<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended March 31, 1998.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (no fee required)
Commission File Number: 0-016072
DECORA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0003300
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 MILL STREET
FORT EDWARD, NEW YORK 12828
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (518) 747-6255
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of Each Class on which registered
- ------------------- ---------------------
<S> <C>
NONE NONE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
<PAGE> 2
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 (Section 229.405 of this chapter) 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.
Yes X No ______
As of June 19, 1998, the Registrant had 7,331,378 shares of Common Stock
outstanding. The aggregate market value of the Common Stock held by
non-affiliates as of June 19, 1998, was approximately $51,515,803 based
on the average of the closing bid and asked prices on that date.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
================================================================================
<PAGE> 3
PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Decora Industries, Inc. ("DII"), is a leading, worldwide manufacturer and
marketer of self-adhesive consumer decorative products. DII, a holding company,
is a Delaware corporation operating through its wholly owned subsidiaries,
Decora, Incorporated ("Decora") and Decora Industries Deutschland GmbH ("DI
Deutschland"). DI Deutschland owns approximately 76% of the stock of Konrad
Hornschuch AG ("Hornschuch"). The main emphasis of DII and its subsidiaries (the
"Company") is the world-wide development, manufacture and sale of self-adhesive
consumer decorative products and of specialty industrial and commercial
products, utilizing proprietary adhesive systems and coating technologies.
Con-Tact(R), Cobra(R) and Wearlon(R) are registered trademarks of Decora.
d-c-fix(R), ceramo-fix(R), skai(R) and sol-pal(R) are registered trademarks of
Hornschuch. Rubbermaid(R) is a registered trademark of Rubbermaid, Incorporated
("Rubbermaid").
HISTORY OF THE COMPANY
The Company's primary line of business, self-adhesive decorative products, was
formerly known as the Decora Division of United Merchants and Manufacturers,
Inc. ("UM&M"). In the 1950's, this division developed and was the exclusive
manufacturer of the Con-Tact brand of products in the United States, and from
1981 through April 29, 1998 these products were distributed through an exclusive
manufacturing and distribution arrangement with Rubbermaid, which purchased the
Con-Tact trademark from UM&M in 1983. The Company acquired the manufacturing
assets from UM&M in April 1990 and maintained the relationship with Rubbermaid.
At the time of the 1990 acquisition, the Company was a holding company for
numerous disparate industrial and telecommunication services businesses. In the
early 1990's, the decision was made to rationalize these disparate businesses to
focus on the Company's core decorative products business. Consequently, the
Company underwent a significant divestiture program (which was completed in
1995) and in 1992 changed its name to "Decora Industries, Inc." to better
reflect its core business. Subsequent to the completion of this divestiture
program, the Company focused on broadening its product lines and customer base
by developing a number of products based upon adhesive technologies to the
extent possible within the constraints of the exclusive manufacturing and
distribution agreement with Rubbermaid. Furthermore, the Company sought
opportunities to enhance manufacturing capacity utilization, reduce customer
concentration and broaden its distribution channels.
On October 1, 1997, the Company acquired 73.2% of the voting stock of Hornschuch
through its newly formed subsidiary, DI Deutschland (the "Hornschuch
Acquisition") which has since increased its ownership to approximately 76%.
Hornschuch is the manufacturer and marketer of d-c-fix, one of the most popular
consumer self-adhesive and surface covering brands outside of North America and
is celebrating its 100th year
1
<PAGE> 4
of operation. Hornschuch also manufactures decorative and functional films for
use by original equipment manufacturers ("OEM's") in the automotive, building,
furniture, handbag, shoe and interior decoration markets. DI Deutschland is
required to make a tender offer for the outstanding balance of Hornschuch shares
(the "Hornschuch Minority Tender Offer") no later than March 1999 (see Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources").
On April 29, 1998, the Company acquired from Rubbermaid assets which constituted
Rubbermaid's decorative coverings group (the "Decorative Coverings Group"), and
which include trademarks, shelf space and manufacturing equipment (the
"Rubbermaid Acquisition"). The assets purchased included the rights to three
product lines: (i) the Con-Tact self-adhesive line, which is manufactured by
Decora, (ii) the Shelf Liner light-adhesive line, which currently is
manufactured by Rubbermaid, and (iii) the Grip Liner non-adhesive covering line,
which is manufactured by a third party pursuant to the terms of an exclusive
manufacturing agreement. The Rubbermaid Acquisition will enable Decora, which
previously had been primarily only a manufacturer of Con-Tact, to integrate the
marketing, sales and distribution of the Con-Tact product line and to capture
the full manufacturer-to-retailer gross margin, although Decora will also
significantly increase its selling, marketing and administrative expenses. In
conjunction with the acquisition of Hornschuch, the Rubbermaid Acquisition has
established the Company as the largest independent manufacturer and marketer of
decorative self-adhesive consumer products worldwide.
NARRATIVE DESCRIPTION OF THE BUSINESS
GENERAL
The Company is a manufacturer and marketer of self-adhesive decorative and
surface covering consumer products and of specialty industrial and commercial
products. The Company markets its consumer products primarily under the Con-Tact
and d-c-fix brands. These two consumer brands are considered to be two of the
most recognized brands of such products in the world, especially in the United
States and Europe. In the United States, the primary market for the Con-Tact
brand, products are distributed to leading retailers such as Kmart, Target, The
Home Depot and Wal-Mart where the products occupy prominent shelf space.
Similarly, in Germany, Italy and the Czech Republic, d-c-fix products are sold
directly to major retail chains such as Brico, Metro and Stinnes. In the
remainder of Western Europe, Eastern Europe, South America, Africa, the Middle
East and the Far East, products under both brands are sold and distributed
through a network of approximately 65 wholesalers, independent distributors and
agents.
Decora and Hornschuch utilize similar manufacturing processes to produce a wide
variety of consumer and industrial products. Each finished product is assembled
from a range of basic components such as film and adhesive using a wide variety
of surface treatments and designs. Final performance attributes of these
products are determined by the specific product application and consumer taste.
The consumer products are used as (i) decorative coverings for household
surfaces like shelving and cabinetry, (ii) arts and crafts project materials and
(iii) decorative and surface protection coverings for do-it-yourself home repair
and improvement projects.
2
<PAGE> 5
The commercial and industrial products also use a broad range of film, release
and coating technologies. These products are sold to OEM's for use in (i)
furniture, automotive, handbag and shoe products, (ii) pressure-sensitive
hazardous marking tape products and (iii) coatings for industrial applications,
such as those utilizing the Company's proprietary release technology sold under
the brand name Wearlon.
INDUSTRY OVERVIEW
The Company operates in the plastics conversion and distribution industry with
product offerings ranging from consumer self-adhesive, decorative and surface
protection products to industrial laminates and textured films. The consumer,
self-adhesive, decorative and surface protection products include versatile
self-adhesive and non-adhesive products for use in a wide range of applications
including shelf lining, do-it-yourself furniture and door repair and
refurbishment, arts and crafts, window decoration, book covering, wall covering
and general surface protection. Consumers purchase these products based upon
their ease of application, design, durability and price. The products are sold
in a wide variety of retail stores, ranging from mass-merchants like Wal-Mart to
individual, independently owned food, drug and hardware stores. Within these
stores, the products have been positioned primarily in the housewares segment in
the United States and the do-it-yourself segment in Europe.
Industrial printed, coated and textured films are sold to users and OEM's in
diversified markets with a majority of such sales made within Germany.
Hornschuch supplies films for use in the manufacture of cabinets, furniture,
automobiles, luggage and shoes. Customers require high quality products with
exact design specifications and consistency as most products are intended to
simulate the appearance and texture of natural materials such as wood, stone and
leather.
CUSTOMERS
Decora sells Con-Tact products primarily to large retailers such as Kmart,
Target, The Home Depot and Wal-Mart as well as to wholesalers who sell to
smaller retailers and food, drug and hardware stores. Sales of decorative
coverings products are concentrated. In calendar year 1997, prior to the
Rubbermaid Acquisition, the Decorative Coverings Group's top three customers
collectively represented 48% of the Decorative Coverings Group's net sales. The
loss of any one or more of these customers could have a material adverse effect
on Decora's business and financial condition. During fiscal 1998, prior to the
Rubbermaid Acquisition, 31% of the Company's net sales were to Rubbermaid.
Decora also has a German customer which purchases and distributes specially
produced decorative coverings products in Germany and certain Eastern European
countries and has industrial customers in the U.S. which purchase its tape and
coating products.
Hornschuch has diverse consumer and industrial product lines utilizing similar
adhesive or film technology. Its consumer decorative coverings products known as
d-c-fix are sold worldwide to large and small retailers in Germany and to
independent distributors outside of Germany. The top five customers for
Hornschuch's decorative products in calendar year 1997 and for the post
acquisition six month period ended March 31, 1998 represented 30% and 34% of its
net sales, respectively. The loss of any one or more of these customers could
3
<PAGE> 6
have a material adverse effect on Hornschuch's business and financial condition.
For calendar year 1997 and for the six months ended March 31, 1998,
approximately 35% and 31%, respectively, of Hornschuch's net sales of decorative
products were made in Germany and the remainder primarily in other parts of
Europe, the Far East and the Middle East. In calendar year 1997 and for the six
months ended March 31, 1998, a single distributor in Russia constituted 16% and
19% of Hornschuch's total decorative products net sales, respectively.
Hornschuch's remaining divisions sell to the OEM market and each has diversified
customers, except for the automotive division which sells primarily to four or
five automotive manufacturers.
PRODUCTS AND MARKETS
The Company is a world leader in consumer self-adhesive decorative and surface
covering products and owns what management believes to be two of the most
popular consumer brand names in its markets, Con-Tact and d-c-fix. The Company
also manufactures films and other products for industrial and OEM applications.
In fiscal 1998, sales of consumer and industrial products represented 70% and
30% of total revenues, respectively; however, this composition reflects only six
months of results from Hornschuch which has a higher percentage of industrial
sales as discussed below.
Decora
Decora's primary consumer product is Con-Tact, a repositionable, self-adhesive,
vinyl decorative covering material which is used for do-it-yourself shelf
decorations, surface protection, arts and crafts and other applications.
Con-Tact is the market leader in the U.S. consumer self-adhesive decorative
market and is sold primarily in the housewares departments of mass merchandisers
in the United States. Con-Tact is manufactured by Decora utilizing a proprietary
and patented repositionable adhesive technology and is sold in roll form with a
wide range of finishes including printed patterns, solid colors and clear vinyl.
As a part of the Rubbermaid Acquisition, the Company also acquired Rubbermaid's
Shelf Liner and Grip Liner product lines. Shelf Liner and Grip Liner are, like
Con-Tact, decorative and functional covering materials. Shelf Liner is a
light-adhesive covering material which is used primarily as a removable shelf
liner. Grip Liner is a cushioned non-adhesive surface covering with non-slip
qualities also used primarily for shelving applications. Decora intends to
expand into and penetrate additional consumer product segments with both
existing and new products.
Decora is also seeking to expand the sales which it derives from its industrial
products, which are currently not material to Decora's overall business. Decora
has developed an industrial coatings business which markets a range of
proprietary coatings under the Wearlon brand name. These non-stick, yet
abrasion-resistant, coatings are water-based and cure at room temperature,
providing the industrial market with an environmentally friendly coating system
for a range of specialized applications. Decora also markets various other
industrial products, including commercial laminating, coating and printing
services and a line of high quality hazardous marking tapes sold under Decora's
Cobra trade name.
4
<PAGE> 7
Hornschuch
Hornschuch's net sales for the six months ended March 31, 1998 were comprised
54% from consumer products and 46% from industrial products. For the twelve
months ended December 31, 1997, sales from consumer and industrial products were
53% and 47%, respectively. Hornschuch's consumer products, in addition to
d-c-fix self adhesive products, include table cloths and place mats.
Hornschuch's consumer products have historically been sold through the
hardware/D-I-Y market, in contrast to those of Decora which typically have been
marketed as a housewares application. As a result, Hornschuch's products differ
somewhat from Decora's Con-Tact products in range of design, grade of materials
and utility. Through Hornschuch, management expects to introduce Decora's
housewares market-oriented products into Europe. Similarly, management expects
to introduce products that currently target the D-I-Y market segment in Europe
into the United States to address product line gaps in the Company's D-I-Y
market offerings.
In addition to its consumer decorative products, Hornschuch has four industrial
film (i.e., covering) product lines: technical films, fashion films, automotive
films and laminates which accounted for approximately 7%, 19%, 10% and 11%,
respectively, of Hornschuch's net sales in calendar year 1997. The technical
films line includes products such as moisture barriers for ponds and pools while
the fashion films line includes synthetic leathers and other materials which are
sold for use in the manufacture of shoes, upholsteries and handbags.
Hornschuch's automotive line primarily consists of artificial leather for use in
automobile interiors, and its laminates line consists of films which are
laminated to wood, metal and injection molded products during the manufacturing
of furniture and cabinetry.
MARKETING AND DISTRIBUTION
Prior to the Hornschuch Acquisition and the Rubbermaid Acquisition, the Company,
as primarily a contract manufacturer, did not incur traditional sales and
marketing expenses. In the past, Rubbermaid had sold and distributed Decora's
Con-Tact products and Decora conducted its international sales primarily through
a limited number of distributors. As a result of the acquisitions, the Company
now performs full sales and marketing activities to support its integrated
manufacturing operations and sells directly to retailers. During a nine month
transition period following the Rubbermaid Acquisition, Decora will continue to
utilize the distribution services of Rubbermaid in an attempt to provide a
smooth transition, and simultaneously is building its own marketing and sales
team and establishing its own distribution system. There can be no assurances
that the transition will occur smoothly or that it will be completed within
management's cost estimates; however, Decora has engaged leading industry
consultants to conduct and evaluate various marketing and distribution studies
and is in the process of selecting and implementing the optimum marketing, sales
and distribution strategies. Decora is also entitled to use the Rubbermaid name
on products of the Decorative Coverings Group for a two-year period following
the acquisition.
Hornschuch has complete marketing and distribution operations which handle sales
in Germany. In addition, approximately 64 independent distributors and sales
representatives marketing products in 160 countries
5
<PAGE> 8
worldwide purchase product directly from Hornschuch and resell to customers. In
the Czech Republic and Italy, subsidiaries of Hornschuch also make direct sales.
Industrial products are marketed to OEM's through a small group of
technically-oriented sales persons.
COMPETITION
Consumer Decorative Coverings
The Con-Tact product line has long held the leading market position in the
United States. The competition is divided among several smaller companies which
have slightly increased their market share in the last several years in certain
product categories. The Shelf Liner product line has dominated the light
adhesive market with a leading market share for a significant period, while the
Grip Liner product line is a significant player in a larger field of
approximately four competitors, only one of which the Company believes has a
market share in this category which is greater than Decora's. Although each
product has a solid competitive position, availability of retail shelf space in
the competitive retail market can be impacted both by products of direct
competitors and by products serving different functions than Decora's products.
Hornschuch's decorative coverings products have been in the market since 1957.
In Germany, Hornschuch has one significant competitor who is the market leader
and, outside of Germany, Hornschuch competes with approximately ten smaller
competitors based in various countries around the world.
The Company's decorative products compete effectively on the basis of brand name
recognition, selection, price, service and quality of products, as well as
retail shelf space and location.
Other Products
The Company sells industrial products in a variety of market segments including
automotive, clothing, textile and furniture manufacturing. The Company does not
hold a significant market share in any of these markets and competes with many
larger and smaller competitors on the basis of quality, performance, customer
service and price.
MANUFACTURING
Decora
The majority of the products sold by Decora are produced at its facility in Fort
Edward, New York. Management believes that the plant currently has available
capacity for use in connection with (i) a proposed expansion of existing and new
decorative self-adhesive products and commercial and industrial products, (ii)
the Rubbermaid Acquisition and (iii) the Hornschuch Acquisition. Decora also
utilizes outside suppliers when required for certain specific printing, coating
and finishing purposes for which it does not currently have sufficient
industrial capabilities, as well as for temporary warehousing requirements.
Decora purchases its Grip
6
<PAGE> 9
Liner product from a third party supplier pursuant to an exclusive supply
agreement which expires in August 1999. As part of the Rubbermaid Acquisition,
during fiscal 1999 Decora will relocate and integrate into its Fort Edward, New
York facility certain equipment used to manufacture Shelf Liner product at a
cost of approximately $2.5 million prior to which time Rubbermaid will continue
to manufacture Shelf Liner for Decora. Management also anticipates making
capital expenditures in amounts similar to current annual levels in order to
maintain operating efficiencies and add additional capacity as warranted by
product demand and mix. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The primary raw materials used in Decora's products are paper, poly vinyl
chloride ("PVC"), adhesives, inks, silicone and other chemicals. Decora uses two
primary suppliers for its PVC, and relations with such suppliers are good.
Decora believes that it has alternative sources of supply for all of its
significant and primary raw materials. Decora expects to purchase a portion of
its sheet PVC from Hornschuch in the future.
Hornschuch
The majority of the products sold by Hornschuch are produced at its facility in
Weissbach, Germany. Management believes that additional machinery will be
required in order to make available capacity for the proposed expansion of its
commercial and industrial products and to provide additional products to Decora.
Historically, Hornschuch has entered into arrangements with various suppliers
for certain specific printing purposes. In the future, Hornschuch expects to use
fewer outside suppliers as additional manufacturing capacity is made available
to it at Decora's Fort Edward, New York facility and through additional capital
investment. Management of Hornschuch expects to increase its capital
expenditures over the next three years to add further capacity including the
acquisition of a printing machine to produce its laminate products.
As with Decora, the primary raw materials used in Hornschuch's products are
paper, PVC, adhesives, inks, silicone and other chemicals. Hornschuch uses at
least two primary suppliers for each of its raw materials, and relations with
such suppliers are good. Management believes that Hornschuch has alternative
sources for its significant and primary raw materials.
SEASONALITY
Decora has generally experienced higher sales and earnings in its first two
fiscal quarters as a result of increased seasonal demand for Con-Tact products
in the late spring and summer. The effect of this seasonality on the Company's
consolidated operations has been somewhat moderated by the Hornschuch
Acquisition. Overall, Hornschuch's historical sales have demonstrated little
seasonality; however, sales of Hornschuch's consumer products are typically
strongest in the fourth quarter. As the Company continues to emphasize its
consumer product lines, it is anticipated that Hornschuch sales will reach
higher levels during the fourth quarter.
7
<PAGE> 10
RESEARCH AND DEVELOPMENT
Decora
Decora has reduced its research and development function and currently maintains
a small internal research group, led by the inventor of the Company's adhesive
and Wearlon technologies. The majority of recent efforts have been placed on the
refinement and enhancement of existing products; however, that group also
continues to pursue new consumer and industrial products and applications
periodically. As a result of these research and development efforts, the Company
has refined a high-end liquid coating product for certain industrial
applications sold under the name Wearlon. Wearlon includes a water-based polymer
which management believes is a breakthrough in coatings requiring non-stick and
slip-lubricity properties. Decora owns a patent on a portion of this technology
and the Boeing Company and certain other purchasers have recently started to use
Wearlon industrial maintenance coating systems within their production lines for
mold release and non-stick applications.
Hornschuch
The majority of Hornschuch's recent efforts have been placed on the refinement
and enhancement of products already developed; however, a limited amount of
research and development is devoted to the pursuit of new industrial products
and applications. Recent research and development has de-emphasized automotive
and fashion products and focused primarily on the development of laminated film
products for desktops, tabletops and bookcases and new films for use in
decorative product manufacturing.
Through collaboration on research and development efforts between Decora and
Hornschuch, management believes that savings will result from the elimination of
duplicate efforts as each of the firms currently markets products that the other
was planning to develop. Management further believes that collaboration on
research and development will also result in a quicker response to new product
development through the sharing of technical expertise, although no assurance
can be given that this will prove to be the case. In particular, management
expects to benefit from the combined significant expertise in adhesive
technology developed by Decora and significant expertise in film technology
developed by Hornschuch.
PROPRIETARY RIGHTS
Decora
Decora owns the rights to the pressure sensitive adhesive technology used in the
manufacturing of its self-adhesive Con-Tact products and owns the worldwide
rights to the Con-Tact trade name. Con-Tact is a registered trademark in over 50
countries worldwide; however, sales of Con-Tact products outside of North
America have been minimal. In connection with the Rubbermaid Acquisition, Decora
also acquired 20 unregistered trade names. In addition, Decora owns the Cobra,
Wearlon and Decora trade names. Decora is not aware of any circumstances that
would negatively impact its trademarks. Decora has also applied for trade
8
<PAGE> 11
name and patent protection for certain of its other new products, including its
protective and decorative thin film products and certain of its Wearlon liquid
coatings and coating additives.
Decora believes that its commercial position is enhanced by the patents it owns
as well as the know-how and trade secrets it has developed. Decora has also
applied for foreign protection for certain of its technologies and trademarks.
To further the development of certain products and establishment of a
distribution network, certain of the Company's technologies have been licensed
to third parties. Decora has executed trade secret and confidentiality
agreements with its licensees and others to protect its proprietary rights as
part of its intellectual property protection program.
Hornschuch
Hornschuch does not currently own any patents; rather, Hornschuch's management
believes that Hornschuch's products are protected under the laws of Germany and
elsewhere with respect to proprietary information. Hornschuch owns 22 German
trademark registrations, four United States trademark registrations and 149
trademark registrations in all countries combined, where Hornschuch is active.
Hornschuch's trademarks include d-c-fix, ceramo-fix, furnit, howesol, laif,
noblessa, select, skai and sol-pal.
Management considers seven of Hornschuch's trademarks, including the original
d-c-fix, skai, laif, furnit, select, howesol and sol-pal, to be important to
Hornschuch's business. Hornschuch is not aware of any circumstances that would
negatively impact its trademarks.
Although the Company seeks to protect its proprietary information by obtaining
patents, registering trade names and entering into trade secret and
confidentiality agreements, there is no guaranty that competitors will not
misappropriate proprietary information or develop similar products that are
outside the protection of the Company's patents, trade secrets and other
proprietary rights.
GOVERNMENTAL REGULATION
The operations of Decora and Hornschuch are subject to regulation by various
federal, state and local authorities regarding the manufacturing of their
products. The Company's manufacturing facilities and products are subject to
periodic inspection by federal, state and local authorities. The Company
believes that it is currently in substantial compliance with all material
governmental laws and regulations and maintains all material permits and
licenses relating to its operations. Nevertheless, there can be no assurance
that the Company is in full compliance with all such laws and regulations or
that it will be able to comply with any future laws and regulations in a
cost-effective manner. Failure by the Company to comply with applicable laws and
regulations could subject it to civil remedies, including fines, injunctions,
recalls or seizures, as well as potential criminal sanctions, which could have a
material adverse effect on the Company's business, financial condition or
results of operations.
9
<PAGE> 12
ENVIRONMENTAL MATTERS
Decora and Hornschuch's operations and properties are subject to numerous U.S.
and German federal, state and local environmental laws and regulations relating
to the emission, discharge, storage, treatment, handling, generation,
transportation, release, disposal, investigation and remediation of certain
materials, substances and wastes used in or resulting from its operations. As
with other companies engaged in similar businesses, the nature of the Company's
operations exposes it to the risk of liabilities or claims with respect to
environmental matters, including those relating to the disposal and release of
hazardous substances.
Decora has not made any material expenditures during the last three fiscal years
in order to comply with environmental laws or regulations. Based on Decora's
experience to date, Decora believes that the future cost of compliance with
existing environmental laws and regulations and liability for known
environmental conditions will not have a material adverse effect on the
Company's business, financial condition or results of operations.
Hornschuch's manufacturing facility is located on property which has been used
for manufacturing purposes for the last 100 years. The current facilities
include water treatment and wastewater treatment facilities and an energy
production facility. Management of Hornschuch reports that certain environmental
issues may exist with respect to both Hornschuch-owned and third party waste
disposal sites, wastewater discharges, and dust and hot air emissions.
Hornschuch has set aside reserves that management believes are adequate to
cover the estimated costs of remediation associated with these issues, if such
remediation is required. However, the Company cannot predict what environmental
or health and safety legislation or regulations will be enacted in the future or
how existing or future laws or regulations will be enforced, administered or
interpreted, nor can it predict the amount of future expenditures which may be
required in order to comply with such environmental or health and safety laws or
regulations or to respond to new environmental claims.
EMPLOYEES
At March 31, 1998, DII employed four people in its corporate office, Decora
employed approximately 164 people and Hornschuch employed approximately 717
people.
As of the same date, 113 of Decora's employees were represented by Local #13
United Paper Workers International Union (AFL-CIO) under a contract which was
renegotiated and renewed in April 1996 and expires in March 1999.
As of the same date, 670 of Hornschuch's employees were represented by a labor
union. Almost all of the union members belong to the Textile and Clothing trade
union, which merged into the Metal trade union effective April 1, 1998. The most
recent collective agreement for Hornschuch's employees (including both blue
collar workers and white collar employees below management level) was signed in
February 1997 and expires in May 1999.
10
<PAGE> 13
Neither Decora nor Hornschuch has experienced any work stoppage in recent years,
and management believes that relations with the Company's labor force are good.
ITEM 2. PROPERTIES
Decora owns its 220,000 square foot facility located on approximately 12 acres
in Fort Edward, New York. The Company's corporate headquarters are located
within this facility. Hornschuch owns its approximately 1.0 million square foot
facility located on approximately 48 acres in Weissbach, Germany. Decora also
has leased 10,000 square feet of office space in Cleveland, Ohio which will
house Decora's North American sales and marketing headquarters and which is
anticipated to be occupied in July 1998.
Through a subsidiary corporation, Hornschuch also owns two commercial real
estate properties which are unrelated to its operating business and which are
being held for sale. Although these properties are currently generating rental
income sufficient to cover related expenses, no assurance can be given that this
will continue to be true in the future (see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Outlook").
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently subject to any material legal proceedings. Although
the Company is subject to certain legal proceedings, the ultimate outcome of
each proceeding will not, in the opinion of management, have a material adverse
effect on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
a. Market Information
The Company's Common Stock trades over the counter and is quoted on the
Nasdaq SmallCap Market.
b. Stock Price Information
The following table reflects actual transactions in the Company's Common
Stock, without retail markup, markdown or commissions for Fiscal 1997 and
1998. The high and low sales prices of the Common Stock for the periods
indicated have been provided by the National Quotation Bureau, Inc. Stock
prices reflect a one-for-five reverse stock split of the Company's Common
Stock which became effective on December 29, 1997.
<TABLE>
<CAPTION>
Sales Prices
------------
High Low
---- ---
<S> <C> <C>
Fiscal 1997:
First Quarter $7 1/2 $5
Second Quarter 7 7/8 4 7/32
Third Quarter 6 1/4 4 3/8
Fourth Quarter 6 1/4 5 5/16
High Low
---- ---
Fiscal 1998:
First Quarter 4 11/16 3 7/16
Second Quarter 5 3 1/8
Third Quarter 6 23/32 3 1/2
Fourth Quarter 5 7/8 4
</TABLE>
On June 19, 1998, the closing sales price for the shares in the
over-the-counter market was $7.31, as reported by the National Quotation
Bureau, Inc. The Company has also authorized a class of preferred stock,
although no shares of preferred stock have been issued.
c. Approximate Number of Holders of Common Stock.
There were 174 holders of record of Common Stock as of June 19, 1998.
12
<PAGE> 15
d. Dividends
The Company has never paid a cash dividend and intends to retain earnings,
if any, for use in its business. The Company's agreements with its lenders
restrict the ability of the Company to pay cash dividends and the Company
does not presently intend to pay any cash dividends on its Common Stock for
the foreseeable future.
e. Recent Sales of Unregistered Securities
In June 1997 and January and February 1998, DII granted options for the
purchase of common stock to certain of its employees and directors for
services rendered and as incentive compensation. Such options were granted
in reliance on a private placement exemption from registration. The options
were granted to a limited number of persons, all of whom have access to
information about the Company, and restrictions were imposed on transfer of
the options and underlying shares. Of the total 890,000 options granted,
60,000 had an exercise price of $4.75 per share, 130,000 had an exercise
price of $5.00 per share, 560,000 had an exercise price of $5.50 per share
and 140,000 had an exercise price of $6.00 per share. 560,000 of the
options vested one third on the date of grant, with another third to vest
in one year and another third to vest in two years. 110,000 options vest
upon achievement of certain performance criteria over a three year period
and the remaining 220,000 options vested on the date of grant. All options
were granted at an exercise price which was either equal to or greater than
the market price of the Company's common stock on the date of grant.
13
<PAGE> 16
ITEM 6. SELECTED FINANCIAL INFORMATION.
The following selected financial data of the Company as to the five fiscal years
ended March 31, 1998 are derived from the consolidated financial statements that
have been audited by Price Waterhouse LLP as to all years.
The following table should be read in conjunction with the Company's historical
consolidated financial statements and the notes thereto. Unless otherwise
indicated, none of the information in the table includes discontinued operations
of the Company. See Note 2 of the financial statements. See also Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
DECORA INDUSTRIES, INC.
SELECTED FINANCIAL DATA(1)
For the five years ended March 31, 1998
(In thousands except per share data)
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------
Statement of Operations Data: 1998 1997 1996 1995 1994
- ----------------------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net sales $ 98,407 $41,082 $38,828 $40,414 $39,955
Operating income 11,049 4,726 4,108 3,895 4,192
Income from continuing operations 2,730 3,566 2,919 2,408 1,629
Loss from discontinued operations -- -- -- (1,297) (1,481)
-------- ------- ------- ------- -------
Net income $ 2,730 $ 3,566 $ 2,919 $ 1,111 $ 148
======== ======= ======= ======= =======
Basic income (loss) per share(2):
Continuing operations $ 0.38 $ 0.51 $ 0.45 $ 0.40 $ 0.27
Discontinued operations -- -- -- (0.22) (0.25)
-------- ------- ------- ------- -------
Net income(2) $ 0.38 $ 0.51 $ 0.45 $ 0.18 $ 0.02
======== ======= ======= ======= =======
Diluted income (loss) per share(2):
Continuing operations $ 0.35 $ 0.46 $ 0.44 $ 0.40 $ 0.27
Discontinued operations -- -- -- (0.22) (0.25)
-------- ------- ------- ------- -------
Net income(2) $ 0.35 $ 0.46 $ 0.44 $ 0.18 $ 0.02
======== ======= ======= ======= =======
Balance Sheet Data:(4)
Total Assets $131,216 $37,189 $36,157 $31,021 $30,023
Working capital $ 16,133 $ 6,631 $ 1,460 $ 238 $ 515
Long-term Obligations $ 74,540 $18,817 $20,299 $18,163 $18,473
Stockholders Equity $ 18,089 $14,503 $10,139 $ 4,396 $ 2,577
Cash Dividends per common share(3) -- -- -- -- --
</TABLE>
- ----------
(1) The selected historical operating data for the twelve months ended March
31, 1998 reflect the results of Hornschuch since the acquisition date of
October 1, 1997. The Hornschuch Acquisition materially impacts the
comparability of the information reflected in the selected financial data
for fiscal 1998 to that of prior years (see Item 7, "Management's
14
<PAGE> 17
Discussion and Analysis of Financial Condition and Results of Operations").
Additionally, the selected financial data does not reflect the Rubbermaid
Acquisition which was completed on April 29, 1998.
(2) Per share amounts reflect a one-for-five reverse stock split which became
effective on December 29, 1997.
(3) The Company has not paid dividends during the five years ended March 31,
1998 and does not anticipate paying cash dividends in the foreseeable
future.
(4) Historical balance sheet data has not been restated for discontinued
operations in years prior to the year in which the relevant measurement
date occurred.
15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company's efforts during fiscal 1998 were focused on transforming itself
from a contract manufacturer for a customer representing approximately 90% of
its business, to a worldwide leader in the self-adhesive consumer decorative
products category through two significant acquisitions. On October 1, 1997, the
Company completed the Hornschuch Acquisition, acquiring 73.2% of the outstanding
shares of Hornschuch. Management believes that Hornschuch is the largest,
independent, vertically integrated manufacturer and marketer of consumer
self-adhesive decorative and surface coverings in Europe. Hornschuch is best
known for d-c-fix, which is one of the largest brands of consumer self-adhesive
decorative coverings in Europe and a popular brand in emerging markets outside
Western Europe and North America. Hornschuch also has a significant industrial
product line which includes sales of various film products to manufacturers of
furniture, luggage and automobiles.
On March 30, 1998, the Company signed a definitive purchase agreement for the
acquisition of the Decorative Products Group from Rubbermaid for $62.5 million,
subject to adjustment (the "Rubbermaid Acquisition"). The Rubbermaid Acquisition
closed on April 29, 1998 and included: (i) the Con-Tact self-adhesive line,
which is currently manufactured by Decora, (ii) the Shelf Liner light-adhesive
line, which is currently manufactured by Rubbermaid, and (iii) the Grip Liner
non-adhesive covering line, which is currently manufactured by a third party
pursuant to the terms of an exclusive manufacturing agreement. The Rubbermaid
Acquisition will enable Decora, which previously had been primarily only a
manufacturer of Con-Tact, to integrate the marketing, sales and distribution of
the Con-Tact product line, as well as the other two product lines, with its
manufacturing abilities. In conjunction with the financing of the Rubbermaid
Acquisition, the Company refinanced a substantial portion of its outstanding
debt and is in the process of making material investments which are required to
integrate the acquired assets into the Company's business (see "Liquidity and
Capital Resources" below).
As a result of these two acquisitions, the Company has established itself as the
world-wide market leader in the self-adhesive consumer product category with
significant competitive strengths including strong brand recognition, strong
product placement with retailers, vertically integrated manufacturing
operations, proprietary technologies, broad product lines and cross-selling
opportunities. The Company's strategy is to integrate the recent acquisitions
and to utilize its competitive strengths in order to maintain its leadership
position and to increase shareholder value. An important initial focus for the
Company is the enhancement of the Con-Tact brand in North America and the
reversal of a declining sales trend of the acquired Decorative Products Group.
While Management believes that some of the decline is attributable to reduction
in inventories by retail customers, the Company will attempt to reverse the
declining trend in sales not caused by inventory reductions through its selling,
marketing and merchandising strategies, although no assurances can be given that
such trend can be reversed (see "Outlook" below).
16
<PAGE> 19
The results of operations of the Company for the twelve months ended March 31,
1998 reflect the results of Hornschuch since the acquisition date of October 1,
1997, thus affecting the comparability of results for such period to those of
prior periods. Additionally, the results of operations for all periods presented
do not reflect the Rubbermaid Acquisition, which was completed during the first
quarter of fiscal 1999.
RESULTS OF OPERATIONS
Year Ended March 31, 1998 vs. Year Ended March 31, 1997
The Company's consolidated financial statements for the year ended March 31,
1998 are the first fiscal year to include post-acquisition results of Hornschuch
and DI Deutschland (unless otherwise noted, in this section financial
information regarding DI Deutschland represents the consolidated results and
financial position of DI Deutschland and Hornschuch), which are so included for
the final six months of such fiscal year. Net sales for the year ended March 31,
1998 were $98,407,000 as compared with net sales of $41,082,000 for the year
ended March 31, 1997. The increase of $57,325,000 resulted principally from the
inclusion of DI Deutschland net sales of $62,150,000 offset by a $5,856,000
decrease in Decora's net sales to its principal U.S. customer, Rubbermaid. DI
Deutschland's net sales for the fourth quarter were 17% above third quarter
sales reflecting both the seasonally peak selling period for decorative products
and unusually strong sales from certain decorative product customers. The
decrease in net sales in the United States resulted primarily from inventory
reductions initiated by Rubbermaid in an effort to implement a just-in-time
replenishment of inventory levels, as well as inventory reductions by certain
retailers. Export net sales from U.S. operations were $5,020,000 for the year
ended March 31, 1998, reflecting an increase of $858,000 as compared with
$4,162,000 in the year ended March 31, 1997. Net sales of U.S.-based, non-core
and industrial products were $749,000 during the year ended March 31, 1998 as
compared with $527,000 in the year ended March 31, 1997.
Gross profit was $30,187,000, or 30.7% of net sales, for the year ended March
31, 1998 as compared with $10,579,000, or 25.8% of net sales, for the year ended
March 31, 1997. The increase of $19,608,000 was a result of the addition of DI
Deutschland's gross profit of $20,897,000 reflected in the year ended March 31,
1998, offset by a decrease of $1,289,000 in gross profit at the U.S. operations.
The decrease in gross profit in the United States was principally due to the
decreased net sales discussed above. Gross profit margin increased by 4.9
percentage points primarily because of the higher gross profit margin
contributed by DI Deutschland's operations in the year ended March 31, 1998. DI
Deutschland's higher gross profit margin reflects its different product mix and
its greater degree of vertical integration than the U.S. operations. DI
Deutschland's gross profit margin was also favorably impacted by changes in
product mix in the fourth quarter due to increased sales of more profitable
decorative products and overall favorable volume variances during the seasonally
strong quarter.
Selling, general and administrative expenses were $17,677,000, or 18.0% of net
sales, for the year ended March 31, 1998 as compared with $5,853,000, or 14.2%
of net sales, in the year ended March 31, 1997. The increase of $11,824,000 was
a result of the addition of DI Deutschland's selling, general and administrative
expenses of $12,764,000 reflected in the year ended March 31, 1998, offset by a
decrease of $889,000 at the
17
<PAGE> 20
U.S. operations. The decrease in selling, general and administrative expenses in
the United States was primarily a result of cost-saving measures implemented in
fiscal year 1997 and workforce reductions implemented in the 1998 fiscal year.
The 3.8 percentage point increase in selling, general and administrative
expenses as a percentage of net sales was primarily attributable to the
inclusion of the results of DI Deutschland in the current year, since DI
Deutschland's selling, general and administrative expenses comprised a higher
percentage of its net sales than those of the U.S. operations due to its greater
level of integrated sales and marketing operations.
Non-recurring charges of $1,461,000 were recorded in the year ended March 31,
1998. Of these charges, $531,000 was recorded relative to severance costs for
U.S. workforce reductions implemented in anticipation of operating synergies
with Hornschuch, and $141,000 was recorded relative to print tooling
redundancies between the two operations. An additional $789,000 was recorded to
reserve against certain notes receivable which the Company obtained in fiscal
years 1996 and 1995 in conjunction with the sale of previously discontinued
non-core operations.
Interest expense was $3,829,000 for the year ended March 31, 1998 as compared
with $2,319,000 in the year ended March 31, 1997. The increase of $1,510,000 is
principally due to interest expense of $563,000 on Hornschuch's operating loans
and the additional interest expense of approximately $1,826,000 associated with
the Hornschuch Acquisition debt, offset by a decrease in interest expense at the
U.S. operations of approximately $879,000 which resulted from lower borrowings
and lower overall interest rates on outstanding debt.
The Company recognized income before taxes and minority interest of $7,220,000
in the year ended March 31, 1998, as compared with $2,407,000 in the year ended
March 31, 1997. This increase is principally a result of earnings of DI
Deutschland since the acquisition and decreases in U.S.-based selling, general
and administrative and interest expenses partially offset by the non-recurring
charge of $1,461,000, as well as increased interest expense associated with the
Hornschuch Acquisition.
Net income of $2,730,000 for the year ended March 31, 1998 was $836,000 lower
than the year ended March 31, 1997 as a result of the above noted changes, a
$4,437,000 increase in the provision for income taxes and a $1,212,000 deduction
for the minority interest in earnings of Hornschuch.
Year Ended March 31, 1997 vs. Year Ended March 31, 1996
Net sales were $41,082,000 for the year ended March 31, 1997 compared to
$38,828,000 for the year ended March 31, 1996, an increase of 6%. This increase
resulted from significant growth in net sales of decorative products to
international customers, as well as increased net sales to the Company's
principal customer, Rubbermaid. In the prior year, net sales to Rubbermaid had
been negatively impacted by inventory consolidation and shipment delays related
to the acquisition and installation of finish packaging operations in the
Company's Fort Edward facility. The prior year also reflected lower per unit net
sales during the first quarter, prior to the start-up of such new operations, in
comparison to the full year of such operations during
18
<PAGE> 21
fiscal 1997. While net sales to Rubbermaid increased $1,407,000, or 4%, over the
prior year amount, unit shipment volumes during fiscal 1997 decreased by 1% and
remained below historical averages. The Company believes that this decline is
partially a result of lower sales by Rubbermaid to its customers and additional
inventory reductions at Rubbermaid.
International net sales of self-adhesive decorative products were $4,465,000, an
increase of $2,204,000 over the prior year. The majority of this increase was
derived from the export of products for sale in the European market in addition
to increased volume of products sold to other international markets. Net sales
from proprietary non-core decorative products such as thin film and industrial
products for the year ended March 31, 1997 were $1,166,000 lower than in fiscal
1996 as certain redesigned decorative products were not introduced into the
market until January 1997, when the Company introduced its Decora Tile Art(TM),
Decora Wall Art(TM) and Decora Glass Art(TM) programs at the International
Housewares Show in Chicago.
Gross profit for fiscal 1997 was $10,579,000, or $5,000 lower than the prior
year's gross profit of $10,584,000. The Company's gross profit margin was 25.8%
during fiscal 1997, or 1.5% lower than the prior year's margin of 27.3%,
reflecting the full year's impact of increased depreciation and amortization
expenses in cost of goods sold related to the manufacturing expansion completed
in September 1995 of the prior year as well as changes in product mix. The gross
profit margin was also impacted by the ramp-up of a new international program
whereby shorter production runs and related inefficiencies were required to
support product shipments. Other contributing factors to the change in gross
margin were changes in production volume and product mix.
Selling, general and administrative expenses were $5,853,000 during fiscal 1997,
or $623,000 lower than the prior year's expenses of $6,476,000. This reduction
reflects the impact of cost saving measures which were implemented during the
last four months of fiscal 1996, including an early retirement program which
resulted in a one-time charge of $282,000 to the prior year's expense. Lower
expenditures also resulted from reduced research and development expense as the
Company continued to shift its emphasis from pure development to the sale of
commercialized products. As a result of the above changes, operating income for
the year ended March 31, 1997 increased to $4,726,000 from $4,108,000 during the
prior year.
Net income for the year ended March 31, 1997 was $3,566,000, an increase of
$647,000 over the prior year's net income of $2,919,000. Interest expense was
$2,319,000 for the year ended March 31, 1997 versus $2,675,000 in the prior
year, a decrease of $356,000. Such decrease resulted from reduced borrowings and
reduced interest rates on new borrowings which were used to refinance
pre-existing, higher cost obligations.
Income from continuing operations was also impacted favorably by a tax benefit
of $1,159,000 resulting from net operating loss carry forwards which had
previously been partially reserved for. The continued profitability of the
Company resulted in the recognition of the remaining benefit under accounting
principles applicable to the Company's net operating loss carry forwards.
19
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash flow are cash from operations and
borrowings under its credit facilities. The Company's primary capital
requirements include debt service, capital expenditures, working capital needs
and financing of acquisitions.
The Company's net working capital increased from $6,631,000 at March 31, 1997 to
$16,133,000 at March 31, 1998, an increase of $9,502,000. The increase is due to
the addition of the net working capital of DI Deutschland of $9,075,000 at
March 31, 1998.
Consolidated cash balances as of March 31, 1998 were $1,807,000 which are
limited by certain security agreements, minority interests and debt covenants as
to use. During recent fiscal periods, DII's subsidiaries generated cash from
operations which was utilized primarily to fund working capital requirements and
repay debt, and DII was funded with management fees, proceeds of notes
receivable and proceeds from the private placement of equity securities.
Net cash flow from operating activities for the year ended March 31, 1998 was
$14,840,000 versus cash flow from operating activities of $3,082,000 for the
year ended March 31, 1997. A decrease in net income was offset primarily by
increased depreciation and amortization and the increase in net working capital
noted above.
Capital expenditures for the year ended March 31, 1998 were $1,778,000 versus
$489,000 for the year ended March 31, 1997. The recent period includes
expenditures of $993,000 at DI Deutschland subsequent to the Hornschuch
Acquisition. Expenditures of Decora's U.S. operations are consistent with
historical averages. The Company anticipates increasing spending on capital
projects to $10,500,000 in the fiscal year ending March 31, 1999. As a result of
the April 1998 acquisition of Rubbermaid's Decorative Coverings Group ("DCG"),
Decora anticipates spending approximately $2,500,000 to move Rubbermaid's Shelf
Liner equipment from Ohio and install it at Decora's Fort Edward, New York
facility and approximately $2,000,000 to install systems and pay related
expenses necessary to establish Decora's new sales, distribution and customer
service functions.
In October 1997, the Company purchased 73.2% of the shares of Hornschuch for
approximately $38.4 million, which was funded with the proceeds of loans from
senior and subordinated lenders and the proceeds from a private placement of
common stock. The Company currently owns approximately 76% of the outstanding
shares of Hornschuch. As a result of the Hornschuch Acquisition, the Company's
consolidated operations and cash flow became significantly exposed to changes in
exchange rates between the U.S. dollar and the Deutsche Mark, as well as, to a
limited extent, other foreign currencies. To date, the Company has engaged in
limited hedging transactions to protect against fluctuations in exchange rates
relative to the payment of interest on the senior loans utilized to fund the
Hornschuch Acquisition. Although the Company plans to utilize limited hedging
strategies in the future as the need arises, its profitability will continue to
be affected by fluctuations in foreign exchange rates.
20
<PAGE> 23
Concurrent with the April 1998 acquisition of the DCG, DII issued $112.75
million of senior secured notes. The notes were issued with an original issue
discount of $2,664,000 resulting in gross cash proceeds of $110,086,000. The
interest rate on the notes is 11% which is paid semi-annually and no principal
payments are required prior to maturity on May 1, 2005. In addition,
(i) Hornschuch borrowed approximately $10.0 million under its secured credit
facilities; (ii) Hornschuch loaned Decora such $10.0 million pursuant to a
secured intercompany note, the proceeds of which were used by Decora to
partially finance the acquisition of the DCG; and (iii) Decora entered into a
three year, $15.0 million secured revolving line of credit facility which, as of
June 19, 1998, has not been utilized. Availability under the credit line is
based on a factor of the amount of accounts receivable and inventory held by
Decora. In addition to financing the acquisition of the DCG, these borrowings
refinanced approximately $32.1 million of debt of DII and Decora, will finance
the Hornschuch Minority Tender Offer and will be used for general corporate
purposes including working capital requirements and the relocation of
manufacturing assets noted above.
OUTLOOK
The completion of the Hornschuch and Rubbermaid Acquisitions represent
significant achievements for the Company and create significant opportunities
for strengthening the Company's market position and increasing sales world-wide.
During fiscal 1999, the Company intends to focus its efforts on areas which are
key to achieving its operational and financial goals, including the following:
o Enhance the North American brands acquired from Rubbermaid and defend
market share.
o Complete the development of its North American sales and distribution
infrastructure.
o Expand international sales.
o Implement manufacturing and product synergies between North American and
German operations.
As a result of financing associated with the Rubbermaid and Hornschuch
Acquisitions, the Company has substantial debt in relation to its shareholders'
equity, as well as substantial debt service requirements that are significant
compared to its cash flow from operations. As of March 31, 1998, on an adjusted
pro forma basis (after giving effect to an extraordinary charge, net of income
tax effect of approximately $2,130,000 for pre-payment premium and the write-off
of certain unamortized financing costs relating the debt being refinanced), the
Company would have had consolidated outstanding indebtedness of approximately
$143.5 million, which would have represented 90% of total capitalization. The
Company's ability to service its debt will depend upon the Company's future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, many of which are beyond the
Company's control. If the Company is unable to service its indebtedness, it may
be required to alter its business plans, restructure or refinance its
indebtedness or seek additional equity capital. There can be no assurance that
the Company would be able to accomplish these objectives on terms acceptable to
it, if at all.
The Company did not acquire the distribution or sales and marketing operations
from Rubbermaid as part of the Rubbermaid Acquisition, and the Company does not
currently have operations which can fulfill such
21
<PAGE> 24
distribution and sales and marketing requirements. Additionally, Rubbermaid will
continue to manufacture the Shelf Liner product line until such operations can
be relocated to Decora's facility in Fort Edward, New York. For a nine-month
transition period which ends in January 1999, Rubbermaid will continue to
provide manufacturing, warehousing, shipping, order entry, customer service,
billing and collection functions for Decora on a contractual basis, until such
activities have been transferred to Decora. Decora has initiated implementation
of a complete distribution and sales system, including the installation of
systems and infrastructure, the hiring of personnel and the transition of
customer interface. Plans for the relocation of the manufacturing operations are
also in process. While Decora plans to complete the transition prior to January
1999, the inability to complete the transition as planned could result in
increased investment requirements, increased operating costs, loss of sales,
loss of customers and reduction in operating cash flow available to service
required debt payments.
Because the DCG was operated under Rubbermaid's centralized management system,
the Company was not able to determine the cost of certain services and functions
required for operation of the DCG which were provided by Rubbermaid's
centralized system (including all advertising, distribution and selling, general
and administrative expenses). The failure to estimate such costs accurately
going forward could have a material adverse effect on the Company's business,
financial condition or results of operations.
The Company's foreign operations are conducted primarily through Hornschuch. The
Company's European operations, representing approximately 79% of the Company's
net sales for the six months ended March 31, 1998, are subject to special risks
inherent in doing business outside the United States, including governmental
instability, war and other international conflicts, civil and labor
disturbances, requirements of local ownership, partial or total expropriation,
nationalization, currency devaluation, foreign exchange controls and foreign
laws and policies, each of which may limit the movement of assets or funds or
result in the deprivation of contract rights or the taking of property without
fair compensation.
Certain indirect subsidiaries of Hornschuch own two commercial real estate
properties in Germany which are unrelated to its operating business and which
collateralize bank loans totaling approximately $16,298,000. Currently, the
properties are producing rental income sufficient to cover interest payments.
Management is attempting to sell the properties; however, there is no assurance
that the properties can be sold in the near term, or at all, at a price which
will be sufficient to repay the loans in full. If not, Hornschuch could be
required to pay amounts due under the loans, which could have a material adverse
effect on Hornschuch's business and financial condition.
YEAR 2000 RISKS
The Company has conducted a review of its electronic data processing systems to
assess what changes might be needed for those systems to recognize the year 2000
and not to treat any date after December 31, 1999 as a date during the twentieth
century. In conjunction with the Rubbermaid Acquisition, during fiscal 1999
Decora is purchasing and installing new electronic data processing systems which
will replace its existing systems and will be fully year 2000 compliant.
Management believes that all such changes can be implemented
22
<PAGE> 25
in an orderly and timely manner. Costs to modify existing systems are not
anticipated to be material while the cost for installation of the new systems
described above are anticipated to total approximately $1,000,000. The Company
plans to try to coordinate its response to these issues with those third parties
with whom the Company engages in electronic transactions, both domestically and
internationally, including suppliers, customers, creditors and financial service
organizations, although the Company cannot effectively ensure against all
potential Year 2000 problems that might originate with third parties. If the
Company or any third party with whom the Company does business were to have a
Year 2000 problem, the Company's business could be seriously disrupted and the
Company's financial condition and results of operations could be materially
adversely affected.
FORWARD LOOKING STATEMENTS
This report includes "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All estimates, forecasts and projections
regarding future business, industry and financial performance and results and
all other statements that are not historical facts are forward-looking
statements. Such statements, estimates, forecasts and projections reflect
various assumptions by the Company concerning anticipated results and are
subject to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the control of the Company. Accordingly,
there can be no assurance that such statements, estimates, forecasts and
projections will be realized. The forecast and actual results will likely vary
and those variations may be material. Important factors that could cause actual
results to differ materially from the Company's expectations are disclosed
herein in conjunction with the forward-looking statements and elsewhere in this
report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is submitted in response to Part IV
hereof. See the Index to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
23
<PAGE> 26
PART III
DIRECTORS AND EXECUTIVE OFFICERS
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS AND DIRECTORS OF DII
AND OFFICERS OF SUBSIDIARIES
The following table sets forth each of the executive officers and directors
of DII and key officers of DII's' subsidiaries, including present position with
DII or its subsidiaries and their ages as of June 19, 1998:
<TABLE>
<CAPTION>
NAME Age Position
---- --- --------
<S> <C> <C>
Nathan Hevrony................ 46 Director, Chairman, Chief Executive Officer
Timothy N. Burditt............ 43 Executive Vice President, Administration and Finance, Secretary
Earl A. Wearsch............... 52 Executive Vice President; President and General Manager of Decora
Hans-Georg Stahmer............ 51 Executive Vice President; President and Member of Hornschuch
Management Board
Bernhard Muller............... 40 Executive Vice President; Member of Hornschuch Management Board
Richard A. DeCoste............ 59 Executive Vice President; Vice President of Operations of Decora
Frank J. Nolfi, Jr............ 65 Vice President-- Finance of Decora
Roger Grafftey-Smith.......... 67 Director
Gabriel Thomas................ 57 Director
Stephen Verchick.............. 57 Director
Ronald Artzer................. 54 Director
</TABLE>
Nathan Hevrony. Mr. Hevrony has served as a director of DII since August
1988 and as Chief Executive Officer and Chairman of the Board of DII since
October 1989.
Timothy N. Burditt. Mr. Burditt was named Executive Vice President,
Administration and Finance of DII in April 1993 and was named Secretary in
August 1993.
Earl A. Wearsch. Mr. Wearsch was named Executive Vice President of DII and
President and General Manager of Decora in January 1998. From 1983 to 1997, Mr.
Wearsch served in various senior management and sales/marketing positions with
Glidden, a manufacturer of paint and coatings.
Hans-Georg Stahmer. Mr. Stahmer was named Executive Vice President of DII
in February 1998. Since 1995, Mr. Stahmer has served as the President and a
member of the Management Board of Hornschuch. His term of office with Hornschuch
expires on September 30, 2000. From 1987 to 1995, Mr. Stahmer held various
management positions with Black & Decker GmbH, most recently as Managing
Director.
Bernhard Muller. Dr. Muller was named Executive Vice President of DII in
February 1998. Since April 1997, Dr. Muller has been one of two members of the
Management Board of Hornschuch. His term of office
24
<PAGE> 27
with Hornschuch expires on December 31, 2002. From June 1993 to March 1997,
Dr. Muller was employed by Fresenius Ltd., a company which produces disposable
materials for the medical industry. From 1990 to May 1993, Dr. Muller held
positions at Bertelsmann Ltd., a printing company.
Richard A. DeCoste. Mr. DeCoste joined Decora in January 1993. In February
1994, Mr. DeCoste became President of its Consumer Decorative Products Group. In
November 1994, he became Executive Vice President of DII. In June 1997, he
became Vice President of Operations of Decora.
Frank J. Nolfi, Jr. Mr. Nolfi has served as Vice-President Finance of
Decora since its acquisition by DII in April 1990. He served in the same
position for the Uniglass Industries division of the prior owner, United
Merchants and Manufacturers, Inc.
Roger Grafftey-Smith. Mr. Grafftey-Smith has served as a director of DII
since August 1988 and has been a managing partner of Grafftey-Smith &
Associates, an international financial consulting firm, since 1981. Mr.
Grafftey-Smith also serves as a director of Americanino Capital Corporation, a
publicly-traded corporation.
Gabriel Thomas. Mr. Thomas has served as a director of DII since June 1991.
He has served as President and Director of Unilab Corporation, a clinical
laboratory services company, since December 1989.
Stephen H. Verchick. Mr. Verchick has served as a director of DII since
October 1993. He has been engaged in the private practice of law as President of
Stephen H. Verchick & Associates, Professional Corporation, in Beverly Hills,
California, for the past 24 years. Mr. Verchick is also President of Warner
Capital Associates, a Los Angeles-based venture capital firm.
Ronald A. Artzer. Mr. Artzer has served as a director of DII since May
1994. Since August 1997, he has been a self-employed management consultant. From
March 1994 to August 1997, Mr. Artzer served as President and Chief Executive
Officer of SoPakCo Foods, a food processing and packaging company. From 1991 to
1993, Mr. Artzer served as President and Chief Executive Officer of Design
Foods, a Division of Sara Lee Corporation.
Officers of DII are elected by the Board of Directors and hold office until
their successors are chosen and qualified, until their death or until they
resign or have been removed from office. All corporate officers serve at the
discretion of the Board of Directors. There are no family relationships between
any director or executive officer of DII and any other director or executive
officer of DII.
Directors of DII hold office until the next annual meeting of shareholders,
until successors are elected and qualified or until their earlier resignation or
removal.
25
<PAGE> 28
ITEM 11. EXECUTIVE COMPENSATION
The tables and discussion below set forth information about the
compensation awarded to, earned by or paid to DII's Chief Executive Officer and
its three other most highly compensated executive officers during the fiscal
years ended March 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
FISCAL ANNUAL COMPENSATION SHARES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1)
- --------------------------- ---- -------- -------- -------------------
<S> <C> <C> <C> <C>
Nathan Hevrony.................. 1998 $217,644(2) $400,000 300,000
Chief Executive Officer 1997 $185,000(2) $ 40,000 --
1996 $185,000(2) -- --
Timothy N. Burditt.............. 1998 $141,592 $275,000 60,000
Executive Vice President, 1997 $120,000 $ 15,000 --
Administration and Finance 1996 $120,000 $ 20,000 5,000
Hans-Georg Atahmer(3)........... 1998 $108,132 $ 39,714 60,000(3)
President & Member of Hornshuch 1997 -- -- --
Management Board 1996 -- -- --
Richard A. DeCoste.............. 1998 $140,000 $ -- 50,000
Director of Operations, 1997 $125,000 $ 5,000 --
Decora, Incorporated 1996 $125,000 -- --
</TABLE>
- ----------
(1) The option share totals reflect the one-for-five reverse stock split which
was effective December 29, 1997.
(2) DII also paid the premium of $17,665 for term life insurance for the
benefit of Mr. Hevrony.
(3) Vesting of the options is contingent on achieving certain performance
criteria during fiscal 1999, 2000 and 2001.
EMPLOYMENT AGREEMENTS
DII has an employment agreement with Mr. Hevrony, its Chief Executive Officer,
until May 31, 2000. The agreement was amended in February 1998 to provide for an
annual salary of $325,000 and additional compensation for any additional
acquisitions calculated pursuant to the acquisition incentive plan of DII which
provides for an amount equal to the product of (i) the ratio of EBITDA of an
acquired company during the twelve month period prior to acquisition of such
company to the EBITDA of DII (derived from all net sales of DII other than the
net sales of the acquired company) during fiscal year 1998, and (ii) one half of
his annualized base salary, exclusive of bonus payments, relocation payments or
allowances and other benefit payments, but including any payments for unused and
accrued vacation and holiday time (the "Acquisition Incentive Bonus"). In August
1997, a bonus of $50,000 was paid to Mr. Hevrony based upon DII's performance
during fiscal year 1997; the amount was based upon the favorable restructuring
of DII's outstanding loans and his role in developing new technologies. Mr.
Hevrony also has been awarded a bonus of $350,000 for his role in the Hornschuch
Acquisition in lieu of an Acquisition Incentive Bonus; $87,500 of such amount
was paid in fiscal 1998. Mr. Hevrony's employment agreement shall terminate upon
breach of
26
<PAGE> 29
a material term of the agreement or upon the permanent disability of Mr.
Hevrony. In the event of termination without cause (as defined in such
agreement), Mr. Hevrony is entitled to receive compensation for the remainder of
the term of the agreement (through May 31, 2000) and an additional 24-month
period.
DII has an employment agreement with Mr. Burditt until June 30, 2001, which
agreement was amended in February 1998 to provide minimum annual compensation in
the amount of $185,000 and additional compensation calculated as an Acquisition
Incentive Bonus. A bonus of $25,000 was paid to Mr. Burditt in August 1997 based
upon DII's performance during fiscal 1997. Mr. Burditt has also been awarded a
bonus of $250,000 for his role in the Hornschuch Acquisition in lieu of an
Acquisition Incentive Bonus; $62,500 of such amount was paid in fiscal 1998.
Upon termination without cause, Mr. Burditt is entitled to receive any earned
but unpaid bonuses on a pro-rata basis, plus compensation for the greater of
twelve months from the date of termination or the remainder of the term.
DII has a three-year employment agreement with Richard DeCoste, Decora's Vice
President of Operations, until May 30, 2000 which provides for annual
compensation of $140,000. Upon termination without cause, Mr. DeCoste is
entitled to receive compensation for the lesser of 12 months or to the end of
the term. As part of his recent employment agreement, Mr. DeCoste was granted an
option to purchase 20,000 shares of DII common stock at $5.00 per share. All of
such options are currently vested.
Hornschuch has an employment agreement with Mr. Stahmer until September 30,
2000, which agreement was amended in March 1998. Pursuant to the agreement,
Mr. Stahmer is an Executive Vice President of DII. The agreement provides for
base compensation in the amount of DM400,000, with an annual bonus consisting of
a cash component of up to DM250,000 in 1998 and DM300,000 in 1999 and 2000.
Additional compensation is payable if other performance targets are met.
Hornschuch has an employment agreement with Dr. Bernhard Muller until December
31, 2000 which was amended on February 20, 1998. Pursuant to the agreement, Dr.
Muller is an Executive Vice President of DII. The agreement provides for base
compensation of DM335,000 with an annual bonus consisting of a cash component of
up to DM250,000 in 1998 and DM200,000 in 1999 and 2000 and incentive stock
options subject to performance. Additional compensation is payable if other
performance compensation targets are met.
As of January 8, 1998, Decora entered into a three-year employment agreement
with Earl A. Wearsch, its President and General Manager, which provides for
annual compensation of $170,000, $185,000 and $200,000, respectively, for the
first, second and third year of the term. As part of the employment agreement,
Mr. Wearsch was awarded an option to purchase 60,000 shares of DII common stock
at $4.75 per share. Upon termination without cause, Mr. Wearsch is entitled to
receive compensation for 12 months from the date of termination. Upon the
occurrence of certain "change of control" events, Mr. Wearsch shall be entitled
to resign his position and receive compensation for 12 months following the
resignation.
27
<PAGE> 30
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Potential
Realizable Value at Assumed
Annual Rates of Stock Price
Individual Grants Appreciation for Option Term
- ------------------------------------------------------------------------ --------------------------------
% of Total
Number of Options
Shares Granted to
Underlying Employees
Options in the Fiscal Exercise Expiration
Name Granted(1) Year Price Date 0% 5% 10%
- ------------------ ---------- ------------- -------- ---------- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Nathan Hevrony 300,000(2) 44.8% $5.50 2-18-2003 $-0- $120,000 $585,000
Timothy N. Burditt 60,000(2) 9.0% $5.50 2-18-2003 $-0- $ 24,000 $117,000
Richard A. DeCoste 30,000(2) 4.5% $6.00 2-18-2003 $-0- $ -0- $ 43,500
20,000(3) 3.0% $5.00 5-31-2000 $-0- $ -0- $ 30,800
Hans-Georg Stahmer 60,000(4) 9.0% $5.00 6-30-2004 $-0- $ -0- $ 92,400
</TABLE>
- ----------
(1) Option share totals reflect the one-for-five reverse stock split that was
effective December 29, 1997.
(2) The options vest as follows: one third on the date of grant, one third on
February 19, 1999 and one third on February 19, 2000.
(3) The options vested on the date of grant.
(4) The options vest over a thee year period contingent on achieving certain
performance criteria.
AGGREGATED MARCH 31, 1998 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END(1) AT FISCAL YEAR END(2)
----------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Nathan Hevrony.......... 250,000 280,000 $32,000 $37,600
Timothy N. Burditt...... 45,000 40,000 $ 5,200 $ 7,520
Richard A. DeCoste...... 45,000 20,000 $13,760 $ 0
Hans-Georg Stahmer...... 0 60,000 $ 0 $ 0
</TABLE>
- ----------
(1) Option share totals reflect the one-for-five reverse stock split which was
effective December 29, 1997.
(2) Value of unexercised in-the-money options was calculated using the closing
sales price for DII's stock on March 31, 1998.
During the year ended March 31, 1998, none of the executive officers exercised
any outstanding stock options. The only unexercised options held by such
executive officers as of March 31, 1998 are shown in the table above.
28
<PAGE> 31
COMPENSATION OF DIRECTORS
Directors are paid $10,000 per year and $500 for each committee meeting which
they attend. Directors may also receive stock options under DII's 1987 Stock
Option Plan, or by other grant by DII. DII reimburses directors for reasonable
expenses incurred in connection with their attendance at meetings and other
Company related functions.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 19, 1998, certain information with
respect to the common stock of DII which may be deemed to be beneficially owned
by each stockholder who is known by DII to own more than 5% of the outstanding
common stock, by each director and executive officer of DII and by all directors
and executive officers of DII as a group. The share totals reflect a
one-for-five reverse stock split which was effective December 29, 1997.
<TABLE>
<CAPTION>
NAME AND PERCENT
ADDRESS OF COMMON OTHER OF
BENEFICIAL OWNER(1) STOCK SECURITIES(2) TOTAL CLASS
- ------------------- ------ ------------- --------- -------
<S> <C> <C> <C> <C>
State Street Bank & Trust............ 0 1,818,447 1,818,447 19.9%
Company, Trustee
Textron Master Trust
One Enterprise Drive
Master Trust -- W6C
North Quincy, MA 02171
Robert W. Johnson, IV(3)............. 391,265(4) 385,000(5) 776,265 10.1%
The Johnson Company
630 Fifth Avenue, Suite 1510
New York, NY 10111
Cumberland Associates................ 563,900(5) 0 563,900 7.7%
1114 Avenue of the Americas
New York, NY 10035
Nathan Hevrony....................... 150,750 250,000 400,750 5.3%
Roger Grafftey-Smith................. 75,000 112,400 187,400 2.5%
Gabriel Thomas....................... 0 142,400 142,400 1.9%
Stephen H. Verchick.................. 0 75,000 75,000 1.0%
Ronald A. Artzer..................... 0 70,000 70,000 (6)
Timothy N. Burditt................... 0 45,000 45,000 (6)
Earl A. Wearsch...................... 0 40,000 40,000 (6)
Hans-Georg Stahmer................... 0 0 0 (6)
Bernhard Muller...................... 0 0 0 (6)
Richard A. DeCoste................... 0 45,000 45,000 (6)
Frank J. Nolfi, Jr................... 0 13,333 13,333 (6)
All directors and executive officers as a
group, including the named persons (11
persons)............................ 225,750 793,133 1,018,883 12.5%
</TABLE>
- ----------
29
<PAGE> 32
(1) Unless otherwise indicated, each person included in the table has sole
investment power and sole voting power with respect to the securities
beneficially owned. The address of each director and officer listed is 1
Mill Street, Fort Edward, New York 12828.
(2) The amounts shown reflect shares of common stock underlying stock options,
convertible notes or warrants which are exercisable within 60 days.
(3) Pursuant to the terms of a Note and Warrant Agreement, dated November 3,
1992, by and between DII and Mr. Johnson, as amended, DII is obligated to
name Mr. Johnson as a director nominee while the note described therein is
outstanding (the "Johnson Note"). The Johnson Note was repaid in full on
May 3, 1998.
(4) Mr. Johnson disclaims beneficial interest in 27,000 shares which are held
by trusts for which he is a trustee.
(5) Of this total, Cumberland Associates has sole voting and investment power
with respect to 437,100 shares, and shares such power with respect to
126,800 shares.
(6) Each of these persons owns less than 1% of the outstanding common stock of
DII.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 1, 1997, the Company issued warrants (the "Textron Warrants") to a
pension fund known as the Textron Master Trust ("Textron") in connection with an
$18,000,000 subordinated loan from Textron to the Company (the "Textron Loan"),
the proceeds of which were used to repay existing indebtedness of Decora and to
help facilitate the Hornschuch Acquisition. The Textron Loan was paid in full on
April 29, 1998 as part of a refinancing associated with the Rubbermaid
Acquisition. The Textron Warrants include (i) a warrant to purchase 427,307
shares of the Company's common stock, (ii) a warrant to purchase 69,557 shares
of Series A Preferred Stock, with each share of Series A Preferred Stock to
automatically convert to 20 shares of common stock, for a total of 1,391,140
shares of common stock, and (iii) a contingent warrant to purchase a fixed
percentage of certain additional shares of common stock if issued by the Company
in the future. All of the Textron Warrants are exercisable until September 30,
2005 at an exercise price of $5.00 per share and to date, no warrants have been
exercised. See Item 12, "Security Ownership of Certain Beneficial Owners and
Management." So long as any of the Textron Warrants are outstanding, Textron
shall have the right to nominate one person to the Company's Board of Directors.
Textron exercised this right by nominating Richard A. Watson, who served as a
member of the Board of Directors until his resignation on May 5, 1998 following
the repayment of the Textron Loan.
On June 1, 1997, the Board of Directors granted options to purchase 20,000
shares of common stock to Mr. DeCoste at an exercise price of $5.00 per share.
All such options were immediately vested and were exercisable for three years.
On January 8,1998, the Board of Directors granted options to purchase 60,000
shares of common stock to Mr. Wearsch at an exercise price of $4.75 per share.
On February 19, 1998, the Board of Directors granted an option to purchase
300,000 shares to Mr. Hevrony, an option to purchase 60,000 shares to Mr.
Burditt and an option to purchase 40,000 shares to each of Mr. Artzer, Mr.
Grafftey-Smith, Mr. Thomas and Mr. Verchick, all at an exercise price of $5.50
per share. On the same date, the Board of Directors granted an option to
purchase 30,000 shares to Mr. DeCoste, an option to purchase 60,000 shares to
Mr. Wearsch and an option to purchase 40,000 shares to Mr. Nolfi, all at an
exercise price of $6.00 per share. One third of these options vested on the date
of grant, one third will vest one year after the date of grant and the remaining
one third will vest two years after the date of grant. All such options granted
have an exercise price which was either equal to or greater than the market
price of the Company's common stock on the date of grant. All such options are
30
<PAGE> 33
exercisable for five years except for those granted to Mr. Wearsch on January 8,
1998 which are exercisable for three years after vesting.
On February 20, 1998, the Board of Directors granted an option to purchase
50,000 shares of common stock to Mr. Muller at an exercise price of $5.00 per
share, with up to 20,000 of the options to vest in each of the next three years
depending on achievement of certain performance targets. On February 20, 1998,
the Board of Directors granted an option to purchase 60,000 shares of common
stock to Mr. Stahmer at an exercise price of $5.00 per share, with up to 16,666
or 16,667 of the options to vest in each of the next three years depending on
achievement of certain performance targets. All such options granted have an
exercise price which was either equal to or greater than the market price of the
Company's common stock on the date of grant. All such options are exercisable
for three years after vesting.
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. See Index to Consolidated Financial Statements.
2. Financial Statement Schedules. See Index to Consolidated Financial
Statements.
3. Exhibits.
The following exhibits are filed or incorporated by reference as part of this
Report.
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
2.1 Stock Purchase Agreement by and between Baden-Wurttenbergische Bank AG and
Newco dated as of September 3, 1997, as amended.(15)
2.2 Stock Purchase Agreement by and between der Kunz Holding GmbH & Co. KG and
Newco dated as of August 18, 1997, as amended.(15)
2.3 Asset Purchase Agreement dated as of March 30, 1998, by and between
Rubbermaid Incorporated and Rubbermaid Specialty Products, Inc., on the one
hand, and Decora Industries, Inc. and Decora, Incorporated, on the other
hand(16)
(3) Articles of Incorporation and By-Laws
3.1 Certificate of Incorporation filed on March 27, 1992.(7)
3.2 By-laws.(7)
(4) Instruments Defining the Rights of Security Holders
4.1 Certificate of Incorporation and By-laws (see Exhibits 3.1-3.2).
4.2 Form of Specimen Certificate.
4.3 Form of Indenture dated as of April 29, 1998 among Decora Industries, Inc.
as Issuer, Decora, Incorporated, Subsidiary Guarantors, and United States
Trust Company of New York as Trustee
31
<PAGE> 34
4.4 Form of 11% Senior Secured Notes due 2005 ("Old Notes") issued under
Indenture dated as of April 29, 1998 (included as Exhibit A to Indenture)
4.5 Form of Series B 11% Senior Secured Notes due 2005 ("Exchange Notes")
issuable under Indenture dated as of April 29, 1998 (included as Exhibit B
to Indenture)
4.6 Form of Guarantee of Decora, Incorporated dated as of April 29 1998
(included as Exhibit G to Indenture)
4.7 Form of Registration Rights Agreement dated as of April 29, 1998 among
Lazard Freres & Co. LLC, Decora Industries, Inc. and Decora, Incorporated
(10) Material Contracts
10.1 Utilitech, Incorporated, 1987 Stock Option Plan.(1)
10.2 Management Agreement dated as of April 18, 1990 by and between Utilitech
and Decora, Incorporated.(2)
10.3 Loan and Security Agreement dated as of April 18, 1990 by and between
Decora, Incorporated, Utilitech and Norstar Bank of Upstate NY
("Norstar").(2)
10.4 Forms of 14% Senior Subordinated Notes due April 15, 1998 dated as of April
18, 1990 in the amounts of $3,206,480.21, $1,327,732.26, $1,138,055.27 and
$1,327,732.26 to CIGNA Mezzanine Partners II, L.P., CIGNA Property and
Casualty Property and Casualty Insurance Company and Zande and Co.(2)
10.5 Securities Purchase Agreement dated as of April 15, 1990 by and between
Utilitech, Decora, Incorporated and Purchasers of 14% Senior Subordinated
Notes due 1998 and Warrants to Purchase Common Stock of Decora,
Incorporated.(2)
10.6 Option Agreement dated as of January 7, 1992, by and between Utilitech,
Incorporated and Nathan Hevrony.(3)
10.7 Option Agreement dated as of January 7, 1992, by and between Utilitech,
Incorporated and Roger Grafftey-Smith.(3)
10.8 Option Agreement dated as of January 7, 1992, by and between Utilitech,
Incorporated and Gabriel Thomas.(3)
10.9 Note and Warrant Purchase Agreement by and between Decora Industries, Inc.
and Robert W. Johnson IV, dated November 3, 1992.(4)
10.10 Convertible Negotiable Promissory Note by and between Decora Industries,
Inc. and Robert W. Johnson IV, dated November 3, 1992.(4)
10.11 Series A Warrant to Purchase Common Stock of Decora Industries, Inc.,
dated November 3, 1992 issued to Robert W. Johnson IV.(4)
32
<PAGE> 35
10.12 Series B Warrant to Purchase Common Stock of Decora Industries, Inc.,
dated November 3, 1992 issued to Robert W. Johnson IV.(4)
10.13 Form of Option Agreement dated as of January 11, 1993, by and between
Richard A. DeCoste and the Company.(5)
10.14 1988 Employee Stock Purchase Plan.(5)
10.15 Promissory Note in the amount of $8,500,000 by and between Decora,
Incorporated and Fleet Bank of New York (successor to Norstar) dated July
20, 1994.(6)
10.16 Amendment No. 1 to Loan and Security Agreement between Decora,
Incorporated and Fleet Bank of New York dated July 20, 1994.(6)
10.17 Promissory Note in the amount of $1,000,000 by and between Decora,
Incorporated and Fleet Bank of New York dated July 20, 1994.(6)
10.18 Loan and Security Agreement in the amount of $1,000,000 by and between
Decora, Incorporated and Fleet Bank of New York dated July 20, 1994.(6)
10.19 Amendment to Securities Purchase Agreement dated as of July 19, 1994 by
and between Decora, Incorporated and CIGNA Mezzanine Partners, Inc.,
CIGNA Property and Casualty and Insurance Company of North America.(6)
10.20 Promissory Note in the amount of $6,000,000 dated as of July 20, 1994 by
and between Decora Industries, Inc. as borrower and Decora, Incorporated
as lender.(6)
10.21 Form of Option Agreement dated as of July 5, 1994 by and between Decora
Industries, Inc. and Stephen Verchick.(6)
10.22 Form of Option Agreement dated as of July 5, 1994 by and between Decora
Industries, Inc. and Ronald Artzer.(6)
10.23 Form of Option Agreement dated as of August 15, 1994 by and between
Decora Industries, Inc. and Nathan Hevrony.(7)
10.24 Amendment to Securities Purchase Agreement dated as of April 1, 1995, by
and among Decora, Incorporated and CIGNA Mezzanine Partners II, L.P.,
CIGNA Property and Casualty Insurance Company and Insurance Company of
North America.(8)
10.25 Manufacturing Agreement dated April 12, 1995 by and among Decora
Industries, Inc., Decora, Incorporated and Rubbermaid Incorporated.
(8)(9)
10.26 Employment Agreement dated June 28, 1995 by and between John Tattersall
and Decora, Incorporated.(8)
10.27 Option Agreement dated June 28, 1995 by and between John Tattersall and
Decora Industries, Inc.(8)
10.28 Option Agreement dated July 6, 1995 by and between Gabriel Thomas and
Decora Industries, Inc.(8)
33
<PAGE> 36
10.29 Amended and Restated Note and Warrant Purchase Agreement by and between
Decora Industries, Inc. and Johnson.(10)
10.30 Amended and Restated Convertible Negotiable Promissory Note in the amount
of $1,500,000 by and between Decora Industries, Inc. as payor and Johnson
as holder.(10)
10.31 Series C Warrant to Purchase Common Stock of Decora Industries, Inc.(10)
10.32 Business Purpose Note dated January 24, 1996 in the amount of $650,000 by
and between Decora Industries, Inc. as payor and Fleet Bank.(11)
10.33 Form of Amendment No. 3 to the Securities Purchase Agreement dated as of
March 31, 1996 by and among Decora, Incorporated, CIGNA Mezzanine
Partners, Inc., CIGNA Property and Casualty and Insurance Company of
North America.(11)
10.34 Form of Exchange Agreement dated March 31, 1996 by and among Decora,
Incorporated, CIGNA Mezzanine Partners, Inc., CIGNA Property and Casualty
and Insurance Company of North America.(11)
10.35 Form of Loan and Security Agreement amendment no. 2, dated August 13,
1996, by and among Decora, Incorporated, as Borrower, the Company, as
Corporate Guarantor and Fleet Bank as Lender.(12)
10.36 Form of Restated Promissory Note dated August 13, 1996 by and between
Decora, Incorporated and Fleet Bank.(12)
10.37 Form of Line of Credit Note dated March 27, 1997 by and between Decora,
Incorporated and Fleet Bank.(13)
10.38 Form of Consolidated and Restated Promissory Note dated March 27, 1997 by
and between Decora, Incorporated and Fleet Bank.(13)
10.39 Form of Amended and Restated Term Note dated March 27, 1997 by and
between Decora, Incorporated and Fleet Bank.(13)
10.40 Form of Employment Agreement dated as of June 1, 1997 by and between
Decora Industries, Inc. and Nathan Hevrony.(13)
10.41 Form of Employment Agreement dated as of June 1, 1997 by and between
Decora, Incorporated and Richard DeCoste.(14)
10.42 Form of Employment Agreement dated as of June 1, 1997 by and between
Decora Industries, Inc. and Timothy N. Burditt.(14)
10.43 Certificate of Designation of Series A Preferred Stock of DII dated
September 26, 1997(15)
10.44 Note and Warrant Purchase Agreement dated as of September 26, 1997 among
Decora, Incorporated ("Borrower"), Decora Industries, Inc., Dorrance
Street Capital Advisors, LLC ("Agent") and Textron Master Trust
("Purchaser").(15)
34
<PAGE> 37
10.45 Common Warrant Certificate with respect to 2,136,534 shares of Decora
Industries, Inc., Common Stock, dated September 29, 1997 issued by Decora
Industries, Inc. to Purchaser.(15)
10.46 Preferred Warrant Certificate with respect to 69,557 shares of Decora
Industries, Inc. Series A Stock, dated September 29, 1997 issued by
Decora Industries, Inc. to Purchaser.(15)
10.47 Contingent Common Warrant Certificate with respect to an indeterminate
number of shares of Decora Industries, Inc. Common Stock, dated September
29, 1997 issued by Decora Industries, Inc. to Purchaser.(15)
10.48 13% Senior Subordinated Note due 2005, dated September 29, 1997 issued by
Borrower in the principal amount of $18,000,000 to Purchaser.(15)
10.49 First Amendment to March 27, 1997 Note dated September 26, 1997 by and
between Fleet Bank and Borrower regarding a $1,000,000 note.(15)
10.50 Second Amendment to Loan and Security Agreement dated September 26, 1997
by and between Fleet Bank and Borrower regarding a $3,354,167 note.(15)
10.51 Credit and Reimbursement Agreement Modification Agreement No. 2 dated
September 26, 1997 by and between the Borrower and Fleet Bank in
connection with a letter of credit issued by Fleet Bank in favor of
Mellon Bank, FSB, as Trustee, concerning the issuance of $2,460,000
industrial revenue development bond.(15)
10.52 Note and Loan and Security Agreement Amendment No. 4 dated September 26,
1997 by and between Borrower and Fleet Bank regarding a $5,169,000
note.(15)
10.53 Promissory Note in the amount of $15,207,000 dated September 30, 1997 by
Decora Industries, Inc. to Borrower.(15)
10.54 Loan Agreement dated September 29, 1997 among Decora Industries
Deutschland GmbH, Decora Industries, Inc. and Dresdner Bank AG (15)
10.55 Form of Guarantor Pledge Agreement dated as of April 29, 1998 between
Decora Industries, Inc. and United States Trust Company of New York.
10.56 Form of Notarial Deed dated as of April 28, 1998 between Decora
Industries, Inc. and United States Trust Company of New York relating to
pledge of shares of Decora Industries Deutschland GmbH ("German Pledge
Agreement").
10.57 Form of Amendment to German Pledge Agreement dated as of April 29, 1998
between Decora Industries, Inc. and United States Trust Company of New
York.
10.58 Form of Loan Agreement dated as of April 28, 1998 between Decora,
Incorporated and Konrad Hornschuch AG.
10.59 Form of Security Agreement dated as of April 29, 1998 between Decora,
Incorporated and Konrad Hornschuch AG.
35
<PAGE> 38
10.60 Form of Restated Revolving Promissory Note dated as of April 29, 1998 by
Decora, Incorporated in favor of Fleet National Bank in the principal
amount of $15,000,000.
10.61 Form of Restated Secured Revolving Line of Credit Agreement dated as of
April 29, 1998 between Decora, Incorporated and Fleet National Bank.
10.62 Form of Credit and Reimbursement Agreement Modification Agreement No. 3
dated as of April 29, 1998 between Decora, Incorporated and Fleet
National Bank.
10.63 Form of Mortgage Modification and Consolidation Agreement dated as of
April 29, 1998 between Decora, Incorporated and Fleet National Bank.
10.64 Form of Mortgage dated as of April 29, 1998 between Decora, Incorporated
and Fleet National Bank securing principal indebtedness in the amount of
$2,497,000.
10.65 Form of Mortgage dated as of April 29, 1998 between Decora, Incorporated
and Fleet National Bank securing principal indebtedness in the amount of
$499,000.
10.66 Form of Restated Security Agreement dated as of April 29, 1998 between
Decora, Incorporated and Fleet National Bank.
10.67 Form of Environmental Compliance and Indemnification Agreement dated as
of April 29, 1998 between Decora, Incorporated and Fleet National Bank.
10.68 Form of Option Agreement dated as of January 8, 1998, by and between
Decora Industries, Inc. and Earl A. Wearsch.
10.69 Form of Option Agreement dated as of February 19, 1998, by and between
Decora Industries, Inc. and Nathan Hevrony.
10.70 Form of Option Agreement dated as of February 19, 1998, by and between
Decora Industries, Inc. and Timothy N. Burditt.
10.71 Form of Option Agreement dated as of February 19, 1998, by and between
Decora Industries, Inc. and Richard DeCoste.
10.72 Form of Option Agreement dated as of February 19, 1998, by and between
Decora Industries, Inc. and Earl A. Wearsch.
10.73 Form of Option Agreement dated as of February 19, 1998, by and between
Decora Industries, Inc. and Frank J. Nolfi, Jr.
10.74 Form of Option Agreement dated as of February 19, 1998, by and between
Decora Industries, Inc. and Bernhard Muller.
10.75 Form of Option Agreement dated as of February 19, 1998, by and between
Decora Industries, Inc. and Hans-Georg Stahmer.
36
<PAGE> 39
10.76 Form of Option Agreement dated as of February 19, 1998, by and between
Decora Industries, Inc. and each of its non-employee directors (Messrs.
Artzer, Grafftey-Smith, Thomas and Verchick, respectively).
10.77 Form of Option Agreement dated as of June 1, 1997, by and between Decora
Industries, Inc. and Richard DeCoste.
10.78 Form of Official Statement of Counties of Warren and Washington, New
York, Industrial Development Agency $2,460,000 Tax-exempt Industrial
Development Revenue Bonds (Decora, Incorporated Project), Series 1996.
(17)
(22) Subsidiaries of the Registrant(6)
- ----------
Notes:
(1) Previously filed as Exhibits to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1988.
(2) Previously filed as Exhibits to the Company's Report on Form 8-K dated
April 18, 1990.
(3) Previously filed as Exhibits to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1992.
(4) Previously filed as Exhibits to the Company's Report on Form 8-K dated
November 5, 1992.
(5) Previously filed as Exhibit to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1993.
(6) Previously filed as Exhibit to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1994.
(7) Previously filed as Exhibit to the Company's Report on Form 10-Q for the
fiscal quarter ended December 31, 1994.
(8) Previously filed as Exhibit to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1995.
(9) Confidential treatment requested.
(10) Previously filed as Exhibit to the Company's Report on Form 10-Q for the
fiscal quarter ended December 31, 1995.
(11) Previously filed as Exhibit to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1996.
37
<PAGE> 40
(12) Previously filed as Exhibit to the Company's Report on Form 10-Q for the
fiscal quarter ended September 30, 1996
(13) Previously filed as Exhibit to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1997.
(14) Previously filed as Exhibit to the Company's Report on Form 10-Q for the
fiscal quarter ended June 30, 1997.
(15) Previously filed as Exhibit to the Company's Report on Form 8-K dated
October 1, 1997.
(16) Previously filed as Exhibit to the Company's Report on Form 8-K dated March
31, 1998.
(17) Previously filed as Exhibit to the Company's Report on Form 10-Q for the
fiscal quarter ended December 31, 1996.
(b) REPORTS ON FORM 8-K
1. Form 8-K/A dated October 1, 1997 (filed January 27, 1998) restating Item 7
to correct certain financial information regarding Hornschuch.
38
<PAGE> 41
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.
DECORA INDUSTRIES, INC.
