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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) OCTOBER 17, 1995
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AMRE, INC. (Exact Name
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of Registrant as Specified in Charter)
DELAWARE 1-9632 75-2041737
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
8585 N. STEMMONS FREEWAY, SOUTH TOWER, DALLAS, TX 75247
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including are code: (214) 658-6300
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On October 17, 1995, TM Acquisition Corp. and Century 21 Real Estate
Corporation (collectively referred to herein as "21"), subsidiaries of HFS
Incorporated, and American Remodeling, Inc. ("ARI"), a wholly-owned subsidiary
of AMRE, Inc. ("AMRE"), entered into a License Agreement (the "LICENSE
AGREEMENT"), pursuant to which 21 has granted to ARI an exclusive 20 year
license to operate under the name "Century 21 Home Improvements" for the
marketing, sale and installation of certain home improvement products. ARI
will make royalty payments to 21 in initial amounts equal to the greater of $11
million per year or 3% of revenues, with the minimum royalty payment increasing
to an estimated amount of $40 million by the end of the 20 year term of the
License Agreement and will make contributions to an advertising fund in the
amount of $10 million per year. ARI also has the right to grant sub-licenses
under the License Agreement. ARI will not renew its current License Agreement
with Sears, Roebuck & Co. when it expires on December 31, 1995.
Concurrently with the execution of the License Agreement, AMRE entered
into the following other agreements:
(i) a Preferred Stock Purchase Agreement (the "PREFERRED STOCK
PURCHASE AGREEMENT") between AMRE and HFS Incorporated ("HFS") pursuant to
which HFS has agreed to purchase 300,000 shares of Senior Convertible Preferred
Stock of AMRE (the " SENIOR CONVERTIBLE PREFERRED STOCK") at $10 per share.
The Senior Convertible Preferred Stock will pay a quarterly dividend of 8% per
annum, is convertible into common stock of AMRE ("COMMON STOCK") at $5.90 per
share, and gives HFS the right to designate two members of AMRE'S Board of
Directors;
(ii) a Credit Agreement between AMRE and HFS (the "CREDIT
AGREEMENT") pursuant to which HFS has agreed to provide a revolving credit
facility in an amount up to $4 million. The Credit Agreement provides for a
commitment fee of 1/2% of the unused portion of the facility and provides that
loans made thereunder carry an interest rate of LIBOR plus 1 1/2%. Under the
Credit Agreement AMRE is subject to certain covenants, including limitations on
indebtedness and liens, limitations on asset dispositions, restrictions on the
payment of dividends, and restrictions on certain fundamental changes. Loans
made under the Credit Agreement will be guaranteed by subsidiaries of AMRE,
including ARI. The Credit Agreement will expire on October 17, 1998;
(iii) a Letter Agreement between AMRE and David Moore ("MOORE") (the
"LETTER AGREEMENT") pursuant to which AMRE in consideration for services
provided by Moore in connection with the negotiation of the License Agreement
and related transactions, among other things, has agreed to:
(a) appoint Moore to its Board of Directors;
(b) issue to Moore options to purchase 200,000 shares of
Common Stock at $5.00 per share and 200,000 shares of Common Stock at
$5.50 per share (which options were issued on October 17, 1995);
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(c) issue to Moore 200,000 shares of Common Stock;
(d) guarantee a $900,000 cash payment to Moore;
(e) grant a sublicense to a corporation controlled by
Moore to operate under the trademarks granted under the License
Agreement; and
(f) enter into a Stock Purchase Agreement (the "MOORE
STOCK PURCHASE AGREEMENT") with Moore or his designees pursuant to
which AMRE will issue 200,000 additional shares of Common Stock at
$5.00 per share.
The Preferred Stock Purchase Agreement, the Credit Agreement and the
obligation to enter into the Moore Stock Purchase Agreement may be terminated
by either party thereto if the conditions to closing have not been satisfied by
January 15, 1996.
The preceding descriptions of the License Agreement, the Preferred
Stock Purchase Agreement, the Credit Agreement, the Moore Stock Purchase
Agreement and the Letter Agreement are not complete and are qualified in their
entirety by the respective agreements, a copy of each of which is filed as an
Exhibit hereto.
ITEM 7(C). EXHIBITS
Exhibit 7.1 License Agreement, dated October 17, 1995, among TM
Acquisition Corp. and Century 21 Real Estate
Corporation and American Remodeling, Inc.
Exhibit 7.2 Preferred Stock Purchase Agreement, dated October 17,
between AMRE, Inc. and HFS Incorporated.
Exhibit 7.3 Credit Agreement, dated October 17, 1995, between
AMRE, Inc. and HFS Incorporated.
Exhibit 7.4 Letter Agreement, dated October 17, 1995, between
AMRE, Inc. and David Moore.
Exhibit 7.5 $5.00 Stock Option Agreement, dated October 17, 1995,
between AMRE, Inc. and David Moore.*
Exhibit 7.6 $5.50 Stock Option Agreement, dated October 17, 1995,
between AMRE, Inc. and David Moore.*
Exhibit 7.7 Stock Purchase Agreement between David Moore or his
designees and AMRE, Inc.*
Exhibit 7.8 Press Release dated October 17, 1995.
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* Filed herewith as an Exhibit to Exhibit 7.4 hereto.
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SIGNATURES
AMRE, INC.
Date: October 24, 1995 By: /s/ C. CURTIS EVERETT
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C. Curtis Everett
Vice President-Law
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
Exhibit 7.1 License Agreement, dated October 17, 1995, among TM
Acquisition Corp. and Century 21 Real Estate
Corporation and American Remodeling, Inc.
Exhibit 7.2 Preferred Stock Purchase Agreement, dated October 17,
between AMRE, Inc. and HFS Incorporated.
Exhibit 7.3 Credit Agreement, dated October 17, 1995, between
AMRE, Inc. and HFS Incorporated.
Exhibit 7.4 Letter Agreement, dated October 17, 1995, between
AMRE, Inc. and David Moore.
Exhibit 7.5 $5.00 Stock Option Agreement, dated October 17, 1995,
between AMRE, Inc. and David Moore.*
Exhibit 7.6 $5.50 Stock Option Agreement, dated October 17, 1995,
between AMRE, Inc. and David Moore.*
Exhibit 7.7 Stock Purchase Agreement between David Moore or his
designees and AMRE, Inc.*
Exhibit 7.8 Press Release dated October 17, 1995.
</TABLE>
__________________
* Filed herewith as an Exhibit to Exhibit 7.4 hereto.
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EXHIBIT 7.1
LICENSE AGREEMENT
This LICENSE AGREEMENT ("Agreement") is entered into as of the 17th
day of October, 1995 between TM Acquisition Corp., a Delaware corporation, with
an address at 3838 East Van Buren, Phoenix, Arizona 85008 ("Licensor"), Century
21 Real Estate Corporation, a Delaware corporation, with an address at 339
Jefferson Road, Parsippany, New Jersey 07054 ("Century 21"), and American
Remodeling, Inc. a Texas Corporation, with an address at 8585 North Stemmons
Freeway, Dallas, Texas 75247 ("Licensee").
WHEREAS, Century 21, an Affiliate of Licensor, is the owner of
registrations and applications for, and common law rights in, the trademark
"CENTURY 21" and the stylized version and logo depicted on Exhibit A hereto,
and the trade dress used in connection with or as part of the foregoing (the
"Trade Dress") (all of the foregoing, individually and collectively, the
"Trademark"); and
WHEREAS, Century 21, has granted to Licensor an exclusive license to
the Trademark in connection with the marketing, selling, furnishing, and
installation of home improvement products pursuant to a license agreement dated
the date hereof (the "Master License"); and
WHEREAS, Licensee is engaged in the business of marketing, selling,
furnishing, and installing home improvement products; and
WHEREAS, Licensee desires to obtain, and Licensor is willing to grant,
a license pursuant to which Licensee shall have the right to use the Trademark
in connection with the marketing, selling, furnishing, and installation of home
improvement products in the United States, Canada (as now constituted), and
Mexico on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Definitions. As used herein, the term:
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1.1. "Advertising Contribution" shall have the meaning set forth in
Subsection 8.1.
1.2. "Affiliate" shall mean, with respect to Licensor or Licensee,
any other person, entity, or organization directly or indirectly controlling,
controlled by, or under common control with, the Licensor or Licensee at any
time during the period for which the determination of affiliation with Licensor
or Licensee is being made.
1.3. "Century 21" shall have the meaning set forth in the Preamble.
1.4. "Confidential Information" shall mean any nonpublic
information, technical data, or know-how which relates to the business,
services, or products of either party or a third party, including without
limitation, any customer lists, salary information, research, products,
services, developments, inventions, processes, techniques, designs, or
distribution, marketing, financial, merchandising and/or sales information.
1.5. "Contract Revenue" shall have the meaning set forth in
Subsection 11.2.
1.6. "Contract(s)" shall mean all contracts of any nature entered
into by Licensee with its customers relating to the provision or sale of
Licensed Products or Licensed Services.
1.7. "Current License Agreement" shall mean the current license
agreement between Licensee and its current licensor under which Licensee
currently sells the Licensed Products and Licensed Services.
1.8. "Earned Royalties" shall have the meaning set forth in
Subsection 11.2.
1.9. "GDP" shall have the meaning set forth in Section 8.1.
1.10. "Franchisee(s)" shall mean the franchisees of Century 21.
1.11. "Joint Referral Program" shall have the meaning set forth in
Subsection 16.1.
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1.12. "License" shall mean the exclusive right to use the Trademark
in the form set forth on Exhibit A hereto in connection with the Licensed
Products and Licensed Services in the Territory during the Term.
1.13. "Licensed Products" shall mean only those home improvement
products specifically designated in Exhibit B hereto and that are sold or
offered for sale for use in Residential Properties.
1.14. "Licensed Services" shall mean the marketing, sale,
furnishing, and installation of Licensed Products for Residential Properties.
1.15. "Licensor" shall have the meaning set forth in the Preamble.
1.16. "Licensor Lists" shall have the meaning set forth in
Subsection 22.4.
1.17. "Licensee" shall have the meaning set forth in the Preamble.
1.18. "Master License" shall have the meaning set forth in the
Preamble.
1.19. "Minimum Royalties" shall have the meaning set forth in
Subsection 11.1.
1.20. "N.A.F." shall have the meaning set forth in Subsection 8.1.
1.21. "Other Products" shall have the meaning set forth in
Subsection 3.1.
1.22. "Prime Rate" shall have the meaning set forth in Subsection
11.3.
1.23. "Quarter" shall mean Licensee's fiscal quarter ending on the
Sunday nearest the last day in the calendar quarter, except for the fourth
quarter, which ends on December 31.
1.24. "Receiving Party" shall have the meaning set forth in
Subsection 22.2.
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1.25. "Referral Service Feel, shall have the meaning set forth in
Subsection 12.1.
1.26. "Residential Properties" shall mean noncommercial properties
that are utilized solely for residential purposes, excluding (a) properties
which Licensee has entered into a contract with respect to four or more
connected and/or attached residential units, and (b) properties which are part
of a residential condominium unit and Licensee has entered into a contract
which is negotiated and paid for by the management of the condominium.
1.27. "Royalties" shall mean, with respect to any Year, the Minimum
Royalties and/or the Earned Royalties, including any and all Sublicensee
Royalties, as the case may be, actually due to Licensor for such Year, as
calculated in accordance with Subsections 11.1, 11.2, and 11.3.
1.28. "Sublicensee Royalties" shall have the meaning set forth in
Subsection 11.2.
1.29. "Term" shall mean the term of this Agreement, which shall
commence as of January 1, 1996 and shall expire on December 31, 2015, unless
earlier terminated pursuant to the terms of this Agreement. Notwithstanding the
foregoing, if Licensee's Current License Agreement should for any reason be
terminated prior to December 31, 1995, then this Agreement shall commence as of
the day following the date of termination of the Current License Agreement, and
the first Year of this Agreement shall be extended by the amount of time
remaining in the 1995 calendar year, with no effect on the Minimum Royalties
for the 1996 Year.
