- ----
In Thousands Except Per Share Data
<S> <C> <C> <C>
NET SALES $1,283,931 $1,083,050 $953,200
Cost of Sales 848,985 704,781 616,062
---------- ---------- ---------
GROSS MARGIN 434,946 378,269 337,138
---------- ---------- ---------
Operating Expenses:
Selling, general, and administrative 316,024 303,621 245,189
Design and research 27,472 33,682 30,151
Patent litigation settlement 16,515 -- --
Restructuring charges -- 31,900 --
---------- ---------- ----------
TOTAL OPERATING EXPENSES 360,011 369,203 275,340
---------- ---------- ----------
OPERATING INCOME 74,935 9,066 61,798
Other Expenses (Income):
Interest expense 7,910 6,299 1,828
Interest income (6,804) (6,154) (3,278)
Loss (gain) on foreign exchange 1,614 3,067 (1,464)
Other, net 2,119 1,815 1,239
---------- ---------- ----------
NET OTHER EXPENSES (INCOME) 4,839 5,027 (1,675)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 70,096 4,039 63,473
Income Taxes 24,150 (300) 23,100
---------- ---------- ----------
NET INCOME $45,946 $4,339 $40,373
---------- ---------- ----------
NET INCOME PER SHARE $1.83 $.18 $1.60
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
-21-
<PAGE> 22
Consolidated Balance Sheets
June 1, 1996, and June 3, 1995
In Thousands Except Per Share Data
<TABLE>
<CAPTION>
ASSETS 1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $57,053 $16,488
Accounts receivable, less allowances of $10,423 in 1996 and
$7,180 in 1995 170,116 165,107
Inventories 65,730 71,076
Prepaid expenses and other 42,006 44,445
-------- --------
TOTAL CURRENT ASSETS 334,905 297,116
-------- --------
Property and Equipment:
Land and improvements 27,386 29,508
Buildings and improvements 159,353 150,910
Machinery and equipment 328,690 301,511
Construction in progress 20,679 31,526
----------- ------------
536,108 513,455
Less--accumulated depreciation 267,343 243,271
----------- ------------
NET PROPERTY AND EQUIPMENT 268,765 270,184
----------- ------------
Notes Receivable, less allowances of $4,415 in 1996 and $2,627 in 1995 39,212 43,734
Other Assets 52,029 47,978
----------- ------------
TOTAL ASSETS $694,911 $659,012
-------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Unfunded Checks $2,867 $ --
Current portion of long-term debt 317 452
Notes payable 21,148 83,591
Accounts payable 59,208 51,819
Accrued liabilities 135,487 121,679
------------ -----------
TOTAL CURRENT LIABILITIES 219,027 257,541
Long-Term Debt, less current portion above 110,245 60,145
Deferred Taxes 3,149 2,289
Other Liabilities 54,345 52,122
------------ -----------
TOTAL LIABILITIES 386,766 372,097
------------ ------------
Shareholders' Equity:
Preferred stock, no par value (10,000,000 shares authorized, none issued) -- --
Common stock, $.20 par value (60,000,000 shares authorized, 24,699,230
and 24,835,784 shares issued and outstanding in 1996 and 1995) 4,934 4,967
Additional paid-in capital 14,468 21,564
Retained earnings 303,578 270,631
Cumulative translation adjustment (11,633) (6,985)
Key executive stock programs (3,202) (3,262)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 308,145 286,915
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $694,911 $659,012
------------ ------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-22-
<PAGE> 23
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
In Thousands Common Additional Retained Cumulative Unearned Total
Except Per Share Data Stock Paid-In Earnings Translation Stock Grant Shareholders'
Capital Adjustment Compensation Equity
------- -------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE MAY 29, 1993 $5,001 $29,863 $251,831 $(1,349) $(1,404) $283,942
Net income -- -- 40,373 -- -- 40,373
Cash dividends ($.52 per share) -- -- (13,043) -- -- (13,043)
Exercise of stock options 85 9,770 -- -- -- 9,855
Common stock issued pursuant
to employee stock purchase plan 18 2,193 -- -- -- 2,211
Repurchase and retirement of
928,800 shares of common stock (186) (25,177) -- -- -- (25,363)
Stock grants earned -- -- -- -- 461 461
Current year translation adjustment -- -- -- (2,111) -- (2,111)
------ -------- -------- --------- -------- --------
BALANCE MAY 28, 1994 $4,918 $16,649 $279,161 $(3,460) $(943) $296,325
Net income -- -- 4,339 -- -- 4,339
Cash dividends ($.52 per share) -- -- (12,869) -- -- (12,869)
Exercise of stock options 23 2,353 -- -- -- 2,376
Common stock issue pursuant
to employee stock purchase plan 26 2,592 -- -- -- 2,618
Common stock issued 4 396 -- -- -- 400
Repurchase and retirement of
34,200 shares of common stock (7) (725) -- -- -- (732)
Stock grants earned -- -- -- -- 207 207
Stock grants issued 3 299 -- -- (361) (59)
Key executive stock purchase
assistance plan -- -- -- -- (2,165) (2,165)
Current year translation adjustment -- -- -- (3,525) -- (3,525)
------ -------- -------- --------- -------- --------
BALANCE JUNE 3, 1995 $4,967 $21,564 $270,631 $(6,985) $(3,262) $286,915
Net income -- -- 45,946 -- -- 45,946
Cash dividends ($.52 per share) -- -- (12,999) -- -- (12,999)
Exercise of stock options 79 9,817 -- -- 31 9,927
Common stock issue pursuant
to employee stock purchase plan 18 2,258 -- -- -- 2,276
Repurchase and retirement of
860,395 shares of common stock (172) (26,006) -- -- 1,077 (25,101)
Common stock issued for acquisitions 43 6,425 -- -- -- 6,468
Stock grants earned -- -- -- -- 284 284
Stock grants forfeited (8) (639) -- -- 647 --
Stock grants issued 7 1,049 -- -- (1,467) (411)
Key executive stock purchase
assistance plan -- -- -- -- (512) (512)
Current year translation adjustment -- -- -- (4,648) -- (4,648)
------ -------- -------- --------- -------- --------
BALANCE JUNE 1, 1996 $4,934 $14,468 $303,578 $(11,633) $(3,202) $308,145
------ -------- -------- --------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
-23-
<PAGE> 24
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
June 1, 1996; June 3, 1995; and May 28, 1994 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
In Thousands
Cash Flows from Operating Activities:
Net Income $45,946 $4,339 $40,373
--------- --------- ---------
Adjustments to reconcile net income
to net cash provided by operating activities 78,512 25,522 29,391
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 124,458 29,861 69,764
========= ========= =========
Cash Flows from Investing Activities:
Notes receivable repayments 455,973 428,375 360,047
Notes receivable issued (454,261) (436,434) (367,366)
Property and equipment additions (54,429) (63,359) (40,347)
Proceeds from sales of property and equipment 13,486 105 212
Net cash paid for acquisition (5,101) (17,721) (7,744)
Other, net (212) (8,705) (4,002)
--------- --------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (44,544) (97,739) (59,200)
========= ========= =========
Cash Flows from Financing Activities:
Increase (decrease) in short-term debt (61,751) 32,834 24,090
Long-term debt borrowings 270,985 60,000 --
Long-term debt repayments (222,772) (20,246) (260)
Dividends paid (13,015) (12,868) (13,098)
Common stock issued 12,203 5,394 12,066
Common stock repurchased and retired (25,101) (732) (25,363)
Capital lease obligation repayments (250) (263) (276)
--------- --------- ---------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES (39,701) 64,119 (2,841)
========= ========= =========
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 352 (2,454) (1,553)
---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 40,565 (6,213) 6,170
========= ========= =========
Cash and Cash Equivalents, Beginning of Year 16,488 22,701 16,531
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $57,053 $16,488 $22,701
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
-24-
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
The following is a summary of significant accounting and reporting policies not
reflected elsewhere in the accompanying financial statements.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Herman Miller, Inc., and its wholly owned domestic and foreign
subsidiaries (the "company"). All significant intercompany accounts and
transactions have been eliminated.
DESCRIPTION OF BUSINESS The company is engaged in the design, manufacture, and
sale of furniture and furniture systems for offices, and, to a lesser extent,
for health-care facilities. The company's products primarily are sold to or
through independent contract office furniture dealers. Accordingly, accounts
and notes receivable in the accompanying balance sheets principally are amounts
due from the company's dealers.
FISCAL YEAR The company's fiscal year ends on the Saturday closest to May 31.
The years ended June 1, 1996, and May 28, 1994, each contained 52 weeks. The
year ended June 3, 1995, contained 53 weeks.
FOREIGN CURRENCY TRANSLATION In accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation," all balance sheet
items are translated at the current rate as of the end of the accounting
period, and income statement items are translated at average currency exchange
rates. The resulting translation adjustment is recorded as a separate component
of shareholders' equity.
CASH EQUIVALENTS The company invests in certain debt and equity securities as
part of its cash management function. Due to the relative short-term maturities
and high liquidity of these securities, they are included in the accompanying
consolidated balance sheets as cash equivalents at market value and total $58.1
million and $10.9 million as of June 1, 1996, and June 3, 1995, respectively.
The company's cash equivalents are considered "available for sale." As of June
1, 1996, the market value approximated the securities' cost. All cash and cash
equivalents are high-credit quality financial instruments, and the amount of
credit exposure to any one financial institution or instrument is limited.
PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment are stated at
cost. The cost is depreciated over the estimated useful lives of the assets
using the straight-line method. The average useful lives of the assets are 32
years for buildings and 7 years for all other property and equipment.
NOTES RECEIVABLE The notes receivable are primarily from certain independent
contract office furniture dealers. The notes are collateralized by the assets
of the dealers and bear interest based on the prevailing prime rate. Interest
income relating to these notes was $3.9, $3.9, and $2.7 million in 1996, 1995,
and 1994, respectively.
INTANGIBLE ASSETS Intangible assets included in other assets consist mainly of
goodwill, patents, and other acquired intangibles, and are carried at cost,
less applicable amortization of $9.5 and $5.6 million in 1996 and 1995,
respectively. These assets are amortized using the straight-line method over
periods of 5 to 15 years. The company continuously evaluates the realizability
of its intangible assets using various methodologies and adjusts their carrying
value if necessary. Such adjustments were not significant in 1996, 1995, or
1994.
-25-
<PAGE> 26
UNFUNDED CHECKS As a result of maintaining a consolidated cash management
system, the company utilizes controlled disbursement bank accounts. These
accounts are funded as checks are presented for payment, not when checks are
issued. A book overdraft position of $2.9 million is included in current
liabilities as unfunded checks at June 1, 1996. The company was not in an
overdraft position at June 3, 1995.
SELF-INSURANCE The company is partially self-insured for general liability,
workers' compensation, and certain employee health benefits. The general and
workers' compensation liabilities are managed through a wholly owned insurance
captive; the related liabilities are included in the accompanying financial
statements. The company's policy is to accrue amounts equal to the actuarially
determined liabilities. The actuarial valuations are based on historical
information along with certain assumptions about future events. Changes in
assumptions for such matters as legal actions, medical costs, and changes in
actual experience could cause these estimates to change in the near term.
RESEARCH, DEVELOPMENT, ADVERTISING, AND OTHER RELATED COSTS Research,
development, advertising materials, pre-production and start-up costs are
expensed as incurred. Research and development costs, included in design and
research expense in the accompanying statements of income, were $24.5, $31.3,
and $26.7 million in 1996, 1995, and 1994, respectively.
INCOME TAXES Deferred tax assets and liabilities are recognized for the
expected future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using the enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to reverse.
LONG-TERM ASSETS In March 1995, the Financial Accounting Standards Board
issued Statement No. 121 "Accounting for the Impairment of Long-lived Assets
and Long-lived Assets to be Disposed of" (SFAS No. 121). The company is
required to adopt the provisions of SFAS No. 121 no later than its fiscal year
1997. Based on information currently available, the company does not expect the
impact of adopting this statement to have a material effect on its financial
condition or results of operations.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
ACQUISITIONS
During 1996 and 1995, the company made several acquisitions, all of which were
recorded using the purchase method of accounting. Accordingly, the purchase
price of these acquisitions has been allocated to the assets acquired and
liabilities assumed based on the estimated fair values at the date of the
acquisition. The cost of the acquisitions in excess of net tangible assets
acquired has been recorded as goodwill. During 1996, the company purchased
various privately owned United States dealers. These companies were acquired
for approximately $11.7 million. The consideration included 212,662 shares of
Herman Miller common stock and approximately $5.3 million in cash.
-26-
<PAGE> 27
During 1995, the company purchased Geneal GmbH, a privately owned office
furniture company in Essen, Germany. The company also purchased a division of
B&B Italia, a privately owned office furniture company in Milan, Italy. In
addition, the company purchased various privately owned United States and
Canadian dealers. These companies were acquired for approximately $21.2
million, which resulted in approximately $9.0 million in goodwill.
The results of the acquisitions in both fiscal 1996 and 1995 were not material
to the company's consolidated operating results.
INVENTORIES
<TABLE>
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
Finished products $24,787 $26,260
Work in process 10,896 8,074
Raw materials 30,047 36,742
------- -------
$65,730 $71,076
------- -------
</TABLE>
Inventories are valued at the lower of cost or market and include material,
labor, and overhead. The inventories of Herman Miller, Inc., are valued using
the last-in, first-out (LIFO) method. The inventories of the company's
subsidiaries are valued using the first-in, first-out method. Inventories
valued using the LIFO method amounted to $30.7 and $41.1 million at June 1,
1996, and June 3, 1995, respectively.
If all inventories had been valued using the first-in, first-out method,
inventories would have been $16.4 and $18.1 million higher than reported at
June 1, 1996, and June 3, 1995, respectively.
-27-
<PAGE> 28
PREPAID EXPENSES AND OTHER
<TABLE>
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
$21,006 $27,305
21,000 17,140
---------- --------
$42,006 $44,445
---------- --------
1996 1995
$54,124 $33,465
Current deferred income taxes 7,493 20,619
Other -- 12,000
ACCRUED LIABILITIES 11,931 9,177
In Thousands 61,939 46,418
Compensation and employee benefits ---------- --------
Restructuring reserves $135,487 $121,679
Litigation costs ---------- --------
Other taxes 1996 1995
Other $20,522 $18,322
OTHER LIABILITIES 33,823 33,800
In Thousands ---------- --------
Postretirement benefits 54,345 $52,122
Other ---------- --------
NOTES PAYABLE 1996 1995
Outstanding short-term borrowings are shown below: $-- $58,012
In Thousands 21,148 25,579
United States dollar ---------- --------
Other currencies $21,148 $83,591
---------- --------
</TABLE>
The following information relates to short-term borrowings in 1996:
<TABLE>
<CAPTION>
Domestic Foreign
<S> <C> <C>
Weighted average interest rate at June 1, 1996 -- 6.9%
Weighted average interest rate during 1996 6.3% 7.6%
Unused short-term credit lines $6,000 $--
</TABLE>
In addition to the company's formal short-term credit lines shown above, the
company has available informal lines of credit totaling $56.7 million and
unsecured revolving credit loans totaling $100.0 million.
LONG-TERM DEBT
<TABLE>
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
$70,000 $--
15,000 --
15,000 --
10,000 --
Series A senior notes, 6.37%, due March 5, 2006 -- 60,000
Series B senior notes, 6.08% due March 5, 2001 562 597
Series C senior notes, 6.52%, due March 5, 2008 -------- --------
Finance lease obligation $110,562 $60,597
Unsecured revolving credit loan 317 452
Other -------- --------
Less current portion $110,245 $60,145
-------- --------
</TABLE>
During the third quarter of 1996, the company entered into a private placement
of $100.0 million of senior notes with seven insurance companies. The Series A,
B, and C notes have interest-only payments until March 5, 2000, March 5, 2001,
and March 5, 2004, respectively.
-28-
<PAGE> 29
The unsecured revolving credit loan provides for a $100.0 million line of
credit which matures on December 2, 1997. Outstanding borrowings bear interest,
at the option of the company, at rates based on the prime rate, certificates of
deposit, LIBOR, or negotiated rates. Interest is payable periodically
throughout the period a borrowing is outstanding. During 1996 and 1995, the
company borrowed at a negotiated rate of 6.0 and 5.1 percent, respectively.
Provisions of the senior notes and the unsecured revolving senior revolving
credit loan limit, without prior consent, the company's borrowings, long-term
leases, sale of certain assets, and acquisitions of the company's stock. In
addition, the company has agreed to maintain specified levels of working
capital and certain financial performance ratios. At June 1, 1996, the company
was in compliance with all these provisions.
During May 1996, the company entered into an agreement for the sale and
leaseback of its Roswell, Georgia, facility. The company has an early buyout
option at the end of three and one-half years at an amount equal to
approximately 103.03 percent of the lessor's cost. The company also has a
purchase option at the end of six years at an amount equal to the facility's
then fair market value. If the purchase option is not exercised, the lease
automatically renews for an additional 30 months. The company has guaranteed a
residual value of 59.0 percent of the lessor's cost. The lease has been
accounted for as a financing in accordance with Statement of Financial Account
Standards No. 98.
The book value and associated depreciation of the facility are approximately
$13.9 million and $6.3 million, respectively.
Annual maturities of long-term debt for the five years subsequent to June 1,
1996, (in millions) are as follows: 1997--$.3; 1998--$.2; 1999--$.1;
2000--$10.0; 2001--$25.0; and thereafter--$75.0.
OPERATING LEASES
The company leases real property and equipment under agreements which expire on
various dates. Certain leases contain renewal provisions and generally require
the company to pay utilities, insurance, taxes, and other operating expenses.
Future minimum rental payments (in millions) required under operating leases
that have initial or remaining noncancellable lease terms in excess of one year
as of June 1, 1996, are as follows: 1997--$20.2; 1998--$13.6; 1999--$9.2;
2000--$7.7; 2001--$6.4; thereafter--$14.7.
Total rental expense charged to operations was $23.9, $18.0, and $18.3 million
in 1996, 1995, and 1994, respectively. Substantially all such rental expense
represented the minimum rental payments under operating leases.
RESTRUCTURING CHARGES
In the fiscal year ended June 3, 1995, the company recorded $31.9 million in
pretax restructuring charges, which reduced net income by $20.3 million, or
$.82 per share. A charge of $15.5 million was taken in the second quarter of
fiscal 1995, to account for the closure of certain of the company's
manufacturing and logistics facilities prior to the relocation of their
production activities to other U.S. Herman Miller facilities. In addition, the
charge also included the costs associated with the closure of wood casegoods
manufacturing in the Sanford, North Carolina, facility and discontinuance of
manufacturing there, and the transfer of products produced there to Geiger
International of Atlanta, Georgia, a respected contract provider of quality
wood casegoods.
-29-
<PAGE> 30
The $16.4 million charge recorded in the fourth quarter of fiscal 1995 included
charges in the United States for reductions in employment and the
discontinuation of a product development program at the company's health-care
subsidiary, Milcare.
The $31.9 million total pretax restructuring charge consisted of facilities and
equipment writeoffs ($15.5 million), termination benefits ($14.1 million), and
other exit costs associated with the restructuring ($2.3 million).
Approximately 535 employees were terminated or took voluntary early retirement
as a result of the facility closing and job elimination process. The closure of
the manufacturing and logistics facilities was substantially complete at the
end of fiscal 1995. The job elimination process was completed in July 1995.
Amounts paid or charged against these reserves during fiscal 1996 were as
follows:
<TABLE>
<CAPTION>
June 3, 1995 Costs paid Ending
In Thousands Balance or charged Balance
<S> <C> <C> <C>
Facilities and equipment $10,829 $5,499 $5,330
Termination benefits 12,279 10,394 1,885
Other exit costs 1,310 1,032 278
------- ---------- -------
$24,418 $16,925 $7,493
------- ---------- -------
</TABLE>
EMPLOYEE BENEFIT PLANS
The company maintains plans which provide retirement benefits for substantially
all employees.
PENSION PLANS The principal domestic plan is a noncontributory defined benefit
pension plan. Benefits under this plan are based upon an employee's years of
service and the average earnings for the five highest consecutive years of
service during the ten years immediately preceding retirement. Domestically,
the company's policy is to fund its plan to the maximum amount currently
deductible for federal income tax purposes which equals or exceeds the minimum
amount required by the Employee Retirement Income Security Act.
One of Herman Miller, Inc.'s wholly owned foreign subsidiaries has a defined
benefit pension plan which is similar to the principal domestic plan. This plan
is included in the information presented below.
Net pension cost included the following components:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Service cost benefits earned during the year $8,688 $8,276 $7,223
Interest cost on projected benefit obligation 10,588 9,239 8,074
Return on assets:
Actual (27,468) (13,391) (4,417)
Deferred gain (loss) 18,582 5,767 (2,631)
Net amortization (224) 106 (170)
Cost of early retirement incentive program 479 1,700 --
-------- -------- -------
Net pension cost $10,645 $11,697 $8,079
-------- -------- -------
</TABLE>
-30-
<PAGE> 31
The following table presents a reconciliation of the funded status of the plans
and the amount recorded in the accompanying balance sheets:
<TABLE>
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
Plan assets at fair market value $145,678 $115,727
----------- ---------
Actuarial present value of benefit obligations:
Vested benefits (102,236) (84,726)
Nonvested benefits (2,271) (4,929)
----------- ---------
Accumulated benefit obligation (104,507) (89,655)
Effect of projected future salary increases (53,618) (50,718)
----------- ---------
Projected benefit obligation (158,125) (140,373)
----------- ---------
Projected benefit obligation in excess of
plan assets at fair market value (12,447) (24,646)
Unrecognized net asset from date of adoption of SFAS No. 87(3,051) (3,836)
Unrecognized net gain from past experience different from that
assumed, and changes in assumptions (1,013) 17,010
Unrecognized prior service cost (218) (661)
----------- ---------
Accrued pension cost included in accrued and other liabilities $(16,729) $(12,133)
----------- ---------
</TABLE>
The assumptions used in the determination of net pension cost were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 7.5%
Rate of salary progression 5.0% 5.0% 5.0%
Long-term rate of return on assets 7.5% 7.5% 7.5%
</TABLE>
Plan assets consist primarily of listed common stocks, mutual funds, and
corporate obligations. Plan assets at June 1, 1996, and June 3, 1995, included
327,672 shares of Herman Miller, Inc., common stock.
In connection with the 1995 restructuring, the company offered an early
retirement incentive program to eligible participants. The results of this
program are reflected in the net cost and funded status of the pension plan and
postretirement benefits.
PROFIT SHARING PLAN Herman Miller, Inc., and three of its subsidiaries have a
trusteed profit sharing plan that covers substantially all employees who have
completed one year of employment. The plan provides for discretionary
contributions (payable in the company's common stock) of not more than 6.0
percent of pretax income of the participating companies, or such other lesser
amounts as may be established by the Board of Directors. The cost of the plan
charged against operations was $4.5, $2.6, and $2.9 million in 1996, 1995, and
1994, respectively.
POSTRETIREMENT BENEFITS In addition to providing pension and profit-sharing
benefits, the company provides health-care and life insurance benefits for
certain retired employees.