Date: June 26, 1998 By: /s/ NATHAN HEVRONY
------------------------------------
Nathan Hevrony
Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ROGER GRAFFTEY-SMITH Director June 26, 1998
- -----------------------------
Roger Grafftey-Smith
/s/ GABRIEL THOMAS Director June 26, 1998
- -----------------------------
Gabriel Thomas
/s/ NATHAN HEVRONY Chief Executive Officer June 26, 1998
- ----------------------------- and Director (Principal
Nathan Hevrony Executive Officer)
/s/ STEPHEN H. VERCHICK Director June 26, 1998
- ----------------------------
Stephen H. Verchick
/s/ RONALD A. ARTZER Director June 26, 1998
- ----------------------------
Ronald A. Artzer
/s/ TIMOTHY N. BURDITT Executive Vice President, June 26, 1998
- ---------------------------- Administration and Finance
Timothy N. Burditt (Principal Financial and
Accounting Officer)
</TABLE>
39
<PAGE> 42
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Financial Statements Page
- -------------------- ----
<S> <C>
The following Consolidated Financial Statements
of Decora Industries, Inc. and Report of Independent
Accountants are filed as part of this report:
Report of Independent Accountants F-2
Consolidated Balance Sheets as of March 31, 1998 and 1997 F-3
Consolidated Statements of Income for the Years
Ended March 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the Years
Ended March 31, 1998, 1997 and 1996 F-6
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended March 31, 1998, 1997 and 1996 F-7
Notes to Consolidated Financial Statements F-8
Financial Statement Schedule for the three years ended March 31, 1998
Schedule II -- Valuation and Qualifying Accounts F-26
</TABLE>
F-1
<PAGE> 43
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Decora Industries, Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Decora
Industries, Inc. and its subsidiaries at March 31, 1998 and 1997 and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 1998 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
June 5, 1998
F-2
<PAGE> 44
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,682 $ 243
Restricted cash 125 --
Accounts receivable, less allowance for
doubtful accounts of $2,148 and $499 at
March 31, 1998 and 1997, respectively 26,049 6,168
Inventories 26,964 5,439
Deferred income taxes 1,913 378
Prepaid expenses and other current assets 1,481 582
-------- --------
Total current assets 58,214 12,810
Property and equipment, net 44,152 7,781
Notes receivable 626 1,468
Goodwill and other intangibles, net 22,478 10,924
Deferred income taxes 3,787 3,849
Other assets 1,959 357
-------- --------
Total assets $131,216 $ 37,189
======== ========
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 45
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1998 1997
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,577 $ 2,002
Accrued liabilities 17,104 1,867
Current portion of long-term debt 10,472 2,310
Other current liabilities 4,928 --
-------- --------
Total current liabilities 42,081 6,179
Long-term debt 50,644 16,507
Pension obligation 13,424 --
-------- --------
Total liabilities 106,149 22,686
-------- --------
Minority interest in subsidiary 6,978 --
-------- --------
Shareholders' equity:
Preferred stock, $.01 par value; 5,000 shares
authorized -- --
Common stock, $.01 par value; 20,000 shares
authorized; 7,331 and 7,094 shares issued and
outstanding at March 31, 1998 and 1997,
respectively 73 71
Additional paid-in capital 33,775 32,146
Accumulated deficit (14,984) (17,714)
Cumulative translation adjustment (775) --
-------- --------
Total shareholders' equity 18,089 14,503
-------- --------
Commitments and contingencies -- --
-------- --------
Total liabilities and shareholders' equity $131,216 $ 37,189
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 46
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996
<S> <C> <C> <C>
Net sales $98,407 $41,082 $38,828
Cost of goods sold 68,220 30,503 28,244
------- ------- -------
Gross profit 30,187 10,579 10,584
Selling, general and administrative
expenses 17,677 5,853 6,476
Non-recurring charges 1,461 -- --
------- ------- -------
Operating income 11,049 4,726 4,108
Interest expense 3,829 2,319 2,675
------- ------- -------
Income before income taxes and
minority interest 7,220 2,407 1,433
Income tax provision (benefit) 3,278 (1,159) (1,486)
------- ------- -------
Income before minority interest 3,942 3,566 2,919
Minority interest in earnings of subsidiary 1,212 -- --
------- ------- -------
Net income $ 2,730 $ 3,566 $ 2,919
======= ======= =======
Net income per share of common stock:
Basic $ 0.38 $ 0.51 $ 0.45
Diluted 0.35 0.46 0.44
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 47
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's (except per share data)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,730 $ 3,566 $ 2,919
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,534 2,444 1,305
Minority interest in earnings of
subsidiary 1,212 -- --
Provision for doubtful notes
receivable 789 -- --
Loss on disposal of property and
equipment 98 -- 98
Deferred income tax provision
(benefit) 3,284 (1,327) (1,500)
Net changes in current assets and
liabilities 2,267 (1,601) (3,316)
Other, net (1,133) -- (337)
-------- ------- -------
Net cash provided by (used in)
operating activities 14,781 3,082 (831)
-------- ------- -------
Cash flows from investing activities:
Acquisition of shares (37,899) -- --
Reductions in (additions to) notes
receivable 406 290 (198)
Purchase of property and equipment (1,778) (489) (2,699)
Disposal of property and equipment -- -- 154
-------- ------- -------
Net cash used in investing activities (39,271) (199) (2,743)
-------- ------- -------
Cash flows from financing activities:
Issuance of long-term debt 39,205 5,814 3,823
Repayment of long-term debt (6,011) (8,362) (920)
Decrease in short-term borrowings (7,216) -- --
Proceeds from exercise of warrants 63 30 --
Proceeds from issuance of common stock 750 -- 550
Payment of deferred financing costs (771) (310) --
-------- ------- -------
Net cash provided by (used in)
financing activities 26,020 (2,828) 3,453
-------- ------- -------
Effect of exchange rate fluctuations on
cash and cash equivalents 34 -- --
-------- ------- -------
Net increase (decrease) in cash 1,564 55 (121)
Cash at beginning of year 243 188 309
-------- ------- -------
Cash at end of year $ 1,807 $ 243 $ 188
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 48
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
---------------- ADDITIONAL ACCUMU- CUMULATIVE
PAR PAID-IN LATED TRANSLATION
SHARES VALUE CAPITAL DEFICIT ADJUSTMENT
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1995 6,144 $ 61 $28,534 $(24,199) $ --
Conversion of note payable 115 1 349 -- --
Common shares issued for interest and debt
restructuring 180 2 545 -- --
Common shares issued to settle outstanding
obligations 267 3 1,374 -- --
Common shares issued in private placement 180 2 548 -- --
Net income -- -- -- 2,919 --
----- ---- ------- -------- ----
Balance at March 31, 1996 6,886 69 31,350 (21,280) --
Warrants exercised 8 -- 30 -- --
Common shares issued in warrant exchange 200 2 766 -- --
Net income -- -- -- 3,566 --
----- ---- ------- -------- ----
Balance at March 31, 1997 7,094 71 32,146 (17,714) --
Common shares issued in private placement 187 2 748 -- --
Allocable detachable warrants issued with
debt -- -- 818 -- --
Warrants exercised 50 -- 63 -- --
Cumulative translation adjustment -- -- -- -- (775)
Net income -- -- -- 2,730
----- ---- ------- -------- ----
Balance at March 31, 1998 7,331 $ 73 $33,775 $(14,984) $(775)
===== ==== ======= ======== =====
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 49
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Decora Industries, Inc. (the "Company") is a leading manufacturer and
marketer of self-adhesive consumer decorative and surface coverings and
other specialty industrial products. The Company is a holding company and
operates primarily through two subsidiaries, Decora, Incorporated
("Decora"), a wholly-owned subsidiary based in the U.S., and Konrad
Hornschuch AG ("Hornschuch"), which is based in Germany and 75.5% owned by
the Company. Hornschuch's results have been included for the six months
since the acquisition (see Note 2). The Company's principal products are
sold under the Con-Tact and d-c-fix brands. The two subsidiaries
manufacture similar products and serve similar customers within their
respective geographic markets; therefore, the Company considers the
subsidiaries to constitute a single business segment.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Decora
Industries, Inc. and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
REVERSE STOCK SPLIT
In December 1997, the Company's shareholders approved a one-for-five
reverse stock split which was effective December 29, 1997. The presentation
of common shares and per share amounts for all periods presented has been
restated to retroactively reflect the reverse stock split.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of cash, accounts receivable, accounts payable and accrued
expenses approximate their carrying values. Financial instruments, when
acquired, are held for purposes other than trading.
A portion of the Company' debt, in combination with interest rate swap
agreements, bears current market rates of interest or is payable on demand.
Accordingly, the carrying amount is considered a reasonable approximation
of fair value.
CASH AND CASH EQUIVALENTS
The Company invests surplus cash in highly liquid debt instruments which
have original maturities of less than three months and are considered to be
cash equivalents. Certain debt agreements require the payment of monthly
sinking fund deposits in order to retire the debt. Cash balances
transferred for this purpose are considered restricted and are separately
stated in the accompanying financial statements.
REVENUES AND RECEIVABLES
Sales of products and services are recognized when products are shipped and
services are performed. Returns are minimal and are recorded when received.
The Company's receivables are generally concentrated from customers in the
U.S. and Europe. A portion of Hornschuch's sales made outside of Germany
are covered by confirmed letters of credit or credit insurance. The Company
does not generally require collateral for sales made within the United
States.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
F-8
<PAGE> 50
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally five to thirty years.
GOODWILL AND OTHER INTANGIBLES
The excess of the aggregate purchase price over the fair value of the net
assets of businesses acquired has been recorded as goodwill and is being
amortized on the straight-line method over forty years. The trademark is
being amortized over twenty years. At each balance sheet date, the Company
evaluates the recoverability of its intangible assets based on estimated
future cash flows.
NET INCOME PER SHARE
Effective fiscal 1998, net income per share is calculated in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings
Per Share. Under SFAS No. 128, the Company is required to report both basic
net income per share based on the weighted average number of common shares
outstanding and diluted net income per share based on the weighted average
number of common shares outstanding plus all potentially dilutive common
shares issuable. In accordance with SFAS No. 128, prior period net income
per share data have been restated. Net income per share calculations for
fiscal 1998, 1997 and 1996 are presented in Note 11.
INCOME TAXES
Income taxes are provided based on the liability method pursuant to SFAS
No. 109, Accounting for Income Taxes. Deferred income taxes are recorded to
reflect expected future tax consequences of events that have been
recognized in the Company's financial statements or its tax returns, but
not both. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement carrying
amounts and tax bases of assets and liabilities using enacted tax rates in
the years in which the differences are expected to reverse.
RESEARCH AND DEVELOPMENT
Research and development costs related to both present and future products
are expensed as incurred. Research and development expenses amounted to
$1,024,000, $216,000 and $302,000 in fiscal 1998, 1997 and 1996,
respectively.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion
("APB") No. 25, Accounting for Stock Issued to Employees, and related
interpretations in accounting for its employee stock options. Under APB No.
25, when the exercise price of employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense
is recorded. The Company has adopted the disclosure only provisions of SFAS
No. 123, Accounting for Stock-Based Compensation.
FOREIGN CURRENCY
The assets and liabilities for the Company's foreign subsidiaries are
translated into U.S. dollars using year-end exchange rates. Income
statement items are translated at average exchange rates prevailing during
the year. The resulting translation adjustments are recorded as a separate
component of shareholders' equity. Exchange gains and losses on
intercompany balances of a long-term nature are also recorded as a
translation adjustment. Foreign currency transaction gains and losses,
which historically have been immaterial, are included in net income. In
addition, the Company also will occasionally enter into foreign currency
hedges.
F-9
<PAGE> 51
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
revenues, costs and expenses during the reporting period. Actual results
may differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' amounts to conform
with the current year presentation.
2. ACQUISITION OF HORNSCHUCH SHARES
On October 1, 1997, the Company acquired 73.2% of the voting stock (the
"Shares") of Hornschuch through a newly formed subsidiary, Decora
Industries Deutschland GmbH ("DI Deutschland"). The Shares were acquired
directly from Hornschuch's two largest shareholders in private transactions
for total consideration of DM 61,582,280, or approximately $35,000,000. The
remaining voting stock of Hornschuch is held by minority shareholders.
Since October 1, the Company has increased its ownership to 75.5% through
open market purchases and, in addition to such purchases, intends to
purchase the remaining shares pursuant to the German Takeover Code within
18 months of the initial acquisition.
The purchase of the Shares was funded with a combination of debt and
equity, including a loan secured by the Shares of approximately $21,205,000
to DI Deutschland from a German bank (the "Bank Loan"), a subordinated loan
of $18,000,000 in the United States (the "Subordinated Loan") provided by a
pension fund (the "Pension Fund") and a private placement of the Company's
common stock in the amount of $750,000. The Pension Fund was also granted
Series A warrants which are currently exercisable for the purchase of
1,818,000 shares of common stock of the Company at an exercise price of
$5.00 per share. The total amount raised was sufficient to fund the
purchase of up to 75% of the shares of Hornschuch, repay an existing
subordinated debt of $2.9 million and pay a portion of the $3.4 million in
closing costs associated with the transaction.
The accompanying consolidated statements of income include the results of
Hornschuch since the date of the acquisition. Pro forma unaudited
consolidated operating results for fiscal 1998 and 1997, assuming the
acquisition had been made as of April 1, 1996, are summarized below (in
thousands, except per share amounts). The income statements of Hornschuch
for the years ended December 31, 1997 and 1996 were translated at DM 1.7347
per dollar and DM 1.5080 per dollar, respectively.
<TABLE>
<CAPTION>
UNAUDITED
--------------------------------
YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997
<S> <C> <C>
Net sales $158,199 $175,061
Net income 2,199 1,529
Basic earnings per common share 0.30 0.22
Diluted earnings per common share 0.28 0.20
</TABLE>
F-10
<PAGE> 52
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
These pro forma results have been prepared for informational purposes only
and include adjustments as a result of applying purchase accounting and the
conversion of financial data compiled using the generally accepted
accounting principles used in Germany to generally accepted accounting
principles in the United States. These adjustments include, but are not
limited to, additional depreciation expense and cost of goods sold due to
the step-up in the basis of property, plant and equipment, goodwill
amortization and increased interest expense on acquisition debt. The
pro-forma financial information is not necessarily indicative of the
operating results that would have occurred if the acquisition had taken
place on the aforementioned date or of future results of operations of the
consolidated entities.
The purchase price for the Shares of approximately $38.4 million (including
closing costs of approximately $3.4 million) has been allocated as of the
acquisition date to the assets acquired and the liabilities assumed as
follows:
<TABLE>
<S> <C>
Cash $ 889
Accounts receivable 18,886
Inventories 21,360
Other current assets 1,072
Property, plant and equipment 40,405
Notes receivable 371
Goodwill 12,297
Intangibles 474
Deferred income taxes 5,147
Other non-current assets 702
Accounts payable (4,976)
Accrued liabilities (12,935)
Other current liabilities (5,619)
Debt (18,696)
Pension obligation (14,332)
Minority interest (6,689)
</TABLE>
3. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31,
1998 1997
Inventories consist of ($000's):
<S> <C> <C>
Raw materials $7,335 $3,194
Work-in-process 4,634 1,035
Finished goods 14,995 1,210
------- ------
$26,964 $5,439
======= ======
</TABLE>
F-11
<PAGE> 53
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of ($000's):
<TABLE>
<CAPTION>
MARCH 31,
1998 1997
<S> <C> <C>
Land and buildings $17,368 $ 4,881
Machinery and equipment 29,565 9,580
Furniture and fixtures 7,132 393
Leasehold improvements 617 617
Construction in progress 1,560 89
------- -------
56,242 15,560
Less accumulated depreciation (12,090) (7,779)
------- -------
$44,152 $ 7,781
======= =======
</TABLE>
Depreciation expense was $4,394,000, $1,652,000 and $1,234,000 for fiscal
1998, 1997 and 1996, respectively.
5. GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles consist of the following (000's):
<TABLE>
<CAPTION>
MARCH 31,
1998 1997
<S> <C> <C>
Goodwill $21,539 $ 9,857
Less: accumulated amortization (1,968) (1,549)
------- -------
19,571 8,308
------- -------
Trademark 2,000 2,000
Organization fees 1,299 1,299
Other 800 280
------- -------
4,099 3,579
Less: accumulated amortization (1,192) (963)
------- -------
2,907 2,616
------- -------
$22,478 $10,924
======= =======
</TABLE>
Goodwill amortization was $425,000, $252,000 and $252,000 for fiscal 1998,
1997 and 1996, respectively. Amortization of other intangibles was
$231,000, $166,000 and $133,000 for fiscal 1998, 1997 and 1996,
respectively.
F-12
<PAGE> 54
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
6. EMPLOYEE BENEFIT PLANS
Hornschuch maintains two non-contributory defined benefit pension plans in
Germany. Both pension plans are unfunded as the laws requiring pension
funding in Germany are considerably different than those in the U.S. Plan A
represents a combination of individual pension arrangements negotiated with
appropriately 40 participants representing past and present management
individuals and is open to additional participants based on individually
negotiated employment contracts. The pension benefits under Plan A may vary
to include only a specified annual benefit amount or may be based on
compensation level and years of service. Plan B covers all employees of the
Company with 1,737 active and retired participants. Plan B provides for a
fixed monthly retirement benefit after 10 years of service with benefit
increases based on additional years of service. Plan B was closed effective
January 1, 1989, and any active participant at that time was permitted to
accrue up to 10 more years of creditable service through December 31, 1998.
The following sets forth the net pension expense recognized in the
Company's financial statements (000's):
<TABLE>
<CAPTION>
MARCH 31,
1998
<S> <C>
Service costs -- benefits earned during the period $ 82
Interest cost on projected benefit obligation 483
Actual returns on plan assets --
Net amortization and deferral --
----
Net pension expense $565
====
</TABLE>
Based on the purchase accounting for the Hornschuch acquisition, the full
projected benefit obligation ("PBO") liability of $15,740,000 was
recognized at the acquisition date. The PBO of $14,867,000 at the end of
fiscal 1998 was determined using a discount rate of 6.5% and a salary
increase assumption of 1.5% in the actuarial valuation. As there are no
plan assets, there are no deferred gains or losses to amortize to future
pension expense.
Decora and its union have executed an agreement to provide retirement
benefits to qualified union employees through the Paper Industry Union -
Management Pension Fund (the "Fund"). Based upon this agreement, Decora
contributes a contractually agreed upon amount for each qualifying hour
that a union employee works. Total contributions to the Fund were $302,000,
$334,000 and $317,000 in fiscal 1998, 1997 and 1996, respectively.
The Company has a profit sharing plan and a 401K plan covering its U.S.
salaried employees. The Company does not contribute to the 401K plan. The
Company contributes to the profit sharing plan based upon company
performance. Total expense relative to the profit sharing contributions
amounted to $200,000, $175,000 and $68,000 in fiscal 1998, 1997 and 1996,
respectively.
F-13
<PAGE> 55
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
7. DEBT
<TABLE>
<CAPTION>
Debt consists of ($000's): MARCH 31,
1998 1997
<S> <C> <C>
DI Deutschland Credit Facility (a) $ 20,203 $ --
Decora, Incorporated, Subordinated Loan (b) 18,000* --
Hornschuch Lines of Credit (c) 7,783 --
Decora, Incorporated Term Loans (d) 6,910* 8,795
Hornschuch Term Loans (e) 2,780 --
Decora, Incorporated Lines of Credit (f) 2,500* 2,907
Decora, Incorporated Industrial
Development Revenue Bonds (g) 2,460 2,460
Decora Industries, Inc. Convertible Notes (h) 1,250* 1,500
Decora, Incorporated Senior Subordinated Note (i) -- 2,900
Decora Industries, Inc. Note (j) -- 321
-------- --------
61,886 18,883
Less: Amounts due within one year (10,472) (2,310)
Unamortized debt discount (770) (66)
-------- --------
$ 50,644 $ 16,507
======== ========
</TABLE>
* Amounts were paid in full with a portion of proceeds of the debt offering
of $112,750,000 principal amount, 11% secured notes due in May 2005
completed by the Company in April 1998.
Amounts maturing in fiscal 1999, 2000, 2001, 2002 and 2003 are:
$10,472,000, $4,077,000, $3,797,000, $3,756,000 and $3,756,000,
respectively. Substantially all of the Company's assets have been pledged
as collateral.
(a) On September 29, 1997, DI Deutschland entered into a loan agreement with a
German Bank for approximately DM 37.3 million ($20.2 million) to provide a
portion of the financing for the Hornschuch acquisition. The loan bears
interest at the German interbank borrowing rate plus 2.50%. In addition, DI
Deutschland will be charged a fee of 0.50% per annum on the average daily
balance of the difference between the original loan amount and the then
current balance. The interest rate at March 31, 1998 was 6.17%.
The DI Deutschland Credit Facility is to be paid in semi-annual
installments of approximately DM 3.0 million ($1.6 million) beginning March
30, 1999. The final installment is due and payable on September 30, 2004.
The DI Deutschland Credit Facility is secured by a pledge of all the
capital stock of Hornschuch owned by DI Deutschland.
DI Deutschland is subject to certain covenants, including a covenant
specifying that DI Deutschland must complete the acquisition of the
remaining minority interest in Hornschuch.
F-14
<PAGE> 56
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
(b) On September 30, 1997, Decora, Incorporated entered into an $18 million
subordinated loan agree- ment with a Pension Fund to provide a portion of
the financing for the Hornschuch acquisition. The subordinated loan bears
interest at 13% with the first cash interest payment due in September 1998
and three principal payments of $6,000,000 each due in September 2003, 2004
and 2005, respectively. The Pension Fund was also granted Series A warrants
which are currently exercisable for the purchase of 1,818,000 shares of
common stock of the Company at an exercise price of $5.00 per share. In
addition, the Pension Fund was granted a contingent warrant to purchase a
fixed percentage of certain additional shares of the Company's common stock
which may be issued in the future. The ability to exercise such contingent
warrant is triggered solely by the issuance of shares of the Company's
common stock in connection with an existing exchange agreement or the sale
of additional shares of common stock of the Company, the proceeds of which
must be used to purchase the outstanding minority interest.
(c) Hornschuch has separate lines of credit with its primary lender and certain
other financial institutions. Interest rates under the lines of credit
range from 3.35% to 7.24% at March 31, 1998. At March 31, 1998, the
availability under these lines was DM 35.7 million ($19.3 million).
(d) Decora, Incorporated has three term loans aggregating $6,910,000 at March
31, 1998. Two of such term loans with its primary lender of $3,837,000 and
$2,875,000, respectively, bear interest at 30-day LIBOR plus 2.00% (7.69%
at March 31, 1998) and are secured by certain accounts receivable,
inventory and property and equipment. Of such term loans, $3,837,000 mature
in May 1999 and $2,875,000 mature in April 2002.
The third term loan arose in September 1995 when Decora, Incorporated
borrowed $375,000 from the Washington County Local Development Corporation.
The loan bears interest at 5.00% and is payable in monthly installments
ending September 1, 2000. It is secured by certain of Decora,
Incorporated's property and equipment. As of March 31, 1998, the
outstanding balance of this loan was $198,000.
As of March 27, 1997, Decora, Incorporated entered into an interest rate
swap agreement with its primary bank lender which expires May 31, 1999. The
agreement effectively converts $8,523,000 of its variable rate borrowings
into fixed rate obligations. Under the terms of the agreement, Decora,
Incorporated makes payments at a fixed rate of 8.58% and receives variable
rate payments at LIBOR plus 200 basis points, repriced at the beginning of
each month. The net amount which will be paid or received is included in
interest expense. The agreement became effective as of April 1, 1997. At
March 31, 1998, the fair value of the interest rate swap agreement
was a $50,000 liability.
(e) Hornschuch has a term loan of DM 1,333,000 (approximately $722,000) at
March 31, 1998 with its primary lender which matures in September 1999,
bears interest at 5% and is secured by certain assets. The loan is to be
repaid at DM 444,000 ($240,000) each March 1 and September 1. Hornschuch
has a second term loan with a balance at March 31, 1998 of DM 3,800,000
(approximately $2,058,000) which matures in March 2006 and is also secured
by certain assets. The second loan is to be repaid at DM 238,000 ($129,000)
semi-annually commencing September 30, 1998 and bears interest at 4.8% as
of March 31, 1998.
(f) Decora, Incorporated has a revolving line of credit of up to $6,000,000
which matures in August 1998 and is secured by various accounts receivable,
inventory and equipment. The amount outstanding under the facility bears
interest at prime plus 1 1/4% (9.5% at March 31, 1998).
F-15
<PAGE> 57
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Availability under this credit facility is limited by specified percentages
of current trade receivables and on-hand inventories. On March 27, 1997,
Decora, Incorporated established a second line of credit of up to
$1,000,000 which also matures in August 1998, bears interest at prime plus
1.0% (9.25% at March 31, 1998) and is secured by certain accounts
receivable. Availability under this credit facility is limited by specified
percentages of certain international trade accounts receivable. As of
March 31, 1998, the borrowing capacity under these lines of credit was
$3,087,000.
(g) On November 13, 1996, Decora, Incorporated borrowed $2,460,000 through the
issuance of Tax-Exempt Industrial Development Revenue Bonds (Decora,
Incorporated Project), Series 1996 by the Counties of Warren and
Washington, New York Industrial Development Agency. These bonds mature on
November 1, 2004 and require sinking fund payments of $20,833 per month
beginning November 1997. The bonds bear interest at a floating rate which
is adjusted weekly based on the remarketing agent's ability to re-market
the bonds at par. As of March 31, 1998, the interest rate on the bonds was
3.65%. The bonds are credit enhanced through a letter of credit issued by
the Company's primary lender and, in addition to interest on the bonds,
Decora, Incorporated pays its primary lender an annual letter of credit fee
equal to 1.50% of the outstanding balance of the letter of credit which
was $2,497,000 at March 31, 1998.
(h) In November 1992, the Company borrowed $1,500,000 from a private lender and
issued a convertible note. As part of the transaction, the Company also
issued 17,800 shares of its common stock, warrants to purchase 45,000
shares of common stock at $7.00 per share and warrants for an additional
20,000 shares of common stock at prices contingent upon the future market
price of the Company's common stock. The convertible note was due in
November 1995 and bears interest at 12% per annum, payable in the form of
the Company's common stock. The fair value of the shares and warrants
issued were reflected as debt issuance costs and amortized to interest
expense over the term of the debt agreement.
In November 1995, the Company and the lender agreed to extend the note
until May 1998. Interest for the extension period ($303,000) and a closing
fee ($197,000) were paid at the date of the extension through the issuance
of 156,400 shares of the Company's common stock and warrants to purchase an
additional 163,600 common shares at $3.90 per share exercisable only in the
event that the note is paid in full without conversion. The prepaid
interest expense and the closing fee are being amortized over the term of
the extended debt agreement.
(i) In April 1990, Decora, Incorporated issued $7,000,000 of 14% senior
subordinated notes, interest payable semi-annually. On June 28, 1996,
Decora, Incorporated and the lender agreed to extend the repayment terms of
the notes to include payments of $3,500,000 on each of April 15, 1997 and
April 15, 1998. The amount due on April 15, 1997 was prepaid by Decora,
Incorporated in two installments of $2,800,000 and $700,000 on November 13,
1996 and March 27, 1997, respectively. On March 27, 1997, Decora,
Incorporated also prepaid $600,000 of the amount due on April 15, 1998. The
notes were repaid in full during fiscal 1998.
On June 28, 1996, the Company and the lender also exchanged warrants held
by the lender to purchase 20% of Decora, Incorporated's common stock for
(i) a two-year, non-interest bearing, promissory note for $200,000 (the
"new note") due April 15, 1998 and (ii) 200,000 shares of the Company's
common stock (the "new common stock"). The new note was repaid in full on
March 27, 1997. The new common stock contains a guaranty which requires the
issuance of additional shares to the lender if the market price of the
Company's common stock does not exceed $15.00 per share by April 1998. As
of March 31, 1998, the market price of the Company's common stock was
$5.69.
F-16
<PAGE> 58
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
At March 31, 1996, prior to closing of the exchange agreement, the warrants
held by the lender were valued at $1,642,000. Prior to the exchange,
changes in the value of the warrants based upon results of operations and
financial position of Decora, Incorporated were charged or credited to
interest expense.
(j) In January 1996, the Company borrowed $650,000 from its primary bank lender
in the form of a three year note. The note which bears interest at prime
plus 1 1/2% (9.75% at March 31, 1998) was repaid in full during fiscal
1998.
8. LONG-TERM INCENTIVE PLANS AND STOCK OPTIONS
The Company has several domestic long-term incentive plans under which
shares of the Company's common stock may be sold to directors, officers and
key employees. Certain other parties have been granted stock options by the
Company in connection with various transactions.
The Company adopted a Stock Option Plan in 1987 (the "1987 Plan") pursuant
to which 340,000 shares of common stock are available for grant. The 1987
Plan is administered by a committee of Directors of the Company who are not
covered by the 1987 Plan. All options granted under the 1987 Plan terminate
either five or ten years after the date of grant and vest quarterly over a
three-year period subsequent to the date of the grant, unless modified by
the Company.
In 1988, the shareholders of the Company approved the Decora Industries,
Inc. 1988 Employee Stock Purchase Plan (the "1988 Plan") pursuant to which
a total of 100,000 shares of the Company's Common Stock may be issued to
participants during the term of the 1988 Plan at an issue price of 85% of
the fair market value at the date of the purchase. The 1988 Plan is
administered by the Board of Directors provided that a majority are not
covered by the 1988 Plan, or by a committee appointed by the Board of
Directors. The 1988 Plan terminates on December 31, 1998; no shares have
been purchased pursuant to the 1988 Plan.
A summary of stock option activity under all plans for the three years
ended March 31, 1998 follows (000's except average price data):
<TABLE>
<CAPTION>
AVERAGE
OPTIONS PRICE
------- -----
<S> <C> <C>
Outstanding at:
March 31, 1995 803 $ 6.90
Granted 45 5.20
Exercised -- $ --
Expired (43) $ 6.50
---
March 31, 1996 805 $ 6.80
Granted 164 $ 5.70
Exercised (8) $ 3.75
Expired (27) $ 8.50
---
</TABLE>
F-17
<PAGE> 59
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE
OPTIONS PRICE
------- -----
<S> <C> <C>
March 31, 1997 934 $6.45
-----
Granted 890 $5.46
Exercised -- $ --
Expired (130) $6.38
-----
March 31, 1998 1,694 $5.94
=====
</TABLE>
The following table summarizes information about stock options outstanding
at March 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
EXERCISE AVERAGE TERM AVERAGE
PRICE SHARES PRICE (MONTHS) SHARES PRICE
------------------ ------ ----- -------- ------- -----
<S> <C> <C> <C> <C> <C>
$4.50 - $4.95 60,000 $4.75 45.27 20,000 $4.75
$5.00 - $5.50 822,000 5.36 42.34 672,000 5.41
$5.55 - $5.95 354,800 5.64 33.04 254,800 5.60
$6.00 - $6.50 195,000 6.07 49.13 101,666 6.14
$7.00 - $7.50 192,000 7.43 14.27 107,000 7.38
$8.00 - $9.30 70,000 8.76 36.37 70,000 8.76
</TABLE>
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair values on the fiscal 1998, 1997 and 1996 grant
dates for those awards, consistent with the requirements of SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's net income and
net income per share would have been reduced to the pro forma amounts
indicated below ($000's except per share data):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C> <C>
Net Income -- As Reported $2,730 $3,566 $2,919
-- Pro Forma 2,527 3,171 2,831
Basic Net Income Per Share -- As Reported $ 0.38 $ 0.51 $ 0.45
-- Pro Forma 0.35 0.45 0.44
Diluted Net Income Per Share -- As Reported $ 0.35 $ 0.46 $ 0.44
-- Pro Forma 0.33 0.41 0.43
</TABLE>
The fair value of each stock option grant has been estimated on the date of
each grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Risk-free interest rate 5.49 % 6.22 % 6.23 %
Expected life (months) 60 45.6 62.4
Expected volatility 0.484 0.594 0.594
Expected dividend yield -- -- --
</TABLE>
F-18
<PAGE> 60
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The weighted average grant date fair values of options granted during
fiscal 1998, 1997 and 1996 were $1.38, $0.80 and $1.25, respectively.
The Company reserved 185,000 shares of common stock for the future possible
exercise of warrants; 90,000 of these warrants expired on July 14, 1997 and
the remaining 95,000 warrants can be exercised at prices ranging from $2.50
to $7.00 and expire on November 3, 2000.
9. INCOME TAXES
Income taxes are summarized as follows ($000's):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Current provision (benefit):
United States:
Federal $ 9 $ 68 $ 45
State 35 100 (31)
Foreign -- -- --
------ ------- -------
44 168 14
------ ------- -------
Deferred provision (benefit):
United States:
Federal 205 (1,327) (1,500)
State -- -- --
Foreign 3,029 -- --
------ ------- -------
3,234 (1,327) (1,500)
------ ------- -------
$3,278 $(1,159) $(1,486)
====== ======= =======
</TABLE>
Net deferred tax assets are comprised of the following at March 31, 1998
and 1997 ($000's):
Current:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
German statutory accruals $ 1,478 $ --
Valuation reserves 435 378
------- ----
$ 1,913 $378
======= ====
</TABLE>
Non-current:
<TABLE>
<CAPTION>
<S> <C> <C>
Depreciation $(7,580) $ (296)
Net operating loss carryforwards 6,919 4,503
Pensions 3,029 --
Non-compete agreement 2,366 --
Tax credits 325 313
Other, net (1,272) (671)
------- ------
$ 3,787 $3,849
======= ======
</TABLE>
F-19
<PAGE> 61
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The provision for (benefit from) income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory federal
income tax rate to pretax income as a result of the following ($000's):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Provision at statutory rate $ 2,527 $ 840 $ 502
State tax expense (benefit) 35 65 (20)
Effect of non-deductible items 160 182 261
Effect of tax credits -- (313) --
Change in valuation allowance -- (1,695) (1,500)
Other 556 (238) (729)
------- ------- -------
Income tax provision (benefit) $ 3,278 $(1,159) $(1,486)
======= ======= =======
</TABLE>
Approximately $11,946,000 and $6,246,000 of the Company's net operating
loss carryforwards remain available at March 31, 1998 in the United States
and Germany, respectively. Their use is limited to future taxable earnings
in the respective countries. In the United States, the carryforwards expire
over the period 2003 through 2007, while in Germany the carryforwards have
an unlimited life.
At March 31, 1998, foreign subsidiary earnings of $3,886,000 were
considered permanently invested in those businesses. Accordingly, U.S.
income taxes have not been provided on these earnings. Foreign withholding
taxes would be payable to the foreign taxing authorities if these earnings
were remitted. Subject to certain limitations, the withholding taxes would
then be available for use as credits against the U.S. tax liability.
10. NON-RECURRING CHARGES
The consolidated statements of income for fiscal 1998 reflects certain
non-recurring charges totalling $1,461,000. Of these charges, $531,000
related to severance costs for U.S. work force reductions implemented in
anticipation of operating synergies with Hornschuch and $141,000 related to
print tooling redundancies between the two operations. An additional
$789,000 was recorded to reserve against notes receivable which the Company
obtained in fiscal years 1996 and 1995 in conjunction with the sale of
previously discontinued operations.
F-20
<PAGE> 62
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. NET INCOME PER SHARE
The Company adopted SFAS No. 128, as required, in the quarter ended
December 31, 1997 with all prior periods being restated. The adoption did
not have a significant impact on net income per share reported for fiscal
1998, 1997 and 1996, respectively.
The number of shares of common stock and common stock equivalents used in
the computation of net income per common share, assuming dilution for each
period, is the weighted average number of common shares outstanding during
the periods and, if dilutive, common stock options, warrants and
convertible securities which are considered common stock equivalents. The
following is a reconciliation of the numerators and denominators for
determining basic and diluted net income per share for fiscal 1998, 1997
and 1996 (in thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- --------------------
Per Per Per
Income Shares Share Income Shares Share Income Share Share
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC NET INCOME PER
SHARE
Net income $2,730 7,236 $0.38 $3,566 7,044 $0.51 $2,919 6,456 $0.45
EFFECT OF DILUTIVE
SECURITIES
Contingently issuable
shares 327 568 --
Options 193 163 165
DILUTED NET INCOME
PER SHARE $2,730 7,756 $0.35 $3,566 7,774 $0.46 $2,919 6,621 $0.44
</TABLE>
The total number of shares of common stock and common stock equivalents
that were not included in the computation of diluted income per common
share because they were anti-dilutive was approximately 3,546,000, 616,000
and 751,000 for fiscal 1998, 1997 and 1996, respectively.
12. COMMITMENTS AND CONTINGENCIES
Leases -- The Company uses certain equipment under lease arrangements, all
of which are accounted for as operating leases. Rent expense under such
arrangements was $699,000, $15,000 and $12,000 for fiscal 1998, 1997 and
1996, respectively. Rental commitments under long-term noncancellable
operating leases are as follows (000's):
<TABLE>
<S> <C>
FY 1999 $1,083
FY 2000 723
FY 2001 357
FY 2002 --
FY 2003 --
</TABLE>
Legal Proceedings -- The Company is involved in various legal proceedings,
the ultimate resolution of which, in the opinion of management, will not
have a materially adverse impact on the financial condition, results of
operations or cash flows of the Company.
F-21
<PAGE> 63
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Guarantee of Subsidiary Debt - As part of the Hornschuch acquisition, the
Company acquired Hornschuch's wholly-owned real estate subsidiaries.
Management identified these subsidiaries as non-core operations upon
acquisition and has decided to sell them. The subsidiaries carry
approximately $16,300,000 million of debt, with Hornschuch a guarantor of
the debt by virtue of its profit pooling agreement with the subsidiaries.
The Company has estimated that the debt exceeds the net realizable value of
these subsidiaries by approximately $4.9 million and has therefore,
recorded a liability for such amount.
13. BUSINESS AND CREDIT CONCENTRATIONS
Since the acquisition of Hornschuch on October 1, 1997, the Company's sales
reflect a broader range of customers. Prior to the acquisition of the
Decorative Coverings Group (see Note 16), Decora Incorporated's primary
customer was Rubbermaid, Inc., which accounted for 31%, 89% and 90% of net
sales in fiscal 1998, 1997 and 1996, respectively. Accounts receivable from
Rubbermaid at March 31, 1998 and 1997 were $4,279,000 and $3,115,000,
respectively. The Company estimates an allowance for doubtful accounts
based upon the credit worthiness of its customers as well as general
economic conditions. Consequently, an adverse change in these factors could
affect the Company's estimate.
14. GEOGRAPHIC SEGMENTS
At March 31, 1998, the Company's equity in subsidiaries outside North
America ("ONA") was $17.8 million. Prior to fiscal 1998, the Company had no
equity in subsidiaries ONA.
Net sales to ONA customers, including exports from U.S. operations,
represented 68%, 10% and 6% of net sales in fiscal 1998, 1997 and 1996,
respectively.
The following is information about the Company's operations in different
geographic regions (000's):
<TABLE>
<CAPTION>
NET SALES OPERATING INCOME TOTAL ASSETS
------------------------- ------------------------ ------------------
1998 1997 1996 1998 1997 1996 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America $31,285 $36,920 $36,644 $ 6,312 $ 6,109 $ 6,289 $ 36,117 $37,454
ONA 67,122 4,162 2,184 4,737 (1,383) (2,181) 90,343 --
------- ------- ------- ------- ------- ------- -------- -------
$98,407 $41,082 $38,829 $11,049 $ 4,726 $ 4,108 $126,460 $37,454
======= ======= ======= ======= ======= ======= ======== =======
</TABLE>
F-22
<PAGE> 64
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
15. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in current assets and liabilities, exclusive of acquisitions and
dispositions of subsidiaries, were as follows ($000's):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Increase in accounts receivable $(1,951) $(2,017) $(1,210)
(Increase) decrease in inventory (1,176) 564 (1,074)
Increase in other assets (19) (205) (193)
Increase (decrease) in
accounts payable 2,884 140 (713)
Increase (decrease) in accrued
liabilities 2,968 (83) (126)
Decrease in other current
liabilities (439) -- --
------- ------- -------
$ 2,267 $(1,601) $(3,316)
======= ======= =======
Supplemental cash flow information is as
follows ($000's):
Cash paid during the year for interest $ 2,140 $ 1,871 $ 2,218
======= ======= =======
Cash paid during the year for income
taxes $ 184 $ 194 $ 45
======= ======= =======
</TABLE>
During fiscal 1997, 200,000 shares of common stock and notes payable in the
amount of $874,000 were issued upon the conversion of $1,642,000 of
warrants in subsidiary. During fiscal 1996, 267,200 shares of common stock
were issued to satisfy the terms of an agreement with the former owners of
an inactive subsidiary of the Company. Also during fiscal 1996, the Company
issued 271,000 shares of common stock in the restructuring of outstanding
obligations and 24,000 shares of stock for the payment of interest expense.
F-23
<PAGE> 65
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
16. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Fiscal 1998:
Net sales $ 9,147 $10,308 $36,909 $42,043
Gross profit $ 2,591 $ 2,410 $ 9,715 $15,471
Net income (loss) $ 583 $ (489)* $ 241 $ 2,395
Net income (loss) per share:
Basic $ 0.08 $ (0.07) $ 0.03 $ 0.33
Diluted 0.08 (0.07) 0.03 0.31
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Fiscal 1997:
Net sales $10,138 $ 12,904 $ 9,533 $ 8,507
Gross profit $ 2,444 $ 3,222 $ 2,379 $ 2,534
Net income $ 520 $ 1,078 $ 406 $ 1,562
Net income per share:
Basic $ 0.08 $ 0.15 $ 0.06 $ 0.22
Diluted 0.07 0.14 0.05 0.19
</TABLE>
*Includes a non-recurring charge of $1,461,000.
17. SUBSEQUENT EVENTS
On April 29, 1998, the Company, through Decora, Incorporated, acquired (at
a cost of approximately $69,000,000 which includes closing costs) certain
assets, including trademarks (including the Con-Tact trademark) and
tradenames, of Rubbermaid's Decorative Coverings Group ("DCG") and
refinanced certain debt (aggregating approximately $32,000,000). These
transactions were funded with a bond offering of $112,750,000 principal
amount, 11%, secured notes due in May 2005, and a loan of $10 million from
Hornschuch's existing credit facilities.
F-24
<PAGE> 66
DECORA INDUSTRIES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G
- -------- -------- -------- -------- -------- -------- --------
Additions
charged
Balance (credited) Deductions Acquisition Transla- Balance
at beginning to costs from of tion at end
Description of period and expenses accounts Hornschuch Adjustment of period
- ----------- ------------ ------------ ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Reserve deducted from
asset to which it
applied:
For the year ended
March 31, 1998
Accounts Receivable
Reserves $ 499 $ 146 $1,572(a) $3,195 $120 $2,148
For the year ended
March 31, 1997
Accounts Receivable
Reserves $ 202 $ 554 $ 257(a) $ - $ - $ 499
For the year ended
March 31, 1996
Accounts Receivable
Reserves $ 175 $ 157 $ 130(a) $ - $ - $ 202
</TABLE>
(a) Uncollectible receivables written off net of recoveries.
F-25
<PAGE> 1
EXHIBIT 4.2
[Front of Certificate]
Number Shares
NY____ ____________
DECORA INDUSTRIES, INC.
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
THIS CERTIFIES THAT
----------------------------------------
CUSIP 243593 30 8
IS THE RECORD HOLDER OF
----------------------------------------
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK,
$.01 PAR VALUE, OF
DECORA INDUSTRIES, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon the surrender of this Certificate properly
endorsed.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
[Superimposed over above text:]
CERTIFICATE OF STOCK
Dated:
-------------------
[SEAL]
DECORA INDUSTRIES, INC.
CORPORATE
SEAL
1992
DELAWARE
/s/ Timothy Burditt /s/ Nathan Hevrony
---------------------- -----------------------
EXECUTIVE VICE PRESIDENT CHIEF EXECUTIVE OFFICER
AND SECRETARY
[Vertical along right margin:]
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK)
TRANSFER AGENT AND REGISTRAR
BY
-------------------------------------
AUTHORIZED SIGNATURE
<PAGE> 2
[Reverse of Certificate]
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ...................Custodian...............
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act........................................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,___________________________ HEREBY SELL, ASSIGN AND
TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
______________________________________________________________________ ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED COMPANY
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED________________________
_______________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the certificate in every particular,
without alteration or enlargement or any
change whatever.
<PAGE> 1
Exhibit 4.3
================================================================================
DECORA INDUSTRIES, INC.,
as Company,
DECORA, INCORPORATED,
as Guarantor,
and
any future
GUARANTORS that become parties hereto
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
11% Senior Secured Notes due 2005
and
11% Senior Secured Notes due 2005, Series B
--------------------
INDENTURE
Dated as of April 29, 1998
--------------------
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
310 (a)(1) 7.9; 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) 7.8; 7.10
(b)(1) 7.10
(c) N.A.
311 (a) 7.11
(b) 7.11
312 (a) 2.5
(b) 2.5; 13.3
(c) 13.3
313 (a) 7.6
(b) 7.6
314 (a) 4.6; 13.2
(a)(4) 4.7
(b) N.A.
(c)(1) 13.4
(c)(2) 13.4
(c)(3) N.A.
(d) 11.3; 11.4; 12.2(c)
(e) 13.5
(f) N.A.
315 (a) 7.1
(b) 7.5; 13.2
(c) 7.1
(d) 7.1
(e) 6.11
316 (a)(last sentence) 13.6
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
317 (a)(1) 6.9
(a)(2) 6.9
(b) 2.4
318(a) 13.1
</TABLE>
- -----------------
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions......................................... 1
SECTION 1.2. Other Definitions ................................ 26
SECTION 1.3. Incorporation by Reference of Trust Indenture
Act ........................................... 27
SECTION 1.4. Rules of Construction............................... 28
ARTICLE 2
THE NOTES
SECTION 2.1. Form and Dating..................................... 29
SECTION 2.2. Title and Terms..................................... 29
SECTION 2.3. Registrar and Paying Agent.......................... 30
SECTION 2.4. Execution and Authentication........................ 31
SECTION 2.5. Temporary Notes..................................... 32
SECTION 2.6. Transfer and Exchange............................... 33
SECTION 2.7. Mutilated, Destroyed, Lost and Stolen Notes......... 34
SECTION 2.8. Payment of Interest; Interest Rights Preserved...... 35
SECTION 2.9. Persons Deemed Owners............................... 36
SECTION 2.10. Cancellation........................................ 36
SECTION 2.11. Computation of Interest............................. 37
Section 2.12. Legal Holidays...................................... 37
SECTION 2.13. CUSIP and CUSIP Numbers............................. 37
SECTION 2.14. Paying Agent To Hold Money In Trust................. 38
Section 2.15. Deposits of Monies.................................. 38
Section 2.16. Book-Entry Provisions for Global Notes.............. 38
SECTION 2.17. Special Transfer Provisions......................... 40
ARTICLE 3
REDEMPTION
SECTION 3.1. Notices to Trustee.................................. 45
SECTION 3.2. Selection of Notes to be Redeemed................... 45
SECTION 3.3. Notice of Redemption................................ 46
SECTION 3.4. Effect of Notice of Redemption...................... 47
SECTION 3.5. Deposit of Redemption Price......................... 47
SECTION 3.6. Notes Redeemed in Part.............................. 47
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 4
COVENANTS
SECTION 4.1. Payment of Notes.................................... 48
SECTION 4.2. Corporate Existence; Conduct of Business............ 48
SECTION 4.3. Maintenance of Office or Agency..................... 49
SECTION 4.4. Payment of Taxes and Other Claims................... 49
SECTION 4.5. Additional Subsidiary Guarantees; Additional
Collateral....................................... 50
SECTION 4.6. Reports to Holders.................................. 51
SECTION 4.7. Compliance Certificate.............................. 51
SECTION 4.8. Change of Control................................... 51
SECTION 4.9. Limitation on Incurrence of Additional
Indebtedness..................................... 53
SECTION 4.10. Limitation on Restricted Payments................... 54
SECTION 4.11. Limitation on Liens................................. 57
SECTION 4.12. Limitation on Transactions with Affiliates.......... 57
SECTION 4.13. Limitation on Asset Sales........................... 59
Section 4.14. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.............. 62
SECTION 4.15. Limitation on Issuance or Sale of Capital Stock
of Restricted Subsidiaries....................... 63
SECTION 4.16. Limitation on Sale and Leaseback Transactions....... 64
SECTION 4.17. Limitation on Preferred Stock of Restricted
Subsidiaries..................................... 64
SECTION 4.18. Designation of Unrestricted Subsidiaries............ 64
SECTION 4.19. Limitation on Capital Expenditures.................. 66
SECTION 4.20. Impairment of Security Interest..................... 67
SECTION 4.21. Amendment to Pledge Agreements...................... 67
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.1. Merger, Consolidation and Sale of Assets............ 67
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default................................... 70
SECTION 6.2. Acceleration........................................ 73
SECTION 6.3. Other Remedies...................................... 74
SECTION 6.4. Waiver of Past Defaults............................. 74
SECTION 6.5. Control by Majority................................. 74
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.6. Limitation on Suits................................. 75
SECTION 6.7. Rights of Holders to Receive Payment................ 76
SECTION 6.8. Collection Suit by Trustee.......................... 76
SECTION 6.9. Trustee May File Proofs of Claim.................... 76
SECTION 6.10. Priorities.......................................... 76
SECTION 6.11. Undertaking for Costs............................... 77
ARTICLE 7
TRUSTEE
SECTION 7.1. Duties of Trustee................................... 78
SECTION 7.2. Rights of Trustee................................... 79
SECTION 7.3. Individual Rights of Trustee........................ 82
SECTION 7.4. Trustee's Disclaimer................................ 82
SECTION 7.5. Notice of Defaults.................................. 82
SECTION 7.6. Reports by Trustee to Holders....................... 82
SECTION 7.7. Compensation and Indemnity.......................... 83
SECTION 7.8. Replacement of Trustee.............................. 84
SECTION 7.9. Successor Trustee by Merger......................... 85
SECTION 7.10. Eligibility; Disqualification....................... 85
SECTION 7.11. Preferential Collection of Claims Against Issuer.... 86
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Discharge of Liability on Notes; Defeasance......... 86
SECTION 8.2. Conditions to Defeasance............................ 88
SECTION 8.3. Application of Trust Money.......................... 90
SECTION 8.4. Repayment to Issuer................................. 90
SECTION 8.5. Indemnity for Government Obligations................ 90
SECTION 8.6. Reinstatement....................................... 90
ARTICLE 9
AMENDMENTS AND WAIVERS
SECTION 9.1. Without Consent of Holders.......................... 91
SECTION 9.2. With Consent of Holders............................. 92
SECTION 9.3. Compliance with Trust Indenture Act................. 94
SECTION 9.4. Revocation and Effect of Consents and Waivers....... 94
SECTION 9.5. Notation on or Exchange of Notes.................... 94
SECTION 9.6. Trustee to Sign Amendments.......................... 95
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 10
GUARANTEES
SECTION 10.1. Guarantees.......................................... 95
SECTION 10.2. Limitation on Liability............................. 97
SECTION 10.3. Successors and Assigns.............................. 98
SECTION 10.4. No Waiver........................................... 98
SECTION 10.5. Modification........................................ 98
SECTION 10.6. Release of Guarantor................................ 99
SECTION 10.7. Execution of Supplemental Indenture for Future
Subsidiary Guarantors............................ 99
ARTICLE 11
COLLATERAL
SECTION 11.1. Pledge of Collateral................................ 100
SECTION 11.2. Recording; Priority; Opinions, Etc.................. 101
SECTION 11.3. Release of Collateral............................... 102
SECTION 11.4. Trust Indenture Act Requirements.................... 103
SECTION 11.5. Suits To Protect Collateral......................... 104
SECTION 11.5. Purchaser Protected................................. 104
SECTION 11.7. Powers Exercisable by Receiver or Trustee........... 104
SECTION 11.8. Determinations Relating to Collateral............... 105
SECTION 11.9. Form and Sufficiency of Release..................... 105
SECTION 11.06. Release upon Termination of Issuer's
Obligations...................................... 105
ARTICLE 12
APPLICATION OF TRUST MONEYS
SECTION 12.1. "Trust Moneys" Defined.............................. 106
SECTION 12.2. Withdrawal of Net Cash Proceeds Following an
Asset Sale....................................... 107
SECTION 12.3. Withdrawal of Trust Moneys for Replacement
Assets........................................... 108
SECTION 12.4. Withdrawal of Trust Moneys on Basis of
Retirement of Notes.............................. 110
SECTION 12.5. Investment of Trust Moneys.......................... 111
SECTION 12.6. Powers Exercisable by Trustee or Receiver........... 112
SECTION 12.7. Disposition of Securities Retired................... 112
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 13
MISCELLANEOUS
SECTION 13.1. Trust Indenture Act Controls........................ 112
SECTION 13.2. Notices............................................. 113
SECTION 13.3. Communication by Holders with Other Holders......... 113
SECTION 13.4. Certificate and Opinion as to Conditions
Precedent........................................ 114
SECTION 13.5. Statements Required in Certificate or Opinion....... 114
SECTION 13.6. When Notes Disregarded.............................. 115
SECTION 13.7. Rules by Trustee, Paying Agent and Registrar........ 115
SECTION 13.8. Legal Holidays...................................... 115
SECTION 13.9. Governing Law....................................... 116
SECTION 13.10. No Recourse Against Others.......................... 116
SECTION 13.11. Successors.......................................... 116
SECTION 13.12. Multiple Originals.................................. 116
SECTION 13.13. Table of Contents; Headings......................... 116
SECTION 13.14. Severability Clause................................. 117
</TABLE>
<TABLE>
<S> <C>
Signatures .......................................................... S-1
Exhibit A - Form of Note.............................................. A-1
Exhibit B - Form of Exchange Note..................................... B-1
Exhibit C - Private Placement Legend.................................. C-1
Exhibit D - Legend for Book-Entry Securities.......................... D-1
Exhibit E - Form of Certificate To Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors....... E-1
Exhibit F - Form of Certificate To Be Delivered in Connection
with Transfers Pursuant to Regulation S.............. F-1
Exhibit G - Form of Guarantee......................................... G-1
Exhibit H - Form of Supplemental Indenture............................ H-1
Exhibit I - Form of Additional Guarantor Pledge Agreement............. I-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
-v-
<PAGE> 8
INDENTURE dated as of April 29, 1998, among DECORA INDUSTRIES, INC.,
a Delaware corporation (together with its successors, "Issuer"), DECORA,
INCORPORATED, a Delaware corporation and a wholly owned Subsidiary of Issuer
(together with its successors, "Decora"), any Subsidiaries of Issuer that become
parties hereto (collectively, the "Guarantors"), and UNITED STATES TRUST COMPANY
OF NEW YORK, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of Issuer's 11% Senior
Secured Notes due 2005:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with Issuer or any of its Subsidiaries or
assumed in connection with the acquisition of assets from such Person and in
each case not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such
acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person. 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;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"amend" means amend, modify, supplement, restate or amend and
restate, including successively; and "amending" and "amended" have correlative
meanings.
"Asset Acquisition" means (a) an Investment by Issuer or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged with or into Issuer or any
Restricted Subsidiary, or (b) the acquisition by Issuer or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary)
which constitute all or substantially all of the assets of such Person or
comprises any division or line of business of such
<PAGE> 9
-2-
Person or any other properties or assets of such Person other than in the
ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by Issuer
or any Restricted Subsidiary (including any Sale and Leaseback Transaction) to
any Person other than Issuer or a Wholly Owned Restricted Subsidiary of (a) any
Capital Stock of any Restricted Subsidiary or (b) any other property or assets
of Issuer or any Restricted Subsidiary other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which Issuer or its Restricted
Subsidiaries receive aggregate consideration of less than $750,000, (ii) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of Issuer in compliance with Article 5, (iii) any transaction
constituting a Change of Control or a Restricted Payment or (iv) the granting of
any Lien, or any foreclosure thereon, to the extent granted in accordance with
Section 4.11.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, as of the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale and Leaseback Transaction (including any period for which
such lease has been extended).
"Board of Directors" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
<PAGE> 10
-3-
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-2 from S&P or at least P-2 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of Is
<PAGE> 11
-4-
suer to any Person or group of related Persons for purposes of Section 13(d) of
the Exchange Act (a "Group"), together with any Affiliates thereof (whether or
not otherwise in compliance with the provisions of this Indenture) other than to
a Wholly Owned Restricted Subsidiary in compliance with Article 5; (ii) the
approval by the holders of Capital Stock of Issuer of any plan or proposal for
the liquidation or dissolution of Issuer (whether or not otherwise in compliance
with the provisions of this Indenture); (iii) any Person or Group shall become
the owner, directly or indirectly, beneficially or of record, of shares
representing more than 50% of the aggregate ordinary voting power represented by
the issued and outstanding Capital Stock of Issuer; or (iv) the replacement of a
majority of the Board of Directors of Issuer over a two-year period from the
directors who constituted the Board of Directors of Issuer at the beginning of
such period, and such replacement shall not have been approved by a vote of at
least a majority of the Board of Directors of Issuer then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means (i) the Share (as defined in the German Pledge
Agreement) and the rights pertaining thereto under the German Pledge Agreement
and (ii) Collateral as defined in the other Security Documents.
"Commission" or "SEC" means the Securities and Exchange
Commission.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Company Order" means a written request or order signed in the name
of Issuer by any one of its Chairman of the Board, its Vice-Chairman, its Chief
Executive Officer, its President or a Vice President, and by its Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and delivered to
the Trustee.
"Consolidated EBITDA" means, for any period, the sum (without
duplication) of (i) Consolidated Net Income plus (ii) to the extent Consolidated
Net Income has been reduced thereby,
<PAGE> 12
-5-
(A) all income taxes of Issuer and the Restricted Subsidiaries paid or accrued
in accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or taxes attributable to
sales or dispositions outside the ordinary course of business), (B) Consolidated
Interest Expense and (C) Consolidated Non-cash Charges less (iii) any non-cash
items increasing Consolidated Net Income for such period, all as determined on a
consolidated basis for Issuer and the Restricted Subsidiaries in accordance with
GAAP.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of (x)
Consolidated EBITDA during the four full fiscal quarters (the "Four Quarter
Period") ending on or prior to the date of the transaction giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction
Date") to (y )Consolidated Fixed Charges for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence or repayment of any Indebtedness of Issuer or
any Restricted Subsidiary (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of
Issuer or any Restricted Subsidiary (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring Acquired
Indebtedness and also including any Consolidated EBITDA (including any pro forma
expense calculated on a basis consistent with Regulation S-X under the Exchange
Act) attributable to the assets which are the subject of the Asset Acquisition
or Asset Sale during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition
(including the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If Issuer or
any Restricted Subsidiary directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the
<PAGE> 13
-6-
incurrence of such guaranteed Indebtedness as if Issuer or any Restricted
Subsidiary had directly incurred such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining the
denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage
Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the Transaction Date; and
(2) notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Swap Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) Consolidated Interest Expense plus (ii) the product of (x)
the amount of all dividend payments on any series of Preferred Stock of Issuer
or any Restricted Subsidiary (other than dividends paid in Qualified Equity
Interests or paid to Issuer or any Restricted Subsidiary) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, for any period, the sum of,
without duplication: (i) the aggregate of the interest expense of Issuer and the
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation, (a) any amortization of debt
discount and amortization or write-off of deferred financing costs, (b) the net
costs under Interest Swap Obligations, (c) all capitalized interest and (d) the
interest portion of any deferred payment obligation; and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by Issuer and the Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of Issuer and the Restricted Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP; provided, however, that
there shall be excluded therefrom (a) after-tax gains from Asset Sales or
abandonments or reserves relating thereto, (b) after-tax items classified as
extraordinary or nonrecurring gains, (c) the net income of any Person acquired
in a "pooling of interests" transaction accrued prior to the date it becomes a
Re-
<PAGE> 14
-7-
stricted Subsidiary or is merged or consolidated with Issuer or any Restricted
Subsidiary, (d) the net income (but not loss) of any Restricted Subsidiary to
the extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by a contract, operation of
law or otherwise, (e) the net income of any Person, other than a Restricted
Subsidiary, except to the extent of cash dividends or distributions paid to
Issuer or to a Wholly Owned Restricted Subsidiary by such Person (subject to the
limitations of the foregoing clause (d)), (f) any restoration to income of any
contingency reserve, except to the extent that provision for such reserve was
made out of Consolidated Net Income accrued at any time following the Issue
Date, (g) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued), and (h) in the case of a
successor to Issuer by consolidation or merger or as a transferee of Issuer's
assets, any earnings of the successor Person prior to such consolidation, merger
or transfer of assets.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Equity Interests of such Person or any Unrestricted Subsidiaries.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of Issuer and the
Restricted Subsidiaries reducing Consolidated Net Income of Issuer and the
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charges constituting an extraordinary
item or loss or any such charge which requires an accrual of or a reserve for
cash charges for any future period).
"Corporate Trust Office" means the office of the Trustee located at
114 West 47th Street, 25th Floor, New York, New York 10036-1532 or such other
office designated by the Trustee and notified to
Issuer in accordance with this Indenture.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
Issuer or any Restricted Subsidiary against fluctuations in currency values.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
<PAGE> 15
-8-
"Depository" means The Depository Trust Company, its nominees and
their respective successors.
"Disinterested Director" means a member of the Board of Directors of
Issuer or a Restricted Subsidiary, as the case may be, who does not have any
direct or indirect personal financial interest in or with respect to the
transaction being considered; provided, however, an indirect interest in an
Affiliate solely by reason of such director's ownership of Equity Interests of
Issuer shall not be deemed to be an indirect personal financial interest in or
with respect to the transaction being considered.
"Disqualified Equity Interests" means that portion of any Equity
Interests which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes; provided, however,
that any Equity Interests that would not constitute Disqualified Equity
Interests but for provisions thereof giving holders thereof the right to require
Issuer to redeem such Equity Interests upon the occurrence of a change in
control occurring prior to the final maturity date of the Notes shall not
constitute Disqualified Equity Interests if the change in control provisions
applicable to such Equity Interests are no more favorable to the holders of such
Equity Interests than Section 4.8 and such Equity Interests specifically provide
that Issuer will not redeem any such Equity Interests pursuant to such
provisions prior to Issuer's repurchase of the Notes as are required to be
repurchased pursuant to Section 4.8.
"Equity Interests" means Capital Stock and any warrants, options or
other rights to purchase or acquire any Capital Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Notes" means the 11% Senior Secured Notes due 2005, Series
B, to be issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement.
"Exchange Offer" has the meaning given to such term in the
Registration Rights Agreement.
"fair market value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing
<PAGE> 16
-9-
seller and a willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction.
"Foreign Credit Facility" means one or more senior credit facilities
providing for term loans, revolving credit loans and/or letters of credit
between one or more Foreign Subsidiaries, on the one hand, and one or more
lenders, on the other hand, together with related documents (including
promissory notes, security agreements and guarantees), as the same may be
amended or Refinanced from time to time.
"Foreign Subsidiary" means a Restricted Subsidiary that is
incorporated in a jurisdiction other than the United States or a state thereof
or the District of Columbia and with respect to which more than 80% of any of
its sales, earnings or assets (determined on a consolidated basis in accordance
with GAAP) are located in, generated from or derived from operations located in
territories outside the United States of America and jurisdictions outside the
United States of America.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect from time to
time.
"German Holdings" means Decora Industries Deutschland GmbH, a German
company and a wholly owned Subsidiary of Issuer, and its successors.
"German Pledge Agreement" means the Pledge Agreement dated April 29,
1998 between Issuer and the Trustee relating to Issuer's pledge of 65% of its
shares in German Holdings.
"Global Notes" means one or more Regulation S Global Notes and 144A
Global Notes.
"guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any Person and any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to take-or-pay or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obli-
<PAGE> 17
-10-
gee of such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "guarantee"
used as a verb has a corresponding meaning. The term "guarantor" shall mean any
Person guaranteeing any obligation.
"Guarantee" means a guarantee of Issuer's obligations under the
Transaction Documents pursuant to Article 10.
"Guarantor" means (i) Decora and (ii) each Restricted Subsidiary
that in the future executes a supplemental indenture in which such Subsidiary
agrees to be bound by the terms of this Indenture as a Guarantor; provided,
however, that any Person constituting a Guarantor as described above shall cease
to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of this Indenture.
"Guarantor Pledge Agreement" means (i) the Pledge Agreement dated
April 29, 1998 between Issuer and the Trustee relating to Issuer's pledge of its
shares in Decora and any future direct Subsidiary that becomes a Guarantor and
(ii) one or more pledge agreements between a Guarantor and the Trustee entered
into pursuant to Section 4.5.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Hornschuch" means Konrad Hornschuch AG, a German company and a
Subsidiary of German Holdings, and its successors.
"incur" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred" and "incurring" shall have meanings
correlative to the foregoing). Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary (other than by reason of the German
Holdings Revocation) or is merged or consolidated with or into Issuer or any
Restricted Subsidiary shall be deemed to be incurred at such time. The accrual
of interest or the accretion of original issue discount shall not be deemed to
be an incurrence.
"Indebtedness" means with respect to any Person,
<PAGE> 18
-11-
without duplication, (i) all indebtedness of such Person for borrowed money,
(ii) all indebtedness of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all Capitalized Lease Obligations of such
Person, (iv) all indebtedness of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
indebtedness under any title retention agreement (but excluding trade accounts
payable and other accrued liabilities arising in the ordinary course of
business), (v) all indebtedness for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations in respect of Indebtedness referred
to in clauses (i) through (v) above and clause (viii) below, (vii) all
indebtedness of any other Person of the type referred to in clauses (i) through
(vi) which are secured by any Lien on any property or asset of such Person, the
amount of such indebtedness being deemed to be the lesser of the fair market
value of such property or asset or the amount of the indebtedness so secured,
(viii) all indebtedness under currency agreements and interest swap agreements
of such Person and (ix) all Disqualified Equity Interests issued by such Person
with the amount of Indebtedness represented by such Disqualified Equity
Interests being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Equity Interests which do not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Equity
Interests as if such Disqualified Equity Interests were purchased on any date on
which Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Equity Interests, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Equity Interests.
"Indenture" means this Indenture as amended or supplemented from
time to time by one or more supplemental indentures entered into pursuant to the
applicable provisions hereof or otherwise in accordance with the terms hereof.
"Independent Financial Advisor" means a nationally recognized
investment banking, consulting, accounting or appraisal firm (i) which does not,
and whose directors, officers and employees or Affiliates do not, have a direct
or indirect financial interest in Issuer and (ii) which, in the judgment of the
Board of Directors of Issuer is otherwise independent and qualified to perform
the task for which it is to be engaged.
"Initial Purchaser" means Lazard Freres & Co. LLC.
<PAGE> 19
-12-
"Initial Notes" means the 11% Senior Secured Notes due 2005 of
Issuer originally issued on the Issue Date.
"interest" means, with respect to the Notes, the sum of any interest
and any Liquidated Damages, if any, on the Notes.
"Interest Payment Date" means, when used with respect to any Note,
the Stated Maturity of an installment of interest on such Note, as set forth in
such Note.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit by
Issuer or any Restricted Subsidiary on commercially reasonable terms in
accordance with normal trade practices of Issuer or such Restricted Subsidiary,
as the case may be. For the purposes of Section 4.10, the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by Issuer or any Restricted Subsidiary, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce the
amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If
Issuer or any Restricted Subsidiary sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary such that, after giving
effect to any such sale or disposition, Issuer no longer owns, directly or
indirectly, greater than 50% of the outstanding Common Stock of such Restricted
Subsidiary,
<PAGE> 20
-13-
Issuer shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of. No Investment shall be deemed to
be made solely by reason of the conversion of an equity interest into a debt
obligation or vice versa.
"Issue Date" means April 29, 1998, the date of original issuance of
the Initial Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Liquidated Damages" has the meaning set forth in the
Registration Rights Agreement.
"Mortgages" means any and all mortgages, deeds of trust or other
security instruments hereafter granting Liens on the real property or leasehold
estates of Issuer or any Restricted Subsidiary to the Trustee for its benefit
and the benefit of the Holders from time to time.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by Issuer or any Restricted Subsidiary from such Asset Sale
net of (a) reasonable out-of-pocket expenses and fees relating to such Asset
Sale (including, without limitation, legal, accounting and investment banking
fees and sales commissions), (b) taxes paid or payable after taking into account
any reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of Indebtedness that
is required to be repaid in connection with such Asset Sale and (d) appropriate
amounts to be provided by Issuer or any Restricted Subsidiary, as the case may
be, as a reserve, in accordance with GAAP, against any liabilities associated
with such Asset Sale and retained by Issuer or any Restricted Subsidiary, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
<PAGE> 21
-14-
"Non-U.S. Person" means a Person who is not a U.S. Person, as
defined in Regulation S.
"Notes" means the Initial Notes and the Exchange Notes.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum dated April 24,
1998 relating to the offering and sale of the Initial Notes.
"Officer" means the Chairman of the Board, any Vice Chairman,
the Chief Executive Officer, the Chief Financial Officer, the President,
any Executive Vice President, Vice President, the Secretary or any
Assistant Secretary of Issuer.
"Officers' Certificate" means with respect to any Person a
certificate signed by two Officers, one of which is the Chairman of the Board,
the Chief Executive Officer, the Chief Financial Officer, the
President or any Executive Vice President.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be counsel to Issuer or
the Trustee. Opinions of Counsel required to be delivered under this Indenture
may have qualifications customary for opinions of the type required, and counsel
delivering such Opinions of Counsel may rely on certificates of Issuer or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact.
"Payment Dates" means Interest Payment Date, Redemption Date,
Change of Control Payment Date, Net Proceeds Offer Payment Date, date
established for the payment of Defaulted Interest or Stated Maturity of
the principal of any Note.
"Permitted Indebtedness" means, without duplication, each of
the following:
(i) Indebtedness under the Notes and the Guarantees, and Permitted
Refinancings thereof;
(ii) Indebtedness incurred pursuant to the U.S. Credit Facility in
an aggregate principal amount at any time outstanding not to exceed the
greater of (x) $15.0 million and (y) the sum of 85% of the book value of
ac-
<PAGE> 22
-15-
counts receivable and 60% of the book value of inventory of Issuer and the
Restricted Subsidiaries (other than any Foreign Subsidiary), calculated on
a consolidated basis in accordance with GAAP;
(iii) Indebtedness incurred pursuant to the Foreign Credit Facility;
provided, however, that after giving effect to such incurrence, the
aggregate principal amount outstanding under the Foreign Credit Facility
shall not exceed the greater of (x) $7.5 million and (y) the sum of 85% of
the book value of accounts receivable and 60% of the book value of
inventory of the Foreign Subsidiaries, calculated on a consolidated basis
in accordance with GAAP;
(iv) Permitted Refinancings of (x) Indebtedness of Issuer or any
Restricted Subsidiary (other than Indebtedness described in clause (i),
(ii) or (iii) above) to the extent outstanding on the Issue Date reduced
by the amount of any scheduled amortization payments or mandatory
prepayments when actually paid or permanent reductions thereon and (y)
Indebtedness incurred under the Consolidated Fixed Charge Coverage Ratio
test of Section 4.9(a);
(v) Interest Swap Obligations of Issuer covering Indebtedness of
Issuer or any Restricted Subsidiary and Interest Swap Obligations of any
Restricted Subsidiary covering Indebtedness of such Restricted Subsidiary;
provided, however, that such Interest Swap Obligations are entered into to
protect Issuer and the Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with this Indenture
to the extent the notional principal amount of such Interest Swap
Obligation does not exceed the principal amount of the Indebtedness to
which such Interest Swap Obligation relates;
(vi) Indebtedness under Currency Agreements; provided, however, that
in the case of Currency Agreements which relate to Indebtedness, such
Currency Agreements do not increase the Indebtedness of Issuer and the
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vii) Indebtedness of a Wholly Owned Restricted Subsidiary to Issuer
or to a Wholly Owned Restricted Subsidiary for so long as such
Indebtedness is held by Issuer or a Wholly Owned Restricted Subsidiary, in
each case subject to no Lien held by a Person other than Issuer or a
Wholly Owned Restricted Subsidiary; provided, however, that if as of any
date any Person other than Issuer or a Wholly Owned
<PAGE> 23
-16-
Restricted Subsidiary owns or holds any such Indebtedness or holds a Lien
in respect of such Indebtedness, such date shall be deemed the incurrence
of Indebtedness not constituting Permitted Indebtedness by the issuer of
such Indebtedness;
(viii) Indebtedness of Issuer to a Wholly Owned Restricted
Subsidiary for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary, in each case subject to no Lien; provided, however,
that (a) any Indebtedness of Issuer to any Wholly Owned Restricted
Subsidiary is unsecured and subordinated, pursuant to a written agreement,
to Issuer's obligations under this Indenture and the Notes and (b) if as
of any date any Person other than a Wholly Owned Restricted Subsidiary
owns or holds any such Indebtedness or any Person holds a Lien in respect
of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Indebtedness permitted by this clause
(viii);
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within five Business Days of
incurrence;
(x) Indebtedness of Issuer or any Restricted Subsidiary represented
by letters of credit for the account of Issuer or such Restricted
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance
or similar requirements in the ordinary course of business;
(xi) guarantees by Issuer or a Guarantor of any Indebtedness of
Issuer or a Wholly Owned Restricted Subsidiary permitted to be incurred
under Section 4.9;
(xii) Permitted Intercompany Loans in an aggregate principal amount
not to exceed $5.0 million at any one time outstanding;
(xiii) Indebtedness represented by Capitalized Lease Obligations and
Purchase Money Indebtedness of Issuer and the Restricted Subsidiaries
incurred in the ordinary course of business, and Permitted Refinancings
thereof, not to exceed (x) prior to the German Holdings Revocation, $2.5
million at any one time outstanding and (y) after the German Holdings
Revocation, $5.0 million at any one time
<PAGE> 24
-17-
outstanding; and
(xiv) additional Indebtedness of Issuer or any Restricted Subsidiary
in an aggregate principal amount not to exceed (x) prior to the German
Holdings Revocation, $5.0 million at any one time outstanding and (y)
after the German Holdings Revocation, $10.0 million at any one time
outstanding.
"Permitted Intercompany Loan" shall mean any loan or advance between
Issuer and one of its Subsidiaries or between its Subsidiaries; provided,
however, that (x) no payments of principal on such loan or advance shall be
required, whether or not upon the happening of any event, on or prior to the
final maturity date of the Notes, (y) upon a bankruptcy, insolvency,
liquidation, dissolution or other similar proceeding all amounts due in respect
of the Notes and this Indenture (including any interest accruing subsequent to
an event of bankruptcy or insolvency, whether or not allowed or allowable
thereunder) shall first be paid in full before any payment in respect of any
Permitted Intercompany Loan shall be made and (z) upon a Default, no payments in
respect of any Permitted Intercompany Loan may be made until such Default has
been waived or cured or the Notes has been discharged in full.
"Permitted Investments" means
(i) Investments by Issuer or any Restricted Subsidiary in any Person
that is or will become immediately after such Investment a Wholly Owned
Restricted Subsidiary or that will merge or consolidate into Issuer or a
Wholly Owned Restricted Subsidiary;
(ii) Investments in Issuer by any Restricted Subsidiary; provided
that any Indebtedness evidencing such Investment is unsecured and
subordinated, pursuant to a written agreement, to Issuer's obligations
under the Notes and this Indenture;
(iii) investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of Issuer and its
Restricted Subsidiaries in the ordinary course of business for bona fide
business purposes not to exceed (x) prior to the German Holdings
Revocation, $500,000 in the aggregate at any one time outstanding and (y)
after the German Holdings Revocation, $1.0 million at any one time
outstanding;
(v) Currency Agreements and Interest Swap Obligations entered into
in the ordinary course of Issuer's or
<PAGE> 25
-18-
any Restricted Subsidiary's businesses and otherwise in compliance with
this Indenture;
(vi) Investments in Unrestricted Subsidiaries not to exceed (x)
prior to the German Holdings Revocation, $500,000 at any one time
outstanding and (y) after the German Holdings Revocation, $1.0 million at
any one time outstanding;
(vii) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers;
(viii) Investments made by Issuer or its Restricted Subsidiaries as
a result of consideration received in connection with an Asset Sale made
in compliance with Section 4.13;
(ix) any Investment to the extent that the consideration therefor
(x) consists solely of Qualified Equity Interests or (y) is paid solely
with the proceeds of a substantially concurrent issuance and sale of
Qualified Equity Interests (provided that any such proceeds used for this
purpose shall not increase the Basket);
(x) Investments in Hornschuch made with the proceeds of the offering
of the Initial Notes to the extent used to purchase Equity Interests of
Hornschuch as described in the Offering Memorandum under "The Transactions
and Use of Proceeds"; and
(xi) additional Investments in an aggregate amount not to exceed (x)
prior to the German Holdings Revocation, $500,000 at any one time
outstanding and (y) after the German Holdings Revocation, $1.0 million at
any one time outstanding.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which Issuer or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not
yet delinquent or
<PAGE> 26
-19-
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of Issuer or
any Restricted Subsidiary;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, however, that such Liens do not extend to any
property or assets which is not leased property subject to such
Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of Issuer
or any Restricted Subsidiary acquired in the ordinary course of business;
provided, however, that (a) the related purchase money Indebtedness shall
not exceed the cost of such property or assets and shall not be secured by
any property or assets of Issuer or any Restricted Subsidiary other than
the property and assets so acquired and (b) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
<PAGE> 27
-20-
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of
Issuer or any Restricted Subsidiary, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens securing Capitalized Lease Obligations and Purchase
Money Indebtedness permitted pursuant to clause (xiii) of the definition
of "Permitted Indebtedness";
(xiii) Liens securing Indebtedness under Currency Agreements; and
(xiv) Liens securing Acquired Indebtedness incurred in accordance
with Section 4.9; provided, however, that (a) such Liens secured such
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by Issuer or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by Issuer or a Restricted Subsidiary and (b) such
Liens do not extend to or cover any property or assets of Issuer or of any
Restricted Subsidiary other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of Issuer or a Restricted Subsidiary and are no more
favorable to the lienholders than those securing the Acquired Indebtedness
prior to the incurrence of such Acquired Indebtedness by Issuer or a
Restricted Subsidiary.
"Permitted Refinancing" means, with respect to any Indebtedness of
any Person, any Refinancing of such Indebtedness; provided, however, that (i)
such Indebtedness shall not result in an increase in the aggregate principal
amount of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the terms
of the instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by Issuer in connection with such Refinancing), (ii) such
Indebtedness shall not have a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Refinanced
or a final maturity earlier than the final maturity of the Indebtedness being
Refinanced, (iii) if the Indebtedness
<PAGE> 28
-21-
being Refinanced is Indebtedness of Issuer, then such Refinancing Indebtedness
shall be Indebtedness solely of Issuer and (iv) if the Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"Person" means an individual, partnership, limited liability
company, corporation, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Pledge Agreements" means all Guarantor Pledge Agreements and
the German Pledge Agreement.
"Preferred Stock" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"principal" of any Note means principal of and premium, if
any, on such Note.
"Private Exchange Notes" has the meaning set forth in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on
the Initial Notes in the form set forth in Exhibit C.
"Public Equity Offering" means an underwritten primary public
offering of common stock of Issuer pursuant to an effective registration
statement under the Securities Act (other than any registration statement filed
on Form S-8 or similar form).
"Purchase Money Indebtedness" means Indebtedness of Issuer or any
Restricted Subsidiary incurred in the normal course of business for the purpose
of financing all or any part of the purchase price, or the cost of installation,
construction or improvement, of property or equipment; provided, however, (A)
the Indebtedness shall not exceed the cost of such property or assets and shall
not be secured by any property or assets of Issuer or any Restricted Subsidiary
other than the property and assets so acquired or constructed and (B) the Lien
securing such Indebtedness shall be created within 180 days of such acquisition
or construction or, in the case of a Refinancing of any Purchase Money
Indebtedness, within 180 days of such Refinancing.
"Qualified Equity Interests" means any Equity Inter-
<PAGE> 29
-22-
ests that are not Disqualified Equity Interests.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Real Property" means all right, title and interest of Issuer or any
Restricted Subsidiary (including, without limitation, any leasehold estate) in
and to a parcel of real property owned or operated by Issuer or any Restricted
Subsidiary together with, in each case, all improvements and appurtenant
fixtures, equipment, personal property, easements and other property and rights
incidental to the ownership, lease or operation thereof.
"Record Date" means the Record Date specified in the Notes.
"redeem" means redeem, repurchase, defease or otherwise acquire or
retire for value; and "redemption" and "redeemed" have correlative meanings.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the Issue Date among Issuer, the Guarantors party thereto
and the Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
"Release Notice" means a notice that shall (i) state that it is
being delivered pursuant to Section 11.3(b), (ii) specify the fair market value
of the Collateral subject to the applicable Asset Sale, which shall be
determined in good faith by an Independent Financial Advisor within 60 days of
the date of such notice if such fair market value exceed $2.5 million, (iii)
certify that the purchase price received is at least equal to the fair market
value of the Collateral subject to the applicable Asset Sale and (iv) confirm
that the sale is a bona fide sale to a Person that is not an Affiliate of
Issuer. Such notice shall be accompanied by an Officers' Certificate which shall
state that such Asset Sale complies with the foregoing and the terms and
conditions of Section 4.13 and that the Net Cash Proceeds of such Asset Sale
will be applied pursuant to Section 4.13.
<PAGE> 30
-23-
"Replacement Assets" means, with respect to any Asset Sale,
properties and assets that replace the properties and assets that were the
subject of such Asset Sale or properties and assets that will be used in the
business of Issuer and the Restricted Subsidiaries as existing on the Issue Date
or in businesses reasonably related thereto.
"Responsible Officer" means, when used with respect to the Trustee,
any officer assigned to the Corporate Trust Office with direct responsibility
for the administration of this Indenture, including any vice president,
assistant vice president, assistant secretary or any other officer of the
Trustee to whom any corporate trust matter is referred because of his or her
knowledge or familiarity with the particular subject.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of Issuer which at the
time of determination is not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to Issuer or a Restricted Subsidiary of any property, whether
owned by Issuer or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by Issuer or such
Restricted Subsidiary to such Person or to any other Person from whom funds have
been or are to be advanced by such Person on the security of such Property.
"Security Documents" means (i) the Pledge Agreements and (ii) any
other pledge or security agreements and Mortgages that may be delivered from
time to time pursuant to Section 4.5(b) or Article 12, which agreements and
Mortgages shall be in form and substance satisfactory to the Trustee.
"Significant Subsidiary," means, at any date of determination, (a)
any Restricted Subsidiary that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act, and (b) any Restricted Subsidiary which, when aggregated with all other
Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as
to which any event described in Section 6.1(vi) or (vii) has occurred and is
continuing, would consti-
<PAGE> 31
-24-
tute a Significant Subsidiary under clause (a) of this definition.
"Special Record Date" means, with respect to the payment of any
Defaulted Interest, a date fixed by the Trustee pursuant to Section 2.8 hereof.
"Stated Maturity" means, with respect to any Note or any installment
of interest thereon, the dates specified in such Note as the fixed date on which
the principal of such Note or such installment of interest is due and payable,
and when used with respect to any other Indebtedness, means the date specified
in the instrument governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or any installment of interest is due and
payable.
"Subsidiary," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.3; provided, however, that, in the event the Trust Indenture Act of
1939 is amended after such date, "TIA" means, to the extent required by any such
amendments, the Trust Indenture Act of 1939 as so amended.
"Transaction Documents" means the Notes, this Indenture, the
Registration Rights Agreement and the Security Documents.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code
as in effect in the State of New York from time to time.
"Unrestricted Notes" means one or more Notes that do not and are not
required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of Issuer designated
as such pursuant to Section 4.18. Any such designation may be revoked by a
resolution of the Board of Directors of Issuer delivered to the Trustee, subject
to the pro-
<PAGE> 32
-25-
visions of Section 4.18.
"U.S. Credit Facility" means one or more senior credit facilities
providing for term loans, revolving credit loans and/or letters of credit
between the Company and/or one or more Restricted Subsidiaries (other than any
Foreign Subsidiary), on the one hand, and one or more lenders, on the other
hand, together with related documents (including promissory notes, security
agreements and guarantees), as the same may be amended or Refinanced from time
to time.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding Capital Stock
(other than in the case of a foreign Restricted Subsidiary, directors'
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by such Person or any Wholly
Owned Restricted Subsidiary of such Person.
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Acceleration Notice" 6.2
"Affiliate Transaction" 4.12
"Agent Members" 2.16
"Bankruptcy Law" 6.1
</TABLE>
<PAGE> 33
-26-
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Basket" 4.10(I)(e)(iii)
"Change of Control Payment Date" 4.8(b)(3)
"Collateral Account" 12.1
"covenant defeasance option" 8.1(b)
"Custodian" 6.1
"Defaulted Interest" 2.8
"defeasance trust" 8.2
"Designation" 4.18
"Designation Amount" 4.18
"Distribution Compliance Period" 2.17
"Event of Default" 6.1
"German Holdings Revocation" 4.18
"Guaranteed Obligations" 10.1
"Guarantees" 4.5
"legal defeasance option" 8.1(b)
"Net Proceeds Offer" 4.13
"Net Proceeds Offer Amount" 4.13
"Net Proceeds Offer Payment Date" 4.13
"Net Proceeds Offer Period" 4.13
"Net Proceeds Offer Trigger Date" 4.13
"Note Register" 2.6
"144A Global Note" 2.4
"Paying Agent" 2.3
"Payment Default" 6.1
"Physical Notes" 2.4
"Revocation Condition" 4.18
"Redemption Date" 3.3
"Reference Date" 4.10(I)(e)(iii)(A)
"Regulation S Global Note" 2.4
"Released Trust Moneys" 12.3
"Restricted Payment" 4.10(I)
"Revocation" 4.18(c)
"Registrar" 2.3
"Surviving Entity" 5.1
"Trust Moneys" 12.1
</TABLE>
SECTION 1.3. Incorporation by Reference of Trust Indenture Act. This
Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture note holder" means a Noteholder.
<PAGE> 34
-27-
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the Notes means Issuer and any other obligor on
the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" or "includes" means including or includes without
limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) the principal amount of any non-interest-bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of Issuer dated such date prepared in
accordance with GAAP;
(7) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States; and
(8) references to a Section or Article refers to a Section or
Article, as the case may be, of this Indenture; and
(9) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
<PAGE> 35
-28-
ARTICLE 2
THE NOTES
SECTION 2.1. Form and Dating. The Initial Notes and the Exchange
Notes and the Trustee's certificate of authentication with respect thereto shall
be in substantially the forms set forth, or referenced, in Exhibit A and Exhibit
B, respectively, annexed hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with any applicable law or with the rules of the Depository, any clearing agency
or any securities exchange or as may, consistently herewith, be determined by
the officers executing such Notes, as evidenced by their execution thereof.
The definitive Notes shall be printed, typewritten, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the Officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms
and provisions contained in the Notes shall constitute, and are expressly made,
a part of this Indenture.
SECTION 2.2. Title and Terms. The aggregate principal amount of
Notes which may be authenticated and delivered under this Indenture is limited
to $112,750,000 in aggregate principal amount of Notes, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Sections 2.4, 2.5, 2.6, 2.7, 3.6,
4.8, 4.13 or 9.5.
The final Stated Maturity of the Notes shall be May 1, 2005, and the
Notes shall bear interest at the rate of 11% per annum from the Issue Date or
from the most recent Interest Payment Date to which interest has been paid, as
the case may be, payable semiannually on May 1 and November 1 in each year,
commencing on November 1, 1998, to the Holders of record at the close of
business on the April 15 and October 15, respectively, immediately preceding
such Interest Payment Dates, until the principal thereof is paid or duly
provided for. Interest on any overdue principal, interest (to the extent lawful)
or premium, if any, shall be payable on demand.
The Notes shall be redeemable at the option of Issuer as provided in
Article 3 and paragraphs 5 and 6 on the reverse
<PAGE> 36
-29-
of the Notes.
At the election of Issuer, the entire Indebtedness on the Notes or
certain of Issuer's obligations and covenants and certain Defaults thereunder
may be defeased as provided in Sections 8.1 and 8.2.
SECTION 2.3. Registrar and Paying Agent. Issuer shall maintain an
office or agency (which shall be located in the Borough of Manhattan in The City
of New York, State of New York) where Notes may be presented for registration of
transfer or for exchange (the "Registrar"), an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where Notes may be presented for payment (the "Paying Agent") and an office or
agency where notices and demands to or upon Issuer in respect of the Transaction
Documents may be served. The Registrar shall keep a register of the Notes and of
their transfer and exchange. Issuer may have one or more co-registrars and one
or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. Issuer may act as its own Paying Agent, except for the
purposes of payments on account of principal on the Notes pursuant to Sections
4.8 and 4.13.
Issuer shall enter into an appropriate agency agreement with any
Paying Agent not a party to this Indenture, which shall incorporate the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Paying Agent. Issuer shall notify the Trustee of
the name and address of any such Paying Agent. If Issuer fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 7.7.
Issuer initially appoints the Trustee as the Registrar and Paying
Agent and agent for service of notices and demands in connection with the Notes.
SECTION 2.4. Execution and Authentication. The Initial Notes and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A hereto. The Exchange Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B hereto. The Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage.
The terms and provisions contained in the Notes annexed hereto as
Exhibits A and B shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, Issuer, the Guarantors and the Trustee,
by their execution and delivery of this Indenture, expressly agree
<PAGE> 37
-30-
to such terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A and Notes offered
and sold in reliance on Regulation S shall be issued initially in the form of
one or more Global Notes (the "144A Global Notes" and the "Regulation S Global
Notes," respectively), substantially in the form set forth in Exhibit A,
deposited with the Trustee, as custodian for the Depository, duly executed by
Issuer and authenticated by the Trustee as hereinafter provided and shall bear
the legend set forth in Exhibit C. The aggregate principal amount of the Global
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as hereinafter
provided.
Notes offered and sold to institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) shall, and
Notes issued in exchange for interests in a Global Note pursuant to Section 2.17
may, be issued in the form of permanent certificated Notes in registered form in
substantially the form set forth in Exhibit A hereto (the "Physical Notes"),
duly executed by Issuer and authenticated by Trustee as hereinafter provided and
shall bear the Private Placement Legend.
All Notes offered and sold in reliance on Regulation S shall remain
in the form of a Global Note until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement; provided, however, that all of
the time periods specified in the Registration Rights Agreement to be complied
with by Issuer have been so complied with.
Two Officers, or an Officer and an Assistant Secretary, shall sign,
or one Officer shall sign, and one Officer or an Assistant Secretary (each of
whom shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for Issuer, by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Note
was an Officer or Assistant Secretary, as the case may be, at the time of such
execution but no longer holds that office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.