1.30. "Territory" shall mean the United States, Canada (as now
constituted), and Mexico.
1.31. "Trade Dress" shall have the meaning set forth in the Preamble.
1.32. "Trademark(s)" shall have the meaning set forth in the
Preamble.
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1.33. "Year" shall mean each twelve month period during the Term
commencing January 1 of each year and ending December 31 of the same calendar
year.
2. Grant of License.
2.1. Subject to the terms and provisions hereof, Licensor hereby
grants to Licensee and Licensee hereby accepts the License during the Term.
2.2. Licensee grants to Licensor the right to approve, prior to the
use thereof, the full trade name under which Licensed Products and Licensed
Services shall be offered by Licensee under this Agreement, which approval
shall not be unreasonably withheld. Licensee shall not commence the conduct of
any business activity under this Agreement without Licensor's prior written
approval of the trade name to be used in conjunction with the Licensed Products
and Licensed Services. Licensee may operate under the trade names "CENTURY 21
Home Improvements," "CENTURY 21 Remodeling" or an alternative trade name which
is approved by Licensor. Licensee shall file assumed name certificates or
similar documents in connection with operating under such names in such
jurisdictions as such filings may be legally required.
2.3. It is understood and agreed that the License applies solely to
the use of the Trademark in connection with the Licensed Products and Licensed
Services and that (i) no use of any other trademark of Licensor or of any of
Licensor's Affiliates, and (ii) no use of the Trademark on any products or
services other than the Licensed Products and Licensed Services, is authorized
or permitted. Licensor reserves the right to use, and to grant to any other
licensee the right to use, the Trademark on or in connection with any and all
products and services outside the Territory and on or in connection with any
and all products and services other than the specific Licensed Products and
Licensed Services within the Territory.
2.4. Unless otherwise approved by Licensor, all references to the
Trademark, including uses of a trade name incorporating the Trademark, in
Contracts, advertisements, or promotional materials, shall prominently display
a statement to the effect that the Licensed Products or Licensed Services are
sold, furnished, and
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installed by American Remodeling, Inc., an independently owned contractor.
2.5. Licensee may sublicense the right to use the Trademark in
connection with Licensed Products and the Licensed Services, provided that
Licensor approves in writing in advance any such sublicensee and sublicense
agreement, which approval shall not be unreasonably withheld. Notwithstanding
the foregoing, Licensee may utilize the services of independent contractors
with respect to the sale or provision of Licensed Products and Licensed
Services.
2.6. Licensee shall provide Licensed Products and Licensed Services
under the Trademark in substantially all of the economically viable markets for
such products and services within the Territory. In the event that Licensor
requests Licensee to provide Licensed Products and Licensed Services in other
markets within the Territory, Licensee agrees that, with respect to such
markets, it shall use commercially reasonable efforts to either: (i) provide
the Licensed Products and Licensed Services within such markets or (ii) subject
to the restrictions of Subsection 2.5 hereof, enter into a sublicense agreement
with a third party whereby the Licensed Products and Licensed Services will be
made available within the market so requested by Licensor.
2.7. Licensee, acting in its sole discretion, may engage in any
business or business activities of any kind or character, including but not
limited to the sale of products and services similar to the Licensed Products
and Licensed Services under names and marks other than the Trademarks or may
acquire other business entities without the approval of the Licensor; provided
that the foregoing shall not in any way adversely affect the Trademark or the
goodwill symbolized thereby. Notwithstanding the foregoing, Licensee agrees
that for purposes of calculating the royalties due hereunder, any and all sales
of Licensed Products or Licensed Services by Licensee or any of its
sublicensees, resulting in any way from (i) use of the Trademarks by Licensor,
or (ii) referrals or leads generated or any customer information provided by
Licensor, Licensor's employees, Franchisees, or Franchisees, employees which
result in the sale of Licensed Products or Licensed Services within six (6)
months from the date of such referral or lead, or (iii)
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as a result of any Licensor Lists, shall be considered sales hereunder, and
Earned Royalties shall be payable with respect thereto.
2.8. Licensee in its sole and absolute discretion may, at any time
not later than six (6) months prior to December 31, 2005, elect, upon written
notification of such election to Licensor, to terminate this Agreement
effective on, and not earlier than, December 31, 2005. In the event that
Licensee does not elect to terminate this Agreement pursuant to the provision
in this Subsection 2.8, the Term shall extend through December 31, 2015 with
Royalty Payments during the remainder of the Term to be calculated and paid as
set forth on Exhibit C hereto, and with other terms and conditions as set forth
herein.
3. Licensee's Right of First Refusal
3.1. Licensee shall have a right of first refusal to obtain a
license to use the Trademark in connection with the marketing, sale,
furnishing, and installation of (a) solar energy systems, (b) tiling and
flooring (excluding carpet), (c) plumbing, and (d) insulation (collectively,
"Other Products") in the Territory.
3.2. In the event that Licensor receives a bona fide offer from a
third party for a license to market, sell, furnish, and install Other Products,
Licensor shall so notify Licensee and Licensee shall have the right and option
to enter into an agreement upon terms that match the material, operative terms
and conditions of the bona fide third party offer.
3.3. Licensee shall have a period of ninety (90) days after
receiving notice of the terms and conditions of the bona fide third party offer
to exercise its option. If within such ninety (90) day period, Licensee does
not enter into such agreement, Licensor shall have the right to enter into such
agreement with the third party (or other third party, so long as the operative
terms and conditions are not materially better than those offered to and
refused by Licensee).
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4. Representations and Warranties.
4.1. Licensor represents and warrants that it has full right,
power, and authority to enter into this Agreement, to grant the License
hereunder, to perform all of its obligations hereunder, and to consummate all
of the transactions contemplated herein and that the Trademark is valid and
enforceable. Licensor additionally represents and warrants that the use of the
Trademark by Licensee in connection with the Licensed Products and Licensed
Services in the Territory during the Term, as expressly authorized hereunder,
shall not infringe any trademark or copyright of any third party. Licensee
agrees and acknowledges that other than those representations explicitly
contained in this Agreement, no representations, warranties, or guarantees of
any kind have been made to Licensee, either by Licensor or its Affiliates, or
by anyone acting on Licensor's behalf. Licensor further represents and warrants
that it: (i) has received such documents and information as it has requested
with respect to, among other things, Licensee's business, operations, product
and service quality standards, financial condition, and prospects, (ii) has had
opportunities to ask questions of and receive full and satisfactory answers
from Licensee concerning all such matters, and (iii) has had reasonable
opportunity to conduct, and has conducted, all other due diligence
investigations and other activities that it deemed relevant or material to its
decision to enter into this Agreement.
4.2. Century 21 represents and warrants that it has full right,
power, and authority to enter into this Agreement, to perform all of its
obligations hereunder, and to consummate all of the transactions contemplated
herein and that the Trademark is valid and enforceable. Century 21 further
represents and warrants that it owns all right, title, and interest in the
Trademark. Licensee agrees and acknowledges that other than those
representations explicitly contained in this Agreement, no representations,
warranties, or guarantees of any kind have been made to Licensee, either by
Century 21 or its Affiliates, or by anyone acting on Century 21's behalf.
4.3. Licensee represents and warrants that it has the full right,
power, and authority to enter into this Agreement, to perform all of its
obligations hereunder, and to consummate the transactions contemplated herein,
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and that as a result of entering into this Agreement, Licensee shall not
violate any contractual or other right of any third party. Licensee further
represents and warrants that no Licensed Product or Licensed Service shall
violate or infringe any patent, trademark, copyright, or other intellectual
property right of any third party, or shall be manufactured (to the extent
within the control of Licensee) or sold in violation of any statute, ordinance
or administrative order, rule, or regulation. Licensee further represents and
warrants that its Current License Agreement shall terminate by its own terms on
December 31, 1995 without any (i) automatic renewal or (ii) unilateral right of
renewal on the part of its current Licensor.
4.4. Licensor and Licensee each represent and warrant that (i) this
Agreement constitutes a valid and legally-binding obligation of it, (ii) the
execution and delivery by it of this Agreement and the performance by it of its
obligations hereunder have been duly authorized by all requisite corporate
action on the part of it, and (iii) no other corporate proceedings on the part
of it or consents are required in connection with the execution, delivery, and
performance by it of this Agreement.
5. Quality Standards.
5.1. Licensee acknowledges that the Trademark has established
extremely valuable goodwill and is well recognized among consumers, and that it
is of great importance to each party that in the sale and provision of the
Licensed Products and Licensed Services, the high standards and reputation that
Licensor has established be maintained. Accordingly, all Licensed Products and
all Licensed Services provided by Licensee hereunder shall be of such high
quality as is consistent with the longstanding reputation of Licensor.
5.2. Licensee may use the Trademark only pursuant to the
specifications and designs for the Trademark approved in writing by Licensor or
provided in writing by Licensor and only in the manner approved by Licensor
with respect to the Licensed Products and Licensed Services. For any Trademark
that is federally registered, appropriate notice of registration in accordance
with the applicable laws or regulations of the applicable jurisdiction shall
accompany uses of such Trademark (i.e., a
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small "R" within a circle in the United States) as necessary to obtain the
maximum protection for trademarks under the applicable trademark law.
5.3. Licensee shall submit to Licensor for Licensor's review and
prior written approval, samples of each initial use of all materials of any
nature bearing the Trademark. The foregoing notwithstanding, following approval
by Licensor of the initial use, no additional approval will be required with
respect to any minor alterations in the format, layout, or color (excluding any
such changes to the Trademark) of approved materials or any changes in media
sources, provided that any such new media sources are similar in all material
respects to those previously approved by Licensor and will not have an adverse
effect on the Trademarks, and provided that in all other respects such
materials are substantially similar to the sample previously approved by
Licensor.
5.4. Licensor shall approve or disapprove all submitted samples
within three (3) business days of receipt of such sample and shall not
unreasonably withhold its approval. In the event that Licensor does not approve
or disapprove such sample in writing within three (3) business days or its
receipt of such sample, Licensor shall be deemed to have approved such sample.
Licensee shall seek approval as early as reasonably possible prior to
production or use of each respective item bearing the Trademark.
5.5. Subject to the coordination through the Chief Financial
Officer or the Vice President of Operations of Licensee, or in the event that
they are not available, such other appropriate officer (each of whom shall
cooperate in such coordination), Licensee shall permit Licensor to visit
Licensee's offices, work sites, or other places of business at any reasonable
time, for inspection by Licensor's representatives of files, documents,
product, and other materials relating to the Licensed Products and Licensed
Services, at which time Licensor may take samples of Licensed Products and
samples or copies of documents and other materials relating to the Licensed
Products and Licensed Services, so long as no samples are taken which could
unreasonably interfere with the ability of Licensee to install jobs which are
in progress. It is understood and agreed that the provisions of Section 22
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apply to all Confidential Information obtained through or derived from such
inspections.
5.6. Licensee shall prepare and maintain periodic (at least
quarterly) summary reports of all customer complaints to any third party or
government agency regarding the Licensed Products and Licensed Services each
month during the Term, and will promptly submit each such summary to Licensor
following the end of each Quarter. In the event that there is a material
increase in the level of registered customer complaints received as a
percentage of total transactions consummated (the "Relevant Percentage") during
any Quarter after the date hereof as compared to the relevant percentage of
such customer complaints received by Licensee during the corresponding Quarter
in the twelve (12) month period from August 1, 1994 through August 1, 1995, as
set forth as part of Exhibit D hereto, or a material increase in the severity
of the nature of the matters complained of as compared to complaints received
in such prior corresponding Quarter, Licensee, upon notification from Licensor,
shall promptly meet with Licensor to discuss steps necessary to reduce the
number and severity of such customer complaints. Licensee shall promptly
thereafter undertake and shall diligently pursue remedial efforts necessary to
reduce the Relevant Percentage of customer complaints to approximately the
level of such complaints for the corresponding Quarter during the twelve (12)
month period from August 1, 1994 through August 1, 1995, as set forth in
Exhibit H hereto, and in any event shall achieve such conformity within one
hundred and twenty (120) days from notification by Licensor.