The components of net postretirement benefit cost were as follows:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Service cost $1,140 $986 $868
Interest cost on accumulated benefit obligation 1,496 1,305 1,192
Cost of early retirement program -- 400 --
Net amortization (39) (44) (25)
------ ------ ------
Net postretirement benefit cost $2,597 $2,647 $2,035
------ ------ ------
</TABLE>
-31-
<PAGE> 32
The following table presents a reconciliation of the plan's funded status with
amounts recognized in the accompanying balance sheets:
<TABLE>
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (8,823) $(7,688)
Fully eligible active plan participants (202) (135)
Other active plan participants (13,212) (12,090)
Unrecognized prior service cost (1,031) (1,081)
Unrecognized net loss 2,250 1,872
--------- ---------
Accrued postretirement benefit obligation $ (21,018) $(19,122)
--------- ---------
</TABLE>
The accumulated postretirement benefit obligation was computed using an assumed
discount rate of 7.5 percent for June 1, 1996, and June 3, 1995.
The weighted average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is 8.0 percent for 1997,
and is assumed to decrease gradually to 6.0 percent for 2001 and remain at that
level thereafter. A 1.0 percent increase in this annual trend rate would have
increased the accumulated postretirement benefit obligation at June 1, 1996, by
$.8 million, with an immaterial effect on 1996 postretirement benefit cost.
STOCK OPTION PLANS
The company has stock option plans under which options are granted to employees
and nonemployee officers and directors at a price not less than the market
price of the company's common stock on the date of grant. All options become
exercisable one year from date of grant and expire ten years from date of
grant. No charges to operations are recorded with respect to authorization,
grant, or exercise of these stock options. At June 1, 1996, there were 140
employees and 11 nonemployee officers and directors eligible, all of whom were
participants in the plans. At June 1, 1996, there were 804,900 shares available
for future options.
A summary of the stock option transactions is as follows:
<TABLE>
<CAPTION>
Exercise Price Weighted Average
Number of Shares Per Share Range Price Per Share
<S> <C> <C> <C>
Outstanding at May 29, 1993 1,315,341 $15.88-26.75 $21.50
Granted 269,740 26.88-34.63 27.35
Exercised (458,406) 16.00-26.75 21.24
Terminated (7,000) 18.63-26.88 26.21
---------------- --------------- ----------------
Outstanding at May 28, 1994 1,119,675 $15.88-34.63 $22.98
Granted 417,280 21.00-29.13 25.86
Exercised (121,400) 15.88-26.88 19.63
Terminated (126,205) 18.63-29.13 26.08
---------------- --------------- ----------------
Outstanding at June 3, 1995 1,289,350 $18.63-34.63 $23.93
Granted 403,900 24.75-32.19 30.28
Exercised (393,170) 18.63-29.43 23.56
Terminated (84,120) 21.00-29.13 25.56
---------------- --------------- ----------------
Outstanding at June 1, 1996 1,215,960 $18.63-34.63 $25.89
---------------- --------------- ----------------
Exercisable at June 1, 1996 840,360 $18.63-34.63 $23.91
---------------- --------------- ----------------
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
Under the terms of the company's 1987 Employee Stock Purchase Plan, 3.1 million
shares of authorized common stock were reserved for purchase by plan
participants at 85.0 percent of the market price. At June 1, 1996, 1,003,462
shares remained available for purchase through the plan, and there were 4,562
employees eligible to participate in the plan, of which 1,359 or 29.8
-32-
<PAGE> 33
percent, were participants. Employees purchased 89,222 shares, at prices
ranging from $22.32 to $27.36, during the year. Total receipts to the
company were $2.3 million. Since the inception of the employee stock purchase
program in 1977, employees have purchased a total of 2,057,149 shares at prices
ranging from $1.90 to $29.43. Since the plan is noncompensatory, no charges to
operations have been recorded.
KEY EXECUTIVE STOCK PROGRAMS
RESTRICTED STOCK GRANTS The company has granted restricted common shares to
certain key employees. Shares were awarded in the name of the employee, who has
all rights of a shareholder, subject to certain restrictions on transferability
and a risk of forfeiture. The forfeiture provisions on the awards expire
annually, over a period not to exceed six years, as certain financial goals are
achieved. During fiscal 1996, 36,720 shares were granted under the company's
long-term incentive plan, 37,932 shares were forfeited, and the forfeiture
provisions expired on 8,091 shares. As of June 1, 1996, 48,086 shares remained
subject to forfeiture provisions and 45,977 shares remained subject to
restrictions on transferability.
The remaining shares subject to forfeiture provisions have been recorded as
unearned stock grant compensation and are presented as a separate component of
shareholders' equity. The unearned compensation is being charged to selling,
general, and administrative expense over the five-year vesting period and was
$.3, $.2, and $.5 million in 1996, 1995, and 1994, respectively.
KEY EXECUTIVE STOCK PURCHASE ASSISTANCE PLAN In October 1994, the company
adopted a key executive stock purchase assistance plan whereby the company may
extend credit to officers and key executives to purchase the company's stock
through the exercise of options or on the open market. These loans are secured
by the shares acquired and are repayable under full recourse promissory notes.
The sale or transfer of shares is restricted for five years after the loan is
fully paid. The plan provides for the key executives to earn repayment of a
portion of the notes based on meeting annual performance objectives as set
forth by the Executive Compensation Committee of the Board of Directors. The
notes bear interest at 7.0 percent per annum. Interest is payable annually and
principal is due on September 1, 2000. As of June 1, 1996, the notes
outstanding relating to the exercise of options were $1.6 million and are
presented as a separate component of shareholders' equity. Notes outstanding
related to open market purchases were $2.2 million and are recorded in other
assets. Compensation expense related to earned repayment was $1.7 million in
1996 and immaterial in 1995.
INCOME TAXES
Pre-tax income consisted of the following:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Domestic $77,169 $13,418 $71,150
Foreign (7,073) (9,379) (7,677)
------- -------- -------
$70,096 $4,039 $63,473
------- -------- -------
</TABLE>
-33-
<PAGE> 34
The provision (credit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Current: Domestic--Federal $15,725 $18,104 $24,780
Domestic--State 1,615 935 1,213
Foreign (527) (1,580) (1,338)
------- -------- -------
$16,813 $17,459 $24,655
------- -------- -------
Deferred: Domestic--Federal 6,115 (15,137) (1,097)
Domestic--State 50 (1,951) 187
Foreign 1,172 (671) (645)
------- -------- -------
7,337 (17,759) (1,555)
------- -------- -------
$24,150 $(300) $23,100
------- -------- -------
</TABLE>
The following table represents a reconciliation of income taxes at the United
States statutory rate with the effective tax rate follows:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Income taxes computed at the United States statutory
rate of 35% $24,534 $ 1,414 $22,216
Increase (decrease) in taxes resulting from:
Corporate-owned life insurance (3,302) (1,842) (458)
Changes in valuation allowance (2,762) -- --
Additional reserves provided 2,834 -- --
State taxes, net 1,082 (660) 910
Foreign net operating losses -- 735 586
Other 1,764 53 (154)
------- ------- -------
$24,150 $(300) $23,100
------- ------- -------
</TABLE>
The tax effects and types of temporary differences that give rise to
significant components of the deferred tax assets and liabilities at June 1,
1996, and June 3, 1995, are presented below:
<TABLE>
<CAPTION>
In Thousands 1996 1995
<S> <C> <C>
Deferred tax assets:
Foreign net operating loss carryforwards $22,475 $20,594
Compensation related accruals 11,164 9,371
Restructuring charge accruals 2,774 9,242
Accrued postretirement benefit obligation 7,410 6,566
Accrued litigation costs -- 4,200
Long-term capital loss carryforwards -- 5,497
Insurance accruals 1,843 3,144
Reserve for uncollectible accounts and notes receivable 2,551 2,558
Other 20,224 13,984
Valuation allowance (22,475) (25,237)
--------- ---------
$45,966 $49,919
--------- ---------
Deferred tax liabilities:
Book basis in property in excess of tax basis $(17,058) $(18,230)
Prepaid employee benefits (3,037) (2,457)
Other (8,014) (4,038)
--------- ---------
$(28,109) $(24,725)
--------- ---------
</TABLE>
-34-
<PAGE> 35
The company has foreign net operating loss carryforwards, the tax benefit of
which is $22.5 million, of which $9.9 million expires at various dates through
2006, and of which $12.6 million has unlimited expiration. For financial
statement purposes, the tax benefit of the foreign net operating loss
carryforward has been recognized as a deferred tax asset, subject to a
valuation allowance.
Changes in the valuation allowance reflects the utilization of the company's
capital loss carryforwards which served to offset capital gains recognized on
the sale and leaseback of the Roswell, Georgia, facility (see the long-term
debt note for a description of the lease) and on certain excess land sold to
the company's captive insurance company. In addition, an allowance was recorded
against the net operating loss carryforward at the company's foreign
subsidiaries.
The company has not provided for United States income taxes on undistributed
earnings of foreign subsidiaries totaling $32.7 million. Recording of deferred
income taxes on these undistributed earnings is not required, since these
earnings have been permanently reinvested. These amounts would be subject to
possible U.S. taxation only if remitted as dividends. The determination of the
hypothetical amount of unrecognized deferred U.S. taxes on undistributed
earnings of foreign entities is not practicable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the company's financial instruments included in current
assets and current liabilities approximates their fair value due to their
short-term nature. The fair value of the notes receivable is estimated by
discounting expected future cash flows using current interest rates at which
similar loans would be made to borrowers with similar credit ratings and
remaining maturities. As of June 1, 1996, and June 3, 1995, the fair value of
the notes receivable approximated the carrying value. The company intends to
hold these notes to maturity and has recorded allowances to reflect the terms
negotiated for carrying value purposes. The company's long-term debt was either
negotiated in the near term or reprices frequently at the then-prevailing
market interest rates. As of June 1, 1996, and June 3, 1995, the carrying value
approximated the fair value of the company's long-term debt.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The company utilizes derivative financial instruments to manage its exposure to
foreign currency volatility at the transactional level. At June 1, 1996, the
company had no outstanding derivative financial instruments. At June 3, 1995,
the company had outstanding $7.2 million, of financial instruments to purchase
and sell foreign currencies, consisting primarily of forward exchange
contracts. The majority of these contracts relate to major currencies such as
the Japanese yen, the Australian dollar, and the British pound. The exposure to
credit risk is minimal since the counterparties are major financial
institutions. The market risk exposure is essentially limited to currency rate
movements. The gains or losses arising from these financial instruments are
applied to offset exchange gains or losses on related hedged exposures.
Realized and unrealized gains or losses in 1996 and 1995 were not material to
the company's results of operations.
-35-
<PAGE> 36
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following table presents a reconciliation of net income to net cash
provided by operating activities:
<TABLE>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Depreciation and amortization $45,009 $39,732 $33,207
Restructuring charges -- 31,900 --
Provision for losses on accounts and notes receivable 4,635 1,405 3,481
Loss on sales of property and equipment 120 1,077 1,832
Deferred taxes 7,337 (17,759) (1,555)
Other liabilities 1,468 6,587 8,258
Stock grants earned 284 207 461
Changes in current assets and liabilities:
Decrease (increase) in assets:
Accounts receivable 4,295 (39,901) (7,151)
Inventories 11,042 (9,239) (3,671)
Prepaid expenses and other (5,009) (3,912) (3,352)
Increase (decrease) in liabilities:
Accounts payable 627 8,674 1,123
Accrued liabilities 8,704 6,751 (3,242)
---------- -------- --------
19,659 (37,627) (16,293)
---------- -------- --------
Total adjustments $78,512 $25,522 $29,391
---------- -------- --------
</TABLE>
Cash payments for interest and income taxes were as follows:
<TABLE>
<CAPTION>
In Thousands 1996 1995 1994
<S> <C> <C> <C>
Interest paid $9,526 $6,296 $1,799
Income taxes paid 13,883 16,095 25,784
</TABLE>
PER SHARE INFORMATION
Earnings per share of common stock have been computed using the weighted
average number of outstanding common shares and common share equivalents to the
extent they are dilutive during each of the three years in the period ended
June 1, 1996 (25,128,735 in 1996; 24,792,057 in 1995; 25,254,743 in 1994).
CONTINGENCIES
During the second quarter ended December 2, 1995, the company's Board of
Directors authorized management to engage in settlement discussions with
Haworth. In January 1996, the company and Haworth agreed to the terms of a
settlement.
The lawsuit, filed in January 1992, alleged that certain electrical products,
which the company offered, infringed two patents held by Haworth. Haworth has
sued Steelcase, Inc., in 1985, claiming that Steelcase's products infringed
those same two patents. In 1989, Steelcase was held to infringe the patents,
and the matter was referred to private dispute resolution to resolve the issue
of damages. The patents at issue expired prior to December 1, 1994.
Since the date of initial claim, the company has always been advised by our
patent litigation counsel that it was more likely than not to prevail on the
merits; however, the mounting legal costs, distraction of management focus, and
the uncertainty present in any litigation made this settlement something which
the company determined is the best interest of its shareholders.
-36-
<PAGE> 37
Under the settlement agreement, Herman Miller paid Haworth $44.0 million in
cash in exchange for a complete release. The release also covers Herman
Miller's customers and suppliers. The companies have exchanged limited
covenants not to sue with respect to certain existing and potential patent
rights. Haworth has agreed not to sue under United States Patent 4,682,984
which refers to a construction process for making storage cabinets. In
addition, Haworth has granted a limited covenant not to sue with respect to
certain potential future patent rights on panel construction. Haworth received
a limited covenant under three United States Patents--5,038,539; 4,685,255; and
4,876,835--all relating to one of the company's system product lines.
The company simultaneously reached a settlement with one of its suppliers. The
supplier agreed to pay Herman Miller $11.0 million and, over the next seven
years, to rebate a percentage of its sales to Herman Miller which are in excess
of current levels. The $11.0 million, plus interest, will be paid in annual
installments over a seven-year period. Herman Miller is also exploring the
possibility of claims against other third parties.
The company recorded net litigation settlement expense of $16.5 million, after
applying previously recorded reserves and the settlement with the supplier, in
the second quarter of fiscal 1996.
The company, for a number of years, has sold various products to the United
States Government under General Services Administration (GSA) multiple award
schedule contracts. The GSA is permitted to audit the company's compliance with
the GSA contracts. As a result of its audits, the GSA has asserted a refund
claim under the 1982 contract for approximately $2.7 million and has other
contracts under audit review. Management has been notified that the GSA has
referred the 1988 contract to the Justice Department for consideration of a
potential civil False Claims Act case. Management disputes the audit result for
the 1982 contract and does not expect resolution of the matter to have a
material adverse effect on the company's consolidated financial statements.
Management does not have information which would indicate a substantive basis
for a civil False Claims Act under the 1988 contract.
The company is also involved in legal proceedings and litigation arising in the
ordinary course of business. In the opinion of management, the outcome of such
proceedings and litigation currently pending will not materially affect the
company's consolidated financial statements.
SEGMENT INFORMATION
The company operates on a worldwide basis in a single industry consisting of
the design, manufacture, and sale of office furniture systems, products, and
related services. The following information is presented with respect to the
company's operations in different geographic areas for the fiscal years ended
June 1, 1996; June 3, 1995; and May 28, 1994. Transfers between geographic
areas represent the selling price of sales to affiliates, which is generally
based on cost plus a mark-up. Net income of foreign operations and export
includes royalty income from licensee sales and reflects the gain or loss on
foreign currency exchange. The cash and cash equivalents accounts of the
company are considered to be corporate assets. All other assets have been
identified with domestic or foreign operations. No single customer accounted
for more than 10.0 percent of consolidated net sales.
-37-
<PAGE> 38
<TABLE>
<CAPTION>
In Thousands Foreign Adjustments
Operations and
United States and Export Eliminations Consolidated
<S> <C> <C> <C> <C>
1996
Sales to unaffiliated customers $1,043,850 $240,081 $ -- $1,283,931
Transfers between geographic areas 34,667 13,176 (47,843) --
---------- ---------- ------------ ------------
Net Sales $1,078,517 $253,257 $ (47,843) $1,283,931
---------- ---------- ------------ ------------
Net income (loss) $ 53,977 $ (8,031) $ -- $ 45,946
---------- ---------- ------------ ------------
Identifiable assets $ 532,371 $105,487 $ -- $ 637,858
---------- ---------- ------------ ------------
Corporate assets 57,053
------------
Total assets $ 694,911
------------
1995
Sales to unaffiliated customers $ 894,455 $188,595 $ -- $1,083,050
Transfers between geographic areas 55,206 5,186 (60,392) --
------------- ---------- ------------ ------------
Net sales $ 949,661 $193,781 $ (60,392) $1,083,050
------------- ---------- ------------ ------------
Net income (loss) $ 7,265 $ (2,926) $ -- $ 4,339
------------- ---------- ------------ ------------
Identifiable assets $ 550,666 $91,858 $ -- $ 642,524
------------- ---------- ------------ ------------
Corporate assets 16,488
------------
Total assets $ 659,012
------------
1994
Sales to unaffiliated customers $ 812,158 $ 141,042 $ -- $ 953,200
Transfers between geographic areas 35,579 5,711 (41,290) --
------------- ---------- ------------ ------------
Net sales $ 847,737 $ 146,753 $ (41,290) $ 953,200
------------- ---------- ------------ ------------
Net income (loss) $ 42,374 $ (2,001) $ -- $ 40,373
------------- ---------- ------------ ------------
Identifiable assets $ 454,210 $ 56,835 $ -- $ 511,045
------------- ---------- ------------ ------------
Corporate assets 22,701
------------
Total assets $ 533,746
------------
</TABLE>
-38-
<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Herman Miller, Inc.:
We have audited the accompanying consolidated balance sheets of Herman Miller,
Inc. (a Michigan corporation) and subsidiaries as of June 1, 1996, and June 3,
1995, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended June 1, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Herman Miller, Inc., and
subsidiaries as of June 1, 1996, and June 3, 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 1, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Grand Rapids, Michigan
June 28, 1996
-39-
<PAGE> 40
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The consolidated financial statements of Herman Miller, Inc., and subsidiaries
were prepared by, and are the responsibility of management. The statements have
been prepared in conformity with generally accepted accounting principles
appropriate in the circumstances and include amounts that are based on
management's best estimates and judgments.
The company maintains systems of internal accounting controls designed to
provide reasonable assurance that all transactions are properly recorded in the
company's books and records, that policies and procedures are adhered to, and
that assets are protected from unauthorized use. The systems of internal
accounting controls are supported by written policies and guidelines and are
complemented by a staff of internal auditors and by the selection, training,
and development of professional financial managers.
The consolidated financial statements have been audited by the independent
public accounting firm Arthur Andersen LLP, whose appointment is ratified
annually by shareholders at the annual shareholders' meeting. The independent
public accountants conduct a review of internal accounting controls to the
extent required by generally accepted auditing standards and perform such tests
and related procedures as they deem necessary to arrive at an opinion on the
fairness of the financial statements.
The Finance and Audit Committee of the Board of Directors, composed solely of
directors from outside the company, regularly meets with the independent public
accountants, management, and the internal auditors to satisfy itself that they
are properly discharging their responsibilities. The independent public
accountants have unrestricted access to the Finance and Audit Committee,
without management present, to discuss the results of their audit and the
quality of financial reporting and internal accounting control.
Michael A. Volkema President and Chief Executive Officer
Brian C. Walker, Chief Financial Officer
June 28, 1996
-40-
<PAGE> 41
Item 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No changes in, or disagreements with, accountants referenced in Item 304 of
Regulation S-K occurred during the 24-month period ended June 1, 1996.
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of Registrant
Information relating to directors and director nominees of the registrant is
contained under the caption "Director and Executive Officer Information," in
the company's definitive Proxy Statement, dated August 26, 1996, relating to
the company's 1996 Annual Meeting of Shareholders and the information within
that section is incorporated by reference. Information relating to Executive
Officers of the company is included in Part I hereof entitled "Executive
Officers of the Registrant."
There are no family relationships between or among the above-named executive
officers. There are no arrangements or understandings between any of the
above-named officers pursuant to which any of them was named an officer.
Item 11 EXECUTIVE COMPENSATION
Information relating to management remuneration is contained under the tables
and discussions on pages 10-12 in the company's definitive Proxy Statement,
dated August 26, 1996, relating to the company's 1996 Annual Meeting of
Shareholders, and the information within those sections is incorporated by
reference.
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The sections entitled "Voting Securities and Principal Shareholders" and
"Director and Executive Officer Information" in the definitive Proxy Statement,
dated August 26, 1996, relating to the company's 1996 Annual Meeting of
Shareholders and the information within those sections is incorporated by
reference.
Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions contained
under the captions "Director and Executive Officer Information" and
"Compensation of Board Members and Non-Employee Officers" in the definitive
Proxy Statement, dated August 26, 1996, relating to the company's 1996 Annual
Meeting of Shareholders is incorporated by reference.
-41-
<PAGE> 42
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of the company are
included in this Form 10-K on the pages noted:
Page Number in
the Form 10-K
Consolidated Statements of Income 21
Consolidated Balance Sheets 22
Consolidated Statements of Shareholders' Equity 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25
Report of Independent Public Accountants 39
Management's Report on Financial Statements 40
(a) 2. Financial Statement Schedule
The following financial statement schedule and related Report of
Independent Public Accountants on the Financial Statement
Schedule are included in this Form 10-K on the pages noted:
Page Number in
this Form 10-K
Report of Independent Public Accountants
on Financial Statement Schedule 44
Consent of Independent Public Accountants 45
-42-
<PAGE> 43
Page Number in
this Form 10-K
Schedule VIII- Valuation and Qualifying
Accounts and Reserves for the
Years Ended June 1, 1996; 47
une 3, 1995; and May 28, 1994
All other schedules required by Form 10-K Annual Report have been omitted
because they were inapplicable, included in the notes to consolidated
financial statements, or otherwise not required under instructions
contained in Regulation S-X.
(a) 3. Exhibits
Reference is made to the Exhibit Index which is found on pages 49 through
51 of this Form 10-K Annual Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
year ended June 1, 1996.
-43-
<PAGE> 44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors of Herman Miller, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Herman Miller, Inc., and subsidiaries
included in this Form 10-K, and have issued our report thereon dated June 28,
1996. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed at Item 14(a)2 above is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
June 28, 1996
-44-
<PAGE> 45
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Herman Miller, Inc.:
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into the Company's previously filed
Form S-8 Registration Statement File Numbers 33-5810, 33-43234, 33-43235,
33-45812, 2-84202, 33-04369, 33-04367, and 33-04365.
/s/ Arthur Andersen LLP
-------------------------
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
August 22, 1996
-45-
<PAGE> 46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HERMAN MILLER, INC.
<TABLE>
<S> <C> <C>
/s/ Michael A. Volkema and /s/ Brian C. Walker
- --- ------------------------------------ -------------------------------
By Michael A. Volkema Brian C. Walker
(President and Chief Executive Officer) (Chief Financial Officer)
</TABLE>
Date: August 22, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on August 22, 1996, by the following persons on
behalf of the Registrant in the capacities indicated. Each Director of the
Registrant, whose signature appears below, hereby appoints Michael A. Volkema
as his attorney-in-fact, to sign in his name and on his behalf, as a Director
of the Registrant, and to file with the Commission any and all amendments to
this Report on Form 10-K.