The Trustee shall authenticate (i) Initial Notes for original issue
in an aggregate principal amount not to exceed $112,750,000, (ii) Private
Exchange Notes from time to time only in exchange for a like principal amount of
Initial Notes and (iii) Unrestricted Notes from time to time only in exchange
for (A) a like principal amount of Initial Notes or (B) a like
<PAGE> 38
-31-
principal amount of Private Exchange Notes, in each case upon a Company Order of
Issuer in the form of an Officers' Certificate of Issuer. Each such Company
Order shall specify the amount of Notes to be authenticated and the date on
which the Notes are to be authenticated, whether the Notes are to be Initial
Notes, Private Exchange Notes or Unrestricted Notes and whether (subject to this
Section 2.4) the Notes are to be issued as Physical Notes or Global Notes and
such other information as the Trustee may reasonably request. The aggregate
principal amount of Notes outstanding at any time may not exceed $112,750,000,
except as provided in Section 2.7.
Notwithstanding the foregoing, all Notes issued under this Indenture
shall vote and consent together on all matters (as to which any of such Notes
may vote or consent) as one class and no series of Notes will have the right to
vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably
acceptable to Issuer to authenticate Notes. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with Issuer and Affiliates of Issuer.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.5. Temporary Notes. Until definitive Notes are prepared
and ready for delivery, Issuer may execute and upon a Company Order the Trustee
shall authenticate and deliver temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes, in any authorized denominations,
but may have variations that Issuer reasonably considers appropriate for
temporary Notes as conclusively evidenced by Issuer's execution of such
temporary Notes.
If temporary Notes are issued, Issuer will cause definitive Notes to
be prepared without unreasonable delay but in no event later than the date that
the Exchange Offer is consummated. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of Issuer designated for such
purpose pursuant to Section 4.3, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes, Issuer shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of like tenor and of
<PAGE> 39
-32-
authorized denominations. Until so exchanged the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
SECTION 2.6. Transfer and Exchange. Issuer shall cause to be kept at
the Corporate Trust Office of the Trustee a register (the register maintained in
such office and in any other office or agency designated pursuant to Section 4.3
being sometimes referred to herein as the "Note Register") in which, subject to
such reasonable regulations as the Registrar may prescribe, Issuer shall provide
for the registration of Notes and of transfers and exchanges of Notes. The
Trustee is hereby initially appointed Registrar for the purpose of registering
Notes and transfers of Notes as herein provided.
Subject to Sections 2.16 and 2.17, when Notes are presented to the
Registrar or a co-Registrar with a request from the Holder of such Notes to
register the transfer or exchange for an equal principal amount of Notes of
other authorized denominations, the Registrar shall register the transfer or
make the exchange as requested; provided, however, that every Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
be accompanied by a written instrument of transfer or exchange in form
satisfactory to Issuer and the Registrar, duly executed by the Holder thereof or
its attorney duly authorized in writing. Whenever any Notes are so presented for
exchange, Issuer shall execute, and the Trustee shall authenticate and deliver,
the Notes which the Holder making the exchange is entitled to receive. No
service charge shall be made to the Noteholder for any registration of transfer
or exchange. Issuer may require from the Noteholder payment of a sum sufficient
to cover any transfer taxes or other governmental charge that may be imposed in
relation to a transfer or exchange, but this provision shall not apply to any
exchange pursuant to Sections 3.6, 4.8, 4.13 or 9.5 hereof (in which events
Issuer will be responsible for the payment of all such taxes which arise solely
as a result of the transfer or exchange and do not depend on the tax status of
the Holder). The Trustee shall not be required to exchange or register the
transfer of any Note for a period of 15 days immediately preceding the first
mailing of notice of redemption of Notes to be redeemed or of any Note selected,
called or being called for redemption except, in the case of any Note to be
redeemed in part, the portion thereof not to be redeemed.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of Issuer, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange.
<PAGE> 40
-33-
Any holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book-entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a
book-entry system.
SECTION 2.7. Mutilated, Destroyed, Lost and Stolen Notes. If a
mutilated Note is surrendered to the Trustee or if the Holder of a Note claims
that the Note has been lost, destroyed or wrongfully taken, Issuer shall execute
and upon a Company Order, the Trustee shall authenticate and deliver a
replacement Note of like tenor and principal amount, bearing a number not
contemporaneously outstanding, if the Holder of such Note furnishes to Issuer
and to the Trustee, in the case of such loss, destruction or theft, evidence
reasonably acceptable to them of the ownership and the destruction, loss or
theft of such Note and, in the case of such loss, destruction or theft, an
indemnity bond shall be posted by such Holder, sufficient in the judgment of
Issuer or the Trustee, as the case may be, to protect Issuer, the Trustee or any
Agent from any loss that any of them may suffer if such Note is replaced. Issuer
may charge such Holder for Issuer's expenses in replacing such Note (including
(i) expenses of the Trustee charged to Issuer and (ii) any tax or other
governmental charge that may be imposed) and the Trustee may charge Issuer for
the Trustee's expenses in replacing such Note.
Every replacement Note issued pursuant to this Section 2.7 in lieu
of any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of Issuer, whether or not the destroyed, lost or stolen
Note shall be at any time enforceable by anyone, and shall be entitled to all
benefits of this Indenture equally and proportionately with any and all other
Notes duly issued hereunder.
SECTION 2.8. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid or duly provided
for, on any Interest Payment Date shall be paid to the Person in whose name such
Note is registered at the close of business on the Record Date for such
interest.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Notes, to
the extent lawful (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest") shall forthwith cease to be payable to
the Holder on the Record Date; and such Defaulted
<PAGE> 41
-34-
Interest may be paid by Issuer, at its election in each case, as provided in
subsection (a) or (b) below:
(a) Issuer may elect to make payment of any Defaulted Interest to
the Persons in whose names the Notes are registered at the close of business on
a Special Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. Issuer shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date of
the proposed payment, and at the same time Issuer shall deposit with the Trustee
an amount of money equal to the aggregate amount proposed to be paid in respect
of such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as provided in this subsection (a). Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify Issuer in writing of such Special Record Date. In the name and at the
expense of Issuer, the Trustee shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at its address as it appears in the
Note Register, not less than 10 days prior to such Special Record Date. Notice
of the proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to the
Persons in whose names the Notes are registered on such Special Record Date and
shall no longer be payable pursuant to the following subsection (b).
(b) Issuer may elect to make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, if, after written notice given by Issuer to the
Trustee of the proposed payment pursuant to this subsection (b), such payment
shall be deemed practicable by the Trustee. The Trustee shall be entitled to
rely on an Opinion of Counsel regarding the legality of any proposed payment
pursuant to this subsection (b).
Subject to the foregoing provisions of this Section 2.8, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
<PAGE> 42
-35-
SECTION 2.9. Persons Deemed Owners. Prior to and at the time of due
presentment for registration of transfer, Issuer, the Trustee and any agent of
Issuer or the Trustee may treat the Person in whose name any Note is registered
in the Note Register as the owner of such Note for the purpose of receiving
payment of principal of and (subject to Section 2.8) interest on such Note and
for all other purposes whatsoever, whether or not such Note shall be overdue,
and neither Issuer, the Trustee nor any agent of Issuer or the Trustee shall be
affected by notice to the contrary.
SECTION 2.10. Cancellation. All Notes surrendered for payment,
redemption, registration of transfer or exchange shall be delivered to the
Trustee and, if not already canceled, shall be promptly canceled by it. Issuer
and any Guarantor may at any time deliver to the Trustee for cancellation any
Notes previously authenticated and delivered hereunder which Issuer or such
Guarantor may have acquired in any manner whatsoever, and all Notes so delivered
shall be promptly canceled by the Trustee. The Registrar and the Paying Agent
shall forward to the Trustee any Notes surrendered to them for registration of
transfer or exchange, redemption or payment. The Trustee and no one else shall
cancel all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section 2.10, except as
expressly permitted by this Indenture. All canceled Notes held by the Trustee
shall be destroyed and certification of their destruction delivered to Issuer
unless, by a Company Order, Issuer shall direct that the canceled Notes be
returned to it.
The Trustee shall provide Issuer a list of all Notes that have been
canceled from time to time as requested by Issuer.
SECTION 2.11. Computation of Interest. Interest on the Notes shall
be computed on the basis of a 360-day year of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed.
SECTION 2.12. Legal Holidays. In any case where any Payment Date
shall not be a Business Day, then (notwithstanding any other provision of this
Indenture or of the Notes) payment of principal or interest need not be made on
such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on such Payment Date. In such event, no interest
shall accrue with respect to such payment for the period from and after such
Payment Date, to the next succeeding Business Day.
<PAGE> 43
-36-
SECTION 2.13. CUSIP and CUSIP Numbers. Issuer in issuing the Notes
may use "CUSIP" and "CINS" numbers (if then generally in use), and if Issuer
does so, the Trustee shall use the CUSIP or CINS numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; provided,
however, that any such notice shall state that no representation is made as to
the correctness or accuracy of the CUSIP or CINS number, as the case may be,
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. Issuer shall promptly
notify the Trustee in writing of any change in the CUSIP or CINS number of any
type of Notes.
SECTION 2.14. Paying Agent To Hold Money In Trust. Each Paying Agent
shall hold in trust for the benefit of the Noteholders or the Trustee all money
held by the Paying Agent for the payment of principal of, premium, if any, or
interest on the Notes, and shall notify the Trustee of any default by Issuer in
making any such payment. Money held in trust by the Paying Agent need not be
segregated, except as required by law and except if Issuer, any Guarantor or any
of their respective Affiliates is acting as Paying Agent, and in no event shall
the Paying Agent be liable for any interest on any money received by it
hereunder. Issuer at any time may require the Paying Agent to pay all money held
by it to the Trustee and account for any funds disbursed and the Trustee may at
any time during the continuance of any Event of Default, upon a Company Order to
the Paying Agent, require such Paying Agent to pay forthwith all money so held
by it to the Trustee and to account for any funds disbursed. Upon making such
payment, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.15. Deposits of Monies. Prior to 10:00 a.m. New York City
time on each Payment Date, Issuer shall deposit with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Payment Date in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Payment Date.
SECTION 2.16. Book-Entry Provisions for Global Notes.
(a) The Global Notes initially shall (i) be registered in the name
of the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit D hereto.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture
<PAGE> 44
-37-
with respect to any Global Note held on their behalf by the Depository, or the
Trustee as its custodian, or under the Global Note, and the Depository may be
treated by Issuer, the Trustee and any agent of Issuer or the Trustee as the
absolute owner of the Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent Issuer, the Trustee or any agent of
Issuer or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depository or impair, as between the
Depository and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Sections 2.4 and 2.17. In addition,
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in Global Notes if (i) the Depository notifies Issuer
that it is unwilling or unable to continue as Depository for any Global Note, or
that it will cease to be a "Clearing Agency" under the Exchange Act, and in
either case a successor Depository is not appointed by Issuer within 90 days of
such notice or (ii) an Event of Default has occurred and is continuing and the
Registrar has received a written request from the Depository or the Trustee to
issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of such Global Note in an amount equal to the principal amount
of the beneficial interest in such Global Note to be transferred, and Issuer
shall execute, and the Trustee shall authenticate and deliver, one or more
Physical Notes of like tenor and principal amount of authorized denominations.
(d) In connection with the transfer of Global Notes as an entirety
to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed
to be surrendered to the Trustee for cancellation, and Issuer shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depository in exchange for its beneficial interest in the Global Notes,
an equal aggregate principal amount of Physical Notes of like tenor of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered
in exchange for an interest in a Global Note
<PAGE> 45
-38-
pursuant to subparagraph (b), (c) or (d) of this Section 2.16 shall, except as
otherwise provided by Section 2.17, bear the Private Placement Legend.
(f) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following additional provisions shall apply with respect to the registration of
any proposed transfer of an Initial Note to any Institutional Accredited
Investor which is not a QIB:
(i) the Registrar shall register the transfer of any Initial Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue Date;
provided, however, that the Holder of such Note certifies to the Registrar
that neither Issuer nor any Affiliate of Issuer has held any beneficial
interest in such Note, or portion thereof, at any time on or prior to the
second anniversary of the Issue Date and such transfer can otherwise be
lawfully made under the Notes without registering such Initial Notes
thereunder or (y) the proposed transferee has delivered to the Registrar a
certificate substantially in the form of Exhibit E hereto and any legal
opinions and certifications required thereby; and
(ii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and the
Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any required
legal opinions and certifications, the Registrar shall register the
transfer and reflect on its books and records the date and a decrease in
the principal amount of the Global Note from which such interests are to
be transferred in an amount equal to the principal amount of the Notes to
be transferred and Issuer shall execute, and the Trustee shall
authenticate, Physical Notes in a principal amount equal to the principal
amount of the Global Note to be transferred.
(b) Transfers to Non-U.S. Persons. The following additional
provisions shall apply with respect to the registra-
<PAGE> 46
-39-
tion of any proposed transfer of an Initial Note to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Initial Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue Date;
provided, however, that the Holder of such Note certifies to the Registrar
that neither Issuer nor any Affiliate of Issuer has held any beneficial
interest in such Note, or portion thereof, at any time on or prior to the
second anniversary of the Issue Date and such transfer can otherwise be
lawfully made under the Securities Act without registering such Initial
Notes thereunder or (y) the proposed transferor has delivered to the
Registrar a certificate substantially in the form of Exhibit F hereto;
(ii) if the proposed transferee is an Agent Member and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Regulation S Global Note, upon receipt by
the Registrar of (x) written instructions given in accordance with the
Depository's and the Registrar's procedures and (y) the appropriate
certificate, if any, required by clause (y) of paragraph (i) above,
together with any required legal opinions and certifications, the
Registrar shall register the transfer and reflect on its books and records
the date and an increase in the principal amount of the Regulation S
Global Note in an amount equal to the principal amount of Physical Notes
to be transferred, and the Trustee shall cancel the Physical Notes so
transferred;
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and the
Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any required
legal opinions and certifications, the Registrar shall register the
transfer and reflect on its books and records the date and (A) a decrease
in the principal amount of the Global Note from which such interests are
to be transferred in an amount equal to the principal amount of the Notes
to be transferred and (B) an increase in the principal amount of the
Regulation S Global Note in an amount equal to the principal amount of the
Global Note to be transferred; and
(iv) until the 41st day after the Issue Date (the "Distribution
Compliance Period"), an owner of a beneficial interest in the Regulation S
Global Note may not
<PAGE> 47
-40-
transfer such interest to a transferee that is a U.S. person or for the
account or benefit of a U.S. person within the meaning of Rule 902(o) of
the Securities Act. During the Distribution Compliance Period, all
beneficial interests in the Regulation S Global Note shall be transferred
only through Cedel or Euroclear, either directly if the transferor and
transferee are participants in such systems, or indirectly through
organizations that are participants therein.
(c) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Note to a QIB
(excluding Non-U.S. Persons):
(i) the Registrar shall register the transfer of any Initial Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the second anniversary of the Issue Date;
provided, however, that the Holder of such Note certifies to the Registrar
that neither Issuer nor any Affiliate of Issuer has held any beneficial
interest in such Note, or portion thereof, at any time on or prior to the
second anniversary of the Issue Date and such transfer can otherwise be
lawfully made under the Securities Act without registering such Initial
Note thereunder or (y) such transfer is being made by a proposed
transferor who has checked the box provided for on the form of Note
stating, or has otherwise advised Issuer and the Registrar in writing,
that the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the form
of Note stating, or has otherwise advised Issuer and the Registrar in
writing, that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding Issuer as it
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from
registration provided by Rule 144A;
(ii) if the proposed transferee is an Agent Member and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the 144A Global Note, upon receipt by the
Registrar of written instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall
<PAGE> 48
-41-
register the transfer and reflect on its book and records the date and an
increase in the principal amount of the 144A Global Note in an amount
equal to the principal amount of Physical Notes to be transferred, and the
Trustee shall cancel the Physical Note so transferred; and
(iii) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall register the transfer and
reflect on its books and records the date and (A) a decrease in the
principal amount of the Global Note from which interests are to be
transferred in an amount equal to the principal amount of the Notes to be
transferred and (B) an increase in the principal amount of the 144A Global
Note in an amount equal to the principal amount of the Global Note to be
transferred.
(d) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) the circumstances contemplated by paragraph
(a)(i)(x) of this Section 2.17 exist, (ii) there is delivered to the Registrar
an Opinion of Counsel reasonably satisfactory to Issuer and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act or (iii) such Note has been sold pursuant to an effective registration
statement under the Securities Act.
(e) Other Transfers. If a Holder proposes to transfer a Note
constituting a Restricted Security pursuant to any exemption from the
registration requirements of the Securities Act other than as provided for by
Section 2.17(a), (b) and (c), the Registrar shall only register such transfer or
exchange if such transferor delivers an Opinion of Counsel satisfactory to
Issuer and the Registrar that such transfer is in compliance with the Securities
Act and the terms of this Indenture.
(f) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
<PAGE> 49
-42-
The Registrar shall retain in accordance with its customary
procedures copies of all letters, notices and other written communications
received pursuant to Section 2.16 or this Section 2.17. Issuer shall have the
right to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable prior
written notice to the Registrar.
ARTICLE 3
REDEMPTION
SECTION 3.1. Notices to Trustee. If Issuer elects to redeem Notes
pursuant to paragraph 5 thereof, it shall notify the Trustee in writing of the
redemption date, the principal amount of Notes to be redeemed and the
subparagraph of the Notes pursuant to which the redemption will occur. Issuer
shall give each notice to the Trustee provided for in this Section at least 45
days before the redemption date unless the Trustee consents to a shorter period.
Such notice shall be accompanied by an Officers' Certificate from Issuer to the
effect that such redemption will comply with the provisions herein.
SECTION 3.2. Selection of Notes to be Redeemed. In the event that
less than all of the Notes are to be redeemed at any time, selection of such
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
such Notes are listed or, if such Notes are not then listed on a national
securities exchange, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided, however, that no Notes of a
principal amount of $1,000 or less shall be redeemed in part; provided, further,
that if a partial redemption is made with the proceeds of a Public Equity
Offering, selection of the Notes or portions thereof for redemption shall be
made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as
is practicable (subject to Depository procedures), unless such method is
otherwise prohibited. Provisions of this Indenture that apply to Notes called
for redemption also apply to portions of Notes called for redemption. The
Trustee shall notify Issuer promptly of the Notes or portions of Notes to be
redeemed. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. In the event Issuer is required to make an offer to purchase
Notes pursuant to Section 4.8 or 4.13 and the amount available for such offer is
not evenly divisible by $1,000, the Trustee shall
<PAGE> 50
-43-
promptly refund to Issuer any remaining funds, which in no event will exceed
$1,000.
SECTION 3.3. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Notes (each, a "Redemption Date"),
Issuer shall mail a notice of redemption by first-class mail to the registered
address appearing in the Note Register of each Holder of Notes to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Notes are to be redeemed, the
identification and principal amounts of the particular Notes to be
redeemed;
(6) that, unless Issuer defaults in making such redemption payment,
interest on Notes (or portion thereof) called for redemption ceases to
accrue on and after the Redemption Date;
(7) the paragraph of the Notes pursuant to which the Notes called
for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the Notes being redeemed;
and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At Issuer's request, the Trustee shall give the notice of redemption
in Issuer's name and at Issuer's sole expense. In such event, Issuer shall
provide the Trustee with the information required by this Section.
SECTION 3.4. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
the notice, plus accrued interest to the Redemption Date. Such notice if mailed
in the manner herein provided shall be
<PAGE> 51
-44-
conclusively presumed to have been given, whether or not the Holder receives
such notice. Failure to give notice or any defect in the notice to any Holder
shall not affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. Prior to 10:00 a.m. (New
York City time) on the Redemption Date, Issuer shall deposit with the Trustee or
Paying Agent (or, if Issuer or a Subsidiary is the Paying Agent, shall segregate
and hold in trust) money sufficient to pay the redemption price of and accrued
interest (if any) on all Notes or portions thereof to be redeemed on that date
other than Notes or portions of Notes called for redemption which have been
delivered by Issuer to the Trustee for cancellation.
SECTION 3.6. Notes Redeemed in Part. Upon surrender of a Note that
is redeemed in part (with, if Issuer or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to Issuer and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), Issuer shall execute, and the Trustee shall authenticate and deliver
to the Holder of such Note without service charge, a new Note or Notes of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Note so surrendered, except that if a Global Certificate is so surrendered,
Issuer shall execute, and the Trustee shall authenticate and deliver to the
Depository for such Global Certificate, without service charge, a new Global
Certificate in denomination equal to and in exchange for the unredeemed portion
of the principal of the Global Certificate so surrendered.
ARTICLE 4
COVENANTS
SECTION 4.1. Payment of Notes. Issuer shall promptly pay the
principal of and interest on the Notes on the dates and in the manner provided
in the Notes and in this Indenture. Principal and interest shall be considered
paid on the date due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture money sufficient to pay all principal and
interest then due. Issuer shall pay interest on overdue principal at 1% per
annum in excess of the rate per annum set forth in the Notes, and it shall pay
interest on overdue installments of interest at the same rate to the extent
lawful.
<PAGE> 52
-45-
SECTION 4.2. Corporate Existence; Conduct of Business.
(a) Subject to Article 5 and Section 4.13, Issuer shall do or caused
to be done, at its own cost and expense, all things necessary to, and will cause
each Restricted Subsidiary to, preserve and keep in full force and effect the
corporate or partnership existence and rights (charter and statutory), licenses
and/or franchises of Issuer and each Restricted Subsidiary; provided, however,
that neither Issuer nor any Restricted Subsidiary shall be required to preserve
any such rights, licenses or franchises if the Board of Directors of Issuer
shall reasonably determine that the preservation thereof is no longer desirable
in the conduct of the business of Issuer and the Subsidiaries, taken as a whole.
(b) Issuer and the Restricted Subsidiaries will not engage in any
businesses which are not the same, similar or reasonably related to the
businesses in which Issuer and the Restricted Subsidiaries are engaged on the
Issue Date, except to the extent as would not be material to Issuer and the
Restricted Subsidiaries taken as a whole.
SECTION 4.3. Maintenance of Office or Agency. Issuer shall maintain
an office or agency (which shall be located in the Borough of Manhattan in The
City of New York, State of New York) where Notes may be presented for
registration of transfer or for exchange, an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where Notes may be presented for payment and an office or agency where notices
and demands to or upon Issuer in respect of the Transaction Documents may be
served. Issuer will give prompt written notice to the Trustee of the location,
and any change in the location, of such office or agency. If at any time Issuer
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee's office
in New York City as set forth in Section 13.2.
Issuer may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve
Issuer of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes. Issuer will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
<PAGE> 53
-46-
Issuer hereby initially designates the Trustee's office or agency in
New York City as set forth in Section 13.2 as an agency of Issuer in accordance
with Section 2.3.
SECTION 4.4. Payment of Taxes and Other Claims. Issuer shall, and
shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments and
governmental charges levied or imposed upon its or its Subsidiaries' income,
profits or property; provided, however, that neither Issuer nor any of its
Subsidiaries shall be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate negotiations or
proceedings and for which disputed amounts adequate reserves have been made in
accordance with GAAP.
SECTION 4.5. Additional Subsidiary Guarantees; Additional
Collateral. (a) If Issuer or any Restricted Subsidiary shall organize, acquire
or otherwise invest in another Person that becomes a Restricted Subsidiary, then
Issuer shall cause such Restricted Subsidiary to (i) execute and deliver to the
Trustee a supplemental indenture substantially in the form of Exhibit G pursuant
to which such Restricted Subsidiary shall become a Guarantor under this
Indenture on the terms set forth in this Indenture and (ii) deliver to the
Trustee an Opinion of Counsel that such supplemental indenture has been duly
authorized, executed and delivered by such Restricted Subsidiary and constitutes
a legal, valid, binding and enforceable obligation of such Restricted
Subsidiary. Thereafter, such Restricted Subsidiary shall be a Guarantor for all
purposes of this Indenture. Notwithstanding the foregoing, no Foreign Subsidiary
(so long as it is a Foreign Subsidiary) shall be required to become a Guarantor.
(b) Concurrently with any Restricted Subsidiary becoming a
Guarantor, Issuer shall (i) supplement Schedule I to the Guarantor Pledge
Agreement to add Issuer's direct interests, if any, in Capital Stock of such
Guarantor as Collateral thereunder and for such interests to be subject to the
Guarantor Pledge Agreement as Additional Shares (as defined in the Guarantor
Pledge Agreement) and (ii) cause each other Guarantor that holds any Capital
Stock of such new Guarantor to enter into a pledge agreement substantially in
the form of Exhibit I and pledge such Capital Stock as Collateral thereunder.
SECTION 4.6. Reports to Holders. Issuer shall deliver to the Trustee
within 15 days after the filing of the same with the Commission, copies of the
quarterly and annual reports and of the information, documents and other
reports, if any, which Issuer is required to file with the Commission pur-
<PAGE> 54
-47-
suant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that Issuer
may not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, Issuer shall file with the Commission, to the extent permitted,
and provide the Trustee and Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act within the time periods specified therein. Issuer shall also
comply with the other provisions of TIA Section 314(a). In addition, for so long
as any Notes remain outstanding, Issuer shall furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act, and, to any beneficial holder of Notes, if not obtainable from
the Commission, information of the type that would be filed with the Commission
pursuant to the foregoing provisions, upon the request of any such holder.
SECTION 4.7. Compliance Certificate. Issuer shall deliver to the
Trustee within 120 days after the end of each fiscal year of Issuer an Officers'
Certificate, one of the signers of which shall be the principal executive,
financial or accounting officer of Issuer, stating that in the course of the
performance by the signers of their duties as Officers of Issuer they would
normally have knowledge of any Default and whether or not the signers know of
any Default that occurred during such period. If they do, the certificate shall
describe the Default, its status and what action Issuer is taking or proposes to
take with respect thereto. Issuer also shall comply with TIA Section 314(a)(4).
SECTION 4.8. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require Issuer to purchase all or a portion of such Holder's
Notes at a purchase price in cash equal to 101% of the principal amount at
maturity thereof, plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of Holders of record on the relevant record date
to receive interest due on an Interest Payment Date that is on or prior to the
date fixed for redemption), in accordance with the terms contemplated in Section
4.8(b).
(b) Within 30 days following any Change of Control, Issuer shall
send, by first class mail, a notice to each Holder with a copy to the Trustee
stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require Issuer to purchase such Holder's Notes at the
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and un-
<PAGE> 55
-48-
paid interest, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest on an
Interest Payment Date that is on or prior to the date fixed for purchase);
(2) the circumstances and relevant facts and relevant financial
information regarding such Change of Control;
(3) the purchase date (which shall be no earlier than 30 days nor
later than 45 days from the date such notice is mailed, other than as may
be required by law) (the "Change of Control Payment Date"); and
(4) the instructions as determined by Issuer, consistent with this
Section 4.8, that a Holder must follow in order to have its Notes
purchased.
(c) Holders electing to have a Note purchased will be required to
surrender the Note, together with all necessary endorsements and other
appropriate materials duly completed, to Issuer at the address specified in the
notice prior to the close of business on the third Business Day prior to the
Change of Control Payment Date. Holders will be entitled to withdraw their
election if the Trustee or Issuer receives not later than one Business Day prior
to the purchase date, a facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note which was delivered for purchase
by the Holder as to which such notice of withdrawal is being submitted and a
statement that such Holder is withdrawing its election to have such Note
purchased.
(d) On the Change of Control Payment Date, all Notes purchased by
Issuer under this Section 4.8 shall be delivered to the Trustee for
cancellation, and Issuer shall pay the purchase price plus accrued and unpaid
interest, if any, to the Holders entitled thereto.
(e) Issuer shall comply, to the extent applicable, with the
requirements of Section 14e-1 under the Exchange Act and any other securities
laws and regulations in connection with the repurchase of Notes pursuant to this
Section 4.8.
SECTION 4.9. Limitation on Incurrence of Additional
Indebtedness.
(a) Issuer shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, incur any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any
<PAGE> 56
-49-
such Indebtedness, Issuer may incur Indebtedness (including, without limitation,
Acquired Indebtedness) and Restricted Subsidiaries may incur Acquired
Indebtedness, in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio is greater than (i) 2.0 to 1.0 if such incurrence
occurs on or prior to the third anniversary of the Issue Date and (ii) 2.25 to
1.0 if such incurrence occurs thereafter.
(b) Notwithstanding the foregoing, Issuer shall not, and shall not
permit any Guarantor to, incur any Indebtedness that purports to be by its terms
(or by the terms of any agreement or instrument governing such Indebtedness)
subordinated to any other Indebtedness of Issuer or of such Guarantor, as the
case may be, unless such Indebtedness is also by its terms (or by the terms of
the agreement or instrument governing such Indebtedness) made expressly
subordinated to the Notes or the Guarantee of such Guarantor, as applicable, to
at least the same extent as such Indebtedness is subordinated to such other
Indebtedness of Issuer or such Guarantor, as applicable.
SECTION 4.10. Limitation on Restricted Payments. (I) Issuer
shall not, and shall not cause or permit any Restricted Subsidiary to,
directly or indirectly,
(a) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Equity Interests of
Issuer) on or in respect of Equity Interests of Issuer to holders of such
Equity Interests,
(b) redeem any Equity Interests of Issuer or any Restricted
Subsidiary (other than any held by Issuer),
(c) redeem or prepay, in whole or in part, prior to the scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, as
applicable, any Indebtedness of Issuer or any Guarantor that is
subordinate or junior in right of payment to the Notes or the Guarantee of
such Guarantor, as the case may be, or
(d) make any Investment (each of the foregoing actions set forth in
clauses (a), (b), (c) and (d) being referred to as a "Restricted
Payment"),
(e) if at the time of such Restricted Payment or immediately after
giving effect thereto,
(i) a Default shall have occurred and be continuing; or
<PAGE> 57
-50-
(ii) Issuer is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with
Section 4.9(a); or
(iii) the aggregate amount of Restricted Payments (including
such proposed Restricted Payment but excluding Restricted Payments
pursuant to clause (2), (3) or (4) of the next paragraph) made
subsequent to the Issue Date shall exceed the sum (the "Basket") of:
(A) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100%
of such loss) earned subsequent to the Issue Date and on or
prior to the date the Restricted Payment occurs (the
"Reference Date") (treating such period as a single accounting
period); plus
(B) 100% of the aggregate net cash proceeds received by
Issuer from any Person (other than a Subsidiary of Issuer)
from the issuance and sale subsequent to the Issue Date and on
or prior to the Reference Date of Qualified Equity Interests
of Issuer; plus
(C) without duplication of any amounts included in
clause (B) above, 100% of the aggregate net cash proceeds of
any common equity contribution received by Issuer (other than
from a Subsidiary of Issuer); plus
(D) in the case of the disposition or repayment of any
Investment that was treated as a Restricted Payment made after
the Issue Date an amount (to the extent not included in the
computation of Consolidated Net Income) equal to the lesser
of: (x) the return of capital with respect to such Investment
and (y) the amount of such Investment that was treated as a
Restricted Payment, in either case, less the cost of the
disposition of such Investment and net of taxes; plus
(E) so long as the Designation thereof was treated as a
Restricted Payment after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the Issue Date in accordance with
Section 4.18, Issuer's proportionate interest in an amount
equal to the excess of (x) the
<PAGE> 58
-51-
total assets of such Subsidiary, valued on an aggregate basis
at the lesser of book value and fair market value, over (y)
the total liabilities of such Subsidiary, determined in
accordance with GAAP (and provided that such amount shall not
in any case exceed the Designation Amount with respect to such
Restricted Subsidiary upon its Designation); minus
(F) with respect to each Subsidiary of Issuer which has
been designated as an Unrestricted Subsidiary after the Issue
Date in accordance with Section 4.18, the greater of (x) $0
and (y) the Designation Amount thereof (measured as of the
date of Designation).
(II) Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
within 60 days after the date of declaration of such dividend if the dividend
would have been permitted on the date of declaration; (2) the redemption of any
Equity Interests of Issuer, either (i) solely in exchange for Qualified Equity
Interests of Issuer or (ii) through the application of net cash proceeds of a
substantially concurrent sale (other than to a Subsidiary of Issuer) of
Qualified Equity Interests of Issuer; (3) the redemption or prepayment of any
Indebtedness of Issuer that is subordinate or junior in right of payment to the
Notes either (i) solely in exchange for Qualified Equity Interests of Issuer or
(ii) through the application of net cash proceeds of a substantially concurrent
sale (other than to a Subsidiary of Issuer) of (A) Qualified Equity Interests of
Issuer or (B) Permitted Refinancings of Indebtedness permitted to be incurred
under this Indenture; and (4) Permitted Investments. No transaction pursuant to
this paragraph shall increase the Basket.
(III) The amount of any non-cash Restricted Payment shall be the
fair market value, on the date such Restricted Payment is made, of the assets or
securities proposed to be transferred or issued by Issuer or such Restricted
Subsidiary, as the case may be, pursuant to such Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors of Issuer, whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $2.5 million.
SECTION 4.11. Limitation on Liens. Issuer shall not, and shall not
cause or permit any Restricted Subsidiary
<PAGE> 59
-52-
to, directly or indirectly, create, incur, assume or permit or suffer to exist
any Liens of any kind against or upon any property or assets of Issuer or any
Restricted Subsidiary whether owned on the Issue Date or acquired after the
Issue Date, or any proceeds therefrom, or assign or otherwise convey any right
to receive income or profits therefrom unless (i) in the case of Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to the
Notes, the Notes are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Liens and (ii) in all other cases, the Notes are
equally and ratably secured. The foregoing shall not apply to: (a) Liens
existing as of the Issue Date to the extent and in the manner such Liens are in
effect on the Issue Date; (b) Liens securing the Notes, the Guarantees and the
Pledge Agreements; (c) Liens securing obligations under the U.S. Credit Facility
incurred pursuant to clause (ii) of the definition of "Permitted Indebtedness"
and Liens securing obligations under the Foreign Credit Facility incurred
pursuant to clause (iii) of the definition of "Permitted Indebtedness"; (d)
Liens of Issuer or a Wholly Owned Restricted Subsidiary on assets of any
Restricted Subsidiary; (e) Liens securing Permitted Refinancings of Indebtedness
secured by a Lien permitted under this Indenture and incurred in accordance with
the provisions of this Indenture; provided, however, that such Liens (x) are no
less favorable to the Holders and are not more favorable to the lienholders with
respect to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (y) do not extend to or cover any property or assets of Issuer or
any Restricted Subsidiary not securing the Indebtedness so Refinanced; (f) Liens
(other than Liens referred to in clauses (a) through (e)) that secure
obligations in an aggregate amount not to exceed (x) prior to the German
Holdings Revocation, $2.0 million at any one time outstanding and (y) after the
German Holdings Revocation, $4.0 million at any one time outstanding; and (g)
Permitted Liens.
SECTION 4.12. Limitation on Transactions with Affiliates. (a) Issuer
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), unless such
transaction or series of related transactions is on terms that are no less
favorable than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of Issuer or such Restricted Subsidiary. All Affiliate Transactions
(and each series of related Affiliate Transactions) involving aggregate value in
excess of $500,000 shall be approved by a majority of the Disin-
<PAGE> 60
-53-
terested Directors of the Board of Directors of Issuer or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If there are no
Disinterested Directors or if Issuer or any Restricted Subsidiary enters into an
Affiliate Transaction (or a series of related Affiliate Transactions) that
involves an aggregate value in excess of $2.5 million, Issuer or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to Issuer or such Restricted Subsidiary, as the case may be, from a
financial point of view, from an Independent Financial Advisor and file the same
with the Trustee; provided, however, that no such opinion shall be required for
(i) any Permitted Intercompany Loan or (ii) commercial transactions in the
ordinary course of business and on reasonable and ordinary commercial terms
exclusively between or among Issuer and/or one or more of its Subsidiaries.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or consultants of Issuer or any Restricted
Subsidiary as determined in good faith by Issuer's Board of Directors; (ii)
transactions exclusively between or among Issuer and any of its Wholly Owned
Restricted Subsidiaries or exclusively between or among such Wholly Owned
Restricted Subsidiaries, provided such transactions are not otherwise prohibited
by this Indenture; (iii) any transaction pursuant to an agreement in effect on
the Issue Date as in effect on the Issue Date or as thereafter amended in a
manner not less favorable to the Holders; and (iv) Restricted Payments permitted
by this Indenture, Permitted Investments and any transaction that is deemed not
to be an Investment by reason of the last sentence of the definition of
"Investment."
SECTION 4.13. Limitation on Asset Sales. Issuer shall not, and shall
not permit any Restricted Subsidiary to, consummate an Asset Sale unless (i)
Issuer or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of; (ii) at least 80% of the
consideration received by Issuer or the Restricted Subsidiary, as the case may
be, from such Asset Sale shall be in the form of cash or Cash Equivalents; and
(iii) upon the consummation of an Asset Sale, Issuer shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset
Sale within 180 days of receipt thereof either (A) to permanently prepay any
term loans of Issuer or any Restricted Subsidiary under the U.S. Credit Fa-
<PAGE> 61
-54-
cility and/or Foreign Credit Facility, as applicable, (B) to make an investment
in Replacement Assets or (C) any combination of the foregoing clauses (A) and
(B); provided, however, that if the assets which were the subject of such Asset
Sale constitute Collateral, Issuer or the applicable Restricted Subsidiary shall
have entered into appropriate security documents pursuant to Article 12, and
such Replacement Assets shall be subject to a perfected first priority Lien in
favor of the Trustee and shall constitute Collateral. Pending such application,
to the extent that the assets which are the subject of any Asset Sale constitute
Collateral, such Net Cash Proceeds shall be deposited in the Collateral Account
in accordance with this Indenture, and Issuer or the applicable Restricted
Subsidiary shall enter into appropriate security documents pursuant to Article
12 and the Net Cash Proceeds of such Asset Sale shall be subject to a perfected
first priority Lien in favor of the Trustee. On the 181st day after an Asset
Sale or such earlier date, if any, as the Board of Directors of Issuer or of
such Restricted Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clause (iii) of the next preceding
sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of
Net Cash Proceeds which have not been applied on or before such Net Proceeds
Offer Trigger Date as permitted in clause (iii) of the next preceding sentence
(each a "Net Proceeds Offer Amount") shall be applied by Issuer or such
Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on
a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45
days following the applicable Net Proceeds Offer Trigger Date, from all Holders
on a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount at maturity of the Notes to be
purchased, plus accrued and unpaid interest thereon, if any, to the date of
purchase; provided, however, that if at any time any non-cash consideration
received by Issuer or any Restricted Subsidiary, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. Issuer may defer the Net Proceeds
Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to
or in excess of $5.0 million resulting from one or more Asset Sales (at which
time, the entire unutilized Net Proceeds Offer Amount, and not just the amount
in excess of $5.0 million, shall be applied as required pursuant to this
paragraph). To the extent that the Net Cash Proceeds of any Asset Sale of assets
constituting Collateral are not required to be applied to the Notes and if there
are Net Cash Proceeds remaining in the Collateral Account after all such offers
or redemp-
<PAGE> 62
-55-
tions required or permitted by this Indenture, then such remaining Net Cash
Proceeds shall be held in the Collateral Account as Collateral and shall be
permitted to be reinvested by Issuer at any time as provided above. Pending the
final application of the Net Cash Proceeds of a sale of assets not constituting
Collateral, Issuer may temporarily reduce revolving credit indebtedness or
otherwise invest such Net Cash Proceeds in any manner that is not prohibited by
this Indenture.
In the event of the transfer of substantially all (but not all) of
the property and assets of Issuer and the Restricted Subsidiaries as an entirety
to a Person in a transaction permitted under Article 5, the Surviving Entity
shall be deemed to have sold the properties and assets of Issuer and the
Restricted Subsidiaries not so transferred for purposes of this Section 4.13,
and shall comply with the provisions of this Section 4.13 with respect to such
deemed sale as if it were an Asset Sale. In addition, the fair market value of
such properties and assets of Issuer and the Restricted Subsidiaries deemed to
be sold shall be deemed to be Net Cash Proceeds for purposes of this Section
4.13.
Promptly, and in any event within 25 days after Issuer becomes
obligated to make a Net Proceeds Offer, Issuer shall be obligated to deliver to
the Trustee and send, to each Holder, at the address appearing in the Notes
Register, a written notice stating that the Holder may elect to have his Notes
purchased by Issuer either in whole or in part (subject to prorationing as
hereinafter described in the event the Net Proceeds Offer is oversubscribed) in
integral multiples of $1,000 of principal amount, at the applicable purchase
price. The notice, which shall govern the terms of the Net Proceeds Offer, shall
include such disclosures as are required by law and shall specify (i) that the
Net Proceeds Offer is being made pursuant to this Section 4.13; (ii) the
purchase price (including the amount of accrued interest, if any) for each Note
and the Net Proceeds Offer Payment Date; (iii) that any Note not tendered or
accepted for payment will continue to accrue interest in accordance with the
terms thereof; (iv) that, unless Issuer defaults on making the payment, any Note
accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue
interest on and after the Purchase Date; (v) that Holders electing to have Notes
purchased pursuant to the Net Proceeds Offer will be required to surrender their
Notes to the Paying Agent at the address specified in the notice at least three
Business Days prior to the Net Proceeds Offer Payment Date and must complete any
form letter of transmittal proposed by Issuer and acceptable to the Trustee and
the Paying Agent; (vi) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than one Business Day prior to the Net
Proceeds Offer Payment Date, a telex, facsimile transmission or
<PAGE> 63
-56-
letter setting forth the name of the Holder, the principal amount of Notes the
Holder delivered for purchase, the Note certificate number (if any) and a
statement that such Holder is withdrawing its election to have such Notes
purchased; (vii) that if Notes in a principal amount in excess of the aggregate
principal amount which Issuer has offered to purchase are tendered pursuant to
the Net Proceeds Offer, Issuer shall purchase Notes on a pro rata basis among
the Notes tendered (with such adjustments as may be deemed appropriate by Issuer
so that only Notes in denominations of $1,000 or integral multiples of $1,000
shall be acquired); (viii) that Holders whose Notes are purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; and (ix) the instructions that Holders must follow in
order to tender their Notes.
Not later than the date upon which written notice of a Net Proceeds
Offer is delivered to the Trustee as provided below, Issuer shall deliver to the
Trustee an Officers' Certificate as to (i) the Net Proceeds Offer Amount, (ii)
the allocation of the Net Cash Proceeds from the Asset Sale pursuant to which
such Net Proceeds Offer is being made, and (iii) the compliance of such
allocation with the provisions of this Section 4.13. Upon the expiration of the
period for which the Net Proceeds Offer remains open (the "Net Proceeds Offer
Period"), Issuer shall deliver to the Trustee for cancellation the Notes or
portions thereof which have been properly tendered to and are to be accepted by
Issuer. Not later than 10:00 a.m. (New York City time) on the Net Proceeds Offer
Payment Date, Issuer shall irrevocably deposit with the Trustee or with a paying
agent (or, if Issuer is acting as Paying Agent, segregate and hold in trust) an
amount in cash sufficient to pay the Net Proceeds Offer Amount for all Notes
properly tendered to and accepted by Issuer. The Trustee shall, on the Net
Proceeds Offer Payment Date, mail or deliver payment to each tendering Holder in
the amount of the purchase price.
Holders electing to have a Note purchased will be required to
surrender the Note, together with all necessary endorsements and other
appropriate materials duly completed, to Issuer at the address specified in the
notice at least three Business Days prior to the Net Proceeds Offer Payment
Date. Holders will be entitled to withdraw their election in whole or in part if
the Trustee or Issuer receives not later than one Business Day prior to the Net
Proceeds Offer Payment Date, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Note (which shall be $1,000
or an integral multiple thereof) which was delivered for purchase by the Holder,
the aggregate principal amount of such Note (if any) that remains subject to the
original notice of the Net Proceeds Offer and that has been or will be delivered
<PAGE> 64
-57-
for purchase by Issuer and a statement that such Holder is withdrawing his
election to have such Note purchased. If at the expiration of the Net Proceeds
Offer Period the aggregate principal amount of Notes surrendered by Holders
exceeds the Net Proceeds Offer Amount, Issuer shall select the Notes to be
purchased on a pro rata basis (to the extent practicable) based on the aggregate
principal amount of Notes tendered by each Holder (with such adjustments as may
be deemed appropriate by Issuer so that only securities in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose Notes
are purchased only in part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered. To the extent that the
aggregate amount of principal and accrued interest of Notes validly tendered and
not withdrawn pursuant to a Net Proceeds Offer is less than the Net Proceeds
Offer Amount, Issuer may use such surplus for general corporate purposes. Upon
completion of a Net Proceeds Offer, the aggregate unutilized Net Proceeds Offer
Amount with respect to the applicable Asset Sale or Asset Sales shall be reset
to zero. A Net Proceeds Offer shall remain open for a period of 20 Business Days
or such longer period as may be required by law.
A Note shall be deemed to have been accepted for purchase at the
time the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
Issuer shall comply with the requirements of Section 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer.
Section 4.14. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries. Issuer shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (x) pay dividends or make any other
distributions on or in respect of its Capital Stock; (y) make loans or advances
or to pay any Indebtedness or other obligation owed to, or enter into guarantees
for the benefit of, Issuer or any other Restricted Subsidiary; or (z) transfer
any of its property or assets to Issuer or any other Restricted Subsidiary,
except for (a) such encumbrances or restrictions existing under or by reason of
(1) applicable law; (2) this Indenture; (3) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired, as such instrument is in effect
on the date of acquisition or as thereafter amended in a manner no less
favorable
<PAGE> 65
-58-
to the Holders; (4) agreements existing on the Issue Date (including the U.S.
Credit Facility and the Foreign Credit Facility) as in effect on the Issue Date
or as thereafter amended in a manner no less favorable to the Holders; or (5) an
agreement governing Permitted Refinancings of Indebtedness incurred pursuant to
an agreement referred to in clause (2), (3) or (4) above; provided, however,
that the provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less favorable to the Holders than the provisions
relating to such encumbrance or restriction contained in agreements referred to
in such clause (2), (3) or (4); (b) customary non-assignment provisions of any
contract or any lease governing a leasehold interest of any Restricted
Subsidiary; (c) customary covenants in any agreement governing Purchase Money
Indebtedness that restrict the transfer of property acquired with the proceeds
of such Purchase Money Indebtedness; (d) covenants in security agreements
securing Indebtedness of a Restricted Subsidiary, to the extent that the Liens
securing such Indebtedness were otherwise incurred in accordance with Section
4.11, that restrict the transfer of property subject to such Liens; and (e)
customary restrictions with respect to a Restricted Subsidiary pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted Subsidiary.
SECTION 4.15. Limitation on Issuance or Sale of Capital Stock of
Restricted Subsidiaries. Issuer shall not sell, and shall not cause or permit
any Restricted Subsidiary, directly or indirectly, to issue or sell, any Capital
Stock of a Restricted Subsidiary, except (i) to Issuer or a Wholly Owned
Restricted Subsidiary; (ii) the sale of all of the Capital Stock of a Restricted
Subsidiary in accordance with Section 4.13; or (iii) in the case of issuance of
Capital Stock by a non-Wholly Owned Restricted Subsidiary if, after giving
effect to such issuance, Issuer maintains its direct or indirect percentage of
beneficial and economic ownership of such non-Wholly Owned Restricted
Subsidiary.
SECTION 4.16. Limitation on Sale and Leaseback Transactions. Issuer
shall not, and shall not permit any Restricted Subsidiary to, enter into any
Sale and Leaseback Transaction; provided, however, that Issuer may enter into a
Sale and Leaseback Transaction if (i) Issuer would have (a) incurred
Indebtedness (other than Permitted Indebtedness) in an amount equal to the
Attributable Debt relating to such Sale and Leaseback Transaction in compliance
with Section 4.9 and (b) incurred a Lien to secure such Indebtedness pursuant to
Section 4.11, (ii) the gross cash proceeds of such Sale and Leaseback
Transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the
<PAGE> 66
-59-
property that is the subject of such Sale and Leaseback Transaction and (iii)
the transfer of assets in such Sale and Leaseback Transaction is permitted by,
and Issuer applies the proceeds of such transaction in compliance with, Section
4.13.
SECTION 4.17. Limitation on Preferred Stock of Restricted
Subsidiaries. Issuer will not permit any Restricted Subsidiary to issue any
Preferred Stock (other than to Issuer or to a Wholly Owned Restricted
Subsidiary) or permit any Person (other than Issuer or a Wholly Owned Restricted
Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
SECTION 4.18. Designation of Unrestricted Subsidiaries. (a) Issuer
may designate any Subsidiary of Issuer (other than Decora or any of its
Subsidiaries and, following the German Holdings Revocation, other than German
Holdings and its Subsidiaries) as an "Unrestricted Subsidiary" under this
Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation,
Issuer could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 4.9(a); and
(iii) Issuer would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to Section 4.10(I) in an
amount (the "Designation Amount") equal to the fair market value of
Issuer's proportionate interest in the net worth of such Subsidiary on
such date calculated in accordance with GAAP.
All Subsidiaries of Unrestricted Subsidiaries shall be
Unrestricted Subsidiaries.
German Holdings and its Subsidiaries shall be deemed to have been
designated Unrestricted Subsidiaries as of the Issue Date. On January 1, 2001,
the Designation of German Holdings and its Subsidiaries as Unrestricted
Subsidiaries shall be deemed to have been revoked (such Revocation, the "German
Holdings Revocation") in accordance with paragraph (c) below. Notwithstanding
the foregoing, in the event that the Consolidated Fixed Charge Coverage Ratio
after giving effect to the German Holdings Revocation (assuming that German
Holdings and its Subsidiaries had been Restricted Subsidiaries since the
beginning of the Four Quarter Period) is less than the Consolidated Fixed Charge
Coverage Ratio before giving effect to the German Holdings Revocation (the
"Revocation Condition"), the German Hold-
<PAGE> 67
-60-
ings Revocation shall not be deemed to have been effected on such date, but
shall be deemed to be effected at the end of the first fiscal quarter thereafter
that the Revocation Condition is satisfied. Issuer shall not cause or suffer
German Holdings or any of its Subsidiaries to incur Indebtedness for the primary
purpose of avoiding the Revocation Condition being satisfied. At no time
following the German Holdings Revocation shall German Holdings or any of its
Subsidiaries be Designated as Unrestricted Subsidiaries.
(b) Issuer shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, at any time (x) provide credit support
for, subject any of its properties or assets (other than the Equity Interests of
any Unrestricted Subsidiary) to the satisfaction of, or guarantee, any
Indebtedness of any Unrestricted Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness), (y) be liable for any
Indebtedness of any Unrestricted Subsidiary or (z) be liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary;
provided, however, that the foregoing shall not prohibit any agreement in effect
on the Issue Date as in effect on the Issue Date or as thereafter amended in a
manner not less favorable to the Holders.
(c) Issuer may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
(d) All Designations and Revocations must be evidenced by
resolutions of the Board of Directors of Issuer, delivered to the Trustee
certifying compliance with the foregoing provisions.
SECTION 4.19. Limitation on Capital Expenditures. Issuer will not
permit or suffer the aggregate amount of capital expenditures of Issuer and the
Restricted Subsidiaries and German Holdings and its Subsidiaries, as determined
on a consolidated basis in accordance with GAAP, (i) for the fiscal year ending
March 31, 1999 to exceed $10.5 million or (ii) for
<PAGE> 68
-61-
any fiscal year thereafter to exceed the sum of 5.5% of net sales of Issuer and
the Restricted Subsidiaries and German Holdings and its Subsidiaries for the
fiscal year immediately preceding such fiscal year, as determined on a
consolidated basis in accordance with GAAP; provided, however, that if the
actual amount of such capital expenditures in any fiscal year is less than the
amount permitted under this Section 4.19 for such fiscal year, the unused amount
(not to exceed 25% of such permitted amount) may be carried over to the
immediately succeeding year, but not any subsequent year.
SECTION 4.20. Impairment of Security Interest. Issuer shall not, and
shall not permit any of its Subsidiaries to, take or omit to take any action
which action or omission might or would have the result of affecting or
impairing the security interest in favor of the Trustee, on behalf of itself and
the Holders of the Notes, with respect to the Collateral, and Issuer shall not
grant to any Person (other than the Trustee on behalf of itself and the Holders
of the Notes) any interest whatsoever in the Collateral other than Liens
permitted by this Indenture and the Security Documents.
SECTION 4.21. Amendment to Pledge Agreements. Except as expressly
permitted under the terms of the applicable Security Document, Issuer shall not,
and shall not permit or consent to any amendment, modification or supplement of,
the Security Documents in any way which would be adverse to the Holders or which
would constitute a Default.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.1. Merger, Consolidation and Sale of Assets. (a) Issuer
shall not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer, lease,
convey or otherwise dispose of (or cause or permit any Restricted Subsidiary to
sell, assign, transfer, lease, convey or otherwise dispose of) all or
substantially all of Issuer's assets (determined on a consolidated basis for
Issuer and the Restricted Subsidiaries) whether as an entirety or substantially
as an entirety to any Person unless:
(i) either (1) Issuer shall be the surviving or continuing
corporation or (2) the Person (if other than Issuer) formed by such
consolidation or into which Issuer is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of Issuer and the Restricted Subsidiaries
substantially as an entirety (the "Surviving En-
<PAGE> 69
-62-
tity");
(x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the
District of Columbia; and
(y) shall expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and delivered
to the Trustee, the due and punctual payment of the principal of and
interest on all of the Notes and the performance of every covenant
of the Transaction Documents on the part of Issuer to be performed
or observed;
(ii) other than in a consolidation or merger solely between Issuer
and a Wholly Owned Restricted Subsidiary, immediately after giving effect
to such transaction and the assumption contemplated by clause (i)(2)(y)
above (including giving effect to any Indebtedness (including Acquired
Indebtedness) incurred or anticipated to be incurred in connection with or
in respect of such transaction), Issuer or such Surviving Entity, as the
case may be,
(1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of Issuer immediately prior to such
transaction and
(2) shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to Section 4.9(a) (if
Issuer shall not be the Surviving Entity, all references to Issuer
and the Restricted Subsidiaries in the definitions used to determine
the Consolidated Fixed Charge Coverage Ratio shall be to the
Surviving Person and its Subsidiaries after giving effect to such
transaction (excluding any Unrestricted Subsidiaries));
(iii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect
to any Indebtedness (including Acquired Indebtedness) incurred or
anticipated to be incurred in connection with or in respect of such
transaction), no Default shall have occurred and be continuing;
(iv) Issuer or the Surviving Entity shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
re-
<PAGE> 70
-63-
quired in connection with such transaction, such supplemental indenture
comply with the applicable provisions of this Indenture and that all
conditions precedent in this Indenture relating to such transaction have
been satisfied.
(b) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries of Issuer the Capital Stock of which constitutes
all or substantially all of the properties and assets of Issuer, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
Issuer.
(c) Each Guarantor (other than any Guarantor whose Guarantee is to
be released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with Section 4.13) will not, and
Issuer will not cause or permit any Guarantor to, consolidate with or merge with
or into any Person other than Issuer or any other Guarantor unless: (i) the
entity formed by or surviving any such consolidation or merger (if other than
the Guarantor) or to which such sale, lease, conveyance or other disposition
shall have been made is a corporation organized and existing under the laws of
the United States or any State thereof or the District of Columbia; (ii) such
entity assumes by supplemental indenture all of the obligations of the Guarantor
on the Guarantee; and (iii) immediately after giving effect to such transaction
and the use of any net proceeds therefrom on a pro forma basis, Issuer could
satisfy the provisions of clause (ii) of the first paragraph of this covenant.
Any merger or consolidation of a Guarantor with and into Issuer (with Issuer
being the surviving entity) or another Guarantor that is a Wholly Owned
Restricted Subsidiary need only comply with clause (iv) of Section 5.1(a).
(d) Upon any consolidation, combination or merger or any transfer of
all or substantially all of the assets of Issuer or a Guarantor in accordance
with the foregoing, in which Issuer or such Guarantor is not the Surviving
Entity, the Surviving Entity shall succeed to, and be substituted for, and may
exercise every right and power of, Issuer or such Guarantor under this
Indenture, the Notes, the Registration Rights Agreement and the Security
Documents with the same effect as if such Surviving Entity had been named as
such herein and therein; and thereafter, except in the case of (a) a lease or
(b) any sale, assignment, conveyance, transfer, lease or other disposition to a
Restricted Subsidiary of Issuer or such Guarantor, Issuer shall be discharged
from all obligations and covenants under this Indenture, the Notes, the
Registration Rights Agreement and the Security Documents and such Guarantor
shall be dis-
<PAGE> 71
-64-
charged from all obligations and covenants under this Indenture, the Guarantee
of such Guarantor, the Registration Rights Agreement and the Security Documents,
as the case may be.
For all purposes of this Indenture and the Notes (including the
provisions of this Article 5 and Sections 4.9, 4.10 and 4.11), Subsidiaries of
any Surviving Person shall, upon such transaction or series of related
transactions, become Restricted Subsidiaries unless and until designated as
Unrestricted Subsidiaries pursuant to and in accordance with Section 4.18, and
all Indebtedness, and all Liens on property or assets, of Issuer and the
Restricted Subsidiaries in existence immediately prior to such transaction or
series of related transactions will be deemed to have been incurred upon such
transaction or series of related transactions.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default. Any of the following shall
constitute an Event of Default:
(i) the failure to pay interest on any Notes when the same becomes
due and payable and the default continues for a period of 30 days;
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer);
(iii) (x) a default in the observance or performance of Section 5.1
or Issuer's obligation to effect a Change of Control Offer pursuant to
Section 4.8 or (y) a default in the observance or performance of any other
covenant or agreement contained in this Indenture or any Security Document
which default continues for a period of 30 days after Issuer receives
written notice specifying the default (and demanding that such default be
remedied) from the Trustee or Issuer and the Trustee receiving such notice
from Holders of at least 25% of the outstanding principal amount of the
Notes;
(iv) default under any mortgage, indenture or other investment or
agreement under which there may be issued or by which there may be secured
or evidenced Indebtedness of Issuer or any Restricted Subsidiary, whether
such Indebtedness now exists or is incurred after the Issue Date, which
default (x) is caused by a failure to pay when due
<PAGE> 72
-65-
principal or interest on such Indebtedness within the applicable express
grace period, (y) results in the acceleration of such Indebtedness prior
to its express final maturity or (z) results in the commencement of
judicial proceedings to foreclose upon, or to exercise remedies under
applicable law or applicable security documents to take ownership of, the
property or assets securing such Indebtedness and, in each case, the
principal amount of such Indebtedness, together with any other
Indebtedness with respect to which an event described in clause (x), (y)
or (z) has occurred and is continuing, aggregates $2.5 million or more;
(v) one or more judgments in an aggregate amount in excess of $2.5
million shall have been rendered against Issuer or any Restricted
Subsidiary and such judgments remain undischarged, unpaid or unstayed for
a period of 60 days after such judgment or judgments become final and
non-appealable;
(vi) Issuer or any Significant Subsidiary:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case in which it is the debtor;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(D) makes a general assignment for the benefit of its
creditors; or
(E) takes any comparable action under any foreign laws
relating to insolvency;
(vii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against Issuer or any Significant Subsidiary
in an involuntary case;
(B) appoints a Custodian of Issuer or any Significant
Subsidiary or for any substantial part of the property of Issuer or
any Significant Subsidiary; or
(C) orders the winding up or liquidation of Issuer or any
Significant Subsidiary of Issuer;
<PAGE> 73
-66-
(or any similar relief is granted under any foreign laws) and the
order or decree remains unstayed and in effect for 60 days;
(viii) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null and void and unenforceable or
any of the Guarantees is found to be invalid or any of the Guarantors
denies its liability under its Guarantee (other than by reason of release
of a Guarantor in accordance with the terms of this Indenture); or
(ix) any of the Security Documents shall cease to be in full force
and effect or cease to give the Trustee the Liens, rights, powers and
privileges purported to be created thereby.
The term "Bankruptcy Law" means Title 11, United States Code, as
amended, or any similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
Issuer shall deliver to the Trustee, promptly after the occurrence
thereof, written notice in the form of an Officers' Certificate of any Default
(provided that such officers shall provide such certification at least annually
whether or not they know of any Default) that has occurred and, if applicable,
describe such Default and the status thereof.
SECTION 6.2. Acceleration. If an Event of Default (other than an
Event of Default specified in clause (vi) or (vii) above with respect to Issuer)
shall occur and be continuing, the Trustee or the Holders of at least 25% in
principal amount of outstanding Notes may declare the principal of and accrued
interest on all the Notes to be due and payable by notice in writing to Issuer
and the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same shall become
immediately due and payable. If an Event of Default specified in clause (vi) or
(vii) above with respect to Issuer occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of the
outstanding Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Notes as described in the preceding paragraph, the Holders of a majority in
principal amount of the Notes may rescind and cancel such declaration and its
consequences (i) if
<PAGE> 74
-67-
the rescission would not conflict with any judgment or decree, (ii) if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration,
(iii) to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iv) if Issuer has paid
the Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances, and any other amounts due the Trustee
under Section 7.7 and (v) in the event of the cure or waiver of an Event of
Default of the type described in clause (vi) of the description above of Events
of Default, the Trustee shall have received an Officers' Certificate and an
Opinion of Counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture and may take any action under the
Security Documents as may be required or permitted thereunder.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are, to the extent permitted by law,
cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may waive any past or existing Default and its consequences except (i) a
Default in the payment of the principal of or interest on a Note or (ii) a
Default in respect of a provision that under Section 9.2 cannot be amended
without the consent of each Holder affected. When a Default is waived, it is
deemed cured, and any Event of Default arising therefrom shall be deemed to have
been cured, but no such waiver shall extend to any subsequent or other Default
or impair any consequent right.
SECTION 6.5. Control by Majority. The Holders of a majority in
principal amount of the outstanding Notes may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee, in each case, whether
<PAGE> 75
-68-
under law, this Indenture, the Security Documents or otherwise. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture or, subject to Section 7.1, that the Trustee determines is unduly
prejudicial to the rights of any other Holder (it being understood that the
Trustee shall have no duty to make such determination) or that would involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification from the Holders satisfactory to it in its sole discretion
against all losses and expenses caused by taking or not taking such action.
SECTION 6.6. Limitation on Suits. A Holder may not pursue any remedy
with respect to this Indenture or the Notes unless:
(1) such Holder has previously given the Trustee notice stating that
an Event of Default is continuing;
(2) Holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy;
(3) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the outstanding
Notes have not given the Trustee a direction inconsistent with such
request during such 60-day period.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal, premium (if any) or interest on the Notes held by such
Holder, on or after the respective due dates therefor, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder except to the extent
that the institution or prosecution of such suit or the entry of judgment
therein would, un-
<PAGE> 76
-69-
der applicable law, result in the surrender, impairment, waiver or loss of the
Lien of this Indenture and the Security Documents upon the Collateral.
SECTION 6.8. Collection Suit by Trustee. If an Event of Default
specified in Section 6.1(i) or (ii) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
Issuer for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.7.
SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Holders allowed in
any judicial proceedings relative to Issuer, its creditors or its property and,
unless prohibited by law or applicable regulations, may vote on behalf of the
Holders in any election of a trustee in bankruptcy or other Person performing
similar functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order, subject to applicable law:
FIRST: to the Trustee for amounts due under Section 7.7 and then for
amounts due under the Pledge Agreement and the other Security Documents;
SECOND: to Holders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively; and
THIRD: to Issuer.
The Trustee may, upon prior written notice to Issuer, fix a record
date and payment date for any payment to Holders pursuant to this Section. At
least 15 days before such record date, Issuer shall mail to each Holder and the
Trustee a notice that states the record date, the payment date and amount to be
paid.
<PAGE> 77
-70-
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by
Holders of more than 10% in aggregate principal amount of the outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent Person
would exercise or use under the circumstances in the conduct of such Person's
own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of
<PAGE> 78
-71-
paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.2 and 6.5 hereof.
(d) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. Subject to Section 7.1,
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate.
(c) Before the Trustee acts or refrains from acting, the Trustee may
consult with counsel, and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity reasonable to the
Trustee against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
(e) Prior to the occurrence of an Event of Default
<PAGE> 79
-72-
hereunder and after the cure or waiver of all Events of Default, the Trustee
shall not be bound to make any investigation into the facts or matters stated in
any resolution, Officers' Certificate, or other request, consent, order,
approval, appraisal, bond, debenture, note, coupon, security or other paper or
document unless requested in writing to do so by the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding; provided,
however, that, if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigations, in the opinion of the Trustee, is not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expenses or liabilities as
a condition to proceeding; the reasonable expenses of every such examination
shall be paid by Issuer or, if advanced by the Trustee, shall be repaid by
Issuer on demand.
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
(g) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, or where information is required or
necessary to be furnished by Issuer in order for the Trustee to act, the Trustee
(unless otherwise evidence by herein specifically prescribed), shall not be
liable for any action it takes or omits to take in good faith in reliance upon
an Officers' Certificate, or for any action taken or omitted to be taken by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture.
(h) The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the part
of Issuer, except as otherwise specifically set forth in this Indenture, but the
Trustee may require of Issuer full information and advice as to the performance
of the covenants, conditions and agreements contained herein.
(i) Except for (i) a default under Section 6.1(i), 6.1(ii) or 4.1,
(ii) the failure of Issuer to file any financial statements, documents or
certificates specifically required to be filed with the Trustee pursuant to the
provisions of this Indenture or (iii) any other event of which the Trustee
<PAGE> 80
-73-
has "actual knowledge" and which event constitutes a Default under this
Indenture, the Trustee shall not be deemed to have notice of any Default or
event unless specifically notified in writing by Issuer or the Holders of not
less than 25% in aggregate principal amount of the Notes then outstanding; as
used herein, the term "actual knowledge" means the actual fact of knowing,
without a duty to make any investigation with regard thereto.
(j) The Trustee shall not be required to give any note, bond or
surety in respect of the execution of the trusts and powers under this
Indenture.
(k) The permissive rights of the Trustee to perform acts enumerated
in this Indenture shall not be construed as a duty.
(l) The Trustee shall not be liable for any interest on any money
received by it except as the Trustee may agree in writing with Issuer.
(m) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 7.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with Issuer or its respective Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for Issuer's use of the
proceeds from the Notes, and it shall not be responsible for any statement of
Issuer in this Indenture or in any document issued in connection with the sale
of the Notes or in the Notes other than the Trustee's certificate of
authentication.
SECTION 7.5. Notice of Defaults. If a Default occurs and is
continuing and if it is known to a Responsible Officer of the Trustee, the
Trustee shall mail to each Holder notice of the Default within 30 days after it
is known by a Responsible Officer or written notice is received by the Trustee.
Except in the case of a Default in payment of principal of or interest on any
Note (including payments pursuant to the mandatory redemption provisions of such
Note, if any), the Trustee may withhold the notice if and so long as a committee
of its
<PAGE> 81
-74-
Responsible Officers in good faith determines that withholding the notice is in
the interests of Holders.
SECTION 7.6. Reports by Trustee to Holders. Within 60 days after
each May 1 beginning with May 1, 1999, the Trustee shall mail to each Holder a
brief report dated as of May 1 that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b). Prior to delivery to the
Holders, the Trustee shall deliver to Issuer a copy of any report it delivers to
Holders pursuant to this Section 7.6.
SECTION 7.7. Compensation and Indemnity. Issuer shall pay to the
Trustee from time to time reasonable compensation for its services hereunder.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. Issuer shall reimburse the Trustee upon request for
all reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to such compensation for its services, except any such
expense, disbursement or advance as may arise from its negligence, willful
misconduct or bad faith. Such expenses shall include the reasonable compensation
and expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. Except during the occurrence of an Event of Default,
the Trustee shall provide Issuer reasonable notice of any expenditure not in the
ordinary course of business. Issuer shall indemnify each of the Trustee and any
predecessor Trustees against any and all loss, damage, claim, liability or
expense (including attorneys' fees and expenses) (other than taxes applicable to
the Trustee's compensation hereunder) incurred by it in connection with the
acceptance or administration of this trust and the performance of its duties
hereunder. The Trustee shall notify Issuer promptly of any claim for which it
may seek indemnity. Failure by the Trustee to so notify Issuer shall not relieve
Issuer of its obligations hereunder. Issuer shall defend the claim and the
Trustee shall cooperate in the defense of such claim. The Trustee may have
separate counsel at the expense of Issuer. Issuer need not reimburse any expense
or indemnify against any loss, liability or expense incurred by the Trustee
through the Trustee's own willful misconduct, negligence or bad faith. Issuer
need not pay for any settlement made without its written consent.
To secure Issuer's payment obligations in this Section, the Trustee
shall have a lien prior to the Notes on all money or property held or collected
by the Trustee other than money or property held in trust to pay principal of
and interest on particular Notes.
Issuer's payment obligations pursuant to this Section and any Lien
arising hereunder or under the Security Documents
<PAGE> 82
-75-
shall survive the discharge of this Indenture and the resignation or removal of
the Trustee. When the Trustee incurs expenses after the occurrence of an Event
of Default specified in Section 6.1(vi) or (vii) with respect to Issuer, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
time upon 30 days notice to Issuer. The Holders of a majority in principal
amount of the outstanding Notes may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. Issuer shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by Issuer or by the Holders of a
majority in principal amount of the outstanding Notes and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), Issuer shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to Issuer. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided for in Section
7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the outstanding Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trus-
<PAGE> 83
-76-
tee.
Any resignation or removal of the Trustee pursuant to this Indenture
shall be deemed to be a resignation or removal of the Trustee in its capacity as
Trustee under the Security Documents and any appointment of a successor Trustee
pursuant to this Indenture shall be deemed to be appointment of a successor
Trustee under the Security Documents and such successor shall assume all of the
obligations of the Trustee in its capacity as Trustee under the Security
Documents.
Notwithstanding the replacement of the Trustee pursuant to this
Section, Issuer's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee, so long as such corporation is
eligible under this Article 7 and TIA Section 310(a).
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
Issuer are outstanding if the requirements for such exclusion set forth in TIA
Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Issuer. The
Trustee shall comply with TIA Section 311(a),
<PAGE> 84
-77-
excluding any creditor relationship listed in TIA Section 311(b). A Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Discharge of Liability on Notes; Defeasance.
(a) This Indenture will be discharged and will cease to be of
further effect (except as to surviving rights or registration of transfer or
exchange of the Notes pursuant to Section 2.6) as to all outstanding Notes when
(i) either (a) all the Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid and Notes for
whose payment money has theretofore been deposited in trust or segregated and
held in trust by Issuer and thereafter repaid to Issuer or discharged from such
trust) have been delivered to the Trustee for cancellation or (b) all Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable and Issuer has irrevocably deposited or caused to be deposited with the
Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of and interest on the Notes to the date of deposit
together with irrevocable instructions from Issuer directing the Trustee to
apply such funds to the payment thereof at maturity or redemption, as the case
may be; (ii) Issuer has paid all other sums payable under the Transaction
Documents by Issuer; and (iii) Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel stating that all conditions precedent
under this Indenture relating to the satisfaction and discharge of this
Indenture have been complied with. Upon satisfaction of such conditions, the
Trustee shall, if requested by Issuer, acknowledge satisfaction and discharge of
this Indenture.
(b) Subject to Sections 8.1(c) and 8.2, Issuer at any time may
terminate (i) all its obligations under the Notes and this Indenture ("legal
defeasance option") or (ii) its obligations under Sections 4.4 through 4.21,
inclusive, and Section 5.1(a)(ii) and the operation of Sections 6.1(iii),
6.1(iv), 6.1(v), 6.1(vi) (but only with respect to Restricted Subsidiaries),
6.1(vii) (but only with respect to Restricted Subsidiaries), 6.1(viii) and
6.1(ix) ("covenant defeasance option"). Issuer may exercise its legal defeasance
option notwithstanding its prior exercise of its covenant defeasance option.
<PAGE> 85
-78-
If Issuer exercises its legal defeasance option, payment of the
Notes may not be accelerated because of an Event of Default. If Issuer exercises
its covenant defeasance option, payment of the Notes may not be accelerated due
to a failure to comply with any of Sections 4.4 through 4.21, inclusive, Section
5.1(a)(ii) or the operation of Sections 6.1(iii), 6.1(iv), 6.1(v), 6.1(vi) (but
only with respect to Restricted Subsidiaries), 6.1(vii) (but only with respect
to Restricted Subsidiaries), 6.1(viii) or 6.1(ix). If Issuer exercises its legal
defeasance option or its covenant defeasance option, each Guarantor will be
released from all of its obligations under Article 11.
Upon satisfaction of the conditions set forth herein and upon
request of Issuer, the Trustee shall acknowledge in writing the discharge of
those obligations that Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, Issuer's obligations
in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.3, 8.4, 8.5 and 8.6 shall
survive until the Notes have been paid in full. Thereafter, Issuer's obligations
in Sections 7.7 (except in respect of Liens on the Collateral), 8.4 and 8.5
shall survive.
SECTION 8.2. Conditions to Defeasance. In order to exercise either
legal defeasance or covenant defeasance:
(i) Issuer must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders cash in U.S. dollars, U.S. Government
Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of and interest on the Notes on
the stated date for payment thereof or on the applicable Redemption Date,
as the case may be;
(ii) in the case of legal defeasance, Issuer shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (x) Issuer has received from, or
there has been published by, the Internal Revenue Service a ruling or (y)
since the Issue Date, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
legal defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such legal defeasance had not occurred;
<PAGE> 86
-79-
(iii) in the case of covenant defeasance, Issuer shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred;
(iv) no Default shall have occurred and be continuing on the date of
such deposit or insofar as Events of Default under Section 6.1(vi) or
(vii) are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(v) such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture or
any other material agreement or instrument to which Issuer or any of its
Subsidiaries is a party or by which Issuer or any of its Subsidiaries is
bound;
(vi) Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by Issuer with the
intent of preferring the Holders over any other creditors of Issuer or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of Issuer or others;
(vii) Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the legal defeasance or the covenant
defeasance have been complied with;
(viii) Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and
(ix) Issuer shall have paid or duly provided for payment under terms
mutually satisfactory to Issuer and the Trustee all amounts then due to
the Trustee pursuant to Section 7.7.
Notwithstanding the foregoing, the Opinion of Counsel required by
clause (ii) above with respect to a legal defeasance need not be delivered if
all Notes not therefore deliv-
<PAGE> 87
-80-
ered to the Trustee for cancellation (x) have become due and payable, (y) will
become due an payable on the maturity date within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of Issuer.
Before or after a deposit, Issuer may make arrangements satisfactory
to the Trustee for the redemption of Notes at a future date in accordance with
Article 3.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article Eight. It shall apply the deposited money and the money from U.S.
Government Obligations either directly or through the Paying Agent (including
Issuer acting as its own Paying Agent as the Trustee may determine) and in
accordance with this Indenture to the payment of principal of and interest on
the Notes.
SECTION 8.4. Repayment to Issuer. Upon request of Issuer, the
Trustee shall promptly turn over to Issuer any money or securities held by it at
any time which, in the opinion of a nationally recognized firm of independent
accountants expressed in a certification delivered to the Trustee, is in excess
of the amounts required to be maintained by the Trustee pursuant to Section 8.2
hereof.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to Issuer upon written request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
and, thereafter, Holders entitled to the money must look to Issuer for payment
as general creditors.
SECTION 8.5. Indemnity for Government Obligations. Issuer shall pay
and shall indemnify the Trustee against any tax, fee or other charge imposed on
or assessed against deposited U.S. Government Obligations or the principal and
interest received on such U.S. Government Obligations other than any such tax,
fee or other charge which by law is for the account of the Holders of the
defeased Notes; provided that the Trustee shall be entitled to charge any such
tax, fee or other charge to such Holder's account.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, Issuer's obligations under this
Indenture and the Notes and the Guarantors' obligations
<PAGE> 88
-81-
under this Indenture and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 8 until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, (a) if
Issuer has made any payment of interest on or principal of any Notes following
the reinstatement of their obligations, Issuer shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent and (b) unless
otherwise required by any legal proceeding or any order or judgment of any court
or governmental authority, the Trustee or Paying Agent shall return all such
money and U.S. Government Obligations to Issuer promptly after receiving a
written request therefor at any time, if such reinstatement of Issuer's
obligations has occurred and continues to be in effect.
ARTICLE 9
AMENDMENTS AND WAIVERS
SECTION 9.1. Without Consent of Holders. Issuer and the Trustee may
amend this Indenture or the Notes without notice to or consent of any Holder:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for the assumption by a successor corporation of the
obligations of Issuer under this Indenture in the event of any transaction
in compliance with Article 5 in which Issuer is not the Surviving Person;
(iii) to provide for uncertificated Notes in addition to or in place
of certificated Notes; provided, however, that the uncertificated Notes
are issued in registered form for purposes of Section 163(f) of the Code
or in a manner such that the uncertificated Notes are as described in
Section 163(f)(2)(B) of the Code;
(iv) to add Guarantees with respect to the Notes;
(v) to release any Guarantor from its Guarantee when permitted by
this Indenture;
(vi) to add security for the Notes;
(vii) to add to the covenants of Issuer for the benefit of the
Holders or to surrender any right or power herein conferred upon Issuer
hereunder or under the Pledge Agreements or other Security Documents;
<PAGE> 89
-82-
(viii) to make any change that does not adversely affect the rights
of any Holder; or
(ix) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA.
After an amendment under this Section becomes effective, Issuer
shall mail to Holders a notice briefly describing such amendment. The failure to
give such notice to all Holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section.
SECTION 9.2. With Consent of Holders. Issuer and the Trustee may
amend this Indenture or the Notes with the consent of the Holders of a majority
in principal amount of the Notes then outstanding (including consents obtained
in connection with a tender offer or exchange for the Notes) and any past
default or compliance with any provisions may also be waived with the consent of
the Holders of a majority in principal amount of the Notes then outstanding.
However, without the consent of each Holder of outstanding Notes affected
thereby, no amendment may:
(i) reduce the amount of Notes whose Holders must consent to an
amendment;
(ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including Defaulted Interest, on any Notes;
(iii) reduce the principal of or change or have the effect of
changing the fixed maturity of any Note, or change the date on which any
Note may be subject to redemption or repurchase, or reduce the redemption
or repurchase price therefor;
(iv) make any Note payable in money other than that stated in the
Notes;
(v) make any change in the provisions of this Indenture protecting
the right of each Holder to receive payment of principal of and interest
on such Note on or after the due date thereof or to bring suit to enforce
such payment;
(vi) waive a Default in the payment of principal or interest on any
Note (except that Holders of at least a majority in aggregate principal
amount of the then outstanding Notes may (x) rescind an acceleration of
the Notes that resulted from a non-payment default and
<PAGE> 90
-83-
(y) waive the payment default that resulted from such acceleration);
(vii) amend in any material respect the obligation of Issuer to make
and consummate a Change of Control Offer in the event of a Change of
Control or modify any of the provisions or definitions with respect
thereto;
(viii) subordinate the Notes or any Guarantee to any other
obligation of Issuer or any Guarantor;
(ix) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms of
this Indenture; or
(x) other than in compliance with this Indenture, consent to a
release of the security interest in the Collateral or make any change in
the provisions of this Indenture or any Security Document relating to the
security interest of the Trustee in the Collateral in a manner adverse to
the Holders.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under this Section becomes effective, Issuer
shall mail to Holders a notice briefly describing such amendment. The failure to
give such notice to all Holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Notes shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Note shall bind the Holder
and every subsequent Holder of that Note or portion of the Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
or waiver is not made on the Note. An amendment or waiver becomes effective once
the requisite number of consents are received by Issuer or the Trustee. After an
amendment or waiver becomes effective, it shall bind every Holder.
Issuer may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to give their consent or take any
other action described above or required or permitted to be taken pursuant to
this Indenture.
<PAGE> 91
-84-
If a record date is fixed, then notwithstanding the immediately preceding
paragraph, those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to give such
consent or to revoke any consent previously given or to take any such action,
whether or not such Persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 120 days after such
record date.
SECTION 9.5. Notation on or Exchange of Notes. If an amendment
changes the terms of a Note, the Trustee may require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder.
Alternatively, if Issuer or the Trustee so determines, Issuer in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms. Failure to make the appropriate notation or to
issue a new Note shall not affect the validity of such amendment.
SECTION 9.6. Trustee to Sign Amendments. The Trustee shall sign any
amendment or waiver authorized pursuant to this Article 9; provided, however,
that the Trustee may, but shall not be obligated to, execute any amendment or
waiver that adversely affects the rights, duties, liabilities or immunities of
the Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.1) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment complies with the provisions of Article 9 of this
Indenture.
ARTICLE 10
GUARANTEES
SECTION 10.1. Guarantees. Each Guarantor hereby unconditionally and
irrevocably guarantees, jointly and severally, to each Holder and to the Trustee
and its successors and assigns as primary obligor and not merely as a surety, on
an unsecured senior basis the performance and punctual payment when due, whether
at Stated Maturity, by acceleration or otherwise, of all obligations of Issuer
under this Indenture and the Notes whether for payment of principal of or
interest on the Notes, expenses, indemnification or otherwise (all such
obligations guaranteed by the Guarantors being herein called the "Guaranteed
Obligations"). The Guarantors will agree to pay, in addition to the amount
stated above, any and all expenses (including reasonable counsel fees and
expenses) incurred by
<PAGE> 92
-85-
the Trustee or the Holders in enforcing any rights under the Guarantees. Each
Guarantor further agrees that the Guaranteed Obligations may be extended or
renewed, in whole or in part, without notice or further assent from such
Guarantor and that such Guarantor will remain bound under this Article 10
notwithstanding any extension or renewal of any Guaranteed Obligations.
Each Guarantor waives presentation to, demand of, payment from and
protest to Issuer of any of the Guaranteed Obligations and also waives notice of
protest for nonpayment. Each Guarantor waives notice of any default under the
Notes or the Guaranteed Obligations. The obligations of each Guarantor hereunder
shall not be affected by (a) the failure of any Holder or the Trustee to assert
any claim or demand or to enforce any right or remedy against Issuer or any
other Person under this Indenture, the Notes or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Notes or any other agreement; (d) the release of any security
held by any Holder or the Trustee for the Guaranteed Obligations or any of them;
(e) the failure of any Holder or the Trustee to exercise any right or remedy
against any other guarantor of the Guaranteed Obligations; or (f) any change in
the ownership of such Guarantor.
Each Guarantor further agrees that its Guarantee herein constitutes
a guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Guaranteed
Obligations.
Except as expressly set forth in Sections 8.2, 10.2 and 10.6, the
obligations of each Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Notes or any
other agreement, by any waiver or modification of any thereof, by any default,
failure or delay, willful or otherwise, in the performance of the Guaranteed
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or
<PAGE> 93
-86-
might in any manner or to any extent vary the risk of such Guarantor or would
otherwise operate as a discharge of such Guarantor as a matter of law or equity.
Each Guarantor further agrees that its Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any Guaranteed Obligation is rescinded or must
otherwise be restored by any Holder or the Trustee upon the bankruptcy or
reorganization of Issuer or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of Issuer to pay any Guaranteed
Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any
Guaranteed Obligation, each Guarantor hereby promises to and will, upon receipt
of written demand by the Trustee, forthwith pay, or cause to be paid, in cash,
to the Holders or the Trustee an amount equal to the sum of (i) the unpaid
amount of such Guaranteed Obligations, (ii) accrued and unpaid interest on such
Guaranteed Obligations (but only to the extent not prohibited by law) and (iii)
all other monetary Guaranteed Obligations of Issuer to the Holders and the
Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Guaranteed Obligations guaranteed hereby until
payment in full of all Guaranteed Obligations. Each Guarantor further agrees
that, as between it, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Guaranteed Obligations hereby may be
accelerated as provided in Article 6 for the purposes of such Guarantor's
Guarantee herein, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the Guaranteed Obligations, and (y)
in the event of any declaration of acceleration of Guaranteed Obligations as
provided in Article 6, the Obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purposes of this
Section.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Section.
SECTION 10.2. Limitation on Liability. Any term or provision of this
Indenture to the contrary notwithstanding, the maximum aggregate amount of the
obligations guaranteed hereunder by any Guarantor shall not exceed the maximum
amount that can be hereby guaranteed without rendering this Indenture,
<PAGE> 94
-87-
as it relates to such Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally. To effectuate the foregoing intention, the
obligations of each Guarantor shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations
hereunder, result in the obligations of such Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal, state
or foreign law. Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a contribution from each other Guarantor in an
amount based on the consolidated net worth of each Guarantor.
SECTION 10.3. Successors and Assigns. This Article 10 shall be
binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Notes shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
SECTION 10.4. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article 10 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 10 at law,
in equity, by statute or otherwise.
SECTION 10.5. Modification. No modification, amendment or waiver of
any provision of this Article 10, nor the consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.
SECTION 10.6. Release of Guarantor. If all of the Capital Stock of a
Guarantor is sold by the Company or any Sub-
<PAGE> 95
-88-
sidiary in a transaction constituting an Asset Sale (or which, but for the
provisions of clause (i) of the definition of such term, would constitute an
Asset Sale), and, if required by this Indenture, (x) the Net Cash Proceeds from
such Asset Sale are used in accordance with Section 4.13 or (y) the Company
delivers to the Trustee an Officers' Certificate to the effect that the Net Cash
Proceeds from such Asset Sale will be used in accordance with Section 4.13
within the time limits specified by such Section, then such Guarantor shall be
released and discharged from its Guarantee upon such use in the case of clause
(x) or upon such delivery in the case of clause (y).
SECTION 10.7. Execution of Supplemental Indenture for Future
Guarantors. Each Subsidiary which is required to become a Guarantor pursuant to
Section 4.5 shall, and Issuer shall cause each such Subsidiary to, promptly
execute and deliver to the Trustee a supplemental indenture in the form of
Exhibit H hereto pursuant to which such Subsidiary shall become a Guarantor
under this Article 10 and shall guarantee the Guaranteed Obligations.
Concurrently with the execution and delivery of such supplemental indenture,
Issuer shall deliver to the Trustee an Opinion of Counsel to the effect that
such supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principles of equity, whether considered
in a proceeding at law or in equity, the Guarantee of such Guarantor is a valid
and legally binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms.
ARTICLE 11
COLLATERAL
SECTION 11.1. Pledge of Collateral.
(a) In order to secure the due and punctual payment of principal of
and interest on the Notes when and as the same shall be due and payable, whether
on an Interest Payment Date, at maturity, by acceleration, repurchase,
redemption or otherwise, and interest on the overdue principal of and interest
(to the extent permitted by law), if any, on the Notes and performance of all
other obligations of Issuer to the Holders or the Trustee under the Transaction
Documents, the Company and the Trustee have simultaneously with the execution of
this Indenture entered into the Pledge Agreements, pursuant to which the Company
has granted to the Trustee for the benefit of the Trustee and the Holders a
first priority Lien on and security interest in the Collateral, and in the event
any Collateral is
<PAGE> 96
-89-
subject to an Asset Sale will supplement the existing Pledge Agreements or enter
into Pledge Agreements or other Security Documents, pursuant to which the
Company or the applicable Guarantor will grant to the Trustee for the benefit of
the Trustee and the Holders a first priority Lien on and security interest in
the Replacement Assets replacing the Collateral subject to such Asset Sale,
which Replacement Assets shall constitute Collateral.
(b) Each Holder, by accepting a Note, consents and agrees to all of
the terms and provisions of the Security Documents, as the same may be in effect
from time to time or may be amended from time to time in accordance with the
provisions of the Security Documents and this Indenture, and authorizes and
directs the Trustee to act as secured party with respect thereto.
(c) As set forth in and governed by the Security Documents, as among
the Holders of Notes, the Collateral as now or hereafter constituted shall be
held for the equal and ratable benefit of the Holders of the Notes without
preference, priority or distinction of any thereof over any other by reason of
difference in time of issuance, sale or otherwise, as security for the Notes.
SECTION 11.2. Recording; Priority; Opinions, Etc.
(a) Issuer shall at its sole cost and expense perform any and all
acts and execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable federal, state or local jurisdiction, which are
necessary or advisable and shall do such other acts and execute such other
documents as may be required under the Security Documents, from time to time, in
order to grant, perfect and maintain in favor of the Trustee for the benefit of
the Trustee and the Holders a valid and perfected first priority Lien on the
Collateral and to fully preserve and protect the rights of the Trustee and the
Holders under this Indenture and the Security Documents.
Issuer shall from time to time promptly pay and satisfy all
financing and continuation statement recording and/or filing fees, charges and
taxes relating to this Indenture and the Security Documents, any amendments
thereto and any other instruments of further assurance. Without limiting the
generality of the foregoing covenant, in the event at any time the Trustee shall
determine that additional transfer or similar taxes are required to be paid to
perfect or continue any Lien
<PAGE> 97
-90-
on any Collateral, Issuer shall pay such taxes promptly upon demand by the
Trustee.