5.7. Licensee represents and warrants that the Licensed Products
and Licensed Services shall be furnished in a workman-like manner and that all
product, labor and materials shall be of high quality. Licensee further
represents and warrants that each completed application or installation
performed hereunder shall be of high quality and that all applied or installed
Licensed Products and their application or installation shall remain in good
condition and be free from defects in material and workmanship for a period of
one year from the date of application or installation. Licensee shall provide a
written warranty to all of its customers for Licensed Products and Licensed
Services substantially in the form attached hereto as Exhibit E.
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5.8. Licensee agrees to maintain and adhere to a general policy of
customer satisfaction and shall use its best efforts to adjust complaints of
customers and resolve controversies with customers with respect to the sale or
provision of the Licensed Products and the Licensed Services. In the event
Licensee receives any notice that any application or installation is defective,
Licensee shall promptly investigate such complaint and shall promptly repair or
replace any defective application or installation at no additional cost
pursuant to the terms of the written warranty. If in the event any adjustment
remains unsatisfactory to the customer, Licensee agrees that it will make good
faith efforts to satisfy the reasonable complaints of such customer.
5.9. All Licensee procedures and policies covering the marketing,
sale, furnishing, and installation of Licensed Products shall be in conformance
with Licensee's customer service standards, which shall be subject to the
reasonable approval of Licensor. Licensee shall not offer Licensed Products and
Licensed Services of a lower level than the quality and price categories that
Licensee has offered similar products and services during the twelve (12) month
period preceding this Agreement. In addition, Licensee agrees to observe no
less than Licensee's minimum specifications, quality, and performance standards
in effect as of the date hereof for Licensed Products and Licensed Services, as
set forth in Exhibit F hereto. Licensor may conduct in its own discretion
customer surveys to measure Licensee's adherence to Licensee's standards,
subject to approval by Licensee as to the general method, form, and content
thereof, which approval shall be promptly provided and may be withheld only for
good cause, the reasons for which Licensee shall notify Licensor in writing. In
conducting a survey, Licensor shall survey a statistically valid sampling of
customers who purchased a Licensed Product, received Licensed Services, or who
allowed Licensee into their home to conduct a sales presentation. Provided that
Licensor has used generally accepted methods of conducting such surveys,
Licensee agrees that, in the event any such survey shows levels of customer
dissatisfactions materially greater than those in effect as of the date hereof
(as reflected in the survey results conducted for the years 1994 and 1995 with
respect to Licensee's business, copies of which are to be provided by Licensee
to Licensor concurrently with the execution
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of this Agreement), then Licensee shall take such immediate steps as are
necessary to correct those problems in quality or performance that are revealed
by the survey. Licensor agrees promptly to provide copies of the questions,
methodology, and results of these surveys to Licensee.
5.10. Licensee agrees to provide the Licensed Products and Licensed
Services materially in conformance with the quality standards in effect as of
the date hereof. In the event that any Licensed Product or Licensed Service is,
in the reasonable judgment of Licensor, not materially in conformance with such
quality standards, Licensor shall notify Licensee thereof in writing specifying
in reasonable detail the facts, circumstances and background of such
non-compliance, and Licensee shall promptly undertake and shall diligently
pursue remedial efforts necessary to bring such Licensed Product or Licensed
Service into conformance with such standards, and shall achieve conformity with
such standards within thirty (30) days from such notification. Notwithstanding
the foregoing, if nonconformity with such standards is not capable of being
remedied within such thirty (30) day period, provided that Licensee promptly
commences and diligently pursues such remedial steps as are necessary, Licensee
shall have such additional time, up to a maximum of one hundred and twenty
(120) days, as is necessary to implement such corrective procedures and bring
such Licensed Product or Licensed Service into conformance with the quality
standards required by this Agreement. If after such one hundred twenty (120)
day period, the Licensed Product or Licensed Service in question does not, in
the reasonable judgment of Licensor, conform to the quality standards required
by this Agreement, then Licensor may, in its discretion, terminate this
Agreement with respect to specific Licensed Products, Licensed Services or
specific geographical markets, or Licensor may terminate this Agreement in its
entirety pursuant to the provisions of Section 15 hereof.
5.11. All Contracts must be in writing and signed by the customer.
Such Contracts shall be retained by Licensee for a period of not less than two
(2) years from the date of Licensee's receipt of full payment on the Contract.
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6. Trademark Ownership and Protection.
6.1. Licensee acknowledges and relies upon Licensor's
representation that Licensor has the exclusive right to use the Trademark, the
Trade Dress, and the goodwill associated therewith in connection with the
Licensed Products and the Licensed Services in the Territory. Licensee
acknowledges Licensor's exclusive right to use the Trademark and the goodwill
associated therewith. Licensee further acknowledges Licensor's exclusive right
to use the Trade Dress and its colors and designs in connection with Licensed
Products and Licensed Services. All use of the Trademark and Trade Dress
pursuant to this Agreement and goodwill generated thereby shall inure to the
benefit of Licensor and shall not vest in Licensee any title to or right or
presumptive right to continue such use. For the purposes of trademark
registration, sales by Licensee of Licensed Products or Licensed Services under
the Trademark shall be deemed to have been made for the benefit of Licensor.
6.2. Nothing contained in this Agreement shall be construed as an
assignment or grant to Licensee of any right, title, or interest in or to the
Trademark, or any of the Licensor's other trademarks, it being understood that
all rights relating thereto are reserved by Licensor, except for the License
hereunder to use the Trademark to the extent specifically provided herein and
subject to the restrictions provided herein.
6.3. Licensee shall not, during the Term of this Agreement or
thereafter, (a) challenge Licensor's title or rights in and to the Trademark in
any jurisdiction or challenge the validity of this License or of the
Trademark, or (b) contest the fact that Licensee's rights under this Agreement
are solely those of a licensee and shall cease upon expiration or earlier
termination of this Agreement. Licensee shall not file or prosecute any
trademark or service mark application or applications to register the
Trademark. The provisions of this Subsection 6.3 shall survive the expiration
or earlier termination of this Agreement.
6.4. Licensor and Century 21 shall maintain all existing
registrations of the Trademark in full force and effect and shall use
commercially reasonable efforts to secure appropriate national registrations of
the Trade-
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mark, at Licensor's expense, in all jurisdictions within the Territory, as
reasonably requested by Licensee. Licensee shall cooperate fully and in good
faith with Licensor for the purpose of maintaining registrations and
prosecuting applications for the Trademark and otherwise securing and
preserving Licensor's rights in and to the Trademark. Licensor shall cooperate
with Licensee for the purpose of obtaining registered user certificates in all
appropriate national jurisdictions.
7. [INTENTIONALLY DELETED]
8. Advertising.
8.1. Licensee shall advertise and actively promote the Licensed
Products and Licensed Services in the Territory. To assist in conducting
consumer advertising, Licensee shall contribute to the Century 21 National
Advertising Fund ("N.A.F.") ten million dollars ($10,000,000) for the first
Year of the Term (the "Advertising Contribution"). For each subsequent Year
during the Term, Licensee's Advertising Contribution to the N.A.F. shall be
increased by an amount equal to the increase in the Gross Domestic Product
Implicit Price Deflator (the "GDP") during the prior calendar year as reported
by the United States Department of Commerce. Licensee's contributions to N.A.F.
for each Year shall be payable as incurred promptly upon receipt of an invoice
for such advertising expenditures; provided, however, that Licensee shall pay
the full Advertising Contribution payable for each Year prior to the expiration
of the third Quarter of such Year. For purposes of clarification, N.A.F. shall
not be obligated to expend for consumer advertising of the Licensed Products
and Licensed Services in any Year any amounts exceeding the Advertising
Contribution for such Year. All such amounts contributed by Licensee shall be
used exclusively by N.A.F. for consumer advertising with respect to the
Licensed Products and Licensed Services in connection with the Trademarks,
including, without limitation, production of commercials, advertising copy, and
media placement all as determined by Licensee in its sole and exclusive
discretion; provided, however, that all of such advertising shall prominently
display the Trademark and shall be in conformity with the quality standards set
forth in Section 5. N.A.F. shall hold all such amounts in a separate account
established solely for such purpose. Upon
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Licensee's reasonable request, Licensee shall have the right to an accounting
of N.A.F.'s expenditures of Licensee's contributions to the N.A.F.
9. Licensee's Employees.
9.1. Licensee shall have no authority to employ persons on behalf
of Licensor and no employees of Licensee shall be deemed to be employees or
agents of Licensor. Licensee shall have the sole and exclusive right to hire,
transfer, suspend, layoff, recall, promote, assign, discipline, adjust
grievances, and discharge said employee, shall meet all other requirements of
the Federal Social Security, State Unemployment Compensation and Federal, State
and Local Income Tax withholding laws on all salary and other compensation of
its employees.
9.2. Licensee will comply with any other Federal, State, or local
law or regulation regarding but not limited to compensation, hours of work, or
other conditions of employment, including but not limited to Federal or State
laws or regulations regarding minimum compensation, health and safety
requirements, overtime, and equal opportunities for employment.
10. Licenses and Permits.
10.1. Licensee, at its expense, shall obtain permits and licenses
which may be required under any applicable Federal, State or local law,
ordinance, rule or regulation by virtue of any acts performed by Licensee in
the performance of this Agreement. Licensee shall in the conduct of said
business and in the performance of this Agreement, comply fully with all
applicable Federal, State and local laws, ordinances, rules, and regulations.
10.2. Licensee, at its expense, shall pay and discharge all license
fees, business, use, sales, gross receipts, income, property or other similar
or different taxes or assessments which may be charged or levied upon Licensee
by reason of anything performed under this Agreement, excluding, however, all
taxes and assessments applicable to Licensor's income from the Minimum
Royalties and Earned Royalties hereunder.
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11. Royalties.
11.1. As compensation for the License granted hereunder for the use
of the Trademark in connection with the sale and provision of Licensed Products
and Licensed Services in the Territory, Licensee shall pay to Licensor as
provided herein the greater of minimum guaranteed royalties for each Year
during the Term of this Agreement ("Minimum Royalties") or Earned Royalties (as
defined below) for such Year. The Earned Royalties paid for each Year of the
Term shall be applied against the Minimum Royalties payable for each Year of
the Term (i.e., Minimum Royalties shall be reduced by the amount of Earned
Royalties paid for the Year and no Minimum Royalties shall be payable for any
Year in which the Earned Royalties are greater than the Minimum Royalties
payable). The minimum Royalties for each Year through the Year 2005 during the
Term hereof shall be as follows:
<TABLE>
<CAPTION>
Year Minimum Royalties
---- -----------------
<S> <C>
1996 $11 Million
1997 $11 Million
1998 $12.4 Million
1999 $13.4 Million
2000 $15.2 Million
2001 $17.1 Million
2002 $19.3 Million
2003 $21.8 Million
2004 $24.7 Million
2005 $27.9 Million
</TABLE>
Minimum Royalties for each Year shall accrue on a monthly basis (i.e.,
one-twelfth of the Minimum Royalties for each Year shall accrue on the first
day of each month of such Year). Minimum Royalties shall be paid annually on or
before January 31 of the following Year. No credit shall be permitted against
Minimum Royalties payable for any Year on account of Earned Royalties or
Minimum Royalties paid for any other Year, and Minimum Royalties shall not be
returnable.