<TABLE>
<S> <C>
/s/ David L. Nelson /s/ Michael A. Volkema
----------------------- ------------------------------------
David L. Nelson Michael A. Volkema
(Chairman of the Board) (President, Chief Executive
Officer and Director)
/s/ William K. Brehm /s/ E. David Crockett
----------------------- ------------------------------------
William K. Brehm E. David Crockett
(Director) (Director)
/s/ Alan M. Fern /s/ Lord Griffiths of Fforestfach
----------------------- ------------------------------------
Alan M. Fern Lord Griffiths of Fforestfach
(Director) (Director)
/s/ Richard H. Ruch /s/ C. William Pollard
----------------------- ------------------------------------
Richard H. Ruch C. William Pollard
(Director) (Director)
/s/ Charles D. Ray /s/ Ruth A. Reister
----------------------- ------------------------------------
Charles D. Ray Ruth A. Reister
(Director) (Director)
/s/ H. Harold Chandler
-----------------------
J. Harold Chandler
(Director)
</TABLE>
-46-
<PAGE> 47
HERMAN MILLER, INC., AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- ---------- ---------- ------------- ---------
Additions Uncollectible
Balance at charged to accounts Balance
beginning costs and written off at end
Description of period expenses (net) (1) of period
- ----------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Year ended June 1, 1996:
Allowance for possible losses
on accounts receivable $7,180 $3,816 $573 $10,423
Allowance for possible losses
on notes receivable $2,627 $2,573 $785 $4,415
Year ended June 3, 1995:
Allowance for possible losses
on accounts receivable $6,742 $405 $(33) $7,180
Allowance for possible losses
on notes receivable $2,159 $1,000 $532 $2,627
Year ended May 28, 1994:
Allowance for possible losses $6,168 $731 $157 $6,742
on accounts receivable
Allowance for possible losses $2,106 $2,750 $2,697 $2,159
on notes receivable
</TABLE>
(1) Includes effects of foreign currency translation.
-47-
<PAGE> 48
HERMAN MILLER, INC., AND SUBSIDIARIES
Exhibit Index
Page
----
(3) Articles of Incorporation and Bylaws
(a) Articles of Incorporation are incorporated by
reference to Exhibit 3(a) and 3(b) of the
Registrant's 1986 Form 10-K Annual Report.
(b) Certificate of Amendment to the Articles of
Incorporation, dated October 15, 1987, are
incorporated by reference to Exhibit 3(b) of the
Registrant's 1988 Form 10-K Annual Report.
(c) Certificate of Amendment to the Articles of
Incorporation, dated May 10, 1988, are incorporated
by reference to Exhibit 3(c) of the Registrant's 1988
Form 10-K Annual Report.
(d) Amended and Restated Bylaws are incorporated
by reference to Exhibit 3(d) of the Registrant's Form
10Q filed for the quarter ended December 1, 1990.
(4) Instruments Defining the Rights of Security Holders
(a) Specimen copy of Herman Miller, Inc., common
stock is incorporated by reference to Exhibit 4(a) of
Registrant's 1981 Form 10-K Annual Report.
(b) Note Purchase Agreement dated March 1, 1996,
is incorporated by reference to Exhibit 4(b) of the
Registrant's 1996 Form 10-K Annual Report. 49-133
(c) Other instruments which define the rights of
holders of long-term debt individually represent debt
of less than 10 percent of total assets. In
accordance with item 601(b)(4)(iii)(A) of regulation
S-K, the Registrant agrees to furnish to the
Commission copies of such agreements upon request.
(10) Material Contracts
(a) Description of Officers Executive
Incentive Plan is incorporated by reference to
Exhibit 10(e) of the Registrant's 1981 Form
10-K Annual Report. *
(b) Officers' Supplemental Retirement
Income Plan is incorporated by reference to
Exhibit 10(f) of the Registrant's 1986 Form
10-K Annual Report. *
(c) Officers' Salary Continuation Plan is
incorporated by reference to Exhibit 10(g) of
the Registrant's 1982 Form 10-K Annual Report. *
(d) Herman Miller, Inc., Plan for Severance
Compensation after Hostile Takeover is
incorporated by reference to Exhibit 10(f) of
the Registrant's 1986 Form 10-K Annual Report. *
(e) Amended Herman Miller, Inc., Plan for
Severance Compensation after Hostile Takeover,
dated January 17, 1990, is incorporated by
reference to Exhibit 10(n) of the Registrant's
1990 Form 10-K Annual Report. *
(f) Herman Miller, Inc., 1994 Key Executive Stock
Purchase Assistant Plan, dated October 6, 1994, is
incorporated byreference to Appendix C of the Registrant's
1994 Proxy Statement. *
(g) Incentive Share Grant Agreement, dated October 4, 1995, 134-141
between the company and Michael A. Volkema is incorporated
by reference to Exhibit 10(g) of the Registrant's 1996 Form
10-K Annual Report. *
(h) Incentive Share Grant Agreement, dated May 15, 1996, 142-149
between the company and Michael A. Volkema is incorporated
by reference to Exhibit 10(h) of the Registrant's 1996 Form
10-K Annual Report. *
(i) Termination and Mutual Release Agreement, dated March 27, 150-157
1996, between the company and Hansjorg Broser is
incorporated by reference to Exhibit 10(i) of the
Registrant's 1996 Form 10K Annual Report. *
(j) Herman Miller, Inc., Long-Term Incentive
Plan, dated October 6, 1994, is incorporated by
reference to Exhibit 4 of the Registrant's May
22, 1996, Form S-8 Registration No. 33-04369*
(k) Herman Miller, Inc., 1994 Nonemployee
Officer and Director Stock Option Plan, dated
October 6, 1994, is incorporated by reference
to Exhibit 4 of the Registrant's May 22, 1996,
Form S-8 Registration No. 33-04367 *
* denotes compensatory plan or arrangement.
(11) Computation of Per Share Earnings. 158
(22) Subsidiaries. 159
(27) Financial Data Schedule (exhibit available upon request)
-48-
<PAGE> 1
EXHIBIT 4(b)
CONFORMED COPY
================================================================================
HERMAN MILLER, INC.
$70,000,000 PRINCIPAL AMOUNT
6.37% SERIES A SENIOR NOTES
DUE MARCH 5, 2006
$15,000,000 PRINCIPAL AMOUNT
6.08% SERIES B SENIOR NOTES
DUE MARCH 5, 2001
$15,000,000 PRINCIPAL AMOUNT
6.52% SERIES C SENIOR NOTES
DUE MARCH 5, 2008
________
NOTE PURCHASE AGREEMENT
________
DATED AS OF MARCH 1, 1996
===============================================================================
PPN: Series A: 600544 B*
0
Series B: 600544 B@
8
Series C: 600544 B#
6
-49-
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. AUTHORIZATION OF NOTES 1
2. SALE AND PURCHASE OF NOTES 1
3. CLOSING 2
4. CONDITIONS TO CLOSING 2
4.1. Representations and Warranties 2
4.2. Performance; No Default 2
4.3. Compliance Certificates 3
4.4. Opinions of Counsel 3
4.5. Purchase Permitted by Applicable Law, etc 3
4.6. Sale of Other Notes 3
4.7. Payment of Special Counsel Fees 4
4.8. Private Placement Number. 4
4.9. Changes in Corporate Structure 4
4.10. Proceedings and Documents 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
COMPANY 4
5.1. Organization; Power and Authority 4
5.2. Authorization, etc 5
5.3. Disclosure 5
5.4. Organization and Ownership of Shares of Subsidiaries 5
5.5. Financial Statements 6
5.6. Compliance with Laws, Other Instruments, etc 6
5.7. Governmental Authorizations, etc. 7
5.8. Litigation; Observance of Agreements, Statutes and Orders 7
5.9. Taxes 7
5.10. Title to Property; Leases 7
5.11. Licenses, Permits, Intellectual Property, etc. 8
5.12. Compliance with ERISA 8
5.13. Private Offering by the Company 9
5.14. Use of Proceeds; Margin Regulations 9
5.15. Existing Indebtedness; Future Liens 9
5.16. Foreign Assets Control Regulations, etc 10
</TABLE>
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<PAGE> 3
5.17. Status under Certain Statutes 10
5.18. Environmental Matters 10
6. REPRESENTATIONS OF THE PURCHASER 11
6.1. Purchase for Investment 11
6.2. Source of Funds 11
7. INFORMATION AS TO COMPANY 12
7.1. Financial and Business Information 12
7.2. Officer's Certificate 15
7.3. Inspection 15
8. PREPAYMENT OF THE NOTES 16
8.1. Required Prepayments 16
8.2. Optional Prepayments with Make-Whole Amount 16
8.3. Allocation of Partial Prepayments 17
8.4. Maturity; Surrender, etc. 17
8.5. Purchase of Notes 17
8.6. Make-Whole Amount 17
9. AFFIRMATIVE COVENANTS 19
9.1. Compliance with Law 19
9.2. Insurance 19
9.3. Maintenance of Properties 19
9.4. Payment of Taxes and Claims 19
9.5. Corporate Existence, etc 20
10. NEGATIVE COVENANTS 20
10.1. Transactions with Affiliates 20
10.2. Merger, Consolidation, etc 20
10.3. Adjusted Consolidated Net Worth. 21
10.4. Limitation on Funded Debt. 21
10.5. Limitation on Consolidated Short-Term Debt. 21
10.6. Indebtedness of Restricted Subsidiaries. 22
10.7. Liens. 22
10.8. Sale of Assets. 23
10.9. Disposition of Stock of Restricted Subsidiaries. 23
10.10. Designation of Unrestricted Subsidiaries. 24
10.11. No Impairment of Subsidiaries. 24
10.12. Nature of Business. 24
11. EVENTS OF DEFAULT 25
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12. REMEDIES ON DEFAULT, ETC 27
12.1. Acceleration 27
12.2. Other Remedies 27
12.3. Rescission 27
12.4. No Waivers or Election of Remedies, Expenses, etc 28
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES 28
13.1. Registration of Notes 28
13.2. Transfer and Exchange of Notes 28
13.3. Replacement of Notes 29
14. PAYMENTS ON NOTES 29
14.1. Place of Payment 29
14.2. Home Office Payment 29
15. EXPENSES, ETC. 30
15.1. Transaction Expenses 30
15.2. Survival 30
16. SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; ENTIRE AGREEMENT 31
17. AMENDMENT AND WAIVER 31
17.1. Requirements 31
17.2. Solicitation of Holders of Notes 31
17.3. Binding Effect, etc. 32
17.4. Notes held by Company, etc 32
18. NOTICES 32
19. REPRODUCTION OF DOCUMENTS 33
20. CONFIDENTIAL INFORMATION 33
21. SUBSTITUTION OF PURCHASER 34
22. MISCELLANEOUS 34
22.1. Successors and Assigns 34
22.2. Payments Due on Non-Business Days 34
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22.3. Severability 34
22.4. Construction 35
22.5. Counterparts 35
22.6. Governing Law. 35
22.7. Accounting Principles. 35
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE B-1 -- Investments
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary
Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Licenses, Permits, Intellectual Property, Etc.
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness
SCHEDULE 10.7 -- Liens
EXHIBIT 1-A -- Form of Series A Senior Note
EXHIBIT 1-B -- Form of Series B Senior Note
EXHIBIT 1-C -- Form of Series C Senior Note
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel to the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel to the Purchasers
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HERMAN MILLER, INC.
855 East Main Avenue
P.O. Box 302
Zeeland, Michigan 49464-0302
Facsimile: (616) 654-3632
6.37% Series A Senior Notes Due March 5, 2006
6.08% Series B Senior Notes Due March 5, 2001
6.52% Series C Senior Notes Due March 5, 2008
Dated as of March 1, 1996
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
HERMAN MILLER, INC., a Michigan corporation (the "COMPANY"), agrees with
you as follows:
1. AUTHORIZATION OF NOTES.
The Company has authorized the issue and sale of $70,000,000 aggregate
principal amount of its 6.37% Series A Senior Notes due March 5, 2006 (the
"SERIES A NOTES"), $15,000,000 aggregate principal amount of its 6.08% Series B
Senior Notes due March 5, 2001 (the "SERIES B NOTES"), and $15,000,000
aggregate principal amount of its 6.52% Series C Senior Notes due March 5, 2008
(the "SERIES C NOTES") (the Series A Notes, the Series B Notes and the Series C
Notes are collectively referred to as the "NOTES", such term to include any
such notes issued in substitution therefor pursuant to Section 13 of this
Agreement or the Other Agreements (as hereinafter defined)). The Notes shall be
substantially in the form set out in EXHIBIT 1 with such changes therefrom, if
any, as may be approved by you and the Company. Certain capitalized terms used
in this Agreement are defined in SCHEDULE B; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes in the series and principal amount specified
opposite your name in SCHEDULE A at the purchase price of 100% of the principal
amount thereof. Contemporaneously with entering into this Agreement, the
Company is entering into separate Note Purchase Agreements (the "OTHER
AGREEMENTS") identical with this Agreement with each of the other purchasers
named in SCHEDULE A (the "OTHER PURCHASERS"), providing for the sale at such
Closing to each of the Other Purchasers of
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Notes in the series and principal amount specified opposite its name in SCHEDULE
A. Your obligation hereunder and the obligations of the Other Purchasers under
the Other Agreements are several and not joint obligations and you shall
have no obligation under any Other Agreement and no liability to any Person for
the performance or nonperformance by any Other Purchaser thereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Gardner, Carton & Douglas, Quaker
Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois 60610-4795 at 9:00
a.m., Chicago time, at a closing (the "CLOSING") on March 5, 1996 or on such
other Business Day thereafter on or prior to March 5, 1996 as may be agreed
upon by the Company and you and the Other Purchasers. At the Closing the
Company will deliver to you the Notes in each series to be purchased by you in
the form of a single Note (or such greater number of Notes in denominations of
at least $1,000,000 as you may request) dated the date of the Closing and
registered in your name (or in the name of your nominee), against delivery by
you to the Company or its order of immediately available funds in the amount of
the purchase price therefor by wire transfer of immediately available funds for
the account of the Company to account number 042-840-3 for credit of Herman
Miller, Inc. at First Chicago-NBD Bank, 611 Woodward Avenue, Detroit, Michigan
48226, ABA #072000326. If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to your satisfaction, you
shall, at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to the issue and
sale of the Notes (and the application of the proceeds thereof as contemplated
by Section 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
this Agreement had it applied since such date.
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4.3. COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you a
certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes, this Agreement and the Other Agreements.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (a) from Varnum, Riddering, Schmidt &
Howlett, counsel for the Company, covering the matters set forth in EXHIBIT
4.4(A) and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to you) and (b)
from Gardner, Carton & Douglas, your special counsel in connection with such
transactions, substantially in the form set forth in EXHIBIT 4.4(B) and
covering such other matters incident to such transactions as you may reasonably
request.
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (a) be permitted
by the laws and regulations of each jurisdiction to which you are subject,
without recourse to provisions (such as Section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (b) not violate
any applicable law or regulation (including, without limitation, Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and (c) not
subject you to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on the
date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6. SALE OF OTHER NOTES.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in SCHEDULE A.
4.7. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel
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referred to in Section 4.4 to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the Closing.
4.8. PRIVATE PLACEMENT NUMBER.
Private Placement numbers issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.9. CHANGES IN CORPORATE STRUCTURE.
Except as specified in SCHEDULE 4.9, the Company shall not have changed
its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of
the liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in SCHEDULE 5.5.
4.10. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and
you and your special counsel shall have received all such counterpart originals
or certified or other copies of such documents as you or they may reasonably
request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreements and the Notes and to perform
the provisions hereof and thereof.
5.2. AUTHORIZATION, ETC.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by
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(i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3. DISCLOSURE.
The Company, through its agent, BA Securities, Inc., has delivered to
you and each Other Purchaser a copy of a Private Placement Memorandum dated
January 1996 and the enclosures referred to therein, (the "MEMORANDUM"),
relating to the transactions contemplated hereby. The Memorandum fairly
describes, in all material respects, the general nature of the business and
principal properties of the Company and its Subsidiaries. This Agreement, the
Memorandum, the documents, certificates or other writings delivered to you by
or on behalf of the Company in connection with the transactions contemplated
hereby and the financial statements listed in SCHEDULE 5.5, taken as a whole,
do not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made. Except as disclosed in the
Memorandum or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in SCHEDULE 5.5,
since June 3, 1995, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any of its
Subsidiaries except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. There is no fact
known to the Company that could reasonably be expected to have a Material
Adverse Effect that has not been set forth herein or in the Memorandum or in
the other documents, certificates and other writings delivered to you by or on
behalf of the Company specifically for use in connection with the transactions
contemplated hereby.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES.
(a) SCHEDULE 5.4 contains (except as noted therein) complete and correct
lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity interests
outstanding owned by the Company and each other Subsidiary, (ii) of the
Company's Affiliates, other than Subsidiaries, and (iii) of the Company's
directors and senior officers and (iv) a designation of each Subsidiary as a
Restricted Subsidiary or an Unrestricted Subsidiary.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in SCHEDULE 5.4 as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and clear
of any Lien (except as otherwise disclosed in SCHEDULE 5.4).
(c) Each Subsidiary identified in SCHEDULE 5.4 is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by
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law, other than those jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the business
it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement, the agreements listed
on SCHEDULE 5.4 and limitations imposed by corporate law statutes) restricting
the ability of such Subsidiary to pay dividends out of profits or make any
other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of the financial
statements of the Company and its Subsidiaries listed on SCHEDULE 5.5. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved
except as set forth in the notes thereto (subject, in the case of any interim
financial statements, to normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this Agreement
and the Notes will not (a) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of the Company or any Subsidiary under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or by-laws, or any
other agreement or instrument to which the Company or any Subsidiary is bound
or by which the Company or any Subsidiary or any of their respective properties
may be bound or affected, (b) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or ruling of
any court, arbitrator or Governmental Authority applicable to the Company or
any Subsidiary, or (c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Subsidiary.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority by the Company is required in
connection with the execution, delivery or performance by the Company of this
Agreement or the Notes, provided, however, the Company must disclose this
Agreement in connection with its next Quarterly Report on Form 10-Q.
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5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in SCHEDULE 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by
any Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including, without limitation, Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that
could reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income tax liabilities of the Company and its Subsidiaries have
been determined by the Internal Revenue Service and paid for all fiscal years
up to and including the fiscal year ended May 30, 1992.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance
sheet referred to in Section 5.5 or purported to have been acquired by the
Company or any Subsidiary after said date (except as sold or otherwise disposed
of in the ordinary course of business), in each case free and clear of Liens
prohibited by this Agreement. All leases that, individually or in the
aggregate, are Material are valid and subsisting and are in full force and
effect in all material respects.
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5.11. LICENSES, PERMITS, INTELLECTUAL PROPERTY, ETC.
Except as disclosed in SCHEDULE 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without conflict with the rights of others which
conflict could reasonably be expected to have a Material Adverse Effect;
(b) no product of the Company infringes on any license, permit,
franchise, authorization, patent, copyright, service mark, trademark, trade
name or other right owned by any other Person which infringement could
reasonably be expected to have a Material Adverse Effect; and
(c) there is no violation by any Person of any right of the Company or
any of its Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any of its
Subsidiaries which violation could reasonably be expected to have a Material
Adverse Effect.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in, and could not reasonably be expected to
result in, a Material Adverse Effect. Neither the Company nor any ERISA
Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit plans
(as defined in Section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the
meaning specified in Section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the meaning specified in Section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
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Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of the
last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Subsidiaries is $19,122,000.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The
representation by the Company in the first sentence of this Section 5.12(e) is
made in reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the sources of the funds to be used to pay the purchase price
of the Notes to be purchased by you.
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than you, the Other Purchasers and not more than 50
other Institutional Investors, each of which has been offered the Notes at a
private sale for investment. Neither the Company nor anyone acting on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes to the registration requirements of Section 5 of the
Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as set
forth in SCHEDULE 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224)
or to involve any broker or dealer in a violation of Regulation T of said Board
(12 CFR 220). The Company and its Subsidiaries have no margin stock and the
Company does not have any present intention to buy, carry or obtain any margin
stock. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF
BUYING OR CARRYING" shall have the meanings assigned to them in said Regulation
G.
5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Except as described therein, SCHEDULE 5.15 sets forth a complete
and correct list of all outstanding Indebtedness of the Company and its
Subsidiaries as of February 16, 1996, since which date there has been no
Material change in the amounts,
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interest rates, sinking funds, installment payments or maturities of the
Indebtedness of the Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default, and no waiver of default is currently in effect, in
the payment of any principal or interest on any Indebtedness of the Company or
such Subsidiary and no event or condition exists with respect to any
Indebtedness of the Company or any Subsidiary that would permit (or that with
notice or the lapse of time, or both, would permit) one or more Persons to
cause such Indebtedness to become due and payable before its stated maturity or
before its regularly scheduled dates of payment.
(b) Except as disclosed in SCHEDULE 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien.
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or
the Federal Power Act, as amended.