(b) Issuer shall, with respect to (i) below, promptly after the
initial issuance of the Notes, and with respect to (ii) below, upon
qualification of this Indenture under the TIA, furnish to the Trustee:
(i) Opinion(s) of Counsel either (a) to the effect that, in the
opinion of such counsel, this Indenture and the grant of a security
interest in the Collateral intended to be made by the Security Documents
and all other instruments of further assurance, including, without
limitation, financing statements, have been properly recorded and filed to
the extent necessary to perfect the Lien on the Collateral created by the
Security Documents and reciting the details of such action, and stating
that as to the Liens created pursuant to the Security Documents, such
recordings and filings are the only recordings and filings necessary to
give notice thereof and that no re-recordings or refilings are necessary
to maintain such notice (other than as stated in such opinion), or (b) to
the effect that, in the opinion of such counsel, no such action is
necessary to perfect such Lien;
(ii) on May 1 in each year beginning with May 1, 1999, an Opinion
of Counsel, dated as of such date, either (a) to the effect that, in the
opinion of such counsel, such action has been taken with respect to the
recordings, registerings, filings, re-recordings, re-registerings and
refilings of all financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of
the Security Documents and reciting with respect to such Liens the details
of such action or referencing prior Opinions of Counsel in which such
details are given, and stating that all financing statements and
continuation statements have been executed and filed that are necessary
fully to preserve and protect the rights of the Holders and the Trustee
hereunder and under the Security Documents with respect to the Liens, or
(b) to the effect that, in the opinion of such counsel, no such action is
necessary to maintain such Liens.
SECTION 11.3. Release of Collateral. The Trustee shall not release
Collateral from the Lien of the Security Documents unless such release is in
accordance with the provisions of this Section 11.3 and of the Security
Documents. To the extent applicable, Issuer shall cause TIA Section 314(d)
relating to the release of property or Liens to be complied with.
(a) Satisfaction and Discharge; Defeasance. Issuer
<PAGE> 98
-91-
shall be entitled to obtain a full release of all of the Collateral from the
Lien of this Indenture and the Security Documents upon compliance with all of
the conditions precedent for satisfaction and discharge of this Indenture or for
defeasance pursuant to Section 8.1. Upon delivery by Issuer to the Trustee of an
Officers' Certificate and an Opinion of Counsel, each to the effect that all of
the conditions precedent have been complied with (which may be the same
Officers' Certificate and Opinion of Counsel required by Article 8), the Trustee
shall take all necessary action, at the request and expense of Issuer, to
release and reconvey to Issuer all of the Collateral, and shall deliver such
Collateral in its possession to Issuer including, without limitation, the
execution and delivery of releases or waivers whenever necessary.
(b) Sales of Collateral. Collateral constituting assets subject to
an Asset Sale may be released from the Lien of this Indenture and the Security
Documents if such Asset Sale complies with this Indenture, including
applications of the Net Cash Proceeds in compliance with Section 4.13 and
Article 12.
Upon compliance with the conditions set forth in (b) above, and the
delivery by Issuer of such other documents that the Trustee may reasonably
require, the Trustee shall execute, acknowledge (if applicable) and deliver to
Issuer such counterpart within 10 Business Days after receipt by the Trustee of
a Release Notice, as applicable, and the satisfaction of the applicable
requirements of this Section 11.3.
At any time when a Default shall have occurred and be continuing, no
release of Collateral pursuant to the provisions of this Indenture or the
Security Documents shall be effective as against the Holders.
SECTION 11.4. Trust Indenture Act Requirements. The release of any
Collateral from the Security Documents or the release of, in whole or in part,
the Liens created by the Security Documents, will not be deemed to impair the
Lien of the Security Documents in contravention of the provisions hereof if and
to the extent the Collateral or Liens are released pursuant to the Security
Documents and pursuant to the terms hereof. The Trustee and each of the Holders
acknowledge that a release of Collateral or Liens strictly in accordance with
the terms of the Security Documents and the terms hereof will not be deemed for
any purpose to be an impairment of the Liens created pursuant to the Security
Documents in contravention of the terms of this Indenture. Without limitation,
Issuer and each other obligor on the Notes shall cause TIA Section 314(d)
relating to the release of property or securities from the Liens of each hereof
and of the Security Documents to be complied with. Any certificate or opinion
required by TIA Section 314(d) may be made by an
<PAGE> 99
-92-
Officer of Issuer, except in cases which TIA Section 314(d) requires that such
certificate or opinion be made by an independent person.
SECTION 11.5. Suits To Protect Collateral. Subject to the provisions
of the Security Documents, the Trustee shall have power to institute and to
maintain such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of any of the Security Documents or this Indenture, and such suits and
proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the Collateral or be
prejudicial to the interests of the Holders or the Trustee).
SECTION 11.6. Purchaser Protected. In no event shall any purchaser
in good faith of any property purported to be released hereunder be bound to
ascertain the authority of the Trustee to execute the release or to inquire as
to the satisfaction of any conditions required by the provisions hereof for the
exercise of such authority or to see to the application of any consideration
given by such purchaser or other transferee; nor shall any purchaser or other
transferee of any property or rights permitted by this Article 11 to be sold be
under obligation to ascertain or inquire into the authority of Issuer to make
any such sale or other transfer.
SECTION 11.7. Powers Exercisable by Receiver or Trustee. In case the
Collateral shall be in the possession of a receiver or trustee, lawfully
appointed, the powers conferred in this Article 11 upon Issuer with respect to
the release, sale or other disposition of such property may be exercised by such
receiver or trustee, and an instrument signed by such receiver or trustee shall
be deemed the equivalent of any similar instrument of Issuer or of any officer
or officers thereof required by the provisions of this Article 11.
SECTION 11.8. Determinations Relating to Collateral. In the event
(i) the Trustee shall receive any written request from Issuer under the Security
Documents for consent or approval with respect to any matter or thing relating
to any Collateral or Issuer's obligations with respect thereto (including,
without limitation, the determination as to whether any portion of the
Collateral constitutes released Collateral) or (ii) there shall be due to or
from the Trustee under the provisions of the Security Documents any performance
or the de-
<PAGE> 100
-93-
livery of any instrument or (iii) the Trustee shall become aware of any
nonperformance by Issuer of any covenant or any breach of any representation or
warranty of Issuer set forth in the Security Documents, then, in each such
event, the Trustee shall be entitled to hire experts, consultants, agents and
attorneys to advise the Trustee on the manner in which the Trustee should
respond to such request or render any requested performance or response to such
nonperformance or breach. The Trustee shall be fully protected in the taking of
any action recommended or approved by any such expert, consultant, agent or
attorney or agreed to by a majority of Holders pursuant to Section 6.5.
SECTION 11.9. Form and Sufficiency of Release. In the event that
Issuer has sold, exchanged, or otherwise disposed of or proposes to sell,
exchange or otherwise dispose of any portion of the Collateral which under the
provisions of Section 11.3 may be sold, exchanged or otherwise disposed of by
Issuer, and Issuer requests the Trustee to furnish a written disclaimer, release
or quitclaim of any interest in such property under the Security Documents, the
Trustee shall promptly execute such an instrument promptly after satisfaction of
the conditions set forth herein for delivery of such release. Notwithstanding
the preceding sentence, all purchasers and grantees of any property or rights
purporting to be released herefrom shall be entitled to rely upon any release
executed by the Trustee hereunder as sufficient for the purposes of this
Indenture and as constituting a good and valid release of the property therein
described from the Lien of this Indenture and the Security Documents.
SECTION 11.10. Release upon Termination of Issuer's Obligations. In
the event that Issuer delivers an Officers' Certificate certifying that the
provisions of Sections 8.1 or 8.2 have been complied with, the Trustee shall (i)
execute and deliver such releases, termination statements and other instruments
as Issuer may reasonably request evidencing the termination of the Liens created
by the Security Documents and (ii) not be deemed to hold the Liens for the
benefit of the Holders.
SECTION 11.11. Perfection with Respect to Certain Collateral.
Notwithstanding anything to the contrary in this Article 11, if the Lien on and
security interest in any Collateral (including any Collateral consisting of
Replacement Assets) is governed by the law of any jurisdiction other than any
jurisdiction in the United States, and such law does not permit "perfection" of
a security interest, then, as to such Collateral, references in this Article 11
to perfection (including in any Opinion of Counsel) shall not apply but shall be
replaced by references to "validity," "made valid" or like appropriate term;
provided, however, that the foregoing shall not relieve
<PAGE> 101
-94-
Issuer of its obligations to perform any and all such acts and execute such
documents as are necessary or advisable to perfect, in favor of the Trustee for
the benefit of the Trustee and the Holders, the Lien on and security interest in
such Collateral to the extent the law of any jurisdiction in the United States
or any other jurisdiction that permits perfection of a security interest may
apply.
ARTICLE 12
APPLICATION OF TRUST MONEYS
SECTION 12.1. "Trust Moneys" Defined. All cash or Cash Equivalents
received by the Trustee:
(a) upon the release of Collateral from the Lien of this Indenture
and/or the Security Documents, including investment earnings thereon; or
(b) as proceeds of any other sale or other disposition of all or any
part of the Collateral by or on behalf of the Trustee or any collection,
recovery, receipt, appropriation or other realization of or from all or
any part of the Collateral pursuant to this Indenture or any of the
Security Documents or otherwise; or
(c) for application under this Article 12 as elsewhere provided in
this Indenture (including, without limitation, and subject to, Section
4.13) or the Security Documents, or whose disposition is not elsewhere
otherwise specifically provided for herein or in any Security Document;
(all such moneys being herein sometimes called "Trust Moneys"; provided,
however, that Trust Moneys shall not include any property deposited with the
Trustee pursuant to Section 3.5 or 4.13 or Article 8 or delivered to or received
by the Trustee for application in accordance with Section 6.10 hereof) shall be
held by the Trustee for the benefit of the Holders as a part of the Collateral
and, upon any entry upon or sale or other disposition of the Collateral or any
part thereof pursuant to enforcement of the Security Documents, such Trust
Moneys shall be applied in accordance with Section 6.10; but, prior to any such
entry, sale or other disposition, all or any part of the Trust Moneys may be
withdrawn, and shall be released, paid or applied by the Trustee, from time to
time as provided in this Article 12.
On the Issue Date there shall be established and, at all times
hereafter until this Indenture shall have terminated, there shall be maintained
with the Trustee an account which
<PAGE> 102
-95-
shall be entitled the "Collateral Account" (the "Collateral Account"). The
Collateral Account shall be established and maintained by the Trustee at the
Corporate Trust Office of the Trustee. All Trust Moneys which are received by
the Trustee shall be deposited in the Collateral Account and thereafter shall be
held, applied and/or disbursed by the Trustee in accordance with the terms of
this Article 12.
SECTION 12.2. Withdrawal of Net Cash Proceeds Following an Asset
Sale. To the extent that any Trust Moneys consist of Trust Moneys received by
the Trustee pursuant to the provisions of Section 4.13 and Issuer has made a Net
Proceeds Offer which is not fully subscribed to by the Holders, the Trust Moneys
remaining after completion of the Net Proceeds Offer may be withdrawn by Issuer
and shall be paid by the Trustee to Issuer (or as otherwise directed by Issuer)
upon a Company Order to the Trustee and upon receipt by the Trustee of the
following:
(a) A notice which shall (A) refer to this Section 12.2 and (B)
describe with particularity the Asset Sale from which such Trust Moneys were
held as Collateral, the amount of Trust Moneys applied to the purchase of Notes
pursuant to the Net Proceeds Offer and the remaining amount of Trust Moneys to
be released to Issuer;
(b) An Officer's Certificate certifying that (A) the release of the
Trust Moneys complies with the terms and conditions of Section 4.13, (B) there
is no Default or Event of Default in effect or continuing on the date hereof,
(C) the release of the Trust Moneys will not result in a Default or Event of
Default hereunder, and (D) all conditions precedent and covenants herein
provided relating to such release have been complied with;
(c) All documentation required under TIA Section 314(d); and
(d) An Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Collateral Agent and the Trustee conform to
the requirements of this Indenture and that all conditions precedent herein
provided for relating to such application of Trust Moneys have been complied
with.
SECTION 12.3. Withdrawal of Trust Moneys for Replacement Assets. To
the extent that any Trust Moneys consist of Net Cash Proceeds received by the
Trustee pursuant to the provisions of Section 4.13 and Issuer intends to invest
such Net Cash Proceeds in Replacement Assets consistent with Section 4.13 (the
"Released Trust Moneys"), such Trust Moneys may be
<PAGE> 103
-96-
withdrawn by Issuer and shall be paid by the Trustee to Issuer (or as otherwise
directed by Issuer) to reimburse Issuer for expenditures made or to pay costs
incurred in connection with such Replacement Assets upon a Company Order to the
Trustee and upon receipt by the Trustee of the following:
(a) If the Replacement Assets are Real Property, Issuer shall also
deliver to the Trustee:
(i) an instrument or instruments in recordable form sufficient for
the Lien of any Mortgage to cover such Real Property which, if the Real
Property is a leasehold or easement interest, shall include normal and
customary provisions with respect thereto and evidence of the filing of
all such financing statements and other instruments as may be necessary to
perfect such Liens;
(ii) a policy of title insurance (or a commitment to issue title
insurance) insuring that the Lien of this Indenture and any Mortgage
constitutes a valid and perfected mortgage Lien on such Real Property in
an aggregate amount equal to the fair market value of the Real Property,
together with an Officers' Certificate stating that any specific
exceptions to such title insurance are Liens of the type which are
customary and incurred in the ordinary course of business, together with
such endorsements and other opinions as may be reasonably requested by
Trustee;
(iii) in the event such Real Property has a fair market value in
excess of $250,000, a survey with respect thereto; and
(iv) evidence of payment or a closing statement indicating payments
to be made by Issuer of all title premiums, recording charges, transfer
taxes and other costs and expenses, including reasonable legal fees and
disbursements of counsel for the Trustee (and any local counsel), that may
be incurred to validly and effectively subject the Real Property to the
Lien of any applicable Security Documents and to perfect such Lien.
(b) If the Replacement Assets are personal property, Issuer shall
deliver to the Trustee:
(i) an instrument in recordable form sufficient for the Lien of any
applicable Security Document to cover such personal property; and
(ii) evidence of payment or a closing statement indicating payments
to be made by Issuer of all filing fees, recording charges, transfer taxes
and other costs and ex-
<PAGE> 104
-97-
penses, including reasonable legal fees and disbursements of counsel for
the Trustee (and any local counsel), that may be incurred to validly and
effectively subject the Replacement Assets to the Lien of any Security
Document and to perfect such Lien.
(c) all documentation required under TIA Section 314(d); and
(d) An Opinion of Counsel stating that the documents that have been
or are therewith delivered to the Trustee conform to the requirements of this
Indenture and that all conditions precedent herein relating to such application
of Trust Moneys have been complied with.
Upon compliance with the foregoing provisions of this Indenture, the
Trustee shall apply the Released Trust Moneys as directed and specified by such
Company Order.
SECTION 12.4. Withdrawal of Trust Moneys on Basis of Retirement of
Notes. Except as otherwise required by the Security Documents, the Trustee shall
apply Trust Moneys from time to time to the payment of the principal of and
interest on any Notes, as Issuer shall request in writing, upon receipt by the
Trustee of the following:
(a) Board Resolutions of Issuer directing the application pursuant
to this Section 12.4 of a specified amount of Trust Moneys and, if such
moneys are to be applied to payment, designating the Notes so to be paid
and, if such moneys are to be applied to the purchase of Notes,
prescribing the method of purchase, the price or prices to be paid and the
maximum principal amount of Notes to be purchased and any other provisions
of this Indenture governing such purchase;
(b) cash in the maximum amount of the accrued interest, if any,
required to be paid in connection with any such purchase, which cash shall
be held by the Trustee in trust for such purpose;
(c) an Officers' Certificate, dated not more than five Business Days
prior to the date of the relevant application stating (i) that no Default
or Event of Default exists unless such Default or Event of Default would
be cured thereby, and (ii) that all conditions precedent and covenants
herein provided for relating to such application of Trust Moneys have been
complied with; and
(d) an Opinion of Counsel stating that the documents and the cash or
Cash Equivalents, if any, which have been
<PAGE> 105
-98-
or are therewith delivered to and deposited with the Trustee conform to
the requirements of this Indenture and that all conditions precedent
herein provided for relating to such application of Trust Moneys have been
complied with.
Upon compliance with the foregoing provisions of this Section, the
Trustee shall apply Trust Moneys as directed and specified by such Board
Resolution, up to, but not exceeding, the principal amount of the Securities so
paid or purchased, using the cash deposited pursuant to paragraph (b) of this
Section 12.05, to the extent necessary, to pay any accrued interest required in
connection with such purchase.
SECTION 12.5. Investment of Trust Moneys. All or any part of any
Trust Moneys held by the Trustee shall from time to time be invested or
reinvested by the Trustee in any Cash Equivalents pursuant to the written
direction of Issuer, which shall specify the Cash Equivalents in which such
Trust Moneys shall be invested. Unless an Event of Default occurs and is
continuing, any interest on such Cash Equivalents (in excess of any accrued
interest paid at the time of purchase) that may be received by the Trustee shall
be forthwith paid to Issuer. Such Cash Equivalents shall be held by the Trustee
as a part of the Collateral, subject to the same provisions hereof as the cash
used by it to purchase such Cash Equivalents.
The Trustee shall not be liable or responsible for any loss
resulting from such investments or sales except only for its own negligent
action, its own negligent failure to act or its own willful misconduct in
complying with this Section 12.5.
SECTION 12.6. Powers Exercisable by Trustee or Receiver.
In case the Collateral (other than any cash, Cash Equivalents,
securities and other personal property held by, or required to be deposited or
pledged with, the Trustee hereunder or under the Security Documents shall be in
the possession of a receiver or trustee lawfully appointed, the powers
hereinbefore in this Article 12 conferred upon Issuer with respect to the
withdrawal or application of Trust Moneys may be exercised by such receiver or
trustee, in which case a certificate signed by such receiver or trustee shall be
deemed the equivalent of any Officers' Certificate required by this Article 12.
If the Trustee shall be in possession of any of the Collateral hereunder or
under any of the Security Documents, such powers may be exercised by the
Trustee, in its discretion.
SECTION 12.7. Disposition of Notes Retired. All Notes received by
the Trustee and for whose purchase Trust Mon-
<PAGE> 106
-99-
eys are applied under this Article 12, if not otherwise canceled, shall be
promptly delivered to the Trustee for cancellation and destruction unless the
Trustee shall be otherwise directed by Issuer. Upon destruction of any Notes,
the Trustee shall issue a certificate of destruction to Issuer.
ARTICLE 13
MISCELLANEOUS
SECTION 13.1. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control. If this Indenture excludes any provision of the TIA that is
required to be included, such provision shall be deemed included herein.
SECTION 13.2. Notices. Any notice or communication shall be in
writing and delivered in person, by overnight courier or facsimile (if to
Issuer, with receipt confirmed by an Officer) or mailed by first-class mail
addressed as follows:
If to Issuer or any Guarantor:
Decora Industries, Inc.
1 Mill Street
Fort Edward, New York 12828-1727
Attention: Chief Financial Officer
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
25th Floor
New York, New York 10036-1532
Attention: Corporate Trust Department
Issuer or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed or sent by overnight courier or
facsimile to a Holder shall be sent to the Holder at the Holder's address as it
appears on the registration books of the Registrar and shall be sufficiently
given if so sent within the time prescribed.
Failure to send a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is sent
<PAGE> 107
-100-
in the manner provided above, it is duly given, whether or not the addressee
receives it.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice.
SECTION 13.3. Communication by Holders with Other Holders. Holders
may communicate pursuant to TIA Section 312(b) with other Holders with respect
to their rights under this Indenture or the Notes. Issuer, the Trustee, the
Registrar and anyone else shall have the protection of TIA Section 312(c).
SECTION 13.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Issuer to the Trustee to take or refrain from
taking any action under this Indenture, Issuer shall furnish to the Trustee to
the extent required by the TIA or this Indenture:
(1) an Officers' Certificate (which in connection with the original
issuance of the Notes need only be executed by one Officer for Issuer) in
form and substance reasonably satisfactory to the Trustee stating that, in
the opinion of the signers, all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been complied with;
and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.5. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
<PAGE> 108
-101-
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with; provided,
that an Opinion of Counsel can rely as to matters of fact on an Officers'
Certificate or a certificate of a public official.
SECTION 13.6. When Notes Disregarded. In determining whether the
Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by Issuer or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with Issuer shall be disregarded and deemed not to be outstanding,
except that, for the purpose of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes which
the Trustee actually knows are so owned shall be so disregarded. Also, subject
to the foregoing, only Notes outstanding at the time shall be considered in any
such determination.
SECTION 13.7. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Holders. The
Trustee shall provide Issuer reasonable notice of such rules. The Registrar and
the Paying Agent may make reasonable rules for their functions.
SECTION 13.8. Legal Holidays. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
SECTION 13.9. Governing Law. This Indenture and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New York
without giving effect to applicable principles of conflict of laws to the extent
that the application of the laws of another jurisdiction would be required
thereby.
SECTION 13.10. No Recourse Against Others. No recourse for the
payment of the principal of or interest on any of the Notes or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of Issuer or any Guarantor in this Indenture,
or in any of the Notes or the Guarantees or because of the creation of any
Indebtedness represented hereby and thereby, shall be had against any
incorporator, stockholder, officer, director, employee or controlling person of
Issuer or any of its Subsidiaries. Each Holder, by accepting a Note, waives and
releases all such liability. The waiver and release shall be part of the
consideration for the issuance of the Notes.
<PAGE> 109
-102-
SECTION 13.11. Successors. All agreements of Issuer in this
Indenture and the Notes shall bind Issuer's successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement. One
signed copy is enough to prove this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 13.14. Severability Clause. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
<PAGE> 110
S-1
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
DECORA INDUSTRIES, INC.
By:
----------------------------------------
Name:
Title:
GUARANTOR:
DECORA, INCORPORATED
By:
----------------------------------------
Name:
Title:
TRUSTEE:
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
----------------------------------------
Name:
Title:
<PAGE> 111
EXHIBIT A
FACE OF NOTE
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $976.37; (2) THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT IS $23.63; (3) THE ISSUE DATE IS APRIL 29, 1998; AND (4)
THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY ON A BOND EQUIVALENT BASIS) IS
11.5%.
CUSIP No.
DECORA INDUSTRIES, INC.
11% SENIOR SECURED NOTES DUE 2005
DECORA INDUSTRIES, INC., a Delaware corporation ("Issuer"), promises
to pay to [_________], or registered assigns, the principal sum of
[__________________] Dollars on May 1, 2005.
Interest Payment Dates: May 1 and November 1, commencing November 1,
1998.
Record Dates: April 15 and October 15.
To the extent set forth in the Security Documents, payment hereof is
secured, on an equal and ratable basis with all other Notes, by a valid,
perfected first priority security interest in the Collateral (as defined in the
Indenture), the terms of which security interest are more fully set forth in the
Security Documents.
Additional provisions of this Note are set forth on the reverse side
of this Note.
A-1
<PAGE> 112
IN WITNESS WHEREOF, Issuer has caused this Note to be signed
manually or by facsimile by a duly authorized officer.
DECORA INDUSTRIES, INC.
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
United States Trust Company of New York, as Trustee, certifies that this is one
of the Notes referred to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
-------------------------------------
Authorized Signatory
A-2
<PAGE> 113
REVERSE OF NOTE
11% SENIOR SECURED NOTES DUE 2005
1. Interest
DECORA INDUSTRIES, INC., a Delaware corporation (such entity, and
its successors and assigns under the Indenture, "Issuer"), promises to pay
interest on the principal amount of this Note at the rate per annum shown above.
Issuer will pay interest semiannually on May 1 and November 1 of each year,
commencing November 1, 1998. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from April 29, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Issuer shall pay interest on overdue principal at 1% per
annum in excess of the rate borne by the Notes, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment
Issuer will pay interest on the Notes (except defaulted interest) to
the Persons who are registered holders of Notes at the close of business on the
record date immediately preceding the Interest Payment Date even if Notes are
canceled on registration of transfer or registration of exchange (including
pursuant to an Exchange Offer (as defined in the Registration Rights Agreement))
after the record date. Holders must surrender Notes to a Paying Agent to collect
principal payments. Issuer will pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, Issuer may pay principal and
interest by its check payable in such U.S. Legal Tender. Issuer may deliver any
such interest payment to the Paying Agent or to a Holder's registered address.
3. Paying Agent and Registrar
Initially, United States Trust Company of New York (the "Trustee"),
will act as Paying Agent and Registrar. Issuer may appoint and change any Paying
Agent, Registrar or co-registrar without notice. Issuer may act as Paying Agent,
Registrar, co-Registrar or transfer agent.
4. Indenture
Issuer issued the Notes under an Indenture dated as of April 29,
1998 (the "Indenture"), among Issuer, the Guaran-
A-3
<PAGE> 114
tors party thereto and the Trustee. This Note is one of a duly authorized issue
of Initial Notes of Issuer designated as its 11% Senior Secured Notes due 2005
(the "Initial Notes"). The Notes include the Initial Notes and the Exchange
Notes (as defined in the Indenture) issued in exchange for the Initial Notes
pursuant to the Registration Rights Agreement. The Initial Notes and the
Exchange Notes are treated as a single class of securities under the Indenture.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA").
Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture and the TIA for a statement of those
terms. Any conflict between this Note and the Indenture will be governed by the
Indenture.
The Notes are secured senior obligations of Issuer limited to
$112,750,000 aggregate principal amount (subject to Section 2.7 of the
Indenture). The Indenture imposes certain limitations on the incurrence of
Indebtedness by Issuer and the Restricted Subsidiaries, the existence of Liens,
the payment of dividends on, and redemption of, the Equity Interests of Issuer,
certain Assets Sales, the issuance or sale of Capital Stock of Restricted
Subsidiaries, investments by Issuer and its Restricted Subsidiaries,
consolidations, mergers and transfers of all or substantially all the assets of
Issuer, and transactions with Affiliates. In addition, the Indenture limits the
ability of Issuer and its Restricted Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal, premium
and interest, if any, on the Notes and all other amounts payable by Issuer under
the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Notes and the Indenture, the Guarantors have unconditionally guaranteed the
obligations of Issuer under the Indenture and the Notes on an unsecured senior
basis pursuant to the terms of the Indenture.
5. Optional Redemption
(a) Except as set forth in the next paragraph, the Notes may not be
redeemed at the option of Issuer prior to May 1, 2002. Thereafter, the Notes
will be redeemable, at Issuer's option, in whole or in part, at any time or from
time to time, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if
A-4
<PAGE> 115
any, to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on an Interest Payment Date that is
on or prior to the date fixed for redemption) if redeemed during the 12-month
period commencing on May 1 of the years set forth below:
<TABLE>
<CAPTION>
Period Percentage
------ ----------
<S> <C>
2002 105.750%
2003 103.833%
2004 and thereafter 101.917%
</TABLE>
(b) At any time and from time to time on or prior to May 1, 2001,
Issuer may redeem Notes with the net cash proceeds of one or more Public Equity
Offerings at a redemption price equal to 111.50% of the principal amount at
maturity thereof, plus accrued and unpaid interest, if any, to the redemption
date (subject to the right of Holders of record on the relevant record date to
receive interest due on an Interest Payment Date that is on or prior to the
dated fixed for redemption); provided, however, that at least $73.29 million
aggregate principal amount at maturity of Notes must remain outstanding after
each such redemption (other that any Notes owned by Issuer or any of its
Subsidiaries) and such redemption shall be effected not more than 120 days after
the consummation of any such Public Equity Offering.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at the registered address. Notes in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued interest on all
Notes (or portions thereof) to be redeemed on the redemption date is deposited
with the Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest ceases to accrue on
such Notes (or such portions thereof) called for redemption. If a notice or
communication is sent in the manner provided in the Indenture, it is duly given,
whether or not the addressee receives it. Failure to send a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
7. Change of Control
Upon a Change of Control, each Holder of Notes will have
A-5
<PAGE> 116
the right to require Issuer to purchase all or any part of the Notes of such
Holder at a purchase price in cash equal to 101% of the principal amount at
maturity of the Notes to be purchased plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest due on an Interest Payment Date that is
on or prior to the date fixed for redemption) as provided in, and subject to the
terms of, the Indenture.
8. Registration Rights
Pursuant to the Registration Rights Agreement dated April 29, 1998
by and among Issuer, the Guarantors and Lazard Freres & Co. LLC, as initial
purchaser of the Notes (the "Registration Rights Agreement"), Issuer will be
obligated to consummate an exchange offer pursuant to which the holder of this
Note shall have the right to exchange this Note for 11% Senior Secured Notes due
2005, Series B, of Issuer (the "Exchange Notes"), which have been registered
under the Securities Act, in like principal amount and having identical terms as
the Notes. The Holders of the Notes shall be entitled to receive liquidated
damages in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
9. Denominations; Transfer; Exchange
The Notes are in registered form, without coupons, and in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture, including any transfer tax or other similar governmental charge
payable in connection therewith. The Registrar need not register the transfer of
or exchange any Notes selected for redemption (except, in the case of a Note to
be redeemed in part, the portion of the Note not to be redeemed) or any Notes
for a period of 15 days before a selection of Notes to be redeemed or 15 days
before an Interest Payment Date.
10. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of it
for all purposes.
A-6
<PAGE> 117
11. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to Issuer at
its written request unless an abandoned property law designates another Person.
After any such payment, Holders entitled to the money must look only to Issuer
and not to the Trustee for payment.
12. Discharge and Defeasance
Subject to certain conditions, Issuer at any time may terminate some
or all of its obligations under the Notes and the Indenture if Issuer deposits
with the Trustee money or U.S. Government Obligations for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Notes and (ii) any past
default or noncompliance with any provision may be waived with the consent of
the Holders of a majority in principal amount outstanding of the Notes. Subject
to certain exceptions set forth in the Indenture, without the consent of any
Holder, Issuer, the Guarantors and the Trustee may amend the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to comply with Article 5
of the Indenture, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to add Guarantees with respect to the Notes, to release
Guarantors when permitted by the Indenture, to secure the Notes with additional
collateral, to add additional covenants or surrender rights and powers conferred
on Issuer, to make any change that does not adversely affect the rights of any
Holder or to comply with any request of the SEC in connection with qualifying
the Indenture under the TIA.
14. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding may
declare all the Notes to be due and payable. Certain events of bankruptcy or
insolvency with respect to Issuer are Events of Default which will result in the
Notes being due and payable immediately upon the occurrence of such Events of
Default.
Holders may not enforce the Indenture or the Notes
A-7
<PAGE> 118
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Notes unless it is offered reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of the
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders notice of any continuing Default (except a Default in
payment of principal or interest) if and so long as a committee of its trust
officers determines that withholding notice is in the interest of the Holders.
15. Trustee Dealings with Issuer
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by Issuer or any of its Affiliates and may otherwise deal with Issuer or any of
its Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of Issuer or any Guarantor in the Indenture, or in any of the Notes or
Guarantees or because of the creation of any Indebtedness represented hereby and
thereby, shall be had against any incorporator, stockholder, officer, director,
employee, agent or controlling person of Issuer or any of its Subsidiaries. Each
Holder, by accepting a Note, waives and releases all such liability.
17. Guarantees
This Note will be entitled to the benefits of certain Guarantees, if
any, made for the benefit of the Holders. Reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
18. Collateral
In order to secure the due and punctual payment of the principal of
and interest on the Notes and all other amounts payable by Issuer under the
Indenture and the Notes when and as the same will be due and payable, whether at
maturity, by acceleration or otherwise, according to the terms of
A-8
<PAGE> 119
the Notes and the Indenture, Issuer has granted a security interest in capital
stock of certain of its direct Subsidiaries.
Each Holder, by accepting a Note, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Security Documents and the terms and provisions of the Indenture will not be
deemed for any purpose to be an impairment of the security under this Indenture.
19. Governing Law
The Indenture and the Notes shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflict of laws to the extent that the application of
the laws of another jurisdiction would be required thereby.
20. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
21. Abbreviations
Customary abbreviations may be used in the name of a Noteholder or
an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
22. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
A-9
<PAGE> 120
Issuer will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture. Requests may be made as follows:
Decora Industries, Inc.
1 Mill Road
Fort Edward, New York 12828-1727
Attention: Chief Financial Officer
A-10
<PAGE> 121
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________ agent to transfer this Note on the books of
Issuer. The agent may substitute another to act for him.
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) two years from the Issue Date, the undersigned confirms that
it has not utilized any general solicitation or general advertising in
connection with the transfer:
[Check One]
<TABLE>
<S> <C> <C>
(1) __ to Issuer or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended; or
(3) __ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933,
as amended) that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter can be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act of
1933, as amended; or
(5) __ pursuant to the exemption from registration provided by Rule 144
under the Securities Act of 1933, as amended; or
(6) __ pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
</TABLE>
A-11
<PAGE> 122
<TABLE>
<S> <C> <C>
(7) __ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
</TABLE>
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of Issuer as defined in Rule 144 under
the Securities Act of 1933, as amended (an "Affiliate"):
[ ] The transferee is an Affiliate of Issuer.
Unless one of the items is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if item
(3), (4), (5) or (7) is checked, Issuer or the Trustee may require, prior to
registering any such transfer of the Notes, in their sole discretion, such
written legal opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the Trustee or Issuer has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, as amended.
If none of the foregoing items is checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.14 of the Indenture shall have
been satisfied.
Dated: Signed:
------------------------ ------------------------------------
Sign exactly as name appears on the
other side of this Note.
Signature Guarantee:
-----------------------------------------------------------
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-12
<PAGE> 123
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Issuer as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
----------------- --------------------------------------------------
NOTICE: To be executed by an executive officer
A-13
<PAGE> 124
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by Issuer pursuant
to Section 4.8 or 4.13 of the Indenture, check the box: [ ]
If you want to elect to have only part of this Note purchased by Issuer
pursuant to Section 4.8 or 4.13 of the Indenture, state the amount: $___________
Date: Your Signature:
------------- -------------------------------------------
(Sign exactly as your name appears on the
other side of the Note.)
Signature Guarantee:
-----------------------------------------------------------
(Signature must be guaranteed)
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-14
<PAGE> 125
EXHIBIT B
FACE OF NOTE
FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS
SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY, (1) THE ISSUE PRICE IS $976.37; (2) THE AMOUNT OF
ORIGINAL ISSUE DISCOUNT IS $23.63; (3) THE ISSUE DATE IS APRIL 29, 1998; AND (4)
THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY ON A BOND EQUIVALENT BASIS) IS
11.5%.
CUSIP No.
DECORA INDUSTRIES, INC.
11% SENIOR SECURED NOTES DUE 2005, SERIES B
DECORA INDUSTRIES, INC., a Delaware corporation ("Issuer"), promises
to pay to [______________], or registered assigns, the principal sum of
[_________________________] Dollars on May 1, 2005.
Interest Payment Dates: May 1 and November 1, commencing November 1,
1998.
Record Dates: April 15 and October 15.
To the extent set forth in the Security Documents, payment hereof is
secured, on an equal and ratable basis with all other Notes, by a valid,
perfected first priority security interest in the Collateral (as defined in the
Indenture), the terms of which security interest are more fully set forth in the
Security Documents.
Additional provisions of this Note are set forth on the reverse side
of this Note.
B-1
<PAGE> 126
IN WITNESS WHEREOF, Issuer has caused this Note to be signed
manually or by facsimile by a duly authorized officer.
DECORA INDUSTRIES, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
United States Trust Company of New York, as Trustee, certifies that this is one
of the Notes referred to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
----------------------------------------
Authorized Signatory
B-2
<PAGE> 127
REVERSE OF NOTE
11% SENIOR SECURED NOTES DUE 2005, SERIES B
1. Interest
DECORA INDUSTRIES, INC., a Delaware corporation (such entity, and
its successors and assigns under the Indenture, "Issuer"), promises to pay
interest on the principal amount of this Note at the rate per annum shown above.
Issuer will pay interest semiannually on May 1 and November 1 of each year,
commencing November 1, 1998. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from April 29, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Issuer shall pay interest on overdue principal at 1% per
annum in excess of the rate borne by the Notes, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment
Issuer will pay interest on the Notes (except defaulted interest) to
the Persons who are registered holders of Notes at the close of business on the
record date immediately preceding the Interest Payment Date even if Notes are
canceled on registration of transfer or registration of exchange after the
record date. Holders must surrender Notes to a Paying Agent to collect principal
payments. Issuer will pay principal and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts ("U.S. Legal Tender"). However, Issuer may pay principal and interest by
its check payable in such U.S. Legal Tender. Issuer may deliver any such
interest payment to the Paying Agent or to a Holder's registered address.
3. Paying Agent and Registrar
Initially, United States Trust Company of New York (the "Trustee"),
will act as Paying Agent and Registrar. Issuer may appoint and change any Paying
Agent, Registrar or co-registrar without notice. Issuer may act as Paying Agent,
Registrar, co-Registrar or transfer agent.
4. Indenture
Issuer issued the Notes under an Indenture dated as of April 29,
1998 (the "Indenture"), among Issuer, the Guaran-
B-3
<PAGE> 128
tors party thereto and the Trustee. This Note is one of a duly authorized issue
of Initial Notes of Issuer designated as its 11% Senior Secured Notes due 2005,
Series B (the "Exchange Notes"). The Notes include the Exchange Notes and the
Initial Notes (as defined in the Indenture). The Exchange Notes and the Initial
Notes are treated as a single class of securities under the Indenture. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture and the TIA for a statement of those
terms. Any conflict between this Note and the Indenture will be governed by the
Indenture.
The Notes are secured senior obligations of Issuer limited to
$112,750,000 aggregate principal amount (subject to Section 2.7 of the
Indenture). The Indenture imposes certain limitations on the incurrence of
Indebtedness by Issuer and the Restricted Subsidiaries, the existence of Liens,
the payment of dividends on, and redemption of, the Equity Interests of Issuer,
certain Assets Sales, the issuance or sale of Capital Stock of Restricted
Subsidiaries, investments by Issuer and its Restricted Subsidiaries,
consolidations, mergers and transfers of all or substantially all the assets of
Issuer, and transactions with Affiliates. In addition, the Indenture limits the
ability of Issuer and its Restricted Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal, premium
and interest, if any, on the Notes and all other amounts payable by Issuer under
the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Notes and the Indenture, the Guarantors have unconditionally guaranteed the
obligations of Issuer under the Indenture and the Notes on an unsecured senior
basis pursuant to the terms of the Indenture.
5. Optional Redemption
(a) Except as set forth in the next paragraph, the Notes may not be
redeemed at the option of Issuer prior to May 1, 2002. Thereafter, the Notes
will be redeemable, at Issuer's option, in whole or in part, at any time or from
time to time, at the following redemption prices (expressed in percent-
B-4
<PAGE> 129
ages of principal amount), plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on an Interest Payment Date that is on or
prior to the date fixed for redemption) if redeemed during the 12-month period
commencing on May 1 of the years set forth below:
<TABLE>
<CAPTION>
Period Percentage
------ ----------
<S> <C>
2002 105.750%
2003 103.833%
2004 and thereafter 101.917%
</TABLE>
(b) At any time and from time to time on or prior to May 1, 2001,
Issuer may redeem Notes with the net cash proceeds of one or more Public Equity
Offerings at a redemption price equal to 111.50% of the principal amount at
maturity thereof, plus accrued and unpaid interest, if any, to the redemption
date (subject to the right of Holders of record on the relevant record date to
receive interest due on an Interest Payment Date that is on or prior to the
dated fixed for redemption); provided, however, that at least $73.29 million
aggregate principal amount at maturity of Notes must remain outstanding after
each such redemption (other that any Notes owned by Issuer or any of its
Subsidiaries) and such redemption shall be effected not more than 120 days after
the consummation of any such Public Equity Offering.
6. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at the registered address. Notes in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued interest on all
Notes (or portions thereof) to be redeemed on the redemption date is deposited
with the Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest ceases to accrue on
such Notes (or such portions thereof) called for redemption. If a notice or
communication is sent in the manner provided in the Indenture, it is duly given,
whether or not the addressee receives it. Failure to send a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
B-5
<PAGE> 130
7. Change of Control
Upon a Change of Control, each Holder of Notes will have the right to
require Issuer to purchase all or any part of the Notes of such Holder at a
purchase price in cash equal to 101% of the principal amount at maturity of the
Notes to be purchased plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of Holders of record on the relevant record date
to receive interest due on an Interest Payment Date that is on or prior to the
date fixed for redemption) as provided in, and subject to the terms of, the
Indenture.
8. Denominations; Transfer; Exchange
The Notes are in registered form, without coupons, and in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture, including any transfer tax or other similar governmental charge
payable in connection therewith. The Registrar need not register the transfer of
or exchange any Notes selected for redemption (except, in the case of a Note to
be redeemed in part, the portion of the Note not to be redeemed) or any Notes
for a period of 15 days before a selection of Notes to be redeemed or 15 days
before an Interest Payment Date.
9. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of it
for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to Issuer at
its written request unless an abandoned property law designates another Person.
After any such payment, Holders entitled to the money must look only to Issuer
and not to the Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, Issuer at any time may terminate some
or all of its obligations under the Notes and
B-6
<PAGE> 131
the Indenture if Issuer deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Notes to redemption
or maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Notes and (ii) any past
default or noncompliance with any provision may be waived with the consent of
the Holders of a majority in principal amount outstanding of the Notes. Subject
to certain exceptions set forth in the Indenture, without the consent of any
Holder, Issuer, the Guarantors and the Trustee may amend the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to comply with Article 5
of the Indenture, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to add Guarantees with respect to the Notes, to release
Guarantors when permitted by the Indenture, to secure the Notes with additional
collateral, to add additional covenants or surrender rights and powers conferred
on Issuer, to make any change that does not adversely affect the rights of any
Holder or to comply with any request of the SEC in connection with qualifying
the Indenture under the TIA.
13. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding may
declare all the Notes to be due and payable. Certain events of bankruptcy or
insolvency with respect to Issuer are Events of Default which will result in the
Notes being due and payable immediately upon the occurrence of such Events of
Default.
Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it is offered reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders notice of any continuing Default (except a Default in
payment of principal or interest) if and so long as a committee of its trust
officers determines that withholding notice is in the interest of the Holders.
14. Trustee Dealings with Issuer
B-7
<PAGE> 132
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by Issuer or any of its Affiliates and may otherwise deal with Issuer or any of
its Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of Issuer or any Guarantor in the Indenture, or in any of the Notes or
Guarantees or because of the creation of any Indebtedness represented hereby and
thereby, shall be had against any incorporator, stockholder, officer, director,
employee, agent or controlling person of Issuer or any of its Subsidiaries. Each
Holder, by accepting a Note, waives and releases all such liability.
16. Guarantees
This Note will be entitled to the benefits of certain Guarantees, if
any, made for the benefit of the Holders. Reference is hereby made to the
Indenture for a statement of the respective rights, limitations of rights,
duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
17. Collateral
In order to secure the due and punctual payment of the principal of
and interest on the Notes and all other amounts payable by Issuer under the
Indenture and the Notes when and as the same will be due and payable, whether at
maturity, by acceleration or otherwise, according to the terms of the Notes and
the Indenture, Issuer has granted a security interest in capital stock of
certain of its direct Subsidiaries.
Each Holder, by accepting a Note, agrees to all of the terms and
provisions of the Security Documents, as the same may be amended from time to
time pursuant to the respective provisions thereof and the Indenture.
The Trustee and each Holder acknowledge that a release of any of the
Collateral or any Lien strictly in accor-
B-8
<PAGE> 133
dance with the terms and provisions of the Security Documents and the terms and
provisions of the Indenture will not be deemed for any purpose to be an
impairment of the security under this Indenture.
18. Governing Law
The Indenture and the Notes shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflict of laws to the extent that the application of
the laws of another jurisdiction would be required thereby.
19. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
20. Abbreviations
Customary abbreviations may be used in the name of a Noteholder or
an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
Issuer will furnish to any Holder upon written request and without
charge to the Holder a copy of the Indenture. Requests may be made as follows:
Decora Industries, Inc.
1 Mill Road
Fort Edward, New York 12828-1727
Attention: Chief Financial Officer
B-9
<PAGE> 134
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint __________ agent to transfer this Note on the books of
Issuer. The agent may substitute another to act for him.
Date: Your Signature:
------------- --------------------------------------------
Sign exactly as your name appears on the
other side of this Note.
Signature Guarantee:
---------------------------------------
(Signature must be guaranteed)
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
B-10
<PAGE> 135
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by Issuer pursuant
to Section 4.8 or 4.13 of the Indenture, check the box: [ ]
If you want to elect to have only part of this Note purchased by
Issuer pursuant to Section 4.8 or 4.13 of the Indenture, state the amount: $
Date: Your Signature:
------------- --------------------------------------------
Sign exactly as your name appears on the
other side of this Note.
Signature Guarantee:
---------------------------------------
(Signature must be guaranteed)
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include membership
or participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
B-11
<PAGE> 136
EXHIBIT C
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501 (a) (1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHED (OR HAS FURNISHED ON ITS
BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE NOTES (THE FORM OF WHICH LETTER MAY BE OBTAINED FROM THE TRUSTEE) OR (C)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY
RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY THEREOF OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501 (a) (1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER MAY BE OBTAINED FROM THE TRUSTEE),
(D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF
THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
C-1
<PAGE> 137
EXHIBIT D
LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
D-1
<PAGE> 138
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
[ ], [ ]
United States Trust Company of New York
114 West 47th Street
25th Floor
New York, New York 10036-1532
Decora Industries, Inc.
1 Mill Street
Fort Edward, New York 12828
Ladies and Gentlemen:
In connection with our proposed purchase of 11% Senior Secured Notes
due 2005 (the "Notes") of Decora Industries, Inc. (the "Company"), we confirm
that:
1. Neither the Company, its subsidiaries nor Lazard Freres & Co.
Inc. (the "Initial Purchaser"), nor any person representing the Company,
its subsidiaries or the Initial Purchaser, has made any representation
with respect to the Company, its subsidiaries or the offer or sale of any
Notes.
2. We have received a copy of the Offering Memorandum dated April
24, 1998 (the "Offering Memorandum") relating to the Notes and such other
information as we deem necessary in order to make our investment decision.
We acknowledge that we have read and agree to the matters stated in the
section entitled "Transfer Restrictions" in the Offering Memorandum.
3. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated April 29, 1998 (the "Indenture") between the Company, certain of its
subsidiaries and United States Trust Company of New York as trustee (the
"Trustee") pursuant to which the Notes were issued, and we agree to be
bound by, and not to resell, pledge or otherwise transfer the Notes except
in compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act").
E-1
<PAGE> 139
4. We understand that the Notes have not been registered under the
Securities Act and, accordingly, may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons except
as set forth below. We agree, on our own behalf and on behalf of any
accounts for which we are acting, that we shall not resell or otherwise
transfer any of such Notes within two years after the original issuance of
the Notes except (i) to the Company or any of its subsidiaries, (ii) to a
QIB in a transaction complying with Rule 144A, (iii) to an institutional
"Accredited Investor" (as defined in Rule 501 (a) (1), (2), (3) or (7) of
Regulation D under the Securities Act) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
Trustee a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes (the form of which
letter may be obtained from the Trustee), (iv) outside the United States
in compliance with Rule 904 under the Securities Act, (v) pursuant to the
exemption from registration provided by Rule 144 (if available) or (vi)
pursuant to an effective registration statement under the Securities Act.
5. We understand that, on any proposed resale of any Notes, we will
be required to furnish to the Company and to the Trustee such
certifications, legal opinions and other information as the Company and
the Trustee may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Notes purchased by us will bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501 (a) (1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting, are each able to
bear the economic risks of our or their investments.
7. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to which we exercise sole investment discretion and not with
a view to any distribution of the Notes, subject, nevertheless, to the
understanding that the disposition of our property shall at all times be
and remain within our control.
E-2
<PAGE> 140
You, Issuer, its subsidiaries and the Trustee are entitled to rely
upon this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
By:
-------------------------------------
Name:
Title:
Notes to Be Purchased:
$ principal amount
Dated:
<PAGE> 141
EXHIBIT F
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
[ ], [ ]
United States Trust Company of New York
114 West 47th Street
25th Floor
New York, New York 10036-1532
Re: Decora Industries, Inc. (the "Company")
11% Senior Secured Notes due 2005 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $[ ] aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(a)(2) or Rule 904(a)(2)
of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You, Issuer and counsel for Issuer are entitled to
F-1
<PAGE> 142
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby. Terms used in
this certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------------
Authorized Signature
F-2
<PAGE> 143
EXHIBIT G
GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of and interest on
this Note in the amounts and at the times when due and interest on the overdue
principal of and interest on this Note, if lawful, and the payment or
performance of all other obligations of Issuer under the Indenture (as defined
below) or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
10 of the Indenture and this Guarantee. This Guarantee will become effective in
accordance with Article 10 of the Indenture and its terms shall be evidenced
therein. The validity and enforceability of any Guarantee shall not be affected
by the fact that it is not affixed to any particular Note. Terms used but not
defined herein shall have the meanings ascribed to them in the Indenture dated
as of April 29, 1998, among Decora Industries, Inc., a Delaware corporation, as
issuer (the "Company"), the Guarantors party thereto and United States Trust
Company of New York, as trustee (the "Trustee"), as amended or supplemented from
time to time (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of
the courts of the State of New York in any action or proceeding arising out of
or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
G-1
<PAGE> 144
IN WITNESS WHEREOF, the Guarantor has caused its Guarantee to be
duly executed.
DECORA INCORPORATED
By:
-------------------------------------
Name:
Title:
G-2
<PAGE> 145
EXHIBIT H
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_______________.
WHEREAS Decora Industries, Inc. (the "Company"), certain of its
subsidiaries and United States Trust Company of New York, as trustee, are
parties to an Indenture (as such may be amended from time to time, the
"Indenture"), dated as of April 29, 1998, relating to Issuer's 11% Senior
Secured Notes due 2005 (the "Notes");
WHEREAS Section 4.5 of the Indenture requires Issuer to cause each
new Restricted Subsidiary (other than any Foreign Subsidiary) to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Restricted Subsidiary shall unconditionally guarantee all of Issuer's
obligations under Indenture and the Notes.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is acknowledged, the undersigned hereby agrees to guarantee Issuer's
obligations under the Indenture and the Notes on the terms and subject to the
conditions set forth in Article 10 of the Indenture. From and after the date
hereof, the undersigned shall be a Guarantor for all purposes under the
Indenture and the Notes.
H-1
<PAGE> 146
IN WITNESS WHEREOF, the undersigned has caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR]
By:
-------------------------------------
Name:
Title:
H-2
<PAGE> 147
================================================================================
GUARANTOR PLEDGE AGREEMENT
BY
[ ],
as Pledgor,
TO
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee for the holders of the
11% Senior Secured Notes due 2005
Dated as of [ ]
================================================================================
<PAGE> 148
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION ........................................................... 1
RECITALS ............................................................... 1
SECTION 1. PLEDGE ..................................................... 1
1.1. Grant of Pledge............................................... 1
1.2. Delivery of Collateral........................................ 3
1.3. Perfection of Uncertificated Securities Collateral............ 3
1.4. Secured Obligations........................................... 3
1.5. No Release.................................................... 4
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR........ 4
2.1. Ownership..................................................... 4
2.2. Shares Validly Issued......................................... 4
2.3. Perfection upon Delivery...................................... 5
2.4. Government Regulations........................................ 5
2.5. Authorization; Enforceability................................. 5
2.6. No Consents, etc.............................................. 5
2.7. No Conflicts.................................................. 5
2.8. Pledgor's Duties.............................................. 5
2.9. Preservation of Collateral.................................... 6
2.10. Further Assurances; Supplements............................... 6
2.11. Trustee May Perform; Trustee Agent Appointed
Attorney-in-Fact ........................................... 7
2.12. Accuracy of Information....................................... 7
2.13. Indemnification............................................... 7
SECTION 3. SPECIAL PROVISIONS CONCERNING COLLATERAL.................... 7
3.1. Voting Rights, Dividends, Etc. Prior to Event of Default...... 7
3.2. Voting Rights and Dividends After Event of Default............ 8
3.3. Further Assurances for Voting Rights and Dividends............ 8
3.4. Dividends Received in Trust................................... 9
3.5. Transfers and Other Liens; Additional Shares.................. 9
SECTION 4. REMEDIES UPON DEFAULT....................................... 10
4.1. Dispositions of Collateral.................................... 10
4.2. Securities Laws Limitations................................... 11
4.3. Additional Information........................................ 11
4.4. Waivers....................................................... 11
4.5. Deficiency.................................................... 12
4.6. Application of Proceeds....................................... 12
4.7. Expenses...................................................... 12
4.8. No Waiver; Discontinuance of Proceeding....................... 12
SECTION 5. MISCELLANEOUS PROVISIONS.................................... 13
5.1. Entire Agreement.............................................. 13
</TABLE>
-i-
<PAGE> 149
<TABLE>
<S> <C>
5.2. Execution in Counterparts..................................... 13
5.3. Survival...................................................... 13
5.4. Headings...................................................... 13
5.5. Severability of Provisions.................................... 13
5.6. Notices....................................................... 13
5.7. Amendments.................................................... 14
5.8. GOVERNING LAW................................................. 14
5.9. CONSENT TO JURISDICTION AND SERVICE OF PROCESS................ 14
5.10. Agents........................................................ 14
5.11. Reasonable Care............................................... 14
5.12. Trustee....................................................... 14
5.13. Continuing Security Interest; Assignment...................... 15
5.14. Obligations Absolute.......................................... 15
5.15. Termination; Release.......................................... 16
</TABLE>
Signatures
Schedule A PLEDGED SHARES
Exhibit 1 PLEDGE AMENDMENT
Exhibit 2 Form of Issuer Acknowledgment
-ii-
<PAGE> 150
-1-
PLEDGE AGREEMENT
I N T R O D U C T I O N :
GUARANTOR PLEDGE AGREEMENT (this "Agreement"), dated as of [ ],
by and between [ ], a Delaware corporation ("Pledgor"), and UNITED STATES
TRUST COMPANY OF NEW YORK (together with any successors or assigns, the
"Trustee"), in its capacity as trustee under the Indenture (as hereinafter
defined).
R E C I T A L S :
A. Decora Industries, Inc., a Delaware corporation, and the Trustee
have entered into an indenture, dated as of April 29, 1998 (the "Indenture"),
pursuant to which the Pledgor's 11% Senior Secured Notes due 2005 (the "Notes")
will be issued concurrently herewith. Terms not defined herein have the meanings
given to them in the Indenture.
B. Pledgor is the legal and beneficial owner of the Collateral (as
hereinafter defined).
C. In order to secure the performance of the Secured Obligations (as
hereinafter defined), the parties hereto are entering into this Agreement
regarding the terms and conditions of Pledgor's pledge of the Collateral to the
Trustee, for the benefit of itself and the Holders of the Notes from time to
time (the Trustee and such Holders, each a "Secured Party" and collectively, the
"Secured Parties").
A G R E E M E N T:
Pledgor and the Trustee agree as follows:
SECTION 14. PLEDGE
14.1. Grant of Pledge. In order to secure the payment and
performance when due of the Secured Obligations, Pledgor does hereby transfer,
convey, warrant, deliver, pledge, assign, hypothecate and grant to the Trustee,
for the benefit of the Secured Parties, a first priority lien on, continuing
security interest in and pledge of all of Pledgor's present and future right,
title and interest in, to and under the following properties, rights, interests
and privileges (collectively, the "Collateral"):
<PAGE> 151
-2-
(a) the shares of capital stock of the issuers set forth on
Schedule A hereto (collectively, the "Current Shares") (which are and
shall remain at all times until this Agreement terminates, certificated
shares);
(b) all additional shares of capital stock of the issuers or the
shares of any other Guarantor of the Notes under the Indenture from time
to time acquired or formed by Pledgor in any manner (collectively, the
"Additional Shares"; together with the Current Shares, the "Pledged
Shares") (which are and shall remain at all times until this Agreement
terminates, certificated shares);
(c) any and all certificates representing the Pledged Shares and
any interest of Pledgor in any securities account pertaining to the
Pledged Shares (collectively, the "Certificates");
(d) all membership interests and/or partnership interests, as
applicable from time to time acquired by Pledgor in any manner in each
Guarantor that is a limited liability company or partnership hereafter
acquired or formed by Pledgor or any Guarantor, together with all rights,
privileges, authority and powers of Pledgor in and to each such limited
liability company or partnership or under the membership or partnership
agreement of each such limited liability company or partnership (the
"Operative Agreements") (collectively, the "Pledged Interests"), and the
certificates, instruments and agreements, if any, representing the Pledged
Interests;
(e) subject to the provisions of Section 3 hereof, all dividends,
cash or proceeds, options, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares or Pledged Interests (collectively, the "Dividends"); and
(f) without affecting the obligations of Pledgor under any
provision prohibiting such action hereunder or under the Indenture, in the
event of any consolidation or merger in which any issuer of Pledged Shares
or Pledged Interests is not the surviving entity, all shares of each class
of the capital stock of the successor corporation or interests or
certificates of the successor limited liability company or partnership
owned by such Pledgor (unless successor is Pledgor itself) formed by or
resulting from such consolidation or merger;
(g) all cash, instruments, securities, funds and
<PAGE> 152
-3-
credits of Pledgor from time to time on deposit with the Trustee, all
investments of such funds and all certificates, securities and instruments
evidencing any such investments of such funds, and all interest,
dividends, cash, instruments and other property received as proceeds of,
or in substitution or exchange for, and all collections and claims in
respect of, any and all of the foregoing (collectively, the "Cash
Collateral").
14.2. Delivery of Collateral. All certificates, agreements or
instruments representing or evidencing the Collateral shall be delivered to and
held by or on behalf of the Trustee pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Trustee. The Trustee shall have the right, at any time upon
or after the occurrence of an Event of Default and without notice to Pledgor, to
endorse, assign or otherwise transfer to or to register in the name of the
Trustee or any of its nominees any or all of the Collateral. In addition, the
Trustee shall have the right at any time to exchange certificates representing
or evidencing Collateral for certificates of smaller or larger denominations.
14.3. Perfection of Uncertificated Securities Collateral. If any
issuer of Pledged Shares or Pledged Interests is organized in a jurisdiction
which does not permit the use of certificates to evidence equity ownership, or
if any of the Pledged Shares or Pledged Interests are at any time not evidenced
by certificates of ownership, then Pledgor shall, to the extent permitted by
applicable law, record such pledge on the equityholder register or the books of
the issuer, cause the issuer to execute and deliver to Trustee an acknowledgment
of the pledge of such Pledged Shares or Pledged Interests substantially in the
form of Exhibit 2 hereto, execute any customary pledge forms or other documents
necessary or appropriate to complete the pledge and give Trustee the right to
transfer such Pledged Shares or Pledged Interests under the terms hereof and
provide to Trustee an Opinion of Counsel, in form and substance satisfactory to
Trustee, confirming such pledge.
14.4. Secured Obligations. This Agreement secures, and the
Collateral is collateral security for, the payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the filing of a petition in bankruptcy (whether or not a
claim is allowed against Pledgor for such interest or other amounts in any such
bankruptcy proceeding) or the operation of the automatic stay under Section
362(a) of the Bankruptcy Law), of (i) all obligations of Pledgor now existing
<PAGE> 153
-4-
or hereafter arising under or in respect of the Indenture, the Notes or the
Registration Rights Agreement (including, without limitation, Pledgor's
obligations to pay principal, interest and all other charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments related to
or in respect of the obligations contained therein) and (ii) without duplication
of the amounts described in clause (i), all obligations of Pledgor now existing
or hereafter arising under or in respect of this Agreement, including, without
limitation, with respect to all charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the obligations contained in this Agreement (the obligations
described in clauses (i) and (ii), collectively, the "Secured Obligations").
14.5. No Release. Nothing set forth in this Agreement shall relieve
Pledgor from the performance of any term, covenant, condition or agreement on
Pledgor's part to be performed or observed under or in respect of any of the
Collateral or from any liability to any Person under or in respect of any of the
Collateral or shall impose any obligation on the Trustee to perform or observe
any such term, covenant, condition or agreement in respect of any of the
Collateral on Pledgor's part to be so performed or observed or shall impose any
liability on the Trustee for the operation, control, care, management or repair
of the Collateral or for any act or omission on the part of Pledgor relating to
Pledgor's obligations thereto or for any breach of any representation or
warranty on the part of Pledgor contained in this Agreement, under or in respect
of the Collateral or made in connection herewith or therewith. The provisions
set forth in this Section 1.5 shall survive the termination of this Agreement
and the discharge of the Pledgor's obligations under this Agreement.
SECTION 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR
Pledgor represents, warrants and covenants (as applicable) as
follows:
15.1. Ownership. Pledgor is as of the date hereof, and, as to
Collateral acquired by it from time to time after the date hereof, Pledgor will
be, the legal, record and beneficial owner of all of the Collateral free and
clear of any Lien or other right, title or interest of any Person other than the
Lien and security interest granted by Pledgor to the Trustee pursuant to this
Agreement.
15.2. Shares Validly Issued. All of the Pledged Shares have been
duly authorized and validly issued and are fully paid and non-assessable.
<PAGE> 154
-5-
15.3. Perfection upon Delivery. Upon delivery by Pledgor to the
Trustee of the certificates evidencing the Pledged Shares, duly endorsed to the
Trustee or in blank, the Lien on such Collateral granted to the Trustee pursuant
to this Agreement constitutes and hereafter will constitute a first priority
perfected Lien on such Collateral, superior and prior to the rights of all other
Persons therein and subject to no other Liens.
15.4. Government Regulations. The pledge of the Collateral pursuant
to this Agreement does not violate Regulation T, U or X of the Federal Reserve
Board.
15.5. Authorization; Enforceability. Pledgor has full corporate
power, authority and legal right to pledge and grant a security interest in all
the Collateral pursuant to this Agreement. This Agreement constitutes the legal,
valid and binding obligation of Pledgor, enforceable against Pledgor in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium and similar laws affecting
creditors' rights generally and to general equitable principles.
15.6. No Consents, etc. No authorization, consent, approval,
license, qualification or formal exemption from, or any filing, declaration or
registration with, any court, governmental agency or regulatory authority, or
with any securities exchange or any other Person, is required in connection with
(i) the execution, delivery or performance by Pledgor of this Agreement, (ii)
the grant of a Lien on (including the priority thereof) the Collateral by
Pledgor in the manner and for the purpose contemplated by this Agreement or
(iii) the exercise of the rights and remedies of the Trustee created hereby,
except (a) those that have been obtained or made concurrently with the execution
hereof, and (b) as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally.
15.7. No Conflicts. The execution, delivery and performance by
Pledgor of this Agreement do not (or with notice or lapse of time or both, will
not) violate, conflict with or constitute a default under, or result in the
termination of or accelerate the performance required by, or result in there
being declared void, voidable or without further binding effect, any provision
of any other agreement, instrument or document to which Pledgor is a party.
15.8. Pledgor's Duties. Pledgor shall perform, abide by and be
governed by each and all of the terms, provisions, covenants and agreements set
forth in this Agreement and in each and every supplement hereto or amendment
hereof which
<PAGE> 155
-6-
may at any time or from time to time be executed and delivered by the parties
hereto or their successors and assigns.
15.9. Preservation of Collateral. All rights, powers and privileges
of the Trustee herein set forth are coupled with an interest and are
irrevocable, subject to the terms and conditions hereof, and Pledgor shall not
take or omit to take any action with respect to the Collateral or otherwise
which is inconsistent with this Agreement, and any such action inconsistent
herewith or therewith shall be void. Pledgor shall not further pledge, encumber,
hypothecate, sell, convey or assign, or grant any option with respect to all or
any part of the Collateral or suffer any of the foregoing to occur by operation
of law or otherwise, except for the Liens and security interests granted by
Pledgor to the Trustee pursuant to this Agreement, and shall promptly take such
action as is reasonably necessary to remove any such other Lien. Pledgor will,
at its expense, warrant and defend the title to the Collateral against all
claims and demands of all third Persons or Persons claiming by, through or under
Pledgor at any time claiming any interest therein adverse to the Trustee.
15.10. Further Assurances; Supplements.
(a) Pledgor agrees that at any time and from time to time, Pledgor
will, at its expense, promptly do, execute, acknowledge and deliver all
and every further act, deed, conveyance, transfer, waiver, subordination,
supplement, opinion of counsel and other instruments, documents and
assurances that may be reasonably necessary or that the Trustee deems
appropriate or advisable, including, without limitation, supplemental or
additional UCC-1 financing statements, for the continued perfection,
preservation and protection of the security interest in the Collateral
granted hereby or to enable the Trustee to exercise and enforce its rights
and remedies hereunder with respect to any Collateral.
(b) Pledgor shall, upon obtaining any Pledged Shares, promptly (and
in any event within five Business Days) deliver to the Trustee a pledge
amendment, duly executed by Pledgor, in substantially the form of Exhibit
1 hereto (each, a "Pledge Amendment"), in respect of the additional
Pledged Shares which are to be pledged pursuant to this Agreement, and
confirming the attachment of the Lien hereby created on and in respect of
such additional shares. Pledgor hereby authorizes the Trustee to attach
each Pledge Amendment to this Agreement and agrees that all Pledged Shares
listed on any Pledge Amendment delivered to the Trustee shall for all
purposes hereunder be considered Collateral.
<PAGE> 156
-7-
15.11. Trustee May Perform; Trustee Appointed Attorney-in-Fact. If
Pledgor fails to perform any agreement contained in this Agreement, the Trustee
may itself perform, or cause performance of, such agreement, and the expenses of
the Trustee, including, without limitation, the reasonable fees and expenses of
its counsel and the allocated cost of staff counsel, incurred in connection
therewith shall be payable by Pledgor on demand. Pledgor hereby appoints the
Trustee its attorney-in-fact, with full authority in the place and stead of
Pledgor and in the name of Pledgor, or otherwise, from time to time in the
Trustee's discretion to take any action which the Trustee may take pursuant to
the provisions of this Section.
15.12. Accuracy of Information. All information set forth herein
(including the exhibits hereto) relating to the Collateral is accurate and
complete in all material respects.
15.13. Indemnification. Pledgor hereby agrees to indemnify the
Trustee for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Trustee in any way relating to or arising out of this Agreement or the pledge
and security interest contemplated hereby or the enforcement of any of the terms
hereof or otherwise arising or relating in any manner to the Lien contemplated
hereunder; provided, however, that Pledgor shall not be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Trustee.
SECTION 16. SPECIAL PROVISIONS CONCERNING COLLATERAL
16.1. Voting Rights, Dividends, Etc. Prior to Event of Default. As
long as no Event of Default shall have occurred and be continuing:
(a) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement or the
Indenture; provided, however, Pledgor shall not in any event exercise such
rights in any manner which may have an adverse effect on the value of the
Collateral or the security intended to be provided by this Agreement.
(b) Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the Lien of this Agreement, any and all dividends and
distributions in respect of the Collateral, but only if and to the extent
made in accordance with the provisions of the Indenture; provided,
<PAGE> 157
-8-
however, that any and all such dividends and distributions consisting of
rights or interests in the form of securities shall be forthwith delivered
to the Trustee to hold as Collateral and shall, if received by Pledgor, be
received in trust for the benefit of the Trustee, be segregated from the
other property or funds of Pledgor and be forthwith delivered to the
Trustee as Collateral in the same form as so received (with any necessary
endorsement).
(c) The Trustee shall be deemed without further action or formality
to have granted to Pledgor all necessary consents relating to voting
rights and shall, if necessary, upon written request of Pledgor and at the
sole cost and expense of Pledgor, from time to time execute and deliver
(or cause to be executed and delivered) to Pledgor all such instruments as
Pledgor may reasonably request in order to permit Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to
Section 3.1(a) hereof and to receive the dividends and distributions which
it is authorized to receive and retain pursuant to Section 3.1(b) hereof.
16.2. Voting Rights and Dividends After Event of Default. Upon the
occurrence and during the continuance of an Event of Default:
(a) Upon written notice from the Trustee to Pledgor, all rights of
Pledgor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 3.1 above shall
cease, and all such rights shall thereupon become vested in the Trustee,
which shall thereupon have the sole right to exercise such voting and
other consensual rights during the continuance of such Event of Default.
(b) Upon written notice from the Trustee to Pledgor, all rights of
Pledgor to receive the dividends and distributions which it would
otherwise be authorized to receive and retain pursuant to Section 3.1
above shall cease and all such rights shall thereupon become vested in the
Trustee, which shall thereupon have the sole right to receive and hold as
Collateral such dividends and distributions during the continuance of such
Event of Default.
16.3. Further Assurances for Voting Rights and Dividends. In order
to permit the Trustee to receive all dividends and other distributions to which
it may be entitled under Section 3.1(b) above, to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
3.2(a) above, and to receive all dividends and distributions which it may be
entitled to receive under Section 3.2(b)
<PAGE> 158
-9-
above, Pledgor shall, if necessary, upon written notice from the Trustee, from
time to time execute and deliver to the Trustee appropriate proxies, dividend
payment orders and other instruments as the Trustee may reasonably request.
16.4. Dividends Received in Trust. All dividends and distributions
which are received by Pledgor contrary to the provisions of Section 3.2 above
shall be received in trust for the benefit of the Trustee, shall be segregated
from other funds of Pledgor and shall be forthwith paid over to the Trustee as
Collateral in the same form as so received (with any necessary endorsement).
16.5. Transfers and Other Liens; Additional Shares.
(a) Transfers and Other Liens. Pledgor shall not (i) pledge,
encumber, hypothecate, sell, convey, assign or otherwise dispose of, or
grant any option or warrant with respect to, any of the Collateral or
suffer any of the foregoing to occur by operation of law or otherwise
except for the Liens and security interests granted by Pledgor to the
Trustee pursuant to this Agreement or (ii) permit any issuer of Pledged
Shares to merge or consolidate unless all the outstanding capital stock of
the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property
is distributed in respect of the outstanding shares of any other
constituent corporation; provided, however, that in the event of an Asset
Sale of any Collateral, pursuant to, and in compliance with, the
provisions of the Indenture, the Trustee shall release the Collateral that
is the subject of such sale to Pledgor free and clear of the Lien and
security interest under this Agreement upon the making of proper
arrangements by the Trustee for the application of the proceeds of such
Asset Sale in accordance with the provisions of the Indenture and the
receipt by the Trustee of an Opinion of Counsel to the effect that such
sale of Collateral was an Asset Sale pursuant to, and in compliance with,
the Indenture and that such release of Collateral is authorized and
permitted hereby.
(b) Additional Shares. Pledgor agrees that it will cause each
issuer of Collateral consisting of capital stock not to issue any stock or
other securities in addition to or in substitution for such Collateral
issued by such issuer, except to Pledgor.
<PAGE> 159
-10-
SECTION 17. REMEDIES UPON DEFAULT
17.1. Dispositions of Collateral. If any Event of Default shall have
occurred and be continuing, the Trustee may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of New York at
that time, and may also in its sole discretion, without notice except as
specified below, subject to applicable law, at any time or from time to time,
sell, assign and deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale, at any
exchange or broker's board for cash, for immediate or future delivery without
any assumption of credit risk, and for such price or prices and on such terms as
may be reasonable.
At any such sale, unless prohibited by applicable law, the Trustee
on behalf of the Secured Parties may bid for and purchase all or any part of the
Collateral so sold free from any right or equity of redemption of Pledgor. Each
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of Pledgor, and Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. The Trustee shall give Pledgor not less than five
days' prior written notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Pledged Collateral which is
perishable or threatens to decline speedily in value and is of a type
customarily sold on a recognized market. The notice of such sale shall (1) in
the case of a public sale, state the time and place fixed for such sale, and (2)
in the case of a private sale, state the day after which such sale may be
consummated. Pledgor agrees that such notice constitutes reasonable notice. The
Trustee shall not be obligated to make any sale of the Collateral regardless of
notice of sale having been given. The Trustee may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjourned. Pledgor hereby waives any claims against the Trustee arising
by reason of the fact that the price at which any Collateral may have been sold
at such a private sale was less than the price which might have been obtained at
a public sale, even if the Trustee accepts the first offer received and does not
offer such Collateral to more than one offeree. Neither the Trustee nor any
Secured Party shall be liable for failure to collect or realize upon any or all
of the Collateral or for any delay in so doing nor shall
<PAGE> 160
-11-
any of them be under any obligation to take any action whatsoever with regard
thereto.
17.2. Securities Laws Limitations. Pledgor recognizes that, by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to the Trustee than
those obtainable through a public sale without such restrictions (including,
without limitation, a public offering made pursuant to a registration statement
under the Securities Act), and, notwithstanding such circumstances, agrees that
any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Trustee shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if Pledgor would agree to do so.
17.3. Additional Information. If the Trustee determines to exercise
its right to sell any or all of the Collateral, upon written request, Pledgor
shall, and shall cause each issuer of any Collateral to be sold hereunder from
time to time to, furnish to the Trustee all such information as the Trustee may
request in order to determine the number of shares and other instruments
included in the Collateral which may be sold by the Trustee as exempt
transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
17.4. Waivers. Pledgor hereby waives, to the extent permitted by
applicable law, notice or judicial hearing in connection with the Trustee's
taking possession or the Trustee's disposition of any Collateral, including,
without limitation, any and all prior notice and hearing for any prejudgment
remedy or remedies and any such right which Pledgor would otherwise have under
law, and Pledgor hereby further waives: (a) all damages occasioned by such
taking of possession; (b) all other requirements as to the time, place and terms
of sale or other requirements with respect to the enforcement of the Trustee's
rights hereunder; and (c) all rights of redemption, appraisal, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law. Any
sale of, or the grant of options to purchase, or any other realization upon, any
Collat-
<PAGE> 161
-12-
eral shall operate to divest all right, title, interest, claim and demand,
either at law or in equity, of Pledgor therein and thereto, and shall be a
perpetual bar both at law and in equity against Pledgor and against any and all
Persons claiming or attempting to claim the Collateral so sold, optioned or
realized upon, or any part thereof, from, through and under Pledgor.
17.5. Deficiency. Notwithstanding any other provision of this
Agreement to the contrary, if, after giving effect to any sale, transfer or
other disposition of any or all of the Collateral pursuant hereto and after the
application of the proceeds hereunder and any Collateral sold, transferred or
otherwise disposed of, any Secured Obligations remain unpaid or unsatisfied,
Pledgor shall remain liable for the unpaid and unsatisfied amount of such
Secured Obligations.
17.6. Application of Proceeds. The proceeds of any sale made under
or by virtue of the provisions of Section 4.13 of the Indenture, together with
any other sums then held by the Trustee pursuant to this Agreement, shall be
applied promptly from time to time by the Trustee as set forth in the Indenture.
17.7. Expenses. Pledgor will upon demand pay to the Trustee the
amount of any and all expenses, including the reasonable fees and expenses of
its counsel and the allocated fees and expenses of staff counsel and the
reasonable fees and expenses of any experts and agents, which the Trustee may
incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Trustee hereunder or (iv) the failure by Pledgor to
perform or observe any of the provisions hereof. All amounts payable by Pledgor
under this Section 4.7 shall be due upon demand and shall be part of the Secured
Obligations. Pledgor's obligations under this Section shall survive the
resignation or removal of the Trustee, the termination of this Agreement and the
Indenture and the discharge of Pledgor's other obligations hereunder.
17.8. No Waiver; Discontinuance of Proceeding.
(a) No failure on the part of the Trustee to exercise, and no
course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the Trustee of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are to
the fullest extent permitted by law cumulative and are not exclusive of
<PAGE> 162
-13-
any remedies provided by law.
(b) In the event the Trustee shall have instituted any
proceeding to enforce any right, power or remedy under this instrument by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Trustee, then and in every such case Pledgor, the Trustee
and each Secured Party shall be restored to their respective former
positions and rights hereunder with respect to the Collateral, and all
rights, remedies and powers of the Trustee shall continue as if no such
proceeding had been instituted.
SECTION 18. Miscellaneous Provisions
18.1. Entire Agreement. This Agreement and the documents and
agreements referred to herein embody the entire agreement and understanding
between the parties hereto and supersede all prior agreements and understandings
relating to the subject matter hereof.
18.2. Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
such counterparts shall constitute one and the same Agreement.
18.3. Survival. All representations, warranties, covenants and
agreements herein contained on the part of Pledgor shall survive the payment and
performance of all the Secured Obligations and the termination of this
Agreement.
18.4. Headings. The Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
18.5. Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
18.6. Notices. All notices or other communications required to be
given hereunder shall be given at the address and in the manner required in the
Indenture.
<PAGE> 163
-14-
18.7. Amendments. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, or consent to
any departure by Pledgor therefrom, shall be effective unless in writing and
signed by the Trustee and Pledgor. Any amendment, modification or supplement of
or to any provision of this Agreement, any waiver of any provision of this
Agreement and any consent to any departure by Pledgor from the terms of any
provision of this Agreement shall be effective only in the specific instance and
for the specific purpose for which made or given.
18.8. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO NEW YORK'S PRINCIPLES OF CONFLICTS OF LAWS).
18.9. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, PLEDGOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT SUBJECT
TO RIGHT OF APPEAL. PLEDGOR HEREBY IRREVOCABLY WAIVES TRIAL BY JURY AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH JURISDICTION. NOTHING HEREIN SHALL AFFECT THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF THE TRUSTEE TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER
JURISDICTION.
18.10. Agents. The Trustee may use one or more agents to perform its
obligations hereunder.
18.11. Reasonable Care. The Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral in its
possession if such Collateral is accorded treatment substantially equivalent to
that which the Trustee, in its individual capacity, accords its own property, it
being understood that the Trustee shall not have responsibility for taking any
necessary steps to preserve rights against any Person with respect to any
Collateral.
18.12. Trustee. The Trustee has been appointed as trustee pursuant
to the Indenture. The actions of the Trustee hereunder and under the other
Security Documents are subject to
<PAGE> 164
-15-
the provisions of the Indenture. The Trustee may resign and a successor Trustee
may be appointed in the manner provided in the Indenture. Upon the acceptance of
any appointment as the Trustee by a successor Trustee, that successor Trustee
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Trustee under this Agreement and the other
Security Documents, and the retiring Trustee shall thereupon be discharged from
its duties and obligations under this Agreement and the other Security
Documents. After any retiring Trustee's resignation, the provisions of this
Agreement and the other Security Documents shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement or any other
Security Documents while it was the Trustee.
18.13. Continuing Security Interest; Assignment. This Agreement
shall create a continuing security interest in the Collateral and shall (i) be
binding upon Pledgor and its successors and assigns and (ii) inure, together
with the rights and remedies of the Trustee hereunder, to the benefit of the
Trustee and each Secured Party and each of their successors, transferees and
assigns. No other Person (including, without limitation, any other creditor of
Pledgor) shall have any interest herein or any right or benefit with respect
hereto. Pledgor may not assign its rights under this Agreement without the prior
written consent of the Trustee.
18.14. Obligations Absolute. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor;
(ii) any lack of validity or enforceability of any loan document, or
any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture,
or any other agreement or instrument relating thereto;
(iv) any exchange or non-perfection of the Collateral, or any
release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Secured Obligations;
(v) any exercise or non-exercise or any waiver of
<PAGE> 165
-16-
any right, remedy, power or privilege under or in respect of any document
relating to the Indenture; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
18.15. Termination; Release. When all of the Secured Obligations
have been paid in full, this Agreement and the other Security Documents shall
terminate. Upon termination of this Agreement and the other Security Documents
or any release of Collateral in accordance with the provisions of the Indenture,
the Trustee shall, upon the request and at the sole cost and the expense of
Pledgor, forthwith assign, transfer and deliver to Pledgor against receipt and
without express or implied recourse to or warranty by the Trustee, such of the
Collateral to be released as may be in possession of the Trustee and as shall
not have been sold or otherwise applied pursuant to the terms hereof, and proper
instruments acknowledging the termination of this Agreement and the other
Security Documents or the release of such Collateral, as the case may be.
<PAGE> 166
IN WITNESS WHEREOF, Pledgor and the Trustee have executed this
Agreement as of the day and year first above written.
[ ]
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
<PAGE> 167
SCHEDULE A
PLEDGED SHARES
<TABLE>
<CAPTION>
Percentage
of All
Capital or
Other Equity
Class of Certificate Number of Interests of
Issuer Stock Par Value Numbers Shares Issuer
- ------ -------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 168
EXHIBIT 1
This Pledge Amendment, dated _______________, is delivered pursuant
to Section 2.10(b) of the Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Guarantor Pledge
Agreement, dated as of [ ], between the undersigned and UNITED STATES TRUST
COMPANY OF NEW YORK, as Trustee (the "Agreement"); capitalized terms used herein
and not defined have the meanings ascribed to them in the Agreement) and that
the Pledged Shares listed on this Pledge Amendment shall be deemed to be and
shall become part of the Collateral and shall secure all Secured Obligations.
[ ],
as Pledgor
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
<PAGE> 169
EXHIBIT 2
FORM OF ISSUER ACKNOWLEDGMENT
The undersigned hereby (i) acknowledges receipt of a copy of the
Pledge Agreement (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Agreement"; capitalized terms used herein but
not defined herein have the meanings given such terms in the Agreement), dated
as of [_____________], between [___________________] (the "Pledgor") and United
States Trust Company of New York, as Trustee ("Trustee"), (ii) agrees promptly
to note on its books the security interests granted and confirmed under the
Agreement, (iii) agrees that it will comply with instructions of Trustee with
respect to the applicable Collateral without further consent by applicable
Pledgor, (iv) agrees to notify Trustee upon obtaining knowledge of any interest
in favor of any Person in the applicable Collateral that is adverse to the
interest of Trustee therein and (v) waives any right or requirement at any time
hereafter to receive a copy of the Agreement in connection with the registration
of any Collateral thereunder in the name of Trustee or its nominee or the
exercise of voting rights by Trustee or its nominee.
[NAME OF ISSUER]
By:
-------------------------------------
Name:
Title:
Note: This form should be signed by each issuer of uncertificated Pledged
Shares.
<PAGE> 1
Exhibit 4.7
DECORA INDUSTRIES, INC.
$112,750,000
11% Senior Secured Notes due 2005
REGISTRATION RIGHTS AGREEMENT
April 29, 1998
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10020
Ladies and Gentlemen:
Decora Industries, Inc., a Delaware corporation (the "Issuer"),
proposes to issue and sell to Lazard Freres & Co. LLC (the "Initial Purchaser"),
upon the terms set forth in a purchase agreement dated April 24, 1998 (the
"Purchase Agreement"), $112,750,000 aggregate principal amount of its 11% Senior
Secured Notes due 2005 (the "Notes") to be unconditionally guaranteed on a
senior basis by Decora, Incorporated, a Delaware corporation and a wholly owned
subsidiary of the Issuer (together with its successors, "Decora"), and any other
future guarantors of the Notes under the Indenture (as defined) (collectively,
the "Guarantors"). The Issuer and the Guarantors are collectively referred to
herein as the "Company," and the obligations of the Company in this Agreement
are joint and several obligations of the Issuer and the Guarantors. The Notes
will be issued pursuant to an Indenture, dated as of April 29, 1998 (the
"Indenture") among the Issuer, the Guarantors and United States Trust Company of
New York, as trustee (the "Trustee"). As an inducement to the Initial Purchaser,
the Company agrees with the Initial Purchaser, for the benefit of the holders of
the Notes (including the Initial Purchaser), the Exchange Notes (as defined
below) and the Private Exchange Notes (as defined below) (collectively, the
"Holders"), as follows:
1. Exchange Offers. The Company shall, at its cost, prepare and,
not later than 75 days after (or if the 75th
<PAGE> 2
-2-
day is not a business day, the first business day thereafter) the date of
original issue of the Notes (the "Issue Date"), file with the Securities and
Exchange Commission (the "Commission") a registration statement (the "Exchange
Offer Registration Statement") on Form S-4 or another appropriate form under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to a
proposed offer (the "Exchange Offer") to the Holders of Transfer Restricted
Notes (as defined in Section 6 hereof), who are not prohibited by any law or
public policy (including, without limitation, rules, regulations, pronouncements
and published interpretations of the Commission) from participating in the
Exchange Offer, to issue and deliver to such Holders, in exchange for the Notes,
a like aggregate principal amount of debt securities (the "Exchange Notes") of
the Issuer issued under the Indenture and identical in all material respects to
the Notes (except for the transfer restrictions and rights to future
registration under the Securities Act relating to the Notes). The Company shall
use its reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective under the Securities Act within 150 days (or if
the 150th day is not a business day, the first business day thereafter) after
the Issue Date and shall keep the Exchange Offer open for not less than 20
business days (or longer, if required by applicable law) after the date notice
of the Exchange Offer is mailed to the Holders (such period being called the
"Exchange Offer Period").
The Company and the Initial Purchaser acknowledge that the staff
of the Commission has taken the position that any broker-dealer that elects to
exchange Notes that were acquired by such broker-dealer for its own account as a
result of market-making or other trading activities for Exchange Notes in the
Exchange Offer (a "Participating Broker-Dealer") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes (other than a resale of an unsold allotment
resulting from the original offering of the Notes).
The Company and the Initial Purchaser also acknowledge that the
staff of the Commission has taken the position that if the Prospectus contained
in the Exchange Offer Registration Statement includes a plan of distribution
containing a statement to the above effect and the means by which Participating
Broker-Dealers may resell the Exchange Notes, without naming the Participating
Broker-Dealers or specifying the amount of Exchange Notes owned by them, such
Prospectus may be delivered by Participating Broker-Dealers to satisfy their
pro-
<PAGE> 3
-3-
spectus delivery obligations under the Securities Act in connection with
resales of Exchange Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the Securities Act.
In light of the foregoing, the Company shall use its reasonable
best efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the prospectus contained therein, in order to permit such
prospectus to be lawfully delivered by all persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as such
persons must comply with such requirements in order to resell the Exchange
Notes; provided, however, that such period shall end at the earlier of the first
anniversary of the consummation of the Exchange Offer and the date on which all
Participating Broker-Dealers and the Initial Purchaser have sold all Exchange
Notes held by them (unless such period is extended pursuant to Section 3(j)
below).
If, upon consummation of the Exchange Offer, the Initial
Purchaser holds Notes acquired by it as part of its initial distribution, the
Company, simultaneously with the delivery of the Exchange Notes pursuant to the
Exchange Offer, shall issue and deliver to the Initial Purchaser upon the
written request of such Initial Purchaser, in exchange (the "Private Exchange")
for the Notes held by the Initial Purchaser, a like principal amount of debt
securities of the Company issued under the Indenture and identical in all
material respects (including the existence of restrictions on transfer under the
Securities Act and the securities laws of the several states of the United
States) to the Notes (the "Private Exchange Notes"). The Notes, the Exchange
Notes and the Private Exchange Notes are hereinafter collectively called the
"Notes."
In connection with the Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Exchange Offer open for not less than 20
business days (or longer, if required by applicable law) after the date
notice of the commencement thereof is mailed to the Holders;
<PAGE> 4
-4-
(c) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York, which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Exchange Offer or
the Private Exchange, as the case may be, the Company shall;
(x) accept for exchange all the Notes validly tendered and
not withdrawn pursuant to the Exchange Offer and the Private Exchange;
(y) deliver to the Trustee for cancellation all the Notes
so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly
to each Holder of the Notes in accordance with a letter of transmittal
received from each such Holder, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes of
such Holder so accepted for exchange.
The Indenture will provide that the Exchange Notes will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Notes will vote and consent together on all matters as one class (to the extent
such Notes are entitled to vote and consent) and that none of the Notes will
have the right to vote or consent as a class separate from one another on any
matter.
Interest on each Exchange Note and Private Exchange Note issued
pursuant to the Exchange Offer and in the Private Exchange will accrue from the
last interest payment date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from the
date of original issue of the Notes.
Each Holder participating in the Exchange Offer shall be required
to represent to the Company in the letter of transmittal that at the time of the
consummation of the Exchange Of-
<PAGE> 5
-5-
fer (i) any Exchange Notes received by such Holder will be acquired in the
ordinary course of its business, (ii) such Holder will have no arrangements or
understanding with any person to participate in the distribution of the Notes or
the Exchange Notes within the meaning of the Securities Act, (iii) such Holder
is not an "affiliate," as defined in Rule 405 of the Securities Act, of the
Company or if it is such an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable, (iv) if such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, directly or indirectly, the
distribution of the Exchange Notes and (v) if such Holder is a broker-dealer,
that it will receive Exchange Notes for its own account in exchange for Notes
that were acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such Exchange Notes.
Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto
complies in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or
public policy (including, without limitation, rules, regulations, pronouncements
and published interpretations by the Commission), the Company is not permitted
to effect the Exchange Offer, as contemplated by Section 1 hereof, (ii) the
Exchange Offer is not consummated within 180 days of the Issue Date, (iii) the
Initial Purchaser so requests with respect to Notes not eligible to be exchanged
by it for Exchange Notes in the Exchange Offer or with respect to the Private
Exchange Notes and, in each case, held by it following consummation of the
Exchange Offer or (iv) any Holder (other than a Participating Broker-Dealer or
an affiliate) is not eligible to participate in the Exchange Offer or, in the
case of
<PAGE> 6
-6-
any Holder (other than a Participating Broker-Dealer or an affiliate) that
participates in the Exchange Offer, such Holder does not receive freely tradable
Exchange Notes on the date of the exchange, the Company shall take the following
actions:
(a) The Company shall, at its cost, as promptly as
practicable file with the Commission and thereafter shall use its
reasonable best efforts to cause to be declared effective, not later
than the 90th day after the earliest of the events described in clauses
(i), (iii) or (iv) occurs and not later than the 30th day after the
event described in clause (ii) (such 90th day or 30th day the "Shelf
Effective Date")a registration statement (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration
Statement, a "Registration Statement") on Form S-1 or another
appropriate form under the Securities Act relating to the offer and
sale of the Transfer Restricted Notes by the Holders thereof from time
to time in accordance with the methods of distribution set forth in the
Shelf Registration Statement and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); provided, however, that no
Holder (other than an Initial Purchaser) shall be entitled to have the
Notes held by it covered by such Shelf Registration Statement unless
such Holder agrees in writing to be bound by all the provisions of this
Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective in order
to permit the prospectus included therein to be lawfully delivered by
the Holders of the relevant Notes, for a period of two years (or for
such longer period if extended pursuant to Section 3(j) below) from the
Issue Date or such shorter period that will terminate when all the
Notes covered by the Shelf Registration Statement (i) have been sold
pursuant thereto or (ii) are eligible for sale pursuant to Rule 144
without any limitations under clauses (c), (e), (f) and (h) of Rule 144
(or any successor provision) under the Securities Act. The Company
shall be deemed not to have used its reasonable best efforts to keep
the Shelf Registration Statement effective during the requisite period
if it voluntarily takes any action that would result in Holders of
Notes covered thereby not being able to offer and sell such Notes
during that period, unless such action is (i) required by applicable
law or (ii) pursuant to Section 2(c) hereof, and,
<PAGE> 7
-7-
in either case, so long as the Company promptly thereafter complies
with the requirements of Section 3(j) hereof, if applicable.
(c) The Company may suspend the use of the prospectus
related to the Shelf Registration Statement for a period not to exceed
45 days in any 90-day period or four periods not to exceed an aggregate
of 90 days in any 12-month period for valid business reasons (not
including avoidance of the Company's obligations hereunder), including
the acquisition or divestiture of assets, public filings with the
Commission, pending corporate developments and similar events.
(d) Notwithstanding any other provisions of this Agreement
to the contrary, the Company shall cause the Shelf Registration
Statement and the related prospectus and any amendment or supplement
thereto, as of the effective date of the Shelf Registration Statement,
amendment or supplement, (i) to comply in all material respects with
the applicable requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Exchange
Offer contemplated by Section 1 hereof, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial
Purchaser, prior to the filing thereof with the Commission, a copy of
the Registration Statement and each amendment thereof and each
supplement, if any, to the prospectus included therein and, in the
event that an Initial Purchaser (with respect to any portion of an
unsold allotment from the original offering) is participating in the
Exchange Offer or the Shelf Registration Statement, shall use its best
efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may
propose; (ii) if requested by an Initial Purchaser, include the
information required by Items 507 or 508 of Regulation S-K under the
Securities Act, as applicable, in the prospectus forming a part of the
Ex-
<PAGE> 8
-8-
change Offer Registration Statement; (iii) include within the
prospectus contained in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," reasonably acceptable to the
Initial Purchaser, which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with
respect to the potential "underwriter" status of a Participating
Broker-Dealer that is the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of Exchange Notes received by such
Participating Broker-Dealer in the Exchange Offer, whether such
positions or policies have been publicly disseminated by the staff of
the Commission or such positions or policies, in the reasonable
judgment of the Initial Purchaser based upon advice of counsel (which
may be in-house counsel) and consultation with Company counsel,
represent the prevailing views of the staff of the Commission; and (iv)
in the case of a Shelf Registration Statement, include the names of the
Holders who propose to sell Notes pursuant to the Shelf Registration
Statement as selling securityholders, the amount of Notes owned by each
such Holder and the amount of Notes to be sold by each such Holder.
(b) The Company shall give written notice to the Initial
Purchaser, the Holders of the Notes and any Participating Broker-Dealer
from whom the Company (in the case of a Shelf Registration) has
received prior written notice that it will be a Participating
Broker-Dealer in the Exchange Offer (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the
use of the prospectus until the requisite changes have been made):
(i) when the Registration Statement or any
amendment thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;
(ii) of any request by the Commission for
amendments or supplements to the Registration Statement or the
prospectus included therein or for additional information;
(iii) of the issuance by the Commission of any
stop order suspending the effectiveness of
<PAGE> 9
-9-
the Registration Statement or the initiation of any proceedings
for that purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires
the Company to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the
prospectus do not contain an untrue statement of a material fact
nor omit to state a material fact required to be stated therein
or necessary to make the statements therein (in the case of the
prospectus, in light of the circumstances under which they were
made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Notes included
within the coverage of the Shelf Registration, without charge, at least
one copy of the effective Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
(e) The Company shall deliver to each Participating Broker-Dealer
and the Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the effective Exchange Offer
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Initial
Purchaser or any such Holder requests, all exhibits thereto (including
those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Notes included within the coverage of the
Shelf Registration, without
<PAGE> 10
-10-
charge, as many copies of the prospectus (including each preliminary
prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this
Agreement, to the use of the prospectus or any amendment or supplement
thereto by each of the selling Holders of the Notes in connection with
the offering and sale of the Notes covered by the prospectus, or any
amendment or supplement thereto, included in the Shelf Registration
Statement.
(g) The Company shall deliver to the Initial Purchaser, any
Participating Broker-Dealer and such other persons required to deliver
a prospectus following the Exchange Offer, without charge, as many
copies of the final prospectus included in the Exchange Offer
Registration Statement and any amendment or supplement thereto as such
persons may reasonably request. The Company consents, subject to the
provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by the Initial Purchaser, if necessary,
any Participating Broker-Dealer and such other persons required to
deliver a prospectus following the Exchange Offer in connection with
the offering and sale of the Exchange Notes covered by the prospectus,
or any amendment or supplement thereto, included in such Exchange Offer
Registration Statement.
(h) Prior to any public offering of the Notes pursuant to
any Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Notes included therein and their
respective counsel in connection with the registration or qualification
of the Notes for offer and sale under the securities or "blue sky" laws
of such states of the United States as any Holder of the Notes
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such
jurisdictions of the Notes covered by such Registration Statement;
provided, however, that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not
then so qualified or (ii) take any action which would subject it to
general service of process or to taxation in any jurisdiction where it
is not then so subject.
<PAGE> 11
-11-
(i) The Company shall cooperate with the Holders of the
Notes to facilitate the timely preparation and delivery of certificates
representing the Notes to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may request a reasonable period
of time prior to confirmation of sales of the Notes pursuant to such
Registration Statement.
(j) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above during the period for
which the Company is required to maintain an effective Registration
Statement, the Company shall promptly prepare and file a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus and any other required document so that, as thereafter
delivered to Holders of the Notes or purchasers of Notes, the
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Company notifies the
Initial Purchaser, the Holders of the Notes and any known Participating
Broker-Dealer in accordance with paragraphs (ii) through (v) of Section
3(b) above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchaser,
the Holders of the Notes and any such Participating Broker-Dealers
shall promptly suspend use of such prospectus, and the period of
effectiveness of the Exchange Offer Registration Statement provided for
in Section 1 above shall be extended by the number of days from and
including the date of the giving of such notice to and including the
date when the Initial Purchaser, the Holders of the Notes and any known
Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Notes, the Exchange Notes or the Private Exchange Notes, as the case
may be, and provide the applicable trustee with printed certificates
for the Notes, the Exchange Notes or the Private Exchange Notes, as the
case may be, in a form eligible for deposit with The Depository Trust
Company.
<PAGE> 12
-12-
(l) The Company will comply with all rules and regulations
of the Commission to the extent and so long as they are applicable to
the Exchange Offer or the Shelf Registration and will make generally
available to its security holders (or otherwise provide in accordance
with Section 11(a) of the Securities Act) an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act, no
later than 90 days after the end of a 12-month period (or 180 days, if
such period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of
the Registration Statement, which statement shall cover such 12-month
period.
(m) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall
appoint a new trustee thereunder pursuant to the applicable provisions
of the Indenture.
(n) The Company may require each Holder of Notes to be sold
pursuant to the Shelf Registration Statement to furnish to the Company
such information regarding the Holder and the distribution of the Notes
as the Company may from time to time reasonably require for inclusion
in the Shelf Registration Statement, and the Company may exclude from
such registration the Notes of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the Notes
shall reasonably request in order to facilitate the disposition of the
Notes pursuant to any Shelf Registration.
(p) in the case of any Shelf Registration, the Company
shall (i) make reasonably available for inspection by the Holders of
the Notes, any underwriter participating in any disposition pursuant to
the Shelf Registration Statement and any attorney, accountant or other
agent retained by the Holders of the Notes or any
<PAGE> 13
-13-
such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders of
the Notes or any such underwriter, attorney, accountant or agent in
connection with the Shelf Registration Statement, in each case, as
shall be reasonably necessary to enable such persons to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial
Purchaser by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in
Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if
requested by any Holder of Notes covered thereby, shall cause (i) its
and its Subsidiaries' respective counsel to deliver opinions and
updates thereof relating to the Notes in customary form addressed to
such Holders and the managing underwriters, if any, thereof and dated
the effective date of such Shelf Registration Statement or of the most
recent post-effective amendment thereto (it being agreed that the
matters to be covered by such opinions shall include the due
incorporation and good standing of the Issuer and its Subsidiaries; the
qualification of the Issuer and its Subsidiaries to transact business
as foreign corporations; the due authorization, execution and delivery
of the relevant agreement of the type referred to in Section 3(o)
hereof; the due authorization, execution, authentication and issuance,
and the validity and enforceability, of the applicable Notes; the
absence of material legal or governmental proceedings involving the
Issuer and its Subsidiaries; the absence of governmental approvals
required to be obtained in connection with the Shelf Registration
Statement, the offering and sale of the applicable Notes, or any
agreement of the type referred to in Section 3(o) hereof; the
compliance as to form of such Shelf Registration Statement and any
documents incorporated by reference therein and of the Indenture with
the requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and as of the
effective date of the Shelf Registration Statement or most recent
post-effective
<PAGE> 14
-14-
amendment thereto, as the case may be, negative assurance as to the
absence from such Shelf Registration Statement and the prospectus
included therein, as then amended or supplemented, and from any
documents incorporated by reference therein of an untrue statement of a
material fact or the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading (in the case of any such documents, in the light of the
circumstances existing at the time that such documents were filed with
the Commission under the Exchange Act) (such negative assurance to be
substantially in the form delivered to the Initial Purchaser in
connection with the original issuance and sale of the Notes)); (ii) its
officers to execute and deliver all customary documents and
certificates and updates thereof reasonably requested by any
underwriters of the applicable Notes and (iii) its independent public
accountants to provide to the selling Holders of the applicable Notes
and any underwriter therefor a comfort letter in customary form and
covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
(r) In the case of the Exchange Offer, if requested by the
Initial Purchaser or any known Participating Broker-Dealer, the Company
shall, at the time of the consummation of such Exchange Offer, cause
(i) its counsel to deliver to the Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the form set forth in
Section 7(a) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration
Statement and (ii) its independent public accountants to deliver to
such Initial Purchaser or such Participating Broker-Dealer a comfort
letter, in customary form, meeting the requirements as to the substance
thereof as set forth in Section 7(d) of the Purchase Agreement, with
appropriate date changes.
(s) If a Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Company (or
to such other Person as directed by the Company) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the
Company shall mark, or cause to be marked, on the Notes
<PAGE> 15
-15-
so exchanged that such Notes are being canceled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; in no
event shall the Notes be marked as paid or otherwise satisfied.
(t) The Company shall use its best efforts to (a) if the
Notes have theretofore been rated by a nationally recognized
statistical rating organization, confirm that the Notes covered by a
Registration Statement shall be so rated on the date such Registration
Statement becomes effective, or (b) if the Notes were not previously
rated, cause the Notes covered by a Registration Statement to be rated
with the appropriate rating agencies, if so requested by Holders of a
majority in aggregate principal amount of Notes covered by such
Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under
the Exchange Act shall underwrite any Notes or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Notes or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Company
shall assist such broker-dealer in complying with the requirements of
such Rules, including (i) if Rule 2720 thereto shall so require,
engaging a "qualified independent underwriter" (as defined in Rule
2720) to participate in the preparation of the Registration Statement
relating to such Notes, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by
such Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Notes, (ii) indemnifying any such qualified independent underwriter to
the extent of the indemnification of underwriters provided in Section 5
hereof and (iii) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the
requirements of the Conduct Rules of the NASD.
(v) The Company shall use its best efforts to take all
other steps necessary to effect the registra-
<PAGE> 16
-16-
tion of the Notes covered by a Registration Statement contemplated
hereby.
4. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 3 hereof (including the reasonable fees and expenses, if any,
of Cahill Gordon & Reindel, counsel for the Initial Purchaser, incurred in
connection with the Exchange Offer), whether or not the Exchange Offer or a
Shelf Registration is filed or becomes effective, and, in the event of a Shelf
Registration, shall bear or reimburse the Holders of the Notes covered thereby
for the reasonable fees and disbursements of one firm of counsel designated by
the Holders of a majority in principal amount of the Notes covered thereby to
act as counsel for the Holders of the Notes in connection therewith.
5. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder of the Notes (including the Initial Purchaser), any
Participating Broker-Dealer and each person, if any, who controls such Holder or
such Participating Broker-Dealer within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (each Holder, any Participating
Broker-Dealer and such controlling persons are referred to collectively as the
"Indemnified Parties") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including any
losses, claims, damages, liabilities or actions relating to purchases and sales
of the Notes) to which each Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the Company
shall not be liable in any such case to the extent that such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in a Registration
Statement or prospectus or in any amendment or supplement
<PAGE> 17
-17-
thereto or in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein and (ii) with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus
relating to any Shelf Registration Statement, the indemnity agreement contained
in this subsection (a) shall not inure to the benefit of any Indemnified Party
from whom the person asserting any such losses, claims, damages or liabilities
purchased the Notes concerned, to the extent that a prospectus relating to such
Notes was required to be delivered by such Holder or Participating Broker-Dealer
under the Securities Act in connection with such purchase and any such loss,
claim, damage or liability of such Holder or Participating Broker-Dealer results
from the fact that there was not sent or given to such person, at or prior to
the written confirmation of the sale of such Notes to such person, a copy of the
final prospectus if the Issuer had previously furnished copies thereof to such
Indemnified Party and such final prospectus corrected such untrue statement or
omission; provided further, however, that this indemnity agreement will be in
addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their officers
and directors and each person who controls such underwriters within the meaning
of the Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Notes and shall, if
requested by such Holders, enter into an underwriting agreement reflecting such
agreement, as provided in Section 3(o) hereof.
(b) Each Holder of the Notes, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any losses, claims, damages or liabilities
or any actions in respect thereof, to which the Company or any such controlling
person may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
<PAGE> 18
-18-
therein not misleading, but in each case only to the extent that the untrue
statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company for any legal
or other expenses reasonably incurred by the Company or any such controlling
person in connection with investigating or defending any loss, claim, damage,
liability or action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have to the Company or
any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
promptly notify the indemnifying party of the commencement thereof; but the
failure so to notify the indemnifying party will not, in any event, (i) relieve
the indemnifying party from liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantive rights and
defenses and (ii) relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such
<PAGE> 19
-19-
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 5 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the sale of the Notes pursuant
to the Purchase Agreement and the Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, which resulted in such Losses;
provided, however, that in no case shall the Initial Purchaser or any subsequent
Holder of any Note be responsible, in the aggregate, for any amount in excess of
the purchase discount or commission applicable to such Note, as set forth in
Section 2 of the Purchase Agreement, nor shall any underwriter be responsible
for any amount in excess of the underwriting discount or commission applicable
to the securities purchased by such underwriter under the Shelf Registration
Statement or Exchange Offer Registration Statement, as the case may be, which
resulted in such Losses. If the alloca-
<PAGE> 20
-20-
tion provided by the immediately preceding sentence is unavailable for any
reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the sale of the Notes pursuant to the Purchase
Agreement (before deducting expenses) as set forth in the "The Transactions and
Use of Proceeds" section of the Offering Memorandum dated the date of the
Purchase Agreement relating to the Notes. Benefits received by the Initial
Purchaser shall be deemed to be equal to the total purchase discounts and
commissions as set forth in Section 3 of the Purchase Agreement and any benefits
received by any other Holders shall be deemed to be equal to the value of the
Notes owned by such Holders and registered under the Securities Act. Benefits
received by any underwriter shall be deemed to be equal to the total
underwriting discounts and commissions, as set forth on the cover page of the
prospectus forming a part of the Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, which resulted in such Losses.
Relative fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the indemnifying party,
on the one hand, or by the indemnified party, on the other hand. The parties
agree that it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5, each person who
controls a Holder within the meaning of either the Securities Act or the
Exchange Act and each director, officer, employee and agent of such Holder shall
have the same rights to contribution as such Holder, and each person who
controls the Company within the meaning of either the Securities Act or the
Exchange Act, each officer of the Company who shall have signed the Shelf
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
<PAGE> 21
-21-
(e) The agreements contained in this Section 5 shall survive the
sale of the Notes pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Liquidated Damages Under Certain Circumstances. (a) Liquidated
Damages ("Liquidated Damages") with respect to the Notes shall be assessed as
follows if any of the following events occur (each such event in clauses (i)
through (iii) below a "Registration Default," and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"):
(i) If within 75 days of the Issue Date, the
Exchange Offer Registration Statement has not been filed with the
Commission;
(ii) If within 150 days after the Issue Date, the
Exchange Offer Registration Statement is not declared effective
under the Securities Act by the Commission;
(iii) If within 180 days of the Issue Date, the
Exchange Offer is not consummated and;
(iv) If the Shelf Registration Statement (if
required) has not been declared effective by the Shelf
Effectiveness Date;
(v) If after either the Exchange Offer
Registration Statement or the Shelf Registration Statement is
declared effective (A) such Registration Statement thereafter
ceases to be effective or (B) such Registration Statement or the
related prospectus ceases to be usable (except as permitted in
paragraph (b) of this Section 6) in connection with resales of
Transfer Restricted Notes during the periods specified herein
because either (1) any event occurs as a result of which the
related prospectus forming part of such Registration Statement
would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, or (2) it shall be
<PAGE> 22
-22-
necessary to amend such Registration Statement or supplement the
related prospectus to comply with the Securities Act or the
Exchange Act or the respective rules thereunder.
Liquidated Damages shall accrue on the Transfer Restricted Notes over
and above the interest set forth in the title of the Transfer
Restricted Notes from and including the date on which any such
Registration Default shall occur to but excluding the date on which all
such Registration Defaults have been cured, at a per annum rate of
0.50% for the first 90 days of the Registration Default Period, at a
per annum rate of 1.00% for the second 90 days of the Registration
Default Period and at a per annum rate of 1.50% thereafter for the
remaining portion of the Registration Default Period. Notice of any
such Registration Default or its cure shall be given by the Issuer to
the Trustee as soon as practicable following the occurrence of any such
event. Liquidated Damages are payable in addition to any other interest
payable from time to time with respect to the Transfer Restricted
Notes.
(b) A Registration Default referred to in Section 6(a)(v)(B)
shall be deemed not to have occurred and be continuing in relation to a
Shelf Registration Statement or the related prospectus if (i) such
Registration Default has occurred solely as a result of (x) the filing
of a post-effective amendment to such Shelf Registration Statement to
incorporate annual audited or interim financial information with
respect to the Company where such post-effective amendment is not yet
effective and needs to be declared effective to permit Holders to use
the related prospectus, (y) the Company having issued information to
its shareholders, including financial statements or other information
not already contained in such Shelf Registration Statement, and as a
result being subject to Section 3-19(f) of Regulation S-X under the
Securities Act or (z) the existence or occurrence of other material
events with respect to the Company that would need to be described in
such Shelf Registration Statement or the related prospectus and (ii) in
the case of clause (y) or (z), the Company is proceeding promptly and
in good faith to amend or supplement such Shelf Registration Statement
and related prospectus to describe such events; provided, however, that
in any case if such Registration Default occurs for a continuous period
in excess of 45 days (or 10 business days in the event of a
Registration Default
<PAGE> 23
-23-
under clause (y)), Liquidated Damages shall be payable in accordance
with the above paragraph from the day such Registration Default occurs
until such Registration Default is cured.
(c) Any amounts of Liquidated Damages due pursuant to clause
(a)(i), (a)(ii), (a)(iii) or (a)(iv) of Section 6 above will be payable
in cash on the regular interest payment dates with respect to the
Transfer Restricted Notes. The amount of Liquidated Damages will be
determined by multiplying the Liquidated Damages rate by the principal
amount of the Transfer Restricted Notes, multiplied by a fraction, the
numerator of which is the number of days such Liquidated Damages rate
was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which
is 360.
(d) "Transfer Restricted Notes" means each Note until (i) the
date on which such Note has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Note in the Exchange
Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of such Note for an Exchange Note, the date on which such
Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement,
(iii) the date on which such Note has been effectively registered under
the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is
distributed to the public pursuant to Rule 144 under the Securities Act
or is freely tradable pursuant to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts to
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Transfer
Restricted Notes, make publicly available other information so long as necessary
to permit sales of their securities pursuant to Rules 144 and 144A. The Company
covenants that it will take such further action as any Holder of Transfer
Restricted Notes may reasonably request, all to the extent required from time to
time to enable such Holder to sell Transfer Restricted Notes without
registration under the Securities Act within the limi-
<PAGE> 24
-24-
tation of the exemptions provided by Rules 144 and 144A (including the
requirements of Rule 144A(d)(4)). The Company will provide a copy of this
Agreement to prospective purchasers of Notes identified to the Company by the
Initial Purchaser upon request. Upon the request of any Holder of Transfer
Restricted Notes, the Company shall deliver to such Holder a written statement
as to whether it has complied with such requirements. Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the Company to
register any of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Notes covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Notes to be included in such offering.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Notes on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, except by the Company, the Initial
Purchaser (if affected by such amendment, modification, supplement, waiver or
consents) and the written consent of the Holders at the time of a majority in
principal amount of the Notes affected by such amendment, modification,
supplement, waivers or consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Notes, at the most current address
given by such Holder to the Company in accordance with the provisions
of this Section 9(b), which address
<PAGE> 25
-25-
initially is, with respect to each Holder, the address of such Holder
to which confirmation of the sale of the Notes to such Holder was first
sent by the Initial Purchaser.
(2) if to the Initial Purchaser, at the following address:
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, NY 10020
Attention: Donald A. Wagner
(3) if to the Company, at the address as follows:
Decora Industries, Inc.
1 Mill Street
Fort Edward, New York 12828-1727
Attention: Timothy N. Burditt
with a copy to:
Miller & Holguin
1801 Century Park East, Seventh Floor
Los Angeles, California 90067
Attention: Lisa Hamilton Klein, Esq.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile machine operator, if sent
by facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes. The Company hereby agrees to
extend the benefits of this Agreement to any Holder of Notes and any such Holder
may specifically enforce
<PAGE> 26
-26-
the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED By, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Notes Held by the Company. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Notes is required
hereunder, Notes held by the Company or its affiliates (other than subsequent
Holders of Notes if such subsequent Holders are deemed to be affiliates solely
by reason of their holdings of such Notes) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(j) Submission to Jurisdiction. To the fullest extent permitted
by applicable law, the Company irrevocably submits to the jurisdiction of any
federal or state court in the City, County and State of New York, United States
of America, in any suit or proceeding based on or arising under this Agreement,
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in any such court. The Company irrevocably and fully waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company agrees that service of process upon it by prepaid registered
first-class mail at its address set forth above for notices, shall be deemed in
every respect effective service of process upon the Company
<PAGE> 27
-27-
in any such suit or proceeding. Nothing herein shall affect the right of any
Holder or any person controlling such Holder to serve process in any other
manner permitted by law.
<PAGE> 28
-28-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Initial Purchaser and the Company in accordance with its terms.
Very truly yours,
DECORA INDUSTRIES, INC.
By:
--------------------------------------
Name:
Title:
DECORA, INCORPORATED
By:
--------------------------------------
Name:
Title:
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above
written.
LAZARD FRERES & CO. LLC
By:
--------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.55
================================================================================
GUARANTOR PLEDGE AGREEMENT
BY
DECORA INDUSTRIES, INC.,
as Pledgor,
TO
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee for the holders of the
11% Senior Secured Notes due 2005
Dated as of April 29, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
INTRODUCTION..............................................................................................1
RECITALS..................................................................................................1
SECTION 1. PLEDGE........................................................................................1
1.1. Grant of Pledge..........................................................................1
1.2. Delivery of Collateral...................................................................3
1.3. Perfection of Uncertificated Securities Collateral.......................................3
1.4. Secured Obligations......................................................................4
1.5. No Release...............................................................................4
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR..........................................5
2.1. Ownership................................................................................5
2.2. Shares Validly Issued....................................................................5
2.3. Perfection upon Delivery.................................................................5
2.4. Government Regulations...................................................................5
2.5. Authorization; Enforceability............................................................5
2.6. No Consents, etc.........................................................................5
2.7. No Conflicts.............................................................................6
2.8. Pledgor's Duties.........................................................................6
2.9. Preservation of Collateral...............................................................6
2.10. Further Assurances; Supplements.........................................................6
2.11. Trustee May Perform; Trustee Agent Appointed Attorney-in-Fact...........................7
2.12. Accuracy of Information.................................................................7
2.13. Indemnification.........................................................................7
SECTION 3. SPECIAL PROVISIONS CONCERNING COLLATERAL......................................................8
3.1. Voting Rights, Dividends, Etc. Prior to Event of Default.................................8
3.2. Voting Rights and Dividends After Event of Default.......................................9
3.3. Further Assurances for Voting Rights and Dividends.......................................9
3.4. Dividends Received in Trust..............................................................9
3.5. Transfers and Other Liens; Additional Shares............................................10
SECTION 4. REMEDIES UPON DEFAULT........................................................................10
4.1. Dispositions of Collateral..............................................................10
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.2. Securities Laws Limitations.............................................................11
4.3. Additional Information..................................................................12
4.4. Waivers.................................................................................12
4.5. Deficiency..............................................................................12
4.6. Application of Proceeds.................................................................13
4.7. Expenses................................................................................13
4.8. No Waiver; Discontinuance of Proceeding.................................................13
SECTION 5. MISCELLANEOUS PROVISIONS.....................................................................14
5.1. Entire Agreement........................................................................14
5.2. Execution in Counterparts...............................................................14
5.3. Survival................................................................................14
5.4. Headings................................................................................14
5.5. Severability of Provisions..............................................................14
5.6. Notices.................................................................................14
5.7. Amendments..............................................................................14
5.8. GOVERNING LAW...........................................................................15
5.9. CONSENT TO JURISDICTION AND SERVICE OF PROCESS..........................................15
5.10. Agents.................................................................................15
5.11. Reasonable Care........................................................................15
5.12. Trustee................................................................................15
5.13. Continuing Security Interest; Assignment...............................................16
5.14. Obligations Absolute...................................................................16
5.15. Termination; Release...................................................................17
Signatures
Schedule A PLEDGED SHARES
Exhibit 1 PLEDGE AMENDMENT
Exhibit 2 Form of Issuer Acknowledgment
</TABLE>
-ii-
<PAGE> 4
PLEDGE AGREEMENT
I N T R O D U C T I O N :
GUARANTOR PLEDGE AGREEMENT (this "Agreement"), dated as of April 29,
1998, by and between DECORA INDUSTRIES, INC., a Delaware corporation
("Pledgor"), and UNITED STATES TRUST COMPANY OF NEW YORK (together with any
successors or assigns, the "Trustee"), in its capacity as trustee under the
Indenture (as hereinafter defined).
R E C I T A L S :
A. Pledgor, Decora, Incorporated, a Delaware corporation ("Decora"), and
the Trustee have entered into an indenture, dated as of the date hereof (the
"Indenture"), pursuant to which the Pledgor's 11% Senior Secured Notes due 2005
(the "Notes") will be issued concurrently herewith. Terms not defined herein
have the meanings given to them in the Indenture.
B. Pledgor is the legal and beneficial owner of the Collateral (as
hereinafter defined).
C. In order to secure the performance of the Secured Obligations (as
hereinafter defined), the parties hereto are entering into this Agreement
regarding the terms and conditions of Pledgor's pledge of the Collateral to the
Trustee, for the benefit of itself and the Holders of the Notes from time to
time (the Trustee and such Holders, each a "Secured Party" and collectively, the
"Secured Parties").
A G R E E M E N T:
Pledgor and the Trustee agree as follows:
SECTION 1. PLEDGE
1.1. Grant of Pledge. In order to secure the payment and performance
when due of the Secured Obligations, Pledgor does hereby transfer, convey,
warrant, deliver, pledge, assign, hypothecate and grant to the Trustee, for the
benefit of the Secured Parties, a first priority lien on, continuing security
interest in and pledge of all of Pledgor's present and future right, title and
interest in, to and under the following
<PAGE> 5
-2-
properties, rights, interests and privileges (collectively, the "Collateral"):
(a) the shares of capital stock of the issuers set forth
on Schedule A hereto (collectively, the "Current Shares") (which are
and shall remain at all times until this Agreement terminates,
certificated shares);
(b) all additional shares of capital stock of Decora or
the shares of any other Guarantor of the Notes under the Indenture
from time to time acquired or formed by Pledgor in any manner
(collectively, the "Additional Shares"; together with the Current
Shares, the "Pledged Shares") (which are and shall remain at all
times until this Agreement terminates, certificated shares);
(c) any and all certificates representing the Pledged
Shares and any interest of Pledgor in any securities account
pertaining to the Pledged Shares (collectively, the "Certificates");
(d) all membership interests and/or partnership
interests, as applicable from time to time acquired by Pledgor in any
manner in each Guarantor that is a limited liability company or
partnership hereafter acquired or formed by Pledgor or any Guarantor,
together with all rights, privileges, authority and powers of Pledgor
in and to each such limited liability company or partnership or under
the membership or partnership agreement of each such limited
liability company or partnership (the "Operative Agreements")
(collectively, the "Pledged Interests"), and the certificates,
instruments and agreements, if any, representing the Pledged
Interests;
(e) subject to the provisions of Section 3 hereof, all
dividends, cash or proceeds, options, warrants, rights, instruments
and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares or Pledged Interests (collectively, the
"Dividends"); and
(f) without affecting the obligations of Pledgor under
any provision prohibiting such action hereunder or under the
Indenture, in the event of any consolidation or merger in which any
issuer of Pledged Shares or Pledged Interests is not the surviving
entity, all shares of each class of the capital stock of the
successor corporation or
<PAGE> 6
-3-
interests or certificates of the successor limited liability company
or partnership owned by such Pledgor (unless successor is Pledgor
itself) formed by or resulting from such consolidation or merger;
(g) all cash, instruments, securities, funds and credits
of Pledgor from time to time on deposit with the Trustee, all
investments of such funds and all certificates, securities and
instruments evidencing any such investments of such funds, and all
interest, dividends, cash, instruments and other property received as
proceeds of, or in substitution or exchange for, and all collections
and claims in respect of, any and all of the foregoing (collectively,
the "Cash Collateral").
1.2. Delivery of Collateral. All certificates, agreements
or instruments representing or evidencing the Collateral shall be delivered to
and held by or on behalf of the Trustee pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Trustee. The Trustee shall have the right, at any time upon
or after the occurrence of an Event of Default and without notice to Pledgor, to
endorse, assign or otherwise transfer to or to register in the name of the
Trustee or any of its nominees any or all of the Collateral. In addition, the
Trustee shall have the right at any time to exchange certificates representing
or evidencing Collateral for certificates of smaller or larger denominations.
1.3. Perfection of Uncertificated Securities Collateral. If
any issuer of Pledged Shares or Pledged Interests is organized in a jurisdiction
which does not permit the use of certificates to evidence equity ownership, or
if any of the Pledged Shares or Pledged Interests are at any time not evidenced
by certificates of ownership, then Pledgor shall, to the extent permitted by
applicable law, record such pledge on the equityholder register or the books of
the issuer, cause the issuer to execute and deliver to Trustee an acknowledgment
of the pledge of such Pledged Shares or Pledged Interests substantially in the
form of Exhibit 2 hereto, execute any customary pledge forms or other documents
necessary or appropriate to complete the pledge and give Trustee the right to
transfer such Pledged Shares or Pledged Interests under the terms hereof and
provide to Trustee an Opinion of Counsel, in form and substance satisfactory to
Trustee, confirming such pledge.
<PAGE> 7
-4-
1.4. Secured Obligations. This Agreement secures, and the
Collateral is collateral security for, the payment and performance in full when
due, whether at stated maturity, by acceleration or otherwise (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the filing of a petition in bankruptcy (whether or not a
claim is allowed against Pledgor for such interest or other amounts in any such
bankruptcy proceeding) or the operation of the automatic stay under Section
362(a) of the Bankruptcy Law), of (i) all obligations of Pledgor now existing or
hereafter arising under or in respect of the Indenture, the Notes or the
Registration Rights Agreement (including, without limitation, Pledgor's
obligations to pay principal, interest and all other charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments related to
or in respect of the obligations contained therein) and (ii) without duplication
of the amounts described in clause (i), all obligations of Pledgor now existing
or hereafter arising under or in respect of this Agreement, including, without
limitation, with respect to all charges, fees, expenses, commissions,
reimbursements, premiums, indemnities and other payments related to or in
respect of the obligations contained in this Agreement (the obligations
described in clauses (i) and (ii), collectively, the "Secured Obligations").
1.5. No Release. Nothing set forth in this Agreement shall
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Collateral or from any liability to any Person under or in respect of
any of the Collateral or shall impose any obligation on the Trustee to perform
or observe any such term, covenant, condition or agreement in respect of any of
the Collateral on Pledgor's part to be so performed or observed or shall impose
any liability on the Trustee for the operation, control, care, management or
repair of the Collateral or for any act or omission on the part of Pledgor
relating to Pledgor's obligations thereto or for any breach of any
representation or warranty on the part of Pledgor contained in this Agreement,
under or in respect of the Collateral or made in connection herewith or
therewith. The provisions set forth in this Section 1.5 shall survive the
termination of this Agreement and the discharge of the Pledgor's obligations
under this Agreement.
<PAGE> 8
-5-
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PLEDGOR
Pledgor represents, warrants and covenants (as applicable)
as follows:
2.1. Ownership. Pledgor is as of the date hereof, and, as
to Collateral acquired by it from time to time after the date hereof, Pledgor
will be, the legal, record and beneficial owner of all of the Collateral free
and clear of any Lien or other right, title or interest of any Person other than
the Lien and security interest granted by Pledgor to the Trustee pursuant to
this Agreement.
2.2. Shares Validly Issued. All of the Pledged Shares have
been duly authorized and validly issued and are fully paid and non-assessable.
2.3. Perfection upon Delivery. Upon delivery by Pledgor to
the Trustee of the certificates evidencing the Pledged Shares, duly endorsed to
the Trustee or in blank, the Lien on such Collateral granted to the Trustee
pursuant to this Agreement constitutes and hereafter will constitute a first
priority perfected Lien on such Collateral, superior and prior to the rights of
all other Persons therein and subject to no other Liens.
2.4. Government Regulations. The pledge of the Collateral
pursuant to this Agreement does not violate Regulation T, U or X of the Federal
Reserve Board.
2.5. Authorization; Enforceability. Pledgor has full
corporate power, authority and legal right to pledge and grant a security
interest in all the Collateral pursuant to this Agreement. This Agreement
constitutes the legal, valid and binding obligation of Pledgor, enforceable
against Pledgor in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium and similar laws
affecting creditors' rights generally and to general equitable principles.
2.6. No Consents, etc. No authorization, consent, approval,
license, qualification or formal exemption from, or any filing, declaration or
registration with, any court, governmental agency or regulatory authority, or
with any securities exchange or any other Person, is required in connection with
(i) the execution, delivery or performance by Pledgor of this Agreement, (ii)
the grant of a Lien on (including the pri-
<PAGE> 9
-6-
ority thereof) the Collateral by Pledgor in the manner and for the purpose
contemplated by this Agreement or (iii) the exercise of the rights and remedies
of the Trustee created hereby, except (a) those that have been obtained or made
concurrently with the execution hereof, and (b) as may be required in connection
with such disposition by laws affecting the offering and sale of securities
generally.
2.7. No Conflicts. The execution, delivery and performance
by Pledgor of this Agreement do not (or with notice or lapse of time or both,
will not) violate, conflict with or constitute a default under, or result in the
termination of or accelerate the performance required by, or result in there
being declared void, voidable or without further binding effect, any provision
of any other agreement, instrument or document to which Pledgor is a party.
2.8. Pledgor's Duties. Pledgor shall perform, abide by and
be governed by each and all of the terms, provisions, covenants and agreements
set forth in this Agreement and in each and every supplement hereto or amendment
hereof which may at any time or from time to time be executed and delivered by
the parties hereto or their successors and assigns.
2.9. Preservation of Collateral. All rights, powers and
privileges of the Trustee herein set forth are coupled with an interest and are
irrevocable, subject to the terms and conditions hereof, and Pledgor shall not
take or omit to take any action with respect to the Collateral or otherwise
which is inconsistent with this Agreement, and any such action inconsistent
herewith or therewith shall be void. Pledgor shall not further pledge, encumber,
hypothecate, sell, convey or assign, or grant any option with respect to all or
any part of the Collateral or suffer any of the foregoing to occur by operation
of law or otherwise, except for the Liens and security interests granted by
Pledgor to the Trustee pursuant to this Agreement, and shall promptly take such
action as is reasonably necessary to remove any such other Lien. Pledgor will,
at its expense, warrant and defend the title to the Collateral against all
claims and demands of all third Persons or Persons claiming by, through or under
Pledgor at any time claiming any interest therein adverse to the Trustee.
2.10. Further Assurances; Supplements.
(a) Pledgor agrees that at any time and from time to time,
Pledgor will, at its expense, promptly do, execute, acknowledge and
deliver all and every further act, deed,
<PAGE> 10
-7-
conveyance, transfer, waiver, subordination, supplement, opinion of
counsel and other instruments, documents and assurances that may be
reasonably necessary or that the Trustee deems appropriate or
advisable, including, without limitation, supplemental or additional
UCC-1 financing statements, for the continued perfection, preservation
and protection of the security interest in the Collateral granted
hereby or to enable the Trustee to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
(b) Pledgor shall, upon obtaining any Pledged Shares,
promptly (and in any event within five Business Days) deliver to the
Trustee a pledge amendment, duly executed by Pledgor, in substantially
the form of Exhibit 1 hereto (each, a "Pledge Amendment"), in respect
of the additional Pledged Shares which are to be pledged pursuant to
this Agreement, and confirming the attachment of the Lien hereby
created on and in respect of such additional shares. Pledgor hereby
authorizes the Trustee to attach each Pledge Amendment to this
Agreement and agrees that all Pledged Shares listed on any Pledge
Amendment delivered to the Trustee shall for all purposes hereunder be
considered Collateral.
2.11. Trustee May Perform; Trustee Appointed
Attorney-in-Fact. If Pledgor fails to perform any agreement contained in this
Agreement, the Trustee may itself perform, or cause performance of, such
agreement, and the expenses of the Trustee, including, without limitation, the
reasonable fees and expenses of its counsel and the allocated cost of staff
counsel, incurred in connection therewith shall be payable by Pledgor on demand.
Pledgor hereby appoints the Trustee its attorney-in-fact, with full authority in
the place and stead of Pledgor and in the name of Pledgor, or otherwise, from
time to time in the Trustee's discretion to take any action which the Trustee
may take pursuant to the provisions of this Section.
2.12. Accuracy of Information. All information set forth
herein (including the exhibits hereto) relating to the Collateral is accurate
and complete in all material respects.
2.13. Indemnification. Pledgor hereby agrees to indemnify
the Trustee for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Trustee in any way relating to or arising out of this Agreement
<PAGE> 11
-8-
or the pledge and security interest contemplated hereby or the enforcement of
any of the terms hereof or otherwise arising or relating in any manner to the
Lien contemplated hereunder; provided, however, that Pledgor shall not be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the Trustee.
SECTION 3. SPECIAL PROVISIONS CONCERNING COLLATERAL
3.1. Voting Rights, Dividends, Etc. Prior to Event of
Default. As long as no Event of Default shall have
occurred and be continuing:
(a) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or the Indenture; provided, however, Pledgor shall not in
any event exercise such rights in any manner which may have an adverse
effect on the value of the Collateral or the security intended to be
provided by this Agreement.
(b) Pledgor shall be entitled to receive and retain, and to
utilize free and clear of the Lien of this Agreement, any and all
dividends and distributions in respect of the Collateral, but only if
and to the extent made in accordance with the provisions of the
Indenture; provided, however, that any and all such dividends and
distributions consisting of rights or interests in the form of
securities shall be forthwith delivered to the Trustee to hold as
Collateral and shall, if received by Pledgor, be received in trust for
the benefit of the Trustee, be segregated from the other property or
funds of Pledgor and be forthwith delivered to the Trustee as
Collateral in the same form as so received (with any necessary
endorsement).
(c) The Trustee shall be deemed without further action or
formality to have granted to Pledgor all necessary consents relating
to voting rights and shall, if necessary, upon written request of
Pledgor and at the sole cost and expense of Pledgor, from time to time
execute and deliver (or cause to be executed and delivered) to Pledgor
all such instruments as Pledgor may reasonably request in order to
permit Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to Section 3.1(a) hereof and to receive
the dividends and dis-
<PAGE> 12
-9-
tributions which it is authorized to receive and retain pursuant to
Section 3.1(b) hereof.
3.2. Voting Rights and Dividends After Event of Default.
Upon the occurrence and during the continuance of an Event of Default:
(a) Upon written notice from the Trustee to Pledgor, all
rights of Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section
3.1 above shall cease, and all such rights shall thereupon become
vested in the Trustee, which shall thereupon have the sole right to
exercise such voting and other consensual rights during the
continuance of such Event of Default.
(b) Upon written notice from the Trustee to Pledgor, all
rights of Pledgor to receive the dividends and distributions which it
would otherwise be authorized to receive and retain pursuant to
Section 3.1 above shall cease and all such rights shall thereupon
become vested in the Trustee, which shall thereupon have the sole
right to receive and hold as Collateral such dividends and
distributions during the continuance of such Event of Default.
3.3. Further Assurances for Voting Rights and Dividends. In
order to permit the Trustee to receive all dividends and other distributions to
which it may be entitled under Section 3.1(b) above, to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
3.2(a) above, and to receive all dividends and distributions which it may be
entitled to receive under Section 3.2(b) above, Pledgor shall, if necessary,
upon written notice from the Trustee, from time to time execute and deliver to
the Trustee appropriate proxies, dividend payment orders and other instruments
as the Trustee may reasonably request.
3.4. Dividends Received in Trust. All dividends and
distributions which are received by Pledgor contrary to the provisions of
Section 3.2 above shall be received in trust for the benefit of the Trustee,
shall be segregated from other funds of Pledgor and shall be forthwith paid over
to the Trustee as Collateral in the same form as so received (with any necessary
endorsement).
<PAGE> 13
-10-
3.5. Transfers and Other Liens; Additional Shares.
(a) Transfers and Other Liens. Pledgor shall not (i)
pledge, encumber, hypothecate, sell, convey, assign or otherwise dispose of, or
grant any option or warrant with respect to, any of the Collateral or suffer any
of the foregoing to occur by operation of law or otherwise except for the Liens
and security interests granted by Pledgor to the Trustee pursuant to this
Agreement or (ii) permit any issuer of Pledged Shares to merge or consolidate
unless all the outstanding capital stock of the surviving or resulting
corporation is, upon such merger or consolidation, pledged hereunder and no
cash, securities or other property is distributed in respect of the outstanding
shares of any other constituent corporation; provided, however, that in the
event of an Asset Sale of any Collateral, pursuant to, and in compliance with,
the provisions of the Indenture, the Trustee shall release the Collateral that
is the subject of such sale to Pledgor free and clear of the Lien and security
interest under this Agreement upon the making of proper arrangements by the
Trustee for the application of the proceeds of such Asset Sale in accordance
with the provisions of the Indenture and the receipt by the Trustee of an
Opinion of Counsel to the effect that such sale of Collateral was an Asset Sale
pursuant to, and in compliance with, the Indenture and that such release of
Collateral is authorized and permitted hereby.
(b) Additional Shares. Pledgor agrees that it will cause
each issuer of Collateral consisting of capital stock not to issue any stock or
other securities in addition to or in substitution for such Collateral issued by
such issuer, except to Pledgor.
SECTION 4. REMEDIES UPON DEFAULT
4.1. Dispositions of Collateral. If any Event of Default
shall have occurred and be continuing, the Trustee may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of New York at
that time, and may also in its sole discretion, without notice except as
specified below, subject to applicable law, at any time or from time to time,
sell, assign and deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale, at any
exchange or broker's board for cash, for immediate or future delivery without
any assumption of credit risk, and
<PAGE> 14
-11-
for such price or prices and on such terms as may be reasonable.
At any such sale, unless prohibited by applicable law, the
Trustee on behalf of the Secured Parties may bid for and purchase all or any
part of the Collateral so sold free from any right or equity of redemption of
Pledgor. Each purchaser at any such sale shall hold the property sold absolutely
free from any claim or right on the part of Pledgor, and Pledgor hereby waives
(to the extent permitted by law) all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted. The Trustee shall give Pledgor not
less than five days' prior written notice of the time and place of any sale or
other intended disposition of any of the Collateral, except any Pledged
Collateral which is perishable or threatens to decline speedily in value and is
of a type customarily sold on a recognized market. The notice of such sale shall
(1) in the case of a public sale, state the time and place fixed for such sale,
and (2) in the case of a private sale, state the day after which such sale may
be consummated. Pledgor agrees that such notice constitutes reasonable notice.
The Trustee shall not be obligated to make any sale of the Collateral regardless
of notice of sale having been given. The Trustee may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Pledgor hereby waives any claims against the
Trustee arising by reason of the fact that the price at which any Collateral may
have been sold at such a private sale was less than the price which might have
been obtained at a public sale, even if the Trustee accepts the first offer
received and does not offer such Collateral to more than one offeree. Neither
the Trustee nor any Secured Party shall be liable for failure to collect or
realize upon any or all of the Collateral or for any delay in so doing nor shall
any of them be under any obligation to take any action whatsoever with regard
thereto.
4.2. Securities Laws Limitations. Pledgor recognizes that,
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a view
to the distribution or resale thereof. Pledgor acknowledges that any such
private sales may
<PAGE> 15
-12-
be at prices and on terms less favorable to the Trustee than those obtainable
through a public sale without such restrictions (including, without limitation,
a public offering made pursuant to a registration statement under the Securities
Act), and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner and that
the Trustee shall have no obligation to engage in public sales and no obligation
to delay the sale of any Collateral for the period of time necessary to permit
the issuer thereof to register it for a form of public sale requiring
registration under the Securities Act or under applicable state securities laws,
even if Pledgor would agree to do so.
4.3. Additional Information. If the Trustee determines to
exercise its right to sell any or all of the Collateral, upon written request,
Pledgor shall, and shall cause each issuer of any Collateral to be sold
hereunder from time to time to, furnish to the Trustee all such information as
the Trustee may request in order to determine the number of shares and other
instruments included in the Collateral which may be sold by the Trustee as
exempt transactions under the Securities Act and the rules of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
4.4. Waivers. Pledgor hereby waives, to the extent
permitted by applicable law, notice or judicial hearing in connection with the
Trustee's taking possession or the Trustee's disposition of any Collateral,
including, without limitation, any and all prior notice and hearing for any
prejudgment remedy or remedies and any such right which Pledgor would otherwise
have under law, and Pledgor hereby further waives: (a) all damages occasioned by
such taking of possession; (b) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of the
Trustee's rights hereunder; and (c) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force under any
applicable law. Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of Pledgor therein and
thereto, and shall be a perpetual bar both at law and in equity against Pledgor
and against any and all Persons claiming or attempting to claim the Collateral
so sold, optioned or realized upon, or any part thereof, from, through and under
Pledgor.
4.5. Deficiency. Notwithstanding any other provision of
this Agreement to the contrary, if, after giving effect
<PAGE> 16
-13-
to any sale, transfer or other disposition of any or all of the Collateral
pursuant hereto and after the application of the proceeds hereunder and any
Collateral sold, transferred or otherwise disposed of, any Secured Obligations
remain unpaid or unsatisfied, Pledgor shall remain liable for the unpaid and
unsatisfied amount of such Secured Obligations.
4.6. Application of Proceeds. The proceeds of any sale made
under or by virtue of the provisions of Section 4.13 of the Indenture, together
with any other sums then held by the Trustee pursuant to this Agreement, shall
be applied promptly from time to time by the Trustee as set forth in the
Indenture.
4.7. Expenses. Pledgor will upon demand pay to the Trustee
the amount of any and all expenses, including the reasonable fees and expenses
of its counsel and the allocated fees and expenses of staff counsel and the
reasonable fees and expenses of any experts and agents, which the Trustee may
incur in connection with (i) the administration of this Agreement or any other
Security Document, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Trustee under this Agreement
or any other Security Document or (iv) the failure by Pledgor to perform or
observe any of the provisions of this Agreement or any other Security Document.
All amounts payable by Pledgor under this Section 4.7 shall be due upon demand
and shall be part of the Secured Obligations. Pledgor's obligations under this
Section shall survive the resignation or removal of the Trustee, the termination
of the Security Documents and the Indenture and the discharge of Pledgor's other
obligations under the Security Documents.
4.8. No Waiver; Discontinuance of Proceeding.
(a) No failure on the part of the Trustee to exercise, and
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the Trustee of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein provided are to the fullest
extent permitted by law cumulative and are not exclusive of any remedies
provided by law.
(b) In the event the Trustee shall have instituted any
proceeding to enforce any right, power or remedy under this instrument by
foreclosure, sale, entry or otherwise, and such
<PAGE> 17
-14-
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Trustee, then and in every such case
Pledgor, the Trustee and each Secured Party shall be restored to their
respective former positions and rights hereunder with respect to the Collateral,
and all rights, remedies and powers of the Trustee shall continue as if no such
proceeding had been instituted.
SECTION 5. MISCELLANEOUS PROVISIONS
5.1. Entire Agreement. This Agreement and the documents and
agreements referred to herein embody the entire agreement and understanding
between the parties hereto and supersede all prior agreements and understandings
relating to the subject matter hereof.
5.2. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts shall constitute one and the same Agreement.
5.3. Survival. All representations, warranties, covenants
and agreements herein contained on the part of Pledgor shall survive the payment
and performance of all the Secured Obligations and the termination of this
Agreement.
5.4. Headings. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
5.5. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
5.6. Notices. All notices or other communications required
to be given hereunder shall be given at the address and in the manner required
in the Indenture.
5.7. Amendments. No amendment, modification, supplement,
termination or waiver of or to any provision of this Agreement, or consent to
any departure by Pledgor therefrom, shall be effective unless in writing and
signed by the Trustee
<PAGE> 18
-15-
and Pledgor. Any amendment, modification or supplement of or to any provision of
this Agreement, any waiver of any provision of this Agreement and any consent to
any departure by Pledgor from the terms of any provision of this Agreement shall
be effective only in the specific instance and for the specific purpose for
which made or given.
5.8. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO NEW YORK'S PRINCIPLES OF CONFLICTS OF LAWS).
5.9. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, PLEDGOR ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT SUBJECT
TO RIGHT OF APPEAL. PLEDGOR HEREBY IRREVOCABLY WAIVES TRIAL BY JURY AND PLEDGOR
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH JURISDICTION. NOTHING HEREIN SHALL AFFECT THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF THE TRUSTEE TO BRING PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER
JURISDICTION.
5.10. Agents. The Trustee may use one or more agents to
perform its obligations hereunder.
5.11. Reasonable Care. The Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of Collateral under
any Security Document in its possession if such Collateral is accorded treatment
substantially equivalent to that which the Trustee, in its individual capacity,
accords its own property, it being understood that the Trustee shall not have
responsibility for taking any necessary steps to preserve rights against any
Person with respect to any Collateral.
5.12. Trustee. The Trustee has been appointed as trustee
pursuant to the Indenture. The actions of the Trustee hereunder and under the
other Security Documents are subject to
<PAGE> 19
-16-
the provisions of the Indenture. The Trustee may resign and a successor Trustee
may be appointed in the manner provided in the Indenture. Upon the acceptance of
any appointment as the Trustee by a successor Trustee, that successor Trustee
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Trustee under this Agreement and the other
Security Documents, and the retiring Trustee shall thereupon be discharged from
its duties and obligations under this Agreement and the other Security
Documents. After any retiring Trustee's resignation, the provisions of this
Agreement and the other Security Documents shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement or any other
Security Document while it was the Trustee.
5.13. Continuing Security Interest; Assignment. This
Agreement shall create a continuing security interest in the Collateral and
shall (i) be binding upon Pledgor and its successors and assigns and (ii) inure,
together with the rights and remedies of the Trustee hereunder, to the benefit
of the Trustee and each Secured Party and each of their successors, transferees
and assigns. No other Person (including, without limitation, any other creditor
of Pledgor) shall have any interest herein or any right or benefit with respect
hereto. Pledgor may not assign its rights under this Agreement without the prior
written consent of the Trustee.
5.14. Obligations Absolute. All obligations of Pledgor
hereunder shall be absolute and unconditional irrespective of:
(i) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of
Pledgor;
(ii) any lack of validity or enforceability of any loan
document, or any other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured Obligations, or
any other amendment or waiver of or any consent to any departure from
the Indenture, or any other agreement or instrument relating thereto;
(iv) any exchange or non-perfection of the Collateral, or
any release or amendment or waiver of or consent
<PAGE> 20
-17-
to any departure from any guarantee, for all or any of the Secured
Obligations;
(v) any exercise or non-exercise or any waiver of any
right, remedy, power or privilege under or in respect of any document
relating to the Indenture; or
(vi) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, Pledgor.
5.15. Termination; Release. When all of the Secured
Obligations have been paid in full, this Agreement and the other Security
Documents shall terminate. Upon termination of this Agreement and the other
Security Documents or any release of Collateral in accordance with the
provisions of the Indenture, the Trustee shall, upon the request and at the sole
cost and the expense of Pledgor, forthwith assign, transfer and deliver to
Pledgor against receipt and without express or implied recourse to or warranty
by the Trustee, such of the Collateral to be released as may be in possession of
the Trustee and as shall not have been sold or otherwise applied pursuant to the
terms hereof, and proper instruments acknowledging the termination of this
Agreement and the other Security Documents or the release of such Collateral, as
the case may be. For the avoidance of doubt, the parties agree that this
Agreement shall survive the release of the Collateral secured hereby and shall
terminate only when all of the Secured Obligations have been paid in full.
<PAGE> 21
IN WITNESS WHEREOF, Pledgor and the Trustee have executed
this Agreement as of the day and year first above written.
DECORA INDUSTRIES, INC.
By: ____________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: ____________________________
Name:
Title:
<PAGE> 22
SCHEDULE A
PLEDGED SHARES
<TABLE>
<CAPTION>
Percentage of
All Capital or
Other Equity
Class of Certificate Number of Interests of
Issuer Stock Par Value Numbers Shares Issuer
- -------------- ---------------- ---------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 23
EXHIBIT 1
This Pledge Amendment, dated _______________, is delivered
pursuant to Section 2.10(b) of the Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to the Guarantor Pledge
Agreement, dated as of April 29, 1998, between the undersigned and UNITED STATES
TRUST COMPANY OF NEW YORK, as Trustee (the "Agreement"); capitalized terms used
herein and not defined have the meanings ascribed to them in the Agreement) and
that the Pledged Shares listed on this Pledge Amendment shall be deemed to be
and shall become part of the Collateral and shall secure all Secured
Obligations.
DECORA INDUSTRIES, INC.,
as Pledgor
By:_______________________
Name:
Title:
By:_______________________
Name:
Title:
<PAGE> 24
EXHIBIT 2
Form of Issuer Acknowledgment
The undersigned hereby (i) acknowledges receipt of a copy
of the Pledge Agreement (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Agreement"; capitalized terms used
herein but not defined herein have the meanings given such terms in the
Agreement), dated as of April 29, 1998, between Decora Industries, Inc. (the
"Pledgor") and United States Trust Company of New York, as Trustee ("Trustee"),
(ii) agrees promptly to note on its books the security interests granted and
confirmed under the Agreement, (iii) agrees that it will comply with
instructions of Trustee with respect to the applicable Collateral without
further consent by applicable Pledgor, (iv) agrees to notify Trustee upon
obtaining knowledge of any interest in favor of any Person in the applicable
Collateral that is adverse to the interest of Trustee therein and (v) waives any
right or requirement at any time hereafter to receive a copy of the Agreement in
connection with the registration of any Collateral thereunder in the name of
Trustee or its nominee or the exercise of voting rights by Trustee or its
nominee.
[NAME OF ISSUER]
By:
---------------------------------
Name:
Title:
Note: This form should be signed by each issuer of uncertificated Pledged
Shares.
<PAGE> 1
Exhibit 10.56
URNr. 865 K /1998
NOTARIAL DEED
Today, on this twenty-eighth day of April nineteen hundred ninety eight,
- April 28, 1998 -
there appeared before me,
Dr. Dieter Karl,
notary public in Munich in my offices at Ottostrasse 4, 80333 Munich:
1. Philipp von Braunschweig, attorney at law, business address:
Lilienthalstrasse 7, 85399 Hallbergmoos, personally known to me, the
notary
and
2. Diethelm Baumann, attorney at law, business address: Lilienthalstrasse 7,
85399 Hallbergmoos, identified by his federal identity card.
The persons appeared requested the notary to record this notarial deed in
the English language. They stated that they have sufficient command of the
English language. The undersigned notary, who has command of both the English
and the German language, communicated with the appeared in English and on the
basis of such conversation was convinced that the appeared have sufficient
command of the English language.
The person appeared ad 1. stated:
In the following, I will not act in my own name but as representative
without power of attorney for Decora Industries, Inc., 1 Mill Street, Fort
Edward, New York 12828, USA (hereinafter called "Pledgor").
The appeared ad 2. stated:
In the following, I will not act in my own name but as representative without
power of attorney for United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036, USA (hereinafter called "Pledgee").
The persons appeared requested the recording of the following:
<PAGE> 2
PREAMBLE
WHEREAS, Pledgor is the sole shareholder of Decora Industries Deutschland
GmbH (the "GmbH"), having its registered seat in Munchen, which is registered in
the commercial register of the local court Munchen under HRB 115991, the
aggregate stated capital of which amounts to DM 50,000.- Pledgor holds the only
share in the GmbH in the nominal amount of DM 50,000.- and
WHEREAS, Pledgor intends to create a first ranking security interest in a
part of its share in the nominal amount of DM 32,500.- in the GmbH in favor of
the Pledgee to secure any and all Secured Obligations (as defined in the Pledge
Agreement between Pledgor and Pledgee; the Pledge Agreement hereinafter referred
to as the "US Pledge Agreement").
NOW THEREFORE, the parties agree as follows:
Section 1
DIVISION AND PLEDGE OF SHARES
(1) Pledgor hereby divides his share in the GmbH in the nominal amount of DM
50,000.- into one share in the nominal amount of DM 32,500, and in one
share in the nominal amount of DM 17,500.- for the purpose of transferring
the share in the nominal amount of DM 32,500.- to Pledgee. The consent of
the GmbH to the division of Pledgor's share in the GmbH has been granted;
a fax copy is attached hereto. Pledgor hereby transfers to Pledgee, who
accepts such transfer, the share in the nominal amount of DM 32,500.- and
Pledgee hereby re-transfers such share to Pledgor, who accepts such
re-transfer.
(2) Pledgor hereby pledges to Pledgee, who accepts such pledge, his share in
the GmbH in the nominal amount of DM 32,500.- (the "Share"). The pledge
shall extend to any and all claims for repayment of capital, present and
future rights to profit, payment of consideration in the event of
redemption of the Share, payment of any liquidation or settlement proceeds
associated with the Share as well as all purchase or subscription rights
relating to the Share which result from an increase of the stated capital
or merger, consolidation or other form of reorganization of the GmbH.
Section 2
PURPOSE OF THE PLEDGE
The pledge created pursuant to Section 1 above shall serve the purpose of
securing any and all Secured Obligations (as defined in the US Pledge
Agreement).
<PAGE> 3
Section 3
VOTING RIGHT, DIVIDENDS
(1) Pledgor shall remain entitled to exercise the voting rights pertaining to
the Share or any part thereof for any purpose; provided, however, Pledgor
shall not in any event exercise such rights and any other voting rights
Pledgor may have with respect to the GmbH in any manner which may have an
adverse effect on the value of the Share or the security intended to be
provided by this Agreement.
(2) Pledgor shall be entitled to receive and retain, and to utilize free and
clear of any encumbrances, any and all dividends and distributions in
respect of the Share, but only if and to the extent made in accordance
with the US Pledge Agreement; but all dividends and distributions in
respect of the Share or any part thereof made in shares or other property
or representing any return of capital, whether resulting from a
subdivision, combination or reclassification of the Share or any part
thereof or received in exchange for the Share or any part thereof or as a
result of any merger, consolidation, acquisition or other exchange of
assets to which the GmbH may be a party or otherwise or as a result of any
exercise of any share or securities purchase or subscription right shall
be, and hereby is, also pledged to Pledgee, which pledge is subject to the
terms and conditions of this Agreement.
(3) Upon notice from Pledgee to Pledgor of any Event of Default (as defined in
the US Pledge Agreement), and so long as the same continues, all rights of
Pledgor which it is entitled to exercise pursuant to subsections (1) and
(2) above shall forthwith cease, and all such rights and claims shall
thereupon become vested in Pledgee who shall have, during the continuance
of such Event of Default, the sole and exclusive authority to exercise
such rights and to receive such dividends; provided that all cash
dividends not applied to the payment of the Secured Obligations prior to
the cure of such Event of Default shall be returned to Pledgor upon
Pledgor's written request.
(4) All dividends and distributions which are received by Pledgor contrary to
the provisions of subsection (2) above shall be received in trust for the
benefit of Pledgee, shall be segregated from other property of Pledgor and
shall be forthwith paid over to Pledgee.
Section 4
REPRESENTATIONS OF PLEDGOR
Pledgor represents and warrants to Pledgee that
a) Pledgor is and will be the legal and equitable owner of the Share free and
clear of all liens, security interest and any encumbrances whatsoever;
<PAGE> 4
b) Pledgee has and will continue to have at all times for any and all claims
secured hereby a valid security interest in the Share;
c) The GmbH has been duly established, is validly existing and is duly
authorized to conduct the business presently conducted by it;
d) The stated capital of the GmbH has been fully paid in and no obligations
to effect additional contributions of stated capital exist;
e) Any and all resolutions and further acts of the GmbH required for the
creation of the pledge have been duly passed and effected; and
f) No authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body will be required for
the exercise by Pledgee of the voting or other rights provided for in this
Agreement or the remedies in respect of the Share.
Section 5
COVENANTS OF PLEDGOR
Pledgor hereby agrees as shareholder of the GmbH:
a) without the expressed prior written consent of Pledgee, not to sell, sign,
exchange, pledge or otherwise transfer, encumber, diminish or impair any
of its rights in, to or under the Share or any part thereof;
b) to promptly effect any payments due to the GmbH or any third party in
respect of the Share;
c) to refrain from any act or omissions the purpose of which is a decline of
the value of the Share or any part thereof or the Share or any part
thereof ceasing to exist;
d) to promptly notify Pledgee of any change in the shareholdings in the GmbH;
e) to keep all records concerning the GmbH, which records shall be of such a
character as will enable Pledgee or its designee to determine at any time
the status thereof:
f) to furnish Pledgee such information concerning the GmbH as the Pledgee may
from time to time reasonably request, and to permit Pledgee and its
designees from time to time, to inspect, audit and make copies of and from
all records and all other papers in the
<PAGE> 5
possession of Pledgor which pertain to the GmbH, and, upon request of
Pledgee, to deliver to Pledgee notarially certified copies of all such
records and paper; and
g) to furnish to Pledgee, as soon as possible and in any event within five
days after occurrence from time to time of any change in the address of
Pledgor's location, notice in writing of such change.
Section 6
REALIZATION OF THE PLEDGE
(1) Pledgee shall be entitled to realize the pledged shares upon notice from
Pledgee to Pledgor in the event or during the continuance of any Event of
Default (as defined in the US Pledge Agreement).
(2) If Pledgee is entitled to realize the pledge pursuant to subsection (1)
above, Pledgee may exercise the right to cause the pledged shares to be
sold at a public auction without the requirement of an enforceable title
and without prior notice to Pledgor
Section 7
COSTS
The costs of this deed shall be borne by Pledgor.
Section 8
MISCELLANEOUS
(1) If a provision of this Agreement should be or become invalid or not
contain a necessary regulation, the validity of the other provisions of
this Agreement shall not be affected thereby. The valid provision shall be
deemed to be replaced and the gap be deemed to be filled by a legally
valid provision which comes as close as possible to the intention of the
parties or what would have been the intention of the parties according to
the purpose of this Agreement if they had been aware of the invalidity or
the gap.
(2) Changes and amendments to this Agreement, including changes of this
subsection (2) must be made in writing and signed by both parties hereto,
unless German law requires a stricter form.
(3) This Agreement shall be governed by the laws of the Federal Republic of
Germany.
<PAGE> 6
The parties requested the notary to notify the GmbH of the transfer,
re-transfer and pledge of the Share.
This notarial deed has been read aloud in the presence of the notary to
the persons appeared, approved by them and signed by them and the notary manu
propria as follows:
<PAGE> 7
DECLARATION OF CONSENT UNDER SEC. 17 OF THE GERMAN LIMITED LIABILITY COMPANIES
ACT
The undersigned managing director of Decora Industries Deutchland GmbH
with its seat in Munchen (now moved to Weisspach) hereby consents to the
split of the share of Decora Industries, Inc. in Decora Industries
Deutschland GmbH in the amount of DM 50,000. into one share in the amount
of DM 32,500, and one share in the amount of DM 17,500 , for purposes of
transferring the share in the amount of DM 32,500, to United States Trust
company of New York.
Fort Edward, this April 27, 1998
------------------------------------------------
(signature of Nathan Hevrony or Timothy Burditt)
<PAGE> 1
EXHIBIT 10.57
AMENDMENT TO GERMAN PLEDGE AGREEMENT
AMENDMENT TO GERMAN PLEDGE AGREEMENT (this "Agreement"), dated as
of April 29, 1998, by and between DECORA INDUSTRIES, INC., a Delaware
corporation ("Pledgor"), and UNITED STATES TRUST COMPANY OF NEW YORK (together
with any successors or assigns, the "Trustee"), in its capacity as trustee under
the Indenture (as hereinafter defined).
WHEREAS, Pledgor, Decora, Incorporated, a Delaware corporation
("Decora"), and the Trustee have entered into an indenture, dated as of the date
hereof (the "Indenture"), pursuant to which the Pledgor's 11% Senior Secured
Notes due 2005 (the "Notes") will be issued concurrently herewith;
WHEREAS, Pledgor and the Trustee have entered into a pledge
agreement (the "Pledge Agreement") relating to a pledge by Pledgor of 65% of its
shares in Decora Industries Deutschland GmbH ("GmbH") (terms defined in the
Pledge Agreement but not defined herein have the meanings given to them in the
Pledge Agreement);
WHEREAS, In the interest of time, the Pledge Agreement was
notarized by a public notary in Germany before the closing of the offering of
the Notes;
WHEREAS, Pledgor and the Trustee wish to make the following
changes to the notarized Pledge Agreement before ratifying the notarization of
the Pledge Agreement;
NOW, THEREFORE, Pledgor and the Trustee agree as follows:
1. Collateral. Pledgor and the Trustee agree that, for the
avoidance of doubt, the Share (as defined in the Pledge Agreement) and the
rights relating thereto set forth under Section 1(2) of the Pledge Agreement
shall constitute Collateral under the Indenture.
2. Issuer Acknowledgment. Pledge agrees to cause GmbH to execute
and deliver to the Trustee the acknowledgment attached hereto in the form of
Exhibit 1.
3. Conforming Changes to Pledge Agreement. Pledgor and the
Trustee agree to enter into such additional agreements governed by German law
and to do such things (including, to the extent necessary, notarization of any
such additional agree-
<PAGE> 2
ments) as are necessary to effect and make valid the changes contained herein.
4. Termination; Release. When all of the Secured Obligations have
been paid in full, this Agreement shall terminate. Upon termination of this
Agreement and the other Security Documents or any release of Collateral in
accordance with the provisions of the Indenture, the Trustee shall, upon the
request and at the sole cost and the expense of Pledgor, forthwith assign,
transfer and deliver to Pledgor against receipt and without express or implied
recourse to or warranty by the Trustee, such of the Collateral to be released as
may be in possession of the Trustee and as shall not have been sold or otherwise
applied pursuant to the terms hereof, and proper instruments acknowledging the
termination of this Agreement and the other Security Documents or the release of
such Collateral, as the case may be.
<PAGE> 3
IN WITNESS WHEREOF, Pledgor and the Trustee have executed this
Agreement as of the day and year first above written.
DECORA INDUSTRIES, INC.
By: ____________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: ____________________________
Name:
Title:
<PAGE> 4
EXHIBIT 1
Form of Issuer Acknowledgment
The undersigned hereby (i) acknowledges receipt of a copy of the
Pledge Agreement (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Pledge Agreement"; capitalized terms used
herein but not defined herein have the meanings given such terms in the Pledge
Agreement), dated as of April 29, 1998, between Decora Industries, Inc. (the
"Pledgor") and United States Trust Company of New York, as Trustee ("Trustee"),
(ii) agrees promptly to note on its books the security interests granted and
confirmed under the Agreement, (iii) agrees that it will comply with
instructions of Trustee with respect to the applicable Collateral without
further consent by applicable Pledgor, (iv) agrees to notify Trustee upon
obtaining knowledge of any interest in favor of any Person in the applicable
Collateral that is adverse to the interest of Trustee therein and (v) waives any
right or requirement at any time hereafter to receive a copy of the Pledge
Agreement in connection with the registration of any Collateral thereunder in
the name of Trustee or its nominee or the exercise of voting rights by Trustee
or its nominee.
DECORA INDUSTRIES DEUTSCHLAND GMBH
By: ________________________________
Name:
Title:
<PAGE> 1
Exhibit 10.58
LOAN AGREEMENT
between
Konrad Hornschuch AG,
Weissbach,
Germany,
hereinafter: the "Lender" -
and
Decora Incorporated,
Fort Edward,
New York, USA
hereinafter: the "Borrower" -
WHEREAS, Decora Industries, Inc. holds 100% of the shares of Decora
Incorporated and of Decora Industries Deutschland GmbH which in turn is the
owner of approximately 75% of all outstanding shares of the Lender and the
Parties agree that their business relationship shall be at arm's length at all
times;
WHEREAS, both the Borrower and the Lender are in the business of producing
and distributing self-adhesive decorative covering; Borrower currently produces
Con-Tact for distribution by Rubbermaid and Con-Tact is a market leader as a
surface covering in the United States; Lender is the manufacturer and
distributor of other decorative covering products in Europe and elsewhere which
currently have no significant distribution in the U.S.;
WHEREAS, the Lender and the Borrower intend to deepen their cooperation
with regard to Lender's establishing of a distribution network in the United
States for its self-adhesive decorative covering and by utilizing the Con-Tact
name outside of North America, thereby realizing substantial synergies for the
mutual benefit of the Lender and the Borrower;
WHEREAS, the Borrower intends to acquire from Rubbermaid Incorporated
(hereinafter, "Rubbermaid") the assets of Rubbermaid's decorative coverings
division which include trademarks (including the Con-Tact brand), retail shelf
space and fixed assets (hereinafter: the "Rubbermaid Acquisition") and the
Lender wishes to participate directly in the Rubbermaid
<PAGE> 2
Acquisition by (i) arranging for Borrower to distribute Lender's products using
Rubbermaid's distribution channels in over 15,000 outlets in the United States
and (ii) by receiving world-wide rights to the Con-Tact brand outside of North
America which will give the Lender access to markets where a popular lower cost
alternative to Lender's d-c-fix brand is required);
WHEREAS, the Lender has substantial funds immediately available under
existing of credit and the Borrower requires funds on short notice in order to
be able to consummate the Rubbermaid Acquisition, the Borrower being ready to
pay interest at rates above the rates payable by the Lender under the Lender's
existing lines of credit;
WHEREAS, the interim financing is intended to be replaced by bank or other
third party financing incurred by the Borrower no later than 3 years from the
Drawdown Date (as defined);
NOW it is hereby agreed as follows:
1. LOAN
The Lender hereby grants to the Borrower a loan in the amount of
DM 18,000,000.
2. DRAWDOWN
The loan can be drawn by the Borrower upon satisfaction of all payment
conditions set forth in clause 8 hereof namely the date the last payment
condition set forth in clause 8 hereof has been satisfied (the "Drawdown Date").
3. PURPOSE OF USE
The loan is made available to the Borrower exclusively for the purpose of
financing the purchase price for the Rubbermaid Acquisition including ancillary
transaction costs. Any use of the loan proceeds for other purposes (including
passing on the loan proceeds to entities affiliated to the Borrower) shall be
expressly excluded. Upon request, the use of the loan proceeds will be
demonstrated to the Lender by the Borrower.
4. INTEREST RATE
The interest rate will be determined by the Parties on the Drawdown Date
based on the effective interest rate payable by the Lender on the refinancing
loans incurred by the Lender plus an effective margin of 0.5 percentage points
p.a.
Interest is due and payable in arrears at the end of the Loan Period.
<PAGE> 3
5. REPAYMENT
The loan is granted for a fixed period ending on the 3rd anniversary of
the Drawdown Date (the "Loan Period"). The statutory rights of either party to
termination for cause shall remain unaffected. The Borrower shall be entitled to
premature partial or total re- payments; no prepayment penalties apply, except
to the extent the Lender shall become subject to prepayment penalties on the
refinancing loans he has incurred.
6. COLLATERAL
The Borrower undertakes to provide the following collateral:
- First security interest in the machinery, equipment and fixtures of
Borrower (the "Collateral").
7. COVENANTS
During the entire Loan Period, to keep the Lender informed on the
development of its financial status, the Borrower will provide the Lender with
- audited annual accounts of the Borrower and Decora Industries, Inc.
no later than 105 days after the end of any business year;
- quarterly reports of the Borrower and Decora Industries, Inc.
including balance sheets and profit and loss statements for the
respective quarter no later than 50 days after the end of the
respective quarter.
8. PAYMENT CONDITIONS
Payment of the Loan Principal to the Borrower is subject to satisfaction
of the following conditions:
- signing of a Purchase Agreement between the Borrower and Rubbermaid
regarding the Rubbermaid Acquisition;
- valid grant of first priority security interests in the Collateral;
- signing of a Marketing and Distribution Agreement regarding
establishment of U.S. distribution for products of the Lender using
distribution channels in the U.S. to be acquired by the Borrower in
the course of the Rubbermaid Acquisition;
<PAGE> 4
- signing of a Licensing Agreement which gives the Lender the right to
world-wide use of the Con-Tact brand outside North America;
9. APPLICABLE LAW; PLACE OF VENUE
This Agreement is exclusively subject to German law without giving effect
to principles of conflicts of laws; the agreements referred to in clause 8 will
be subject to the law stipulated therein. Any and all claims under this
Agreement are subject to the exclusive jurisdiction of the courts of Stuttgart.
10. MISCELLANEOUS
Except as stipulated herein, there are no side agreements to this
Agreement. Any amendments to this Agreement must be made in writing in order to
become valid.
In the event that any provision hereof shall be held to be invalid or
ineffective, the remaining provisions hereof shall be unaffected thereby. The
parties undertake to replace the invalid or ineffective provision by such valid
and effective provision which most closely corresponds to the economic purpose
of the invalid or ineffective provision. The same shall apply mutatis mutandis
with regard to supplementary interpretation of this Agreement.
Dated: April 28, 1998
/s/ Konrad Hornschuch AG /s/ Decora Incorporated
- --------------------------------- ----------------------------------------
Lender Borrower
<PAGE> 1
Exhibit 10.59
SECURITY AGREEMENT
This Security Agreement ("Security Agreement") is entered into effective
as of the ____ day of April, 1998, by and between DECORA, INCORPORATED, a
Delaware corporation, doing business as Decora Manufacturing ("Debtor"), and
KONRAD HORNSCHUCH AG, a German corporation ("Secured Party"), with reference to
the following facts:
A. Secured Party and Debtor have heretofore entered into that certain Loan
Agreement ("Loan Agreement") executed and dated concurrently herewith,
pursuant to which Debtor has acknowledged a current and continuing
indebtedness to Secured Party.
B. As security for the prompt and complete payment of the indebtedness of
Debtor to Secured Party under the Loan Agreement, Debtor has agreed to
grant Secured Party a security interest in and to all of its right, title
and interest in and to the property hereinafter described.
NOW, THEREFORE, for good and valuable consideration including the mutual
promises, conditions and covenants of the parties as set forth in the Loan
Agreement, it is agreed as follows:
1. Defined Terms. For purposes of this Security Agreement, all capitalized
terms shall have the same meaning as set forth in the Loan Agreement, unless
specifically noted
1
<PAGE> 2
otherwise herein, and all paragraph references shall relate to similarly
numbered paragraphs in the Loan Agreement.
2. Grant of Security Interest. As assurance and security for prompt and
complete payment and performance by Debtor of all of its respective obligations
and covenants under the Loan Agreement (including, without limitation,
attorneys' fees, court costs and collection, legal and receivers' expenses,
advanced or incurred by Secured Party in connection with the perfection and
protection of the security interest herein granted, the preservation or
disposition of the Collateral (as hereafter defined), or any part thereof, or
the enforcement by Secured Party of any of the foregoing obligations of Debtor
to Secured Party whether upon default by Debtor or otherwise), Debtor hereby
pledges, grants, bargains, assigns and transfers to Secured Party a security
interest, pursuant to the New York Commercial Code, in and to the collateral
described on Schedule "1," attached hereto and incorporated herein by this
reference, and all substitutions, replacements and proceeds thereof, including
cash proceeds. Such property, substitutions, and replacements, and all such
proceeds are hereafter collectively referred to as the "Collateral." For
purposes hereof, all terms set forth in Schedule 1 shall be defined as provided
in the New York Commercial Code.
3. Representations and Warranties of Debtor. Debtor represents and
warrants that:
(a) No financing statement covering the Collateral or any part of it
or any proceeds of it is on file in any public office. At the Secured Party's
request, the Debtor will join in executing and pay the filing fees required for
all necessary financing statements in forms satisfactory to the Secured Party
and will further execute all other instruments deemed necessary by the Secured
Party;
2
<PAGE> 3
(b) Upon the execution of this Security Agreement by Debtor and the
delivery hereof to the Secured Party, and the filing of a Form UCC-1 Financing
Statement with the New York Secretary of State, a Form UCC-1 Financing Statement
with the Office of the Clerk of Washington County, and a Form UCC-1 Financing
Statement with the Ohio Secretary of State, Secured Party shall have a first
perfected security interest in and to the Collateral listed on Schedule 1,
except that the security interest for all of the Collateral listed on Schedule 1
may in the future be subordinated as set in Section 7 hereof.
4. Default. Default under this Security Agreement will be deemed to have
occurred upon the happening of any of the following events:
(a) Upon any default or failure of performance by Debtor of the
duties and obligations set forth in the Loan Agreement, which default is not
cured within any grace period granted with respect to such default or, if no
specific grace period is granted with respect to such default, where such
default is not cured within thirty (30) business days after the date in which
written notice thereof is provided by Secured Party, or the occurrence of any
other event of default under any instrument or amendment executed or delivered
pursuant to the foregoing;
(b) Upon Debtor's dissolution, termination of existence, insolvency,
business failure, appointment of a receiver for any part of the Collateral,
assignment for the benefit of creditors, or the commencement of any proceeding
under any bankruptcy or insolvency law by or against the Debtor or any guarantor
or surety for the Debtor; or
3
<PAGE> 4
(c) Upon an attack by Debtor, its shareholders, officers or
directors, or Debtor's assignee, on the validity or enforceability of this
Security Agreement, and/or the Loan Agreement.
5. Remedies on Default. Upon the occurrence of a default, Secured Party
shall have all of the remedies of a secured party under the New York Commercial
Code and any other law, which rights shall include the right to enter upon the
premises and any other place where the Collateral may be located, to remove,
sell or dispose of the Collateral, or any part thereof, at public or private
sale, and to foreclose the lien or security interest created pursuant to this
Security Agreement by any available judicial procedure. The Collateral may then
be sold on such day and at such place as determined by Secured Party. Secured
Party shall deduct and retain from the proceeds of such sale or sales all costs,
expenses and charges paid or incurred on the taking, removal, handling and sale
of the Collateral, or otherwise incurred in connection therewith, including,
without limitation, all attorneys' fees incurred by Secured Party; the balance
of the proceeds shall be applied by Secured Party to the indebtedness,
obligations and liabilities secured by the Collateral; and the surplus, if any,
shall be paid to the person or persons lawfully entitled to receive the same. At
any sale or sales made under this Security Agreement, or authorized herein,
Secured Party or any person on behalf of Secured Party, or any other person, may
bid for and purchase the Collateral being sold.
6. Further Documents. Debtor agrees to execute and deliver such further
documents as may be required by Secured Party to more fully perfect or secure
its position under this Security Agreement, including, but not limited to
financing statements on Form
4
<PAGE> 5
UCC-1 with the Secretary of State of New York, Office of the Clerk of Washington
County, New York and Secretary of State of Ohio.
7. Sale or Hypothecation of Collateral.
(a) Permitted Sale or Hypothecation. Provided that no default under
this Security Agreement has occurred, or, if such a default has occurred,
provided that Secured Party has not exercised its permitted remedies with
respect thereto, Debtor shall not be prohibited: (i) from paying dividends out
of moneys of the Debtor properly available therefrom or (ii) after obtaining the
written consent of Secured Party, from selling, alienating, assigning, leasing,
mortgaging, charging, pledging or otherwise disposing of or dealing with the
Collateral; provided, however, that Debtor need not obtain such consent if, in
connection with or after such sale or disposition, (x) Debtor obtains
replacement Collateral or (y) applies the net cash proceeds of any such sale or
disposition of Collateral to reduce indebtedness of Debtor to Secured Party
under the Loan Agreement.
(b) Notwithstanding the provisions of subparagraph (a) above, Debtor
covenants to and in favor of Secured Party that, so long as any obligation
secured hereby remains outstanding, without the prior written consent of Secured
Party, Debtor shall not cause, suffer or permit the Collateral to be subjected
to any lien, encumbrance or security interest securing indebtedness for money
borrowed and ranking in priority senior to or equal with the security interest
created hereby, except such liens as may from time to time be expressly
permitted in writing by Secured Party.
5
<PAGE> 6
(c) Debtor further covenants not to take any action with respect to
the Collateral which is materially inconsistent with the provisions or purpose
of this Security Agreement or which would materially adversely affect the rights
of Secured Party hereunder.
8. Assignment. This Security Agreement and all rights hereunder may not be
assigned by either party without written consent of the other party hereto, and
any such assignment by either party without such consent shall be void.
9. Notices. All notices or other communications permitted or required
pursuant to this Security Agreement shall be in writing and shall be deemed
given upon deposit in the mail of the United States, first class, postage
prepaid, certified with return receipt, addressed to the last known address of
the parties or such other notification details as may be provided in writing by
one party to the other from time to time. Either party shall have the right to
change the place in which proper notice is to be made by providing written
notice of the change to the other party.
10. Entire Agreement. This Security Agreement, together with the Loan
Agreement, constitutes the entire agreement between the parties pertaining to
the security interest being granted hereby. This Security Agreement may not be
amended or modified except by a writing executed both by Secured Party and
Debtor.
11. Governing Law. This Security Agreement is to be governed by,
interpreted and enforced in accordance with the laws of the State of New York
applicable to agreements executed and to be performed wholly within the State of
New York. Venue shall be in New York, New York.
6
<PAGE> 7
12. Counterparts. This Security Agreement may be executed in counterparts,
each of which shall constitute an original document, but which together shall
constitute one and the same instrument.
AGREED TO AND ACCEPTED effective as of the ______ day of April, 1998.
"SECURED PARTY" "DEBTOR"
KONRAD HORNSCHUCH AG DECORA, INCORPORATED
a German corporation a Delaware Corporation
doing business as Decora Manufacturing
By: By:
-------------------------------- -----------------------------------
Its: Its:
-------------------------------- -----------------------------------
7
<PAGE> 8
SCHEDULE 1
(a) All of Debtor's now owned and hereafter acquired machinery,
equipment and fixtures, wherever located, and any interest of Debtor in any of
the foregoing; and
(b) All proceeds, replacements, substitutions, additions,
improvements, products and accessions of and to any and all of the foregoing.
8
<PAGE> 1
EXHIBIT 10.60
RESTATED REVOLVING PROMISSORY NOTE
$15,000,000.00 as of April 29, 1998
Albany, New York
This RESTATED REVOLVING PROMISSORY NOTE is made and executed this 27th
day of April, 1998 by DECORA, INCORPORATED, a Delaware corporation authorized to
do business in the State of New York as DECORA MANUFACTURING and having an
office at 1 Mill Street, Fort Edward, New York 12828 (the "Borrower") to and in
favor of FLEET NATIONAL BANK,its successors and/or assigns, a national banking
association organized and existing under the laws of the United States of
America and having a principal place of business at 69 State Street, Albany, New
York 12201 (the "Bank").
WHEREAS, the Bank is the holder of a $6,000,000.00 Restated Promissory
Note (Revolving Line of Credit) executed by the Borrower in favor of the Bank on
August 13, 1996 (the "Prior Note"); and
WHEREAS, the Borrower agrees and confirms that the aggregate principal
amount outstanding pursuant to the terms of the Prior Note is $2,500,000.00, all
interest having been paid to date, and that there are no offsets, claims,
setoffs, defenses or counterclaims against payment of said amounts; and
WHEREAS, the Bank is the holder of a Demand Note (the "Demand Note")
dated the date hereof in the face amount of $12,500,000.00, which Demand Note is
pursuant to a Mortgage Modification Agreement dated the date hereof between the
Borrower and the Bank consolidated and incorporated in full into the Prior Note;
and
WHEREAS, the Borrower and the Bank desire to modify and restate in full
the terms of the Prior Note as hereinafter set forth; and
NOW, THEREFORE, the Borrower and the Bank agree that the Prior Note is
hereby modified and restated in full in the principal amount of $15,000,000.00,
with interest payable as hereinafter set forth. Said modified and restated note
is hereinafter called the "Note" and provides as follows:
FOR VALUE RECEIVED, the undersigned, Decora, Incorporated, a Delaware
corporation duly authorized to do business in the State of New York as Decora
Manufacturing, with its principal place of business at 1 Mill Street, Fort
Edward, New York 12828 (herein called the "Borrower"), hereby promises to pay to
the order of Fleet National Bank (herein called the "Bank"), at such Bank's main
office at 69 State Street, Albany, New York 12207, or such other
1
<PAGE> 2
location as the Bank shall designate in writing from time to time, the principal
sum of $15,000,000.00 together with interest on the disbursed, unpaid principal,
or, if less, the aggregate unpaid principal amount due hereunder as shown on
records of the Bank, together with interest at the rate specified below until
paid in full. The records of the Bank maintained in the ordinary course of
business shall be prima facie evidence of the existence and amounts of the
Borrower's obligations therein. All computations of interest under the Note
shall be made on the basis of a three hundred sixty (360) day year and the
actual number of days elapsed. All payments shall be in lawful money of the
United States in immediately available funds.
As used herein, the following terms shall have the following meanings:
Default Rate - A rate which is four (4) percentage points per annum greater than
the Fleet National Bank Prime Rate.
Election Notice - The Loan Portion and Interest Rate Election Notice to be
delivered by the Borrower to the Bank from time to time in the form of EXHIBIT A
attached hereto, in which the Borrower shall indicate a Loan Portion and an
Interest Rate Election.
Event of Default - Any of those events defined as an Event of Default under the
Credit Agreement.
Fleet National Bank Prime Rate - That variable per annum rate of interest so
designated from time to time by Fleet National Bank as its prime rate. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate being charged to any customer. Any change in this interest rate shall be
effective on the date the change in such rate occurs, whether or not notice has
been given to the Borrower.
Floating Rate - The Fleet National Bank Prime Rate.
Interest Rate Election - An election on the part of the Borrower to choose the
LIBOR Fixed Rate or the Floating Rate to be charged on each Loan Portion.