11.2. Licensee shall pay to Licensor earned royalties ("Earned
Royalties") for each Year of the Term equal to the sum of (i) three percent
(3%) of Licensee's Contract Revenue for such Year, and (ii) all Sublicensee
Royalties (as defined below) for such Year. The term
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"Contract Revenue" shall mean all revenues which arise directly from the sale
of Licensed Products and Licensed Services pursuant to this Agreement
(reflected by the sales contract amount plus or minus any Contract change
orders), less (a) refunds, credits and allowances to customers; (b) financing
discounts incurred in connection with the sale of Contracts; (c) sales to
employees of Licensee and its Affiliates; (d) sales, excise and other similar
taxes; and (e) fees associated with building permits and other similar fees and
expenses. "Sublicensee Royalties" shall mean three percent (3%) of all revenue
of Licensee's sublicensees upon which any payments to Licensee by Licensee's
sublicensees pursuant to sublicense agreements hereunder are based. Sublicensee
Royalties shall be included in Earned Royalties and accounted for on the same
basis and pursuant to the same requirements as Earned Royalties. Earned
Royalties shall accrue on all Contracts completed during the applicable month.
Completion shall be deemed to have occurred when Licensee or an Affiliate of
Licensee receives cash payment substantially in full in connection with a
Contract or from any of its sublicensees hereunder (i.e., when Licensee has
been paid substantially all sums that Licensee reasonably can expect to collect
on such Contract), from the customer or from a third party financing source or
from a sublicensee, as the case may be, or receives written customer acceptance
with respect to any project financed by Licensee. In connection therewith,
Licensee agrees and covenants that it shall use commercially reasonable efforts
to promptly collect all sums due to Licensee from Contracts or sublicensees
hereunder.
11.3. All Earned Royalties, other than the initial $2,750,000 in
Earned Royalties accrued in the first Year shall be paid on a quarterly basis
prior to the fifteenth (15th) day of the month following the end of the Quarter
in which accrued. The initial $2,750,000 in Earned Royalties attributable to
the first Year of the Term shall be payable on January 31, 1997 and shall be
deemed to bear interest from April 15, 1996 through the payment date at a rate
equal to the prime rate of interest in effect from time to time at Chemical
Bank, New York, New York, or any successor bank (the "Prime Rate") plus two
percent (2%). Within thirty (30) days after the end of each Year, Licensee
shall prepare and furnish to Licensor a reconciliation of all amounts paid with
respect to Earned Royalties attributable to the preceding Year. In
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the event that the Earned Royalties paid during such Year exceed the amount of
Royalties actually due under Subsections 11.1 and 11.2 hereof, Licensor shall
refund such overpayment within twenty (20) business days of receipt of the
reconciliation statement from Licensee.
11.4. If the payment of any Minimum Royalties or Earned Royalties is
unpaid as of the due date for any reason, interest shall accrue on the unpaid
principal amount of such installment from and after the date the Royalties
became due pursuant to Subsections 11.1 or 11.2 hereof at the lower of (i) the
highest rate permitted by law in New York, or (ii) two percent (2%) per annum
above the Prime Rate.
12. Referral Service Fee.
12.1. In addition to the Earned Royalties and Minimum Royalty set
forth in Section 11, in the event any Franchisee provides a referral that
results in Contract Revenue, Licensee shall pay to such Franchisee a fee
calculated as set forth on Exhibit G hereto ("Referral Service Fee"). Licensee
shall maintain records in reasonable detail of all referrals received by it
from any Franchisee or its employees or agents and shall establish the Joint
Referral Program set forth on Exhibit H hereto. The record shall contain the
date, the customer's name and address, the final disposition of the referral,
the name and employee identification number of the Franchisee's employee that
supplied the referral, and address of the Franchisee from which the referral
was supplied.
12.2. For referrals that result in a Contract, Licensee shall, no
later than the fifteenth (15th) day of the month following the end of the
Quarter in which the Contract Revenue becomes payable, submit to each
Franchisee for which a Referral Service Fee is owed the information required in
Subsection 12.1, with a copy to Licensor, and the payment in the full amount
for the Referral Service Fee payable to that Franchisee for that Quarter. For
purposes of clarification, the Referral Service Fee shall not affect the amount
of Earned Royalties or Minimum Royalties payable hereunder. Notwithstanding the
foregoing, Licensee shall have no obligation to pay a particular Referral
Service Fee if (i) on the written advice of independent counsel, Licensee is
advised that
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<PAGE> 20
payment of such Referral Service Fee would constitute a violation of the Real
Estate Settlement Procedures Act, 12 U.S.C. Section 2610 et seq ("RESPA") or
(ii) such referral, lead, or assumed information results in a sale to such
customer or potential customer more than six (6) months after delivery of such
referral, lead, or customer information to Licensee.
13. Accounting.
13.1. Licensee shall at all times keep an accurate account of all
operations within the scope of this Agreement. All royalty payments made
pursuant to Subsections 11.1 and 11.2 shall be accompanied by a statement
setting forth a full accounting of the calculation of Earned Royalties for such
Quarter, including all aggregate gross revenue payable for the Licensed
Products and Licensed Services, all sublicensee Contract Revenue, and all
exclusions included in the calculation of royalties. Such statements shall be
in sufficient detail to be audited from the books of Licensee. Each statement
furnished by Licensee shall be certified by the chief financial officer of
Licensee.
13.2. Licensor and its duly authorized representatives, on
reasonable notice, shall have the right, no more than once in each Year, during
regular business hours, for the duration of the Term and for one (1) year
thereafter, to verify the accuracy of the amount of royalties due, to examine
the books of account and records and all other documents, materials, and
inventory in the possession or under the control of Licensee and its successors
with respect to the subject matter of this Agreement. All such books of
account, records, and documents shall be maintained and kept available by
Licensee for at least five (5) Years. Licensor shall have free and full access
thereto in the manner set forth above and shall have the right to make copies
and/or extracts therefrom. If as a result of any examination of Licensee's
books and records, it is shown that Licensee's actual payments to Licensor
hereunder with respect to any Year were less than the amount which should have
been paid to Licensor, Licensee shall promptly pay to Licensor the amount of
any underpayment, with interest at the Prime Rate plus two percent (2%) from
the date on which each payment was due. In addition if it is shown that
Licensee's actual payments for such Year were less than
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<PAGE> 21
the amount that should have been paid by an amount equal to five percent (5%)
or more of the amount which should have been paid for such Year, Licensee shall
promptly reimburse Licensor for the cost of such examination. If as a result of
any such examination of Licensee's books and records it is shown that
Licensee's actual payments to Licensor hereunder with respect to any Year were
greater than the amount which should have been paid to Licensor, Licensor shall
reimburse to Licensee the amount of any such overpayment, with interest at the
Prime Rate plus two percent (2%) from the date on which such overpayment was
made.
14. Infringement.
14.1. The parties shall cooperate to actively enforce against third
parties the exclusive rights furnished to Licensee hereunder, and the parties
shall promptly notify each other in writing of any unauthorized uses which may
be infringements by third parties of the Trademark which may come to the
attention of the parties. Licensor shall have the first option to take, and to
determine whether or not to take, any action(s) it deems appropriate in its
sole discretion against any third party with respect to any unauthorized use,
infringement, or dilution of the Trademark, and Licensee shall fully cooperate
with Licensor in connection with any such actions. Without limitation, if
Licensor so desires, Licensor may bring any claims or suits in Licensor's own
name or in the name of Licensee or join Licensee as a party thereto. Licensor
shall bear the costs of all such actions or proceedings. In the event that
Licensor declines to take action against any alleged infringer within a
reasonable time, upon the prior written consent of Licensor, which consent
shall not be unreasonably withheld, Licensee shall have the right to bring any
claims or suits against such infringer in Licensee's own name and at Licensee's
own expense. Licensor and Century 21 shall fully cooperate with Licensee in
connection with any such action, including joining such action, as necessary.
All recovery in the form of legal damages or settlement shall belong to the
party bearing the expense of bringing such claim or legal action.
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15. Default.
15.1. Licensor shall have the right but not the obligation to
immediately terminate this Agreement without affecting any other rights or
remedies:
(i) immediately upon notice, if (a) any bankruptcy, or
insolvency proceedings should be commenced by Licensee or a
substantial part of the property of Licensee passes into the hands of
any receiver, assignee, officer of the law or creditor or (b) any
proceeding shall be instituted by or against Licensee seeking to
adjudicate it bankrupt or insolvent, under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, and, in
the case of any such proceeding instituted against it (but not
instituted by it), such proceeding shall remain undismissed or
unstayed for sixty (60) days.
(ii) immediately upon notice, if Licensee admits, in
writing, its inability to pay its debts as they become due;
(iii) immediately upon notice, if Licensee abandons or
ceases to operate under or renounces this Agreement;
(iv) if Licensee fails to make any Royalty payment due
hereunder or any payment to N.A.F. pursuant to Subsection 8.1
hereunder, and fails to cure the same within ten (10) days of receipt
of written notice thereof from Licensor; or
(v) if Licensee otherwise fails to comply with any
material provision of this Agreement, including without limitation any
provision relating to quality control, and fails to cure such default
within (a) the time period applicable thereto under the terms of this
Agreement, or (b) if no time period shall be provided, then within
thirty (30) days of receipt of written notice from Licensee. In the
event that any such non-compliance shall not be remediable within
such thirty (30) day period then, provided that Licensee promptly
commences and diligently pursues such remedial steps as are necessary,
Licensee shall have such additional time as is necessary to effect
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<PAGE> 23
such remedy, but in no event more than an additional one hundred and
twenty (120) days.
15.2. Licensee shall have the right but not the obligation to
immediately terminate this Agreement without affecting any other rights or
remedies:
(i) immediately upon notice, if (a) any bankruptcy, or
insolvency proceedings should be commenced by Licensor or a
substantial part of the property of Licensor passes into the hands of
any receiver, assignee, officer of the law or creditor or (b) any
proceeding shall be instituted by or against Licensor seeking to
adjudicate it bankrupt or insolvent, under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, and, in
the case of any such proceeding instituted against it (but not
instituted by it), such proceeding shall remain undismissed or
unstayed for sixty (60) days.
(ii) immediately upon notice, if Licensor admits, in
writing, its inability to pay its debts as they become due;
(iii) immediately upon notice, if Licensor abandons or
ceases to operate under or renounces this Agreement; or
(iv) if Licensor otherwise fails to comply with any
material provision of this Agreement and fails to cure such default
within (a) the time period applicable thereto under the terms of this
Agreement, or (b) if no time period shall be provided, then within
thirty (30) days of receipt of written notice from Licensee. In the
event that any such non-compliance shall not be remediable within such
thirty (30) day period then, provided that Licensor promptly commences
and diligently pursues such remedial steps as are necessary, Licensor
shall have such additional time as is necessary to effect such remedy,
but in no event more than an additional one hundred and twenty (120)
days.
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16. Cooperation.
16.1. Licensor, Century 21, and Licensee agree to work together in
good faith to implement the "Joint Referral Program," a copy of which is
attached hereto as Exhibit H. Licensee acknowledges that the Franchisees shall
have no obligation to participate in any such Joint Referral Program. Licensor
and Licensee intend to work closely together for their mutual benefit. Licensor
shall use reasonable efforts to facilitate Licensee's provision of Licensed
Products and Licensed Services. Accordingly, Licensor shall use reasonable
efforts to provide Licensee with lists of potential customers of Licensed
Products and Licensed Services and to train Licensor's employees to facilitate
Licensee's sale and provision of Licensed Products and Licensed Services. In
addition, Licensor shall use reasonable efforts to assist Licensee in obtaining
lower costs for its business of selling Licensed Products and Licensed
Services, including telephone services, postage services, and advertising
services.
17. Consumer Paper.
17.1. Licensee acknowledges Licensor's expertise in the area of the
financing of consumer paper. At the request of Licensor, Licensee agrees to
work with Licensor to develop a financing arrangement which is in the best
interest of both Licensee and Licensor.