5.18. ENVIRONMENTAL MATTERS.
Except as otherwise disclosed to you in writing, neither the Company
nor any Subsidiary has knowledge of any claim or has received any notice of any
claim, and no proceeding has been instituted raising any claim, against the
Company or any of its Subsidiaries or any of their respective real properties
now or formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any Environmental Laws,
except, in each case, such as could not reasonably be expected to result in a
Material Adverse Effect. Except as otherwise disclosed to you in writing;
(a) neither the Company nor any Subsidiary has knowledge of any facts
which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
could not reasonably be expected to result in a Material Adverse Effect;
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(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them or disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws in each case in any manner that could
reasonably be expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or operated
by the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one
or more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) if you are an insurance company, the Source does not include assets
allocated to any separate account maintained by you in which any employee
benefit plan (or its related trust) has any interest, other than a separate
account that is maintained solely in connection with your fixed contractual
obligations under which the amounts payable, or credited, to such plan and to
any participant or beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the separate account;
or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of Prohibited Transaction Exemption ("PTE") 90-1
(issued January 29, 1990), or (ii) a bank collective investment fund, within
the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have
disclosed to the Company in writing pursuant to this paragraph (b), no employee
benefit plan or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated to such
pooled separate account or collective investment fund; or
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(c) the Source constitutes assets of an "INVESTMENT FUND" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified professional
asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption),
no employee benefit plan's assets that are included in such investment fund,
when combined with the assets of all other employee benefit plans established
or maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "CONTROL" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
such QPAM and (ii) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each of
which has been identified to the Company in writing pursuant to this paragraph
(e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA; or
(g) if you are an insurance company and the Source includes assets of
your general account, (i) your purchase of Notes is entitled to the exemption
afforded by PTE 95-60 (issued July 12, 1995), provided the Company is not an
affiliate (within the meaning of Section v(a) of PTE 95-60) of you, or (ii)
there is no Plan with respect to which the assets of your general account's
reserves (as determined under Section 807(d) of the Code) for all contracts
held by or on behalf of such Plan and all other Plans maintained by the same
employer or its affiliates (as so defined) or by the same employee organization
exceed 10% of the liabilities of your general account.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN," "GOVERNMENTAL
PLAN," "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an Institutional
Investor:
(a) Quarterly Statements -- within 45 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the last
quarterly fiscal period of each such fiscal year), duplicate copies of,
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(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with
such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial statements
generally, and certified by a Senior Financial Officer as fairly presenting, in
all material respects, the financial position of the companies being reported
on and their results of operations and cash flows, subject to changes resulting
from year-end adjustments, provided that delivery within the time period
specified above of copies of the Company's Quarterly Report on Form 10-Q
prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the requirements
of this Section 7.1(a);
(b) Annual Statements -- within 90 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances; and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making
their audit, they have become aware of any condition or event that
then constitutes a Default or an Event of Default, and, if they
are aware that any such condition or event then exists, specifying
the nature and period of the existence thereof (it being
understood that such accountants shall not be liable, directly or
indirectly, for any failure to obtain knowledge of any
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Default or Event of Default unless such accountants should have
obtained knowledge thereof in making an audit in accordance with
generally accepted auditing standards or did not make such an
audit);
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule
14a-3 under the Exchange Act) prepared in accordance with the requirements
therefor and filed with the Securities and Exchange Commission together with
the accountant's certificate described in clause (B) above, shall be deemed to
satisfy the foregoing requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming
available, but in any event within 15 days of being sent or filed, one copy of
(i) each financial statement, report, notice or proxy statement sent by the
Company or any Subsidiary to public securities holders generally, and (ii) each
regular or periodic report, each registration statement (without exhibits
except as expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the Securities
and Exchange Commission and of all press releases and other statements made
available generally by the Company or any Subsidiary to the public concerning
developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in
any event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given any
notice or taken any action with respect to a claimed default hereunder or that
any Person has given any notice or taken any action with respect to a claimed
default of the type referred to in Section 11(f), a written notice specifying
the nature and period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant
to such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or
(iii) any event, transaction or condition that could result
in the incurrence of any liability by the Company or any ERISA
Affiliate
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pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any
other such liabilities or Liens then existing, could reasonably be
expected to have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating to any
order, ruling, statute or other law or regulation that could reasonably be
expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.2 through 10.9 hereof,
inclusive, during the quarterly or annual period covered by the statements then
being furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms of such Sections, and the calculation
of the amount, ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made, under
his or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence during
such period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including,
without limitation, any such event or condition resulting from the failure of
the Company or any Subsidiary to comply with any Environmental Law), specifying
the nature and proposes to take with respect thereto.
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7.3. INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at the
expense of such holder and upon reasonable prior notice to the Company, to
visit the principal executive office of the Company, to discuss the affairs,
finances and accounts of the Company and its Subsidiaries with the Company's
officers, and, with the consent of the Company (which consent will not be
unreasonably withheld) its independent public accountants, and with the consent
of the Company (which consent will not be unreasonably withheld) to visit the
other offices and properties of the Company and each Subsidiary, all at such
reasonable times and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or properties
of the Company or any Subsidiary, to examine all their respective books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Subsidiaries), all at such times
and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
8.1. REQUIRED PREPAYMENTS.
On March 5, 2000 and on each March 5 thereafter to and including March
5, 2005, the Company will prepay $10,000,000 principal amount (or such lesser
principal amount as shall then be outstanding) of the Series A Notes at par and
without payment of the Make-Whole Amount or any premium, and on March 5, 2004
and on each March 5 thereafter to and including March 5, 2007, the Company will
prepay $3,000,000 principal amount (or such lesser principal amount as shall
then be outstanding) of the Series C Notes at par and without payment of the
Make-Whole Amount or any premium; provided that upon any partial prepayment of
the Notes pursuant to Section 8.2, or purchase of the Notes permitted by
Section 8.5, the principal amount of each required prepayment of the Notes
becoming due under this Section 8.1 on and after the date of such prepayment or
purchase shall be reduced in the same proportion as the aggregate unpaid
principal amount of the Notes is reduced as a result of such prepayment or
purchase.
8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below, prepay
on any interest payment date all or any part of the Notes, in an amount not
less than $1,000,000 in aggregate principal amount in the case of a partial
prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole
Amount determined for the prepayment date with respect to such principal
amount. The Company will give each
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holder of Notes written notice of each optional prepayment under this Section
8.2 not less than 30 days and not more than 60 days prior to the date fixed
for such prepayment. Each such notice shall specify such date, the aggregate
principal amount of the Notes to be prepaid on such date, the principal amount
of each Note held by such holder to be prepaid (determined in accordance with
Section 8.3), and the interest to be paid on the prepayment date with respect
to such principal amount being prepaid, and shall be accompanied by a
certificate of a Senior Financial Officer as to the estimated Make-Whole Amount
due in connection with such prepayment (calculated as if the date of such
notice were the date of the prepayment), setting forth the details of such
computation. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.
8.3. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes at
the time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment.
8.4. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and the
Make-Whole Amount, if any, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall be surrendered
to the Company and canceled and shall not be reissued, and no Note shall be
issued in lieu of any prepaid principal amount of any Note.
8.5. PURCHASE OF NOTES.
The Company will not, and will not permit any Affiliate to, purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.6. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than
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zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 12.1,
as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, the yield to maturity implied by 50 basis points plus (i) the
yields reported, as of 10:00 A.M. (New York City time) on the second
Business Day preceding the Settlement Date with respect to such Called
Principal, on the display designated as the "PX Screen" on the Bloomberg
Financial Market Service (or such other display as may replace the PX
Screen on Bloomberg Financial Market Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if such
yields are not reported as of such time or the yields reported as of such
time are not ascertainable, the Treasury Constant Maturity Series Yields
reported, for the latest day for which such yields have been so reported
as of the second Business Day preceding the Settlement Date with respect
to such Called Principal, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date. Such
implied yield will be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between (1)
the actively traded U.S. Treasury security with the duration closest to
and greater than the Remaining Average Life and (2) the actively traded
U.S. Treasury security with the duration closest to and less than the
Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth year) that
will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled Payment.
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"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
Section 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Restricted Subsidiaries to
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. INSURANCE.
The Company will, and will cause each of its Restricted Subsidiaries to,
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
9.3. MAINTENANCE OF PROPERTIES.
The Company will, and will cause each of its Restricted Subsidiaries to,
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection therewith may be
properly conducted at all times,
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provided that this Section shall not prevent the Company or any Restricted
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its
business and the Company has concluded that such discontinuance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each of its Restricted Subsidiaries
to, file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Restricted Subsidiary need pay any such tax or
assessment if the amount, applicability or validity thereof is contested by the
Company or such Restricted Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Restricted Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Restricted Subsidiary.
9.5. CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.8 and 10.9, the Company
will at all times preserve and keep in full force and effect the corporate
existence of each of its Restricted Subsidiaries (unless merged into the Company
or a Restricted Subsidiary) and all rights and franchises of the Company and its
Restricted Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary
to, enter into, directly or indirectly, any transaction or Material group of
related transactions (including, without limitation, the purchase, lease, sale
or exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Restricted Subsidiary), except
pursuant to the reasonable requirements of the Company's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Restricted Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
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10.2. MERGER, CONSOLIDATION, ETC.
The Company will not, and will not permit any Restricted Subsidiary
to, consolidate with or merge with any other corporation or Person or convey,
transfer or lease substantially all of its assets in a single transaction or
series of transactions to any Person, except that:
(a) The Company may merge or consolidate with, or convey, transfer or
lease substantially all of its assets to, another Person, if (i) the successor
formed by such consolidation or the survivor of such merger or the Person that
acquires by conveyance, transfer or lease substantially all of the assets of the
Company as an entirety, as the case may be, shall be a solvent corporation
organized and existing under the laws of the United States or any State thereof
(including the District of Columbia), and, if the Company is not such
corporation, such corporation shall have executed and delivered to each holder
of any Notes its assumption of the due and punctual performance and observance
of each covenant and condition of this Agreement, the Other Agreements and the
Notes together with an opinion of counsel in form and substance satisfactory to
the holders of the Notes to the effect that the instrument of assumption has
been duly authorized, executed and delivered and constitutes the legal, value
and binding agreement of such corporation enforceable in accordance with its
terms; and (ii) immediately after giving effect to such transaction, (A) no
Default or Event of Default shall have occurred and (B) such corporation could
incur $1.00 of additional Funded Debt.
(b) any Restricted Subsidiary may merge into, or convey, transfer or
lease substantially all of its assets to, the Company or another Wholly-Owned
Restricted Subsidiary.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.2 from its liability under this Agreement, the Other Agreements
or the Notes.
10.3. ADJUSTED CONSOLIDATED NET WORTH.
The Company will not permit its Adjusted Consolidated Net Worth to be less
than $200,000,000 at any time.
10.4. LIMITATION ON FUNDED DEBT.
The Company will not, and will not permit any Restricted Subsidiary
to, create, assume, incur or otherwise become liable for, directly or
indirectly, any Funded Debt, other than:
(a) the Notes;
(b) Outstanding Funded Debt of the Company and its Restricted
Subsidiaries described in SCHEDULE 5.15.
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(c) Funded Debt of a Restricted Subsidiary owed to the Company or a
Wholly-Owned Restricted Subsidiary; and
(d) Additional Funded Debt, provided that at the time of incurrence and
after giving effect thereto and to the application of the proceeds thereof,
Consolidated Funded Debt does not exceed 55% of Consolidated Total
Capitalization.
10.5. LIMITATION ON CONSOLIDATED SHORT-TERM DEBT.
The Company will not, and will not permit any Restricted Subsidiary to,
have outstanding Consolidated Short-Term Debt unless, for a period of not less
than 45 consecutive days during the preceding 12 month period on each day of
which the sum of (i) Consolidated Short-Term Debt on such day and (ii)
Consolidated Funded Debt on such day did not exceed 55% of Consolidated Total
Capitalization on such day.
10.6. INDEBTEDNESS OF RESTRICTED SUBSIDIARIES.
The Company will not permit any Restricted Subsidiary to create, assume,
incur or otherwise become liable for, directly or indirectly, any Indebtedness
other than:
(a) Indebtedness of a Restricted Subsidiary owed to the Company or a
Wholly-Owned Restricted Subsidiary; and
(b) Additional Indebtedness, provided that at the time of incurrence
thereof and after giving effect thereto and to the application of the proceeds
therefrom, the sum (without duplication) of outstanding (i) Indebtedness of
Restricted Subsidiaries (other than Indebtedness referred to in paragraph (a)
of this Section 10.6), and (ii) Consolidated Indebtedness secured by Liens
permitted by Section 10.7(g), does not at any time exceed 25% of Adjusted
Consolidated Net Worth.
10.7. LIENS.
The Company will not, and will not permit any Restricted Subsidiary to,
permit to exist, create, assume or incur, directly or indirectly, any Lien on
its properties or assets, whether now owned or hereafter acquired, except:
(a) Liens existing on property or assets of the Company or any Restricted
Subsidiary as of the date of this Agreement that are described in the attached
SCHEDULE 10.7;
(b) Liens for taxes, assessments or governmental charges not then due and
delinquent or the validity of which is being contested in good faith and as to
which the Company has established adequate reserves on its books in accordance
with GAAP;
(c) Liens arising in connection with court proceedings, provided the
execution of such Liens is effectively stayed, such Liens are being contested
in good faith by appropriate proceedings and the Company has established
adequate reserves therefor on its books in accordance with GAAP;
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(d) Liens arising in the ordinary course of business and not incurred in
connection with the borrowing of money (including encumbrances in the nature of
zoning restrictions, easements, rights and restrictions of record on the use of
real property, defects in title and landlord's, lessor's, mechanics' and
materialmen's liens) that in the aggregate do not materially interfere with the
conduct of the business of the Company and its Restricted Subsidiaries taken as
a whole or materially impair the value of the property or assets subject
thereto;
(e) Liens securing Indebtedness of a Restricted Subsidiary to the Company;
(f) Liens on fixed assets created substantially contemporaneously or
within 90 days of the acquisition thereof to secure or provide for all or a
portion of the purchase price of such fixed assets; provided that (i) such
Liens do not extend to other property of the Company or any Restricted
Subsidiary, (ii) such assets were not previously owned and disposed of while
not subject to any Lien by the Company or any Restricted Subsidiary, (iii) the
aggregate principal amount of Indebtedness secured by each such Lien does not
exceed the purchase price of the fixed assets subject thereto, and (iv) the
Indebtedness so secured is permitted by Section 10.4, Section 10.5 or Section
10.6;
(g) Liens not otherwise permitted by paragraphs (a) through (f) above
incurred subsequent to the date of Closing to secure Indebtedness, provided
that at the time of incurring such additional Indebtedness and after giving
effect thereto and to the application of the proceeds therefrom, the sum of
such additional Indebtedness and Indebtedness of Restricted Subsidiaries
permitted by Section 10.6 (other than Indebtedness referred to in paragraph (a)
of Section 10.6) does not exceed 25% of Adjusted Consolidated Net Worth.
10.8. SALE OF ASSETS.
Except as permitted by Section 10.2 hereof, the Company will not, and will
not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise
dispose of, including by way of merger (collectively a "DISPOSITION"), any
assets, including capital stock of Subsidiaries, in one or a series of
transactions, to any Person, other than in the ordinary course of business,
except to the Company or, in the case of a Restricted Subsidiary, to a
Wholly-Owned Restricted Subsidiary, (i) if, in any fiscal year, after giving
effect to such Disposition, the aggregate net book value of assets subject to
Dispositions during such fiscal year would exceed 10% of Consolidated Total
Assets as of the end of the immediately preceding fiscal year or (ii) if a
Default or Event of Default exists or would exist. Notwithstanding the
foregoing, the Company may, or may permit a Restricted Subsidiary to, make a
Disposition and the assets subject to such Disposition shall not be subject to
or included in the foregoing limitation and computation contained in clause (i)
of the preceding sentence to the extent that (x) such assets are not at the
time subject to any Lien and are leased back by the Company or any Restricted
Subsidiary, as lessee, within 180 days of the acquisition or construction
thereof by the Company or any Restricted Subsidiary or (y) the net proceeds
from such Disposition are within 180 days of such Disposition (1) reinvested in
productive assets of the Company or a Restricted
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Subsidiary of at least equivalent value which productive assets shall not be
subject to Liens permitted by Section 10.7(f) unless the assets sold were
subject to Liens at the time of the Disposition or (2) applied to the
payment or prepayment of outstanding Indebtedness other than Indebtedness which
is subordinate in the right of payment or prepayment to the Notes. Any
prepayment of Notes pursuant to this Section 10.8 shall be in accordance with
Section 8.2.
10.9. DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES.
The Company will not permit any Restricted Subsidiary to issue its capital
stock, or any warrants, rights or options to purchase, or securities
convertible into or exchangeable for, such capital stock, to any Person other
than the Company or a Wholly-Owned Restricted Subsidiary or directors,
management and employees of the Company or a Restricted Subsidiary pursuant to
incentive programs approved by the Company's board of directors. The Company
will not, and will not permit any Restricted Subsidiary to, sell, transfer or
otherwise dispose of (other than to the Company or a Wholly-Owned Restricted
Subsidiary or directors, management and employees of the Company or a
Restricted Subsidiary pursuant to incentive programs approved by the Company's
board of directors) any capital stock (including any warrants, rights or
options to purchase, or securities convertible into or exchangeable for,
capital stock) or Indebtedness of any Restricted Subsidiary, unless:
(a) simultaneously therewith all Investments in such Restricted
Subsidiary owned by the Company and every other Restricted Subsidiary are
disposed of as an entirety;
(b) such Restricted Subsidiary does not have any continuing
Investment in the Company or any other Subsidiary not being simultaneously
disposed of;
(c) such sale, transfer or other disposition is permitted by Section
10.8; and
(d) after giving effect to such sale, transfer or disposition and to
the application of the proceeds thereof, the Company could incur at least
$1.00 of additional Funded Debt.
10.10. DESIGNATION OF UNRESTRICTED SUBSIDIARIES.
The Company will not designate any Restricted Subsidiary as an
Unrestricted Subsidiary if such Subsidiary has been designated an Unrestricted
Subsidiary more than twice previously and unless immediately before and after
such designation:
(a) such Subsidiary does not own any Investment in the Company or
any Restricted Subsidiary; and
(b) there exists no Default or Event of Default.
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10.11. NO IMPAIRMENT OF SUBSIDIARIES.
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any agreement or amend the charter or by-laws of such Restricted
Subsidiary or take or omit to take any action, the effect of which is to
legally or contractually impair the ability of any Restricted Subsidiary to pay
dividends or make distributions to the Company, or if the Company is not its
parent, to its parent.
10.12. NATURE OF BUSINESS.
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business if, as a result thereof, the business then to be
conducted by the Company and its Restricted Subsidiaries, taken as a whole,
would cease to be substantially that described in the Memorandum.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with
any term contained in Sections 10.2 through 10.9, 10.11 or 10.12; or
(d) the Company defaults in the performance of or compliance with
any term contained in Sections 10.1 or 10.10 and such default is not remedied
within 10 days; or
(e) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs (a), (b),
(c) and (d) of this Section 11) and such default is not remedied within 30
days; or
(f) any representation or warranty made in writing by or on behalf
of the Company or by any officer of the Company in this Agreement or in any
writing furnished in connection with the transactions contemplated hereby
proves to have been false or incorrect in any material respect on the date as
of which made; or
(g) (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal of
or premium or make-whole amount or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $10,000,000 beyond any
period of grace provided with respect thereto, or (ii) the Company or any
Restricted Subsidiary is in default in the performance of or compliance with
any term of any evidence of any Indebtedness in an
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aggregate outstanding principal amount of at least $10,000,000 or of any
mortgage, indenture or other agreement relating thereto beyond any period of
grace provided with respect thereto, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the passage of
time or the right of the holder of Indebtedness to convert such Indebtedness
into equity interests), (x) the Company or any Restricted Subsidiary has become
obligated to purchase or repay Indebtedness before its regular maturity or
before its regularly scheduled dates of payment in an aggregate outstanding
principal amount of at least $10,000,000 or (y) one or more Persons have the
right to require the Company or any Restricted Subsidiary so to purchase or
repay such Indebtedness; or
(h) the Company or any Restricted Subsidiary (i) is generally not paying,
or admits in writing its inability to pay, its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii)
makes an assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes
corporate action for the purpose of any of the foregoing; or
(i) a court or governmental authority of competent jurisdiction enters an
order appointing, without consent by the Company or any of its Restricted
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for
relief or reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any jurisdiction,
or ordering the dissolution, winding-up or liquidation of the Company or any of
its Restricted Subsidiaries, or any such petition shall be filed against the
Company or any of its Restricted Subsidiaries and such petition shall not be
dismissed within 60 days; or
(j) a final judgment or judgments for the payment of money aggregating in
excess of $5,000,000 are rendered against one or more of the Company and its
Subsidiaries and which judgments are not, within 30 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within 30
days after the expiration of such stay; or
(k) if (i) any Plan shall fail to satisfy the minimum funding standards of
ERISA or the Code for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under
section 412 of the Code, (ii) a notice of intent to terminate any Plan shall
have been or is reasonably expected to be filed with the PBGC or the PBGC shall
have instituted proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate "amount of unfunded benefit liabilities" (within the
meaning of section 4001(a)(18) of ERISA) under all Plans, determined in
accordance
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with Title IV of ERISA, shall exceed 15% of the value of benefit liabilities
within the meaning of Section 4001(a)(18)(A) of ERISA, (iv) the Company or any
ERISA Affiliate shall have incurred or is reasonably expected to incur
any liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the Company or
any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company
or any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such event or
events described in clauses (i) through (vi) above, either individually or
together with any other such event or events, could reasonably be expected to
have a Material Adverse Effect.
As used in Section 11(k), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (h) or (i) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (h) or described in clause (vi) of paragraph (h) by
virtue of the fact that such clause encompasses clause (i) of paragraph (h))
has occurred, all the Notes then outstanding shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of 50% or more in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of Section
11 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it
or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the
entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid
interest thereon and (y) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and that the provision for
payment of a Make-Whole Amount by the Company in the event that the
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Notes are prepaid or are accelerated as a result of an Event of Default, is
intended to provide compensation for the deprivation of such right under
such circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable pursuant to
clause (b) or (c) of Section 12.1, the holders of not less than 51% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount
as shall be sufficient to cover all costs and expenses of such holder incurred
in any enforcement or collection under this Section 12, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
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13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address
of each holder of one or more Notes, each transfer thereof and the name and
address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one
or more new Notes of the same series (as requested by the holder thereof) in
exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be payable
to such Person as such holder may request and shall be substantially in the
form of EXHIBIT 1-A, EXHIBIT 1-B or EXHIBIT 1-C, as appropriate. Each such new
Note shall be dated and bear interest from the date to which interest shall
have been paid on the surrendered Note or dated the date of the surrendered
Note if no interest shall have been paid thereon. The Company may require
payment of a sum sufficient to cover any stamp tax or governmental charge
imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $3,000,000. Nothing contained herein
shall prohibit any holder of Notes from transferring; (i) its entire holdings
of any series of Notes, (ii) any portion of its holdings of any series of
Notes to any affiliate of such holder, or (iii) any portion of its holdings of
any series of Notes to any other holder of Notes. Any transferee, by its
acceptance of a Note registered in its name (or the name of its nominee),
shall be deemed to have made the representations set forth in Sections 6.1 and
6.2.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
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(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a
nominee for, an original Purchaser or another holder of a Note which is an
Institutional Investor, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Note or dated the date
of such lost, stolen, destroyed or mutilated Note if no interest shall have
been paid thereon.
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if any,
and interest becoming due and payable on the Notes shall be made in Zeeland,
Michigan at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place
of payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in SCHEDULE A, or by such
other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of payment most
recently designated by the Company pursuant to Section 14.1. Prior to any sale
or other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to
Section 13.2. The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
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15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of a special counsel and, if reasonably required, local or other counsel)
incurred by you and each Other Purchaser or holder of a Note in connection with
such transactions and in connection with any amendments, waivers or consents
under or in respect of this Agreement or the Notes (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement or the
Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses if any, of
brokers and finders (other than those retained by you).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders,
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except that (a) no amendment or waiver of any of the provisions of Section 1, 2,
3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be
effective as to you unless consented to by you in writing, and (b) no such
amendment or waiver may, without the written consent of the holder of each Note
at the time outstanding affected thereby, (i) subject to the provisions of
Section 12 relating to acceleration or rescission, change the amount or time of
any prepayment or payment of principal of, or reduce the rate or change the time
of payment or method of computation of interest or of the Make-Whole Amount on,
the Notes, (ii) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or
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consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in SCHEDULE A, or at such other
address as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of chief financial officer,
or at such other address as the Company shall have specified to the
holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
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<PAGE> 39
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with your current
practice or your policies and procedures from time to time in effect to protect
confidential information of third parties delivered to you, provided that you
may deliver or disclose Confidential Information to (i) your directors,
officers, employees, agents, attorneys and affiliates, (to the extent such
disclosure reasonably relates to the administration of the investment
represented by your Notes), (ii) your financial advisors and other professional
advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 20, (iii) any other
holder of any Note, (iv) any Institutional Investor to which you sell or offer
to sell such Note or any part thereof or any participation therein (if such
Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (v) any Person
from which you offer to purchase any security of the Company, (vi) any federal
or state regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio, or (viii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain
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<PAGE> 40
such Affiliate's agreement to be bound by this Agreement and shall contain a
confirmation by such Affiliate of the accuracy with respect to it of the
representations set forth in Section 6. Upon receipt of such notice, wherever
the word "you" is used in this Agreement (other than in this Section 21), such
word shall be deemed to refer to such Affiliate in lieu of you. In the event
that such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by such
Affiliate, upon receipt by the Company of notice of such transfer, wherever the
word "you" is used in this Agreement (other than in this Section 21), such word
shall no longer be deemed to refer to such Affiliate, but shall refer to you,
and you shall have all the rights of an original holder of the Notes under this
Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount or interest on
any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day, without including the additional days elapsed in
the computation of the interest payable on such next succeeding Business Day.