Interest Rate Period - The time period during which interest is to accrue on a
Loan Portion at the LIBOR Fixed Rate or the Floating Rate. An Interest Rate
Period during which interest is to accrue at the LIBOR Fixed Rate shall be for a
term of one (1) month. In no event shall any Interest Rate Period extend beyond
the Maturity Date of this Loan.
LIBOR Advance - any Loan Portion bearing interest at the LIBOR Fixed Rate.
2
<PAGE> 3
LIBOR Fixed Rate - A rate fixed at the one month LIBOR Rate plus two hundred and
twenty-five (225) basis points.
LIBOR Rate - As applicable to any LIBOR Advance, the rate per annum (rounded
upward, if necessary, to the nearest 1/32 of one percent) as determined on the
basis of the offered rates for deposits in U.S. dollars for a period of time
comparable to the Interest Rate Period for such LIBOR Advance which appears on
the Telerate page 3750 as of 11:00 a.m. London time on the day that is two (2)
London Banking Days preceding the first day of the Interest Rate Period for such
LIBOR Advance; if the rate does not appear on the Telerate System on any
applicable interest determination date, the LIBOR rate shall be the rate
(rounded upwards as described above, if necessary) for deposits in U.S. dollars
for a period substantially equal to the Interest Rate Period for such LIBOR
Advance on the Reuters Page "LIBO" (or such other page as may replace the LIBO
Page on that service for the purpose of displaying such rates), as of 11:00 a.m.
(London Time); on the day that is two (2) London Banking Days prior to the
beginning of such Interest Rate Period. "Banking Day" shall mean, in respect of
any city, any date on which commercial banks are open for business in that city.
If both the Telerate and Reuters System are unavailable, the rate for that date
will be determined on the basis of the offered rates for deposits in U.S.
dollars for a period of time comparable to such LIBOR Advance which are offered
by four major banks in the London interbank market at approximately 11:00 a.m.
London time, on the day that is two (2) London Banking Days preceding the first
day of such LIBOR Advance as selected by Fleet National Bank. The principal
London office of each of the four major London banks will be requested to
provide a quotation of its U.S. dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable to the
Interest Rate Period for such LIBOR Advance offered by major banks in New York
City at approximately 11:00 a.m. New York City time, on the day that is two
London Banking Days preceding the first day of the Interest Rate Period for such
LIBOR Advance. In the event that the Bank is unable to obtain any such quotation
as provided above, it will be deemed that the LIBOR Rate cannot be determined,
in which case, the interest rate shall be the Floating Rate until such time as
the LIBOR Rate can be determined.
In the event that the Board of Governors of the Federal Reserve System shall
impose a Reserve Percentage with respect to LIBOR deposits of the Bank then for
any period during which such Reserve Percentage shall apply, the LIBOR Rate
shall be equal to the amount determined above divided by an amount equal to 1
minus the Reserve Percentage.
3
<PAGE> 4
Loan - The loan of up to $15,000,000.00 by the Bank to the Borrower.
Loan Documents - This Note, a Restated Secured Revolving Line of Credit
Agreement (the "Credit Agreement") dated the date hereof executed by the Bank
and the Borrower, the Instruments of Collateral Security as defined in said
Credit Agreement and any other instruments, documents or agreements executed in
connection with the Loan, together with any and all amendments or modifications
thereto.
Loan Portion - Each advance of Loan proceeds by the Bank to the Borrower; each
advance shall be in an amount of at least $100,000.00 or more and will be
treated separately for purposes of computing interest. Each such advance shall
accrue interest at the LIBOR Fixed Rate or the Floating Rate, as selected by the
Borrower. However, at no time shall there be more than four (4) outstanding
advances subject to the LIBOR Fixed Rate.
Maturity Date - May 1, 2001.
When requesting each advance of Loan proceeds from the Bank, the
Borrower shall deliver to the Bank an Election Notice setting forth the Loan
Portion, and indicating an Interest Rate Election for such Loan Portion. The
Interest Rate Election for each Loan Portion shall remain in effect until
expiration of the Interest Period for that Loan Portion. At the end of each
Interest Period for any Loan Portion priced at the LIBOR Fixed Rate, the
interest rate on the Loan Portion will be automatically repriced at the then
LIBOR Fixed Rate or in the event that there is less than one month at the end of
an Interest Period before the Maturity Date, interest shall accrue on that Loan
Portion at the Floating Rate.
Interest shall be payable monthly in arrears commencing May 1, 1998, and
continuing on the first day of each and every month thereafter until and
including April 1, 2001. The entire unpaid balance of principal, plus accrued
interest, on all Loan Portions shall be due and payable in any event on the
Maturity Date. If the Borrower elects to make principal payments during the term
of this Loan, said principal payments shall be applied to reduce those Loan
Portions having Interest Rate Periods which are next to expire, in chronological
order. Advances under this Note shall be reflected on the records of the Bank.
The Bank shall not be obligated to make advances under this Note (1) if an Event
of Default has occurred or (2) if in the Bank's sole judgement, a material
adverse change in the Borrower's financial condition has occurred, or (3) if
Borrower has failed to observe or perform any other covenant or agreement in the
Loan Documents or in any other note or agreement executed by the Borrower in
favor of the Bank.
In the event the Borrower prepays any Loan Portion carrying interest at
the Floating Rate, there shall be no prepayment
4
<PAGE> 5
premium. In the event the Borrower wishes to prepay any Loan Portion carrying a
LIBOR Fixed Rate, and the Bank in its sole discretion should determine that
current market conditions can accommodate a prepayment request, Borrower shall
have the right at any time and from time to time to prepay the Loan Portion in
whole (but not in part), and Borrower shall pay to Bank a yield maintenance fee
in an amount computed as follows: The current rate for United States Treasury
securities (bills on a discounted basis shall be converted to a bond equivalent)
with a maturity date closest to the maturity date of the Interest Rate Period as
to which the prepayment is made, shall be subtracted from the "cost of funds"
component of the fixed rate in effect at the time of prepayment. If the result
is zero or a negative number, there shall be no yield maintenance fee. If the
result is a positive number, then the resulting percentage shall be multiplied
by the amount of the principal balance being prepaid. The resulting amount shall
be divided by 360 and multiplied by the number of days remaining in the Interest
Rate Period as to which the prepayment is made. Said amount shall be reduced to
present value calculated by using the above-referenced United States Treasury
security rate and the number of days remaining in the Interest Rate Period as to
which the prepayment is made. The resulting amount shall be the yield
maintenance fee due to Bank upon prepayment of the Loan Portion. If by reason of
an event of default Bank elects to declare the Loan to be immediately due and
payable, then any yield maintenance fee with respect to the Loan shall become
due and payable in the same manner as though Borrower had exercised such right
of prepayment.
The Borrower acknowledges that this Note is subject to the provisions of
the Loan Documents and all such terms, covenants and conditions of such Loan
Documents are all hereby incorporated in this Note as though said terms,
covenants and conditions were fully set forth herein.
If the entire amount of any required principal and/or interest is not
paid in full within ten (10) days after the same is due, Borrower shall pay to
the Bank a late fee ("Late Fee") equal to five percent (5%) of the required
payment.
Upon the occurrence of an Event of Default under the Credit Agreement,
the Bank may, in its discretion, accelerate the payment of all obligations owing
by Borrower to Bank, and upon written demand of the Bank, such obligations shall
become immediately due and payable without presentment or protest or other
notice or demand, all of which are expressly waived by the Borrower.
If an Event of Default has occurred and is continuing, the Borrower
shall not be permitted to make any Interest Rate Elections unless and until the
Event of Default is cured, and interest shall accrue at the Default Rate until
the earlier of (i) the Event of Default is cured, or (ii) this Note is paid in
full.
5
<PAGE> 6
The powers and remedies given hereby and by the Loan Documents shall not
be exclusive of any other powers and remedies available to the Bank. No course
of dealings between the Borrower and the Bank and no delay on the part of the
Bank in exercising any rights with respect to any default shall operate as a
waiver of any rights of the Bank. Failure on the part of the Bank to exercise
any rights with respect to any default shall not operate as a waiver of any
rights with respect to any other default. The Borrower agrees to pay all costs
and expenses incurred by the Bank in enforcing this Note, including, without
limitation, reasonable attorneys' fees and legal expenses.
Interest after maturity (whether by acceleration or otherwise) shall be
payable at the Default Rate until this Note is paid in full. If any provisions
of this Note or the application of it to any person or circumstance, shall be
invalid or unenforceable, the remainder of this Note or the application of those
provisions to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected and every other provision of
this Note shall be valid and fully enforceable.
This Note may not be waived, changed, modified or discharged orally, but
only by agreement in writing signed by the party against whom any enforcement of
any waiver, change, modification or discharge is sought.
This Note and all rights of the Bank hereunder, may be assigned by the
Bank, but this Note may not be assigned by the Borrower.
The purchaser, assignee, transferee, or pledgee of this Note shall be
entitled to all rights of the Bank hereunder as if said purchaser, assignee,
transferee, or pledgee were originally named in this Note.
Borrower hereby grant to Bank, a lien, security interest and right of
setoff as security for all liabilities and obligations to Bank, whether now
existing or hereafter arising, upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Fleet
Financial Group, Inc., or in transit to any of them. At any time, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the
Loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
BORROWER AND BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
6
<PAGE> 7
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BANK TO
ACCEPT THIS NOTE AND MAKE THE LOAN.
IN WITNESS WHEREOF, the Borrower has duly executed this Note the day and
year first above written.
Decora, Incorporated d/b/a
Decora Manufacturing
By: _________________________________
Timothy N. Burditt
Vice President,
Administration Secretary
7
<PAGE> 8
EXHIBIT A
ELECTION NOTICE
TO: Fleet National Bank (Lender)
DATE:
Pursuant to a $15,000,000.00 Restated Revolving Promissory Note dated as
of April 29, 1998 executed by Decora, Incorporated d/b/a Decora Manufacturing
("Borrower") to the order of Lender, Borrower hereby authorizes, requests and
elects to have an advance in the amount of $_______________ (must be $100,000.00
or more) funded in the manner selected herein.
__ FLOATING RATE
__ LIBOR FIXED RATE
In connection with and in order to induce Lender to advance the
Loan as requested above, Borrower hereby represents, warrants and stipulates as
follows:
1. The representations and warranties of the Borrower contained in the
Restated Secured Revolving Line of Credit Agreement dated as of April 29, 1998
(the "Loan Agreement"), are true and correct as of the date of this Election
Notice.
2. There exists no Event of Default pursuant to the terms of the Loan
Documents (as defined in the Loan Agreement).
Capitalized terms used herein which are not otherwise defined shall have
the meanings ascribed to them in the Loan Documents.
BORROWER:
Decora, Incorporated d/b/a
Decora Manufacturing
By: ______________________________
Name: ____________________________
Title: ___________________________
8
<PAGE> 1
Exhibit 10.61
RESTATED SECURED REVOLVING LINE
OF CREDIT AGREEMENT
THIS AGREEMENT, made as of the 29th day of April, 1998, by and between
FLEET NATIONAL BANK (formerly known as NORSTAR BANK OF UPSTATE NY), a national
banking association organized and existing under the laws of the United States
of America, and having its principal banking house located at 69 State Street,
Albany, New York 12201 (herein called the "Bank") and DECORA, INCORPORATED, a
Delaware corporation duly authorized to do business in the State of New York as
DECORA MANUFACTURING and having its principal place of business at 1 Mill
Street, Fort Edward, New York 12828 (herein called the "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrower and the Bank entered into a Secured Revolving Line
of Credit Agreement on April 18, 1990 (the "Secured Revolving Line of Credit
Agreement") pursuant to the terms and conditions of which the Bank agreed, from
time to time, up to and including July 31, 1992, to make loans to the Borrower
in such amount or amounts as the Bank would determine, but not to exceed
$5,000,000.00 outstanding in the aggregate at any one time, with all borrowings
evidenced on Borrower's Promissory ("GRID") Note executed and delivered by the
Borrower on April 18, 1990; and
WHEREAS, the Borrower and the Bank entered into an Amendment to Secured
Revolving Line of Credit Agreement effective and dated as at July 31, 1992 (the
"First Amendment"), pursuant to the terms and conditions of which the Bank
agreed, from time to time, on a month-to-month basis, to make loans to the
Borrower in such amount or amounts as the Bank would determine, but not to
exceed $5,000,000.00 outstanding in the aggregate at any one time, with all
borrowings evidenced by Borrower's Promissory ("GRID") Note dated July 31, 1992,
which Note substituted the Promissory ("GRID") Note dated April 18, 1990; and
WHEREAS, the Borrower and the Bank entered into a Second Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 29th
day of July, 1993 (the "Second Amendment"), pursuant to the terms and conditions
of which the Bank agreed, from time to time, on a month to month basis, to make
loans to the Borrower in such amount or amounts as the Bank would determine but
not to exceed $5,000,000.00 outstanding in the aggregate at any one time, with
all borrowings evidenced by Borrower's Promissory ("Grid") Note dated July 29,
1993, which Note substituted the Promissory ("Grid") Note dated July 31, 1992;
and
WHEREAS, the Borrower and the Bank entered into a Third Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 19th
day of July, 1994 (the
<PAGE> 2
"Third Amendment") pursuant to the terms and conditions of which the Bank
agreed, from time to time, on a month to month basis, to make loans to the
Borrower in such amount or amounts as the Bank would determine not to exceed
$6,000,000.00 outstanding in the aggregate at any one time, with all borrowings
evidenced by Borrower's Promissory ("GRID") Note dated as at the 19th day of
July, 1994, which Note substituted the Promissory ("GRID") Note dated July 29,
1993; and
WHEREAS, the Borrower and the Bank entered into a Fourth Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 13th
day of August, 1996 (the "Fourth Amendment") pursuant to the terms and
conditions of which the Bank agreed, from time to time, on a month to month
basis, to make loans to the Borrower in such amount or amounts as the Bank would
determine not to exceed $6,000,000.00 outstanding in the aggregate at any one
time, with all borrowings evidenced by Borrower's Restated Promissory ("GRID")
Note dated as at the 13th day of August, 1996, which Note substituted the
Promissory ("GRID") Note dated July 19, 1994; and
WHEREAS, the Borrower and the Bank entered into a Fifth Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 27th
day of March, 1997 (the "Fifth Amendment") pursuant to the terms and conditions
of which the Bank agreed, from time to time, on a month to month basis, to make
loans to the Borrower in such amount or amounts as the Bank would determine not
to exceed $6,000,000.00 outstanding in the aggregate at any one time, with all
borrowings evidenced by Borrower's Restated Promissory ("GRID") Note dated as at
the 13th day of August, 1996; and
WHEREAS, the Borrower and the Bank entered into a Sixth Amendment to
Secured Revolving Line of Credit Agreement effective and dated as of the 26th
day of September, 1997 (the "Sixth Amendment") pursuant to the terms and
conditions of which the Bank agreed, from time to time, on a month to month
basis, to make loans to the Borrower in such amount or amounts as the Bank would
determine not to exceed $6,000,000.00 outstanding in the aggregate at any one
time, with all borrowings evidenced by Borrower's Restated Promissory ("GRID")
Note dated as at the 13th day of August, 1996; and
WHEREAS, the Borrower has requested that the Bank increase the
availability under the Secured Revolving Line of Credit Agreement to an amount
not to exceed $15,000,000.00 and that the Bank further extend the time for
making loans under the Secured Revolving Line of Credit Agreement until April
30, 2001 and make certain further changes to the Secured Revolving Line of
Credit Agreement, and the Bank is willing to do so, but only pursuant to the
terms of this Restated Secured Revolving Line of Credit Agreement.
NOW, THEREFORE, in consideration of the Bank agreeing to increase the
availability under the Secured Revolving Line of Credit, to extend the time to
make loans and to make further amendments under the Secured Revolving Line of
Credit Agreement as previously
2
<PAGE> 3
amended by the terms of the First Amendment, the Second Amendment, the Third
Amendment, the Fourth Amendment, the Fifth Amendment and the Sixth Amendment,
and other good and valuable consideration, receipt of which is hereby
acknowledged, it is agreed on the part of the Borrower with the Bank that the
Secured Revolving Line of Credit Agreement together with all amendments thereto
is hereby restated in full as follows:
I. Definitions. The following definitions shall apply to this agreement:
(a) "Acceptable Accounts Receivable" - eighty five percent (85%) of all
Domestic Accounts Receivable, Canadian Accounts Receivable and Freidola Accounts
Receivable aged ninety (90) days or less and all insured and letter of credit
backed foreign accounts receivable aged 90 days or less- that are free and clear
of all liens, and are unconditionally owed to the Borrower without defense,
offset or counterclaim;
(b) "Acceptable Inventory" - until November 2, 1998, sixty percent (60%)
of all inventory subject to a $6,000,000.00 cap on borrowings based on
inventory; on November 3, 1998 and thereafter, sixty percent (60%) of all
inventory subject to a $4,000,000.00 cap on borrowings based on inventory - all
valued at the lower of "cost" or "market" as would be determined on a balance
sheet of the Borrower prepared in accordance with generally accepted accounting
principals consistently applied;
(c) "Canadian Accounts Receivable" - those accounts receivable of the
Borrower owed to it by all Canadian based retailers ("Canadian Companies").
(d) "Credit and Reimbursement Agreement" - The Credit and Reimbursement
Agreement, together with all amendments thereto, executed by the Borrower in
favor of the Bank in connection with that certain letter of credit (the "Letter
of Credit") issued on November 13, 1996 by the Bank in favor of Mellon Bank,
FSB, as Trustee, in the amount of $2,497,000.00 concerning the issuance by the
Counties of Warren and Washington Industrial Development Agency of a Two Million
Four Hundred Sixty Thousand and no/100 Dollars ($2,460,000.00) aggregate
principal amount industrial development revenue bonds (Decora, Incorporated
Project, Series 1996).
(e) "Current Asset Collateral" - all of Borrower's now owned and
hereafter acquired or arising, wherever located, inventory, accounts receivable,
chattel paper, contract rights, instruments and choses in action, plus all
proceeds and products thereof, if any, and all replacements, additions and
accessions thereto .
(f) "Domestic Accounts Receivable" - those accounts receivable of the
Borrower owed to it by all United States based retailers ("Domestic Companies").
3
<PAGE> 4
(g) "Events of Default" - Any of those events defined as an Event of
Default under this Agreement, and Loan Document or any other instrument or
document between the Borrower and the Bank.
(h) "Freidola Accounts Receivable" - those accounts receivable of the
Borrower owed to it by Freidola Debr. Holzapfel GmbH & Co. KG ("Freidola"), a
German company with its principal place of Business in Meinhard-Frieda, Germany.
(i) "Loan" - The loan of up to $15,000,000.00 by the Bank to the
Borrower.
(j) "Loan Documents" - The Note (as defined herein), this Agreement, the
Instruments of Collateral Security (as defined herein) and any other document or
agreement now or hereafter executed by the Borrower in favor of the Bank in
connection with the Loan.
(k) "Other Accounts Receivable" - those accounts receivable of the
Borrower owed to it by entities other than Domestic Companies, Freidola and
Canadian Companies.
(l) "Parent Notes" - High yield senior notes totaling $110,000,000.00
issued by Decora Industries, Inc. to finance the acquisition of Rubbermaid
Decorative Products Group and to refinance certain other indebtedness of its
subsidiaries.
II. Amount and Terms of Loan.
(a) The Bank, will from time to time, up to and including April 30, 2001
(herein called the "Maturity Date"), make revolving loans to the Borrower in
such amount or amounts as the Bank may determine in the exercise of its
commercially reasonable discretion exercised in good faith, up to the lesser of
(1) the sum of Acceptable Accounts Receivable and Acceptable Inventory or (2)
Fifteen Million Dollars ($15,000,000.00) outstanding in the aggregate at any one
time. Borrower may borrow, repay and reborrow revolving loans under this
Agreement, subject to the limitation on the aggregate principal amount of
outstanding borrowings set forth in the preceding sentence and the limitations
set forth in subparagraph (b) below. On or before the first and second
anniversary of this Agreement and assuming no Event of Default exists, no event
that but for the passage of time would constitute an Event of Default exists, no
material changes in Bank policy with respect to similar loans have occurred, and
that there is no adverse change in Borrower's financial condition, the Bank will
consider extending the Maturity Date for an additional year, on terms and
conditions acceptable to the Bank. All borrowings shall be evidenced on the
records of the Bank pursuant to Borrower's RESTATED REVOLVING PROMISSORY NOTE
(herein called "Note"), executed and delivered by the Borrower to the Bank on
even date herewith. Said Note shall refer on the face thereof to this Agreement,
and shall be subject to all the terms and conditions hereof. Said Note shall
bear interest as set forth in said Note;
4
<PAGE> 5
(b) Notwithstanding the above, the Bank has no obligation, at any point
in time, to make any advance under this Agreement, in the event that there has
then occurred a material deterioration to the financial condition of the
Borrower, in the event that the Borrower has not provided the necessary
prerequisites for each advance hereunder, or in the event that Borrower is then
in default, or but for the passage of time would be in default, under this or
any Loan Document or other agreement or instrument concerning money or credit
between the Bank and the Borrower.
(c) On or before the fifteenth day of the month immediately succeeding
the date of this agreement, and monthly thereafter, the Borrower will deliver to
the Bank a written schedule and aging report (herein called the "Aging
Schedule"), as of the end of the preceding month, clearly indicating the names
and addresses of each account debtor having an account payable to the Borrower,
indicating the amount due and the age of the account receivable in terms of less
than thirty (30), sixty (60), ninety (90) and more than ninety (90) day
intervals from the time of the billings, plus said "aging schedule" shall
distinguish between Domestic Accounts Receivable, Canadian Accounts Receivable,
Freidola Accounts Receivable and Other Accounts Receivable; plus such other
information as the Bank may reasonably request from time to time. Borrower will
hold at its principal place of business and relative to accounts receivable then
subject to Bank's security interest (1) duplicate invoices (the originals of
which will have been previously mailed to the respective accounts debtors),
which shall set forth with respect to each account receivable full details of
the sale and shipment and/or services rendered and (2) copies of shipping
documents and evidence of delivery, if any. Such invoices, documents and
evidence will be held by the Borrower available for inspection by the Bank for a
period of at least two (2) years from the date of the creation of the accounts
receivable to which they are applicable or for such other period as may be
required by the Bank in writing, segregated from other books and records of the
Borrower, and stamped or marked in a manner satisfactory to the Bank, clearly
indicating the security interest of the Bank and the relative accounts
receivable. In addition, Borrower will also forward to the Bank on or before the
fifteenth (15th) day of each month, a list (herein called the "Inventory
Schedule") to include its cost of all inventory (to include raw materials, work
in process and finished goods), as at the end of the preceding month. In
addition, Borrower will also forward to the Bank on or before the fifteenth
(15th) day of each month, an aging schedule of all payables;
(d) Advances by the Bank to the Borrower shall be at the commercially
reasonable discretion of the Bank exercised in good faith, by means of a loan
formula certificate (in the form of EXHIBIT A attached hereto) based upon the
Aging Schedule of Accounts Receivable and the Inventory Schedule, referred to in
the above subparagraph; except that the total loans outstanding at any one time
in connection with this Agreement shall not exceed "Acceptable Accounts
Receivable" and "Acceptable Inventory";
(e) Simultaneously herewith, the Borrower agrees to open and maintain a
separate account with the Bank, said account to be designated as a Cash
Collateral Account. Borrower
5
<PAGE> 6
agrees to also enter into simultaneously herewith, a lock box arrangement with
the Bank concerning its accounts receivable. Audits will be done three times a
year at the Bank's option and at Borrower's expense either by (1) an independent
certified public accountant acceptable to the Bank, or (2) by the Bank's
internal staff. In addition, all proceeds and cash sales of inventory, work in
process, raw materials, finished goods and services rendered, if any, and of
collections on accounts receivable shall, if received by the Borrower, be
immediately deposited in the form received except for its endorsements when
necessary, in the Cash Collateral Account. Until so deposited, all such proceeds
shall be held in trust by the Borrower for and as the property of the Bank and
shall not be co-mingled with any other funds or property of the Borrower. All
instruments so received shall be deposited in the Cash Collateral Account
subject to final payment. Provided the Borrower is not in default under any of
the terms and conditions of this Agreement, the Loan Documents, or any other
loan by Bank to Borrower, plus any amendments, modifications, extensions or
renewals of any of the foregoing, the Bank shall within a reasonable period of
time apply the amounts deposited in the Cash Collateral Account as payment on
the Note. In the event of default, application of the deposits held in the Cash
Collateral Account shall be subject to the discretion of the Bank, and deposits
in said Cash Collateral Account shall be security for all financial obligations
of the Borrower to the Bank (hereinafter called "Financial Obligation(s) of
Borrower") arising under the Note, this Agreement, the Loan Documents, or any
other loan or agreement between the Bank to the Borrower, plus any amendments,
modifications, extensions or renewals of any of the foregoing or any present or
future indebtedness arising therefrom and shall not constitute payment on any
Financial Obligation of Borrower until applied, in the Bank's discretion,
against a Financial Obligation of Borrower. The Borrower shall have the
liability of a general endorser with respect to all instruments deposited
therein whether or not it shall have endorsed the same. Each deposit made by the
Borrower in the Cash Collateral Account shall also be accompanied by a deposit
slip or slips clearly indicating proceeds collected from cash sales or
inventory, and the proceeds collected from accounts receivable with the same
name of each account receivable and the amount collected.
(f) As security for the payment of all indebtedness evidenced by the
Note and all indebtedness now or hereafter owed by the Borrower to the Bank
pursuant to the Credit and Reimbursement Agreement, plus any other loan or
indebtedness owed by Borrower to Bank, the Borrower has made, executed and
delivered to the Bank those instruments of collateral security (hereinafter
collectively called "Instruments of Collateral Security") listed below:
(1) The Borrower has made, executed and delivered to the Bank a
$2,497,000.00 real property Mortgage dated the date hereof, on all real
property owned by the Borrower situated at 1 Mill Street, Fort Edward,
New York (hereinafter the "Premises"); and
(2) The Borrower has made, executed and delivered to the Bank a
Mortgage Modification Agreement (herein called "Mortgage Modification
Agreement") dated the
6
<PAGE> 7
date hereof, modifying a Mortgage on the Premises in the face amount of
$4,000,000.00 dated May 18, 1990, and recorded in the Office of the
Clerk of the County of Washington, New York, on the 23rd day of April,
1990, in Book 601 of Mortgages at Page 291, as modified by Mortgage
Modification Agreement by and between the Borrower and the Bank dated
July 19, 1994 and recorded in the Office of the Clerk of the County of
Washington, New York on the 25th day of July, 1994 in Book 846 of
Mortgages at Page 199 and as further modified by Mortgage Modification
Agreement by and between the Borrower and the Bank dated the 27th day of
March, 1997 and recorded in the Office of the Clerk of the County of
Washington, New York on the 28th day of March, 1997 in Book 995 of
Mortgages at Page 213; said Mortgage Modification Agreement secures the
Note to the extent of $2,999,000.00; and
(3) The Borrower has made, executed and delivered to the Bank, a
Restated Security Agreement dated the date hereof which hereby continues
Bank's first priority security interest in the Current Asset Collateral
granted to the Bank by the Secured Revolving Line of Credit Agreement
and grants Bank a current security interest in said Current Asset
Collateral.
(g) Bank hereby releases any security interest it may have in all of
Borrower's now owned and hereafter acquired and arising, wherever located:
machinery, equipment, furniture and fixtures that can be removed without
significant damage to either the realty or the article being removed, or both
and the Bank's lien will remain on those fixtures which are so annexed to the
realty that they cannot be removed without significant damage to either the
realty or the article being removed, or both. Bank further releases its security
interest in General Intangibles and Patents, Copyrights and Trademarks (as
defined in the Secured Revolving Line of Credit Agreement). Bank further
releases (i) Decora Industries, Inc. (hereinafter "Decora") from any liabilities
or obligations arising from a Guaranty dated March 27, 1997 executed by Decora
in favor of the Bank guaranteeing all indebtedness owed by the Borrower to the
Bank together with all other guarantees executed by Decora dated on or before
the date hereof guaranteeing the indebtedness owed by the Borrower to the Bank
and (ii) any security interest in, lien on, or pledge of any capital stock of
Borrower previously granted by Decora Industries, Inc. to secure said guarantees
or any other indebtedness previously owing by Decora Industries, Inc. to Bank.
It is the intent of the parties that only those liens and security interests
created, continued and/or maintained by the Loan Documents, the Credit and
Reimbursement Agreement or any other document or agreement executed by Borrower
in favor of Bank in connection with the Loan or Letter of Credit be maintained
and the Bank agrees to release any other collateral at the request of Borrower
and in connection therewith, executes such agreements, documents and instruments
as requested by Borrower.
(h) In consideration for the foregoing, the Borrower does hereby agree
to pay to the Bank a commitment fee of Forty-five Thousand Dollars ($45,000.00),
which shall be delivered to Bank at closing in immediately available funds. In
addition, the Borrower agrees to pay to
7
<PAGE> 8
the Bank a one-quarter of one percent (.25 of 1.00%) per annum facility fee on
the unused portion of this revolving credit (the unused portion being the
difference between the average amount of principal disbursed under the Note
during the quarter and Fifteen Million Dollars $15,000,000.00), which facility
fee will be payable quarterly in arrears beginning June 30, 1998;
III. Representations and Warranties of the Borrower. The Borrower represents and
warrants as follows:
(a) That Borrower is duly incorporated, validly existing and is in good
standing under the laws of the State of Delaware. That Borrower is qualified as
a foreign corporation and will remain in good standing in all other
jurisdictions, if any, where its activities make such qualifications necessary.
That the Borrower is duly authorized to do business in the State of New York as
DECORA MANUFACTURING and is duly authorized under all applicable provisions of
law to carry on its business as now conducted.
(b) That the Borrower is duly authorized under its Certificate of
Incorporation and its By-Laws to enter into and perform this Agreement. Entering
into and performing this Agreement will not result in a breach or violation of
or a default under any applicable law, agreement or instrument to which Borrower
is subject or a party and will not result in the creation of any
security interest, lien, charge, or encumbrance upon any of its assets under any
such agreement or instrument. This Agreement, the Note and all Loan Documents
are, or upon the execution and delivery thereof will be, valid and enforceable
obligations of the Borrower in accordance with their terms.
(c) The Borrower's entire authorized capital stock consists of twenty
million (20,000,000) shares of common stock, par value $0.01 per share of which
one thousand (1,000) shares are issued and outstanding. All such issued shares
have been validly issued and are fully paid and non-assessable. There are no
outstanding rights and options to any person, firm or corporation to purchase or
otherwise acquire any of the Borrower's capital stock, except that Decora
Industries, Inc. may pledge its capital stock of Borrower to the holders of the
Parent Notes (or the trustee for such holders) as collateral for said Parent
Notes.
(d) The Borrower warrants that all financial statements heretofore given
by the Borrower to the Bank, and upon which the Bank relies in making this Loan,
were all prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied and are true, correct and complete in all material
respects and represent the financial condition of the Borrower as of the dates
of said balance sheets and the results of operations of the Borrower for the
period covered by said statements of profit and loss and surplus, if any. There
has been no material adverse change in the financial condition or the assets of
the Borrower since the last dated balance sheet delivered to the Bank.
8
<PAGE> 9
(e) The Borrower has good marketable title to all assets reflected in
the last dated balance sheet referred to above, except assets sold or disposed
of in the ordinary course of business since the date of said balance sheet. None
of said assets are subject to any mortgages, security interests, liens, charges,
pledges, or encumbrances not referred to in said balance sheets, except liens,
if any, in respect to current taxes, liens granted to the Bank pursuant to the
Loan Documents, liens granted to the Washington County Local Development
Corporation to secure a loan in the original principal amount of $375,000.00,
liens granted to Borrower's affiliate, Konrad Hornschuch A.G. ("Hornschuch") in
connection with certain intercompany loans in the approximate amount of
$10,000,000.00 from Hornschuch to Borrower and the pledge of Borrower's capital
stock to secure the Parent Notes.
(f) The Borrower possesses all necessary patents, trademarks, trade
names, copyrights and licenses to carry on its business as now conducted without
known conflict with the valid patents, trademarks, trade names, copyrights and
licenses of others and shall not pledge or in anyway encumber said patents,
trademarks, tradenames, copyrights or licenses without the Bank's prior written
consent.
(g) Except as set forth on Rider A hereto, no litigation in any court or
proceedings before any commission or other administrative authority is pending
or threatened against the Borrower.
(h) The Borrower has filed all tax and similar returns and has paid or
provided for the payment of all taxes and assessments due. The Borrower has no
knowledge of any claims for taxes which might become a lien upon its assets.
(i) There are no judgments or tax liens against the Borrower.
(j) The Borrower is not an insurer, endorser, or guarantor of any
indebtedness or obligation of another, except that the Borrower is a guarantor
of the Parent Notes.
IV. Affirmative Covenants and Agreements of the Borrower. The Borrower covenants
and agrees that until the Note and interest thereon shall have been paid in
full:
(a) The Borrower will apply the proceeds of the Loan provided for in
this Agreement to acquire Rubbermaid's Decorative Products Division, to
refinance existing senior and subordinated debt, to pay transaction fees and to
finance ongoing working capital and capital expenditures.
(b) The Borrower will promptly pay or discharge all taxes, assessments,
charges, or levies imposed upon it or upon any of its property (unless any such
taxes, assessments, charges
9
<PAGE> 10
or levies are contested by the Borrower in good faith) and all lawful claims for
labor, material or supplies which, if unpaid, might become a lien or charge upon
any such property.
(c) The Borrower will do all things necessary to preserve and keep in
full force and effect its existence, rights and franchises.
(d) The Borrower will maintain the following financial covenant, the
calculation of same to be based on GAAP:
The Borrower will at all times maintain a Minimum Fixed Charge
Coverage Covenant of 1.10 to 1.00. The covenant shall be measured
quarterly on a rolling four (4) quarters basis with the first
test to occur on March 31, 1999. The covenant is defined as
follows:
EBITDA + non-cash restructuring expenses + cash from intercompany
loans and/or advances divided by interest expense + Current
Maturities of Long Term Debt (prior four quarters) + Cash Taxes +
Tangible and Intangible CAPEX (net of financed CAPEX) +
Dividends/Distributions + Repayment of Intercompany loans or
advances.
(e) The Borrower will carry insurance as required in the Loan Documents.
It will carry insurance with responsible insurance companies for which the Bank
will be named as an insured against such other risks of whatever kind and in
such amounts as the Bank may from time to time reasonably request in writing for
its protection. The Borrower will deliver to the Bank the insurance policies
provided for above and will reimburse the Bank for any premiums paid for
insurance by the Bank on the failure of it to carry such insurance or deliver
and assign such policies. In addition to the foregoing, the Borrower will carry
such other types and amounts of insurance as are usually carried by corporations
engaged in the same or similar businesses similarly situated.
(f) The Borrower will maintain its properties in good repair and
condition and will make all needed renewals and replacements so that its
business may be properly and advantageously conducted at all times. Borrower
will comply with all statutes, ordinances, rules, regulations and orders of any
federal, state, municipal authority or official having jurisdiction over its
property; provided that it may contest in good faith any statutes, ordinances,
rules, regulations and orders of such bodies or officials in any reasonable
manner which will not, in the Bank's opinion, adversely affect its rights under
this Agreement. As to any real property owned or occupied by the Borrower, the
Borrower will cure any violation of any governmental requirements respecting the
property, if within Borrower's power to do so, including without limitation, any
laws, rules or regulations governing hazardous waste removal and clean-up or
arising from an intentional or unintentional act or omission of the Borrower or
any previous owner and/or operator of the real property, within twenty (20) days
after receipt of written notice
10
<PAGE> 11
and demand from the Bank. The expenses of any environmental testing and
clean-up, or fees for environmental auditors or engineers, shall be chargeable
to the Borrower and shall be secured by any and all Instruments of Collateral
Security. The Borrower agrees to indemnify and hold Bank harmless against any
loss or liability, cost or expense (including, without limitation, reasonable
attorney's fees and disbursements) which Bank may sustain as a result of or on
account of any lien imposed upon any Instrument of Collateral Security by any
federal, state or local authority charged with the enforcement of environmental
protection laws and regulations or by reason of Borrower's failure, or the
failure of any of Borrower's predecessors in title, or the failure of any of
Borrower's (sub)tenants, to perform any of its obligations pursuant to any
federal, state or local environmental protection laws and regulations. The
provisions of this paragraph shall survive any transfer of any asset included in
any Instrument of Collateral Security, including a transfer after a foreclosure
of real property subject to a mortgage, and delivery of the deed affecting such
transfer.
(g) The Borrower will at all times keep proper books of record and
account in accordance with GAAP and the Borrower will furnish to the Bank:
(1) With reasonable promptness upon the written request of the
Bank, such information regarding the business affairs and financial
condition of the Borrower as the Bank may reasonably request.
(2) Simultaneously at the time they are so furnished, a copy of
all statements and reports furnished to stockholders of the Borrower.
(3) Within ninety-five (95) days of the end of its fiscal year,
annual certified public accountant audited, consolidated statements for
Decora Industries, Inc. (which must include a consolidating statement
schedule), all prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied, along with copies of the
Borrower's 10-K report;
(4) Within ninety-five (95) days of the end of its fiscal year,
annual certified public accountant audited statements for Borrower, all
prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied;
(5) Within ninety-five (95) days of the end of its fiscal year,
internally prepared annual budgets for the Borrower;
(6) Field audits 3 times per year of the Borrower conducted, at
the Bank's option, by an independent certified public accountant or the
Bank's internal bank personnel, at Borrower's expense.
11
<PAGE> 12
(7) Within thirty (30) days of each calendar month end,
internally prepared financial statements for the Borrower for the
preceding month, in form acceptable to the Bank, all prepared in
accordance with GAAP;
(8) Within sixty (60) days of the end of each fiscal quarter, 10Q
reports for Decora Industries, Inc.;
(9) Within thirty (30) days of the end of each month, account
receivable aging reports concerning the Borrower in form acceptable to
the Bank;
(10) Within sixty (60) days after the end of each fiscal quarter,
a compliance letter acknowledged by the Chief Financial Officers of both
the Borrower and Decora Industries, Inc. concerning the financial
covenant referenced in subparagraph (d) of this paragraph IV; and
(11) A loan formula certificate in the form of EXHIBIT A attached
hereto and made a part hereof at the time the Borrower requests each
advance under the Loan, but no less frequently than weekly.
(h) The Borrower will furnish to the Bank promptly after their
effectiveness, copies of all amendments or other documents modifying the
Certificate of Incorporation of the Borrower, certified by the Secretary for the
states that it is incorporated in and authorized to do business in, and copies
of all amendments to the By-Laws of the Borrower certified by its Secretary.
(i) The Borrower will permit the Bank, by its officers and agents, to
have access to and examine at all reasonable times the properties, minute books
and other corporate records, and books of account and financial records of the
Borrower.
(j) The Borrower will promptly notify the Bank upon the occurrence of
any event of default, as provided in this Agreement, of which the Borrower has
knowledge.
(k) The Borrower agrees to reimburse the Bank for any and all
out-of-pocket expenses incurred by the Bank in connection with the making of
this Agreement, the Note and any Loan Document, or in connection with the
enforcement thereof (irrespective of whether litigation is actually commenced),
including, if applicable, reasonable counsel fees, searches for prior liens,
recording and filing fees, and if applicable, mortgage taxes, title insurance
premiums, and the cost of surveying the property covered by any Mortgage given
as an Instrument of Collateral Security. Counsel fees to McNamee, Lochner, Titus
& Williams, P.C. in connection with their representation of the Bank concerning
this Agreement, the Note and all Loan Documents prepared and delivered in
connection therewith, plus the documentation in connection with the
12
<PAGE> 13
any modification of the Credit and Reimbursement Agreement, shall be paid in
full by the Borrower prior to or simultaneously with the disbursement of any
Loan proceeds hereunder.
(l) Borrower shall comply in all material respects with the applicable
provisions of ERISA and furnish to the Bank (i) as soon as possible, and in any
event within ten (10) days after any officer of the Borrower knows or has reason
to know that any Reportable Event (as defined in ERISA) with respect to any Plan
has occurred, a statement of the appropriate officer of the Borrower setting
forth details as to such Reportable Event, if any, given to the Pension Benefit
Guaranty Corporation (hereinafter called "PBGC") and (ii) promptly after receipt
thereof, a copy of any notice that the Borrower may receive from the PBGC
relating to the intention of the PBGC to determine any Plan or to appoint a
trustee to administer any Plan.
(m) If a Change in Control (as hereinafter defined) shall occur, the
Bank shall have the right, by written notice given to the Borrower not earlier
than ten (10) nor later than twenty five (25) days after the first to occur of
(i) receipt by the Bank from the Borrower of written notice of the occurrence of
such Change in Control or (ii) the date on which Bank, having otherwise obtained
actual knowledge of such Change of Control, notifies the Borrower thereof, to
demand that the Borrower prepay the Note and/or all amounts owed or to be owed
pursuant to the Credit and Reimbursement Agreement. Five (5) business days after
receipt by the Borrower of demand for the prepayment of the Note and/or all
amounts owed or to be owed pursuant to the Credit and Reimbursement Agreement,
the Borrower shall pay to the Bank all principal and accrued interest on the
Note and/or on the Credit and Reimbursement Agreement. Promptly after obtaining
knowledge of the occurrence of any Change of Control (or of any proposed or
attempted Change of Control), the Borrower will notify the Bank thereof,
specifying in reasonable detail the facts and circumstances surrounding such
event. As used in this subparagraph a "Change in Control" shall be deemed to
have occurred upon the occurrence of the following:
If Nathan Hevrony and/or Timothy Burditt shall fail to be substantially
involved in the management and operations of the Borrower;
provided, however, that a Change of Control shall not be deemed to have occurred
if either Nathan Hevrony or Timothy Burditt shall have died or become
permanently disabled and the Borrower shall replace Mr. Hevrony and/or Mr.
Burditt with a person or persons acceptable to the Bank within ninety (90) days
of their failure to be substantially involved in the management and operation of
the Borrower.
(n) The Borrower shall place notations upon its books of accounts
receivable to disclose assignment of all receivables to the Bank and the Bank's
security interest therein.
(o) Borrower covenants that it will keep all books and records
pertaining to its business and its accounts receivable at 1 Mill Street, Fort
Edward, New York 12828; and that
13
<PAGE> 14
it will make available said books and said records for audit and inspection to
the Bank at any reasonable time during business hours, not only as a
prerequisite for each advance, but also for the purposes of audit and
inspection;
(p) Borrower agrees to maintain its primary banking relationship with
the Bank;
(q) The Borrower will forward to the Bank upon demand, but not less than
monthly, a report of all returns and credits to it, in form acceptable to the
Bank; and
V. Negative Covenants and Agreements of the Borrower. The Borrower covenants and
agrees that until the Note and interest thereon shall have been paid in full,
without the written consent of the Bank:
(a) The Borrower will not suffer or permit any Event of Default to
occur.
(b) The Borrower will not pledge or otherwise create or suffer the
imposition of any liens, security interests, charges or encumbrances upon any of
its assets pledged or encumbered to secure indebtedness owed to the Bank,
whether now owned or hereafter acquired, except pledges, security interests,
liens, charges or encumbrances specifically provided for in this Agreement. No
liens, security interests, charges or encumbrances will be permitted by the
holders of the Parent Notes on any of Borrower's assets, except for the pledge
of Borrower's capital stock. The Contact trademark shall not be pledged or in
anyway encumbered without the prior written consent of the Bank.
(c) The Borrower will not sell, lease, or otherwise dispose of all or
any substantial part of its assets to any other person, firm or corporation.
(d) Except as described in the Preliminary Offering Memorandum for the
Parent Notes, the Borrower will not change the general character of its business
or engage directly or indirectly in any other type of business.
(e) The Borrower will not without the written permission of the Bank,
violate any of the negative covenants and conditions contained in the Credit and
Reimbursement Agreement.
VI. Events of Default. Upon an Event of Default the Bank may, in its discretion,
accelerate the payment of all obligations owing by Borrower to Bank and demand
immediate payment thereof to Bank. Any one or more of the following shall
constitute an Event of Default:
14
<PAGE> 15
(a) Failure to pay any part of the principal or interest on the Note,
the Credit and Reimbursement Agreement or any other financial obligation owed by
Borrower to Bank when due and payable and continuance of such failure for ten
(10) days.
(b) An Event of Default under any provision of the Loan
Documents or any other agreement or document from the Borrower to the Bank, or
any modification, amendment, extension or renewal thereof.
(c) Failure to observe or perform any covenant or agreement provided for
in this Agreement; provided, however, that in the event Borrower shall fail to
comply in a timely fashion with the financial reporting requirements of Section
IV(g) hereof, Borrower shall have twenty (20) days to cure such non-compliance
and provided further, that Borrower shall have thirty (30) days after receipt of
notice from Bank to cure any non-compliance by Borrower with the provisions of
paragraph IV(e) hereof regarding maintenance of insurance coverage.
(d) Falsity of any material representation or material warranty of the
Borrower contained in this Agreement; falsity of any material statement,
certificate, report, representation, or warranty made or furnished by the
Borrower or any officer thereof in connection with the making or the performance
of this Agreement, the Note or any Loan Document.
(e) Entry of final judgment for the payment of money in excess of Fifty
Thousand Dollars ($50,000.00) against the Borrower and with respect to which
Borrower is not insured, and failure to discharge such judgment or to have it
stayed pending appeal within sixty (60) days from the entry thereof or, if such
judgment shall be affirmed on appeal, failure to discharge such judgment within
sixty (60) days from the entry of such affirmance.
(f) Voluntary suspension of all or a substantial part of its businesses
as a going concern by the Borrower; insolvency or dissolution of the Borrower;
commencement of any proceedings under any bankruptcy or insolvency law by the
Borrower; an assignment for the benefit of creditors by the Borrower;
application for consent to the appointment of any receiver or trustee or
custodian for the Borrower of all or any substantial portion of the property of
the Borrower; or assignment to an agent authorized to liquidate any substantial
part of the assets of the Borrower.
(g) Commencement of any proceedings under any bankruptcy or insolvency
law against the Borrower, which proceedings are involuntary in nature and
failure to have said proceedings dismissed within sixty (60) days after the
commencement thereof; or issuance of a writ, warrant, attachment or similar
process against all or any substantial portion of the property of the Borrower
and failure to have such writ, attachment or similar process released or bonded
within sixty (60) days after its issuance.
15
<PAGE> 16
(h) Failure to notify the Bank of a Change in Control as required by
subparagraph (m) of paragraph IV of this Agreement, or failure to prepay the
Note and/or any other indebtedness owed by Borrower to Bank within ten (10) days
of demand by the Bank to the Borrower pursuant to said subparagraph.
(i) A Reportable Event shall have occurred with respect to any Plan and,
within thirty (30) days after the reporting of such Reportable Event to the
Bank, the Bank shall have notified the Borrower, in writing, that (i) it has
made a determination that, on the basis of such Reportable Event, there are
reasonable grounds for the termination of such Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan and as a result thereof, an event of default exists
hereunder; and (ii) a trustee shall be appointed by a United States District
Court to administer any Plan; or (iii) the PBGC shall institute proceedings to
terminate any Plan.
(j) Upon the occurrence and continuation of an Event of Default after
the expiration of any applicable notice or cure period, by Borrower or Decora
Industries, Inc. under any loan or lending agreement either corporation may have
with any other lender.
VII. Power of Substitution. Upon the occurrence of an Event of Default, the
Borrower hereby irrevocably appoints the Bank as its true and lawful attorney
with power of substitution in its name or otherwise for the Bank's sole use and
benefit, but at the Borrower's cost and expense, to exercise at any time and
from time to time, all or any of the following powers with respect to all or any
of the accounts:
(a) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof;
(b) to receive, take, endorse, assign and deliver any and all checks,
notes, drafts, documents and other negotiable and non-negotiable instruments and
chattel paper taken or received by the Bank in connection therewith;
(c) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto;
(d) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof as fully and effectually as if the Bank were the
absolute owner thereof;
(e) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;
(f) after default by the Borrower in the payment or performance of any
of the terms and conditions of this Agreement to notify the post office
authorities to change the address for
16
<PAGE> 17
delivery of Borrower's mail to an address designated by the Bank and, after such
default, to receive, open and distribute all mail addressed to the Borrower,
retaining all mail relative to receivables and forwarding all other mail to the
Borrower; and
(g) to send requests for verification of receivables and to do all
things necessary to carry out this Agreement provided, however, the exercise by
the Bank of or failure to exercise any such authority shall in no manner affect
the Borrower's liability to the Bank hereunder, or under the Note and provided
further, that the Bank shall be under no obligation or duty to exercise any of
the powers hereby conferred upon it and it shall be without liability for any
act or failure to act, in connection with the collection if, or the preservation
of any rights under any one or more of the accounts. The Bank shall not be bound
to take any steps necessary to preserve rights in any instrument or chattel
paper against prior parties.
In addition, the Bank shall have all the rights and remedies of a
secured party under the Uniform Commercial Code (whether or not the Code is in
effect in the jurisdiction where rights and remedies are assured to close).
Borrower shall, at the request of the Bank, assemble the collateral at such
place or places as the Bank designates. In addition, the Borrower will provide
access to its business premises for the Bank or its agents for the purposes of
assembling and selling the collateral. The expenses of pursuing, searching for,
retaking, receiving, holding, storing, safeguarding, insuring, accounting for,
advertising, preparing for sale or lease, selling, leasing and the like, plus
attorney's fees, fees for certified public accountants, fees for auctioneers,
fees for brokers and/or appraisers, fees for security guards, fees for hazard
insurance premiums, or any other costs or disbursements whatsoever incurred by
or contracted for by the Bank in connection with disposition of the collateral
(including any of the foregoing incurred or contracted for by the Bank in
connection with any bankruptcy or insolvency proceedings involving the Borrower)
- --shall all be chargeable to the collateral and then to the Borrower. The
Borrower shall remain liable for any deficiency resulting from a sale of the
collateral and shall pay any such deficiency to the Bank forthwith on demand,
and the Bank agrees to remit any surplus resulting therefrom after payment in
full of all obligations hereunder and such expenses of sale.
VIII. UCC Financing Statements. The Borrower hereby authorizes the Bank, at
Borrower's expense, to file any Financing Statements relating to any collateral
covered by this Agreement, without the signature of the Borrower as the Bank, at
its option, may deem appropriate.
IX. Waiver. No waiver by Bank of any default shall operate as a waiver of any
other default or of the same default on a future occasion. Borrower hereby
waives promptness by Bank in making any demand upon it and agrees that no delay
by Bank in exercising any of its rights hereunder shall be deemed to constitute
a waiver thereof. The powers and remedies given hereby and by the Loan
Documents, shall not be exclusive of any other powers or remedies
17
<PAGE> 18
available to the Bank. No course of dealings between the Bank and the Borrower
or any other individual guarantor, and no delay on the part of the Bank in
exercising any rights with respect to any default shall operate as a waiver of
any rights of the Bank. Bank shall have the right to proceed against all or any
portion of the collateral covered or included in any Instrument of Collateral
Security, in any order. All rights and remedies granted Bank hereunder shall be
deemed concurrent and cumulative and not alternate remedies and Bank may proceed
with any number of remedies at the same time until all loans and financial
obligations of the Borrower to the Bank are satisfied in full. The exercise of
any one right or remedy shall not be deemed a waiver or release of any other
right or remedy and Bank, upon the occurrence of any event of default, may
proceed against the Borrower at any time, under any one or more of the
Instruments of Collateral Security, in any order and with any available remedy.
No waiver by the Bank will be effective unless it is in writing and then only to
the extent specifically stated. This Agreement cannot be changed or terminated
orally.
X. Survival of Representations, Warranties, Covenants and Agreements. All
representations and warranties, covenants and agreements in this Agreement or
any certificate or document delivered in connection with this Agreement or
pursuant hereto shall survive the making of the Loan provided for herein and the
delivery of the Note and the Loan Documents. Any partial invalidity of the
provisions hereof shall not invalidate the remaining portions hereof.
XI. Notices and Demands. Any notices or demands required by this Agreement, the
Note or any other Loan Document, shall be in writing and delivered personally or
mailed to the party entitled to such notice or demand at the address set forth
below opposite its name, or at such other address as either party may notify the
other in writing:
Fleet National Bank 69 State Street
Albany, New York 12201
Decora, Incorporated One Mill Street
Fort Edward, New York 12828
Any notice sent by the Bank by registered or certified mail shall be deemed to
have been given and received within three (3) days of the date so mailed.
XII. Successors and Assigns. This Agreement, the Note and the Loan
Documents are binding upon and for the benefit of the respective
successors and assigns of the parties.
XIII. Pledge to Other Bank. Bank may at any time pledge all or any portion of
its rights under the Loan Documents including any portion of the Note to any of
the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341.
18
<PAGE> 19
No such pledge or enforcement thereof shall release Bank from its obligations
under any of the Loan Documents.
XIV. Assignment Rights. Bank shall have the unrestricted right at any time or
from time to time, and without Borrower's consent, to assign all or any portion
of its rights and obligations hereunder to one or more banks or other financial
institutions (each, an "Assignee"), and Borrower agrees that it shall execute,
or cause to be executed, such documents, including without limitation,
amendments to this Agreement and to any other documents, instruments and
agreements executed in connection herewith as Bank shall deem necessary to
effect the foregoing. In addition, at the request of Bank and any such Assignee,
Borrower shall issue one or more new promissory notes, as applicable, to any
such Assignee and, if Bank has retained any of its rights and obligations
hereunder following such assignment, to Bank, which new promissory notes shall
be issued in replacement of, but not in discharge of, the liability evidenced by
the promissory note held by Bank prior to such Assignment and shall reflect the
amount of the respective commitments and Loans held by such Assignee and Bank
after giving effect to such assignment. Upon the execution and delivery of
appropriate assignment documentation, amendments and any other documentation
required by Bank in connection with such assignment, and the payment by Assignee
of the purchase price agreed to by Bank, and such Assignee, such Assignee shall
be a party to this agreement and shall have all of the rights and obligations of
Bank hereunder (and under any and all other guaranties, documents, instruments
and agreements executed in connection herewith) to the extent that such rights
and obligations have been assigned by Bank pursuant to the assignment
documentation between Bank and such Assignee, and Bank shall be released from
its obligations hereunder and thereunder to a corresponding extent.
XV. Participation. Bank shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to Borrower, to grant to one
or more banks or other financial institutions (each, a "Participant")
participating interests in Bank's obligation to lend hereunder and/or any or all
of the loans held by Bank hereunder. In the event of any such grant by Bank of a
participating interest to a Participant, whether or not upon notice to Borrower,
Bank shall remain responsible for the performance of its obligations hereunder
and Borrower shall continue to deal solely and directly with Bank in connection
with Bank's rights and obligations hereunder. Bank may furnish any information
concerning Borrower in its possession from time to time
to prospective Assignees and Participants, provided that Bank shall require any
such prospective Assignee or Participant to agree in writing to maintain the
confidentiality of such information.
XVI. Setoff. Borrower hereby grants to Bank, a lien, security interest and right
of setoff as security for all liabilities and obligations to Bank, whether now
existing or hereafter arising, upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Fleet
Financial Group,
19
<PAGE> 20
Inc., or in transit to any of them. At any time, without demand or notice, Bank
may set off the same or any part thereof and apply the same to any liability or
obligation of Borrower even though unmatured and regardless of the adequacy of
any other collateral securing the Loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE Loan, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
XVII. Usury. All agreements between Borrower and Bank are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Bank for the use or the
forbearance of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law" shall mean the
law in effect as of the date hereof provided, however, that in the event there
is a change in the law which results in a higher permissible rate of interest,
then the Note shall be governed by such new law as of its effective date. In
this regard, it is expressly agreed that it is the intent of Borrower and Bank
in the execution, delivery and acceptance of Note to contract in strict
compliance with the laws of the State of New York from time to time in effect.
If, under or from any circumstances whatsoever, fulfillment of any provision
hereof or of any of the Loan Documents at the time of performance of such
provision shall be due, shall involve transcending the limit of such validity
prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever Bank should ever receive as interest any amount which
would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between Borrower and Bank.
XVIII. Waiver of Jury Trial. BORROWER AND BANK MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE NOTE OR ANY OTHER LOAN DOCUMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR BANK TO ACCEPT THIS AGREEMENT AND MAKE THE Loan.
XIX. Corrective Documents. Upon receipt of an affidavit of an officer of Bank as
to the loss, theft, destruction or mutilation of the Note or any other Loan
Document which is not of public record, and, in the case of any such loss,
theft, destruction or mutilation, upon surrender and
20
<PAGE> 21
cancellation of such Note or other Loan Document. Borrower will issue, in lieu
thereof, a replacement Note or other Loan Document in the same principal amount
thereof and otherwise of like tenor.
XX. No Further Obligation to Lend. Nothing herein contained shall obligate the
Bank to make any loan or advance to the Borrower under this Agreement after May
1, 2001.
XXI. Governing Law; Jurisdiction; Certain Consents and Waivers. This Agreement
and all Loan Documents shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of New York, without regard to
principles of conflict of laws. Each action and other legal proceeding relating
to the Loan Documents commenced by the Bank may be litigated in any court that
is either a court of record of the State of New York or a court of the United
States located in the State of New York. Each such action and other legal
proceeding not commenced by the Bank shall be litigated in such a court.
Borrower (a) consents in each action an other legal proceeding relating to any
Loan Document commenced by the Bank to the personal jurisdiction of any court
that is either a court of record of the State of New York or a court of the
United States located in the State of New York, (2) waives each objection to the
laying of venue of any such action or other legal proceeding, (3) waives
personal service of process in each such action and other legal proceeding, and
(4) consents to the making of service of process in each such action and other
legal proceeding by registered mail directed to Borrower at the last address of
Borrower shown in the records relating to the Loan Documents, with such service
of process to be deemed completed five days after the mailing thereof.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties have caused this Instrument to be
executed by their duly authorized officers as of the day and year first above
written.
DECORA, INCORPORATED d/b/a
DECORA MANUFACTURING
By: ________________________
Name: ______________________
Title: _____________________
FLEET NATIONAL BANK
By: ________________________
James M. Marini
Vice President
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this 27th day of April, 1998, before me personally appeared
Timothy N. Burditt, to me known, who being by me duly sworn, did
depose and say that he resides in Clifton Park, New York, that he
is the Vice President, Administration Secretary of DECORA,
INCORPORATED d/b/a DECORA MANUFACTURING, the corporation described
in and which executed the above instrument; and that he signed his
name thereto by order of the Board of Directors of said
corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this 27th day of April, 1998, before me personally appeared
James M. Marini, to me known, who being by me duly sworn, did
depose and say that he resides in Valatie, New York, that he is a
Vice President of FLEET NATIONAL BANK, the corporation described in
and
22
<PAGE> 23
which executed the above instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
------------------------------
Notary Public
23
<PAGE> 24
EXHIBIT A
LOAN FORMULA CERTIFICATE
24
<PAGE> 25
RIDER A
PENDING AND THREATENED LITIGATION
25
<PAGE> 1
EXHIBIT 10.62
CREDIT AND REIMBURSEMENT AGREEMENT
MODIFICATION AGREEMENT NO. 3
This Credit and Reimbursement Agreement Modification Agreement No. 3
dated as of April 29, 1998 by and between Decora, Incorporated, a business
corporation organized and existing under the laws of the State of Delaware and
authorized to do business in the State of New York under the name Decora
Manufacturing, having an office for the transaction of business located at 1
Mill Street, Fort Edward, New York 12828 (hereinafter referred to as the
"Company") and Fleet Bank, a banking corporation organized and existing under
the laws of the State of New York having an office for the transaction of
business located at 69 State Street, Albany, New York 12201 (the "Bank").
W I T N E S S E T H:
WHEREAS, as of November 1, 1996, the Company executed in favor of the
Bank a Credit and Reimbursement Agreement (the "Credit and Reimbursement
Agreement") in connection with that certain letter of credit issued by the Bank
in favor of Mellon Bank, FSB, as Trustee, concerning the issuance by the
Counties of Warren and Washington Industrial Development Agency of Two Million
Four Hundred Sixty Thousand and no/100 Dollars ($2,460,000.00) aggregate
principal amount industrial development revenue bonds (Decora, Incorporated
Project, Series 1996), which Credit and Reimbursement Agreement was modified
pursuant to the terms of that certain Credit and Reimbursement Agreement
Modification Agreement No. 1 by and between the Company and the Bank dated March
27, 1997 (the "Amendment No. 1") and that certain Credit and Reimbursement
Agreement Modification Agreement No. 2 by and between the Company and the Bank
dated September 26, 1997 (the "Amendment No. 2"); and
WHEREAS, the Company and the Bank have agreed to further modify certain
terms of the Credit and Reimbursement Agreement.
WHEREAS, this agreement is made in conjunction with a loan by the Bank
to the Company pursuant to a $15,000,000 Restated Revolving Promissory Note
bearing even date.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt of which is acknowledged by the parties,
the Company and the Bank hereby agree as follows:
1. The Bank hereby releases its security interest in all of
Borrower's general intangibles, goods, motor vehicles,
machinery, equipment (including without limitation, all items
identified on SCHEDULE A attached hereto), furniture and
<PAGE> 2
fixtures that can be removed without significant damage to
either realty or the article being removed, or both, as granted
pursuant to the Security Agreement (the "Original Security
Agreement") dated as of November 1, 1996 (a copy of which is
attached hereto as EXHIBIT A) securing the obligations under the
Credit and Reimbursement Agreement. The security interests set
forth in the Original Security Agreement shall continue with
respect to all of Borrower's accounts receivable, inventory,
chattel paper, contract rights, instruments and choses in
action, those fixtures which are so annexed to realty that they
cannot be removed without significant damage to either realty or
the article being removed, or both, plus all proceeds and
products thereof, if any, and all replacements, additions and
accessions thereto. The Company will substitute in place of the
security interests being released the following collateral:
(a) a mortgage on certain pieces or parcels of land with the
buildings and improvements erected thereon more
particularly described in SCHEDULE B annexed hereto and
made a part hereof (herein called "Mortgage Premises");
(b) an assignment of leases and rents concerning the
Mortgaged Premises;
(c) a first security interest in all of the Company's
accounts receivable, contract rights, inventory,
instruments, chattel paper and choses in action plus all
proceeds and products thereof and all replacements,
additions and accessions thereto;
(d) an assignment, pledge and security interest in the
lock-box account in to which the Company directs its
customers to deposit all payments on accounts
receivable.
2. "Revolving Credit Agreement" means that Restated Secured
Revolving Line of Credit Agreement dated as of April 29, 1998
between the Bank and the Company, as the same may be modified,
amended or extended from time to time.
3. Section 6.01(G) of Article VI of the Credit and Reimbursement
Agreement entitled "Reporting Requirements" is hereby amended,
modified and restated in its entirety to read as follows:
"(G) REPORTING REQUIREMENTS. Furnish, or cause to be furnished,
to the Bank:
<PAGE> 3
(a) within ninety-five (95) days of the end of its fiscal
year, annual certified public accountant audited,
consolidated statements for Decora, Industries, Inc.
(which must include a consolidating statement schedule),
all prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied,
along with copies of the Company's 10-K report;
(b) within ninety-five (95) days of the end of its fiscal
year, annual certified public accountant audited
statements for Company, all prepared in accordance with
generally accepted accounting principles ("GAAP")
consistently applied;
(c) within ninety-five (95) days of the end of its fiscal
year, internally prepared annual budgets for the
Company;
(d) field audits three times a year of the Company
conducted, at the Bank's option, by an independent
certified public accountant or the Bank's internal bank
personnel, at Company's expense.
(e) within thirty (30) days of each calendar month end,
internally prepared financial statements for the Company
for the preceding month, in form acceptable to the Bank,
all prepared in accordance with GAAP;
(f) within sixty (60) days of the end of each fiscal
quarter, 10Q reports for Decora Industries, Inc.;
(g) within thirty (30) days of the end of each month,
account receivable aging reports concerning the Company
in form acceptable to the Bank; and
(h) within sixty (60) days after the end of each fiscal
quarter, a compliance letter acknowledged by the Chief
Financial Officers of both the Company and Decora
Industries, Inc. concerning the financial covenant
referenced in paragraph 4 below.
4. Section 6.01(H) of Article VI of the Credit and Reimbursement
Agreement entitled "Financial Covenants" is hereby amended,
modified and restated in its entirety as follows:
(H) FINANCIAL COVENANTS. The Company shall maintain the
following financial covenant:
<PAGE> 4
During the term of the Loans, the Company must maintain a
Minimum Fixed Charge Coverage Covenant of 1.10 to 1.00. The
covenant shall be measured quarterly on a rolling four (4)
quarters basis with the first test to occur on March 31, 1999.
The covenant is defined as follows:
EBITDA + non-cash restructuring expenses + cash from
intercompany loans and/or advances divided by interest expense +
Current Maturities of Long Term Debt (prior four quarters) +
Cash Taxes + Tangible and Intangible CAPEX (net of financed
CAPEX) + Dividends/Distributions + Repayment of Intercompany
loans or advances.
5. Section 6.02(A) of the Credit and Reimbursement Agreement
(entitled "Liens, etc.") is hereby amended to read in its
entirety as follows:
"LIENS, ETC. Create or suffer to exist any Lien, security
interest or other charge or encumbrance, or any type of
preferential arrangement, upon or with respect to the Equipment,
the Project Facility or the Existing Facility or assign any
right to receive income to secure any Indebtedness of any
Person, other than (1) Liens permitted under the Loan Documents,
or (2) prior to the making of the LC Loan pursuant to Section
2.02(A) hereof, Liens existing under the Indenture and the
Installment Sale Agreement, or (3) Permitted Encumbrances (as
defined in the Indenture, or (4) Liens, security interests, or
other charges or encumbrances as permitted by the Revolving
Credit Agreement."
6. Section 6.02(G) of the Credit and Reimbursement Agreement
(entitled "Change in Nature of Business") is hereby amended to
read in its entirety as follows:
Make any material change in the nature of its business, except
as permitted by the Revolving Credit Agreement.
7. Section 6.02(H) of the Credit and Reimbursement Agreement
(entitled "No Pledge") is hereby amended to read in its entirety
as follows:
Pledge any of its assets (realty, personalty or otherwise)
without the Bank's prior written consent, except as permitted by
the Revolving Credit Agreement.
8. Section 6.02(I) of the Credit and Reimbursement Agreement
(entitled "Limitation on Contingent Obligations) is hereby
amended to read in its entirety as follows:
<PAGE> 5
"LIMITATION ON CONTINGENT OBLIGATIONS. Agree to, or assume,
guarantee, endorse or otherwise in any way be or become
responsible or liable, directly or indirectly for the
obligations of any Person or for any obligations pursuant to any
document or arrangement which is the economic equivalent of a
guarantee (all such transactions being herein called
"Guarantees"), whether through an agreement, contingent or
otherwise, to purchase or repurchase such obligations, or to
purchase, sell or lease (as lessee or lessor) any property or
services primarily for the purposes of enabling the debtor to
make payment of such obligations or to assure the owner of the
obligations against loss, or to advance or supply funds to or to
invest in any other manner in the debtor (whether through
purchasing stock, making a loan, advance or capital contribution
or by means of agreeing to maintain or cause such Person to
maintain, a minimum working capital or net worth of such Person,
or otherwise), except (a) Guarantees by endorsement of
instruments for deposit or collection in the ordinary course of
business, (b) Guarantees by the Company or any Subsidiary
pursuant to the Bonds, (c) any Guarantees already existing or
hereafter guarantee to the Bank by the Company, or (d)
Guarantees permitted by the Revolving Credit Agreement.
9. Section 6.02(J) of the Credit and Reimbursement Agreement
(entitled "Rubbermaid Agreement") is hereby deleted in its
entirety.
10. Section 6.02(L) of the Credit and Reimbursement Agreement
(entitled "No Transfer of Assets") is hereby amended to read in
its entirety as follows:
Sell, lease or otherwise dispose of all or any substantial part
of its assets to any other person, firm or corporation.
11. Section 6.02(M) of the Credit and Reimbursement Agreement
(entitled Prohibition on Fundamental Changes) is hereby deleted
in its entirety.
Bank acknowledges and agrees that Decora Industries, Inc. shall
no longer be a guarantor of the obligations of Borrower under
this Agreement. The Credit and Reimbursement Agreement (entitled
"Events of Default") is also hereby amended to delete therefrom
the reference to "Guarantor" wherever such term appears.
12. Article VIII Section 8.01 Event of Default shall be modified to
add the following paragraph M as an additional Event of Default.
M. In the event the $15,000,000.00 Restated Revolving
Promissory Note is replaced by a loan from a lender
other than the Bank,
<PAGE> 6
13. Except as expressly modified pursuant to the terms hereof, all
the remaining terms of the Credit and Reimbursement Agreement,
as previously modified pursuant to Amendment No. 1, and
Amendment No. 2, remain in full force and effect without
modification.
14. The Company hereby warrants and covenants to the Bank that as of
the date of this Credit and Reimbursement Agreement Modification
Agreement No. 3, there are no disputes, offsets, claims or
counterclaims of any kind or nature whatsoever under the Credit
and Reimbursement Agreement, Amendment No. 1, Amendment No. 2 or
any of the documents executed herewith or therewith or the
obligations represented or evidenced hereby or thereby.
15. WAIVER OF TRIAL BY JURY. COMPANY AND THE BANK MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A
TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT
OF, UNDER OR IN CONNECTION WITH THE CREDIT AND REIMBURSEMENT
AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE
OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY TO THE FULLEST EXTENT ALLOWED BY LAW. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS
CREDIT AND REIMBURSEMENT AGREEMENT MODIFICATION NO. 3 AND MAKE
THE $15,000,000.00 LOAN.
16. PLEDGING OF RIGHTS. Bank may at any time pledge all or any
portion of its rights under the loan documents including any
portion of the Letter of Credit to any of the twelve (12)
Federal Reserve Banks organized under section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or
enforcement thereof shall release Company from its obligations
under any of the loan documents.
17. PARTICIPATIONS.
The Bank shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to the
Company to grant to one or more banks or other financial
institutions (each, a "Participant") participating interests in
Bank's obligation to lend hereunder and/or any or all of the
loans held by Bank hereunder. In the event of any such grant by
Bank of a participating interest to a Participant, whether or
not upon notice to Company, Bank shall remain responsible for
the performance of its obligations hereunder
<PAGE> 7
and Company shall continue to deal solely and directly with Bank
in connection with Bank's rights and obligations hereunder.
Bank may furnish any information concerning Company in its
possession from time to time to prospective Assignees and
Participants, provided that Bank shall require any such
prospective Assignee or Participant to agree in writing to
maintain the confidentiality of such information.
18. SETOFF. Company hereby grants to Bank, a lien, security interest
and right of setoff as security for all liabilities and
obligations to Bank, whether now existing or hereafter arising,
upon and against all deposits, credits, collateral and property,
now or hereafter in the possession, custody, safekeeping or
control of Bank or any entity under the control of Fleet
Financial Group, Inc., or in transit to any of them. At any
time, without demand or notice, Bank may set off the same or any
part thereof and apply the same to any liability or obligation
of Company even though unmatured and regardless of the adequacy
of any other collateral securing the loan. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR
OTHER PROPERTY OF THE COMPANY, ARE HEREBY KNOWINGLY, VOLUNTARILY
AND IRREVOCABLY WAIVED.
IN WITNESS WHEREOF, the parties hereto have executed this Credit and
Reimbursement Agreement Modification Agreement No. 3 the day and year first
above written.
Fleet National Bank
By: ______________________________
James M. Marini, Vice President
Decora, Incorporated d/b/a Decora Manufacturing
By: ________________________________
Timothy N. Burditt,
Vice President
<PAGE> 8
SCHEDULE A
REAL PROPERTY DESCRIPTION OF ONE MILL STREET, FORT EDWARD, N.Y.
<PAGE> 1
EXHIBIT 10.63
MORTGAGE MODIFICATION AND CONSOLIDATION AGREEMENT
THIS MORTGAGE MODIFICATION AND CONSOLIDATION AGREEMENT made as of this
____ day of April, 1998, between DECORA, INCORPORATED, a Delaware corporation
authorized to do business in the State of New York as Decora Manufacturing and
having its principal place of business at 1 Mill Street, Fort Edward, New York
12828, the "Mortgagor" or "Borrower", and FLEET NATIONAL BANK, a banking
association organized and existing under the laws of the United States of
America with an office at 69 State Street, City and County of Albany, State of
New York 12207, hereinafter the "Mortgagee".
WHEREAS, the Mortgagee is the holder of the below listed mortgages as to
the Premises (herein called "Prior Mortgages As To The Premises"); and the below
listed notes, to pay money secured by said Prior Mortgage As To The Premises
(said notes hereinafter called the "Instruments Of Indebtedness Secured By The
Prior Mortgages As To The Premises"):
Prior Mortgage No. 1
That certain revolving line of credit note dated the 19th day of July,
1994 executed by the Mortgagor in favor of the Mortgagee in the face
amount of Six Million and no/100 Dollars ($6,000,000.00) and amended and
restated in its entirety pursuant to the terms of a Restated Promissory
Note (Revolving Line of Credit) in the face amount of Six Million and
no/100 Dollars ($6,000,000.00) executed by the Mortgagor in favor of the
Mortgagee on August 13, 1996 ("Note No. 1"); which Note is secured in
part to the extent of Four Million and no/100 Dollars ($4,000,000.00)
only by a mortgage made and given by the Mortgagor, dated the 18th day
of April, 1990, and recorded in the Office of the Clerk of the County of
Washington, New York, on the 23rd day of April, 1990, in Book 601 of
Mortgages at Page 291, as modified by Mortgage Modification Agreement by
and between the Mortgagor and the Mortgagee dated July 19, 1994 and
recorded in the Office of the Clerk of the County of Washington, New
York on the 25th day of July, 1994 in Book 846 of Mortgages at Page 199
(the "Mortgage"); and as further modified by Mortgagee Modification
Agreement by and between the Borrower and the Bank dated the 27th day of
March, 1997 and recorded in the Office of the Clerk of the County of
Washington, New York on the 28th day of March, 1997 in Book 995 of
Mortgages at Page 213. Prior Mortgage No. 1 has a principal balance due
and unpaid of $2,500,000.00.
Prior Mortgage No. 2
<PAGE> 2
That certain Demand Note bearing even date executed by the Mortgagor to
the Mortgagee in the face amount of Four Hundred Ninety-Nine Thousand
and 00/100 Dollars ($499,000.00) ("Demand Note") which Demand Note is
secured in part to the extent of $499,000.00 by that certain Mortgage
("Prior Mortgage No. 2") bearing even date in the amount of $499,000.00
from Mortgagor to Mortgagee, which mortgage will be recorded in
Washington County Clerk's Office concurrently herewith. Prior Mortgage
No. 2 has a principal balance due and unpaid of $499,000.00.
WHEREAS, the aggregate principal indebtedness owed by the Mortgagor to
the Mortgagee under the above mentioned Instruments Of Indebtedness Secured By
The Prior Mortgages As To The Premises, is $2,999,000.00, as of the date hereof
(all interest thereon having been paid to date); and
WHEREAS, the Mortgagor hereunder and the Mortgagee hereunder desire to
consolidate, modify and extend the indebtedness of $2,500,000.00 evidenced by
Prior Mortgage No. 1 and the indebtedness of $499,000.00, evidenced by Prior
Mortgage No. 2 into one consolidated principal indebtedness of Two Million Nine
Hundred Ninety-Nine Thousand and 00/100 Dollars ($2,999,000.00), and to amend,
modify, consolidate, and extend this Mortgage Modification and Consolidation
Agreement, with the Prior Mortgages As To The Premises, so that together, this
Mortgage Modification and Consolidation Agreement and the Prior Mortgages As To
The Premises shall all constitute in law but one first mortgage and consolidated
first mortgage lien in the amount of $2,999,000.00 upon the entire Premises
attached at Schedule "A" to this Mortgage Modification and Consolidation
Agreement.
WHEREAS, the Bank has agreed at the request of the Mortgagor to (i)
extend to the Mortgagor a new loan in the amount of Twelve Million Five Hundred
Thousand and no/100 Dollars ($12,500,000.00) pursuant to the terms of a demand
note in said amount executed by the Mortgagor in favor of the Bank on even date
herewith (the "Demand Note") and to consolidate the outstanding principal
balance of Note No. 1 with the Demand Note, and as consolidated to modify and
restate the terms of Note No. 1 and the Demand Note into one consolidated and
restated revolving promissory note in the face amount of Fifteen Million and
00/100 Dollars ($15,000,000.00) (the "Restated Revolving Promissory Note"); and
WHEREAS, it is a condition to the Mortgagee agreeing to extend to the
Mortgagor the additional monies evidenced by the Demand Note that the Mortgage
continue to secure to the extent of Two Million Nine Hundred Ninety-Nine
Thousand Nine Hundred and no/100 Dollars ($2,999,000.00) the Restated Revolving
Promissory Note in the face amount of Fifteen Million Dollars ($15,000,000.00);
NOW, THEREFORE, in pursuance of said agreement and in consideration of
the mutual promises, covenants and agreements herein contained and other
valuable
<PAGE> 3
consideration, the receipt of which is hereby respectively acknowledged by the
parties, the Mortgagor and the Mortgagee mutually covenant and agree as follows:
THAT the lien of this Mortgage Modification and Consolidation Agreement,
plus the lien of the Prior Mortgages As To The Premises are hereby consolidated
so that together they shall hereinafter constitute in law but one first mortgage
and a single lien, securing the principal sum of $2,999,000.00 with interest as
hereinafter provided upon the Premises.
THAT the Instruments of Indebtedness Secured By The Prior Mortgages As
To The Premises, are all consolidated into one Restated Revolving Promissory
Note in the principal sum of 15,000,000.00 executed by the Mortgagor hereunder
in favor of the Mortgagee hereunder and simultaneously herewith. Said Note is
repayable, together with interest in certain monthly installments - all as more
fully set forth in said Note (which Note is hereinafter referred to as the
"Note"), and the terms and conditions of which are incorporated herein and made
a part hereof as if specifically set forth.
THAT all the terms and conditions of the Prior Mortgages As
To The Premises are hereby amended and modified to read as hereinafter set
forth, said Prior Mortgages As To The Premises and this Mortgage Modification
and Consolidation Agreement are all hereinafter referred to and described as
"Mortgage".
That the Mortgagor, for further securing the payment of said Note, and
interest thereon, hereby mortgages to the Mortgagee all those certain pieces or
parcels of land, with the buildings and improvements erected thereon, more
particularly described in Schedule A attached hereto and made a part hereof
(herein called the "premises" or "mortgaged premises."
TOGETHER WITH all rights, title and interest of the Mortgagor in and to
the following property, rights and interests (the Premises and the Improvements
together with such property, rights and interest being hereinafter collectively
called the "mortgaged premises"):
(a) all easements, rights-of-way, gores of land, streets, ways
alleys, passages, sewer rights, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments, and
appurtenances of any nature whatsoever, in any way belonging, relating
or pertaining to the mortgaged premises and all land lying in the bed of
any street, road or avenue, opened or proposed, in front of or adjoining
the Premises to the center line thereof;
(b) all fixtures and articles now or hereafter attached to said
premises which constitute part of the building, building systems and/or
real estate improvements and which cannot be removed without significant
damage either to the
<PAGE> 4
realty or to the article being removed or both, including but not
limited to antennas, towers, transmission lines, sample systems, remote
control units, wiring, catwalks, transformers, transmitters, other radio
and/or tv transmission and communication equipment, furnaces, boilers,
oil or gas burners, fire extinguishers and other fire preventing and
extinguishing apparatus, hoses, fans, conveyors, air compressors,
scales, radiators and heating units and piping, plumbing, washroom and
drinking facilities, air conditioning, humidifying and sprinkler
systems, building electrical fixtures and wiring, fluorescent fixtures,
elevators, dynamos, incinerators, water pumps, together with any and all
replacements thereof and additions thereto. Notwithstanding the
foregoing, this Mortgage shall not cover machinery, equipment, furniture
and fixtures that can be removed without significant damage to either
the realty or the article being removed, or both and the Mortgagee's
lien will remain on those fixtures which are are so annexed to the
realty that they cannot be removed without significant damage to either
the realty or the article being removed, or both;
(c) all awards or payments, including interest thereon, and the
right to receive the same, which may be made with respect to the
mortgaged premises, whether from the exercise of the right of eminent
domain (including any transfer made in lieu of the exercise of said
right), or for any other injury to or decrease in the value of the
mortgaged premises;
(d) all leases and other agreements affecting the use or
occupancy of the mortgaged premises now or hereafter entered into, and
the right to receive and apply the rents, issues and profits of the
mortgaged premises to the payment of the aforementioned indebtedness;
(e) all proceeds of any unearned premiums on any insurance
policies covering the mortgaged premises, including, without limitation,
the right to receive and apply the proceeds of any insurance, judgments,
or settlements made in lieu thereof, for damage to the mortgaged
premises;
(f) the right, in the name and on behalf of the Mortgagor to
appear in and defend any action or proceeding brought with respect to
the mortgaged premises and to commence any action or proceedings to
protect the interest of the Mortgagee in the mortgaged premises.
That the Mortgagor agrees that the Mortgage shall secure to the extent
of Two Million Nine Hundred Ninety-Nine Thousand and no/100 Dollars
($2,999,000.00) only the Restated Revolving Promissory Note bearing even date in
the face amount of $15,000,000.00, and that this is a "Credit Line Mortgage" as
defined in New York State Tax Law Section 253-b(2).
<PAGE> 5
That the full amount owed is secured, to the extent of $2,999,900.00
only, by the Mortgage described above, as modified which is and shall remain a
first lien on the premises described in Schedule A (the "Premises") attached
hereto and made a part hereof.
That notwithstanding anything to the contrary in this Mortgage, the
maximum aggregate principal amount of indebtedness that is, or under any
contingency may be, secured by this Mortgage (including Borrower's obligation to
reimburse advances made by Mortgagee), either at execution or at any time
thereafter (the "Secured Amount"), is Two Million Nine Hundred Ninety-Nine
Thousand and no/100 Dollars ($2,999,000.00), plus amounts that Mortgagee expends
after a declaration of default under this Mortgage to the extent that any such
amounts shall constitute payment of (i) taxes, charges or assessments that may
be imposed by law upon any Mortgaged Premises; (ii) premiums on insurance
policies covering any Mortgaged Premises; (iii) expenses incurred in upholding
the lien of this Mortgage, including the expenses of any litigation to prosecute
or defend the rights and lien created by this Mortgage; or (iv) any amount, cost
or change to which Mortgagee becomes subrogated, upon payment, whether under
recognized principles of law or equity, or under express statutory authority;
then, and in each such event, such amounts or costs, together with interest
thereon, shall be added to the indebtedness secured hereby and shall be secured
by this Mortgage.
That pursuant to the Restated Secured Revolving Line of Credit Agreement
("Credit Agreement") between the Mortgagor and Mortgagee bearing even date, the
amount of the Restated Revolving Promissory Note may increase and decrease from
time to time as Mortgagee advances, Borrower repays, and Mortgagee readvances
sums on account of the loan, all as more fully described in the Credit
Agreement. For purposes of this Mortgage so long as the balance of the loan
equals or exceeds the Secured Amount, the amount of the loan secured by this
Mortgage shall at all times equal only the Secured Amount as more fully
described above. Such Secured Amount represents only a portion of the first sums
advanced by Mortgagee with respect to the loan.
That the Secured Amount shall be reduced only by the last and final sums
the Borrower repays with respect to the loan and shall not be reduced by any
intervening repayments of the loan by Borrower. As of the date hereof, the total
amount of the loan exceeds the Secured Amount, so that the Secured Amount
represents only a portion of the Secured Obligations actually outstanding.
That so long as the balance of the loan exceeds the Secured Amount, any
payments and repayments of the loan by Borrower shall not be deemed to be
applied against, or to reduce, the portion of the Restated Revolving Promissory
Note secured by this Mortgage, as more fully described above.
<PAGE> 6
That the Mortgagor agrees to comply with and perform all the obligations
and conditions of the Mortgage, as hereby modified, for the benefit of the Bank.
That the security of the Mortgage shall not be lessened by any
provisions of this Agreement; but whenever the terms and conditions of this
Agreement conflict in any way with the terms or conditions of the Mortgage, the
terms and conditions of this Agreement shall control and prevail.
That the Mortgagor hereby warrants and covenants to the Mortgagee that
as of the date of this Agreement, there are no disputes, offsets, claims or
counterclaims of any kind or nature whatsoever under the Mortgage or any of the
documents executed in connection herewith or therewith or the obligations
represented or evidenced hereby or thereby.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the proper use and benefit of the Mortgagee, and the successors and
assigns of the Mortgagee, forever.
And the Mortgagor covenants with the Mortgagee as follows:
1. PAYMENT. The Mortgagor promises to pay the principal and interest on
the Note when due and payable, plus all other indebtedness secured by this
Mortgage.
2. WARRANTY OF TITLE. The Mortgagor warrants the title to the mortgaged
premises, and confirms and ratifies that the full amount owed as described above
is secured by the Mortgage.
3. CASUALTY AND OTHER INSURANCE. Mortgagor shall maintain insurance
against such risks and for such amounts as are customarily insured against by
businesses of like size and type in the area, including the following:
(a) Mortgagor shall keep all improvements situated on the
mortgage premises continuously insured against loss by fire and the
risks covered under a so-called "extended coverage endorsement", flood,
explosion of boilers, heating apparatus and other pressure vessels, and
such other hazards, casualties and contingencies as Mortgagee from time
to time reasonably may require, in an amount equal to one hundred
percent (100%) of the replacement cost of such Improvements. All such
insurance shall be evidenced by valid and enforceable policies in form
and substance satisfactory to Mortgagee. Without limiting the generality
of the foregoing: (a) all such insurance policies shall contain an
endorsement requiring thirty (30) days written notice to Mortgagee at
the following address: Fleet National Bank, P.O. Box 2984, CT/HM/M10J,
Hartford, CT 06101-2984, prior to cancellation or change in the
coverage, scope or amount of any such policy or policies; and (b) any
and all policies
<PAGE> 7
evidencing casualty insurance shall provide that any and all loss shall
be payable to Mortgagee notwithstanding any act or omission of Mortgagor
which might otherwise result in cancellation or forfeiture of said
insurance:
(b) Insurance against loss or damage by flood, such insurance to
be in an amount not less than the principal amount of the Loan unless
Mortgagee receives satisfactory evidence that no portion of the Premises
is located within an area identified by the U.S. Department of Housing
and Urban Development as having special flood hazards;
(c) Business interruption (extra expense/loss of income)
insurance in an amount sufficient to cover any loss of income from the
Premises for a period of not less than 12 months; and
(d) Insurance protecting Mortgagor against loss arising from
liability imposed by law or assumed in any written contract and loss or
liability arising from personal injury, including bodily injury or
death, or damage to the property of others, caused by an accident or
occurrence with a limit of liability of not less than $1,000,000
(combined single limit for personal injury, including bodily injury or
death, and property damage).
All policies of insurance required by this Section shall be procured and
maintained in financially sound and generally recognized responsible insurance
companies selected by Mortgagor and authorized to write such insurance in the
State of New York. The company or companies issuing the policies of insurance
required by subparagraphs (a) and (c) hereof shall be rated "A" or better by
A.M. Best Co., Inc. in Best's Key Rating Guide. Such insurance may be written
with deductible amounts comparable to those on similar policies carried by other
companies engaged in businesses similar in size, character and other respects to
those in which Mortgagor is engaged. All policies evidencing the insurance
required by subparagraphs (a), (b) and (c) hereof shall contain a New York
standard mortgagee clause, without contribution, showing Mortgagee's interest as
first mortgagee, and loss payee shall provide for payment to Mortgagee of the
proceeds of insurance resulting from any claim for loss or damage thereunder,
shall provide for at least thirty (30) days' prior written notice to Mortgagee
of the cancellation of such policies and of any material change in the terms or
conditions thereof and shall provide for notice to Mortgagee of all material
claims made thereunder.
The policies (or binders) of insurance required by subparagraphs (a),
(b) and (c) hereof, together with proof of the payment of the premiums therefor,
and a photocopy of the policy (or binder) of insurance required by subparagraphs
(d) and (e) hereof shall be delivered to Mortgagee at the time of the execution
and delivery of this Mortgage. Mortgagor shall deliver to Mortgagee annually a
certificate reciting that there is in full force
<PAGE> 8
and effect insurance coverage of the types and in the amounts required by this
Section and complying with the requirements hereof. Prior to the expiration of
each such policy, Mortgagor shall furnish Mortgagee with satisfactory evidence
that such policy has been renewed or replaced or is no longer required.
Mortgagor shall pay all premiums on the insurance policies required by this
Section and shall provide such further information with respect to the insurance
coverage required hereby as Mortgagee may from time to time reasonably require.
Mortgagor shall promptly notify Mortgagee of any loss, damage or other
casualty with resect to the Improvements, the Equipment or any part thereof.