18. Disposal of Stock Upon Termination or Expiration.
18.1. Upon the effective date of expiration or earlier termination
of this Agreement by Licensor, Licensee shall immediately cease all use of, and
shall destroy, and effectively remove, the Trademark and all references thereto
from all remaining unsold or returned Licensed Products and related
advertising, promotional, display and other materials bearing the Trademark or
Trade Dress.
19. Effect of Expiration or Termination.
19.1. It is understood and agreed that except for the License to use
the Trademark only as specifically provided for in this Agreement, Licensee
shall have no right, title, or interest in or to the Trademark. Upon
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and after the expiration or earlier termination of this Agreement, all rights
granted to Licensee hereunder, together with any interest in and to the
Trademark which Licensee may acquire, shall forthwith and without further act
or instrument be assigned to and revert to Licensor. In addition, Licensee will
execute any instruments requested by Licensor which are necessary to accomplish
or confirm the foregoing. Any such assignment, transfer, or conveyance shall be
without consideration other than the mutual agreements contained herein.
Licensor shall thereafter be free to license to others the right to use the
Trademark in connection with the sale and provision of Licensed Products and
Licensed Services, and Licensee will refrain from further use of the Trademark
or any further reference to the Trademark, direct or indirect, or any other
trademark, trade name, or logo that is confusingly similar to the Trademark. It
is expressly understood that under no circumstances shall Licensee be entitled,
directly or indirectly, to any form of compensation or indemnity from Licensor
or its Affiliates, as a consequence of the expiration or earlier termination of
this Agreement, whether as a result of the passage of time, or as the result of
any other cause of termination referred to in this Agreement. Without limiting
the generality of the foregoing, by its execution of the present Agreement,
Licensee hereby waives any claim which it has or which it may have in the
future against Licensor or its Affiliates, arising from any alleged goodwill
created by Licensee for the benefit of any or all of the said parties or from
the alleged creation or increase of a market for Licensed Products or Licensed
Services.
19.2. Licensee acknowledges and admits that there would be no
adequate remedy at law for its failure to cease using the Trademark in
connection with the marketing, sale, furnishing, or installation of the
Licensed Products or Licensed Services at the expiration or earlier termination
of the License, and Licensee agrees that in the event of such failure, Licensor
shall be entitled to equitable relief by the way of temporary, preliminary, and
permanent injunction and such other and further relief as any court with
jurisdiction may deem just and proper.
19.3. Licensee agrees that it shall continue to assume any and all
obligations under the terminated or expired Agreement arising out of the
operation thereunder
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prior to the expiration or earlier termination thereof which continues after
such expiration or termination date.
20. Indemnity.
20.1. Licensee agrees that it will protect, defend, hold harmless
and indemnify Licensor, its successors, assigns, directors, officers and
employees, and their respective heirs and representatives from and against any
and all claims, demands, actions, liabilities, damages, losses, fines,
penalties, costs and expenses (including all attorneys' fees) of any kind
whatsoever (including without limitation of the foregoing, those relating to
actual or alleged death of or injury to person and damage to property),
actually or allegedly, directly or indirectly, arising or resulting from or in
connection with:
(i) Licensee's breach of any representation, warranty, or
obligation under this Agreement;
(ii) Licensee carrying on its business, whether or not in
connection with the use of the Trademark, including, but not limited
to, all allegations that the products, materials, or services provided
by, prepared by, or distributed by or through Licensee constitute:
(a) libel, slander, or defamation;
(b) trademark infringement or dilution, other
than in connection with the Trademark as used by Licensee
hereunder in strict accordance with the terms hereof, unfair
competition or infringement of any statutory copyright, common
law right, title or slogan;
(c) piracy, plagiarism, the misappropriation of
another's ideas, or unfair competition; and/or
(d) invasion of rights of privacy or rights of
publicity;
(iii) any actual or alleged defect in such products or
materials, whether latent or patent, including actual or alleged
improper construction or
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design of such products or materials or the failure of such products
or materials to comply with specifications or with any express or
implied warranties of Licensee;
(iv) Licensee's assembly or installation or application of
products or materials covered by this Agreement;
(v) all purchases, contracts, debts, or obligations made
by Licensee, including the breach of any Contract;
(vi) any third party financing utilized by Licensee in
connection with this Agreement;
(vii) the omission or commission of any act, lawful or
unlawful, by Licensee or of any of Licensee's agents or employees,
whether or not such act is within the scope of employment of such
agents or employees; or
(viii) the failure or alleged failure of Licensee to comply
with any applicable law, statute, ordinance, governmental
administrative order, rule, or regulation.
20.2. Licensor agrees that it will protect, defend, indemnify and
hold harmless Licensee and its successors, assigns, directors, officers, and
employees from and against any and all claims, demands, actions, liabilities,
damages, losses, fines, penalties, costs, and expenses (including attorneys'
fees) of any kind whatsoever, actually or allegedly, caused by the gross
negligence or willful misconduct of Licensor or any of Licensor's agents or
associates.
20.3. Licensor and Century 21 shall each indemnify and hold Licensee
and its permitted assignees, directors, officers, servants, agents, and
employees harmless from and against any and all liability, claims, causes of
action, suits, damages, and expenses (including reasonable attorneys' fees and
expenses) which Licensee is or becomes liable to a third party for, solely by
reason of its use within the Territory of the Trademark in strict accordance
with the terms and conditions of this Agreement, to the extent that such
liability arises through
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infringement of a third party's trademark or copyright, provided that Licensee
gives Licensor prompt notice of, and full cooperation in the defense against,
such claim. If any action or proceeding shall be brought or asserted against
Licensee in respect of which indemnity may be sought from Licensor or Century
21 under this Subsection 20.3, Licensee shall promptly notify Licensor thereof
in writing, and Licensor shall assume and direct the defense thereof. Licensee
may thereafter, at its own expense, be represented by its own counsel in such
action or proceeding.
21. Insurance.
Licensee shall carry liability insurance providing adequate protection
with limits of liability in the minimum amount of $500,000 per occurrence and
$500,000 per person for any claims relating to the Licensed Products, the
Licensed Services, or Licensee's operation of its business. Licensor shall be
named therein as an insured. The maximum deductible with respect to such
insurance shall be $250,000. Licensee shall, promptly after the signing of this
Agreement, deliver to Licensor a certificate of such insurance from the
insurance carrier, setting forth the scope of coverage and the limits of
liability.
22. Confidentiality; Non-Disclosure.
22.1. Licensor, Century 21, and Licensee, and their respective
Affiliates, employees, agents, consultants, attorneys, accountants, financial
advisors, and bankers, shall hold in confidence and not use or disclose to any
third party, except as permitted by this Agreement, any Confidential
Information of the other party. Licensor and Licensee each acknowledges that
the confidentiality of the terms of this Agreement cannot be maintained
inasmuch as Licensor and Licensee are required to file a copy of this Agreement
as an exhibit to various reports filed with the Securities and Exchange
Commission and the New York Stock Exchange and may be required to summarize
this Agreement in the text of their respective Annual Reports on Form 10-K and
in Notes to their respective Financial Statements.
22.2. Nothing herein shall prevent either party or any of its
Affiliates, employees, agents, consultants,
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attorneys, accountants, advisors, or bankers (the "Receiving Party") from
using, disclosing, or authorizing the disclosure of any Confidential
Information it receives:
(a) that becomes publicly available without default
hereunder by the Receiving Party;
(b) that is lawfully received by the Receiving Party from
a source not, to the knowledge of the Receiving Party, under any obligation to
the disclosing party regarding disclosure of such information;
(c) that the Receiving Party reasonably believes it is
required by law to disclose, provided that the Receiving Party consults with
the other party prior to making such disclosure;
(d) to its attorneys, accountants, financial and
investment advisors, bankers, or lending institutions, and other advisors and
consultants of a similar nature, provided that such persons have an obligation
to, or otherwise agree to, keep such Confidential Information confidential.
22.3. Except for references to the Trademark and the existence of
this Agreement in the ordinary course of business, Licensee will not issue any
publicity or press release regarding its contractual relations with Licensor
hereunder or regarding Licensee's activities hereunder without obtaining
Licensor's prior written approval and consent to such release from Licensor.
22.4. Any customer lists or prospective names provided to Licensee
by Licensor or Franchisees or Franchisees, employees or agents ("Licensor
Lists") shall be the property of Licensor, and Licensee shall not use the same
other than for purposes of selling Licensed Products and Licensed Services
under the Trademark. Licensee agrees that it will not resell any customer lists
or prospective names obtained from any Licensor List; provided, however, that
Licensee may resell the names of any respondents to solicitations made by
Licensee to individuals on Licensor Lists, but only after six (6) months have
elapsed from the date of delivery to Licensee of the applicable Licensor List.
Any customer information (including customer lists) developed by or acquired
29
<PAGE> 30
by Licensee itself or its employees or agents, other than as set forth above,
during the term of this Agreement or thereafter, are deemed to be the property
of Licensee.
23. Dispute Resolution.
23.1. Licensor, Century 21, and Licensee agree to negotiate in good
faith in an effort to resolve any dispute related to this Agreement. If any
such dispute cannot be resolved within thirty (30) days by negotiation, the
dispute shall be submitted to non-binding mediation before resort to
litigation. If the need for mediation arises, mediation services shall be
conducted in either Dallas, Texas or New York, New York, whichever location
relates most directly to the subject matter in dispute and bears the closest
proximity to the location of the information and documentation relevant to the
dispute.
23.2. In the event of litigation, each of the parties hereby
consents to the service of process by registered or certified mail at its
address set forth below and agrees that its submission to jurisdiction and its
consent to service of process by mail is made for the express benefit of the
other party.
23.3. Notwithstanding anything to the contrary in this Section 23,
the parties expressly agree that either may seek provisional relief, including
but not limited to temporary restraining orders and preliminary injunctions, in
addition to the remedy of mediation set forth herein. Any such action for
provisional relief shall not constitute a waiver of the right or obligation to
mediate. Each party agrees that it shall bring any such action for provisional
relief, or any other litigation to enforce rights or obligations under this
Agreement, in (i) a federal court located in the State of New York, or (ii) a
state court located in the State of New York, if none of the federal courts
have jurisdiction over the subject matter of such provisional relief and/or
litigation. Each party hereby submits to the jurisdiction of the state and
federal courts located in the State of New York for any such relief, in
accordance with the service provisions set forth in Subsection 23.2 hereof.
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<PAGE> 31
24. Miscellaneous.
24.1. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed to have been properly given
or sent (i) on the date when such notice, request, consent, or communication is
personally delivered or (ii) five (5) days after the same was sent, if sent by
certified or registered mail or (iii) two (2) days after the same was sent, if
sent by overnight courier delivery or confirmed telecopier transmission, as
follows:
(a) if to Licensee, addressed as follows:
American Remodeling, Inc.
8585 North Stemmons Freeway
Dallas, Texas 75247
Attention: President
Telecopier: (214) 658-6101
with a copy to:
American Remodeling, Inc.
8585 North Stemmons Freeway
Dallas, Texas 75247
Attention: General Counsel
Telecopier: (214) 658-6101
(b) if to Licensor, addressed as follows:
TM Acquisition Corporation
3838 East Van Buren
Phoenix Arizona 85008
Attention: Douglas Patterson
Telecopier: (602) 389-3909
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Attention: David Fox, Esq.
Telecopier: (212) 735-2000
31
<PAGE> 32
(c) if to Century 21, addressed as follows:
Century 21 Real Estate Corporation
339 Jefferson Road
Parsippany, New Jersey 07054
Attention: James E. Buckman
Telecopier: (201) 428-5269
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Attention: David Fox, Esq.
Telecopier: (212) 735-2000
Anyone entitled to notice hereunder may change the address to which notices or
other communications are to be sent to it by notice given in the manner
contemplated hereby.
24.2. Licensee shall operate in the capacity of an independent
contractor. Nothing herein contained shall be construed to place the parties in
the relationship of partners or joint venturers, and no party hereto shall have
any power to obligate or bind any other party hereto in any manner whatsoever,
except as otherwise provided for herein.