22.3. SEVERABILITY.
Any provision of this Agreement that 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 (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
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<PAGE> 41
22.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto. Each
of the Purchasers are identified on the signature pages hereto as a matter of
convenience but such identification shall not diminish the concept of separate
Agreements or imply any joint and several liability on the part of the
Purchasers.
22.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of
Illinois, excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
22.7. ACCOUNTING PRINCIPLES.
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, except where such
principles are inconsistent with the requirements of this Agreement.
* * * * *
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<PAGE> 42
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
HERMAN MILLER, INC.
By: /s/ Brian C. Walker
--------------------------
Title: EVP Finance, CFO
-----------------------
The foregoing is agreed
to as of the date thereof.
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ John R. Endres
------------------------------
Title: Assistant Vice-President
---------------------------
METROPOLITAN PROPERTY AND
CASUALTY INSURANCE COMPANY
By: /s/ James A. Kuchta
------------------------------
Title: Vice President
---------------------------
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Patricia W. Wilson
------------------------------
Name: Patricia W. Wilson
----------------------------
By: /s/ Steven M. Laude
------------------------------
Name: Steven M. Laude
----------------------------
Authorized Signatories
ALLSTATE LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Patricia W. Wilson
------------------------------
Name: Patricia W. Wilson
----------------------------
By: /s/ Steven M. Laude
------------------------------
Name: Steven M. Laude
----------------------------
Authorized Signatories
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<PAGE> 43
AID ASSOCIATION FOR LUTHERANS
By: /s/ R. Jerry Scheel
--------------------------------
Title: Second Vice-President -
-----------------------------
Securities
- -----------------------------------
NATIONWIDE LIFE INSURANCE
COMPANY
By: /s/ Michael D. Groseclose
--------------------------------
Title: Associate Vice President
-----------------------------
NATIONWIDE LIFE INSURANCE
COMPANY SEPARATE ACCOUNT OH
By: /s/ Michael D. Groseclose
--------------------------------
Title: Associate Vice President
-----------------------------
AMERICAN UNITED LIFE INSURANCE
COMPANY
By: /s/ Kent R. Adams
--------------------------------
Title: Vice President
-----------------------------
THE STATE LIFE INSURANCE COMPANY
By: /s/ Kent R. Adams
--------------------------------
Title: Vice President
-----------------------------
LUTHERAN BROTHERHOOD
By: /s/ Michael Landreville
--------------------------------
Title: Assistant Vice-President
-----------------------------
AMERITAS LIFE INSURANCE CORP.
By: /s/ Patrick J. Henry
--------------------------------
Title: Vice President-Fixed Income
-----------------------------
Securities
----------
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<PAGE> 44
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
METROPOLITAN LIFE $27,000,000
INSURANCE COMPANY
(1) All payments by wire transfer of immediately available funds to:
Metropolitan Life Insurance Company, Corporate Investments
Account No. 002-2-410591
The Chase Manhattan Bank, N.A.
Metropolitan Branch
33 East 23rd Street
New York, NY 10010
ABA # 021000021
providing sufficient information, including PPN, to identify the source
and application of funds and requesting the bank to send a credit
advice thereof to Metropolitan Life Insurance Company.
(2) All other communications:
Metropolitan Life Insurance Company
Fixed Income Investments
334 Madison Avenue, P.O. Box 633
Convent Station, NJ 07961-0633
Attention: Vice-President
Telecopier Number: (201) 254-3050
with a copy to:
Metropolitan Life Insurance Company
One Lincoln Centre, Suite 800
Oakbrook Terrace, IL 60181
Attention: Assistant Vice-President
Telecopier Number: (847) 916-2575
Tax ID #13-5581829
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<PAGE> 45
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
METROPOLITAN PROPERTY AND $5,000,000
CASUALTY INSURANCE COMPANY
(1) All payments by wire transfer of immediately available funds to:
Metropolitan Property and Casualty Insurance Company
Account No. 002-1-025432
The Chase Manhattan Bank, N.A.
Metropolitan Branch
33 East 23rd Street
New York, NY 10010
providing sufficient information, including PPN, to identify the source
and application of funds and requesting the bank to send a credit
advice thereof to Metropolitan Property and Casualty Insurance Company.
(2) All other communications:
Metropolitan Life Insurance Company
Fixed Income Investments
334 Madison Avenue, P.O. Box 633
Convent Station, NJ 07961-0633
Attention: Vice-President
Telecopier Number: (201) 254-3050
with a copy to:
Metropolitan Life Insurance Company
One Lincoln Centre, Suite 800
Oakbrook Terrace, IL 60181
Attention: Assistant Vice-President
Telecopier Number: (847) 916-2575
Tax ID #13-2725441
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<PAGE> 46
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
Series A Series B
Series C
ALLSTATE LIFE INSURANCE $19,000,000*
COMPANY
(1) All payments by wire transfer of immediately available funds to:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-117-0
ORG = Herman Miller, Inc.
OBI = DPP (enter PPN)
Payment Due Date (MM/DD/YY)
P___________(enter amount of principal being remitted, for example,
P5,000,000)
I___________(enter amount of interest being remitted, for example,
I225,000)
(2) All notices of payments and written confirmations of such wire transfers:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, Ste G4A
Northbrook, IL 60062-7127
Telephone: (847) 402-8709
Telecopy: (847) 402-7331
(3) Deliver securities to:
Harris Trust and Savings Bank
111 West Monroe Street
Institutional Custody, 5E
Chicago, IL 60690
Attention: Lisa Cox
For Allstate Life Insurance Company/
Safekeeping Account No. 23-91317
- ---------------
* To consist of four Notes, two in the principal amount of $5,000,000 and
the others to be in the principal amount of $1,000,000 and $8,000,000.
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<PAGE> 47
(4) All other communications:
Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, Ste G3A
Northbrook, IL 60062-7127
Telephone: (847) 402-4394
Telecopy: (847) 402-3092
Tax ID #36-2554642
-95-
<PAGE> 48
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
Series A Series B
Series C
ALLSTATE LIFE INSURANCE $1,000,000
COMPANY OF NEW YORK
(1) All payments by wire transfer of immediately available funds to:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company of New York
Collection Account #168-120-4
ORG = Herman Miller, Inc.
OBI = DPP (enter PPN)
Payment Due Date (MM/DD/YY)
P___________ (enter amount of principal being remitted, for example,
P5,000,000)
I (enter amount of interest being remitted, for example,
I225,000)
(2) All notices of payments and written confirmations of such wire transfers:
Allstate Insurance Company
Investment Operations - Private Placements
3075 Sanders Road, Ste G4A
Northbrook, IL 60062-7127
Telephone: (847) 402-8709
Telecopy: (847) 402-7331
(3) Deliver securities to:
Northern Trust Company of New York
80 Broad Street, 19th Floor
New York, NY 10004
Attention: Mike Sacaccio
For Allstate Life Insurance Company of New York/
Safekeeping Account No. 26-02960
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<PAGE> 49
(4) All other communications:
Allstate Life Insurance Company
Private Placements Department
3075 Sanders Road, Ste G3A
Northbrook, IL 60062-7127
Telephone: (847) 402-4394
Telecopy: (847) 402-3092
Tax ID #36-2608394
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<PAGE> 50
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
AID ASSOCIATION FOR LUTHERANS $15,000,000
(1) All payments by wire transfer of immediately available funds to:
Harris Trust and Savings Bank, Chicago
ABA #071 000 288
A/C #109-211-3
Attention: Trust Collection/P&I
Ref. Information: Security Description, PPN, Payable Date, Principal
and Interest breakdown, and Interest rate for variable rate
(2) All notices of payments and written confirmations of such wire
transfers:
Aid Association for Lutherans
Attention: Investment Accounting
4321 North Ballard Road
Appleton, WI 54919
AND
Harris Trust and Savings Bank
Institutional Custody - 5E
111 West Monroe Street
Chicago, IL 60690-0755
(3) Deliver securities to:
Ms. Polly Jozefczyk
Investment Manager Services 190/6
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690
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<PAGE> 51
(4) All other communications:
Aid Association for Lutherans
Attention: Investment Department
4321 North Ballard Road
Appleton, WI 54919
Tax ID #39-0123480
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<PAGE> 52
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
NATIONWIDE LIFE INSURANCE $13,500,000
COMPANY
(1) All payments by wire transfer of immediately available funds to:
Morgan Guaranty Trust Company of New York
ABA #021-000-238
JOURNAL #999-99-024
F/A/O Nationwide Life Insurance Company
Custody A/C #71615
Attention: Custody Service Department
PPN: 600544 B#6
with a description of the securities
(2) All notices of payments and written confirmations of such wire
transfers:
Nationwide Life Insurance Company
One Nationwide Plaza (1-32-09)
Columbus, OH 43215-2220
Attention: Corporate Money Management
(3) Deliver securities to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, NY 10260-0023
F/A/O Nationwide Life Insurance Company
Custody Account #71615
(4) All other communications:
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, OH 43215-2220
Attention: Corporate Fixed-Income Securities
Tax ID #31-4156830
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<PAGE> 53
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
NATIONWIDE LIFE INSURANCE $1,500,000
COMPANY SEPARATE ACCOUNT OH
(1) All payments by wire transfer of immediately available funds to:
Morgan Guaranty Trust Company of New York
ABA #021-000-238
JOURNAL #999-99-024
F/A/O Nationwide Life Insurance Company
Separate Account OH Custody A/C #74605
Attention: Custody Service Department
PPN: 600544 B# 6
with a description of the securities
(2) All notices of payments and written confirmations of such wire
transfers:
Nationwide Life Insurance Company Separate Account OH
One Nationwide Plaza (1-32-09)
Columbus, OH 43215-2220
Attention: Corporate Money Management
(3) Deliver securities to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, NY 10260-0023
F/A/O Nationwide Life Insurance Company Separate Account OH
Custody Account #74605
(4) All other communications:
Nationwide Life Insurance Company Separate Account OH
One Nationwide Plaza (1-33-07)
Columbus, OH 43215-2220
Attention: Corporate Fixed-Income Securities
Tax ID #31-4156830
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<PAGE> 54
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
- ----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
AMERICAN UNITED LIFE $7,000,000*
INSURANCE COMPANY
(1) All payments by wire transfer of immediately available funds to:
Bank of New York
One Wall Street, 3rd Floor
ABA #021000018
Window A
Acct. #186683/AUL
New York, NY 10286
payments should contain sufficient information to identify the
breakdown of principal and interest and should identify the full
description of the bond and the payment date.
(2) All notices of payments and written confirmations of such wire
transfers:
American United Life Insurance Company
ATTN: Mike Bullock, Securities Department
1 American Square
Post Office Box 368
Indianapolis, IN 46206
(3) Deliver securities to:
Bank of New York
One Wall Street, 3rd Floor
Window A
Acct. #186683/American Untied Life
New York, NY 10286
- ------------------------
* To consist of two Notes, in the principal amounts of $4,000,000 and
$3,000,000.
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<PAGE> 55
(4) All other communications:
American United Life Insurance Company
ATTN: Mike Bullock, Securities Department
1 American Square
Post Office Box 368
Indianapolis, IN 46206
Tax ID #35-0145825
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<PAGE> 56
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
THE STATE LIFE INSURANCE COMPANY $1,000,000
(1) All payments by wire transfer of immediately available funds to:
Bank of New York
One Wall Street, 3rd Floor
ABA #021000018
Window A
Acct. #343761/State Life, c/o American United Life
New York, NY 10286
payments should contain sufficient information to identify the breakdown
of principal and interest and should identify the full description of the
bond and the payment date.
(2) All notices of payments and written confirmations of such wire
transfers:
American United Life Insurance Company
ATTN: Mike Bullock, Securities Department
1 American Square
Post Office Box 368
Indianapolis, IN 46206
(3) Deliver securities to:
Bank of New York
Trust Securities
One Wall Street, 3rd Floor
Window A
Acct. #343761/State Life, c/o American United Life
New York, NY 10286
(4) All other communications:
American United Life Insurance Company
ATTN: Mike Bullock, Securities Department
1 American Square
Post Office Box 368
Indianapolis, IN 46206
Tax ID #35-0684263
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<PAGE> 57
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
LUTHERAN BROTHERHOOD $3,000,000 $4,000,000
(1) All payments by wire transfer of immediately available funds to:
Norwest Bank Minnesota, N.A.
ABA #091000019
For Credit to Trust Clearing Account #08-40-245
Attn: Income Collection
For Credit to: Lutheran Brotherhood
Acct. No. 12651300
include the following information:
A/C Lutheran Brotherhood
Account No. 12651300
Security Description
Private Placement Number
Reference Purpose of Payment
Interest and/or Principal Breakdown
(2) All notices of payments and written confirmations of such wire
transfers:
Lutheran Brotherhood
Attn: Investment Division
625 Fourth Avenue South
10th Floor
Minneapolis, MN 55415
Telecopy: (612) 340-5776
(3) Deliver securities to:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
5th Floor
Investors Building
Minneapolis, MN 55479-0047
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<PAGE> 58
(4) All other communications:
Lutheran Brotherhood
Attn: Investment Division
625 Fourth Avenue South
10th Floor
Minneapolis, MN 55415
Telecopy: (612) 340-5776
Tax ID #41-0385700
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<PAGE> 59
SCHEDULE A
INFORMATION RELATING TO PURCHASER
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
Series A Series B
-------- --------
Series C
--------
AMERITAS LIFE INSURANCE CORP. $3,000,000
(1) All payments by wire transfer of immediately available funds to:
First Bank Nebraska, NA
ABA #104000029
Account: Ameritas Life Insurance Corp.
Account #1-494-0070-0188
Re: Herman Miller 6.08% due 2001
P&I Breakdown
with sufficient information to identify the source and application of
such funds
(2) All notices of payments and written confirmations of such wire
transfers:
Ameritas Life Insurance Corp.
5900 "O" Street
Lincoln, NE 68510
Attn: Financial Department
phone: (402) 467-6961
FAX: (402) 467-6970
(3) All other communications:
Ameritas Life Insurance Corp.
5900 "O" Street
Lincoln, NE 68510
phone: (402) 467-6961
FAX: (402) 467-6970
Tax ID #47-0098400
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<PAGE> 60
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"ADJUSTED CONSOLIDATED NET WORTH" means the consolidated stockholders'
equity of the Company and its Restricted Subsidiaries, determined in accordance
with GAAP, less the amount by which Restricted Investments exceed 10% of
consolidated stockholders' equity as so determined.
"AFFILIATE" means any Person (other than a Restricted Subsidiary or an
original Purchaser) (i) who is a director or executive officer of the Company
or any Restricted Subsidiary, (ii) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, the Company, (iii) which beneficially owns or holds securities
representing 5% or more of the combined voting power of the Voting Stock of the
Company or any Subsidiary, or (iv) of which securities representing 5% or more
of the combined voting power of its Voting Stock (or in the case of a Person
not a corporation, 5% or more of its equity) is beneficially owned or held by
the Company or any Subsidiary. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Chicago, Illinois or New York City are
required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means any amounts required to be
capitalized under any Capital Lease.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"COMPANY" means Herman Miller, Inc., a Michigan corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
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<PAGE> 61
"CONSOLIDATED FUNDED DEBT" means Funded Debt of the Company and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED SHORT-TERM DEBT" means all Consolidated Indebtedness other
than Consolidated Funded Debt.
"CONSOLIDATED TOTAL ASSETS" means the assets and properties of the Company
and its Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED TOTAL CAPITALIZATION" means the sum of Adjusted Consolidated
Net Worth and Consolidated Funded Debt and, solely for purposes of Section
10.5, Consolidated Short-Term Debt.
"DEALER LOAN PROGRAM" means all secured loans and advances made to the
Company's independent furniture dealers at a prevailing rate not less than the
prime lending rate.
"DEFAULT" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"DEFAULT RATE" means that rate of interest that is the greater of (i) 2%
per annum above the rate of interest stated in clause (a) of the first
paragraph of the Series A Notes, the Series B Notes or the Series C Notes, as
the case may be, or (ii) 2% over the rate of interest publicly announced by
Bank of America Illinois in Chicago, Illinois as its "base" or "prime" rate.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges
to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FUNDED DEBT" means, as of any date of determination, (i) Indebtedness
which by its terms matures more than one year from the date of creation
(including any portion thereof payable within a year), (ii) Indebtedness
outstanding under a revolving credit or similar agreement providing for
borrowings (and renewals and extensions thereof) over a period of more than one
year notwithstanding that any such Indebtedness may be payable within one year
after the creation thereof, and (iii) Capitalized Lease Obligations.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary,
or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GUARANTY" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
any indebtedness, dividend or other obligation of any other Person in any
manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital
or other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
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(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety,
the removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration
of which is or shall be restricted, prohibited or penalized by any applicable
law (including, without limitation, asbestos, urea formaldehyde foam insulation
and polycholorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INDEBTEDNESS" means, for any Person (without duplication), all (i)
obligations for borrowed money or to pay the deferred purchase price of
property or assets (except trade account payables), (ii) obligations secured by
any Lien upon property or assets owned by such Person, even though such Person
has not assumed or become liable for the payment of such obligations, (iii)
obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired, notwithstanding the fact
that the rights and remedies of the seller, lender or lessor under such
agreement in the event of default are limited to repossession or sale of
property, (iv) Capitalized Lease Obligations, and (v) Guaranties of obligations
of others of the character referred to in this definition.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note, and
(b) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
"INVESTMENTS" means all investments made, in cash or by delivery of
property, directly or indirectly, by any Person, in any other Person, whether
by acquisition of shares of capital stock, indebtedness or other obligations or
securities or by loan, advance, capital contribution or otherwise; provided,
however, that "Investments" shall not mean or include investments in property
to be used or consumed in the ordinary course of business.
"KEY EXECUTIVE STOCK PURCHASE ASSISTANCE PLAN" means the plan adopted by
the Company's Board of Directors and Stockholders in 1994, as amended or
hereafter amended in accordance therewith, that authorizes the Executive
Compensation Committee of the Board of Directors to extend loans to selected
executives of the Company to acquire Common Stock of the Company.
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"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.6.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, or properties of the Company and its
Restricted Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"MEMORANDUM" is defined in Section 5.3.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NOTES" is defined in Section 1.
"OFFICER'S CERTIFICATE" means a certificate of a Responsible Officer.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any
liability.
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"PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"RESTRICTED INVESTMENTS" means any Investment of the Company and its
Restricted Subsidiaries other than:
(i) Investments in Restricted Subsidiaries;
(ii) Investments in a Person which, as a result thereof,
becomes a Restricted Subsidiary;
(iii) Investments in:
(A) commercial paper maturing in 270 days or less from the
date of issuance which is rated in one of the top two rating
classifications by at least one nationally recognized rating
agency,
(B) certificates of deposit or banker's acceptances maturing
within one year from the date of issuance of commercial bank
subsidiaries of BankAmerica Corp. or of other financial
institutions in each case whose long-term debt is rated within one
of the top two ratings classifications by at least one nationally
recognized rating agency,
(C) eurodollar time deposits maturing within one year from
the date of issuance with foreign branches of institutions
described in clause (B) above,
(D) up to $15,000,000 in the aggregate made by Milsure
Insurance Limited, a Barbados corporation and a Wholly-Owned
Subsidiary of the Company, in obligations of or fully guaranteed
by the United States of America or an agency thereof maturing
within five years from the date of issuance,
(E) obligations of or fully guaranteed by the United States
of America or an agency thereof maturing within one year from the
date of issuance,
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(F) municipal securities maturing within one year of the date
of acquisition which are rated in one of the top two rating
classifications by at least one nationally recognized rating
agency, and
(G) money market instrument programs which are rated in one
of the top two rating classifications by at least one nationally
recognized rating agency and that are properly classified as
current assets in accordance with GAAP;
(iv) Investments in the ordinary course in notes receivable
of dealers under the Dealer Loan Program;
(v) Loans to key executives under the Key Executive Stock
Purchase Assistance Plan provided that such loans do not exceed
$4,000,000 in the aggregate at any time;
(vi) Investments existing as of the date of this Agreement
which are listed in the attached SCHEDULE B-1.
"RESTRICTED SUBSIDIARY" means any Subsidiary (i) 80% or more of the
Voting Stock of which is owned by the Company and/or one or more Wholly-Owned
Restricted Subsidiaries, (ii) which is organized under the laws of the United
States or any state thereof, or Canada, or any European country, any Asian
country, Mexico, Japan or Australia (iii) which maintains substantially all of
its assets and conducts substantially all of its business within the one or
more of the geographic areas referred to in clause (ii), (iv) which the Company
has not designated an Unrestricted Subsidiary by notice (including designation
in SCHEDULE 5.4) to the holders of the Notes (for purposes hereof all
Subsidiaries shall be deemed Restricted Subsidiaries unless and until expressly
designated otherwise), and (v) which has not been designated a Restricted
Subsidiary more than twice previously.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer, vice
president, finance, principal accounting officer, treasurer or comptroller of
the Company.
"SUBSIDIARY" means, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
Voting Stock to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of
its
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Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary which has been designated
an Unrestricted Subsidiary or which is hereafter designated an Unrestricted
Subsidiary by the Company by notice to holders of the Notes.
"VOTING STOCK" means capital stock of any class of a corporation having
power under ordinary circumstances to vote for the election of members of the
board of directors of such corporation, or persons performing similar
functions.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary 100% of all
of the equity interests (except directors' qualifying shares) and Voting Stock
of which are owned by any one or more of the Company and the Company's other
Wholly-Owned Subsidiaries at such time.
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SCHEDULE B-1
INVESTMENTS
SEE ATTACHED
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SCHEDULE 4.9
CHANGES IN CORPORATE STRUCTURE
NONE
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SCHEDULE 5.4
SUBSIDIARIES OF THE COMPANY
AND
OWNERSHIP OF SUBSIDIARY STOCK
SEE ATTACHED
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SCHEDULE 5.5
FINANCIAL STATEMENTS
1. The Company's Form 10-Q Statement for the six months ended December 3,
1994 and December 2, 1995 (unaudited).
2. The Company's audited financial statements on Form 10-K for fiscal years
1991 through 1995.