Mortgagor shall not permit any condition to exist on the Premises or in the
Improvements which would wholly or partially invalidate the insurance thereon.
Mortgagor hereby assigns to Mortgagee all of its right, title and interest in
and to the insurance policies required by subsections (a) and (b) hereof,
including any unearned premiums thereon, such assignment to take effect
immediately upon the occurrence of any Event of Default. Mortgagor hereby
irrevocably authorizes Mortgagee to participate with Mortgagor in the adjustment
and compromise of any insurance claims for any loss, damage or other casualty
with respect to the improvements, the Equipment or any part thereof under said
insurance policies, to collect and receive any Casualty Insurance Proceeds from
the insurers paying the same, to give proper receipts and acquittances therefor
and, at Mortgagee's sole option, to apply all or any portion of the Net Proceeds
thereof to payment on account of the unpaid principal amount of the Loan,
whether then matured or not, together with interest thereon at the Contract Rate
to the date of receipt of such payment by Mortgagee, or to make the same
available to Mortgagor, in whole or in part, for the purpose of repairing,
restoring, rebuilding or replacing the damaged Improvements and/or Equipment, in
which case such proceeds shall be payable to Mortgagor in such installments and
under such terms and conditions as Mortgagee may require. After application in
accordance with the terms of this Mortgage, the remaining portion of the
Casualty Insurance Proceeds (if any) shall be paid over to Mortgagor or
otherwise as a court of competent jurisdiction may direct. Mortgagor shall
submit to Mortgagee for prior approval the proposed amount of any Casualty
Insurance Proceeds to be paid by reason of any such loss, damage or casualty.
Mortgagor hereby appoints Mortgagee its agent and attorney-in-fact (which
appointment shall be deemed to be an agency coupled with an interest), with full
power of substitution, to participate in the adjustment and compromise of any
Casualty Insurance Proceeds on its behalf in the event that, at the time of any
such loss, damage or casualty, any Event of Default has occurred and is
continuing. Mortgagor shall execute and deliver to Mortgagee on demand such
assignments and other instruments as Mortgagee may require for such purposes and
shall reimburse Mortgagee for its costs (including reasonable legal fees) in the
collection of any Casualty Insurance Proceeds.
Business Interruption Insurance Proceeds shall be applied by Mortgagee,
to the extent received, first to the payment of Taxes, and then to the payment
of premiums for the policies of insurance required by this Section and then to
the payment of amounts required to be paid
<PAGE> 9
by any law or ordinance relating to the use of occupancy of the Premises or the
Improvements or by any requirement, order or notice of violation thereof issued
by any Governmental Agency and then to the payment of installments of principal
and/or interest required to be made by Mortgagor under the Note, as and when the
same become due and payable. After application in accordance with the terms of
this Mortgage, the remaining portion of Business Interruption Insurance Proceeds
(if any) shall be paid over to Mortgagor or otherwise as a court of competent
jurisdiction may direct.
Within 15 days of receipt of written request therefor, Mortgagor shall
deliver to Mortgagee receipted bills, cancelled checks or other proof reasonably
satisfactory to Mortgagee evidencing payment of the premiums for the policies of
insurance required by this Section.
At any time during the term of the Loan, Mortgagee may require Mortgagor
to pay to Mortgagee on the first day of each and every month, together with and
in addition to the monthly installment of principal and/or interest required to
be paid under the Note, a sum equal to the premiums next due under said policies
of insurance (as estimated by Mortgagee), less all sums already paid therefor,
divided by the number of monthly installments of principal and/or interest due
under the Note one month prior to the date on which such premiums shall be due
and payable, which sums, to the extent received, will be held without interest
and applied by Mortgagee to the payment of such premiums as and when the same
become due and payable. If such monthly insurance escrow payments become due at
a time when any premium shall not have been determined, such payments shall be
estimated on the basis of the premium for the preceding year. If the premium
when determined varies from the premium as estimated, (a) any excess arising
from such monthly payments shall be retained by Mortgagee to be applied in
reduction of subsequent monthly payments and (b) any deficiency in the amount of
such monthly payments shall be paid by Mortgagor to Mortgagee on demand.
4. NO ALTERATIONS. No building or improvement presently on or
hereinafter constructed on the mortgaged premises shall be removed, demolished
or altered in such a manner as to adversely affect its structural strength or
its value, without the consent of the Mortgagee.
5. TAXES. The Mortgagor will pay all taxes, including corporate
franchise taxes, if applicable, assessments and/or water rates and/or sewer
rates and/or any and all taxes, charges, assessments which are applicable to the
use and/or occupancy and/or existence of the mortgaged premises; and in the
event that the Mortgagor fails to pay same, Mortgagee may (but is not obligated
to) pay same and the Mortgagor will on demand, pay to the Mortgagee any amounts
so paid, by the Mortgagee with interest from the day of payment, and the same
shall be deemed to be secured by the Mortgage and shall be collectible thereupon
in like manner as the principal monies. In addition to the foregoing, but only
in the
<PAGE> 10
event that the Mortgagor is in default, the Mortgagor agrees, that upon fifteen
(15) days of the receipt of written notice from the Mortgagee, that it will open
with the Mortgagee, or a commercial bank to be selected by the Mortgagee, a
separate account designated as "Real Property Tax and Insurance Account" and
will deposit in said account on the first day of each month thereafter until the
entire indebtedness represented by the Note and interest thereon, shall have
been paid in full, a sum equal to l/l2th of the estimated annual taxes and
assessments levied upon the mortgaged premises and l/l2th of the estimated
annual premium for casualty insurance with reference to said mortgaged premises;
any deficiency in the amount so held in said separate account to be payable by
the Mortgagor on demand.
6. ESTOPPEL CERTIFICATE. The Mortgagor within three (3) days upon
request in person or within five (5) days upon request by mail will furnish a
written statement duly acknowledged of the amount due on this Mortgage and
whether any offsets or defenses exist against the mortgage debt.
7. SECTION 911 of the BUSINESS CORPORATION LAW. If the Mortgagor is a
New York corporation or a corporation authorized to do business in the state of
New York, this Mortgage is made, executed and delivered pursuant to the
provisions of Section 911 of the Business Corporation Law and that Mortgagor's
Certificate of Incorporation does not require the consent of stockholders to
mortgage its real property or chattels.
8. SECTION 13 OF THE LIEN LAW. The Mortgagor will receive the proceeds
of indebtedness secured by this Mortgage subject to the trust fund provisions of
Section 13 of the Lien Law.
9. NO RELEASE OR DISCHARGE UNTIL FULL PAYMENT. Regardless of any
subsequent agreement with any other person, firm or corporation modifying,
amending, altering or changing the terms of the Note or any agreement referred
to in said Note or this Mortgage, or spreading the lien thereof, or
consolidating the same with any other mortgage, the obligations of the Mortgagor
to pay the indebtedness and interest at the rate specified in the Note secured
by this Mortgage shall not be released or discharged or affected in any way
until the full payment of all indebtedness evidenced by the Note with interest
at the rate therein specified.
10. BOOKS, RECORDS AND FINANCIAL STATEMENTS. The Mortgagor will at all
times keep proper books and records and accounts in accordance with generally
accepted accounting principles consistently applied and shall within fifteen
(15) days of demand, permit the Mortgagee or its representatives to examine such
books and records and all supporting vouchers and data at any time from time to
time on request, at its offices, or at such other location as may be mutually
agreed upon.
<PAGE> 11
11. ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION. The
Mortgagor and Mortgagee have executed and delivered an "Environmental Compliance
and Indemnification Agreement" ("Environmental Agreement") bearing even date
affecting the mortgaged premises. Any financial liability of the Mortgagor to
the Mortgagee accruing under the Environmental Agreement or monies paid by the
Mortgagee pursuant to said agreement shall be secured by the lien of this
Mortgage.
12. MORTGAGE TAX. Mortgagor agrees that in the event that mortgage
recording tax is required for any reason whatsoever, Mortgagor will pay said tax
on demand to Mortgagee; and if Mortgagor fails to pay said tax, the Mortgagee
may pay same. The amounts paid by the Mortgagee, plus interest at the rate set
forth in the Note from the date of payment, shall be deemed to be secured by
this Mortgage and shall be collected in like manner as the principal monies.
13. DEFAULT. The Mortgagee shall be entitled, at its option, to declare
the Mortgagor in default and the whole of the indebtedness and interest to be
immediately due and payable:
(a) after failure to pay any installment of principal or of
interest for ten (l0) days;
(b) after failure to pay any tax, water rate or assessment, or to
exhibit to the Mortgagee receipts evidencing payment thereof, within ten
(l0) days after notice and demand;
(c) after failure to pay any premiums on the policies insuring
the buildings and improvements on the mortgaged premises, or to exhibit
to the Mortgagee receipts evidencing payment thereof, or to assign and
deliver such policies to the Mortgagee, or to reimburse the Mortgagee
for premiums paid on such insurance, within three (3) days after notice
and demand;
(d) after failure, upon request, to furnish a statement of the
amount due on this Mortgage and whether any offsets or defenses exist
against the mortgage debt, as hereinbefore provided;
(e) upon the actual or threatened removal or demolition of any
building or improvement on the mortgaged premises or the commission of
any waste on the mortgaged premises;
(f) upon the actual or threatened removal by anyone of any
fixtures subject to the lien of this Mortgage;
<PAGE> 12
(g) upon failure of the Mortgagor to notify the Mortgagee in
writing within five (5) days after loss or damage caused by fire or
other casualty to the mortgaged premises, or any part thereof, and prior
to making of any repairs thereto, or the refusal of the Mortgagor to
permit the Mortgagee to inspect such loss or damage prior to the making
of any repairs thereto;
(h) upon failure to pay any Mortgage tax now due or hereafter due
on this Mortgage within thirty (30) days after notice and demand given
by the Mortgagee to the Mortgagor;
(i) in the event that the Mortgagor conveys, sells, assigns, or
otherwise transfers the mortgaged premises, or any part thereof, or any
interest therein, without the prior written consent of the Mortgagee;
(j) in the event that the Mortgagor assigns the rents, or any
part thereof, of the mortgaged premises or accepts prepayment of rents
with respect to all or any part of the mortgaged premises covering a
period greater than one (l) month;
(k) upon failure of the Mortgagor to cure any violation of any
governmental requirements respecting the mortgaged premises including
without limitation any laws, rules or regulations governing hazardous
waste removal and clean-up or arising from an intentional or
unintentional action or omission of the Mortgagor or any previous owner
and/or operator of the mortgaged premises, within ten (l0) days after
receipt of written notice and demand from the Mortgagee; or, if in the
reasonable judgment of the Mortgagee, any said violation cannot be cured
within said ten (10) day period, failure to either commence a cure
within said ten (10) day period and/or to pursue said cure diligently
until completed;
(l) upon the breach by the Mortgagor of any covenant or provision
contained in this Mortgage, or upon the default in any debt instrument,
term loan agreement, building loan agreement, environmental
indemnification agreement or any instrument of collateral security
delivered by or on behalf of the Mortgagor to the Mortgagee;
(m) upon the imposition of any liens, charges, or encumbrances
upon the mortgaged premises after the date hereof, which liens, charges
or encumbrances are not released, vacated, suspended, discharged, or
bonded to the satisfaction of the Mortgagee within thirty (30) days of
their imposition;
(n) in the event that the Mortgagor fails to submit to the
Mortgagee the financial statements as required by paragraph 10 hereof,
and continuance of such failure for thirty (30) days after receipt of
written notice from the Mortgagee;
<PAGE> 13
(o) voluntary suspension of all or a substantial part of its
businesses as a going concern by the Mortgagor; insolvency or
dissolution of the Mortgagor; commencement of any proceedings under any
bankruptcy or insolvency law by the Mortgagor; an assignment for the
benefit of creditors by the Mortgagor; application for consent to the
appointment of any receiver or trustee or custodian for the Mortgagor of
all or any substantial portion of the property of the Mortgagor; or
assignment to an agent authorized to liquidate any substantial part of
the assets of the Mortgagor.
(p) commencement of any proceedings under any bankruptcy or
insolvency law against the Mortgagor, which proceedings are involuntary
in nature and failure to have said proceedings dismissed within sixty
(60) days after the commencement thereof; or issuance of a writ,
warrant, attachment or similar process against all or any substantial
portion of the property of the Mortgagor and failure to have such writ,
attachment or similar process released or bonded within sixty (60) days
after its issuance.
(q) default beyond any grace period pursuant to the terms and
conditions of any other loan by the Mortgagee to the Mortgagor;
(r) if any information furnished by or any representation or
warranty of Mortgagor or of any Guarantor, or any representative of
Mortgagor or of any Guarantor, made herein or in any instrument or
financial statement furnished in connection herewith, or in any
guaranty, shall prove false or misleading in any material respect;
(s) Upon an event of default under any agreement document or
instrument between the Mortgagor and Mortgagee, including but not
limited to a Restated Revolving Promissory Note in the amount of
$15,000,000.00 bearing even date.
If the Mortgagee declares the Mortgagor to be in default, the
Mortgagee personally, or by its agents or attorneys, may enter into and upon all
or any part of the mortgaged premises, and each and every part thereof, and may
exclude the Mortgagor, its agents and servants wholly therefrom; and having and
holding the same, may use, operate, manage and control the mortgaged premises,
either personally or by its superintendents, managers, agents, servants,
attorneys or receivers; and upon every such entry, the Mortgagee at the expense
of the mortgaged premises, from time to time, either by purchase, repairs or
construction, may maintain and restore the mortgaged premises, whereof it shall
become possessed as aforesaid, may complete the construction of the improvements
and in the course of such completion may make such contemplated improvements as
it may deem desirable and may insure the same; and likewise, from time to time,
at the expense of the mortgaged
<PAGE> 14
premises, the Mortgagee may make all necessary or proper repairs, renewals and
replacements and such useful alterations, additions, betterments and
improvements thereto and thereon as to it may seem advisable; and in every such
case, the Mortgagee shall have the right, but not the obligation, to manage and
operate the mortgaged premises and exercise all rights and powers of the
Mortgagor with respect thereto, either in the name of the Mortgagor or otherwise
as it shall deem best. In addition to the foregoing, the Mortgagor, may proceed
forthwith to protect and enforce its rights under this Mortgage and/or the other
loan documents by such suits, actions or proceedings, in equity or at law, as it
shall deem appropriate, including, without limitation, an action to foreclose
the lien of this Mortgage, in which case the mortgaged premises or any interest
therein or any part thereof may be sold in one or more interests and in any
order or manner. Moreover, the Mortgagee shall not be required to proceed
hereunder before proceeding against any other security, shall not be required to
proceed against any other security before proceeding hereunder, and shall not be
precluded from proceeding against any or all of any security in any order or at
the same time.
14. ASSIGNMENT OF RENTS.
(a) The Mortgagor hereby transfers, sells and assigns to the
Mortgagee, any existing and future leases with respect to the mortgaged
premises (the "Leases") and all rents, revenues, issues and profits now
due and hereafter to become due, under the terms of all Leases and other
rental arrangements or any renewals or replacements thereof concerning
any part or all of the mortgaged premises, all as further security for
the payment of the indebtedness. The Mortgagor also assigns to the
Mortgagee any award made hereafter to it in any court proceedings
involving any tenant(s) under any of the Leases in any bankruptcy,
insolvency or reorganization proceedings and any and all payments paid
by said tenant(s) in lieu of rent.
(b) If no event of default has occurred hereunder, the
Mortgagor shall have the right to collect the rents, income and profits
from the Leases, to administer the Leases and to retain, use and enjoy
the same; provided, however, that even if no event of default has
occurred (i) no rent more than one month in advance shall be collected
or accepted without obtaining the prior written consent of the Mortgagee
and (ii) the Leases shall not be modified or amended without the prior
written consent of the Mortgagee, which shall not be unreasonably
withheld or delayed.
(c) The Mortgagor represents and warrants that there are no other
assignments of the Leases and that all Leases presented to the Mortgagee
have not previously been amended and are in full force and effect.
<PAGE> 15
(d) The rights assigned hereunder include all of the Mortgagor's
right and power to modify the Leases or to terminate the term thereof or
to accept a surrender thereof or to waive or release the tenants
thereunder from the performance, or observance of any obligations or
conditions or provisions thereof; provided, however, that so long as no
event of default shall have occurred hereunder, the Mortgagee shall not
have the right to exercise any of the aforesaid rights or powers without
the prior written consent of the Mortgagor.
(e) The Mortgagee shall not be obligated to perform or discharge
any obligation or duty to be performed or discharged by the Mortgagor
under the Leases and the assignment of the Leases effected hereby shall
not place responsibility for the control, care, management or repair of
the mortgaged premises (or any part thereof) on the Mortgagee or make
the Mortgagee responsible or liable for any negligence in the
management, operation, upkeep, repair or control of the mortgaged
premises. The Mortgagor hereby agrees to indemnify, to defend and to
save harmless the Mortgagee and its officers, members, agents and
employees from any and all liability arising from the Leases, or from
this assignment of Leases, or from any and all claims and demands
whatsoever that may be asserted against the Mortgagee or its officers,
members, agents or employees by reason of any alleged obligations or
undertakings on the part of the Mortgagee or its officers, members,
agents or employees to perform or discharge any of the terms of the
Leases prior to the date on which the Mortgagee elects to exercise its
rights as an assignee hereunder.
(f) The Mortgagor will (i) fulfill or perform every condition and
covenant of the Leases by the Landlord to be fulfilled or performed,
(ii) enforce, short of termination of the Leases, the performance and
observance of every covenant and condition of the Leases by the tenants
to be performed and observed thereunder, (iii) not terminate the Leases
without the prior written consent of the Mortgagee, which shall not be
unreasonably withheld or delayed, nor accept a surrender thereof, unless
required to do so by the terms of the Leases and (iv) deliver to the
Mortgagee, upon written demand, a statement specifying the rents and
other profits to be derived or received from the Leases for the periods
specified in such demand and true and correct copies of the Leases as
they then exist.
(g) In the event of a default hereunder, the Mortgagee, at its
option, without notice, either in person or by agent with or without
bringing any action or proceeding, or by a receiver to be appointed by a
court may: enter upon, take possession of, and operate the mortgaged
premises; make, enforce, modify and accept the surrender of Leases;
obtain and evict tenants; fix or modify rents; and do any acts which the
Mortgagee deems proper to protect the security hereof until all
indebtedness secured hereby is paid in full, and either with or without
taking possession of the mortgaged premises, in its own name, sue for or
otherwise collect and receive all rents, issues and
<PAGE> 16
profits, including those past due and unpaid, and apply the same, less
costs and expenses of operation and collection, including reasonable
attorneys' fees, upon any indebtedness secured hereby in such order as
the Mortgagee may determine. The entering upon and taking possession of
said property, the collection of such rents, issues and profits and the
application thereof as aforesaid, shall not cure or waive any default or
waive, modify or affect any notice of default under this Mortgage.
15. REAL PROPERTY LAW 291-f. The Mortgagor shall not, and shall not have
the right or power, as against the Mortgagee without its consent, to cancel,
abridge or otherwise modify, or accept prepayments of installments of rent to
become due under any lease of the mortgaged premises or any part thereof not
made primarily for the residential purposes of the owner of the leasehold estate
and which is either now in existence and has an unexpired term of at least five
(5) years or hereafter is entered into for a term of at least five (5) years.
The Agreement contained in this paragraph has been made with reference to
section 29l-f of the New York State Real Property Law.
16. RECEIVER. The holders of this Mortgage, in any action to foreclose
it, shall be entitled to the appointment of a receiver of the rents and profits
of the said premises without notice, as a matter of right, without consideration
of the value of the mortgaged premises as security for the amounts due the
Mortgagee, or the solvency of any person or persons liable for the payment of
such amounts.
17. SALE IN ONE PARCEL. That in case of sale under foreclosure, the
mortgaged premises may be sold in one parcel.
19. FEES AND EXPENSES. All sums paid or incurred by the Mortgagee for
the expenses (including reasonable attorneys' fees) of enforcing, defending or
upholding the lien of this Mortgage, regardless of whether any action or
proceeding has been commenced, but including any action to foreclose the
Mortgage or to collect the debt secured thereby, shall be paid by the Mortgagor,
together with interest thereon at the rate set forth in the Note (but in no
event shall the interest rate be more than the law allows), and such sum and the
interest thereon shall be a lien on the mortgaged premises, prior to any right,
or title to, interest in or claim upon said mortgaged premises attaching or
accruing subsequent to the lien of the Mortgage and shall be secured by the
Mortgage. In addition to and not in limitation of the foregoing, in any action
or proceeding to foreclose the Mortgage, or to recover or collect the debt
secured thereby, the provisions of law respecting the recovery of costs,
disbursements and allowances shall also apply. The expenses of pursuing,
searching for, retaking, receiving, holding, storing, safe-guarding, any
environmental testing and cleanup, insuring, accounting for, advertising,
preparing for sale or lease, selling, leasing and the like, plus attorney's
fees, fees for certified public accountants, fees for auctioneers, fees for
brokers and/or appraisers, fees for security guards, fees for environmental
auditors and engineers, fees for hazard insurance premiums, or any other costs
or disbursements whatsoever incurred
<PAGE> 17
by or contracted for by the Mortgagee in connection with the disposition of the
mortgaged premises (including any of the foregoing incurred or contracted for by
the Mortgagee in connection with any bankruptcy or insolvency proceedings
involving the Mortgagor) -- shall all be chargeable to Mortgagor and shall be
secured by the Mortgage, and said Mortgagor will also be responsible for any
deficiency.
Without limiting the generality of the foregoing, if at any time the
United States of America, any state thereof or any governmental subdivision of
such state, having jurisdiction, shall require internal revenue stamps to be
affixed to the Note, or other tax paid on or in connection therewith, Mortgagor
will pay the same with any interest or penalties imposed in connection
therewith. If, by reason of the additional sums that may become secured by the
lien of this Mortgage pursuant to the terms hereof, a court or other
governmental authority having jurisdiction at any time shall determine that this
Mortgage falls within the ambit of Section 256 of the Tax Law of the State of
New York, then Mortgagee reserves the right, in its sole and absolute
discretion, to elect not to have such additional sums secured by this Mortgage
and thereby reduce the indebtedness secured hereby to a definite amount equal to
the principal amount of the Note, interest thereon at the rate provided in the
Note, plus any disbursements made to protect the security of this Mortgage, with
annual interest on such disbursements at the rate applicable to overdue payments
under the Note (or the highest rate permitted by law, whichever shall be less),
plus any such other sums as by statute or judicial interpretation now or
hereafter may be permitted to be secured by the lien of a mortgage without
incurring any additional mortgage recording tax. Any election by Mortgagee to so
reduce the indebtedness secured hereby shall in no event be deemed a release,
waiver or discharge by Mortgagee of Mortgagor's obligation to pay or reimburse
Mortgagee for such sums and such obligation shall continue unimpaired and shall
be recourse obligations of Mortgagor and any Guarantor of the indebtedness
secured hereby, regardless of any other provisions set forth herein or in the
Note or in any such guaranty that may limit recourse against Mortgagor or anyone
else. It is further understood and agreed that any sums, including, without
limitation, any prepayment penalties, late charges or liquidated damages, that
may become due and payable pursuant to the terms of the Note and/or this
Mortgage and that are in the nature of interest shall, for the purpose of
determining the amount of mortgage recording tax due and payable on this
Mortgage, be considered as additional interest, whether or not so denominated,
and such sums shall be secured by the lien of this Mortgage to the fullest
extent possible without causing this Mortgage to be covered by Section 256 of
the New York Tax Law, and shall not be deemed principal and shall not accrue any
interest thereon.
19. CONDEMNATION AWARDS. The Mortgagor does hereby assign to the
Mortgagee any awards heretofore made and hereafter to be made by any state,
county or local authorities to the owner of the mortgaged premises, as a result
of condemnation of all or any portion of said mortgaged premises or of the use
thereof and the said Mortgagee, at its option, is hereby authorized to collect
and receive the proceeds of any such awards from the
<PAGE> 18
authorities making the same and to give proper receipts and acquittances
therefor, and to apply the same to reduction of installments due to the
mortgagee, in the inverse order of their maturity, notwithstanding the fact that
no installment on account of this Mortgage may then be due and payable; and the
Mortgagor, upon request by the Mortgagee, will make, execute and deliver any and
all assignments and other instruments sufficient for the purpose of assigning
the aforesaid awards to the Mortgagee, free, clear and discharged of any and all
encumbrances of any kind or nature whatsoever.
20. LATE FEES. If the entire amount of any payment is not paid in full
within ten (10) days after the same is due, Mortgagor shall pay to the Mortgagee
a late fee equal to five percent (5%) of the required payment and such late fees
are also secured by this Mortgage.
21. SECURITY FOR OTHER INDEBTEDNESS: In addition to the Note referred to
on Page 1 of this Mortgage, this Mortgage is intended to secure any and all
liabilities, obligations and further loans or indebtedness owed or to be owed by
the Mortgagor to the Mortgagee, whether direct and/or indirect, contingent
and/or noncontingent and/or liquidated or unliquidated, and it is stipulated
that the maximum amount secured by this Mortgage at execution or which under any
contingency may be secured thereby at any time in the future shall be the
original principal amount hereof. The obligation of the Mortgagee to make
further or future advances or readvances shall be optional with the Mortgagee.
Readvances may be made under the provisions hereof to the present or to any
future owner of the mortgaged premises. However, in no event shall this Mortgage
secure any transaction with respect to which the Mortgagor shall be entitled to
notice of a right to rescind pursuant to the Federal Truth and Lending Act and
Regulation Z thereunder, unless said notice has been given.
22. NO ORAL MODIFICATION. The provisions of this instrument cannot be
changed, modified or discharged unless such change, modification or discharge is
in writing and signed by the party against whom enforcement of such change,
modification or discharge is sought, or by its agent thereunto duly authorized
in writing.
23. MISCELLANEOUS. This Mortgage and all agreements and covenants
contained herein shall bind the executors, administrators, successors and
assigns of the Mortgagor and inure to the benefit of the successors and assigns
of the Mortgagee, with like effect as if named herein. If more than one person
or entity joins in the execution of this Mortgage, the covenants and agreements
hereof shall be their joint and several obligations, and if any be masculine or
feminine or under any assumed business name, the relative words herein shall be
read as if written in the plural or in the masculine, feminine or neuter gender,
as the case may be, and the words "Mortgagor" and "Mortgagee" where used herein
shall be construed to include their and each of their , executors,
administrators, successors and assigns. Captions used herein are for convenience
only and shall not affect the interpretation of any provisions herein.
<PAGE> 19
24. NOTICES. Any notice, demand or request pursuant to this Mortgage
shall, at the option of the party so giving the notice, demand or request, be
(a) sent overnight via Federal Express or other substantial national delivery
service, or (b) delivered personally, or (c) sent via Led Foot Express or other
substantial delivery service, return receipt requested, or (d) sent via
certified mail, return receipt requested, and, in each case, addressed as set
forth on page 1 of this Mortgage (adding, in the case of the Mortgagee's
address, "Attention: Commercial Loan Department"). Notice shall be deemed to
have been given on the date of personal delivery or if given by overnight
service or regional delivery service or by certified mail on the date of receipt
as indicated by the records of the overnight or regional delivery service, or
the U.S. Postal Service as the case may be. Any change of address shall be
effective if sent in accordance with this paragraph. Failure of the Mortgagor to
provide notice of a change in address within thirty (30) days of said change
shall constitute an event of default hereunder.
Mortgagor: Decora Incorporated
1 Mill Street
Fort Edward, New York 12828
Mortgagee: Fleet Bank of New York
69 State Street
Albany, New York 12207
25. CORRECTIVE DOCUMENTS. Upon receipt of an affidavit of an officer of
Mortgagee as to the loss, theft, destruction or mutilation of the Note or any
other security document which is not of public record, and, in the case of any
such loss, theft, destruction or mutilation, upon surrender and cancellation of
such Note or other security document, Borrower will issue, in lieu thereof, a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.
26. NO RELIANCE ON MORTGAGEE. Mortgagor affirms that it is not relying
on the fact that the Mortgagee has extended this Mortgage or loan as evidence of
good condition and/or good title of the mortgaged premises.
27. INVALID PROVISION. If any provision hereof would be invalid under
applicable law, then such provision shall be deemed to be modified to the extent
necessary to render it valid while most nearly preserving its original intent;
no provision hereof shall be affected by another provision being held invalid.
28. NO WAIVER. No failure by Mortgagee to exercise, and no delay in
exercising, and no course of dealing with respect to, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any
<PAGE> 20
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any other remedies
provided by law.
29. CHOICE OF LAW. This Mortgage is being executed and delivered in the
State of New York and shall be construed and enforced in accordance with the
laws of the State of New York.
30. JURISDICTION. The Mortgagor consents to the jurisdiction of the
courts of the State of New York which courts shall be the sole and exclusive
forum.
31. APPRAISALS. Upon request of the Mortgagee, which request shall be
made not more than once in any twelve (12) month period during the term hereof,
the Mortgagor agrees to provide at its sole cost and expense updated appraisals
covering the mortgaged premises, in form satisfactory to the Mortgagee and
completed by an appraiser satisfactory to the Mortgagee. At the sole option of
the Mortgagee, the Mortgagee may procure said appraisal(s) and pay the cost
therefor, and in such event, the Mortgagor will on demand pay to the Mortgagee
such costs so paid and the same shall be deemed to be secured by this Mortgage
and shall be collectible thereupon in like manner as the principal monies.
32. TAX SEARCH FEE: Upon the request of the Mortgagee, the Mortgagor
shall pay to Mortgagee such fees as may be charged by others to monitor the
payment of taxes assessed against the mortgaged premises, and upon the failure
of the Mortgagor to promptly remit such fees to the Mortgagee, such fees may be
paid by the Mortgagee and shall be secured by the lien of this Mortgage.
33. MORTGAGEE'S RIGHT TO INSPECT THE MORTGAGED PREMISES. Mortgagee, and
others authorized by Mortgagee, may enter on and inspect the mortgaged premises
at reasonable times and in a reasonable manner. Before or at the time any such
inspection is made, Mortgagee shall give the Mortgagor a notice stating a
reasonable purpose for the inspection.
34. SETOFF RIGHTS. Mortgagor and each Guarantor hereby grant to the
Mortgagee a lien, security interest and right of setoff as security for all
liabilities and obligations of Mortgagor to the Mortgagee, whether now existing
or hereafter arising, upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
the Mortgagee or any entity under the control of Fleet Financial Group, Inc., or
in transit to any one of them. Upon default at any time, without demand or
notice, the Mortgagee may set off the same or any part thereof and apply the
same to any liability or obligation of Mortgagor or the Guarantor even though
unmatured and regardless of the adequacy or any other collateral securing the
Note. ANY AND ALL RIGHTS TO REQUIRE THE MORTGAGEE TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE
<PAGE> 21
NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS,
CREDITS OR OTHER PROPERTY OF THE MORTGAGOR AND ITS GUARANTORS ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
35. WAIVER OF TRIAL BY JURY. MORTGAGOR AND THE MORTGAGEE MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE NOTE, THIS MORTGAGE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED
IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY TO THE FULLEST EXTENT
ALLOWED BY LAW. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE MORTGAGEE
TO ACCEPT THIS MORTGAGE AND MAKE THE LOAN.
36. PLEDGING OF RIGHTS. Mortgagee may at any time pledge all or any
portion of its rights under the loan documents including any portion of the Note
to any of the twelve (12) Federal Reserve Banks organized under section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement
thereof shall release Mortgagor from its obligations under any of the loan
documents.
37. MODIFIED FOLLOWING BUSINESS DAY CONVENTION. The Modified Following
Business Day Convention shall mean the convention for adjusting any relevant
date if it would otherwise fall on a day that is not a Business Day. The
following terms, when used in conjunction with the term, "Modified Following
Business Day Convention," and a date, shall mean that an adjustment will be made
if that date would otherwise fall on a day that is not a Business Day so that
the date will be the first following day that is a Business Day.
A "Business Day" means, in respect of any date that is specified in this
Agreement to be subject to adjustment in accordance with applicable Business Day
Convention, a day on which commercial banks settle payments in New York or
London if the payment obligation is calculated by reference to any (i) LIBOR
Rate, or (ii) New York, if the payment obligation is calculated by reference to
any Prime Rate.
38. PARTICIPATIONS.
The Mortgagee shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to Mortgagee or any Guarantor
to grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in Mortgagee's obligation to lend
hereunder and/or any or all of the loans held by Mortgagee hereunder. In
<PAGE> 22
the event of any such grant by Mortgagee of a participating interest to a
Participant, whether or not upon notice to Mortgagor, Mortgagee shall remain
responsible for the performance of its obligations hereunder and Mortgagor shall
continue to deal solely and directly with Mortgagee in connection with
Mortgagee's rights and obligations hereunder.
Mortgagee may furnish any information concerning Mortgagor in its
possession from time to time to prospective Assignees and Participants, provided
that Mortgagee shall require any such prospective Assignee or Participant to
agree in writing to maintain the confidentiality of such information.
IN WITNESS WHEREOF, the Mortgagor has caused this instrument to be
signed the day and year first above written.
DECORA, INCORPORATED d/b/a
DECORA MANUFACTURING
By:________________________________
Timothy N. Burditt, Vice
President Finance
FLEET NATIONAL BANK
By:________________________________
Name: James M. Marini
Title: Vice President
<PAGE> 23
STATE OF NEW YORK )
) ss.:
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this ____ day of April, 1998, before me personally appeared Timothy
N. Burditt, to me known, who being by me duly sworn, did depose and say that he
resides in Clifton Park, New York, that he is the Vice President, Finance of
DECORA, INCORPORATED d/b/a DECORA MANUFACTURING, the corporation described in
and which executed the above instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this ____th day of April, 1998, before me personally appeared James
M. Marini, to me known, who being by me duly sworn, did depose and say that he
resides in Valatie, New York, that he is a Vice President of FLEET NATIONAL
BANK, the corporation described in and which executed the above instrument; and
that he signed his name thereto by order of the Board of Directors of said
corporation.
------------------------------
Notary Public
<PAGE> 1
EXHIBIT 10.64
MORTGAGE
THIS MORTGAGE, made the __ day of April, 1998, between DECORA,
INCORPORATED, a Delaware corporation authorized to do business in the State of
New York as Decora Manufacturing and having its principal place of business at 1
Mill Street, Fort Edward, New York 12828 (herein called the "Mortgagor") and
FLEET NATIONAL BANK, a bank organized and existing under the laws of the United
States of America, having an office at 69 State Street, City and County of
Albany, State of New York 12201 (herein called the "Mortgagee").
W I T N E S S E T H :
To secure the payment of a principal indebtedness in the amount of Two
Million Four Hundred Ninety Seven Thousand and 00/100 Dollars ($2,497,000.00)
lawful money of the United States plus the interest thereon at a rate more
particularly set forth in a Credit and Reimbursement Agreement dated as of
November 1, 1996 Mortgagor and Mortgagee executed and delivered to the Mortgagee
by the Mortgagor on November 1, 1996 herewith plus any modifications or
extensions thereof or substitutions therefor (herein called the "Note"); the
Mortgagor hereby mortgages to the Mortgagee all those certain pieces or parcels
of land, with the buildings and improvements erected thereon, more particularly
described in Schedule A attached hereto and made a part hereof (herein called
the "mortgaged premises").
TOGETHER with all fixtures and articles now or hereafter attached to
said premises which constitute part of the building, building systems and/or
real estate improvements and which cannot be removed without significant damage
either to the realty or to the article being removed or both, including but not
limited to antennas, towers, transmission lines, sample systems, remote control
units, wiring, catwalks, transformers, transmitters, other radio and/or tv
transmission and communication equipment, furnaces, boilers, oil or gas burners,
fire extinguishers and other fire preventing and extinguishing apparatus, hoses,
fans, conveyors, air compressors, scales, radiators and heating units and
piping, plumbing, washroom and drinking facilities, air conditioning,
humidifying and sprinkler systems, building electrical fixtures and wiring,
fluorescent fixtures, elevators, dynamos, incinerators, water pumps, together
with any and all replacements thereof and additions thereto. Notwithstanding the
foregoing, this Mortgage shall not cover machinery, equipment, furniture and
fixtures that can be removed without significant damage to either the realty or
the article being removed, or both and the Mortgagee's lien will remain on those
fixtures which are are so annexed to the realty
<PAGE> 2
that they cannot be removed without significant damage to either the realty or
the article being removed, or both.
And the Mortgagor covenants and agrees with the Mortgagee as follows:
1. PAYMENT. The Mortgagor promises to pay the principal and interest on
the Note when due and payable, plus all other indebtedness secured by this
Mortgage.
2. WARRANTY OF TITLE. The Mortgagor warrants the title to the mortgaged
premises, and confirms and ratifies that the full amount owed as described above
is secured by the Mortgage.
3. CASUALTY AND OTHER INSURANCE. Mortgagor shall maintain insurance
against such risks and for such amounts as are customarily insured against by
businesses of like size and type in the area, including the following:
(a) Mortgagor shall keep all improvements situated on the
mortgage premises continuously insured against loss by fire and the
risks covered under a so-called "extended coverage endorsement", flood,
explosion of boilers, heating apparatus and other pressure vessels, and
such other hazards, casualties and contingencies as Mortgagee from time
to time reasonably may require, in an amount equal to one hundred
percent (100%) of the replacement cost of such Improvements. All such
insurance shall be evidenced by valid and enforceable policies in form
and substance satisfactory to Mortgagee. Without limiting the generality
of the foregoing: (a) all such insurance policies shall contain an
endorsement requiring thirty (30) days written notice to Mortgagee at
the following address: Fleet National Bank, P.O. Box 2984, CT/HM/M10J,
Hartford, CT 06101-2984, prior to cancellation or change in the
coverage, scope or amount of any such policy or policies; and (b) any
and all policies evidencing casualty insurance shall provide that any
and all loss shall be payable to Mortgagee notwithstanding any act or
omission of Mortgagor which might otherwise result in cancellation or
forfeiture of said insurance:
(b) Insurance against loss or damage by flood, such insurance to
be in an amount not less than the principal amount of the Loan unless
Mortgagee receives satisfactory evidence that no portion of the Premises
is located within an area identified by the U.S. Department of Housing
and Urban Development as having special flood hazards;
(c) Business interruption (extra expense/loss of income)
insurance in an amount sufficient to cover any loss of income from the
Premises for a period of not less than 12 months; and
-2-
<PAGE> 3
(d) Insurance protecting Mortgagor against loss arising from
liability imposed by law or assumed in any written contract and loss or
liability arising from personal injury, including bodily injury or
death, or damage to the property of others, caused by an accident or
occurrence with a limit of liability of not less than $1,000,000
(combined single limit for personal injury, including bodily injury or
death, and property damage).
All policies of insurance required by this Section shall be procured and
maintained in financially sound and generally recognized responsible insurance
companies selected by Mortgagor and authorized to write such insurance in the
State of New York. The company or companies issuing the policies of insurance
required by subparagraphs (a) and (c) hereof shall be rated "A" or better by
A.M. Best Co., Inc. in Best's Key Rating Guide. Such insurance may be written
with deductible amounts comparable to those on similar policies carried by other
companies engaged in businesses similar in size, character and other respects to
those in which Mortgagor is engaged. All policies evidencing the insurance
required by subparagraphs (a), (b) and (c) hereof shall contain a New York
standard mortgagee clause, without contribution, showing Mortgagee's interest as
first mortgagee, and loss payee shall provide for payment to Mortgagee of the
proceeds of insurance resulting from any claim for loss or damage thereunder,
shall provide for at least thirty (30) days' prior written notice to Mortgagee
of the cancellation of such policies and of any material change in the terms or
conditions thereof and shall provide for notice to Mortgagee of all material
claims made thereunder.
The policies (or binders) of insurance required by subparagraphs (a),
(b) and (c) hereof, together with proof of the payment of the premiums therefor,
and a photocopy of the policy (or binder) of insurance required by subparagraphs
(d) and (e) hereof shall be delivered to Mortgagee at the time of the execution
and delivery of this Mortgage. Mortgagor shall deliver to Mortgagee annually a
certificate reciting that there is in full force and effect insurance coverage
of the types and in the amounts required by this Section and complying with the
requirements hereof. Prior to the expiration of each such policy, Mortgagor
shall furnish Mortgagee with satisfactory evidence that such policy has been
renewed or replaced or is no longer required. Mortgagor shall pay all premiums
on the insurance policies required by this Section and shall provide such
further information with respect to the insurance coverage required hereby as
Mortgagee may from time to time reasonably require.
Mortgagor shall promptly notify Mortgagee of any loss, damage or other
casualty with resect to the Improvements, the Equipment or any part thereof.
Mortgagor shall not permit any condition to exist on the Premises or in the
Improvements which would wholly or partially invalidate the insurance thereon.
Mortgagor hereby
-3-
<PAGE> 4
assigns to Mortgagee all of its right, title and interest in and to the
insurance policies required by subsections (a) and (b) hereof, including any
unearned premiums thereon, such assignment to take effect immediately upon the
occurrence of any Event of Default. Mortgagor hereby irrevocably authorizes
Mortgagee to participate with Mortgagor in the adjustment and compromise of any
insurance claims for any loss, damage or other casualty with respect to the
improvements, the Equipment or any part thereof under said insurance policies,
to collect and receive any Casualty Insurance Proceeds from the insurers paying
the same, to give proper receipts and acquittances therefor and, at Mortgagee's
sole option, to apply all or any portion of the Net Proceeds thereof to payment
on account of the unpaid principal amount of the Loan, whether then matured or
not, together with interest thereon at the Contract Rate to the date of receipt
of such payment by Mortgagee, or to make the same available to Mortgagor, in
whole or in part, for the purpose of repairing, restoring, rebuilding or
replacing the damaged Improvements and/or Equipment, in which case such proceeds
shall be payable to Mortgagor in such installments and under such terms and
conditions as Mortgagee may require. After application in accordance with the
terms of this Mortgage, the remaining portion of the Casualty Insurance Proceeds
(if any) shall be paid over to Mortgagor or otherwise as a court of competent
jurisdiction may direct. Mortgagor shall submit to Mortgagee for prior approval
the proposed amount of any Casualty Insurance Proceeds to be paid by reason of
any such loss, damage or casualty. Mortgagor hereby appoints Mortgagee its agent
and attorney-in-fact (which appointment shall be deemed to be an agency coupled
with an interest), with full power of substitution, to participate in the
adjustment and compromise of any Casualty Insurance Proceeds on its behalf in
the event that, at the time of any such loss, damage or casualty, any Event of
Default has occurred and is continuing. Mortgagor shall execute and deliver to
Mortgagee on demand such assignments and other instruments as Mortgagee may
require for such purposes and shall reimburse Mortgagee for its costs (including
reasonable legal fees) in the collection of any Casualty Insurance Proceeds.
Business Interruption Insurance Proceeds shall be applied by Mortgagee,
to the extent received, first to the payment of Taxes, and then to the payment
of premiums for the policies of insurance required by this Section and then to
the payment of amounts required to be paid by any law or ordinance relating to
the use of occupancy of the Premises or the Improvements or by any requirement,
order or notice of violation thereof issued by any Governmental Agency and then
to the payment of installments of principal and/or interest required to be made
by Mortgagor under the Note, as and when the same become due and payable. After
application in accordance with the terms of this Mortgage, the remaining portion
of Business Interruption Insurance Proceeds (if any) shall be paid over to
Mortgagor or otherwise as a court of competent jurisdiction may direct.
-4-
<PAGE> 5
Within 15 days of receipt of written request therefor, Mortgagor shall
deliver to Mortgagee receipted bills, cancelled checks or other proof reasonably
satisfactory to Mortgagee evidencing payment of the premiums for the policies of
insurance required by this Section.
At any time during the term of the Loan, Mortgagee may require Mortgagor
to pay to Mortgagee on the first day of each and every month, together with and
in addition to the monthly installment of principal and/or interest required to
be paid under the Note, a sum equal to the premiums next due under said policies
of insurance (as estimated by Mortgagee), less all sums already paid therefor,
divided by the number of monthly installments of principal and/or interest due
under the Note one month prior to the date on which such premiums shall be due
and payable, which sums, to the extent received, will be held without interest
and applied by Mortgagee to the payment of such premiums as and when the same
become due and payable. If such monthly insurance escrow payments become due at
a time when any premium shall not have been determined, such payments shall be
estimated on the basis of the premium for the preceding year. If the premium
when determined varies from the premium as estimated, (a) any excess arising
from such monthly payments shall be retained by Mortgagee to be applied in
reduction of subsequent monthly payments and (b) any deficiency in the amount of
such monthly payments shall be paid by Mortgagor to Mortgagee on demand.
4. NO ALTERATIONS. No building or improvement presently on or
hereinafter constructed on the mortgaged premises shall be removed, demolished
or altered in such a manner as to adversely affect its structural strength or
its value, without the consent of the Mortgagee.
5. TAXES. The Mortgagor will pay all taxes, including corporate
franchise taxes, if applicable, assessments and/or water rates and/or sewer
rates and/or any and all taxes, charges, assessments which are applicable to the
use and/or occupancy and/or existence of the mortgaged premises; and in the
event that the Mortgagor fails to pay same, Mortgagee may (but is not obligated
to) pay same and the Mortgagor will on demand, pay to the Mortgagee any amounts
so paid, by the Mortgagee with interest from the day of payment, and the same
shall be deemed to be secured by the Mortgage and shall be collectible thereupon
in like manner as the principal monies. In addition to the foregoing, but only
in the event that the Mortgagor is in default, the Mortgagor agrees, that upon
fifteen (15) days of the receipt of written notice from the Mortgagee, that it
will open with the Mortgagee, or a commercial bank to be selected by the
Mortgagee, a separate account designated as "Real Property Tax and Insurance
Account" and will deposit in said account on the first day of each month
thereafter until the entire indebtedness represented by the Note and interest
thereon, shall have been paid in full, a sum equal to l/l2th of the
-5-
<PAGE> 6
estimated annual taxes and assessments levied upon the mortgaged premises and
l/l2th of the estimated annual premium for casualty insurance with reference to
said mortgaged premises; any deficiency in the amount so held in said separate
account to be payable by the Mortgagor on demand.
6. ESTOPPEL CERTIFICATE. The Mortgagor within three (3) days upon
request in person or within five (5) days upon request by mail will furnish a
written statement duly acknowledged of the amount due on this Mortgage and
whether any offsets or defenses exist against the mortgage debt.
7. SECTION 911 of the BUSINESS CORPORATION LAW. If the Mortgagor is a
New York corporation or a corporation authorized to do business in the state of
New York, this Mortgage is made, executed and delivered pursuant to the
provisions of Section 911 of the Business Corporation Law and that Mortgagor's
Certificate of Incorporation does not require the consent of stockholders to
mortgage its real property or chattels.
8. SECTION 13 OF THE LIEN LAW. The Mortgagor will receive the proceeds
of indebtedness secured by this Mortgage subject to the trust fund provisions of
Section 13 of the Lien Law.
9. NO RELEASE OR DISCHARGE UNTIL FULL PAYMENT. Regardless of any
subsequent agreement with any other person, firm or corporation modifying,
amending, altering or changing the terms of the Note or any agreement referred
to in said Note or this Mortgage, or spreading the lien thereof, or
consolidating the same with any other mortgage, the obligations of the Mortgagor
to pay the indebtedness and interest at the rate specified in the Note secured
by this Mortgage shall not be released or discharged or affected in any way
until the full payment of all indebtedness evidenced by the Note with interest
at the rate therein specified.
10. BOOKS, RECORDS AND FINANCIAL STATEMENTS. The Mortgagor will at all
times keep proper books and records and accounts in accordance with generally
accepted accounting principles consis tently applied and shall within fifteen
(15) days of demand, permit the Mortgagee or its representatives to examine such
books and records and all supporting vouchers and data at any time from time to
time on request, at its offices, or at such other location as may be mutually
agreed upon.
11. ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION. The Mortgagor and
Mortgagee have executed and delivered an "Environmental Compliance and
Indemnification Agreement" ("Environmental Agreement") bearing even date
affecting the mortgaged premises. Any financial liability of the Mortgagor to
the Mortgagee accruing under the Environmental Agreement or monies paid by the
Mortgagee pursuant to said agreement shall be secured by the lien of this
Mortgage.
-6-
<PAGE> 7
12. MORTGAGE TAX. Mortgagor agrees that in the event that mortgage
recording tax is required for any reason whatsoever, Mortgagor will pay said tax
on demand to Mortgagee; and if Mortgagor fails to pay said tax, the Mortgagee
may pay same. The amounts paid by the Mortgagee, plus interest at the rate set
forth in the Note from the date of payment, shall be deemed to be secured by
this Mortgage and shall be collected in like manner as the principal monies.
13. DEFAULT. The Mortgagee shall be entitled, at its option, to declare
the Mortgagor in default and the whole of the indebtedness and interest to be
immediately due and payable:
(a) after failure to pay any installment of principal or
of interest for ten (l0) days;
(b) after failure to pay any tax, water rate or assessment, or to
exhibit to the Mortgagee receipts evidencing payment thereof, within ten
(l0) days after notice and demand;
(c) after failure to pay any premiums on the policies insuring
the buildings and improvements on the mortgaged premises, or to exhibit
to the Mortgagee receipts evidencing payment thereof, or to assign and
deliver such policies to the Mortgagee, or to reimburse the Mortgagee
for premiums paid on such insurance, within thirty (30) days after
notice and demand;
(d) after failure, upon request, to furnish a statement of the
amount due on this Mortgage and whether any offsets or defenses exist
against the mortgage debt, as hereinbefore provided;
(e) upon the actual or threatened removal or demolition of any
building or improvement on the mortgaged premises or the commission of
any waste on the mortgaged premises;
(f) upon the actual or threatened removal by anyone of any
fixtures subject to the lien of this Mortgage;
(g) upon failure of the Mortgagor to notify the Mortgagee in
writing within five (5) days after loss or damage caused by fire or
other casualty to the mortgaged premises, or any part thereof, and prior
to making of any repairs thereto, or the refusal of the Mortgagor to
permit the Mortgagee to inspect such loss or damage prior to the making
of any repairs thereto;
(h) upon failure to pay any Mortgage tax now due or hereafter due
on this Mortgage within thirty (30) days after notice and demand given
by the Mortgagee to the Mortgagor;
-7-
<PAGE> 8
(i) in the event that the Mortgagor conveys, sells, assigns, or
otherwise transfers the mortgaged premises, or any part thereof, or any
interest therein, without the prior written consent of the Mortgagee;
(j) in the event that the Mortgagor assigns the rents, or any
part thereof, of the mortgaged premises or accepts prepayment of rents
with respect to all or any part of the mortgaged premises covering a
period greater than one (l) month;
(k) upon failure of the Mortgagor to cure any violation of any
governmental requirements respecting the mortgaged premises including
without limitation any laws, rules or regulations governing hazardous
waste removal and clean-up or arising from an intentional or
unintentional action or omission of the Mortgagor or any previous owner
and/or operator of the mortgaged premises, within ten (l0) days after
receipt of written notice and demand from the Mortgagee; or, if in the
reasonable judgment of the Mortgagee, any said violation cannot be cured
within said ten (10) day period, failure to either commence a cure
within said ten (10) day period and/or to pursue said cure diligently
until completed;
(l) upon the breach by the Mortgagor of any covenant or provision
contained in this Mortgage, or upon the default in any debt instrument,
term loan agreement, building loan agreement, environmental
indemnification agreement or any instrument of collateral security
delivered by or on behalf of the Mortgagor to the Mortgagee;
(m) upon the imposition of any liens, charges, or encumbrances
upon the mortgaged premises after the date hereof, which liens, charges
or encumbrances are not released, vacated, suspended, discharged, or
bonded to the satisfaction of the Mortgagee within thirty (30) days of
their imposition;
(n) in the event that the Mortgagor fails to submit to the
Mortgagee the financial statements as required by paragraph 10 hereof,
and continuance of such failure for thirty (30) days after receipt of
written notice from the Mortgagee;
(o) voluntary suspension of all or a substantial part of its
businesses as a going concern by the Mortgagor; insolvency or
dissolution of the Mortgagor; commencement of any proceedings under any
bankruptcy or insolvency law by the Mortgagor; an assignment for the
benefit of creditors by the Mortgagor; application for consent to the
appointment of any receiver or trustee or custodian for the Mortgagor of
all or any substantial portion of the property of the Mortgagor; or
-8-
<PAGE> 9
assignment to an agent authorized to liquidate any substantial part of
the assets of the Mortgagor.
(p) commencement of any proceedings under any bankruptcy or
insolvency law against the Mortgagor, which proceedings are involuntary
in nature and failure to have said proceedings dismissed within sixty
(60) days after the commencement thereof; or issuance of a writ,
warrant, attachment or similar process against all or any substantial
portion of the property of the Mortgagor and failure to have such writ,
attachment or similar process released or bonded within sixty (60) days
after its issuance.
(q) default beyond any grace period pursuant to the terms and
conditions of any other loan by the Mortgagee to the Mortgagor;
(r) if any information furnished by or any representation or
warranty of Mortgagor or of any Guarantor, or any representative of
Mortgagor or of any Guarantor, made herein or in any instrument or
financial statement furnished in connection herewith, or in any
guaranty, shall prove false or misleading in any material respect;
(s) Upon an event of default under any agreement, document or
instrument between the Mortgagor and Mortgagee, including but not
limited to a Restated Revolving Promissory Note in the amount of
$15,000,000.00 bearing even date.
If the Mortgagee declares the Mortgagor to be in default, the
Mortgagee personally, or by its agents or attorneys, may enter into and upon all
or any part of the mortgaged premises, and each and every part thereof, and may
exclude the Mortgagor, its agents and servants wholly therefrom; and having and
holding the same, may use, operate, manage and control the mortgaged premises,
either personally or by its superintendents, managers, agents, servants,
attorneys or receivers; and upon every such entry, the Mortgagee at the expense
of the mortgaged premises, from time to time, either by purchase, repairs or
construction, may maintain and restore the mortgaged premises, whereof it shall
become possessed as aforesaid, may complete the construction of the improvements
and in the course of such completion may make such contemplated improvements as
it may deem desirable and may insure the same; and likewise, from time to time,
at the expense of the mortgaged premises, the Mortgagee may make all necessary
or proper repairs, renewals and replacements and such useful alterations,
additions, betterments and improvements thereto and thereon as to it may seem
advisable; and in every such case, the Mortgagee shall have the right, but not
the obligation, to manage and operate the mortgaged premises and exercise all
rights and powers of the Mortgagor with respect thereto, either in the name of
the Mortgagor or otherwise as it shall deem best. In addition to the foregoing,
the Mortgagor, may
-9-
<PAGE> 10
proceed forthwith to protect and enforce its rights under this Mortgage and/or
the other loan documents by such suits, actions or proceedings, in equity or at
law, as it shall deem appropriate, including, without limitation, an action to
foreclose the lien of this Mortgage, in which case the mortgaged premises or any
interest therein or any part thereof may be sold in one or more interests and in
any order or manner. Moreover, the Mortgagee shall not be required to proceed
hereunder before proceeding against any other security, shall not be required to
proceed against any other security before proceeding hereunder, and shall not be
precluded from proceeding against any or all of any security in any order or at
the same time.
14. ASSIGNMENT OF RENTS.
(a) The Mortgagor hereby transfers, sells and assigns to the
Mortgagee, any existing and future leases with respect to the mortgaged
premises (the "Leases") and all rents, revenues, issues and profits now
due and hereafter to become due, under the terms of all Leases and other
rental arrangements or any renewals or replacements thereof concerning
any part or all of the mortgaged premises, all as further security for
the payment of the indebtedness. The Mortgagor also assigns to the
Mortgagee any award made hereafter to it in any court proceedings
involving any tenant(s) under any of the Leases in any bankruptcy,
insolvency or reorganization proceedings and any and all payments paid
by said tenant(s) in lieu of rent.
(b) If no event of default has occurred hereunder, the Mortgagor
shall have the right to collect the rents, income and profits from the
Leases, to administer the Leases and to retain, use and enjoy the same;
provided, however, that even if no event of default has occurred (i) no
rent more than one month in advance shall be collected or accepted
without obtaining the prior written consent of the Mortgagee and (ii)
the Leases shall not be modified or amended without the prior written
consent of the Mortgagee, which shall not be unreasonably withheld or
delayed.
(c) The Mortgagor represents and warrants that there are no other
assignments of the Leases and that all Leases presented to the Mortgagee
have not previously been amended and are in full force and effect.
(d) The rights assigned hereunder include all of the Mortgagor's
right and power to modify the Leases or to terminate the term thereof or
to accept a surrender thereof or to waive or release the tenants
thereunder from the performance, or observance of any obligations or
conditions or provisions thereof; provided, however, that so long as no
event of default shall have occurred hereunder, the Mortgagee
-10-
<PAGE> 11
shall not have the right to exercise any of the aforesaid rights or
powers without the prior written consent of the Mortgagor.
(e) The Mortgagee shall not be obligated to perform or discharge
any obligation or duty to be performed or discharged by the Mortgagor
under the Leases and the assignment of the Leases effected hereby shall
not place responsibility for the control, care, management or repair of
the mortgaged premises (or any part thereof) on the Mortgagee or make
the Mortgagee responsible or liable for any negligence in the
management, operation, upkeep, repair or control of the mortgaged
premises. The Mortgagor hereby agrees to indemnify, to defend and to
save harmless the Mortgagee and its officers, members, agents and
employees from any and all liability arising from the Leases, or from
this assignment of Leases, or from any and all claims and demands
whatsoever that may be asserted against the Mortgagee or its officers,
members, agents or employees by reason of any alleged obligations or
undertakings on the part of the Mortgagee or its officers, members,
agents or employees to perform or discharge any of the terms of the
Leases prior to the date on which the Mortgagee elects to exercise its
rights as an assignee hereunder.
(f) The Mortgagor will (i) fulfill or perform every condition and
covenant of the Leases by the Landlord to be fulfilled or performed,
(ii) enforce, short of termination of the Leases, the performance and
observance of every covenant and condition of the Leases by the tenants
to be performed and observed thereunder, (iii) not terminate the Leases
without the prior written consent of the Mortgagee, which shall not be
unreasonably withheld or delayed, nor accept a surrender thereof, unless
required to do so by the terms of the Leases and (iv) deliver to the
Mortgagee, upon written demand, a statement specifying the rents and
other profits to be derived or received from the Leases for the periods
specified in such demand and true and correct copies of the Leases as
they then exist.
(g) In the event of a default hereunder, the Mortgagee, at its
option, without notice, either in person or by agent with or without
bringing any action or proceeding, or by a receiver to be appointed by a
court may: enter upon, take possession of, and operate the mortgaged
premises; make, enforce, modify and accept the surrender of Leases;
obtain and evict tenants; fix or modify rents; and do any acts which the
Mortgagee deems proper to protect the security hereof until all
indebtedness secured hereby is paid in full, and either with or without
taking possession of the mortgaged premises, in its own name, sue for or
otherwise collect and receive all rents, issues and profits, including
those past due and unpaid, and apply the same, less costs and expenses
of
-11-
<PAGE> 12
operation and collection, including reasonable attorneys' fees, upon any
indebtedness secured hereby in such order as the Mortgagee may
determine. The entering upon and taking possession of said property, the
collection of such rents, issues and profits and the application thereof
as aforesaid, shall not cure or waive any default or waive, modify or
affect any notice of default under this Mortgage.
15. REAL PROPERTY LAW 291-f. The Mortgagor shall not, and shall not have
the right or power, as against the Mortgagee without its consent, to cancel,
abridge or otherwise modify, or accept prepayments of installments of rent to
become due under any lease of the mortgaged premises or any part thereof not
made primarily for the residential purposes of the owner of the leasehold estate
and which is either now in existence and has an unexpired term of at least five
(5) years or hereafter is entered into for a term of at least five (5) years.
The Agreement contained in this paragraph has been made with reference to
section 29l-f of the New York State Real Property Law.
16. RECEIVER. The holders of this Mortgage, in any action to foreclose
it, shall be entitled to the appointment of a receiver of the rents and profits
of the said premises without notice, as a matter of right, without consideration
of the value of the mortgaged premises as security for the amounts due the
Mortgagee, or the solvency of any person or persons liable for the payment of
such amounts.
17. SALE IN ONE PARCEL. That in case of sale under foreclosure, the
mortgaged premises may be sold in one parcel.
19. FEES AND EXPENSES. All sums paid or incurred by the Mortgagee for
the expenses (including reasonable attorneys' fees) of enforcing, defending or
upholding the lien of this Mortgage, regardless of whether any action or
proceeding has been commenced, but including any action to foreclose the
Mortgage or to collect the debt secured thereby, shall be paid by the Mortgagor,
together with interest thereon at the rate set forth in the Note (but in no
event shall the interest rate be more than the law allows), and such sum and the
interest thereon shall be a lien on the mortgaged premises, prior to any right,
or title to, interest in or claim upon said mortgaged premises attaching or
accruing subsequent to the lien of the Mortgage and shall be secured by the
Mortgage. In addition to and not in limitation of the foregoing, in any action
or proceeding to foreclose the Mortgage, or to recover or collect the debt
secured thereby, the provisions of law respecting the recovery of costs,
disbursements and allowances shall also apply. The expenses of pursuing,
searching for, retaking, receiving, holding, storing, safe-guarding, any
environmental testing and cleanup, insuring, accounting for, advertising,
preparing for sale or lease, selling, leasing and the like, plus attorney's
fees, fees for certified public accountants, fees for auctioneers, fees for
-12-
<PAGE> 13
brokers and/or appraisers, fees for security guards, fees for environmental
auditors and engineers, fees for hazard insurance premiums, or any other costs
or disbursements whatsoever incurred by or contracted for by the Mortgagee in
connection with the disposition of the mortgaged premises (including any of the
foregoing incurred or contracted for by the Mortgagee in connection with any
bankruptcy or insolvency proceedings involving the Mortgagor) -- shall all be
chargeable to Mortgagor and shall be secured by the Mortgage, and said Mortgagor
will also be responsible for any deficiency.
Without limiting the generality of the foregoing, if at any time the
United States of America, any state thereof or any governmental subdivision of
such state, having jurisdiction, shall require internal revenue stamps to be
affixed to the Note, or other tax paid on or in connection therewith, Mortgagor
will pay the same with any interest or penalties imposed in connection
therewith. If, by reason of the additional sums that may become secured by the
lien of this Mortgage pursuant to the terms hereof, a court or other
governmental authority having jurisdiction at any time shall determine that this
Mortgage falls within the ambit of Section 256 of the Tax Law of the State of
New York, then Mortgagee reserves the right, in its sole and absolute
discretion, to elect not to have such additional sums secured by this Mortgage
and thereby reduce the indebtedness secured hereby to a definite amount equal to
the principal amount of the Note, interest thereon at the rate provided in the
Note, plus any disbursements made to protect the security of this Mortgage, with
annual interest on such disbursements at the rate applicable to overdue payments
under the Note (or the highest rate permitted by law, whichever shall be less),
plus any such other sums as by statute or judicial interpretation now or
hereafter may be permitted to be secured by the lien of a mortgage without
incurring any additional mortgage recording tax. Any election by Mortgagee to so
reduce the indebtedness secured hereby shall in no event be deemed a release,
waiver or discharge by Mortgagee of Mortgagor's obligation to pay or reimburse
Mortgagee for such sums and such obligation shall continue unimpaired and shall
be recourse obligations of Mortgagor and any Guarantor of the indebtedness
secured hereby, regardless of any other provisions set forth herein or in the
Note or in any such guaranty that may limit recourse against Mortgagor or anyone
else. It is further understood and agreed that any sums, including, without
limitation, any prepayment penalties, late charges or liquidated damages, that
may become due and payable pursuant to the terms of the Note and/or this
Mortgage and that are in the nature of interest shall, for the purpose of
determining the amount of mortgage recording tax due and payable on this
Mortgage, be considered as additional interest, whether or not so denominated,
and such sums shall be secured by the lien of this Mortgage to the fullest
extent possible without causing this Mortgage to be covered by Section 256 of
the New York Tax Law, and shall not be deemed principal and shall not accrue any
interest thereon.
-13-
<PAGE> 14
19. CONDEMNATION AWARDS. The Mortgagor does hereby assign to the
Mortgagee any awards heretofore made and hereafter to be made by any state,
county or local authorities to the owner of the mortgaged premises, as a result
of condemnation of all or any portion of said mortgaged premises or of the use
thereof and the said Mortgagee, at its option, is hereby authorized to collect
and receive the proceeds of any such awards from the authorities making the same
and to give proper receipts and acquittances therefor, and to apply the same to
reduction of installments due to the mortgagee, in the inverse order of their
maturity, notwithstanding the fact that no installment on account of this
Mortgage may then be due and payable; and the Mortgagor, upon request by the
Mortgagee, will make, execute and deliver any and all assignments and other
instruments sufficient for the purpose of assigning the aforesaid awards to the
Mortgagee, free, clear and discharged of any and all encumbrances of any kind or
nature whatsoever.
20. LATE FEES. If the entire amount of any payment is not paid in full
within ten (10) days after the same is due, Mortgagor shall pay to the Mortgagee
a late fee equal to five percent (5%) of the required payment and such late fees
are also secured by this Mortgage.
21. SECURITY FOR OTHER INDEBTEDNESS: In addition to the Note referred to
on Page 1 of this Mortgage, this Mortgage is intended to secure any and all
liabilities, obligations and further loans or indebtedness owed or to be owed by
the Mortgagor to the Mortgagee, whether direct and/or indirect, contingent
and/or noncontingent and/or liquidated or unliquidated, and it is stipulated
that the maximum amount secured by this Mortgage at execution or which under any
contingency may be secured thereby at any time in the future shall be the
original principal amount hereof. The obligation of the Mortgagee to make
further or future advances or readvances shall be optional with the Mortgagee.
Readvances may be made under the provisions hereof to the present or to any
future owner of the mortgaged premises. However, in no event shall this Mortgage
secure any transaction with respect to which the Mortgagor shall be entitled to
notice of a right to rescind pursuant to the Federal Truth and Lending Act and
Regulation Z thereunder, unless said notice has been given.
22. NO ORAL MODIFICATION. The provisions of this instrument cannot be
changed, modified or discharged unless such change, modification or discharge is
in writing and signed by the party against whom enforcement of such change,
modification or discharge is sought, or by its agent thereunto duly authorized
in writing.
23. MISCELLANEOUS. This Mortgage and all agreements and covenants
contained herein shall bind the executors, administra tors, successors and
assigns of the Mortgagor and inure to the benefit of the successors and assigns
of the Mortgagee, with like effect as if named herein. If more than one person
or entity joins
-14-
<PAGE> 15
in the execution of this Mortgage, the covenants and agreements hereof shall be
their joint and several obligations, and if any be masculine or feminine or
under any assumed business name, the relative words herein shall be read as if
written in the plural or in the masculine, feminine or neuter gender, as the
case may be, and the words "Mortgagor" and "Mortgagee" where used herein shall
be construed to include their and each of their , executors, administrators,
successors and assigns. Captions used herein are for convenience only and shall
not affect the interpretation of any provisions herein.
24. NOTICES. Any notice, demand or request pursuant to this Mortgage
shall, at the option of the party so giving the notice, demand or request, be
(a) sent overnight via Federal Express or other substantial national delivery
service, or (b) delivered personally, or (c) sent via Led Foot Express or other
substantial delivery service, return receipt requested, or (d) sent via
certified mail, return receipt requested, and, in each case, addressed as set
forth on page 1 of this Mortgage (adding, in the case of the Mortgagee's
address, "Attention: Commercial Loan Department"). Notice shall be deemed to
have been given on the date of personal delivery or if given by overnight
service or regional delivery service or by certified mail on the date of receipt
as indicated by the records of the overnight or regional delivery service, or
the U.S. Postal Service as the case may be. Any change of address shall be
effective if sent in accordance with this paragraph. Failure of the Mortgagor to
provide notice of a change in address within thirty (30) days of said change
shall constitute an event of default hereunder.
Mortgagor: Decora Incorporated
1 Mill Street
Fort Edward, New York 12828
Mortgagee: Fleet Bank of New York
69 State Street
Albany, New York 12207
25. CORRECTIVE DOCUMENTS. Upon receipt of an affidavit of an officer of
Mortgagee as to the loss, theft, destruction or mutilation of the Note or any
other security document which is not of public record, and, in the case of any
such loss, theft, destruction or mutilation, upon surrender and cancellation of
such Note or other security document, Borrower will issue, in lieu thereof, a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.
26. NO RELIANCE ON MORTGAGEE. Mortgagor affirms that it is not relying
on the fact that the Mortgagee has extended this Mortgage or loan as evidence of
good condition and/or good title of the mortgaged premises.
-15-
<PAGE> 16
27. INVALID PROVISION. If any provision hereof would be invalid under
applicable law, then such provision shall be deemed to be modified to the extent
necessary to render it valid while most nearly preserving its original intent;
no provision hereof shall be affected by another provision being held invalid.
28. NO WAIVER. No failure by Mortgagee to exercise, and no delay in
exercising, and no course of dealing with respect to, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any other remedies provided by law.
29. CHOICE OF LAW. This Mortgage is being executed and delivered in the
State of New York and shall be construed and enforced in accordance with the
laws of the State of New York.
30. JURISDICTION. The Mortgagor consents to the jurisdiction of the
courts of the State of New York which courts shall be the sole and exclusive
forum.
31. APPRAISALS. Upon request of the Mortgagee, which request shall be
made not more than once in any twelve (12) month period during the term hereof,
the Mortgagor agrees to provide at its sole cost and expense updated appraisals
covering the mortgaged premises, in form satisfactory to the Mortgagee and
completed by an appraiser satisfactory to the Mortgagee. At the sole option of
the Mortgagee, the Mortgagee may procure said appraisal(s) and pay the cost
therefor, and in such event, the Mortgagor will on demand pay to the Mortgagee
such costs so paid and the same shall be deemed to be secured by this Mortgage
and shall be collectible thereupon in like manner as the principal monies.
32. TAX SEARCH FEE: Upon the request of the Mortgagee, the Mortgagor
shall pay to Mortgagee such fees as may be charged by others to monitor the
payment of taxes assessed against the mortgaged premises, and upon the failure
of the Mortgagor to promptly remit such fees to the Mortgagee, such fees may be
paid by the Mortgagee and shall be secured by the lien of this Mortgage.
33. MORTGAGEE'S RIGHT TO INSPECT THE MORTGAGED PREMISES. Mortgagee, and
others authorized by Mortgagee, may enter on and inspect the mortgaged premises
at reasonable times and in a reasonable manner. Before or at the time any such
inspection is made, Mortgagee shall give the Mortgagor a notice stating a
reasonable purpose for the inspection.
34. SETOFF RIGHTS. Mortgagor and each Guarantor hereby grant to the
Mortgagee a lien, security interest and right of setoff as security for all
liabilities and obligations of Mortgagor to the Mortgagee, whether now existing
or hereafter arising, upon and
-16-
<PAGE> 17
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Mortgagee or any entity under
the control of Fleet Financial Group, Inc., or in transit to any one of them.
Upon default at any time, without demand or notice, the Mortgagee may set off
the same or any part thereof and apply the same to any liability or obligation
of Mortgagor or the Guarantor even though unmatured and regardless of the
adequacy or any other collateral securing the Note. ANY AND ALL RIGHTS TO
REQUIRE THE MORTGAGEE TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF
WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE MORTGAGOR AND
ITS GUARANTORS ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
35. WAIVER OF TRIAL BY JURY. MORTGAGOR AND THE MORTGAGEE MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE NOTE, THIS MORTGAGE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED
IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY TO THE FULLEST EXTENT
ALLOWED BY LAW. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE MORTGAGEE
TO ACCEPT THIS MORTGAGE AND MAKE THE LOAN.
36. PLEDGING OF RIGHTS. Mortgagee may at any time pledge all or any
portion of its rights under the loan documents including any portion of the Note
to any of the twelve (12) Federal Reserve Banks organized under section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement
thereof shall release Mortgagor from its obligations under any of the loan
documents.
37. MODIFIED FOLLOWING BUSINESS DAY CONVENTION. The Modified Following
Business Day Convention shall mean the convention for adjusting any relevant
date if it would otherwise fall on a day that is not a Business Day. The
following terms, when used in conjunction with the term, "Modified Following
Business Day Convention," and a date, shall mean that an adjustment will be made
if that date would otherwise fall on a day that is not a Business Day so that
the date will be the first following day that is a Business Day.
A "Business Day" means, in respect of any date that is specified in this
Agreement to be subject to adjustment in accordance with applicable Business Day
Convention, a day on which commercial banks settle payments in New York or
London if the payment obligation is calculated by reference to any (i) LIBOR
Rate, or (ii) New York, if the payment obligation is calculated by reference to
any Prime Rate.
38. PARTICIPATIONS.
-17-
<PAGE> 18
The Mortgagee shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to Mortgagee or any Guarantor
to grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in Mortgagee's obligation to lend
hereunder and/or any or all of the loans held by Mortgagee hereunder. In the
event of any such grant by Mortgagee of a participating interest to a
Participant, whether or not upon notice to Mortgagor, Mortgagee shall remain
responsible for the performance of its obligations hereunder and Mortgagor shall
continue to deal solely and directly with Mortgagee in connection with
Mortgagee's rights and obligations hereunder.
Mortgagee may furnish any information concerning Mortgagor in its
possession from time to time to prospective Assignees and Participants, provided
that Mortgagee shall require any such prospective Assignee or Participant to
agree in writing to maintain the confidentiality of such information.
IN WITNESS WHEREOF, the Mortgagor has caused this instrument to be
signed the day and year first above written.
DECORA, INCORPORATED d/b/a
DECORA MANUFACTURING
By:________________________________
Timothy N. Burditt, Vice
President Finance
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this ____ day of April, 1998, before me personally appeared Timothy
N. Burditt, to me known, who being by me duly sworn, did depose and say that he
resides in Clifton Park, New York, that he is the Vice President, Finance of
DECORA, INCORPORATED d/b/a DECORA MANUFACTURING, the corporation described in
and which executed the above instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
------------------------------
Notary Public
-18-
<PAGE> 1
Exhibit 10.65
MORTGAGE
THIS MORTGAGE, made the __ day of April, 1998, between DECORA,
INCORPORATED, a Delaware corporation authorized to do business in the State of
New York as Decora Manufacturing and having its principal place of business at 1
Mill Street, Fort Edward, New York 12828 (herein called the "Mortgagor") and
FLEET NATIONAL BANK, a bank organized and existing under the laws of the United
States of America, having an office at 69 State Street, City and County of
Albany, State of New York 12201 (herein called the "Mortgagee").
W I T N E S S E T H :
To secure the payment of a principal indebtedness in the amount of Four
Hundred Ninety -Nine Thousand and 00/100 Dollars ($499,000.00) lawful money of
the United States plus the interest thereon at a rate more particularly set
forth in a Note in the amount of Twelve Million Five Hundred Thousand and 00/100
Dollars ($12,500,000.00) executed and delivered to the Mortgagee by the
Mortgagor on even date herewith plus any modifications or extensions thereof or
substitutions therefor (herein called the "Note"); the Mortgagor hereby
mortgages to the Mortgagee all those certain pieces or parcels of land, with the
buildings and improvements erected thereon, more particularly described in
Schedule A attached hereto and made a part hereof (herein called the "mortgaged
premises").
TOGETHER with all fixtures and articles now or hereafter attached to
said premises which constitute part of the building, building systems and/or
real estate improvements and which cannot be removed without significant damage
either to the realty or to the article being removed or both, including but not
limited to antennas, towers, transmission lines, sample systems, remote control
units, wiring, catwalks, transformers, transmitters, other radio and/or tv
transmission and communication equipment, furnaces, boilers, oil or gas burners,
fire extinguishers and other fire preventing and extinguishing apparatus, hoses,
fans, conveyors, air compressors, scales, radiators and heating units and
piping, plumbing, washroom and drinking facilities, air conditioning,
humidifying and sprinkler systems, building electrical fixtures and wiring,
fluorescent fixtures, elevators, dynamos, incinerators, water pumps, together
with any and all replacements thereof and additions thereto. Notwithstanding the
foregoing, this Mortgage shall not cover machinery, equipment, furniture and
fixtures that can be removed without significant damage to either the realty or
the article being removed, or both and the Mortgagee's lien will remain on those
fixtures which are so annexed to the realty
<PAGE> 2
that they cannot be removed without significant damage to either the realty or
the article being removed, or both.
And the Mortgagor covenants and agrees with the Mortgagee as follows:
1. PAYMENT. The Mortgagor promises to pay the principal and
interest on the Note when due and payable, plus all other
indebtedness secured by this Mortgage.
2. WARRANTY OF TITLE. The Mortgagor warrants the title to the mortgaged
premises, and confirms and ratifies that the full amount owed as described above
is secured by the Mortgage.
3. CASUALTY AND OTHER INSURANCE. Mortgagor shall maintain insurance
against such risks and for such amounts as are customarily insured against by
businesses of like size and type in the area, including the following:
(a) Mortgagor shall keep all improvements situated on the
mortgage premises continuously insured against loss by fire and the
risks covered under a so-called "extended coverage endorsement", flood,
explosion of boilers, heating apparatus and other pressure vessels, and
such other hazards, casualties and contingencies as Mortgagee from time
to time reasonably may require, in an amount equal to one hundred
percent (100%) of the replacement cost of such Improvements. All such
insurance shall be evidenced by valid and enforceable policies in form
and substance satisfactory to Mortgagee. Without limiting the generality
of the foregoing: (a) all such insurance policies shall contain an
endorsement requiring thirty (30) days written notice to Mortgagee at
the following address: Fleet National Bank, P.O. Box 2984, CT/HM/M10J,
Hartford, CT 06101-2984, prior to cancellation or change in the
coverage, scope or amount of any such policy or policies; and (b) any
and all policies evidencing casualty insurance shall provide that any
and all loss shall be payable to Mortgagee notwithstanding any act or
omission of Mortgagor which might otherwise result in cancellation or
forfeiture of said insurance:
(b) Insurance against loss or damage by flood, such insurance to
be in an amount not less than the principal amount of the Loan unless
Mortgagee receives satisfactory evidence that no portion of the Premises
is located within an area identified by the U.S. Department of Housing
and Urban Development as having special flood hazards;
(c) Business interruption (extra expense/loss of income)
insurance in an amount sufficient to cover any loss of income from the
Premises for a period of not less than 12 months; and
-2-
<PAGE> 3
(d) Insurance protecting Mortgagor against loss arising from
liability imposed by law or assumed in any written contract and loss or
liability arising from personal injury, including bodily injury or
death, or damage to the property of others, caused by an accident or
occurrence with a limit of liability of not less than $1,000,000
(combined single limit for personal injury, including bodily injury or
death, and property damage).
All policies of insurance required by this Section shall be procured and
maintained in financially sound and generally recognized responsible insurance
companies selected by Mortgagor and authorized to write such insurance in the
State of New York. The company or companies issuing the policies of insurance
required by subparagraphs (a) and (c) hereof shall be rated "A" or better by
A.M. Best Co., Inc. in Best's Key Rating Guide. Such insurance may be written
with deductible amounts comparable to those on similar policies carried by other
companies engaged in businesses similar in size, character and other respects to
those in which Mortgagor is engaged. All policies evidencing the insurance
required by subparagraphs (a), (b) and (c) hereof shall contain a New York
standard mortgagee clause, without contribution, showing Mortgagee's interest as
first mortgagee, and loss payee shall provide for payment to Mortgagee of the
proceeds of insurance resulting from any claim for loss or damage thereunder,
shall provide for at least thirty (30) days' prior written notice to Mortgagee
of the cancellation of such policies and of any material change in the terms or
conditions thereof and shall provide for notice to Mortgagee of all material
claims made thereunder.
The policies (or binders) of insurance required by subparagraphs (a),
(b) and (c) hereof, together with proof of the payment of the premiums therefor,
and a photocopy of the policy (or binder) of insurance required by subparagraphs
(d) and (e) hereof shall be delivered to Mortgagee at the time of the execution
and delivery of this Mortgage. Mortgagor shall deliver to Mortgagee annually a
certificate reciting that there is in full force and effect insurance coverage
of the types and in the amounts required by this Section and complying with the
requirements hereof. Prior to the expiration of each such policy, Mortgagor
shall furnish Mortgagee with satisfactory evidence that such policy has been
renewed or replaced or is no longer required. Mortgagor shall pay all premiums
on the insurance policies required by this Section and shall provide such
further information with respect to the insurance coverage required hereby as
Mortgagee may from time to time reasonably require.
Mortgagor shall promptly notify Mortgagee of any loss, damage or other
casualty with resect to the Improvements, the Equipment or any part thereof.
Mortgagor shall not permit any condition to exist on the Premises or in the
Improvements which would wholly or partially invalidate the insurance thereon.
Mortgagor hereby
-3-
<PAGE> 4
assigns to Mortgagee all of its right, title and interest in and to the
insurance policies required by subsections (a) and (b) hereof, including any
unearned premiums thereon, such assignment to take effect immediately upon the
occurrence of any Event of Default. Mortgagor hereby irrevocably authorizes
Mortgagee to participate with Mortgagor in the adjustment and compromise of any
insurance claims for any loss, damage or other casualty with respect to the
improvements, the Equipment or any part thereof under said insurance policies,
to collect and receive any Casualty Insurance Proceeds from the insurers paying
the same, to give proper receipts and acquittances therefor and, at Mortgagee's
sole option, to apply all or any portion of the Net Proceeds thereof to payment
on account of the unpaid principal amount of the Loan, whether then matured or
not, together with interest thereon at the Contract Rate to the date of receipt
of such payment by Mortgagee, or to make the same available to Mortgagor, in
whole or in part, for the purpose of repairing, restoring, rebuilding or
replacing the damaged Improvements and/or Equipment, in which case such proceeds
shall be payable to Mortgagor in such installments and under such terms and
conditions as Mortgagee may require. After application in accordance with the
terms of this Mortgage, the remaining portion of the Casualty Insurance Proceeds
(if any) shall be paid over to Mortgagor or otherwise as a court of competent
jurisdiction may direct. Mortgagor shall submit to Mortgagee for prior approval
the proposed amount of any Casualty Insurance Proceeds to be paid by reason of
any such loss, damage or casualty. Mortgagor hereby appoints Mortgagee its agent
and attorney-in-fact (which appointment shall be deemed to be an agency coupled
with an interest), with full power of substitution, to participate in the
adjustment and compromise of any Casualty Insurance Proceeds on its behalf in
the event that, at the time of any such loss, damage or casualty, any Event of
Default has occurred and is continuing. Mortgagor shall execute and deliver to
Mortgagee on demand such assignments and other instruments as Mortgagee may
require for such purposes and shall reimburse Mortgagee for its costs (including
reasonable legal fees) in the collection of any Casualty Insurance Proceeds.
Business Interruption Insurance Proceeds shall be applied by Mortgagee,
to the extent received, first to the payment of Taxes, and then to the payment
of premiums for the policies of insurance required by this Section and then to
the payment of amounts required to be paid by any law or ordinance relating to
the use of occupancy of the Premises or the Improvements or by any requirement,
order or notice of violation thereof issued by any Governmental Agency and then
to the payment of installments of principal and/or interest required to be made
by Mortgagor under the Note, as and when the same become due and payable. After
application in accordance with the terms of this Mortgage, the remaining portion
of Business Interruption Insurance Proceeds (if any) shall be paid over to
Mortgagor or otherwise as a court of competent jurisdiction may direct.
-4-
<PAGE> 5
Within 15 days of receipt of written request therefor, Mortgagor shall
deliver to Mortgagee receipted bills, cancelled checks or other proof reasonably
satisfactory to Mortgagee evidencing payment of the premiums for the policies of
insurance required by this Section.
At any time during the term of the Loan, Mortgagee may require Mortgagor
to pay to Mortgagee on the first day of each and every month, together with and
in addition to the monthly installment of principal and/or interest required to
be paid under the Note, a sum equal to the premiums next due under said policies
of insurance (as estimated by Mortgagee), less all sums already paid therefor,
divided by the number of monthly installments of principal and/or interest due
under the Note one month prior to the date on which such premiums shall be due
and payable, which sums, to the extent received, will be held without interest
and applied by Mortgagee to the payment of such premiums as and when the same
become due and payable. If such monthly insurance escrow payments become due at
a time when any premium shall not have been determined, such payments shall be
estimated on the basis of the premium for the preceding year. If the premium
when determined varies from the premium as estimated, (a) any excess arising
from such monthly payments shall be retained by Mortgagee to be applied in
reduction of subsequent monthly payments and (b) any deficiency in the amount of
such monthly payments shall be paid by Mortgagor to Mortgagee on demand.
4. NO ALTERATIONS. No building or improvement presently on or
hereinafter constructed on the mortgaged premises shall be removed, demolished
or altered in such a manner as to adversely affect its structural strength or
its value, without the consent of the Mortgagee.
5. TAXES. The Mortgagor will pay all taxes, including corporate
franchise taxes, if applicable, assessments and/or water rates and/or sewer
rates and/or any and all taxes, charges, assessments which are applicable to the
use and/or occupancy and/or existence of the mortgaged premises; and in the
event that the Mortgagor fails to pay same, Mortgagee may (but is not obligated
to) pay same and the Mortgagor will on demand, pay to the Mortgagee any amounts
so paid, by the Mortgagee with interest from the day of payment, and the same
shall be deemed to be secured by the Mortgage and shall be collectible thereupon
in like manner as the principal monies. In addition to the foregoing, but only
in the event that the Mortgagor is in default, the Mortgagor agrees, that upon
fifteen (15) days of the receipt of written notice from the Mortgagee, that it
will open with the Mortgagee, or a commercial bank to be selected by the
Mortgagee, a separate account designated as "Real Property Tax and Insurance
Account" and will deposit in said account on the first day of each month
thereafter until the entire indebtedness represented by the Note and interest
thereon, shall have been paid in full, a sum equal to l/l2th of the
-5-
<PAGE> 6
estimated annual taxes and assessments levied upon the mortgaged premises and
l/l2th of the estimated annual premium for casualty insurance with reference to
said mortgaged premises; any deficiency in the amount so held in said separate
account to be payable by the Mortgagor on demand.
6. ESTOPPEL CERTIFICATE. The Mortgagor within three (3) days upon
request in person or within five (5) days upon request by mail will furnish a
written statement duly acknowledged of the amount due on this Mortgage and
whether any offsets or defenses exist against the mortgage debt.
7. SECTION 911 of the BUSINESS CORPORATION LAW. If the Mortgagor is a
New York corporation or a corporation authorized to do business in the state of
New York, this Mortgage is made, executed and delivered pursuant to the
provisions of Section 911 of the Business Corporation Law and that Mortgagor's
Certificate of Incorporation does not require the consent of stockholders to
mortgage its real property or chattels.
8. SECTION 13 OF THE LIEN LAW. The Mortgagor will receive the proceeds
of indebtedness secured by this Mortgage subject to the trust fund provisions of
Section 13 of the Lien Law.
9. NO RELEASE OR DISCHARGE UNTIL FULL PAYMENT. Regardless of any
subsequent agreement with any other person, firm or corporation modifying,
amending, altering or changing the terms of the Note or any agreement referred
to in said Note or this Mortgage, or spreading the lien thereof, or
consolidating the same with any other mortgage, the obligations of the Mortgagor
to pay the indebtedness and interest at the rate specified in the Note secured
by this Mortgage shall not be released or discharged or affected in any way
until the full payment of all indebtedness evidenced by the Note with interest
at the rate therein specified.
10. BOOKS, RECORDS AND FINANCIAL STATEMENTS. The Mortgagor will at all
times keep proper books and records and accounts in accordance with generally
accepted accounting principles consistently applied and shall within fifteen
(15) days of demand, permit the Mortgagee or its representatives to examine such
books and records and all supporting vouchers and data at any time from time to
time on request, at its offices, or at such other location as may be mutually
agreed upon.
11. ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION. The Mortgagor and
Mortgagee have executed and delivered an "Environmental Compliance and
Indemnification Agreement" ("Environmental Agreement") bearing even date
affecting the mortgaged premises. Any financial liability of the Mortgagor to
the Mortgagee accruing under the Environmental Agreement or monies paid by the
Mortgagee pursuant to said agreement shall be secured by the lien of this
Mortgage.
-6-
<PAGE> 7
12. MORTGAGE TAX. Mortgagor agrees that in the event that mortgage
recording tax is required for any reason whatsoever, Mortgagor will pay said tax
on demand to Mortgagee; and if Mortgagor fails to pay said tax, the Mortgagee
may pay same. The amounts paid by the Mortgagee, plus interest at the rate set
forth in the Note from the date of payment, shall be deemed to be secured by
this Mortgage and shall be collected in like manner as the principal monies.