24.3. None of the terms hereof can be waived or modified except by
an express agreement in writing signed by the party to be charged. The failure
of any party hereto to enforce, or the delay by any party in enforcing, any of
its rights hereunder shall not be deemed a continuing waiver or a modification
thereof and any party may, within the time provided by applicable law, commence
appropriate legal proceedings to enforce any and all of such rights. All rights
and remedies provided for herein shall be cumulative and in addition to any
other rights or remedies such parties may have at law or in equity. Any party
hereto may employ any of the remedies available to it with respect to any of
its rights hereunder without prejudice to the use by it in the future of any
other remedy with respect to any of such rights. No person, firm, or
corporation, other than the parties hereto shall
32
<PAGE> 33
be deemed to have acquired any rights by reason of anything contained in this
Agreement.
24.4. This Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the parties hereto. Licensor may
assign all of its rights, duties, and obligations hereunder to any entity to
which the Trademark, or the right to use the Trademark, has been transferred,
or to an affiliate of any such entity. The rights granted to Licensee hereunder
are unique and personal in nature, and neither this Agreement nor the License
may be assigned by Licensee (including without limitation by operation of law)
without Licensor's prior written consent, which may be withheld in Licensor's
sole discretion, but not unreasonably denied. Notwithstanding the foregoing,
Licensee may transfer or assign the rights and obligations granted hereunder
(i) in whole or in part to an Affiliate controlled by Licensee, which Affiliate
agrees in writing to be bound to the terms of this Agreement; or (ii) in whole,
to another corporation or entity that is acquiring all or substantially all of
the assets of Licensee, provided that such surviving corporation or entity (a)
agrees in writing to be bound by the terms of this Agreement, (b) shall be no
less credit-worthy than Licensee is immediately prior to the consummation of
such transfer or assignment, as evidenced by a certificate of confirmation of
an investment banking firm selected by Licensee and reasonably approved by
Licensor, (c) is, and will remain throughout the Term, a public company subject
to the reporting requirements of Sections 13 or 15 of the Securities Exchange
Act of 1934, and (d) has, and throughout the Term will have, no single
individual controlling stockholder. Any attempt by Licensee to transfer any of
its rights or obligations under this Agreement, whether by assignment,
sublicense or otherwise, other than as explicitly permitted pursuant to this
Agreement, shall constitute an event of default, but shall otherwise be null
and void.
24.5. Licensee shall comply with all laws, rules, regulations, and
requirements of any governmental body which may be applicable to the operations
of Licensee contemplated hereby, including, without limitation, as they relate
to the provision, sale, or promotion of Licensed Products or Licensed Services,
notwithstanding the fact that Licensor may have approved such item or con-
33
<PAGE> 34
duct. Licensee shall advise Licensor promptly upon obtaining knowledge that any
Licensed Product or Licensed Service does not comply with any such law, rule,
regulation, or requirement.
24.6. This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, applicable to contracts made and
to be wholly performed therein without regard to its conflicts of law rules,
and any applicable laws of the United States.
24.7. If the Master License shall terminate for any reason, upon
such termination, Century 21 shall grant the License to Licensee and assume all
of Licensor's rights and obligations hereunder.
24.8. The provisions hereof are severable, and if any provision
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
then such invalidity or unenforceability shall affect only such provision, or
part thereof in such jurisdiction and shall not in any manner affect such
provision in any other jurisdiction, or any other provision in this Agreement
in any jurisdiction. To the extent legally permissible, an arrangement which
reflects the original intent of the parties shall be substituted for such
invalid or unenforceable provision.
24.9. The Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
24.10. This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
24.11. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
24.12. If Licensee shall be delayed or hindered in or prevented from
the performance of any act required hereunder by reason of strikes, lockouts,
labor disputes,
34
<PAGE> 35
inability to procure materials, riots, war, act of God or other reason of a
like nature not within the control of Licensee, the period of performance of
any such act shall be extended for a period equivalent to such delay, provided;
however, that none of the foregoing shall in any way excuse or delay Licensee's
obligations to pay Royalties and to comply with the quality standards
hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused the same to be executed by a duly authorized officer as of the day and
year first above written.
TM ACQUISITION CORP.
By: /s/ DOUGLAS L. PATTERSON
----------------------------------
Name: Douglas L. Pattrson
Title: SVP
AMERICAN REMODELING, INC.
By: /s/ ROBERT M. SWARTZ
----------------------------------
Name: Robert A. Swartz
Title: President
CENTURY 21 REAL ESTATE CORPORATION
By: /s/ JAMES E. BUCKMAN
----------------------------------
Name: James E. Buckman
Title: Executive Vice President
35
<PAGE> 36
Exhibit A
TRADEMARKS
1. CENTURY 21
2.
(CENTURY 21 LOGO)
36
<PAGE> 37
Exhibit B
LICENSED PRODUCTS
1. Siding and related products, which related products include, but are
not limited to, overhang and trim.
2. Continuous guttering.
3. Windows and related products, which related products include, but are
not limited to, storm windows (interior and exterior), shutters,
awnings, screens and skylights.
4. Kitchen cabinet refacing and related products, which related products
include, but are not limited to, counter tops and replacement
cabinets.
5. Kitchen and bath remodeling, including all related materials, products
and trades.
6. Roofing and related products, which related products include, but are
not limited to, attic ventilation, insulation, whole house fans and
skylights.
7. Exterior coating.
8. Brick and decorative stone facing.
9. Painting (exterior and interior) and related products, which related
products include, but are not limited to, exterior textured coating
and stucco.
10. Doors, including, but not limited to, entry doors and patio doors.
11. Garage doors.
12. Patio enclosures.
13. Deck, patio, and related products, including, but not limited to, wood
decks, car ports, roofovers and foundations.
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<PAGE> 38
14. Unattached garages.
15. Fencing.
16. HVAC (installation only - not servicing).
17. Swimming pools and related products (installation only - not
servicing).
38
<PAGE> 39
Exhibit C
ROYALTY PAYMENTS FOR SECOND HALF OF TERM
Minimum royalties payable by Licensee to Licensor during the Year 2006
shall be $27.9 Million increased by an amount equal to the increase in the GDP
during 2005 as reported by the United States Bureau of Labor Statistics. The
minimum royalty payable for each subsequent Year of the Term shall be computed
by increasing the minimum royalty payable for the preceding calendar year by
the increase in the GDP for such year. Payments shall be made in accordance
with the payment schedule as set forth in Subsection 11.1 of this Agreement.
39
<PAGE> 40
Exhibit D
CUSTOMER COMPLAINTS
Attached hereto.
40
<PAGE> 41
Exhibit E
CUSTOMER WARRANTY
The written warranties provided to all customers for Licensed Products
and Licensed Services shall be for one year and shall be substantially as set
forth in the forms of the warranties attached hereto.
41
<PAGE> 42
CABINET REFACING WARRANTY
________________________________________________________________________________
AMERICAN REMODELING, INC.
(A SEARS AUTHORIZED CONTRACTOR)
LIMITED WARRANTY
1. LIMITED WARRANTY. The Seller agrees to repair or replace at
Seller's expense for a period of one (1) year from completion of installation,
any part of the Product specified in this contract, which upon Seller's
inspection proves to be defective. The Seller, however, is not responsible for
any damages caused by Purchaser through misuse, neglect or accident.
2. WARRANTY DISCLAIMER. Except as set forth in Paragraph 1.
Seller makes NO OTHER EXPRESS WARRANTIES concerning the product.
3. LIMITATION OF LIABILITIES AND REMEDIES. Seller's obligation
described in paragraph 1 above shall be PURCHASER'S SOLE AND EXCLUSIVE REMEDY
AGAINST SELLER FOR ANY LIABILITY. Purchaser agrees that NO OTHER REMEDY SHALL
BE AVAILABLE to Purchaser and that IN NO EVENT SHALL SELLER BE LIABLE FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGE.
4. ALL IMPLIED WARRANTIES ARE LIMITED IN DURATION TO THE ONE (1)
YEAR WARRANTY PERIOD ACCORDINGLY. ANY SUCH IMPLIED WARRANTIES INCLUDING
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR OTHERWISE ARE DISCLAIMED
IN THEIR ENTIRETY AFTER THE EXPIRATION OF THE ONE (1) YEAR WARRANTY PERIOD. THE
OBLIGATION UNDER THIS WARRANTY IS STRICTLY LIMITED TO THE REPAIR OR REPLACEMENT
OF DEFECTIVE PARTS.
5. Some states do not allow the exclusion or limitation of
incidental or consequential damages or limitations on how long an implied
warranty lasts, so the above limitations may not apply to you. This warranty
gives you specific legal rights, and you may also have other rights which vary
from state to state.
Service under this warranty is available by calling or writing the following:
AMERICAN REMODELING, INC.
ATTN: Customer Service Department
1625 East Algonquin Road
Arlington Heights, Illinois 60005
Phone: 1-800-942-0040
________________________________________________________________________________
<PAGE> 43
TEXTURE COATING WARRANTY
________________________________________________________________________________
MANUFACTURER'S LIMITED WARRANTY FOR AS LONG AS YOU OWN YOUR HOME.
FOR MATERIALS ONLY
Your Sears Authorized Textured House Coating is hereby warranted for as long as
you own your home against chipping, flaking or peeling from the underlying
surface. This warranty is to be in force for as long as you own you home from
the Registration Date (Date of Application) and material replacement only shall
be made by Textured Coatings of America, Inc. should this replacement be
necessary as a result of defect in this product only. Texture Coatings of
America, Inc. shall have no obligation to combine to or otherwise participate
in the labor, or costs associated with effecting repairs. THIS WARRANTY DOES
NOT COVER DAMAGE RESULTING FROM SETTLING OF THE BUILDING, MAJOR BUILDING
MOVEMENT, CRACKING EFFLORESCENCE OR MECHANICAL OR EXTERNAL CAUSES.
This product warranty applies only to residential "HOME IMPROVEMENT" sales. New
construction and commercial use is excluded. Said NON-TEXTURED warranty does
not apply to those portions of the applications which include doors, windows,
and garage doors. This warranty is issued in lieu of all other express
guarantees or warranties. In no event shall Texture Coatings of America, Inc. be
liable for any consequential damages to the building or its contents.
This warranty gives you specific legal rights, and you may have other rights
which vary from state to state. Some states do not allow the exclusion of
limitation of incidental or consequential damages so the above information may
not apply to you. Please ask Representative for additional warranty details.
Service under this warranty is available by simply contacting your Sears
Authorized Contractor at 1-800-442-4997. This warranty is transferable under
certain conditions.
A warranty registration form and a limited warranty will be mailed to each
customer at the time all work has been completed.
________________________________________________________________________________
<PAGE> 44
TUFF-GUARD 99(R)
Limited Warranty
Materials Only
TEXTURED HOUSE COATING
FOR AS LONG AS YOU OWN YOU HOME
Premium Registration______
Textured Date______
Your TUFF-GUARD 99 Textured House Coating is hereby warranted for as long as
you own your home against chipping, flaking or peeling from the underlying
surface. This warranty is to be in force for as long as you own your home from
the Registration Date (Date of Application) and material replacement only shall
be made by Textured Coatings of America, Inc. should this replacement be
necessary as a result of defect in this product only. This warranty is
non-transferable and is extended only to the original purchaser of the product.
Textured Coatings of America, Inc. shall have no obligation to the consumer to
contribute to or participate in the labor costs necessary to effect repairs.
Replacement product will be shipped F.O.B. Textured Coatings of America, Inc.'s
closest facility. THIS WARRANTY DOES NOT COVER DAMAGE RESULTING FROM SETTLING OF
THE BUILDING, MAJOR BUILDING MOVEMENT, CRACKING, ROOF LEAKS, ACTS OF GOD,
(I.E., WIND STORMS, HAIL, FLOOD, HURRICANE, TORNADO, OR EARTHQUAKE),
EFFLORESCENCE OR MECHANICAL OR EXTERNAL PHYSICAL CAUSES.