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SCHEDULE 5.8
CERTAIN LITIGATION
NONE
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SCHEDULE 5.11
LICENSES, PERMITS, INTELLECTUAL PROPERTY, ETC.
NONE
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SCHEDULE 5.14
USE OF PROCEEDS
Proceeds of the Notes will be used to repay $80,000,000 to $100,000,000 of the
existing Indebtedness set forth on Schedule 5.15 and for general corporate
purposes.
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SCHEDULE 5.15
EXISTING INDEBTEDNESS
SEE ATTACHED
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SCHEDULE 10.7
LIENS
Liens in connection with certain finance leases and miscellaneous capital
leases and purchase money equipment liens which in the aggregate do not exceed
$1,000,000.
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EXHIBIT 1-A
FORM OF SERIES A NOTE
HERMAN MILLER, INC.
6.37% SERIES A SENIOR NOTE
DUE MARCH 5, 2006
No. [_____] March 5, 1996
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, HERMAN MILLER, INC. (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Michigan, hereby promises to pay to [ ], or registered
assigns, the principal sum of $[ ] on March 5, 2006, with interest
(computed on the basis of a 360-day year of twelve 30-day months) (a) on the
unpaid balance thereof at the rate of 6.37% per annum from the date hereof,
payable semiannually, March 5 and September 5 in each year, commencing with the
March 5 or September 5 next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) to the extent permitted by
law on any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Make-Whole Amount
(as defined in the Note Purchase Agreements referred to below), payable
semiannually as aforesaid (or, at the option of the registered holder hereof,
on demand), at a rate per annum from time to time equal to the greater of (i)
8.37% or (ii) 2% over the rate of interest publicly announced by Bank of
America Illinois from time to time in Chicago, Illinois as its "base" or
"prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the Company's office in Zeeland, Michigan or at such other place as
the Company shall have designated by written notice to the holder of this Note
as provided in the Note Purchase Agreements referred to below.
This Note is one of a series of Series A Notes (herein called the "Notes")
issued pursuant to separate Note Purchase Agreements, dated as of March 1, 1996
(as from time to time amended, the "Note Purchase Agreements"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder
125
<PAGE> 78
hereof or such holder's attorney duly authorized in writing, a new Note for a
like principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates and
in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with, and shall be
governed by, the law of the State of Illinois excluding choice-of-law
principles of the law of such State that would require the application of a
jurisdiction other than such state.
HERMAN MILLER, INC.
By:
----------------------------
Title:
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<PAGE> 79
EXHIBIT 1-B
FORM OF SERIES B NOTE
HERMAN MILLER, INC.
6.08% SERIES B SENIOR NOTE
DUE MARCH 5, 2001
No. [_____] March 5, 1996
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, HERMAN MILLER, INC. (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Michigan, hereby promises to pay to [ ], or registered assigns,
the principal sum of $[ ] on March 5, 2001, with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 6.08% per annum from the date hereof, payable
semiannually, March 5 and September 5 in each year, commencing with the March
5 or September 5 next succeeding the date hereof, until the principal hereof
shall have become due and payable, and (b) to the extent permitted by law on
any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Make-Whole Amount
(as defined in the Note Purchase Agreements referred to below), payable
semiannually as aforesaid (or, at the option of the registered holder hereof,
on demand), at a rate per annum from time to time equal to the greater of (i)
8.08% or (ii) 2% over the rate of interest publicly announced by Bank of
America Illinois from time to time in Chicago, Illinois as its "base" or
"prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the Company's office in Zeeland, Michigan or at such other place as
the Company shall have designated by written notice to the holder of this Note
as provided in the Note Purchase Agreements referred to below.
This Note is one of a series of Series B Notes (herein called the "Notes")
issued pursuant to separate Note Purchase Agreements, dated as of March 1, 1996
(as from time to time amended, the "Note Purchase Agreements"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder
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hereof or such holder's attorney duly authorized in writing, a new Note for a
like principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates and
in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with, and shall be
governed by, the law of the State of Illinois excluding choice-of-law
principles of the law of such State that would require the application of a
jurisdiction other than such state.
HERMAN MILLER, INC.
By:
---------------------
Title:
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<PAGE> 81
EXHIBIT 1-C
FORM OF SERIES C NOTE
HERMAN MILLER, INC.
6.52% SERIES C SENIOR NOTE
DUE MARCH 5, 2008
No. [_____] March 5, 1996
$[_______] PPN[______________]
FOR VALUE RECEIVED, the undersigned, HERMAN MILLER, INC. (herein called
the "Company"), a corporation organized and existing under the laws of the
State of Michigan, hereby promises to pay to [ ], or registered assigns,
the principal sum of $[ ] on March 5, 2008, with interest (computed on the
basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 6.52% per annum from the date hereof, payable
semiannually, March 5 and September 5 in each year, commencing with the March 5
or September 5 next succeeding the date hereof, until the principal hereof
shall have become due and payable, and (b) to the extent permitted by law on
any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Make-Whole Amount
(as defined in the Note Purchase Agreements referred to below), payable
semiannually as aforesaid (or, at the option of the registered holder hereof,
on demand), at a rate per annum from time to time equal to the greater of (i)
8.52% or (ii) 2% over the rate of interest publicly announced by Bank of
America Illinois from time to time in Chicago, Illinois as its "base" or
"prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the Company's office in Zeeland, Michigan or at such other place as
the Company shall have designated by written notice to the holder of this Note
as provided in the Note Purchase Agreements referred to below.
This Note is one of a series of Series C Notes (herein called the "Notes")
issued pursuant to separate Note Purchase Agreements, dated as of March 1, 1996
(as from time to time amended, the "Note Purchase Agreements"), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to
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due presentment for registration of transfer, the Company may treat the
person in whose name this Note is registered as the owner hereof for the
purpose of receiving payment and for all other purposes, and the Company will
not be affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates and
in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase
Agreements.
This Note shall be construed and enforced in accordance with, and shall be
governed by, the law of the State of Illinois excluding choice-of-law
principles of the law of such State that would require the application of a
jurisdiction other than such state.
HERMAN MILLER, INC.
By:
----------------------
Title:
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<PAGE> 83
EXHIBIT 4.4(a)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY
The opinion of Varnum, Riddering, Schmidt & Howlett, counsel for the Company,
shall be to the effect that:
1. Each of the Company and each Subsidiary is a corporation duly
incorporated, validly existing in good standing under the laws of its
jurisdiction of incorporation, and each has all requisite corporate power and
authority to own and operate its properties, to carry on its business as now
conducted, and, in the case of the Company, to enter into and perform under the
Agreement and the Other Agreements and to issue and sell the Notes.
2. The Agreement, the Other Agreements and the Notes have been duly
authorized by proper corporate action on the part of the Company, have been
duly executed and delivered by an authorized officer of the Company, and
constitute the legal, valid and binding agreements of the Company, enforceable
in accordance with their terms, except to the extent that enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws of general application relating to or affecting the enforcement
of the rights of creditors or by equitable principles, regardless of whether
enforcement is sought in a proceeding in equity or at law.
3. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes do not require the registration of the
Notes under the Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
4. No authorization, approval or consent of any governmental or regulatory
body is necessary or required in connection with the execution and delivery by
the Company of the Agreement, the Other Agreements or the offering, issuance
and sale by the Company of the Notes, and no designation, filing, declaration,
registration and/or qualification with any governmental authority is required
in connection with the offer, issuance and sale of the Notes by the Company.
5. The issuance and sale of the Notes by the Company, the performance of
the terms and conditions of the Notes and the Agreement and the Other
Agreements and the execution and delivery of the Agreement and the Other
Agreements do not conflict with, or result in any breach or violation of any of
the provisions of, or constitute a default under, or result in the creation or
imposition of any Lien upon the property of the Company or any Subsidiary
pursuant to the provisions of (i) the Certificate of Incorporation or By-laws
of the Company or any Subsidiary, (ii) any loan agreement to
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<PAGE> 84
which the Company or any Subsidiary is a party or by which any of them or their
property is bound, (iii) any other agreement or instrument known to such
counsel to which the Company or any Subsidiary is a party or by which any of
them or their property is bound, (iv) any law (including usury laws) or
regulation applicable to the Company, or (v) any order, writ, injunction or
decree of any court or governmental authority applicable to the Company.
6. All of the issued and outstanding shares of capital stock of each
Subsidiary have been duly and validly issued, are fully paid and nonassessable
and are owned by the Company free and clear of any pledge or, to the knowledge
of such counsel, any other Lien.
7. Neither the Company nor any Subsidiary is (i) a "public utility
company" or a "holding company," or an "affiliate" or a "subsidiary company" of
a "holding company," or an "affiliate" of such a "subsidiary company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended, (ii) a "public utility" as defined in the Federal Power Act, as
amended, or (iii) an "investment company" or an "affiliated person" thereof, as
such terms are defined in the Investment Company Act of 1940, as amended.
8. The issuance of the Notes and the intended use of the proceeds of the
sale of the Notes do not violate or conflict with Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System.
9. There are no actions, suits or proceedings pending or, to the best of
such counsel's knowledge, threatened against, or affecting the Company or any
Subsidiary, at law or in equity or before or by any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which are likely to have a Material
Adverse Effect.
The opinion of Varnum, Riddering, Schmidt & Howlett, counsel for the Company,
shall cover such other matters relating to the sale of the Notes as the
Purchasers may reasonably request. With respect to matters of fact on which
such opinion is based, such counsel shall be entitled to rely on appropriate
certificates of public officials and officers of the Company and with respect
to matters governed by the laws of any jurisdiction other than the United
States of America and the laws of the States of Delaware and Michigan, such
counsel may rely upon the opinions of counsel deemed (and stated in their
opinion to be deemed) by them to be competent and reliable.
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EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The opinion of Gardner, Carton & Douglas, special counsel for the
Purchasers, shall be to the effect that:
1. The Company is a corporation organized and validly existing in good
standing under the laws of the State of Michigan, with all requisite corporate
power and authority to enter into the Agreement and to issue and sell the
Notes.
2. The Agreement and the Notes have been duly authorized by proper
corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
of general application relating to or affecting the enforcement of the rights
of creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.
3. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes do not require the registration of the
Notes under the Securities Act of 1933, as amended, nor the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
4. The issuance and sale of the Notes and compliance with the terms and
provisions of the Notes and the Agreement will not conflict with or result in
any breach of any of the provisions of the Certificate of Incorporation or
By-Laws of the Company.
5. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal or
state, is necessary in connection with the execution and delivery of the Note
Agreement or the Notes.
The opinion of Gardner, Carton & Douglas also shall state that the legal
opinion of Varnum, Riddering, Schmidt & Howlett, counsel for the Company,
delivered to you pursuant to the Agreement, is satisfactory in form and scope
to Gardner, Carton & Douglas, and, in its opinion, the Purchasers and it are
justified in relying thereon and shall cover such other matters relating to the
sale of the Notes as the Purchaser may reasonably request.
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EXHIBIT 10(G)
INCENTIVE SHARE AWARD AGREEMENT
AGREEMENT Made as of October 4, 1995, by HERMAN MILLER, INC., a Michigan
corporation (the "Company"), and MICHAEL A. VOLKEMA (herein called "Mr.
Volkema").
RECITALS
A. Mr. Volkema is the president, chief executive officer, and a director
of the Company.
B. To provide an incentive to Mr. Volkema, the Company's Board of
Directors has elected to award Mr. Volkema shares of common stock of the
Company under the terms of the Company's Long-Term Incentive Plan (the "Plan").
C. The award of Restricted Stock (as defined in the Plan) to Mr. Volkema
is subject to the terms and restrictions of the Plan and this Agreement,
including the automatic reversion to the Company of some or all of the shares
if Mr. Volkema does not continue to serve the Company as an officer or director
for the period specified herein.
D. Mr. Volkema has accepted the grant of shares upon the terms,
restrictions and conditions of this Agreement.
E. The parties desire to confirm in this Agreement the terms, conditions
and restrictions applicable to the grant of shares.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliated Emplover" means any entity controlling, controlled by or
under common control with the Company.
1.2 "Board" means the Board of Directors of the Company.
1.3 "Bonus Payout Percentage" means the percentage which results from
dividing the actual bonus earned by Mr. Volkema in a particular fiscal year
under the Company's Executive Incentive Plan for that year by his Bonus
Potential (at 100 percent, as defined in such plan) for such year.
1.4 "Common Stock" means the common stock of the Company, par value $.20
per share.
1.5 "Company" means Herman Miller, Inc., a Michigan corporation, its
successors and assigns.
1.6 "Executive Incentive Plan" means the Company's officers' executive
incentive plan approved and adopted by the Board with respect to each fiscal
year of the Company.
1.7 "Fiscal year" means the year ending the Saturday nearest the end of
May of each year, or such other fiscal year as may be adopted for the Company
by the Board.
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1.8 "Plan" means the Company's Long-Term Incentive Plan, as approved by
the Company's shareholders on October 6, 1994.
1.9 "Restricted Share" means a Share which is subject to the restriction
on sale, pledge or other transfer imposed by Section 3.1. An "Unrestricted
Share" is a Share which is no longer a Restricted Share.
1.10 "Reverted Shares" means Unvested Shares which have reverted to the
Company pursuant to Sections 5.7 and 5.8.
1.11 "Shares" means the shares of Common Stock awarded, issued and
delivered to Mr. Volkema under this Agreement. If, as a result of a stock
split, stock dividend, combination of stock, or any other change or exchange of
securities, by reclassification, reorganization, recapitalization or otherwise,
the Shares shall be increased or decreased, or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or another corporation, the term "Shares" shall mean and include the shares of
stock or other securities issued with respect to the Shares.
1.12 "Silver Parachute Plan" means the Herman Miller, Inc. Plan for
Severance Compensation After Hostile Takeover, as amended and restated as of
January 17, 1990, and as it may thereafter be amended.
1.13 "Vested Percentage" means the percentage of Shares which have become
Vested Shares pursuant to Section 5.4.
1.14 "Vested Shares" and "Unvested Shares" shall have the meanings
expressed in Section 5.3.
2. GRANT AND ACCEPTANCE OF AWARD
2.1 Grant. The Company confirms that on October 4, 1995, as authorized by
the Board, Mr. Volkema was awarded thirty thousand (30,000) shares of Common
Stock (the "Shares") pursuant to the Plan.
2.2 Acceptance. Mr. Volkema confirms that he has accepted the award of
Shares and agrees to hold them subject to the terms, conditions and limitations
of the Plan and this Agreement.
2.3 Tax Election. Mr. Volkema agrees to elect to be taxed in 1995 on the
fair market value of the Shares awarded to him, and agrees to sign an election
to be so taxed under Section 83(b) of the Internal Revenue Code. Mr. Volkema
agrees to file such election on or before thirty (30) days from the date
hereof.
Mr. Volkema confirms his understanding that, having made the election
under Section 83(b) to be taxed in 1995 on the value of the Shares, if any of
the Shares shall revert to the Company pursuant to Sections 5.7 and 5.8, the
effect will be that he will have paid tax as if he had retained such Shares but
will have been denied the right to retain them.
2.4 Withholding. Mr. Volkema recognizes that the Company is required by
federal regulations to deduct and withhold income taxes at the rate of 28% of
the market value of the Shares, and to pay the tax in money at the time or
times the payroll deposit is due with respect to such income. The Company has
offered to withhold 28 percent of the Shares (8,400 shares) and itself pay the
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<PAGE> 3
amount to be withheld. Mr. Volkema has accepted such offer rather than pay to
the Company in cash the full amount to be withheld. Accordingly, Mr. Volkema
will receive a certificate for 21,600 Shares and the Company will pay the
requisite withholding tax. Mr. Volkema is responsible to pay when due all
income taxes on the fair market value of the Shares in excess of the amount
which is withheld.
3. RESTRICTIONS ON TRANSFER OF SHARES: LAPSE OF RESTRICTIONS
3.1 Transfer Prohibition. Mr. Volkema shall not sell any Share, pledge any
Share or otherwise transfer any Share or any interest in any Share if such
Share is a Restricted Share.
3.2 Restricted Shares. Every Share shall be a Restricted Share until the
Share shall no longer be deemed to be a Restricted Share as provided in Section
3.6.
3.3 Securities Law Compliance. Mr. Volkema shall not sell or transfer any
Share or any interest in any Share, whether such Share is or is not a
Restricted Share, unless either (a) the Company shall consent in writing to
such transfer, or (b) the Company shall have received an opinion of counsel
reasonably satisfactory to the Company to the effect that such transfer will
not violate the registration requirements imposed by the Securities Act of 1933
or any other provision of law which the Company shall desire such opinion to
cover.
3.4 Legend. Every certificate representing a Share shall at all times bear
the following legend:
'The Shares represented by this certificate are subject to certain
restrictions and prohibitions and to the rights of Herman Miller,
Inc. (the "Company"), as set forth in an Incentive Share Grant
Agreement dated October 4, 1995 ("Agreement"), between the Company
and Michael A. Volkema including but not limited to: (1) the
Company's right to acquire absolute ownership of some or all of
these Shares upon their reversion to the Company; (2) a prohibition
against any transfer of any interest in these Shares without the
Company's consent while these Shares remain Restricted Shares under
the Agreement; and (3) a prohibition against transfer of any
interest in these Shares except in compliance with requirements
imposed by the Securities Act of 1933. No interest in these Shares
may be transferred without compliance with the requirements in the
Agreement."
3.5 Stop Transfer Instructions. The Company shall have the right to issue
instructions to the transfer agent for the shares of the Company, prohibiting
transfer of any Shares except in accordance with the requirements of this
Agreement.
3.6 Unrestricted Shares. A Share shall no longer be deemed to be a
Restricted Share if:
a. The Company stipulates in writing that the Share is no longer a
Restricted Share.
b. The Share is or becomes a Vested Share as of the end of the
Company's fiscal year ending in the year 2000.
c. The Share becomes a Vested Share as of the end of the Company's
fiscal year ending in the year 2001.
d. The Share becomes a Vested Share pursuant to Section 5.6(c), (d) or
(e).
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<PAGE> 4
A Share which is no longer deemed to be a Restricted Share
shall be an Unrestricted Share.
3.7 New Certificate for Unrestricted Shares. If Mr. Volkema holds
certificates representing Shares which are no longer Restricted Shares, Mr.
Volkema shall be entitled to receive from the Company, in exchange therefor, a
certificate representing such Unrestricted Shares, bearing a legend, if the
Company shall deem such a legend to be appropriate, only to the effect that the
transfer of such Shares is prohibited if it would violate the Securities Act of
1933. If the certificate held by Mr. Volkema represents both Restricted and
Unrestricted Shares, he shall be entitled to receive two certificates in
exchange therefor, one of which shall represent the Restricted Shares and one
of which shall represent Unrestricted Shares.
3.8 Rights as Stockholder. Except for the restrictions imposed in this
Article 3, and unless the Shares have reverted to the Company pursuant to
Sections 5.7 and 5.8, Mr. Volkema shall have all the rights as a stockholder
with respect to the Restricted Shares, including the right to vote and to
receive the dividends declared and paid thereon.
4. ACQUISITION WARRANTIES
In order to induce the Company to issue and deliver the Shares on the
terms of this Agreement, Mr. Volkema warrants to and agrees with the Company as
follows:
4.1 No Participating Interest. Mr. Volkema is acquiring the Shares for his
own account. He has not made any arrangement or commitment to convey any
interest in the Shares to any person, other than to transfer Reverted Shares to
the Company pursuant to Section 5.8 of this Agreement.
4.2 Ability to Evaluate. Because of his knowledge and experience in
financial and business matters, Mr. Volkema is capable of evaluating the merits
and risks of acquiring the Shares under the arrangements prescribed by this
Agreement.
4.3 Familiaritv with Companv. Mr. Volkema is familiar with the business,
properties, financial condition, liabilities, shares, earnings, prospects and
operations of the Company. He confirms that the Company has not made any
representation, warranty or agreement regarding the foregoing matters, the
merits of the arrangements made pursuant to this Agreement, or any other matter
except as expressly indicated in this Agreement.
4.4 All Questions Answered. Mr. Volkema thoroughly understands all the
terms of this Agreement, the actions which may be taken under this Agreement,
and the consequences such actions might have for him. He confirms there are no
questions relating to any such matters which have not been answered to his
complete satisfaction.
4.5 Agreement Binding and Enforceable. Mr. Volkema intends and agrees that
every provision in this Agreement shall be binding upon and enforceable against
him in accordance with its terms.
5. VESTING AND REVERSION
5.1 General. In general, Shares shall vest in accordance with Section 5.4
and the table of vesting set forth in that section. Shares may also become
vested in accordance with Sections 5.5 and 5.6.
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5.2 Vested Percentage. The "Vested Percentage" of the Shares at any time
is the percentage of the Shares which have become vested pursuant to Section
5.4.
5.3 Vested Shares. The number of vested shares ("Vested Shares") at any
time shall be the greater of (a) the number derived by multiplying the Vested
Percentage at that time by the number of Shares issued hereunder, or (b) the
number which have become vested pursuant to Sections 5.5 or 5.6.
5.4 Table of Vesting. The vesting of Shares shall be based upon the Bonus
Payout Percentage earned by Mr. Volkema under the Company's Executive Incentive
Plan for each of the fiscal years designated in the following table. The Vested
Percentage for the fiscal years ending in 1997, 1998, 1999, and 2000,
respectively, shall be based upon the sum of the bonus Payout Percentages
earned by Mr. Volkema for that year and for each of the fiscal years ended
prior to that date ("Cumulative Bonus Payout Percentage"), in accordance with
the following table of vesting:
<TABLE>
<CAPTION> <S> <C> <C>
If Cumulative
Fiscal Year Bonus Payout The Vested
Ending In Percentage is Percentage is
------------- ----------------- -------------
1996 100 or more 20
1997 200 or more 40
1998 300 or more 60
1999 400 or more 80
2000 500 or more 100
</TABLE>
In any fiscal year ending in the years 1996 to 2000 inclusive, in which
Mr. Volkema's Vested Percentage does not increase by at least twenty (20)
percentage points in accordance with the foregoing table of vesting, his Vested
Percentage in that fiscal year shall increase by ten (10) percentage points.
No Shares shall be Vested Shares prior to the end of the Company's fiscal
year ending in 1996.
If the Shares are not 100 percent vested by the end of the Company's
fiscal year ending in the year 2000, the remainder of the Shares shall vest at
the end of the Company's fiscal year ending in the year 2001.
5.5 Acceleration of Vested Percentage. The Board shall have the right at
any time (but shall not be obligated) to increase the Vested Percentage under
this Agreement to 100 percent, or to any other percentage greater than would
otherwise apply under this Agreement. After any such action by the Board:
a. The Vested Percentage shall never be less than the percentage
designated by the Board; and
b. If the Vested Percentage is less than 100 percent, the Vested
Percentage shall increase at the end of each of the Company's fiscal years
thereafter in accordance with Section 5.4.