13. DEFAULT. The Mortgagee shall be entitled, at its option, to declare
the Mortgagor in default and the whole of the indebtedness and interest to be
immediately due and payable:
(a) after failure to pay any installment of principal or
of interest for ten (l0) days;
(b) after failure to pay any tax, water rate or assessment, or to
exhibit to the Mortgagee receipts evidencing payment thereof, within ten
(l0) days after notice and demand;
(c) after failure to pay any premiums on the policies insuring
the buildings and improvements on the mortgaged premises, or to exhibit
to the Mortgagee receipts evidencing payment thereof, or to assign and
deliver such policies to the Mortgagee, or to reimburse the Mortgagee
for premiums paid on such insurance, within thirty (30) days after
notice and demand;
(d) after failure, upon request, to furnish a statement of the
amount due on this Mortgage and whether any offsets or defenses exist
against the mortgage debt, as hereinbefore provided;
(e) upon the actual or threatened removal or demolition of any
building or improvement on the mortgaged premises or the commission of
any waste on the mortgaged premises;
(f) upon the actual or threatened removal by anyone of any
fixtures subject to the lien of this Mortgage;
(g) upon failure of the Mortgagor to notify the Mortgagee in
writing within five (5) days after loss or damage caused by fire or
other casualty to the mortgaged premises, or any part thereof, and prior
to making of any repairs thereto, or the refusal of the Mortgagor to
permit the Mortgagee to inspect such loss or damage prior to the making
of any repairs thereto;
(h) upon failure to pay any Mortgage tax now due or hereafter due
on this Mortgage within thirty (30) days after notice and demand given
by the Mortgagee to the Mortgagor;
-7-
<PAGE> 8
(i) in the event that the Mortgagor conveys, sells, assigns, or
otherwise transfers the mortgaged premises, or any part thereof, or any
interest therein, without the prior written consent of the Mortgagee;
(j) in the event that the Mortgagor assigns the rents, or any
part thereof, of the mortgaged premises or accepts prepayment of rents
with respect to all or any part of the mortgaged premises covering a
period greater than one (l) month;
(k) upon failure of the Mortgagor to cure any violation of any
governmental requirements respecting the mortgaged premises including
without limitation any laws, rules or regulations governing hazardous
waste removal and clean-up or arising from an intentional or
unintentional action or omission of the Mortgagor or any previous owner
and/or operator of the mortgaged premises, within ten (l0) days after
receipt of written notice and demand from the Mortgagee; or, if in the
reasonable judgment of the Mortgagee, any said violation cannot be cured
within said ten (10) day period, failure to either commence a cure
within said ten (10) day period and/or to pursue said cure diligently
until completed;
(l) upon the breach by the Mortgagor of any covenant or provision
contained in this Mortgage, or upon the default in any debt instrument,
term loan agreement, building loan agreement, environmental
indemnification agreement or any instrument of collateral security
delivered by or on behalf of the Mortgagor to the Mortgagee;
(m) upon the imposition of any liens, charges, or encumbrances
upon the mortgaged premises after the date hereof, which liens, charges
or encumbrances are not released, vacated, suspended, discharged, or
bonded to the satisfaction of the Mortgagee within thirty (30) days of
their imposition;
(n) in the event that the Mortgagor fails to submit to the
Mortgagee the financial statements as required by paragraph 10 hereof,
and continuance of such failure for thirty (30) days after receipt of
written notice from the Mortgagee;
(o) voluntary suspension of all or a substantial part of its
businesses as a going concern by the Mortgagor; insolvency or
dissolution of the Mortgagor; commencement of any proceedings under any
bankruptcy or insolvency law by the Mortgagor; an assignment for the
benefit of creditors by the Mortgagor; application for consent to the
appointment of any receiver or trustee or custodian for the Mortgagor of
all or any substantial portion of the property of the Mortgagor; or
-8-
<PAGE> 9
assignment to an agent authorized to liquidate any substantial part of
the assets of the Mortgagor.
(p) commencement of any proceedings under any bankruptcy or
insolvency law against the Mortgagor, which proceedings are involuntary
in nature and failure to have said proceedings dismissed within sixty
(60) days after the commencement thereof; or issuance of a writ,
warrant, attachment or similar process against all or any substantial
portion of the property of the Mortgagor and failure to have such writ,
attachment or similar process released or bonded within sixty (60) days
after its issuance.
(q) default beyond any grace period pursuant to the terms and
conditions of any other loan by the Mortgagee to the Mortgagor;
(r) if any information furnished by or any representation or
warranty of Mortgagor or of any Guarantor, or any representative of
Mortgagor or of any Guarantor, made herein or in any instrument or
financial statement furnished in connection herewith, or in any
guaranty, shall prove false or misleading in any material respect;
(s) Upon an event of default under any agreement, document or
instrument between the Mortgagor and Mortgagee, including but not
limited to a Restated Revolving Promissory Note in the amount of
$15,000,000.00 bearing even date.
If the Mortgagee declares the Mortgagor to be in default, the
Mortgagee personally, or by its agents or attorneys, may enter into and upon all
or any part of the mortgaged premises, and each and every part thereof, and may
exclude the Mortgagor, its agents and servants wholly therefrom; and having and
holding the same, may use, operate, manage and control the mortgaged premises,
either personally or by its superintendents, managers, agents, servants,
attorneys or receivers; and upon every such entry, the Mortgagee at the expense
of the mortgaged premises, from time to time, either by purchase, repairs or
construction, may maintain and restore the mortgaged premises, whereof it shall
become possessed as aforesaid, may complete the construction of the improvements
and in the course of such completion may make such contemplated improvements as
it may deem desirable and may insure the same; and likewise, from time to time,
at the expense of the mortgaged premises, the Mortgagee may make all necessary
or proper repairs, renewals and replacements and such useful alterations,
additions, betterments and improvements thereto and thereon as to it may seem
advisable; and in every such case, the Mortgagee shall have the right, but not
the obligation, to manage and operate the mortgaged premises and exercise all
rights and powers of the Mortgagor with respect thereto, either in the name of
the Mortgagor or otherwise as it shall deem best. In addition to the foregoing,
the Mortgagor, may
-9-
<PAGE> 10
proceed forthwith to protect and enforce its rights under this Mortgage and/or
the other loan documents by such suits, actions or proceedings, in equity or at
law, as it shall deem appropriate, including, without limitation, an action to
foreclose the lien of this Mortgage, in which case the mortgaged premises or any
interest therein or any part thereof may be sold in one or more interests and in
any order or manner. Moreover, the Mortgagee shall not be required to proceed
hereunder before proceeding against any other security, shall not be required to
proceed against any other security before proceeding hereunder, and shall not be
precluded from proceeding against any or all of any security in any order or at
the same time.
14. ASSIGNMENT OF RENTS.
(a) The Mortgagor hereby transfers, sells and assigns to the
Mortgagee, any existing and future leases with respect to the mortgaged
premises (the "Leases") and all rents, revenues, issues and profits now
due and hereafter to become due, under the terms of all Leases and other
rental arrangements or any renewals or replacements thereof concerning
any part or all of the mortgaged premises, all as further security for
the payment of the indebtedness. The Mortgagor also assigns to the
Mortgagee any award made hereafter to it in any court proceedings
involving any tenant(s) under any of the Leases in any bankruptcy,
insolvency or reorganization proceedings and any and all payments paid
by said tenant(s) in lieu of rent.
(b) If no event of default has occurred hereunder, the Mortgagor
shall have the right to collect the rents, income and profits from the
Leases, to administer the Leases and to retain, use and enjoy the same;
provided, however, that even if no event of default has occurred (i) no
rent more than one month in advance shall be collected or accepted
without obtaining the prior written consent of the Mortgagee and (ii)
the Leases shall not be modified or amended without the prior written
consent of the Mortgagee, which shall not be unreasonably withheld or
delayed.
(c) The Mortgagor represents and warrants that there are no other
assignments of the Leases and that all Leases presented to the Mortgagee
have not previously been amended and are in full force and effect.
(d) The rights assigned hereunder include all of the Mortgagor's
right and power to modify the Leases or to terminate the term thereof or
to accept a surrender thereof or to waive or release the tenants
thereunder from the performance, or observance of any obligations or
conditions or provisions thereof; provided, however, that so long as no
event of default shall have occurred hereunder, the Mortgagee
-10-
<PAGE> 11
shall not have the right to exercise any of the aforesaid rights or
powers without the prior written consent of the Mortgagor.
(e) The Mortgagee shall not be obligated to perform or discharge
any obligation or duty to be performed or discharged by the Mortgagor
under the Leases and the assignment of the Leases effected hereby shall
not place responsibility for the control, care, management or repair of
the mortgaged premises (or any part thereof) on the Mortgagee or make
the Mortgagee responsible or liable for any negligence in the
management, operation, upkeep, repair or control of the mortgaged
premises. The Mortgagor hereby agrees to indemnify, to defend and to
save harmless the Mortgagee and its officers, members, agents and
employees from any and all liability arising from the Leases, or from
this assignment of Leases, or from any and all claims and demands
whatsoever that may be asserted against the Mortgagee or its officers,
members, agents or employees by reason of any alleged obligations or
undertakings on the part of the Mortgagee or its officers, members,
agents or employees to perform or discharge any of the terms of the
Leases prior to the date on which the Mortgagee elects to exercise its
rights as an assignee hereunder.
(f) The Mortgagor will (i) fulfill or perform every condition and
covenant of the Leases by the Landlord to be fulfilled or performed,
(ii) enforce, short of termination of the Leases, the performance and
observance of every covenant and condition of the Leases by the tenants
to be performed and observed thereunder, (iii) not terminate the Leases
without the prior written consent of the Mortgagee, which shall not be
unreasonably withheld or delayed, nor accept a surrender thereof, unless
required to do so by the terms of the Leases and (iv) deliver to the
Mortgagee, upon written demand, a statement specifying the rents and
other profits to be derived or received from the Leases for the periods
specified in such demand and true and correct copies of the Leases as
they then exist.
(g) In the event of a default hereunder, the Mortgagee, at its
option, without notice, either in person or by agent with or without
bringing any action or proceeding, or by a receiver to be appointed by a
court may: enter upon, take possession of, and operate the mortgaged
premises; make, enforce, modify and accept the surrender of Leases;
obtain and evict tenants; fix or modify rents; and do any acts which the
Mortgagee deems proper to protect the security hereof until all
indebtedness secured hereby is paid in full, and either with or without
taking possession of the mortgaged premises, in its own name, sue for or
otherwise collect and receive all rents, issues and profits, including
those past due and unpaid, and apply the same, less costs and expenses
of
-11-
<PAGE> 12
operation and collection, including reasonable attorneys' fees, upon any
indebtedness secured hereby in such order as the Mortgagee may
determine. The entering upon and taking possession of said property, the
collection of such rents, issues and profits and the application thereof
as aforesaid, shall not cure or waive any default or waive, modify or
affect any notice of default under this Mortgage.
15. REAL PROPERTY LAW 291-f. The Mortgagor shall not, and shall not have
the right or power, as against the Mortgagee without its consent, to cancel,
abridge or otherwise modify, or accept prepayments of installments of rent to
become due under any lease of the mortgaged premises or any part thereof not
made primarily for the residential purposes of the owner of the leasehold estate
and which is either now in existence and has an unexpired term of at least five
(5) years or hereafter is entered into for a term of at least five (5) years.
The Agreement contained in this paragraph has been made with reference to
section 29l-f of the New York State Real Property Law.
16. RECEIVER. The holders of this Mortgage, in any action to foreclose
it, shall be entitled to the appointment of a receiver of the rents and profits
of the said premises without notice, as a matter of right, without consideration
of the value of the mortgaged premises as security for the amounts due the
Mortgagee, or the solvency of any person or persons liable for the payment of
such amounts.
17. SALE IN ONE PARCEL. That in case of sale under foreclosure, the
mortgaged premises may be sold in one parcel.
19. FEES AND EXPENSES. All sums paid or incurred by the Mortgagee for
the expenses (including reasonable attorneys' fees) of enforcing, defending or
upholding the lien of this Mortgage, regardless of whether any action or
proceeding has been commenced, but including any action to foreclose the
Mortgage or to collect the debt secured thereby, shall be paid by the Mortgagor,
together with interest thereon at the rate set forth in the Note (but in no
event shall the interest rate be more than the law allows), and such sum and the
interest thereon shall be a lien on the mortgaged premises, prior to any right,
or title to, interest in or claim upon said mortgaged premises attaching or
accruing subsequent to the lien of the Mortgage and shall be secured by the
Mortgage. In addition to and not in limitation of the foregoing, in any action
or proceeding to foreclose the Mortgage, or to recover or collect the debt
secured thereby, the provisions of law respecting the recovery of costs,
disbursements and allowances shall also apply. The expenses of pursuing,
searching for, retaking, receiving, holding, storing, safe-guarding, any
environmental testing and cleanup, insuring, accounting for, advertising,
preparing for sale or lease, selling, leasing and the like, plus attorney's
fees, fees for certified public accountants, fees for auctioneers, fees for
-12-
<PAGE> 13
brokers and/or appraisers, fees for security guards, fees for environmental
auditors and engineers, fees for hazard insurance premiums, or any other costs
or disbursements whatsoever incurred by or contracted for by the Mortgagee in
connection with the disposition of the mortgaged premises (including any of the
foregoing incurred or contracted for by the Mortgagee in connection with any
bankruptcy or insolvency proceedings involving the Mortgagor) -- shall all be
chargeable to Mortgagor and shall be secured by the Mortgage, and said Mortgagor
will also be responsible for any deficiency.
Without limiting the generality of the foregoing, if at any time the
United States of America, any state thereof or any governmental subdivision of
such state, having jurisdiction, shall require internal revenue stamps to be
affixed to the Note, or other tax paid on or in connection therewith, Mortgagor
will pay the same with any interest or penalties imposed in connection
therewith. If, by reason of the additional sums that may become secured by the
lien of this Mortgage pursuant to the terms hereof, a court or other
governmental authority having jurisdiction at any time shall determine that this
Mortgage falls within the ambit of Section 256 of the Tax Law of the State of
New York, then Mortgagee reserves the right, in its sole and absolute
discretion, to elect not to have such additional sums secured by this Mortgage
and thereby reduce the indebtedness secured hereby to a definite amount equal to
the principal amount of the Note, interest thereon at the rate provided in the
Note, plus any disbursements made to protect the security of this Mortgage, with
annual interest on such disbursements at the rate applicable to overdue payments
under the Note (or the highest rate permitted by law, whichever shall be less),
plus any such other sums as by statute or judicial interpretation now or
hereafter may be permitted to be secured by the lien of a mortgage without
incurring any additional mortgage recording tax. Any election by Mortgagee to so
reduce the indebtedness secured hereby shall in no event be deemed a release,
waiver or discharge by Mortgagee of Mortgagor's obligation to pay or reimburse
Mortgagee for such sums and such obligation shall continue unimpaired and shall
be recourse obligations of Mortgagor and any Guarantor of the indebtedness
secured hereby, regardless of any other provisions set forth herein or in the
Note or in any such guaranty that may limit recourse against Mortgagor or anyone
else. It is further understood and agreed that any sums, including, without
limitation, any prepayment penalties, late charges or liquidated damages, that
may become due and payable pursuant to the terms of the Note and/or this
Mortgage and that are in the nature of interest shall, for the purpose of
determining the amount of mortgage recording tax due and payable on this
Mortgage, be considered as additional interest, whether or not so denominated,
and such sums shall be secured by the lien of this Mortgage to the fullest
extent possible without causing this Mortgage to be covered by Section 256 of
the New York Tax Law, and shall not be deemed principal and shall not accrue any
interest thereon.
-13-
<PAGE> 14
19. CONDEMNATION AWARDS. The Mortgagor does hereby assign to the
Mortgagee any awards heretofore made and hereafter to be made by any state,
county or local authorities to the owner of the mortgaged premises, as a result
of condemnation of all or any portion of said mortgaged premises or of the use
thereof and the said Mortgagee, at its option, is hereby authorized to collect
and receive the proceeds of any such awards from the authorities making the same
and to give proper receipts and acquittances therefor, and to apply the same to
reduction of installments due to the mortgagee, in the inverse order of their
maturity, notwithstanding the fact that no installment on account of this
Mortgage may then be due and payable; and the Mortgagor, upon request by the
Mortgagee, will make, execute and deliver any and all assignments and other
instruments sufficient for the purpose of assigning the aforesaid awards to the
Mortgagee, free, clear and discharged of any and all encumbrances of any kind or
nature whatsoever.
20. LATE FEES. If the entire amount of any payment is not paid in full
within ten (10) days after the same is due, Mortgagor shall pay to the Mortgagee
a late fee equal to five percent (5%) of the required payment and such late fees
are also secured by this Mortgage.
21. SECURITY FOR OTHER INDEBTEDNESS: In addition to the Note referred to
on Page 1 of this Mortgage, this Mortgage is intended to secure any and all
liabilities, obligations and further loans or indebtedness owed or to be owed by
the Mortgagor to the Mortgagee, whether direct and/or indirect, contingent
and/or noncontingent and/or liquidated or unliquidated, and it is stipulated
that the maximum amount secured by this Mortgage at execution or which under any
contingency may be secured thereby at any time in the future shall be the
original principal amount hereof. The obligation of the Mortgagee to make
further or future advances or readvances shall be optional with the Mortgagee.
Readvances may be made under the provisions hereof to the present or to any
future owner of the mortgaged premises. However, in no event shall this Mortgage
secure any transaction with respect to which the Mortgagor shall be entitled to
notice of a right to rescind pursuant to the Federal Truth and Lending Act and
Regulation Z thereunder, unless said notice has been given.
22. NO ORAL MODIFICATION. The provisions of this instrument cannot be
changed, modified or discharged unless such change, modification or discharge is
in writing and signed by the party against whom enforcement of such change,
modification or discharge is sought, or by its agent thereunto duly authorized
in writing.
23. MISCELLANEOUS. This Mortgage and all agreements and covenants
contained herein shall bind the executors, administrators, successors and
assigns of the Mortgagor and inure to the benefit of the successors and assigns
of the Mortgagee, with like effect as if named herein. If more than one person
or entity joins
-14-
<PAGE> 15
in the execution of this Mortgage, the covenants and agreements hereof shall be
their joint and several obligations, and if any be masculine or feminine or
under any assumed business name, the relative words herein shall be read as if
written in the plural or in the masculine, feminine or neuter gender, as the
case may be, and the words "Mortgagor" and "Mortgagee" where used herein shall
be construed to include their and each of their , executors, administrators,
successors and assigns. Captions used herein are for convenience only and shall
not affect the interpretation of any provisions herein.
24. NOTICES. Any notice, demand or request pursuant to this Mortgage
shall, at the option of the party so giving the notice, demand or request, be
(a) sent overnight via Federal Express or other substantial national delivery
service, or (b) delivered personally, or (c) sent via Led Foot Express or other
substantial delivery service, return receipt requested, or (d) sent via
certified mail, return receipt requested, and, in each case, addressed as set
forth on page 1 of this Mortgage (adding, in the case of the Mortgagee's
address, "Attention: Commercial Loan Department"). Notice shall be deemed to
have been given on the date of personal delivery or if given by overnight
service or regional delivery service or by certified mail on the date of receipt
as indicated by the records of the overnight or regional delivery service, or
the U.S. Postal Service as the case may be. Any change of address shall be
effective if sent in accordance with this paragraph. Failure of the Mortgagor to
provide notice of a change in address within thirty (30) days of said change
shall constitute an event of default hereunder.
Mortgagor: Decora Incorporated
1 Mill Street
Fort Edward, New York 12828
Mortgagee: Fleet Bank of New York
69 State Street
Albany, New York 12207
25. CORRECTIVE DOCUMENTS. Upon receipt of an affidavit of an officer of
Mortgagee as to the loss, theft, destruction or mutilation of the Note or any
other security document which is not of public record, and, in the case of any
such loss, theft, destruction or mutilation, upon surrender and cancellation of
such Note or other security document, Borrower will issue, in lieu thereof, a
replacement Note or other security document in the same principal amount thereof
and otherwise of like tenor.
26. NO RELIANCE ON MORTGAGEE. Mortgagor affirms that it is not relying
on the fact that the Mortgagee has extended this Mortgage or loan as evidence of
good condition and/or good title of the mortgaged premises.
-15-
<PAGE> 16
27. INVALID PROVISION. If any provision hereof would be invalid under
applicable law, then such provision shall be deemed to be modified to the extent
necessary to render it valid while most nearly preserving its original intent;
no provision hereof shall be affected by another provision being held invalid.
28. NO WAIVER. No failure by Mortgagee to exercise, and no delay in
exercising, and no course of dealing with respect to, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any other remedies provided by law.
29. CHOICE OF LAW. This Mortgage is being executed and delivered in the
State of New York and shall be construed and enforced in accordance with the
laws of the State of New York.
30. JURISDICTION. The Mortgagor consents to the jurisdiction of the
courts of the State of New York which courts shall be the sole and exclusive
forum.
31. APPRAISALS. Upon request of the Mortgagee, which request shall be
made not more than once in any twelve (12) month period during the term hereof,
the Mortgagor agrees to provide at its sole cost and expense updated appraisals
covering the mortgaged premises, in form satisfactory to the Mortgagee and
completed by an appraiser satisfactory to the Mortgagee. At the sole option of
the Mortgagee, the Mortgagee may procure said appraisal(s) and pay the cost
therefor, and in such event, the Mortgagor will on demand pay to the Mortgagee
such costs so paid and the same shall be deemed to be secured by this Mortgage
and shall be collectible thereupon in like manner as the principal monies.
32. TAX SEARCH FEE: Upon the request of the Mortgagee, the Mortgagor
shall pay to Mortgagee such fees as may be charged by others to monitor the
payment of taxes assessed against the mortgaged premises, and upon the failure
of the Mortgagor to promptly remit such fees to the Mortgagee, such fees may be
paid by the Mortgagee and shall be secured by the lien of this Mortgage.
33. MORTGAGEE'S RIGHT TO INSPECT THE MORTGAGED PREMISES. Mortgagee, and
others authorized by Mortgagee, may enter on and inspect the mortgaged premises
at reasonable times and in a reasonable manner. Before or at the time any such
inspection is made, Mortgagee shall give the Mortgagor a notice stating a
reasonable purpose for the inspection.
34. SETOFF RIGHTS. Mortgagor and each Guarantor hereby grant to the
Mortgagee a lien, security interest and right of setoff as security for all
liabilities and obligations of Mortgagor to the Mortgagee, whether now existing
or hereafter arising, upon and
-16-
<PAGE> 17
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Mortgagee or any entity under
the control of Fleet Financial Group, Inc., or in transit to any one of them.
Upon default at any time, without demand or notice, the Mortgagee may set off
the same or any part thereof and apply the same to any liability or obligation
of Mortgagor or the Guarantor even though unmatured and regardless of the
adequacy or any other collateral securing the Note. ANY AND ALL RIGHTS TO
REQUIRE THE MORTGAGEE TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF
WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE MORTGAGOR AND
ITS GUARANTORS ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
35. WAIVER OF TRIAL BY JURY. MORTGAGOR AND THE MORTGAGEE MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE NOTE, THIS MORTGAGE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED
IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY TO THE FULLEST EXTENT
ALLOWED BY LAW. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE MORTGAGEE
TO ACCEPT THIS MORTGAGE AND MAKE THE LOAN.
36. PLEDGING OF RIGHTS. Mortgagee may at any time pledge all or any
portion of its rights under the loan documents including any portion of the Note
to any of the twelve (12) Federal Reserve Banks organized under section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement
thereof shall release Mortgagor from its obligations under any of the loan
documents.
37. MODIFIED FOLLOWING BUSINESS DAY CONVENTION. The Modified Following
Business Day Convention shall mean the convention for adjusting any relevant
date if it would otherwise fall on a day that is not a Business Day. The
following terms, when used in conjunction with the term, "Modified Following
Business Day Convention," and a date, shall mean that an adjustment will be made
if that date would otherwise fall on a day that is not a Business Day so that
the date will be the first following day that is a Business Day.
A "Business Day" means, in respect of any date that is specified in this
Agreement to be subject to adjustment in accordance with applicable Business Day
Convention, a day on which commercial banks settle payments in New York or
London if the payment obligation is calculated by reference to any (i) LIBOR
Rate, or (ii) New York, if the payment obligation is calculated by reference to
any Prime Rate.
38. PARTICIPATIONS.
-17-
<PAGE> 18
The Mortgagee shall have the unrestricted right at any time and from
time to time, and without the consent of or notice to Mortgagee or any Guarantor
to grant to one or more banks or other financial institutions (each, a
"Participant") participating interests in Mortgagee's obligation to lend
hereunder and/or any or all of the loans held by Mortgagee hereunder. In the
event of any such grant by Mortgagee of a participating interest to a
Participant, whether or not upon notice to Mortgagor, Mortgagee shall remain
responsible for the performance of its obligations hereunder and Mortgagor shall
continue to deal solely and directly with Mortgagee in connection with
Mortgagee's rights and obligations hereunder.
Mortgagee may furnish any information concerning Mortgagor in its
possession from time to time to prospective Assignees and Participants, provided
that Mortgagee shall require any such prospective Assignee or Participant to
agree in writing to maintain the confidentiality of such information.
IN WITNESS WHEREOF, the Mortgagor has caused this instrument to be
signed the day and year first above written.
DECORA, INCORPORATED d/b/a
DECORA MANUFACTURING
By:________________________________
Timothy N. Burditt, Vice
President Finance
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this ____ day of April, 1998, before me personally appeared Timothy
N. Burditt, to me known, who being by me duly sworn, did depose and say that he
resides in Clifton Park, New York, that he is the Vice President, Finance of
DECORA, INCORPORATED d/b/a DECORA MANUFACTURING, the corporation described in
and which executed the above instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
------------------------------
Notary Public
-18-
<PAGE> 1
Exhibit 10.66
RESTATED SECURITY AGREEMENT
(Accounts and/or Inventory, Chattel Paper, Contract Rights)
This Restated Security Agreement made as of the 29th day of April, 1998
by and between DECORA, INCORPORATED, a Delaware corporation authorized to do
business in the State of New York as DECORA MANUFACTURING, and having its
principal place of business at One Mill Street, Fort Edward, New York 12828,
which is located in the County of Washington (herein called "Debtor") and FLEET
NATIONAL BANK (formerly known as Norstar Bank of Upstate NY), a banking
association organized and existing under and by virtue of the laws of the United
States of America and having an office for the transaction of business located
at 69 State Street, Albany, Albany County, New York 12201.
W I T N E S S E T H:
WHEREAS, the Debtor and the Secured Party entered into a Secured
Revolving Line of Credit Agreement on April 18, 1990 (together with all
amendments and modifications thereto herein called the "1990 Credit Agreement");
and
WHEREAS, pursuant to the 1990 Credit Agreement the Debtor did grant
Secured Party a security interest under the Uniform Commercial Code in, inter
alia, all of Debtor's now owned and hereafter acquired or arising, wherever
located, inventory, accounts receivable, chattel paper, contract rights,
instruments and choses in action, plus all proceeds and products thereof, if
any, and all replacements, additions and accessions thereto (herein called the
"Collateral"); and
WHEREAS, the Debtor and the Secured Party have, simultaneously herewith,
modified and restated the 1990 Credit Agreement in full pursuant to the terms
and conditions of a Restated Secured Revolving Line of Credit Agreement dated
the date hereof executed between the Debtor and the Secured Party (herein called
the "Restated Credit Agreement"); and
WHEREAS, pursuant to the Restated Credit Agreement the Debtor and the
Secured Party have agreed to continue the Secured Party's first priority
security interest in the Collateral and to grant a present security interest in
said Collateral all pursuant to the terms of this Restated Security Agreement.
NOW, THEREFORE, the Debtor and the Secured Party agree as follows:
The Debtor, in consideration for any and all loans and other credit
accommodations extended or to be extended to Debtor (or to others--the repayment
of which is unconditionally guaranteed by Debtor) by Secured Party, and for
other good and valuable consideration, receipt of which
<PAGE> 2
is acknowledged by Debtor, said Debtor does hereby continue the Secured Party's
first priority security interest in the Debtor's Collateral created by the 1990
Credit Agreement and does grant to Secured Party a security interest under the
Uniform Commercial Code in the Collateral.
1. The security interest hereunder secures payment of any and all
indebtedness of Debtor to Secured Party, whether now existing or hereafter
incurred, of every kind and character,direct or indirect, absolute or
contingent, and whether such indebtedness is from time to time reduced and
thereafter increased, or entirely extinguished and thereafter reincurred,
including, without limitation, any sums advanced by Secured Party for taxes,
assessments, insurance and other charges and expenses as hereinafter provided
(all herein called the "Indebtedness").
2. Debtor covenants that the Collateral and all records pertaining
thereto will remain located at its principal place of business unless specified
otherwise at Schedule A attached.
3. So long as any Indebtedness remains unpaid, Debtor (a) will defend
the Collateral against the claims and demands of all other parties; will keep
the Collateral free from all security interests or other encumbrances, except
this Security Interest; and will not sell, transfer, assign, deliver or
otherwise dispose of any Collateral or any interest therein without the prior
written consent of Secured Party or except as otherwise permitted in any other
agreement between Debtor and Secured Party; (b) will keep accurate and complete
records concerning the Collateral; and will permit Secured Party or its agents
to inspect the Collateral and to audit and make extracts from such records or
any of Debtor's books, ledgers, reports, correspondence and other records; (c)
upon demand, will deliver to Secured Party any instruments, any documents of
title and any chattel paper representing or relating to the Collateral or any
part thereof; any invoices, purchase orders, contracts or other documents
representing or relating to purchases or other acquisitions or sales, leases or
other dispositions of the Collateral and proceeds thereof; (d) will notify
Secured Party promptly in writing of any change in Debtor's address specified
above, and of any change in the location or any additional locations at which
Collateral is kept; (e) in connection herewith, will execute and deliver to
Secured Party such financing statements and other documents, pay all costs of
title searches and filing financing statements and other documents in all public
offices requested by Secured Party, and do such other things as Secured Party
may request; (f) will pay or cause to be paid all taxes, assessments and other
charges of every nature which may be levied or assessed against the Collateral;
(g) will insure or cause to be insured the Collateral against risks, and in
coverage, form and amounts satisfactory to Secured Party, will cause Secured
Party to be named as Lender Loss Payee under said policies, and at Secured
Party's request, will deliver or cause to be delivered each policy or
certificate of insurance thereof to Secured Party. In addition, Debtor hereby
authorizes Secured Party, at Debtor's expense, to file any financing statements
relating to the Collateral without Debtor's signature thereon as Secured Party
at its option may deem appropriate.
2
<PAGE> 3
4. Debtor agrees to deliver to Secured Party, in form satisfactory to
Secured Party, such year end financial statements, interim financial statements,
copies of federal tax returns, and supporting schedules and reports as Secured
Party may from time to time reasonably request; to cause any personal guarantor
of any of the Indebtedness to deliver to Secured Party such financial statements
and/or tax returns as Secured Party may from time to time reasonably request; to
deliver or cause to be delivered any Landlord Waiver, Mortgagee Waiver, or other
duly executed instruments of security or guaranty as Secured Party may now or
hereafter deem necessary to carry out the intent and purpose of this Security
Agreement. Debtor also agrees to furnish Secured Party from time to time upon
request, written Aging Schedules concerning accounts and account debtors and
such other written Schedules identifying and describing all Collateral as
defined in this Security Agreement, then owned by Debtor, and any additions or
substitutions thereof in such detail as Secured Party may require; and Secured
Party may examine and inspect the Collateral and supporting books and documents
at any reasonable time wherever located.
5. Debtor shall be in default under this Security Agreement upon the
occurrence of an Event of Default as defined in the Restated Credit Agreement.
6. Upon any such default and at any time thereafter, Secured Party may
declare all Indebtedness secured hereby immediately due and payable and Secured
Party shall have the remedies of a secured party provided in the Uniform
Commercial Code, and in addition, those provided by other provisions of law and
in this Security Agreement. Secured Party may notify any or all parties
obligated to pay Debtor instruments, chattel paper, contract rights, and
accounts arising from any of the foregoing, and may also direct any and all such
account debtors to make all payments on any of the foregoing directly to Secured
Party and Secured Party may demand, collect and sue for any of the foregoing
(but without the obligation to do so), in either Debtor's or Secured Party's
name at the latter's option, with the right to enforce, compromise, settle or
discharge any of the foregoing, and may endorse Debtor's name on any and all
checks, commercial paper and any other instruments pertaining to the foregoing.
Secured Party will at all times have the right to enter upon any place or places
where Collateral may be located and take possession on Debtor's premises or to
remove the Collateral or any part thereof to such other premises as Secured
Party may desire. Upon Secured Party's request, Debtor shall assemble the
Collateral and make it available to Secured Party at a place designated by
Secured Party. If any notification of intended disposition of any Collateral is
required by law, such notification, if mailed, shall be deemed properly and
reasonably given if mailed at least five days before such disposition, postage
prepaid, addressed to Debtor at its place of business indicated in the opening
paragraph of this Security Agreement or at any address appearing on Secured
Party's records for Debtor. The expenses of pursuing, searching for, retaking,
receiving, holding, storing, safeguarding, insuring, accounting for,
advertising, preparing for sale or lease, selling, leasing and the like, plus
fees for attorneys, certified public accountants, auctioneers, brokers and/or
appraisers, and security guards, premiums for hazard insurance, and any other
costs or disbursements whatsoever incurred by or contracted for by Secured Party
in connection with the
3
<PAGE> 4
Collateral (including any of the foregoing incurred or contracted for by Secured
Party in connection with any bankruptcy or insolvency proceedings involving
Debtor)--shall all be chargeable to the Collateral and then to Debtor. Debtor
will be liable to Secured Party and on demand shall pay to Secured Party any
deficiency which may remain after such sale or other disposition, and Secured
Party agrees to remit to Debtor any surplus resulting therefrom after payment in
full of the Indebtedness and the foregoing expenses.
7. Upon Debtor's failure to perform any of its duties hereunder, Secured
Party may, but shall not be obligated to, perform any or all such duties, and
Debtor shall pay an amount equal to the expense thereof to Secured Party
forthwith upon written demand by Secured Party. No delay or omission by Secured
Party in exercising any right or remedy hereunder or with respect to any
Indebtedness shall operate as a waiver thereof or of any other right or remedy,
and no single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. Secured Party may
remedy any default by Debtor hereunder or with respect to any Indebtedness in
any reasonable manner without waiving the default remedied and without waiving
any other prior or subsequent default by Debtor. All rights and remedies of
Secured Party hereunder are cumulative. Secured Party shall have no obligation
to take, and Debtor shall have the sole responsibility for taking, any and all
steps to preserve rights against any and all prior parties to any instrument or
chattel paper constituting Collateral, whether or not in Secured Party's
possession. Secured Party shall not be responsible to Debtor for loss or damage
resulting from Secured Party's failure to enforce or collect any proceeds,
chattel paper or account arising therefrom, or any instrument constituting
Collateral hereunder. Debtor waives protest of any instrument constituting
Collateral at any time held by Secured Party on which Debtor is in any way
liable and waives notice of any other action taken by Secured Party.
8. All the rights, remedies, options, privileges and elections given to
Secured Party hereunder shall inure to the benefit of its successors and
assigns, and shall be binding on the heirs, executors, administrators or legal
representatives, or the successors and assigns of Debtor. No modification,
rescission, waiver, release or amendment of any provision of this Security
Agreement shall be made except by a written agreement subscribed by Debtor and
by a duly authorized officer of Secured Party. Any partial invalidity of the
provisions hereof shall not invalidate the remaining portions hereof. This
Security Agreement shall be construed in accordance with the laws of the State
of New York.
9. As to the insurance referred to in paragraph 3 above, Debtor agrees
that not only will Secured Party be named as a loss payee, but that all policies
will include a Lender's Loss Payable Clause endorsement in favor of Secured
Party, and proof of same will be submitted to Secured Party.
10. Debtor hereby grants to Secured Party, a lien, security interest and
right of setoff as security for all liabilities and obligations to Secured
Party, whether now existing or hereafter
4
<PAGE> 5
arising, upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of Secured Party or
any entity under the control of Fleet Financial Group, Inc., or in transit to
any of them. At any time, without demand or notice, Secured Party may set off
the same or any part thereof and apply the same to any liability or obligation
of Debtor or any guarantor even though unmatured and regardless of the adequacy
of any other collateral securing the Loan. ANY AND ALL RIGHTS TO REQUIRE SECURED
PARTY TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE DEBTOR OR ANY GUARANTOR, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
11. DEBTOR AND SECURED PARTY MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR
ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR
ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT
FOR SECURED PARTY TO ACCEPT THIS SECURITY AGREEMENT AND MAKE THE LOAN.
5
<PAGE> 6
IN WITNESS WHEREOF, Debtor has duly executed this Security Agreement as
of the 29th day of April, 1998.
DEBTOR: DECORA, INCORPORATED
By: ______________________________
Name: Timothy N. Burditt
Title: Vice President,
Administration Secretary
STATE OF NEW YORK )
)ss:
COUNTY OF ALBANY )
On the 27th day of April, 1998, before me personally came Timothy N.
Burditt, who being by me duly sworn, did depose and say that he resides in
Clifton Park, New York; that he is the Vice President, Administration Secretary
of DECORA, INCORPORATED, the corporation described in and which executed the
above instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
----------------------------------
Notary Public
6
<PAGE> 7
Schedule A
List of Specific Trading Assets
If applicable - address and county location of all Collateral not at Debtor's
place of business
7
<PAGE> 1
Exhibit 10.67
ENVIRONMENTAL COMPLIANCE AND
INDEMNIFICATION AGREEMENT
THIS AGREEMENT, dated as of April 29, 1998 from Decora Incorporated
d/b/a Decora Manufacturing, having an address of 1 Mill Street, Fort Edward, New
York 12828 (the "Borrower") to Fleet Bank of New York, a bank organized and
existing under the laws of the State of New York and having its principal place
of business located at 69 State Street, City and County of Albany, State of New
York 12201, (the "Lender").
RECITALS
WHEREAS, Borrower is the owner of certain real property more
particularly described in Schedule "A" attached hereto (the "Premises"); and
WHEREAS, Borrower has applied to Lender for a loan (the "Loan"); and
WHEREAS, the Loan will be evidenced by certain Notes and related
documents in favor of the Lender on even date herewith, being hereinafter
referred to collectively as the "Loan Documents"); and
WHEREAS, Lender is unwilling to make the Loans to Borrower unless
Borrower executes and delivers this Agreement.
NOW THEREFORE, in order to induce Lender to make the Loans and for other
good and valuable consideration, Borrower hereby covenants and agrees with
Lender as follows:
I. DEFINITIONS: All capitalized terms used in this Agreement and
not heretofore defined shall have the meanings set forth below.
"Environment" means any water or water vapor, any land
including land surface or subsurface, air, fish, wildlife, biota and all other
natural resources.
"Environmental Laws" mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes, and the common law, relating to pollution
and/or the protection of the Environment and/or the health and safety of any
persons and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
<PAGE> 2
"Environmental Permits" mean all permits, licenses,
approvals, authorizations, consents or registrations required by an applicable
Environmental Law in connection with the ownership, use and/or operation of the
Premises for the storage, treatment, gen eration, transportation, processing,
handling, production or disposal of Hazardous Substances or the sale, transfer
or conveyance of the Premises.
"Hazardous Substance" means, without limitation, any
flammables, explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated-biphenyls, petroleum and petroleum
based products or by-products, methane, hazardous materials, medical waste,
hazardous wastes, hazardous or toxic substances or related materials, as defined
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportations Act, as amended (49 U.S.C. Sections 1801, et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. Sections 2601, et seq.), Articles
15 and 27 of the New York State Environmental Conservation Law and in the
regulations promulgated thereunder. The term "Hazardous Substance" does not
include consumer products which are packaged for, stored, and used by a consumer
with reasonable care in accordance with labeling and instructions and for their
intended use.
"Improvements" mean the buildings, structures and other
improvements (if any) presently located on the Premises.
"Indemnitee" means the Lender, its participants in the
Loans, if any, and all subsequent holders of any of the loan documents, their
respective officers, directors, employees, agents, representatives, contractors
and subcontractors, and any subsequent owner of the Premises who acquires title
thereto from or through the Lender, and the successors and assigns of all the
foregoing.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the Environment, including the abandonment or discarding of
barrels, containers, and other receptacles containing any Hazardous Substance.
II. REPRESENTATIONS AND WARRANTIES: Borrower represents and warrants
to Lender that Borrower has no knowledge of the presence of any
Hazardous Substances in the Environment or the violation of any
Environmental Laws or Environmental Permits on any property
adjacent to or within the immediate vicinity of the premises,
although Borrower has made no inquiry in such matters. Moreover,
Borrower has undertaken due and diligent inquiry and to the best
of its knowledge:
(a) The Borrower is in full compliance with and has
discharged all of its affirmative covenants
2
<PAGE> 3
regarding the Environmental Compliance and
Indemnification Agreement entered into between Borrower
and Lender on or about July 19, 1994; (the "1994 ECIA");
and
(b) Except for the reports itemized in Section II (a) of the
1994 ECIA and all quarterly reports submitted to the
Lender by the Borrower pursuant to the 1994 ECIA,
(hereinafter collectively referred to as the "Reports"),
Borrower has no knowledge regarding any Releases of
Hazardous Substances into the Environment at the
Premises; and
(c) The Premises are not being and have not been used for
the storage, treatment, generation, transportation,
processing, handling, production or disposal of any
Hazardous Substance in violation of any Environmental
Laws, or as a landfill or other waste disposal site or
for military manufacturing or industrial purposes.
(d) Except as indicated in the Reports and in Appendix A:
(i) underground storage tanks are not and have not
been located on the Premises.
(ii) the soil, subsoil, bedrock, surface water and
groundwater of the Premises are free of any
Hazardous Substances in violation of
Environmental Laws or Environmental Permits.
(iii) there has been no Release nor is there the
threat of a Release on, at or from the Premises
which through soil, subsoil, bedrock, surface
water or groundwater migration could come to be
located on the Premises, and Borrower has not
received any form of notice or inquiry from any
federal, state or local governmental agency or
authority, any owner, operator, tenant,
subtenant, licensee or occupant of the Premises
or any property adjacent to or within the
immediate vicinity of the Premises, or any other
person with regard to a Release or the threat of
a Release on, at or from the Premises or any
property adjacent to or within the immediate
vicinity of the Premises.
(iv) all Environmental Permits relating to the
Premises have been obtained and are in full
force and effect.
3
<PAGE> 4
(v) no event has occurred with respect to the
Premises which, with the passage of time or the
giving of notice, or both, would constitute a
violation of any applicable Environmental Law or
non-compliance with any Environmental Permit.
There are no liens, covenants, deed
restrictions, or notice registration
requirements based upon any Environmental Laws.
(vi) there are no agreements, consent orders,
decrees, judgments, License or permit conditions
or other orders or directives of any federal,
state or local court, governmental agency or
authority relating to the past, present or
future ownership, use, operation, sale, transfer
or conveyance of the Premises which require any
change in the present condition of the Premises
or any work, repairs, construction, containment,
clean up, investigations, studies, removal or
other remedial action or capital expenditures
with respect to the Premises.
(vii) with the exception of an ongoing investigation
(which has not been officially closed but which
management believes has been resolved) by the
New York State Department of Environmental
Conservation concerning (i) Borrower's Rotostar
machine volatile emissions, and (ii) Borrower's
print machine source testing resulting from a
permit condition, there are no actions, suits,
claims or proceedings, pending or threatened,
which could cause the incurrence of expenses or
costs of any name or description or which seek
money damages, injunctive relief, remedial
action or any other remedy that arise out of,
relate to or result from (i) a violation or
alleged violation of any applicable
Environmental Law or non-compliance or alleged
non-compliance with any Environmental Permit, or
(ii) the Release or the presence of any
Hazardous Substance or nuisances of whatever
kind to the extent the same arise from the
condition of the Premises or the ownership, use,
operation, sale, transfer or conveyance thereof.
(d) Borrower's Rotostar system and print machine emissions
are in full compliance with all Environmental Laws and
Environmental Permits.
4
<PAGE> 5
(e) All drains within the interior of the Premises discharge
to the sanitary sewer system with the permission of
local public works officials.
III. COVENANTS OF BORROWER: Borrower covenants and agrees with Lender
as follows:
(a) Borrower shall keep, and shall cause all operators,
tenants, subtenants, licensees and occupants of the
Premises to keep, the Premises in full compliance with
all Environmental Laws and all Environmental Permits and
shall not cause or permit the Premises or any part
thereof to be used for the storage, treatment,
generation, transportation, processing, handling,
production or disposal of any Hazardous Substances in
violation of any Environmental Laws or Environmental
Permits.
(b) Borrower shall comply with, and shall cause all
operators, tenants, subtenants, licensees and occupants
of the Premises to comply with, all applicable
Environmental Laws, and all orders, decrees, or
directives by federal, state, or local courts or
government agencies relating thereto, and shall obtain
and comply with, and shall cause all operators, tenants,
subtenants, licensees and occupants of the Premises to
obtain and comply with all Environmental Permits.
(c) Borrower shall not cause or permit any change to be made
in the present or intended use of the Premises which
would violate any applicable Environmental Law or
constitute non-compliance with any Environ mental
Permit.
(d) Borrower shall promptly provide Lender with a copy of
any and all notifications it receives of alleged
violation of any Environmental Law or Environmental
Permit and which it gives or receives with respect to
any past or present Release or the threat of a Release
on, at or from the Premises or any property adjacent to
or within the immediate vicinity of the Premises, and,
in any event, will immediately notify Lender of any such
Release or threat of a Release once Borrower has
knowledge of such Release or threat of a Release.
(e) Borrower shall undertake and complete all
investigations, studies, sampling and testing and all
removal and other remedial actions necessary to contain,
remove and clean up all Hazardous Substances that are
determined to be present at the Premises in accordance
with all applicable Environmental Laws and all
Environmental Permits.
5
<PAGE> 6
(f) Borrower shall at all times allow Lender and its
officers, employees, agents, representatives,
contractors and subcontractors reasonable access to the
Premises for inspection and testing and to relevant
books and records, for any items related to compliance
with Environmental Laws and Environmental Permits,
environmental reporting, record keeping, notices or
violations. Lender may inspect and conduct any tests on
the Premises required in the reasonable professional
judgment of Lender's engineer or legal counsel,
including taking soil, air, water, dust, waste or other
samples in order to determine whether (i) a Release has
occurred or (ii) the Borrower or any other party in
possession of the Premises are in continuing compliance
with all Environmental Laws and Environmental Permits.
(g) If at any time Lender obtains any evidence or
information which suggests that potential environmental
problems may exist at the Premises, Lender may require
that a full or supplemental environmental inspection and
audit report with respect to the Premises of a scope and
level of detail satisfactory to Lender be prepared by an
environmental engineer or other qualified person
acceptable to Lender, at Borrower's expense. Said audit
may include a physical inspection of the Premises, a
visual inspection of any property adjacent to or within
the immediate vicinity of the Premises, personnel
interviews and a review of all Environmental Permits. If
Lender requires, such inspection shall also include a
records search and/or subsurface testing on or at the
Premises for the presence of Hazardous Substances in the
Environment. All audits and inspections shall generally
comply with industry standards and Borrower shall be
provided an opportunity to comment on the scope of an
audit inspection work plan. If said audit report
indicates the presence of any Hazardous Substance or a
Release or the threat of a Release on, at or from the
Premises, Borrower shall promptly undertake and
diligently pursue to completion all necessary and
appropriate investigative, containment, removal, clean
up and other remedial actions, using methods recommended
by the engineer or other person who prepared said audit
report.
(h) Borrower agrees to reimburse Lender for any and all
expenses, costs and fees (including attorney's fees)
incurred in exercising any of Lender's rights to
inspect, investigate, audit, test or review matters
under this Agreement. Such costs shall be
6
<PAGE> 7
chargeable to the Borrower and shall be secured by any
and all Instruments of Collateral Security, as that term
is defined in the Loan and Security Agreement.
(i) Borrower shall reimburse Lender for any diminution in
the value of the Premises that results in a higher
loan-to-value ratio than exists on the date of this
Agreement, which diminution is caused by the presence of
Hazardous Substances on the Premises or by the breach of
any representation, warranty, covenant, obligation or
indemnification provision of this Agreement.
(j) Borrower shall comply with all of the conditions set
forth in the attached Appendix A, "Affirmative
Covenants."
IV. INDEMNIFICATION PROVISIONS: Borrower hereby covenants and
agrees, at its sole cost and expense, to indemnify, protect,
defend and save harmless each and every Indemnitee from and
against any and all damages, losses, liabilities, obligations,
penalties, claims, litigation, demands, defenses, judgments,
suits, actions, proceedings, costs, disbursements and/or
expenses (including, without limitation attorneys', consultants'
and experts' fees, expenses and disbursements) of any kind or
nature whatsoever by whomever asserted which may at any time be
imposed upon, incurred by or asserted or awarded against any
Indemnitee relating to, resulting from or arising out of the
past, present or future (a) use of the Premises for the storage,
treatment, generation, transportation, processing, handling,
production or disposal of any Hazardous Substance or as a
landfill or other waste disposal site or for military,
manufacturing or industrial purposes, (b) presence of any
Hazardous Substances or a Release or the threat of a Release on,
at or from the Premises, (c) appropriate investigative,
containment, removal, clean up and other remedial actions with
respect to a Release or the threat of any Release on, at or from
the Premises, (d) human exposure to any Hazardous Substance or
nuisances of whatever kind to the extent the same arise from the
condition of the Premises or the ownership, use, operation,
sale, transfer or conveyance thereof, (e) violation of any
applicable Environmental Law, (f) non-compliance with any
Environmental Permit or (g) material misrepresentation or
inaccuracy in any representation or warranty or a material
breach of or failure to perform any covenant made by Borrower in
this Agreement or arising out of Lender's exercise of any of its
rights under this Agreement (collectively, the "Indemnified
Matters").
7
<PAGE> 8
The liability of Borrower to each Indemnitee hereunder shall in
no way be limited, abridged, impaired or otherwise affected by (i) any amendment
or modification of the Loans Documents by or for the benefit of Borrower or any
subsequent owner of the Premises, (ii) any extensions of time for payment or
performance required by any of the Loans Documents, (iii) any extensions of time
for payment or performance required by any of the Loans Documents, (iv) the
release of Borrower, any guarantor of the Loans or any other person from the
performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the agreements, covenants, terms or provisions of
the Loans Documents, (v) any exculpatory provision contained in any of the Loans
Documents limiting Lender's recourse to property encumbered by the Mortgage or
to any other security or limiting Lender's rights to a deficiency judgment
against Borrower, (vi) any applicable statute of limitations, (vii) any
investigation or inquiry conducted by or on the behalf of Lender or any other
Indemnitee or any information which Lender or any other Indemnitee may have or
obtain with respect to the environmental or ecological condition of the Premises
(viii) the sale, assignment or foreclosure of the Note or the mortgage, (ix) the
sale, transfer, conveyance or lease of all or part of the Premises, (x) the
dissolution or liquidation of Borrower, (xi) the death or legal incapacity of
any Borrower, (xii) the release or discharge, in whole or in part, of any
Borrower in any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding or (xiii) any other
circumstances which might otherwise constitute a legal or equitable release or
discharge, in whole or in part, of Borrower under the Note, the Mortgage or
under this Agreement.
The indemnification agreement contained herein is wholly
independent of and in addition to any indemnification agreement heretofore given
to Lender or any other Indemnitee as part of the application process for the
Loans.
V. TERMINATION OF AGREEMENT: Notwithstanding anything to the
contrary contained herein, this Agreement shall terminate and be
of no further force and effect when all of the following
conditions are satisfied in full:
(a) all principal, interest and other sums evidenced or
secured by the Loans Documents and any other costs and
expenses incurred by Lender in connection with the Loans
or as may be required by this Agreement are paid in full
by Borrower;
(b) no Indemnitee has at any time or in any manner
participated in the management or control of, taken
possession of or title to the Premises or any portion
thereof, whether by foreclosure of the Mortgage, deed in
lieu of foreclosure or otherwise;
8
<PAGE> 9
(c) between the date of this Agreement and the date on which
the Loans is paid in full, as provided in clause (a)
above, there has been no change in any applicable
Environmental Law which would make the Lender liable in
respect of the Indemnified Matters notwithstanding the
fact that no event, circumstance or condition of the
nature described in clause (b) above ever occurred; and
(d) there exists no pending Indemnified Matters at the time
a, b and c of this paragraph 5 are satisfied in full.
VI. COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original. Said
counterparts shall constitute but one and the same instrument
and shall be binding upon each of the undersigned as fully and
completely as if all had signed the same instrument.
VII. SUCCESSORS AND ASSIGNS: This Assignment shall be binding upon
Borrower, its successors and assigns and shall inure to the
benefit of each Indemnitee.
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed as of the day and year first above written.
DECORA, INCORPORATED d/b/a
DECORA MANUFACTURING
By:________________________________
Timothy N. Burditt, Vice
President Finance
FLEET NATIONAL BANK
By: ________________________
Name: James M. Marini
Title: Vice President
9
<PAGE> 10
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this ____ day of April, 1998, before me personally appeared Timothy
N. Burditt, to me known, who being by me duly sworn, did depose and say that he
resides in Clifton Park, New York, that he is the Vice President, Finance of
DECORA, INCORPORATED d/b/a DECORA MANUFACTURING, the corporation described in
and which executed the above instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF ALBANY )
On this ____th day of April, 1998, before me personally appeared James
M. Marini, to me known, who being by me duly sworn, did depose and say that he
resides in Valatie, New York, that he is a Vice President of FLEET NATIONAL
BANK, the corporation described in and which executed the above instrument; and
that he signed his name thereto by order of the Board of Directors of said
corporation.
------------------------------
Notary Public
10
<PAGE> 1
Exhibit 10.68
OPTION AGREEMENT
THIS AGREEMENT is made effective as of January 8, 1998 by and between
Earl Wearsch (hereinafter referred to as "Optionee"), and Decora Industries,
Inc., a Delaware corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee has entered into an Employment Agreement with
Optionor's subsidiary Decora Manufacturing dated as of the date hereof;
WHEREAS, the Employment Agreement provides for compensation to Optionee
in the form of the issuance of options;
WHEREAS, Optionor desires to grant to Optionee and Optionee is desirous
of acquiring an option to purchase shares of the common stock of Optionor,
subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase authorized but unissued common shares of Optionor at such time and for
the purchase price specified below.
A. Optionor hereby gives and grants to Optionee, an option to
purchase 60,000 shares of the authorized but unissued common stock of Optionor
at an exercise price of $4.75 per share which shall vest as follows: 20,000
options shall vest as of the date hereof; 20,000 options shall vest twelve
months from the date hereof and 20,000 options shall vest twenty-four months
from the date hereof;
B. Each option shall be exercisable for three years from vesting;
and
C. Unvested options shall terminate as set forth in the
Employment Agreement.
<PAGE> 2
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other
disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased
and delivered to Optionee hereunder upon the exercise of
such option unless and until (a) such option or shares,
as applicable, are included in a registration statement
or a post-effective amendment under the Securities Act
which has been filed by the Optionor and declared
effective by the Securities and Exchange Commission (the
"SEC"), or (b) in the opinion of counsel for the
Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional
condition of its obligation to deliver the shares upon
exercise of any option hereunder, to make any
representations and warranties (including without limit
those set forth in Paragraph 5 hereof) with respect to
the shares as may, in the opinion of counsel to
Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any
other applicable law, regulation, or rule of any
governmental agency.
2
<PAGE> 3
B. Each certificate representing the shares issued pursuant
to this Agreement shall bear whatever legends are
required by federal or state law or by any governmental
agency. In particular, unless an appropriate
registration statement is filed pursuant to the
Securities Act with respect to the shares, each
certificate representing such shares shall be endorsed
on its face with the following legend or its equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION
LETTER OR AN OPINION OF COUNSEL TO THE ISSUER OR TO THE
HOLDER HEREOF REASONABLY SATISFACTORY TO THE ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared
by Optionor, unless and until an option is exercised;
and
B. Shall not be entitled to any voting rights by virtue of
an option; and
C. Acknowledges that the options granted hereby are
personal to Optionee and that Optionee may not sell,
assign, transfer or otherwise dispose of such options to
any other person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice
3
<PAGE> 4
of any default and Optionor shall have 10 days from receipt of said notice to
cure the stated default.
10. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
11. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
12. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
13. Arbitration. Any claim arising out of this agreement shall be
settled by binding arbitration in Albany, New York in accordance with the
Commercial Rules of the American Arbitration Association. The arbitrator shall
be an active member of the New York bar. The arbitrator shall prepare an award
in writing which shall include factual findings and any legal conclusions on
which the decision is based. Judgment upon an award to rendered may be entered
in any court having jurisdiction.
IN WITNESS WHEREOF, the parties have executed this option Agreement as
of the day and year first above written.
OPTIONOR OPTIONEE
DECORA INDUSTRIES, INC. EARL WEARSCH
By:____________________________ By:________________________________
Its:___________________________ Its:_______________________________
4
<PAGE> 1
Exhibit 10.69
OPTION AGREEMENT
THIS AGREEMENT is made effective as of February 19, 1998 by and between
Nathan Hevrony (hereinafter referred to as "Optionee"), and Decora Industries,
Inc., a Delaware corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee has performed numerous valuable services to the
Optionor, including serving as a director and Chief Executive Officer; and
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals
set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. From February 19, 1998, and up until and including February
18, 2003, Optionee shall have the right and option to purchase, at $5.50 per
share and Optionor shall have the obligation to issue to Optionee, 300,000
shares of the authorized but unissued common shares of Optionor. Such options
shall vest as follows: 100,000 shall vest immediately; 100,000 on February 19,
1999; and 100,000 shall vest on February 19, 2000.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
<PAGE> 2
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other
disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased
and delivered to Optionee hereunder upon the exercise of
such option unless and until (a) such option or shares,
as applicable, are included in a registration statement
or a post-effective amendment under the Securities Act
which has been filed by the Optionor and declared
effective by the Securities and Exchange Commission (the
"SEC"), or (b) in the opinion of counsel for the
Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional
condition of its obligation to deliver the shares upon
exercise of any option hereunder, to make any
representations and warranties (including without limit
those set forth in Paragraph 5 hereof) with respect to
the shares as may, in the opinion of counsel to
Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any
other applicable law, regulation, or rule of any
governmental agency.
B. Each certificate representing the shares issued pursuant
to this Agreement shall bear whatever legends are
required by federal or state law or by any governmental
agency. In particular, unless an appropriate
registration statement is filed pursuant to the
Securities Act with respect to the shares, each
certificate representing such shares shall be endorsed
on its face with the following legend or its equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION
LETTER OR AN OPINION OF COUNSEL TO THE ISSUER
2
<PAGE> 3
OR TO THE HOLDER HEREOF REASONABLY SATISFACTORY TO
THE ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared by
Optionor, unless and until an option is exercised; and
B. Shall not be entitled to any voting rights by virtue of an
option; and
C. Acknowledges that the options granted hereby are personal
to Optionee and that Optionee may not sell, assign,
transfer or otherwise dispose of such options to any other
person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Piggyback Registration Rights.
A. The Optionor will permit any option shares subject to this
agreement to be included, at the request of the Optionee in
any registration of securities of the Optionor (other than
shares of Common Stock pursuant to the Optionor's stock
option plan or stock purchase plan) under a registration
statement filed by the Optionor under the Securities Act.
The Optionor shall provide written notice to the Optionee
at least 30 days prior to the filing of any such
registration statement sent by registered mail to the
address of record of the Optionee. If Optionee shall
deliver a written request to the Optionor within ten (10)
business days after the mailing of such notice, setting
forth the number of securities which he intends to sell in
the public offering (the "Registered Securities"), and
requesting inclusion of such Registered Securities therein,
the Optionor agrees to include the Registered Securities in
such registration statement and related underwriting
agreements (if any) or if the Optionor eligible to use Form
S-3 permit Optionee to utilize a selling shareholders
Registration Statement on Form S-3. Notwithstanding the
above, the Optionee may only have option shares subject to
this agreement so registered one time.
B. The parties hereto agree that if the offering is
underwritten, the Registered Securities shall be for
purposes of the preceding sentence underwritten by the
3
<PAGE> 4
same underwriter or underwriters on terms no less
favorable than those applicable to the shares offered by
the Optionor or other stockholders pursuant to such
registration statement, and agree, at the request of the
Optionor or such other stockholders, to join with the
Optionor or such other stockholders in executing
appropriate underwriting agreements with such underwriter
or underwriters and to execute appropriate powers of
attorney and custodian agreements in forms acceptable to
the underwriter or underwriters, which agreements shall
not place any restrictions upon the sale or transfer of
the Registered Securities not otherwise placed on all
other shareholders whose shares are registered in such
registration statement. Optionee agrees that if, in spite
of the best efforts of the Optionor (which the Optionor
agrees to use), the inclusion of all of the Registered
Securities which he may desire to include in any such
registration statement shall not be acceptable to the
managing underwriter or underwriters of the offering
(acting reasonably and in good faith), some or all of his
Registered Securities may be excluded or withdrawn from
such registration statement in accordance with the
following provision: Optionee shall have the right to
include in such registration statement such number (but
only such number) of shares, as applicable, as shall bear
the same relationship to the total number of Units,
Warrants, or shares, as applicable, which the managing
underwriter or underwriters will permit to be included in
such registration statement by all holders of securities
who wish to register securities in such registration
statement.
C. Optionor shall pay all expenses associated with filing and
causing to become effective any registration statement and
with maintaining its effectiveness excepting only (i) the
underwriting discounts and commissions incurred directly
on the sale of any of Optionee's Registered Securities
included therein, and (ii) legal expense individually
incurred by Optionee, said discounts, commissions and
legal expenses with respect to the sale of Optionee's
shares to be borne by Optionee.
10. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
11. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
12. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
13. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
4
<PAGE> 5
14. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONEE
----------------------
Nathan Hevrony
OPTIONOR
Decora Industries, Inc.
By:____________________
Its:___________________
5
<PAGE> 1
Exhibit 10.70
OPTION AGREEMENT
THIS AGREEMENT is made effective as of February 19, 1998, by and between
Timothy Burditt (hereinafter referred to as "Optionee"), and Decora Industries,
Inc., a Delaware corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee has performed numerous valuable services to the
Optionor, including serving as Executive Vice President, Administration and
Finance;
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. From February 19, 1998, and up until and including February
18, 2003, Optionee shall have the right and option to purchase, at $5.50 per
share and Optionor shall have the obligation to issue to Optionee, 60,000 shares
of the authorized but unissued common shares of Optionor. Such options shall
vest as follows: 20,000 shall vest immediately; 20,000 shall vest on February
19, 1999 and 20,000 shall vest on February 19, 2000. Upon any termination of
Optionee's employment with Optionor (or any of its subsidiaries as applicable),
all unvested options shall terminate.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
<PAGE> 2
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other disposition
thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased and
delivered to Optionee hereunder upon the exercise of such
option unless and until (a) such option or shares, as
applicable, are included in a registration statement or a
post-effective amendment under the Securities Act which has
been filed by the Optionor and declared effective by the
Securities and Exchange Commission (the "SEC"), or (b) in
the opinion of counsel for the Optionor, no such
registration statement or post-effective amendment is
required, or (c) the SEC has first issued a "no action"
letter regarding any such proposed disposition of any
option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional condition
of its obligation to deliver the shares upon exercise of
any option hereunder, to make any representations and
warranties (including without limit those set forth in
Paragraph 5 hereof) with respect to the shares as may, in
the opinion of counsel to Optionor, be required to ensure
compliance with the Securities Act, the securities laws of
any state, or any other applicable law, regulation, or rule
of any governmental agency.
B. Each certificate representing the shares issued pursuant to
this Agreement shall bear whatever legends are required by
federal or state law or by any governmental agency. In
particular, unless an appropriate registration statement is
filed pursuant to the Securities Act with respect to the
shares, each certificate representing such shares shall be
endorsed on its face with the following legend or its
equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN EXEMPTION
FROM REGISTRATION UNDER SAID ACT OR THE RULES AND
REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION LETTER OR
AN OPINION OF COUNSEL TO THE ISSUER
2
<PAGE> 3
OR TO THE HOLDER HEREOF REASONABLY SATISFACTORY TO
THE ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared by
Optionor, unless and until an option is exercised; and
B. Shall not be entitled to any voting rights by virtue of an
option; and
C. Acknowledges that the options granted hereby are personal
to Optionee and that Optionee may not sell, assign,
transfer or otherwise dispose of such options to any other
person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
10. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
11. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
12. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
13. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
3
<PAGE> 4
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONEE
-----------------------
TIMOTHY BURDITT
OPTIONOR
Decora Industries, Inc.
By:____________________
Its:___________________
4
<PAGE> 1
Exhibit 10.71
OPTION AGREEMENT
THIS AGREEMENT is made effective as of February 19, 1998, by and between
Richard DeCoste (hereinafter referred to as "Optionee"), and Decora Industries,
Inc., a Delaware corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee has performed numerous valuable services to Optionor's
Decora Manufacturing subsidiary; and
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. From February 19, 1998, and up until and including February
18, 2003, Optionee shall have the right and option to purchase, at $6.00 per
share and Optionor shall have the obligation to issue to Optionee, 30,000 shares
of the authorized but unissued common shares of Optionor. Such options shall
vest as follows: 10,000 shall vest immediately; 10,000 shall vest on February
19, 1999 and 10,000 shall vest on February 19, 2000. Upon any termination of
Optionee's employment with Optionor (or any of its subsidiaries as applicable),
all unvested options shall terminate.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
1
<PAGE> 2
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other
disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased
and delivered to Optionee hereunder upon the exercise of
such option unless and until (a) such option or shares,
as applicable, are included in a registration statement
or a post-effective amendment under the Securities Act
which has been filed by the Optionor and declared
effective by the Securities and Exchange Commission (the
"SEC"), or (b) in the opinion of counsel for the
Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional
condition of its obligation to deliver the shares upon
exercise of any option hereunder, to make any
representations and warranties (including without limit
those set forth in Paragraph 5 hereof) with respect to
the shares as may, in the opinion of counsel to
Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any
other applicable law, regulation, or rule of any
governmental agency.
B. Each certificate representing the shares issued pursuant
to this Agreement shall bear whatever legends are
required by federal or state law or by any governmental
agency. In particular, unless an appropriate
registration statement is filed pursuant to the
Securities Act with respect to the shares, each
certificate representing such shares shall be endorsed
on its face with the following legend or its equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION
LETTER OR AN OPINION OF COUNSEL TO THE ISSUER
2
<PAGE> 3
OR TO THE HOLDER HEREOF REASONABLY SATISFACTORY TO THE
ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared
by Optionor, unless and until an option is exercised;
and
B. Shall not be entitled to any voting rights by virtue of
an option; and
C. Acknowledges that the options granted hereby are
personal to Optionee and that Optionee may not sell,
assign, transfer or otherwise dispose of such options to
any other person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
10. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
11. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
12. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
13. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
3
<PAGE> 4
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONEE
----------------------------------------
RICHARD DECOSTE
OPTIONOR
Decora Industries, Inc.
By:
-------------------------------------
Its:
------------------------------------
4
<PAGE> 1
Exhibit 10.72
OPTION AGREEMENT
THIS AGREEMENT is made effective as of February 19, 1998, by and between
Earl Wearsch (hereinafter referred to as "Optionee"), and Decora Industries,
Inc., a Delaware corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee has been appointed as Executive Vice President of
Optionor and President of Optionor's Decora Manufacturing subsidiary, and
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. From February 19, 1998, and up until and including February
18, 2003, Optionee shall have the right and option to purchase, at $6.00 per
share and Optionor shall have the obligation to issue to Optionee, 60,000 shares
of the authorized but unissued common shares of Optionor. Such options shall
vest as follows: 20,000 shall vest immediately; 20,000 shall vest on February
19, 1999 and 20,000 shall vest on February 19, 2000. Upon any termination of
Optionee's employment with Optionor (or any of its subsidiaries as applicable),
all unvested options shall terminate.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
1
<PAGE> 2
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other
disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased
and delivered to Optionee hereunder upon the exercise of
such option unless and until (a) such option or shares,
as applicable, are included in a registration statement
or a post-effective amendment under the Securities Act
which has been filed by the Optionor and declared
effective by the Securities and Exchange Commission (the
"SEC"), or (b) in the opinion of counsel for the
Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional
condition of its obligation to deliver the shares upon
exercise of any option hereunder, to make any
representations and warranties (including without limit
those set forth in Paragraph 5 hereof) with respect to
the shares as may, in the opinion of counsel to
Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any
other applicable law, regulation, or rule of any
governmental agency.
B. Each certificate representing the shares issued pursuant
to this Agreement shall bear whatever legends are
required by federal or state law or by any governmental
agency. In particular, unless an appropriate
registration statement is filed pursuant to the
Securities Act with respect to the shares, each
certificate representing such shares shall be endorsed
on its face with the following legend or its equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION
LETTER OR AN OPINION OF COUNSEL TO THE ISSUER
2
<PAGE> 3
OR TO THE HOLDER HEREOF REASONABLY SATISFACTORY TO THE
ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared
by Optionor, unless and until an option is exercised;
and
B. Shall not be entitled to any voting rights by virtue of
an option; and
C. Acknowledges that the options granted hereby are
personal to Optionee and that Optionee may not sell,
assign, transfer or otherwise dispose of such options to
any other person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
10. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
11. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
12. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
13. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
3
<PAGE> 4
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONEE
-------------------------------------
EARL WEARSCH
OPTIONOR
Decora Industries, Inc.
By:
----------------------------------
Its:
---------------------------------
4
<PAGE> 1
Exhibit 10.73
OPTION AGREEMENT
THIS AGREEMENT is made effective as of February 19, 1998, by and between
Frank J. Nolfi, Jr. (hereinafter referred to as "Optionee"), and Decora
Industries, Inc., a Delaware corporation (hereinafter referred to as
"Optionor").
RECITALS:
WHEREAS, Optionee has performed numerous valuable services to the
Optionor, including serving as Vice President, Finance of Optionor's subsidiary,
Decora Incorporated; and
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. From February 19, 1998, and up until and including February
18, 2003, Optionee shall have the right and option to purchase, at $6.00 per
share and Optionor shall have the obligation to issue to Optionee, 40,000 shares
of the authorized but unissued common shares of Optionor. Such options shall
vest as follows: 13,333 shall vest immediately; 13,333 shall vest on February
19, 1999 and 13,334 shall vest on February 19, 2000. Upon any termination of
Optionee's employment with Optionor (or any of its subsidiaries as applicable),
all unvested options shall terminate.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
1
<PAGE> 2
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other
disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased
and delivered to Optionee hereunder upon the exercise of
such option unless and until (a) such option or shares,
as applicable, are included in a registration statement
or a post-effective amendment under the Securities Act
which has been filed by the Optionor and declared
effective by the Securities and Exchange Commission (the
"SEC"), or (b) in the opinion of counsel for the
Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional
condition of its obligation to deliver the shares upon
exercise of any option hereunder, to make any
representations and warranties (including without limit
those set forth in Paragraph 5 hereof) with respect to
the shares as may, in the opinion of counsel to
Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any
other applicable law, regulation, or rule of any
governmental agency.
B. Each certificate representing the shares issued pursuant
to this Agreement shall bear whatever legends are
required by federal or state law or by any governmental
agency. In particular, unless an appropriate
registration statement is filed pursuant to the
Securities Act with respect to the shares, each
certificate representing such shares shall be endorsed
on its face with the following legend or its equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION
LETTER OR AN OPINION OF COUNSEL TO THE ISSUER
2
<PAGE> 3
OR TO THE HOLDER HEREOF REASONABLY SATISFACTORY TO THE
ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared
by Optionor, unless and until an option is exercised;
and
B. Shall not be entitled to any voting rights by virtue of
an option; and
C. Acknowledges that the options granted hereby are
personal to Optionee and that Optionee may not sell,
assign, transfer or otherwise dispose of such options to
any other person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
10. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
11. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
12. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
13. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
3
<PAGE> 4
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONEE
---------------------------------------
FRANK J. NOLFI, JR.
OPTIONOR
Decora Industries, Inc.
By:
------------------------------------
Its:
-----------------------------------
4
<PAGE> 1
Exhibit 10.74
OPTION AGREEMENT
THIS AGREEMENT is made effective as of February 19, 1998, by and between
Bernhard Muller (hereinafter referred to as "Optionee"), and Decora Industries,
Inc., a Delaware corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee has been appointed as Executive Vice President of
Optionor and serves as one of the two members on the Management Board of the
Company's subsidiary Konrad Hornschuch AG ("Hornschuch"); and
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. During the periods described below in this paragraph, Optionee
shall have the right and option to purchase, at $5.00 per share and Optionor
shall have the obligation to issue to Optionee, up to 50,000 shares of the
authorized but unissued common shares of Optionor, upon Optionee's meeting or
exceeding certain financial targets set forth in the letter agreement dated
February 20, 1998, by and between Optionee and Optionor (the "Letter
Agreement"), a copy of which is attached hereto as Exhibit A and incorporated
herein by this reference. Such options shall vest in accordance with the terms
of the Letter Agreement upon satisfaction of the conditions stated therein as
follows: options to purchase up to 16,666, 16,666 and 16,667 shares shall vest
for the fiscal years 1998, 1999 and 2000, respectively, of Hornschuch on the
applicable date that incentive compensation is paid pursuant to the Letter
Agreement for each such fiscal year. Optionee may exercise any option granted
hereunder at any time during the three years following the date such option
vested. In the event that Optionee ceases to be employed by Optionor for any
reason whatsoever, any option granted hereunder that has not yet vested shall be
canceled immediately upon such cessation.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares
<PAGE> 2
duly endorsed. Optionee may purchase all or any part of the Shares subject to
options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other
disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased
and delivered to Optionee hereunder upon the exercise of
such option unless and until (a) such option or shares,
as applicable, are included in a registration statement
or a post-effective amendment under the Securities Act
which has been filed by the Optionor and declared
effective by the Securities and Exchange Commission (the
"SEC"), or (b) in the opinion of counsel for the
Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional
condition of its obligation to deliver the shares upon
exercise of any option hereunder, to make any
representations and warranties (including without limit
those set forth in Paragraph 5 hereof) with respect to
the shares as may, in the opinion of counsel to
Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any
other applicable law, regulation, or rule of any
governmental agency.
B. Each certificate representing the shares issued pursuant
to this Agreement shall bear whatever legends are
required by federal or state law or by any governmental
agency. In particular, unless an appropriate
registration statement is filed pursuant to the
Securities Act with respect to the shares, each
certificate representing such shares shall be endorsed
on its face with the following legend or its equivalent:
2
<PAGE> 3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION
LETTER OR AN OPINION OF COUNSEL TO THE ISSUER OR TO THE
HOLDER HEREOF REASONABLY SATISFACTORY TO THE ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared
by Optionor, unless and until an option is exercised;
and
B. Shall not be entitled to any voting rights by virtue of
an option; and
C. Acknowledges that the options granted hereby are
personal to Optionee and that Optionee may not sell,
assign, transfer or otherwise dispose of such options to
any other person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
10. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
11. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
12. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
3
<PAGE> 4
13. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONEE:
--------------------------
BERNHARD MULLER
OPTIONOR:
Decora Industries, Inc.
By:_______________________
Its:______________________
4
<PAGE> 1
Exhibit 10.75
OPTION AGREEMENT
THIS AGREEMENT is made effective as of February 19, 1998, by and between
Hans-Georg Stahmer (hereinafter referred to as "Optionee"), and Decora
Industries, Inc., a Delaware corporation (hereinafter referred to as
"Optionor").
RECITALS:
WHEREAS, Optionee has been appointed as Executive Vice President of
Optionor and is President of its subsidiary, Konrad Hornschuch AG
("Hornschuch"); and
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. During the periods described below in this paragraph, Optionee
shall have the right and option to purchase, at $5.00 per share and Optionor
shall have the obligation to issue to Optionee, up to 60,000 shares of the
authorized but unissued common shares of Optionor, upon Optionee's meeting or
exceeding certain financial targets set forth in the letter agreement dated
March 16, 1998, by and between Optionee and Optionor (the "Letter Agreement"), a
copy of which is attached hereto as Exhibit A and incorporated herein by this
reference. Such options shall vest in accordance with the terms of the Letter
Agreement upon satisfaction of the conditions stated therein as follows: options
to purchase up to 20,000 shares shall vest for each of the Hornschuch fiscal
years 1998, 1999 and 2000 on each of the dates that incentive compensation is
paid pursuant to the Letter Agreement for each such fiscal year, which dates
shall be within 30 days of the issuance of the Optionor's annual report on Form
10-K. Optionee may exercise any option granted hereunder at any time during the
three years following the date such option vested. In the event that Optionee
ceases to be employed by Optionor for any reason whatsoever, any option granted
hereunder that has not yet vested shall be canceled immediately upon such
cessation.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
<PAGE> 2
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other
disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased
and delivered to Optionee hereunder upon the exercise of
such option unless and until (a) such option or shares,
as applicable, are included in a registration statement
or a post-effective amendment under the Securities Act
which has been filed by the Optionor and declared
effective by the Securities and Exchange Commission (the
"SEC"), or (b) in the opinion of counsel for the
Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional
condition of its obligation to deliver the shares upon
exercise of any option hereunder, to make any
representations and warranties (including without limit
those set forth in Paragraph 5 hereof) with respect to
the shares as may, in the opinion of counsel to
Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any
other applicable law, regulation, or rule of any
governmental agency.
B. Each certificate representing the shares issued pursuant
to this Agreement shall bear whatever legends are
required by federal or state law or by any governmental
agency. In particular, unless an appropriate
registration statement is filed pursuant to the
Securities Act with respect to the shares, each
certificate representing such shares shall be endorsed
on its face with the following legend or its equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY
2
<PAGE> 3
HAVE BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION
LETTER OR AN OPINION OF COUNSEL TO THE ISSUER OR TO THE
HOLDER HEREOF REASONABLY SATISFACTORY TO THE ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared
by Optionor, unless and until an option is exercised;
and
B. Shall not be entitled to any voting rights by virtue of
an option; and
C. Acknowledges that the options granted hereby are
personal to Optionee and that Optionee may not sell,
assign, transfer or otherwise dispose of such options to
any other person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
10. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
11. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
12. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
13. Litigation and Attorneys' Fees. In the event of any litigation
between the parties in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
3
<PAGE> 4
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONEE:
_____________________________
HANS-GEORG STAHMER
OPTIONOR:
Decora Industries, Inc.
By:________________________
Its:________________________
4
<PAGE> 1
Exhibit 10.76
OPTION AGREEMENT
THIS AGREEMENT is made effective as of February 19, 1998, by and between
[name of non-employee director] (hereinafter referred to as "Optionee"), and
Decora Industries, Inc., a Delaware corporation (hereinafter referred to as
"Optionor").
RECITALS:
WHEREAS, Optionee has performed numerous valuable services to the
Optionor, including serving as a director;
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
has granted to Optionee on an annual basis an option to purchase shares of the
common stock of Optionor;
WHEREAS, Optionee has not been granted an option to purchase the common
stock of Optionor since August 1996;
WHEREAS, Optionor now desires to grant to Optionee and Optionee is
desirous of acquiring an option to purchase a total of 40,000 shares of the
common stock of Optionor (20,000 for 1997 service and 20,000 for 1998 service)
subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. From February 19, 1998, and up until and including February
18, 2003, Optionee shall have the right and option to purchase, at $5.50 per
share, and Optionor shall have the obligation to issue to Optionee, 40,000
shares of the authorized but unissued common shares of Optionor.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the
<PAGE> 2
options being granted hereby, free of all pledges, liens and encumbrances,
except as stated in paragraph 5.
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other
disposition thereof.
B. Optionee will not sell, transfer, or make any other
disposition of any option or the shares to be purchased
and delivered to Optionee hereunder upon the exercise of
such option unless and until (a) such option or shares,
as applicable, are included in a registration statement
or a post-effective amendment under the Securities Act
which has been filed by the Optionor and declared
effective by the Securities and Exchange Commission (the
"SEC"), or (b) in the opinion of counsel for the
Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional
condition of its obligation to deliver the shares upon
exercise of any option hereunder, to make any
representations and warranties (including without limit
those set forth in Paragraph 5 hereof) with respect to
the shares as may, in the opinion of counsel to
Optionor, be required to ensure compliance with the
Securities Act, the securities laws of any state, or any
other applicable law, regulation, or rule of any
governmental agency.
B. Each certificate representing the shares issued pursuant
to this Agreement shall bear whatever legends are
required by federal or state law or by any governmental
agency. In particular, unless an appropriate
registration statement is filed pursuant to the
Securities Act with respect to the shares, each
certificate representing such shares shall be endorsed
on its face with the following legend or its equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE
2
<PAGE> 3
RULES AND REGULATIONS THEREUNDER EVIDENCED BY A
NO-ACTION LETTER OR AN OPINION OF COUNSEL TO THE ISSUER
OR TO THE HOLDER HEREOF REASONABLY SATISFACTORY TO THE
ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared
by Optionor, unless and until an option is exercised;
and
B. Shall not be entitled to any voting rights by virtue of
an option; and
C. Acknowledges that the options granted hereby are
personal to Optionee and that Optionee may not sell,
assign, transfer or otherwise dispose of such options to
any other person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Piggyback Registration Rights.
A. The Optionor will permit any option shares subject to
this agreement to be included, at the request of the
Optionee in any registration of securities of the
Optionor (other than shares of Common Stock pursuant to
the Optionor's stock option plan or stock purchase plan)
under a registration statement filed by the Optionor
under the Securities Act. The Optionor shall provide
written notice to the Optionee at least 30 days prior to
the filing of any such registration statement sent by
registered mail to the address of record of the
Optionee. If Optionee shall deliver a written request to
the Optionor within ten (10) business days after the
mailing of such notice, setting forth the number of
securities which he intends to sell in the public
offering (the "Registered Securities"), and requesting
inclusion of such Registered Securities therein, the
Optionor agrees to include the Registered Securities in
such registration statement and related underwriting
agreements (if any) or if the Optionor eligible to use
Form S-3 permit Optionee to utilize a selling
shareholders Registration Statement on Form S-3.
Notwithstanding the above, the Optionee may only have
option shares subject to this agreement so registered
one time.
3
<PAGE> 4
B. The parties hereto agree that if the offering is
underwritten, the Registered Securities shall be for
purposes of the preceding sentence underwritten by the
same underwriter or underwriters on terms no less
favorable than those applicable to the shares offered by
the Optionor or other stockholders pursuant to such
registration statement, and agree, at the request of the
Optionor or such other stockholders, to join with the
Optionor or such other stockholders in executing
appropriate underwriting agreements with such
underwriter or underwriters and to execute appropriate
powers of attorney and custodian agreements in forms
acceptable to the underwriter or underwriters, which
agreements shall not place any restrictions upon the
sale or transfer of the Registered Securities not
otherwise placed on all other shareholders whose shares
are registered in such registration statement. Optionee
agrees that if, in spite of the best efforts of the
Optionor (which the Optionor agrees to use), the
inclusion of all of the Registered Securities which he
may desire to include in any such registration statement
shall not be acceptable to the managing underwriter or
underwriters of the offering (acting reasonably and in
good faith), some or all of his Registered Securities
may be excluded or withdrawn from such registration
statement in accordance with the following provision:
Optionee shall have the right to include in such
registration statement such number (but only such
number) of shares, as applicable, as shall bear the same
relationship to the total number of Units, Warrants, or
shares, as applicable, which the managing underwriter or
underwriters will permit to be included in such
registration statement by all holders of securities who
wish to register securities in such registration
statement.
C. Optionor shall pay all expenses associated with filing
and causing to become effective any registration
statement and with maintaining its effectiveness
excepting only (i) the underwriting discounts and
commissions incurred directly on the sale of any of
Optionee's Registered Securities included therein, and
(ii) legal expense individually incurred by Optionee,
said discounts, commissions and legal expenses with
respect to the sale of Optionee's shares to be borne by
Optionee.
10. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
11. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
12. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
4
<PAGE> 5
13. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
14. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.
IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.
OPTIONOR OPTIONEE
Decora Industries, Inc.
By:______________________________
Its:_____________________________ _________________________
[Name of Non-Employee Director]
5
<PAGE> 1
Exhibit 10.77
OPTION AGREEMENT
THIS AGREEMENT is made effective as of June 1, 1997 by and between
Richard DeCoste (hereinafter referred to as "Optionee"), and Decora Industries,
Inc., a Delaware corporation (hereinafter referred to as "Optionor").
RECITALS:
WHEREAS, Optionee is the Vice President of Operations of Optionor; and
WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereby agree as follows:
1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.
2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase heretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.
A. Optionor hereby gives and grants to Optionee, an option to
purchase up to 100,000 shares of the common stock of Optionor. The option shall
be exercisable at an exercise price of $1.00 (the fair market value of a share
of common stock as of the date hereof).
B. Such options shall all be vested.
C. The options shall be exercisable for three years following
vesting. Notwithstanding the foregoing, upon termination of Optionee's
employment with Decora Manufacturing no further options shall vest and Optionee
shall have a maximum of seven months to exercise the vested options hereunder.
3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
<PAGE> 2
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.
4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.
5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:
A. The options granted hereby and the Shares which will be
purchased by and delivered to Optionee upon exercise of
such options are being acquired by Optionee for his own
account and not with a view to resale or other disposition
thereof.
B. Optionee will not sell, transfer, or make any other
disposition of the shares to be purchased and delivered to
Optionee hereunder upon the exercise of such option unless
and until (a) such option or shares, as applicable, are
included in a registration statement or a post-effective
amendment under the Securities Act which has been filed by
the Optionor and declared effective by the Securities and
Exchange Commission (the "SEC"), or (b) in the opinion of
counsel for the Optionor, no such registration statement or
post-effective amendment is required, or (c) the SEC has
first issued a "no action" letter regarding any such
proposed disposition of any option or the shares.
6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:
A. Optionor may require Optionee, as an additional condition
of its obligation to deliver the shares upon exercise of
any option hereunder, to make any representations and
warranties (including without limit those set forth in
Paragraph 5 hereof) with respect to the shares as may, in
the opinion of counsel to Optionor, be required to ensure
compliance with the Securities Act, the securities laws of
any state, or any other applicable law, regulation, or rule
of any governmental agency.
B. Each certificate representing the shares issued pursuant to
this Agreement shall bear whatever legends are required by
federal or state law or by any governmental agency. In
particular, unless an appropriate registration statement is
filed pursuant to the Securities Act with respect to the
shares,
-2-
<PAGE> 3
each certificate representing such shares shall be
endorsed on its face with the following legend or its
equivalent:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION LETTER
OR AN OPINION OF COUNSEL TO THE ISSUER OR TO THE HOLDER
HEREOF REASONABLY SATISFACTORY TO THE ISSUER.
7. Restrictions. Optionee:
A. Shall not be entitled to any type of dividend declared by
Optionor, unless and until an option is exercised; and
B. Shall not be entitled to any voting rights by virtue of an
option; and
C. Acknowledges that the options granted hereby are personal
to Optionee and that Optionee may not sell, assign,
transfer or otherwise dispose of such options to any other
person.
8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.
9. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.
10. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.
-3-
<PAGE> 4
11. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.
12. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.
13. Arbitration: Any claim arising out of this Agreement shall be
settled by binding arbitration in Albany, New York in accordance with the
Commercial Rules of the American Arbitration Association. The arbitrator shall
be an active member of the New York bar. The arbitrator shall prepare an award
in writing which shall include factual findings and any legal conclusions on
which the decision is based. Judgement upon an award so rendered may be entered
in any court having jurisdiction
IN WITNESS WHEREOF, the parties have executed this option Agreement as
of the day and year first above written.
OPTIONOR OPTIONEE
DECORA INDUSTRIES, INC.
By:__________________________
Its:_________________________ ----------------------
RICHARD DECOSTE
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 1,807
<SECURITIES> 0
<RECEIVABLES> 28,197
<ALLOWANCES> (2,148)
<INVENTORY> 26,964
<CURRENT-ASSETS> 58,214
<PP&E> 56,242
<DEPRECIATION> (12,090)
<TOTAL-ASSETS> 131,216
<CURRENT-LIABILITIES> 42,081
<BONDS> 50,644
0
0
<COMMON> 73
<OTHER-SE> 18,016
<TOTAL-LIABILITY-AND-EQUITY> 131,216
<SALES> 98,407
<TOTAL-REVENUES> 98,407
<CGS> 68,220
<TOTAL-COSTS> 85,897
<OTHER-EXPENSES> 672
<LOSS-PROVISION> 789
<INTEREST-EXPENSE> 3,829
<INCOME-PRETAX> 7,220
<INCOME-TAX> 3,278
<INCOME-CONTINUING> 2,730
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,730
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.35
</TABLE>