This product warranty applies only to residential "HOME IMPROVEMENT" sales. New
construction and commercial use is excluded. This warranty does not apply to
trim, garage doors, wood, and any movable surfaces.
This warranty is issued in lieu of all other guarantees or warranties. The
terms of this warranty are limited to the express warranties contained herein
and are not subject to modification. Any additional promises or guarantees made
by the sales representative SHALL NOT become part of this limited warranty. In
no event shall Textured Coatings of America, Inc. be liable for any
consequential damage or damages to the building or its contents.
This warranty gives you specific legal rights, and you may also have other
rights which may vary from state to state. Some states do not allow the
exclusion or limitation of incidental or consequential damages so the above
limitation may not apply to you.
Service under this warranty is available by simply contacting 1-800-442-4997.
THIS CERTIFICATE
ISSUED TO: ISSUED BY:
TEXTURED COATINGS OF AMERICA, INC.
- --------------------------------- 5950 S. Avalon Boulevard
Customer Los Angeles, California 90003
- ---------------------------------
Street
- ---------------------------------
City, State, Zip Code
MANUFACTURED BY TEXTURED COATINGS OF AMERICA, INC., 5950 S. Avalon Blvd., Los
Angeles, CA 90003
<PAGE> 45
TUFF-GUARD 99(R)
Limited Warranty
Materials Only
TEXTURED HOUSE COATING
FIFTEEN (15) YEARS
Premium Registration______
Textured Date______
Your TUFF-GUARD 99 Textured House Coating is hereby warranted Fifteen (15)
Years against chipping, flaking or peeling from the underlying surface. This
warranty is to be in force for Fifteen (15) Years from the Registration Date
(Date of Application) and material replacement only shall be made by Textured
Coatings of America, Inc. should this replacement be necessary as a result of
defect in this product only. This warranty is non-transferable and is extended
only to the original purchaser of the product. Textured Coatings of America,
Inc. shall have no obligation to the consumer to contribute to or participate
in the labor costs necessary to effect repairs. Replacement product will be
shipped F.O.B. Textured Coatings of America, Inc.'s closest facility. THIS
WARRANTY DOES NOT COVER DAMAGE RESULTING FROM SETTLING OF THE BUILDING, MAJOR
BUILDING MOVEMENT, CRACKING, ROOF LEAKS, ACTS OF GOD, (I.E., WIND STORMS, HAIL,
FLOOD, HURRICANE, TORNADO, OR EARTHQUAKE), EFFLORESCENCE OR MECHANICAL OR
EXTERNAL PHYSICAL CAUSES.
This product warranty applies only to residential "HOME IMPROVEMENT" sales. New
construction and commercial use is excluded. This warranty does not apply to
trim, garage doors, wood, and any movable surfaces.
This warranty is issued in lieu of all other guarantees or warranties. The
terms of this warranty are limited to the express warranties contained herein
and are not subject to modification. Any additional promises or guarantees made
by the sales representative SHALL NOT become part of this limited warranty. In
no event shall Textured Coatings of America, Inc. be liable for any
consequential damage or damages to the building or its contents.
This warranty gives you specific legal rights, and you may also have other
rights which may vary from state to state. Some states do not allow the
exclusion or limitation of incidental or consequential damages so the above
limitation may not apply to you.
Service under this warranty is available by simply contacting 1-800-442-4997.
THIS CERTIFICATE
ISSUED TO: ISSUED BY:
TEXTURED COATINGS OF AMERICA, INC.
- --------------------------------- 5950 S. Avalon Boulevard
Customer Los Angeles, California 90003
- ---------------------------------
Street
- ---------------------------------
City, State, Zip Code
MANUFACTURED BY TEXTURED COATINGS OF AMERICA, INC., 5950 S. Avalon Blvd., Los
Angeles, CA 90003
<PAGE> 46
TUFF-GUARD 99(R)
Limited Warranty
Materials Only
TEXTURED HOUSE COATING
TEN (10) YEARS
Premium Registration______
Textured Date______
Your TUFF-GUARD 99 Textured House Coating is hereby warranted Ten (10) Years
against chipping, flaking or peeling from the underlying surface. This warranty
is to be in force for Ten (10) Years from the Registration Date (Date of
Application) and material replacement only shall be made by Textured Coatings
of America, Inc. should this replacement be necessary as a result of defect in
this product only. This warranty is non-transferable and is extended only to
the original purchaser of the product. Textured Coatings of America, Inc. shall
have no obligation to the consumer to contribute to or participate in the labor
costs necessary to effect repairs. Replacement product will be shipped F.O.B.
Textured Coatings of America, Inc.'s closest facility. THIS WARRANTY DOES NOT
COVER DAMAGE RESULTING FROM SETTLING OF THE BUILDING, MAJOR BUILDING MOVEMENT,
CRACKING, ROOF LEAKS, ACTS OF GOD, (I.E., WIND STORMS, HAIL, FLOOD, HURRICANE,
TORNADO, OR EARTHQUAKE), EFFLORESCENCE OR MECHANICAL OR EXTERNAL PHYSICAL
CAUSES.
This product warranty applies only to residential "HOME IMPROVEMENT" sales. New
construction and commercial use is excluded. This warranty does not apply to
trim, garage doors, wood, and any movable surfaces.
This warranty is issued in lieu of all other guarantees or warranties. The
terms of this warranty are limited to the express warranties contained herein
and are not subject to modification. Any additional promises or guarantees made
by the sales representative SHALL NOT become part of this limited warranty. In
no event shall Textured Coatings of America, Inc. be liable for any
consequential damage or damages to the building or its contents.
This warranty gives you specific legal rights, and you may also have other
rights which may vary from state to state. Some states do not allow the
exclusion or limitation of incidental or consequential damages so the above
limitation may not apply to you.
Service under this warranty is available by simply contacting 1-800-442-4997.
THIS CERTIFICATE
ISSUED TO: ISSUED BY:
TEXTURED COATINGS OF AMERICA, INC.
- --------------------------------- 5950 S. Avalon Boulevard
Customer Los Angeles, California 90003
- ---------------------------------
Street
- ---------------------------------
City, State, Zip Code
MANUFACTURED BY TEXTURED COATINGS OF AMERICA, INC., 5950 S. Avalon Blvd., Los
Angeles, CA 90003
<PAGE> 47
________________________________________________________________________________
QUALITY WARRANTY
LIMITED WARRANTY
KENSINGTON WINDOWS INC. warrants to you, the original purchaser of The Quality
Vinyl Replacement Windows and/or Sliding Glass Doors, that these products will
be free from defects in materials and workmanship under normal use and service,
except for moving parts and insulating glass, for a period of ten (10) years
from the date of original purchase to the original consumer purchaser.
Purchaser(s) should sign and return the attached Warranty Registration
Certificate within thirty (30) days of the date of installation to establish
proof of purchase. The purchaser(s) are not required to return the warranty
registration certificate and failure to do so will not affect the purchaser(s)
rights under this warranty so long as the original purchaser(s) can prove in a
reasonable manner the information requested on the warranty registration
certificate.
VINYL LINEALS - 10 YEARS
The rigid vinyl in the product is warranted against chipping, cracking,
peeling, pitting or blistering, for a period of ten (10) years from the date in
which those products were installed. This limited warranty does not apply to
any damage caused by improper installation, accident, fire, hail, flood,
explosion, misuse, abuse, vandalism or other external forces.
INSULATING GLASS - 10 YEARS
The sealed insulating glass unit is warranted against defects resulting in
material obstruction of vision from film formation caused by dust or moisture
in the dead air space of the sealed unit for a period of ten (10) years from
the date of installation. Small marks, scratches and spots which do not exceed
our company standards or federal government specifications DD-04516 do not make
insulating glass units defective.
FIBERGLASS SCREENS - 10 YEARS
The materials used in manufacturing screens are warranted for a period of ten
(10) years from the date of installation. This warranty does not apply to any
damage caused by improper installation, accident, fire, flood, explosion,
misuse, abuse, vandalism, or other external forces. The warranty shall be
limited to providing you with new screen material and/or frames or spine for
any manufacturing defect in the screen.
MOVING PARTS - 5 YEARS - NOT TRANSFERABLE
Moving parts, such as balances that are used on double hung products and
locking mechanisms are warranted for a period of five (5) years from the date
of installation to the original purchaser only.
PROCEDURE
If you believe your window or any part thereof is defective in any manner
covered by the Limited Warranty, call Toll Free 1-800-442-4997 and explain in
detail the nature of the product problem. In some instances you may be asked to
submit picture or send representative samples of the defect to the manufacturer
at the address listed below. If the defect is covered by the Limited Warranty,
Kensington Windows Inc. will replace the defective part(s) or complete window
unit(s) with new part(s) or new window unit(s) at no charge (except as
otherwise provided herein) in accordance with the terms of the warranty. In all
cases the manufacturer reserves the right to determine if repair or replacement
is the proper method to relieve the defect. Repair, replacement or refund under
the Limited Warranty or under any other warranty (including any implied
warranty of merchantability or fitness for a particular purpose) is your
exclusive remedy. Kensington Windows Inc. shall not be liable for any
incidental or consequential damages arising from a breach of any expressed or
implied warranties or for any labor involved in replacing parts or complete
window units after one (1) year from the date of original installation, except
where prohibited by applicable law. Any implied warranty of merchantability or
fitness for a particular purpose is limited to the duration of this Limited
Warranty.
MOVING PARTS
Upon inspection and verification that the part failed due to manufacturing
defect, a new replacement part will then be forwarded to you at no charge.
Replacement parts furnished may very somewhat in appearance due to possible
design modifications.
VINYL, LINEALS, INSULATING GLASS, AND FIBERGLASS SCREENS
Upon inspection, if the manufacturer determines that the component has failed
due to manufacturing defect, during the one (1) year period from date of window
installation the manufacturer will pay the cost of labor. During the (1) year
period, there will be no charge to the Original Purchaser for repair or
replacement of the warranted window part or component under the provisions of
this Limited Warranty.
At the expiration of the one (1) year warranty, if an inspection substantiates
that the material has failed due to manufacturer defect, and is covered under
the warranty, a replacement part will be shipped to a designated distribution
center closest to you at no extra charge. At your option you may pick up the
part at the designated distribution center or pay the shipping costs to have
the component shipped directly to you.
KENSINGTON WINDOWS, INC. WILL NOT BE LIABLE FOR ANY LABOR INVOLVED IN REPLACING
ANY PARTS AFTER ONE (1) YEAR FROM THE DATE OF INSTALLATION. AFTER ONE (1) YEAR
ALL LABOR COSTS ARE THE RESPONSIBILITY OF THE CONSUMER.
This limited warranty is made in lieu of all other express warranties and
extends only to the original consumer's purchases. In no event shall KENSINGTON
WINDOWS INC. be liable for special incidental, or consequential damages or for
any delays in the performance of this warranty due to circumstances beyond our
control.
CONDENSATION
Condensation on glass is the natural result of excessive moisture in the house
and does not indicate a defective product or faulty installation. Additional
information is available upon request.
COLOR
The vinyl will maintain its manufactured color as it ages; however, atmospheric
pollution and residues deposited on the window can discolor them. Mild soaps or
detergents are usually all that is necessary to restore its original
manufactured color.
CAULKING
On some installations, caulking is used to seal the frame or trim packages
against water or air penetration. Caulking is not considered part of the
window/door, and therefore, is not covered under this warranty. Caulking is
normally considered a maintenance responsibility of the homeowner.
Kensington Windows Inc. reserves the right to charge, alter, or discontinue any
of its products at its sole discretion. If any part, component or complete
window unit is not available at the time of any claim by you under this Limited
Warranty, Kensington reserves the right to substitute another product that in
its sole discretion is of equal quality and value or at its sole option refund
the original purchase price paid for the window unit(s) in involved in the
warranty request.