5.6 One Hundred Percent Vesting. All Shares issued hereunder shall become
Vested Shares:
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<PAGE> 6
a. If the Shares are 100 percent vested pursuant to Section 5.4.
b. If the Company so stipulates in writing.
c. Upon Mr. Volkema's death.
d. If Mr. Volkema's service to the Company both as an officer and as a
director ends at a time when he is permanently disabled, as determined by a
physician approved by the Board.
e. If Mr. Volkema's employment is voluntarily or involuntarily terminated
at a time when he is entitled to receive a severance benefit under the
Company's Silver Parachute Plan.
5.7 Reversion. All Unvested Shares shall automatically revert to the
Company at any time Mr. Volkema shall no longer be employed by the Company or
an Affiliated Employer for any reason whatsoever, including involuntary
termination without the consent of Mr. Volkema. Except as provided in Section
5.9, no compensation shall be payable to Mr. Volkema for shares which revert to
the Company.
5.8 Effect of Reversion. Upon reversion of any Unvested Shares (a)
absolute ownership thereof shall automatically revert to the Company at that
time, (b) such Unvested Shares shall be deemed to be "Reverted Shares" for
purposes of this Agreement, (c) all Mr. Volkema's rights and interests in the
Reverted Shares shall cease at that time, and (d) Mr. Volkema shall be
obligated immediately to surrender to the Company the certificates representing
the Reverted Shares, but the failure to do so shall not impair the immediate
effect of clauses (a), (b) and (c) above.
5.9 Payment on Reversion. If Mr. Volkema's employment is terminated
involuntarily and without his consent, so that he is no longer employed by the
Company or an Affiliated Employer, and if Unvested Shares thereby revert to the
Company pursuant to Section 5.7, the Company shall pay Mr. Volkema $6.625 per
Reverted Share in full payment therefor. (This price is equal to 25 percent of
the fair market value of the Shares at the date (October 4, 1995) on which the
Shares were awarded to Mr. Volkema.) If, prior to the termination of Mr.
Volkema's employment, Shares of common stock of the Company are increased,
decreased or changed as a result of any event described in Section 1.10, the
stated price payable by the Company for the Reverted Shares shall be fairly
adjusted to reflect the effects of such an event.
6. MR VOLKEMA'S UNDERSTANDINGS AND ACKNOWLEDGMENTS
6.1 Free Choice. Mr. Volkema understands, acknowledges and agrees that he
has no obligation to enter into this Agreement and that failure to do so will
not have any adverse consequences on his other compensation, position, job
responsibilities, or future prospects at the Company. Mr. Volkema has elected
to enter into this Agreement because he has concluded that the potential
benefits he could derive under this Agreement outweigh the risk of substantial
after-tax loss which could be realized if any Unvested Shares revert to the
Company or if the market value for the Shares declines substantially.
6.2 No Right to Employment. Neither the execution or delivery of this
Agreement nor any action taken by the Company under this Agreement nor any
course of dealing between the Company and Mr. Volkema, nor anything else, shall
limit or impair in any way the right of the
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<PAGE> 7
Company to terminate Mr. Volkema's employment at any time. He acknowledges that
no one has made any explicit or implicit promise that his employment
relationship with the Company will be continued for all or any part of the
period required for all or any part of the Shares to become Vested Shares.
7. INTERPRETATION OF THIS AGREEMENT
7.1 Severabilitv. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be valid and enforceable, but if any
provision of this Agreement shall be held to be prohibited or unenforceable
under applicable law (a) such provision shall be deemed amended to accomplish
the objectives of the provision as originally written to the fullest extent
permitted by law, and (b) all other provisions of this Agreement shall remain
in full force and effect.
7.2 Captions. The captions used in this Agreement are for convenience
only, do not constitute a part of this Agreement and all of the provisions of
this Agreement shall be enforced and construed as if no captions had been used.
7.3 Complete Agreement. This Agreement contains the complete agreement
between the parties relating in any way to the subject matter of this Agreement
and supersedes any prior understandings, agreements or representations, written
or oral, which may have related to such subject matter in any way.
8. GENERAL PROVISIONS
8.1 Notices.
a. Procedures Required. Each communication given or delivered under
this Agreement must be in writing and may be given by personal delivery or by
registered or certified mail. A written communication shall be deemed to have
been given on the date it shall be delivered to the address required by this
Agreement.
b. Communications to Company. Communications to the Company shall be
addressed to it at the principal corporate headquarters (which on the date
hereof were located at 8500 Byron Road, Zeeland, Michigan) and marked to
the attention of the Company's chairman of the Board or, if Mr. Volkema becomes
chairman of the Board, to the attention of the Company's general counsel; if,
prior to the issuance of such notice, the Company shall have given notice to
Mr. Volkema that communications to the Company should be directed to a
different address or to the attention of a different officer, then such
communication shall be addressed in the manner most recently specified.
c. Cornmunications to Mr. Volkema. Every communication to Mr. Volkema
shall be addressed to him at the address given immediately below his signature
to this Agreement, provided that, if, prior to the issuance of such notice, he
shall have given the Company notice that communications to him should be
directed to a different address, then such communication shall be addressed to
the address which shall most recently have been so specified.
8.2 Assignment. This Agreement is not assignable by Mr. Volkema during his
lifetime. This Agreement shall be binding upon and inure to the benefit of (a)
the successors and assigns of the Company, and (b) any person to whom Mr.
Volkema's rights under this Agreement may pass by reason of his death.
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<PAGE> 8
8.3 Amendment. This Agreement may be amended or modified in any manner
whatsoever or terminated by written agreement between the Company and Mr.
Volkema. No course of dealing between the parties shall be deemed effective to
modify, amend or terminate any part of this Agreement or any rights or
obligations of either party hereunder.
8.4 Waiver. No delay or omission in exercising any right hereunder shall
operate as a waiver of such right or of any other right hereunder. A waiver
upon any one occasion shall not be construed as a bar or waiver of any right or
remedy on any other occasion. All of the rights and remedies of the parties
hereto, whether evidenced hereby or granted by law, shall be cumulative.
8.5 No Oral Commitments. No arnendment, modification or termination of
this
Agreement under Section 8.3 and no waiver under this Agreement under Section
8.4 shall be effective or enforceable unless it is set forth in writing and
signed by both parties.
8.6 Counterparts. Two or more duplicate originals of this Agreement may be
signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same agreement.
8.7 Choice of Law. This Agreement shall be deemed to be a contract made
under the laws of the State of Michigan and for all purposes shall be construed
in accordance with and governed by the laws of the state of Michigan or
applicable federal law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
HERMAN MILLER, INC.
By
- ---------------------------- -------------------------
Michael A. Volkema Richard H. Ruch
Its Chairman of the Board
Address:
18061 Lovell Road
Spring Lake, Michigan 49456
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<PAGE> 1
EXHIBIT 10(h)
INCENTIVE SHARE AWARD AGREEMENT
AGREEMENT Made as of May 15, 1996, by HERMAN MILLER, INC., a Michigan
corporation (the "Company"), and MICHAEL A. VOLKEMA (herein called "Mr.
Volkema").
RECITALS
A. Mr. Volkema is the president, chief executive officer, and a director
of the Company.
B. To provide an incentive to Mr. Volkema, the Company's Board of
Directors has elected to award Mr. Volkema shares of common stock of the
Company under the terms of the Company's Long-Term Incentive Plan (the "Plan").
C. The award of Restricted Stock (as defined in the Plan) to Mr. Volkema
is subject to the terms and restrictions of the Plan and this Agreement,
including the automatic reversion to the Company of some or all of the shares
if Mr. Volkema does not continue to serve the Company as an officer or director
for the period specified herein.
D. Mr. Volkema has accepted the grant of shares upon the terms,
restrictions and conditions of this Agreement.
E. The parties desire to confirm in this Agreement the terms, conditions
and restrictions applicable to the grant of shares.
NOW, THEREFORES the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliated Employer" means any entity controlling, controlled by or
under common control with the Company.
1.2 "Board" means the Board of Directors of the Company.
1.3 "Bonus Payout Percentage" means the percentage which results from
dividing the actual bonus earned by Mr. Volkema in a particular fiscal year
under the Company's Executive Incentive Plan for that year by his Bonus
Potential (at 100 percent, as defined in such plan) for such year.
1.4 "Cornmon Stock" means the common stock of the Company, par value $.20
per share.
1.5 "Company" means Herman Miller, Inc., a Michigan corporation, its
successors and assigns.
1.6 "Executive Incentive Plan" means the Company's officers' executive
incentive plan approved and adopted by the Board with respect to each fiscal
year of the Company.
1.7 "Fiscal year" means the year ending the Saturday nearest the end of
May of each year, or such other fiscal year as may be adopted for the Company
by the Board.
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1.8 "Plan" means the Company's Long-Term Incentive Plan, as approved by
the Company's shareholders on October 6, 1994.
1.9 "Restricted Share" means a Share which is subject to the restriction
on sale, pledge or other transfer imposed by Section 3.1. An "Unrestricted
Share" is a Share which is no longer a Restricted Share.
1.10 "Reverted Shares" means Unvested Shares which have reverted to the
Company pursuant to Sections 5.7 and 5.8.
1.11 "Shares" means the shares of Common Stock awarded, issued and
delivered to Mr. Volkema under this Agreement. If, as a result of a stock
split, stock dividend, combination of stock, or any other change or exchange of
securities, by reclassification, reorganization, recapitalization or otherwise,
the Shares shall be increased or decreased, or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or another corporation, the term "Shares" shall mean and include the shares of
stock or other securities issued with respect to the Shares.
1.12 "Silver Parachute Plan" means the Herman Miller, Inc., Plan for
Severance Compensation After Hostile Takeover, as amended and restated as of
January 17, 1990, and as it may thereafter be amended.
1.13 "Vested Percentage" means the percentage of Shares which have become
Vested Shares pursuant to Section 5.4.
1.14 "Vested Shares" and "Unvested Shares" shall have the meanings
expressed in Section 5.3.
2. GRANT AND ACCEPTANCE OF AWARD
2.1 Grant. The Company confirms that on May 15, 1996, as authorized by the
Board, Mr. Volkema was awarded twenty thousand (20,000) shares of Common Stock
(the "Shares") pursuant to the Plan.
2.2 Acceptance. Mr. Volkema confirms that he has accepted the award of
Shares and agrees to hold them subject to the terms, conditions and limitations
of the Plan and this Agreement.
2.3 Tax Election. Mr. Volkema agrees to elect to be taxed in 1996 on the
fair market value of the Shares awarded to him, and agrees to sign an election
to be so taxed under Section 83(b) of the Internal Revenue Code. Mr. Volkema
agrees to file such election on or before thirty (30) days from the date
hereof.
Mr. Volkema confirms his understanding that, having made the election
under Section 83(b) to be taxed in 1996 on the value ofthe Shares, if any of
the Shares shall revert to the Company pursuant to Sections 5.7 and 5.8, the
effect will be that he will have paid tax as if he had retained such Shares but
will have been denied the right to retain them.
2.4 Withholding. Mr. Volkema recognizes that the Company is required by
federal regulations to deduct and withhold income taxes at the rate of 28
percent of the market value of the Shares, and to pay the tax in money at the
time or times the payroll deposit is due with respect to such income. The
Company has offered to withhold 28 percent of the Shares (5,600 shares) and
itself pay
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<PAGE> 3
the amount to be withheld. Mr. Volkema has accepted such offer rather than pay
to the Company in cash the full amount to be withheld. Accordingly, Mr.
Volkema will receive a certificate for 14,400 Shares and the Company will pay
the requisite withholding tax. Mr. Volkema is responsible to pay when due all
income taxes on the fair market value of the Shares in excess of the amount
which is withheld.
3. RESTRICTIONS ON TRANSFER OF SHARES: LAPSE OF RESTRICTIONS
3.1 Transfer Prohibition. Mr. Volkema shall not sell any Share, pledge any
Share or otherwise transfer any Share or any interest in any Share if such
Share is a Restricted Share.
3.2 Restricted Shares. Every Share shall be a Restricted Share until the
Share shall no longer be deemed to be a Restricted Share as provided in Section
3.6.
3.3 Securities Law Compliance. Mr. Volkema shall not sell or transfer any
Share or any interest in any Share, whether such Share is or is not a
Restricted Share, unless either (a) the Company shall consent in writing to
such transfer, or (b) the Company shall have received an opinion of counsel
reasonably satisfactory to the Company to the effect that such transfer will
not violate the registration requirements imposed by the Securities Act of 1933
or any other provision of law which the Company shall desire such opinion to
cover.
3.4 Legend. Every certificate representing a Share shall at all times bear
the following legend:
"The Shares represented by this certificate are subject to certain
restrictions and prohibitions and to the rights of Herman Miller, Inc. (the
"Company"), as set forth in an Incentive Share Grant Agreement dated May 15,
1996 ("Agreement"), between the Company and Michael A. Volkema, including but
not limited to: ( 1) the Company's right to acquire absolute ownership of some
or all of these Shares upon their reversion to the Company; (2) a prohibition
against any transfer of any interest in these Shares without the Company's
consent while these Shares remain Restricted Shares under the Agreement; and
(3) a prohibition against transfer of any interest in these Shares except in
compliance with requirements imposed by the Securities Act of 1933. No interest
in these Shares may be transferred without compliance with the requirements in
the Agreement."
3.5 Stop Transfer Instructions. The Company shall have the right to issue
instructions to the transfer agent for the shares of the Company, prohibiting
transfer of any Shares except in accordance with the requirements of this
Agreement.
3.6 Unrestricted Shares. A Share shall no longer be deemed to be a
Restricted Share if:
a. The Company stipulates in writing that the Share is no longer a
Restricted Share.
b. The Share is or becomes a Vested Share as of the end of the Company's
fiscal year ending in the year 2001.
c. The Share becomes a Vested Share as of the end of the Company's fiscal
year ending in the year 2002.
d. The Share becomes a Vested Share pursuant to Section 5.6(c), (d), or
(e).
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A Share which is no longer deemed to be a Restricted Share shall be an
Unrestricted Share.
3.7 New Certificate for Unrestricted Shares. If Mr. Volkema holds
certificates representing Shares which are no longer Restricted Shares, Mr.
Volkema shall be entitled to receive from the Company, in exchange therefor, a
certificate representing such Unrestricted Shares, bearing a legend, if the
Company shall deem such a legend to be appropriate, only to the effect that the
transfer of such Shares is prohibited if it would violate the Securities Act of
1933. If the certificate held by Mr. Volkema represents both Restricted and
Unrestricted Shares, he shall be entitled to receive two certificates in
exchange therefor, one of which shall represent the Restricted Shares and one
of which shall represent Unrestricted Shares.
3.8 Rights as Stockholder. Except for the restrictions imposed in this
Article 3, and unless the Shares have reverted to the Company pursuant to
Sections 5.7 and 5.8, Mr. Volkema shall have all the rights as a stockholder
with respect to the Restricted Shares, including the right to vote and to
receive the dividends declared and paid thereon.
4. ACQUISITION WARRANTIES
In order to induce the Company to issue and deliver the Shares on the
terms of this Agreement, Mr. Volkema warrants to and agrees with the Company as
follows:
4.1 No Participating Interest. Mr. Volkema is acquiring the Shares for his
own account. He has not made any arrangement or commitment to convey any
interest in the Shares to any person, other than to transfer Reverted Shares to
the Company pursuant to Section 5.8 of this Agreement.
4.2 Ability to Evaluate. Because of his knowledge and experience in
financial and business matters, Mr. Volkema is capable of evaluating the merits
and risks of acquiring the Shares under the arrangements prescribed by this
Agreement.
4.3 Familiarity with Company . Mr. Volkema is familiar with the business,
properties, financial condition, liabilities, shares, earnings, prospects and
operations of the Company. He confirms that the Company has not made any
representation, warranty or agreement regarding the foregoing matters, the
merits of the arrangements made pursuant to this Agreement, or any other matter
except as expressly indicated in this Agreement.
4.4 All Ouestions Answered.. Mr. Volkema thoroughly understands all the
terms of this Agreement, the actions which may be taken under this Agreement,
and the consequences such actions might have for him. He confirms there are no
questions relating to any such matters which have not been answered to his
complete satisfaction.
4.5 Agreement Binding and Enforceable. Mr. Volkema intends and agrees that
every provision in this Agreement shall be binding upon and enforceable against
him in accordance with its terms.
5. VESTING AND REVERSION
5.1 General. In general, Shares shall vest in accordance with Section 5.4
and the table of vesting set forth in that section. Shares may also become
vested in accordance with Sections 5.5 and 5.6.
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5.1 Vested Percentage. The "Vested Percentage" of the Shares at any time
is the percentage of the Shares which have become vested pursuant to Section
5.4.
5.3 Vested Shares. The number of vested shares ("Vested Shares") at any
time shall be the greater of (a) the number derived by multiplying the Vested
Percentage at that time by the number of Shares issued hereunder, or (b) the
number which have become vested pursuant to Sections 5.5 or 5.6.
5.4 Table of Vesting. The vesting of Shares shall be based upon the Bonus
Payout Percentage earned by Mr. Volkema under the Company's Executive Incentive
Plan for each of the fiscal years designated in the following table. The Vested
Percentage for the fiscal years ending in 1998, 1999, 2000, and 2001,
respectively, shall be based upon the sum of the bonus Payout Percentages
earned by Mr. Volkema for that year and for each of the fiscal years ended
prior to that date ("Cumulative Bonus Payout Percentage"), in accordance with
the following table of vesting:
<TABLE>
<CAPTION>
If Cumulative
Fiscal Year Bonus Payout The Vested
Ending In Percentage is Percentage is
------------- ------------- -------------
<S> <C> <C>
1997 100 or more 20
1998 200 or more 40
1999 300 or more 60
2000 400 ormore 80
2001 500 or more 100
</TABLE>
In any fiscal year ending in the years 1997 to 2001 inclusive, in which
Mr. Volkema's Vested Percentage does not increase by at least twenty (20)
percentage points in accordance with the foregoing table of vesting, his Vested
Percentage in that fiscal year shall increase by ten (10) percentage points.
No Shares shall be Vested Shares prior to the end of the Company's fiscal
year ending in 1997.
If the Shares are not 100 percent vested by the end of the Company's
fiscal year ending in the year 2001, the remainder of the Shares shall vest at
the end of the Company's fiscal year ending in the year 2002.
5.5 Acceleration of Vested Percentage. The Board shall have the right at
any time (but shall not be obligated) to increase the Vested Percentage under
this Agreement to 100 percent, or to any other percentage greater than would
otherwise apply under this Agreement. After any such action by the Board:
a. The Vested Percentage shall never be less than the percentage
designated by the Board; and
b. If the Vested Percentage is less than 100 percent, the Vested
Percentage shall increase at the end of each of the Company's fiscal years
thereafter in accordance with Section 5.4.
5.6 One Hundred Percent Vesting. All Shares issued hereunder shall become
Vested Shares:
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a. If the Shares are 100 percent vested pursuant to Section 5.4.
b. If the Company so stipulates in writing.
c. Upon Mr. Volkema's death.
d. If Mr. Volkema's service to the Company both as an officer and as a
director ends at a time when he is permanently disabled, as determined by a
physician approved by the Board.
e. If Mr. Volkema's employment is voluntarily or involuntarily
terminated at a time when he is entitled to receive a severance benefit under
the Company's Silver Parachute Plan.
5.7 Reversion. All Unvested Shares shall automatically revert to the
Company at any time Mr. Volkema shall no longer be employed by the Company or
an Affiliated Employer for any reason whatsoever, including involuntary
termination without the consent of Mr. Volkema. Except as provided in Section
5.9, no compensation shall be payable to Mr. Volkema for shares which revert to
the Company.
5.8 Effect of Reversion. Upon reversion of any Unvested Shares (a)
absolute ownership thereof shall automatically revert to the Company at that
time, (b) such Unvested Shares shall be deemed to be "Reverted Shares" for
purposes of this Agreements (c) all Mr. Volkema's rights and interests in the
Reverted Shares shall cease at that time, and (d) Mr. Volkema shall be
obligated immediately to surrender to the Company the certificates representing
the Reverted Shares, but the failure to do so shall not impair the immediate
effect of clauses (a), (b) and (c) above.
5.9 Payment on Reversion. If Mr. Volkema's employment is terminated
involuntarily and without his consent, so that he is no longer employed by the
Company or an Affiliated Employer, and if Unvested Shares thereby revert to the
Company pursuant to Section 5.7, the Company shall pay Mr. Volkema $8.00 per
Reverted Share in full payment therefor. (This price is equal to 25 percent of
the fair market value of the Shares at the date (May 15, 1996) on which the
Shares were awarded to Mr. Volkema.) If, prior to the termination of Mr.
Volkema's employment, Shares of common stock of the Company are increased,
decreased or changed as a result of any event described in Section 1.11, the
stated price payable by the Company for the Reverted Shares shall be fairly
adjusted to reflect the effects of such an event.
6. MR. VOLKEMA'S UNDERSTANDINGS AND ACKNOWLEDGMENTS
6.1 Free Choice. Mr. Volkema understands, acknowledges and agrees that he
has no obligation to enter into this Agreement and that failure to do so will
not have any adverse consequences on his other compensation, position, job
responsibilities, or future prospects at the Company. Mr. Volkema has elected
to enter into this Agreement because he has concluded that the potential
benefits he could derive under this Agreement outweigh the risk of substantial
after-tax loss which could be realized if any Unvested Shares revert to the
Company or if the market value for the Shares declines substantially.
6.2 No Right to Employment. Neither the execution or delivery of this
Agreement nor any action taken by the Company under this Agreement nor any
course of dealing between the Company and Mr. Volkema, nor anything else,
shall limit or impair in any way the right of the Company to terminate Mr.
Volkema's employment at any time. He acknowledges that no one has
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<PAGE> 7
made any explicit or implicit promise that his employment relationship with the
Company will be continued for all or any part of the period required for all or
any part of the Shares to become Vested Shares.
7. INTERPRETATION OF THIS AGREEMENT
7.1 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be valid and enforceable, but if any
provision of this Agreement shall be held to be prohibited or unenforceable
under applicable law (a) such provision shall be deemed amended to accomplish
the objectives of the provision as originally written to the fullest extent
permitted by law, and (b) all other provisions of this Agreement shall remain
in full force and effect.
7.2 Captions. The captions used in this Agreement are for convenience
only, do not constitute a part of this Agreement and all of the provisions of
this Agreement shall be enforced and construed as if no captions had been
used.
7.3 Complete Agreement. This Agreement contains the complete agreement
between the parties relating in any way to the subject matter of this Agreement
and supersedes any prior understandings, agreements or representations, written
or oral, which may have related to such subject matter in any way.
8. GENERAL PROVISIONS
8.1 Notices.
a. Procedures Required. Each communication given or delivered under
this Agreement must be in writing and may be given by personal delivery or by
registered or certified mail. A written communication shall be deemed to have
been given on the date it shall be delivered to the address required by this
Agreement.
b. Communications to Company. Communications to the Company shall be
addressed to it at the principal corporate headquarters (which on the date
hereof were located at 855 East Main Avenue, Zeeland, Michigan) and marked to
the attention of the Company's chairman of the Board; or, if Mr. Volkema
becomes chairman of the Board, to the attention of the Company's general
counsel; if, prior to the issuance of such notice, the Company shall have
given notice to Mr. Volkema that communications to the Company should be
directed to a different address or to the attention of a different officer,
then such communication shall be addressed in the manner most recently
specified.
c. Communications to Mr. Volkema. Every communication to Mr. Volkema
shall be addressed to him at the address given immediately below his signature
to this Agreement, provided that, if, prior to the issuance of such notice, he
shall have given the Company notice that communications to him should be
directed to a different address, then such communication shall be addressed to
the address which shall most recently have been so specified.