Some states do not allow the exclusion or limitation of incidental or
consequential damages or the limitation of remedies for breach of warranty, so
the above limitations or exclusions may not apply to you. This warranty gives
you specific legal rights. You also have other rights which vary from state to
state.
Manufactured by:
Kensington Windows Inc.
RD #1, One Kiski Valley Industrial Park
Vandergrift, PA 15690
________________________________________________________________________________
REGISTRATION & ACKNOWLEDGEMENT CARD
(This card is to be filled out and mailed to Kensington
Windows Inc. within 30 days
after installation.
- -------------------
Registration Number
005101
Original purchaser's name:
-----------------------------------------------------
Original purchaser's address:
-------------------------------------------------
Applicator/Dealer name: AMRE REMODELING/AMERICAN REMODELING
-------------------------------------------------------
Applicator/Dealer address: 8585 NORTH STEMMONS FREEWAY SOUTH TOWER,
DALLAS, TEXAS, 75247
----------------------------------------------------
Product Installed: Color
------------------- ---------------------------------
Purchase Price: Date:
--------------------------------------- -----------------
<PAGE> 48
________________________________________________________________________________
Registration Number
001062
QUALITY WARRANTY
LIMITED WARRANTY
GREAT LAKES WINDOW, INC. warrants to you, the original purchaser of The Quality
Vinyl Replacement Windows and/or Sliding Glass Doors, that these products will
be free from defects in materials and workmanship, except for moving parts, for
a period of ten (10) years from the date of original purchase to the original
consumer purchaser.
Purchaser(s) should sign and return the attached Warranty Registration
Certificate within thirty (30) days of the date of installation to establish
proof of purchase. The purchaser(s) are not required to return the warranty
registration certificate and failure to do so will not affect the purchaser(s)
rights under this warranty so long as the original purchaser(s) can prove in a
reasonable manner the information requested on the warranty registration
certificate.
VINYL LINEALS - 10 YEARS
The rigid vinyl in the product is warranted against chipping, cracking,
peeling, pitting or blistering, for a period of ten (10) years from the date in
which those products were installed. This limited warranty does not apply to
any damage caused by improper installation, accident, fire, hail, flood,
explosion, misuse, abuse, vandalism or other external forces.
INSULATING GLASS - 10 YEARS
The sealed insulating glass unit is warranted against defects resulting in
material obstruction of vision from film formation caused by dust or moisture
in the dead air space of the sealed unit for a period of ten (10) years from
the date of installation. Small marks, scratches and spots which do not exceed
our company standards or federal government specifications DD-04516 do not make
insulating glass units defective.
FIBERGLASS SCREENS - 10 YEARS
The materials used in manufacturing screens are warranted for a period of ten
(10) years from the date of installation. This warranty does not apply to any
damage caused by improper installation, accident, fire, flood, explosion,
misuse, abuse, vandalism, or other external forces. The warranty shall be
limited to providing you with new screen material and/or frames or spine for
any manufacturing defect in the screen.
MOVING PARTS - 5 YEARS - NOT TRANSFERABLE
Moving parts, such as balances that are used on double hung products and
locking mechanisms are warranted for a period of five (5) years from the date
of installation.
PROCEDURE The procedure for obtaining performance of the product obligation is
simple. If any part of the product described above should fail, call TOLL FREE
1-800-442-4997 and explain in detail the nature of the product problem. The
following actions will then be taken.
MOVING PARTS
Upon inspection and verification that the part failed due to manufacturing
defect, a new replacement part will then be forwarded to you at no extra charge.
Replacement parts furnished may very somewhat in appearance due to possible
design modifications.
VINYL, LINEALS, INSULATING GLASS, AND FIBERGLASS SCREENS
Upon inspection, if the manufacturer determines that the component has failed
due to manufacturing defect, during the one (1) year period from date of window
installation the manufacturer will provide the labor at no charge to the
Original Purchaser for repair or replacement of the warranted window part or
component under the providers of this Limited Warranty.
At the expiration of the one (1) year warranty, if an inspection substantiates
that the material has failed due to manufacturer defect, and is covered under
the warranty, a replacement part will be shipped to a designated distribution
center closest to you at no extra charge. At your option you may pick up the
part at the designated distribution center or pay the shipping costs to have
the component shipped directly to you.
GREAT LAKES WINDOW, INC. WILL NOT BE LIABLE FOR ANY LABOR INVOLVED IN REPLACING
ANY PARTS AFTER ONE (1) YEAR FROM THE DATE OF INSTALLATION. AFTER ONE (1) YEAR
ALL LABOR COSTS ARE THE RESPONSIBILITY OF THE CONSUMER.
This limited warranty is made in lieu of all other express warranties and
extends only to the original consumer's purchase. In no event shall GREAT LAKES
WINDOW, INC. be liable for special incidental, or consequential damages or for
any delays in the performance of this warranty due to circumstances beyond our
control.
CONDENSATION
Condensation on glass is the natural result of excessive moisture in the house
and does not indicate a defective product or faulty installation. Additional
information is available upon request.
COLOR
The vinyl will maintain its manufactured color as it ages; however, atmospheric
pollution and residues deposited on the window can discolor them. Mild soaps or
detergents are usually all that is necessary to restore its original
manufactured color.
CAULKING
On some installations, caulking is used to seal the frame or trim packages
against water or air penetration. Caulking is not considered part of the
window/door, and therefore, is not covered under this warranty. Caulking is
normally considered a maintenance responsibility of the homeowner.
Some states do not allow the exclusion or limitation of incidental or
consequential damages or the limitation of remedies for breach of warranty,
so the above limitations or exclusions may not apply to you. This warranty
gives you specific legal rights. You also have other rights which vary from
state to state.
Warranted by:
(GREAT LAKES Great Lakes Window, Inc. (A PLY GEM
WINDOW LOGO) P.O. Box 1896 COMPANY LOGO)
Toledo, Ohio 43603-1896
________________________________________________________________________________
REGISTRATION & ACKNOWLEDGEMENT CARD
(This card is to be filled out and mailed to Great Lakes Window, Inc. within
30 days after installation.
- -------------------
Registration Number
001062
Original purchaser's name:
-----------------------------------------------------
Original purchaser's address:
-------------------------------------------------
Applicator/Dealer name: AMRE REMODELING/AMERICAN REMODELING
-------------------------------------------------------
Applicator/Dealer address: 8585 NORTH STEMMONS FREEWAY SOUTH TOWER,
DALLAS, TEXAS, 75247
----------------------------------------------------
Product Installed: Color
------------------- ---------------------------------
Purchase Price: Date:
--------------------------------------- -----------------
<PAGE> 49
- -------------------
Registration Number
01887
(BIRD VINYL PRODUCTS LOGO)
50 YEAR NON-TRANSFERABLE
VINYL SIDING & SOFFIT LIMITED WARRANTY
Bird Vinyl Products (Bird) hereby warrants that subject to the terms,
conditions, and limitations set forth below, Bird's private label Better Grade
vinyl siding and vinyl soffit, Bird's Standard Grade vinyl siding and related
vinyl accessories manufactured by Bird are free from manufacturing defects and
will not corrode, blister, peel or flake, will not conduct electricity so as to
require grounding, will not deteriorate as a result of salt spray, windblown
sand or termite activity, and meet the American Society of Testing Materials
Test D-635 for non combustibility.
WARRANTY COVERAGE
ORIGINAL OWNER - If any defect covered hereby is discovered by the original
owner, Bird, at its option, will repair or replace the defective material
(providing all material and labor reasonably necessary to remedy the covered
defect). Any costs and expenses beyond Bird's liability hereunder shall be the
owner's responsibility.
COMMERCIAL/GOVERNMENT OR PUBLIC OWNERSHIP
If the structure upon which the product is applied is owned by an entity other
than an individual, be it a corporation, partnership, an unincorporated
association, or by a government or public entity, including, without limitation,
a church or school, the warranty period shall be a fifty (50) year prorated on
the following basis: First three years following installation 100% replacement,
replacement in subsequent years during the term of this warranty shall decline
10% per year, but Bird's liability shall not be less than 10% unless Bird's
obligation hereunder shall cease sooner under the terms and conditions of this
warranty.
COVERAGE EXCLUSIONS AND LIMITATIONS
This Warranty covers only manufacturing defects, and Bird shall not be liable
for material failures attributable in whole or in part to any other causes,
including but not limited to:
1. Faulty application or application not in accordance with Bird's
written instructions;
2. Impact of foreign objects;
3. Hurricane, tornado, gale, lightning, hail damage, flood or other
violent or unusual phenomena of the elements, or fire, or other
casualties;
4. Defect, deterioration, movement or casualty occurring in the substrate
wall on which the siding is applied or in any other structural part of
the building;
5. Normal surface weathering: normal surface weathering is defined as
exposure to sunlight and extremes of weather and atmosphere which will
cause any colored surface to gradually fade, chalk, or suffer an
accumulation of surface dirt or stains. The severity of any of these
conditions depends upon the geographical location of your home, the
cleanliness of the air in you area and many other local influences
over which Bird has no control, (if Bird determines that fading other
than normal weathering or disclaimers stated above has occurred,
warranty coverage shall be prorated on the following basis: First five
years following installation 100% replacement; replacement in
subsequent years during the term of this warranty shall decline 10%
per year, but Bird's liability shall not be less than 10% unless
Bird's obligation hereunder shall cease sooner under the terms and
conditions of this warranty.)
6. Surface discoloration due to air pollution;
7. Discoloration or damage caused by exposure to harmful chemicals;
8. Use of incompatible accessories or accessories not manufactured by
Bird;
9. Aluminum and PVC coated trim coil are not covered by this warranty;
10. Brown panels and brown trim are warranted only for soffit application.
BIRD SHALL IN NO EVENT BE LIABLE FOR INCIDENTAL, REMOTE OR CONSEQUENTIAL
DAMAGES (INCLUDING WITHOUT LIMITATION INJURY TO PERSONS OR DAMAGE TO ANY
BUILDING OR ANY CONTENT THEREOF) RESULTING FROM BREACH OF THIS OR ANY OTHER
WARRANTY, WITH RESPECT TO BIRD'S PRIVATE LABEL BETTER GRADE VINYL SIDING AND
VINYL SOFFIT; BIRD'S STANDARD GRADE VINYL SIDING; AND RELATED VINYL ACCESSORIES
MANUFACTURED BY BIRD, EXCEPT TO THE EXTENT THAT AN ALLOWANCE FOR INCIDENTAL
DAMAGES IS MANDATED BY APPLICABLE LAW. SOME STATES DO NOT ALLOW THE EXCLUSION
OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION
OR EXCLUSION MAY NOT APPLY TO YOU.
Bird reserves the right to discontinue and/or make changes to any of its
products. In the event that products identical to those covered by this
Warranty are not available for replacement purposes, Bird shall have the right
to substitute reasonably equivalent products.
This Warranty is the only express warranty made by Bird in connection with the
sale of Bird's private label Better Grade vinyl siding and vinyl soffit, Bird's
Standard Grade vinyl siding, and related vinyl accessories manufactured by
Bird. No representative of Bird and or any other person has any authority
whatsoever to accept for Bird any additional or different liability or
responsibility for vinyl panels or related accessories which Bird has
manufactured.
This warranty gives you specific legal rights, and you may also have other
rights which may vary from state to state.
REGISTRATION AND ACKNOWLEDGEMENT CARD
This Warranty is valid only after the REGISTRATION AND ACKNOWLEDGEMENT CARD is
completed, signed by the original owner and mailed to Bird within thirty (30)
days after installation has been completed. This warranty is non-transferable
to a successor owner. In the vent that the REGISTRATION AND ACKNOWLEDGEMENT
CARD is not mailed to Bird as set forth above, liability of Bird to the
original purchaser(s) shall be limited to providing replacement material. Any
claims made hereunder must be accompanied by claimants check in the amount of
fifty dollars to cover