8.2 Assignment. This Agreement is not assignable by Mr. Volkema during
his lifetime. This Agreement shall be binding upon and inure to the benefit of
(a) the successors and assigns of the Company, and (b) any person to whom Mr.
Volkema's rights under this Agreement may pass by reason of his death.
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8.3 Amendment. This Agreement may be amended or modified in any manner
whatsoever or terminated by written agreement between the Company and Mr.
VoLlcema. No course of dealing between the parties shall be deemed effective
to modify, amend or terminate any part of this Agreement or any rights or
obligations of either party hereunder.
8.4 Waiver. No delay or omission in exercising any right hereunder
shall operate as a waiver of such right or of any other right hereunder. A
waiver upon any one occasion shall not be construed as a bar or waiver of any
right or remedy on any other occasion. All of the rights and remedies of the
parties hereto, whether evidenced hereby or granted by law, shall be
cumulative.
8.5 No Oral Commitments. No amendment, modification or termination of
this Agreement under Section 8.3 and no waiver under this Agreement under
Section 8.4 shall be effective or enforceable unless it is set forth in
writing and signed by both parties.
8.6 Counterparts. Two or more duplicate originals of this Agreement may
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same agreement.
8.7 Choice of Law. This Agreement shall be deemed to be a contract made
under the laws of the State of Michigan and for all purposes shall be
construed in accordance with and governed by the laws of the state of Michigan
or applicable federal law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
HERMAN MILLER, INC.
By
- ----------------------- ------------------------
Michael A. Volkema David L. Nelson
Its Chairman of the Board
Address:
283 Whispering Way
Holland, Michigan 49424
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<PAGE> 1
EXHIBIT 10 (i)
TERMINATION AND MUTUAL RELEASE AGREEMENT
Agreement made effective as of March 27, 1996, by and between Hansjorg Broser,
of 15, rue Raynouard, 75016 Paris, France (hereinafter "Employee"), and Herman
Miller, Inc., a Michigan corporation, having its principal place of business at
855 East Main Avenue, PO Box 302, Zeeland, MI 49464-0302 (hereinafter
"Employer") on its own behalf and as duly authorized agent on behalf of, and as
joint and several guarantor of the obligations of, Herman Miller et Cie SNC (a
French "societe en nom collectif" (hereinafter collectively "HMI").
In consideration of the mutual covenants and releases contained herein, the
Employee and HMI agree as follows:
1. OFFICER STATUS. Effective immediately, Employee shall no longer be an
officer of Employer.
2. TERMINATION IN FRANCE. It is acknowledged by the parties that Employee's
French employer, Herman Miller et Cie SNC, has terminated Employee's
position as a salaried employee of such company by giving notice to
Employee of his dismissal on May 21, 1996, with effect on May 21, 1996
(after waiving Employee's obligation to be present in such company and to
perform any services during the notice period).
3. TERMINATION COMPENSATION
A. Employer shall pay and make available and shall cause Herman
Miller et Cie SNC to pay and to make available to Employee, between
the date hereof and September 27, 1996, unless Employee breaches this
Agreement, all of the same compensation (both in cash and in kind)
and benefits as Employee was receiving on March 27, 1996 (except as
otherwise provided in the starred items set forth in Exhibit A), all
of such compensation and benefits being so paid and made available in
the same manner and amounts as currently is the case (except as
otherwise provided in the starred items set forth in Exhibit A).
Except as expressly otherwise provided herein, Employee, between the
date hereof and September 27, 1996, shall (subject to Paragraph 5
below) have no obligation to provide any services to Employer and
shall be free to accept such other employment or consultancy as he
may decide in his entire discretion (in which case all of the
compensation and benefits provided for by this Paragraph 3 shall
nevertheless continue to be made by Employer through September 27,
1996).
B. Beginning on September 28, 1996, and up to and including
September 27, 1997, unless Employee breaches this Agreement, Employer
shall continue to pay and make available and shall cause Herman
Miller et Cie SNC to pay and make available to Employee all of the
same compensation (both in cash and in kind) and benefits Employee
was receiving on March 27, 1996 (except as otherwise provided in the
starred items set forth in Exhibit A), all of such compensation and
benefits being so paid and made available in the same manner and
amounts as currently is the case (except as otherwise provided in the
starred items set forth in Exhibit A), it being understood and agreed
that such payments and
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<PAGE> 2
benefits shall be made whether or not Employee has during such period
taken on new employment, provided however that if Employee takes on
new employment at any time during the period from March 27, 1997, to
September 27, 1997 (the "Six-Month Period"), then the periodic
monetary compensation received by Employee from such new employer
during the Six-Month Period shall reduce dollar for dollar and franc
for franc the amounts otherwise due to him during such Six-Month
Period pursuant to this Paragraph 3B.
c. Employer, subject to the terms of this Agreement, further
agrees to and shall provide to Employee all of the benefits and
payments indicated in Exhibit A hereto.
4. TERMINATION IN U.S. On September 27, 1996, Employee's position as an
employee of Employer shall end unless Employee has previously notified
Employer that he has taken on new employment, in which latter case such
employment shall terminate on the date Employee so notifies Employer but
(as set forth in Paragraph 3 above) all of the compensation and benefits
provided for by Paragraph 3 shall nevertheless continue through September
27, 1996.
5. CONSULTATION. Beginning on the date hereof, Employee will upon written
request from time to time of Employer provide consulting services to HMI
for a period ending on September 27, 1997, or until he obtains new
employment, whichever occurs first. Employee will be reimbursed by HMI for
all out-of-pocket expenses incurred at the request of HMI. Employee will
provide HMI with 10 hours of consulting services in each 180-day period
(or part thereof) starting from the date hereof without charge and
thereafter HMI will compensate Employee at the rate of the French franc
equivalent of US $1,000 per day (or part thereof) (net of taxes) for such
consulting services. HMI will coordinate its request for consulting
services with Employee's other activities so as to not place undue burdens
on Employee.
6. CONFIDENTIAL INFORMATION. Employee understands that in the ordinary
course of its business, HMI has developed various valuable trade secrets
and confidential business information. Employee acknowledges that he has
been privy to such trade secrets and information and that protection of
such is of vital importance to HMI's business. All information, whether
written or not, regarding HMI's business, is presumed to be confidential.
Examples of confidential information would include information as to any
of HMI's customers, prices, sales techniques, estimating and pricing
systems, internal cost controls, production processes and methods, product
planning and development programs, marketing plans, product information,
inventions, blueprints, sketches and drawings, trade secrets and technical
and business concepts related to the business, whether devised or invented
in whole or in part by Employee and whether or not reduced to practice.
7. NONDISCLOSURE. Employee agrees that for so long as same is not generally
known outside Employer, he will not at any time disclose any trade secrets
or confidential information of HMI to others which he has obtained in the
course of his employment with HMI. Employee shall not use any such trade
secrets or confidential information for his own personal use or advantage,
or make such trade secrets or confidential information available for use
by others. Nothing in this Agreement shall, however,
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<PAGE> 3
prevent Employee from using his general knowledge, skill, and
experience (including the contacts made while an employee of HMI) in the
employment of a third party after the date hereof or in connection with
the rendering of any consultancy services to third parties.
8. RETURN OF PROPERTY. Employee acknowledges having returned to HMI all
Company property in his prior possession except for garage door opener and
a cellular telephone. Employer acknowledges that Employee has vacated his
prior office and returned all such property except as mentioned above.
Employee will return such property as soon as possible. For the next three
months HMI will forward Employee's mail.
9. PAYMENT OF PRE-TERMINATION EXPENSES. Employer shall promptly reimburse
Employee for business expenses incurred in the ordinary course of
Employee's employment on or before the date hereof, but not previously
reimbursed, provided that Employer's policies of documentation and
approval are satisfied. However, Employee is not authorized to be
reimbursed for any business expenses incurred after the date hereof unless
specifically set forth herein or authorized in advance by Employer.
10. MUTUAL RELEASE. Except for the enforcement of the terms and covenants in
this Agreement, Employee and HMI hereby release each other from any and
all claims and obligations arising under French, European Community,
United States federal, state, or local law by statute, common law, or
equity that each may have against the other arising out of the employment
relationship and the termination thereof. Employee specifically waives any
claim for unlawful discrimination including, but not limited to claims for
race, sex, religion, disability, or national origin discrimination.
Employee further agrees to waive and release any rights he might have
under the federal Age Discrimination in Employment Act of 1967, as amended
(29 USCSection 621 et seq.) ("ADEA") against the Company. This release
covers claims and obligations even if they are unknown at this time. HMI
and Employee also agree that as to any such claim they will not start or
pursue any complaint or proceeding against the other before any court,
tribunal, or government agency. HMI and Employee agree that this Agreement
is a complete defense to any claim and obligation released and waived by
this Agreement which may be subsequently asserted. The parties acknowledge
and agree that this release and covenant not to sue are essential and
material terms of this Agreement and that, without such releases and
covenant not to sue, no agreement would have been reached by the parties.
Employee understands and acknowledges the significance of this release and
this Agreement.
11. SEVERABILITY. In the event any term of this Agreement is invalid or
unenforceable, then such invalid or unenforceable term, if possible, will
by reasonable agreement of the parties be altered so as to be valid and
enforceable, or, if that is not possible, then it will be deleted from
this Agreement and the remaining part of the Agreement will remain in
effect.
12. NONCOMPETITION. Employee agrees that until September 27, 1997, he will
not directly or indirectly engage or invest in (except up to five percent
of a publicly held company), or counsel, or advise, or be employed by, or
affiliated with, any entity which is a competitor with HMI. The right and
authority to determine whether or not the new employer or client is a
competitor is vested solely with HMI's chief executive officer whose
decision shall be final and binding.
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<PAGE> 4
13. PAYMENT BY HMI. If Employee (1) signs and returns this Agreement within
30 days of the date of this Agreement, (2) has otherwise complied with
this Agreement, and (3) signs and complies with the terms of an agreement
having the same date as this Agreement settling his claims under French
law, then the Employee will be entitled to receive the discretionary and
additional Termination Benefits listed on Exhibit A. Otherwise, the
Employee will not be entitled to the Termination Benefits listed on
Exhibit A. The Termination Benefits may be terminated if Employee breaches
this Agreement, or if Employee harasses or intimidates any HMI employee or
family member. In the event that HMI believes that Employee is in breach
of the restrictions contained in paragraph 2 of Exhibit A relating to
competition, it will give Employee written notice of the breach. Employee
will then have 60 days to cure the breach before HMI may stop Termination
Benefits under this Agreement.
14. GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Michigan. Any dispute arising out
of this Agreement shall be submitted exclusively to either the United
States District Court for the Western District of Michigan or the Circuit
Court of Ottawa County, Michigan, for resolution.
15. ENTIRE AGREEMENT. This Agreement and any other documents between the same
parties relating to all their differences contain the entire understanding
of the parties and supersede all previous oral and written agreements
relating to the subject matter hereof; there are no other agreements,
representations, or understandings relating to the subject matter hereof
not set forth herein and in such other documents. Further, this Agreement
can be modified only by a written agreement signed by Employee and
Employer.
16. BINDING EFFECT. This is a binding agreement. The term HMI includes all of
Herman Miller, Inc.'s subsidiaries, officers, directors, and affiliates.
The term Employee includes Hansjorg Broser and all of his heirs,
administrators, successors, assigns, and those who could make a claim
through him. This Agreement shall benefit and be binding upon HMI's
successors and assigns, and Employee's executors, administrators, and
representatives.
17. VOLUNTARY EXECUTION. Employee acknowledges that he has read this
Agreement, understands its terms, has been given an opportunity to
consider this Agreement and its release of claims and covenant not to sue,
and it has been entered into by him voluntarily. Employee further
acknowledges that he has been advised to consult with an attorney prior to
executing this Agreement.
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HERMAN MILLER, INC.
__________________________________ By ____________________________
Date James E. Christenson
Vice President
HANSJORG BROSER
_________________________________ ________________________________
Date Employee Signature
_________________________________ ________________________________
Date Witness
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<PAGE> 6
EXHIBIT A
1. Employee will receive his executive incentive for 1995/96 pursuant to the
Executive Incentive Plan, such payment to be made to Employee no later
than June 30, 1996. Employee will not be eligible to participate in the
Executive Incentive Plan after June 1, 1996.
2. Employee will be entitled to the bundled fringe benefits including, but
not limited to, any carry-over in the amount of $11,948.24 until July 1,
1996. Employee will not be eligible to any such benefits after July 1,
1996.
3. If Employee has money in either the Health Care or Dependent Care
spending accounts for the current year, claims must be submitted within 90
days of September 27, 1996. Any unused balances will be forfeited at that
time.
4. If Employee has an existing balance on his corporate Visa card or his
cellular phone service, he will pay off the balance within 20 days after
the date of this Agreement.
5. Employee will pay the balance owed to HMI on his employee purchase
account (product purchase) within 20 days of the date of this Agreement.
6. Employee will, in accordance with Paragraph 3A (through September 27,
1996) and Paragraph 3B (from September 27, 1996, through September 27,
1997) of the Agreement, continue to receive the expatriate package
pursuant to the August 7, 1992, document setting out the terms and
conditions of Employee's assignment in Paris. HMI may deduct from the
payments otherwise due to him from the Executive Bonus, U.S. $37,616 for
the 1994 tax equalization. Any other amounts finally determined due to HMI
by Employee pursuant to the tax equalization package included in the
Expatriate Terms and Conditions, shall be payable in accordance with such
Expatriate Terms and Conditions. Employee's expatriate package includes
but is not limited to:
a. Tax equalization--HMI will pay for John Rigg or any other
accounting firm mutually agreed between the parties to calculate
Employee's tax liabilities, and will cover those taxes related to
money earned or received pursuant to this Agreement which result in a
higher burden than working in the U.S. would have caused in
accordance with the methodology and principles in practice on March
27, 1996. This provision will continue up to the filing of the 1996
tax returns. Employee is responsible for the preparation and filing
of all tax-related documents for both home and host countries.
Employee is accountable for monitoring any changes in home country
laws which might impact his legal obligations.
b. Goods and service allowance--Employee is to be paid by HMI one
hundred percent of the level recommended by ORC to reflect
cost-of-living differences, which amount is currently net FF35,230.76
(including the amount of FF1,194.00 currently paid by Employee to HMI
for car rental reimbursement), and which amount will be reviewed
every six months to determine appropriate
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<PAGE> 7
adjustments in accordance with the methodology and principles in
practice on March 27, 1996.
c. Housing allowance--Employee is to be paid a housing allowance
by HMI. In such connection, Employee is entitled to occupy the
apartment he is currently occupying which apartment is leased by HMI.
HMI will continue to pay the rent and charges, including the cost of
insuring the apartment, in accordance with the current practice.
Provided that Employee has not breached this Agreement, HMI will
permit Employee, if Employee so chooses in his sole discretion, to
sublease the said apartment from HMI from the expiration of the
termination payments (i.e., as provided in Paragraph 3 of the
Agreement) until the first cancellation dates contained in such
lease. Employee will indemnify HMI from any liability in connection
with such sublease and will attempt to have HMI released from
liability.
d. Automobile lease--Employee is to be paid an allowance for the
lease of an automobile. In this connection, HMI will continue to pay
the existing lease of the automobile used by Employee. HMI also pays
and will continue to pay the additional costs of renting the garage
currently used to store the automobile. Provided that Employee has
not breached this Agreement, HMI will permit Employee, if Employee so
chooses in his sole discretion, to sublease the current automobile
and garage from the expiration of the termination payments (i.e., as
provided in Paragraph 3 of the Agreement) until the first
cancellation date contained in such leases. Employee will indemnify
HMI from any liability in connection with such subleases and will
attempt to have HMI released from liability.
7. In the event that Employee relocates at any time during the period in
which compensation payments are payable as provided in Paragraph 3A of the
Agreement and thereafter the period in which termination payments are
payable as provided in Paragraph 3B of the Agreement, he shall give to the
Employer four weeks' notice on the expiry of which he may leave the flat
and garage in Paris and return the automobile leased by the Employer for
the Employee's use with no obligations or liabilities therefore. Further,
for any such period, if the Employee relocates to the United States, the
Employer shall pay to the Employee all relocation benefits provided for by
the Employer as if the Employee were moving to take on another job with
the Employer up to a gross maximum of U.S. $25,000 according to HMI's
relocation policy.
8. On undertaking other employment during the Six-Month Period provided in
Paragraph 3B of the Agreement, the Employee shall on or before the first
payroll date thereof provide to the Employer written details of the amount
of his remuneration therefore so as to enable the Employer to determine
the amount of termination compensation payable thereafter in accordance
with the provisions of said Paragraph 3B.
9. Employee will continue to participate in the Flexible Benefits Plan until
September 27, 1997. If Employee becomes eligible for benefits comparable
to the Flexible Benefits Plan through another employer, his participation
in the Flexible Benefits Plan will cease.
-156-
<PAGE> 8
10. Employee will receive full outplacement support through Roberston and
Lowstuter and Mediator Paris France. HMI will also pay for telephone and
other communication expenses not covered by the terms of the outplacement
agreement between HMI and Robertson and Lowstuter.
11. Stock options granted to Employee under the HMI Employee Stock Option
Plan will terminate 90 days after Employee's employment with HMI is
terminated, or 90 days after September 27, 1996, whichever is earlier. As
of the date of this Agreement, Employee is vested in 16,000 shares and
10,000 will vest on June 1, 1996, if Employee is still employed on such
date. Employee is entitled to contact Bob Dentzman if he has any
questions.
12. The loan to Employee under the HMI Key Employee Stock Purchase Plan will
be due and payable at the earlier of September 1, 1996, or when Employee's
employment with HMI is terminated. At that time HMI will foreclose the
pledge on the 15,000 shares of HMI stock held as security for the loan.
The amount owed by Employee as of March 27, 1996, is U.S. $304,628
principal plus U.S. $12,210.18 interest. Employee will receive credit
against these amounts for repayment credits earned through June 1, 1996,
as provided in the plan.
13. Employee's restricted stock grant of 6,000 shares awarded on October 1,
1992, will be foreclosed according to its terms. Forty percent (40%) of
the shares (2,400 shares) is expected to be vested as of June 1, 1996, and
sixty percent (60%) (3,600 shares) is expected to be forfeited at the
price of U.S. $3.97 per share, the total amount of which shall be paid by
HMI to Employee within 14 days after the earlier of the date Employee's
employment with HMI is terminated and September 27, 1996. The shares
subject to vesting under the restricted stock grant will be determined on
the earlier of the date Employee's employment with HMI is terminated and
September 27, 1996.
14. The balance of Employee's Employee Ownership/Profit Sharing account will
be paid to Employee at the end of the month after he is no longer employed
by HMI (i.e., September 30, 1996, unless terminated earlier) and Employee
is entitled to make contributions to such account until such date.
Employee may contact Del Arendsen if he has any questions.
15. The balance of Employee's employee stock purchase account will be paid to
Employee upon termination of his employment (i.e., September 27, 1996,
unless terminated earlier) and Employee is entitled to make contributions
to such account until such date.
16. The Retirement Income Plan benefit and Officers Supplemental Plan
benefits will be based upon your total compensation through the fiscal
year ending June 1, 1996. Benefits will be explained in a separate cover
letter.
-157-
<PAGE> 1
EXHIBIT 11
HERMAN MILLER, INC., AND SUBSIDIARIES
Exhibit 11
Statement Regarding Computation of Per Share Earnings
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
June 1, June 3, May 28,
1996(d) 1995(c) 1994(d)
----------- ---------- ----------
<S> <C> <C> <C>
NET INCOME APPLICABLE
TO COMMON SHARES $ 45,946(a) $ 4,339(b) $ 40,373
=========== =========== ==========
Weighted Average Common
Shares Outstanding 25,001,560 24,720,638 25,080,895
Net Common Shares
Issuable Upon Exercise
of Certain Stock Options 127,175 71,419 173,849
----------- ---------- ----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING AS
ADJUSTED 25,128,735 24,792,057 25,254,743
=========== ========== ==========
NET INCOME PER SHARE $ 1.83 $ .18 $ 1.60
=========== ========== ==========
</TABLE>
Earnings per share on a fully diluted basis are not significantly different
from reported primary amounts.
(a) Includes $10.6 million of patent litigation settlement charges.
(b) Includes $28.1 million of restructuring and other charges.
(c) Represents a 53-week period.
(d) Represents a 52-week period.
-158-
<PAGE> 1
EXHIBIT 22
HERMAN MILLER, INC., AND SUBSIDIARIES
Subsidiaries
The Company's principal subsidiaries are as follows:
<TABLE>
<CAPTION>
Jurisdiction
Name Ownership Of Incorporation
-------------------------------------------- ------------ ----------------
<S> <C> <C>
Coro, Inc. 98% Company Michigan
Herman Miller (Australia) Pty., Ltd. 100% Company Australia
Herman Miller B.V. (Netherlands) 100% Company Netherlands
Herman Miller Canada, Inc. 100% Company Canada
Herman Miller Deutschland, Inc. und Co.--OHG 100% Company Germany
Herman Miller Et Cie 100% Company France
Herman Miller Italia 100% Company Italy
Herman Miller, Japan, Ltd. 100% Company Japan
Herman Miller, Limited 100% Company England, U.K.
Herman Miller Mexico 100% Company Mexico
Herman Miller Transportation Company 100% Company Michigan
Integrated Metal Technology, Inc. 100% Company Michigan
Meridian Incorporated 100% Company Michigan
Milcare, Inc. 100% Company Michigan
Milsure Insurance Limited 100% Company Barbados
Miller SQA, Inc. 100% Company Michigan
Powder Coat Technology, Inc. 100% Company Michigan
The Resource Alliance, Inc. 100% Company Canada
</TABLE>
-159-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-01-1996
<PERIOD-START> JUN-04-1995
<PERIOD-END> JUN-01-1996
<CASH> 57,053
<SECURITIES> 0
<RECEIVABLES> 180,539
<ALLOWANCES> 10,423
<INVENTORY> 65,730
<CURRENT-ASSETS> 42,006
<PP&E> 536,108
<DEPRECIATION> 267,343
<TOTAL-ASSETS> 694,911
<CURRENT-LIABILITIES> 219,027
<BONDS> 110,245
0
0
<COMMON> 4,934
<OTHER-SE> 303,211
<TOTAL-LIABILITY-AND-EQUITY> 694,911
<SALES> 1,283,931
<TOTAL-REVENUES> 1,283,931
<CGS> 848,985
<TOTAL-COSTS> 848,985
<OTHER-EXPENSES> 352,305
<LOSS-PROVISION> 4,635
<INTEREST-EXPENSE> 7,910
<INCOME-PRETAX> 70,096
<INCOME-TAX> 24,150
<INCOME-CONTINUING> 45,946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,946
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 1.83
</TABLE>
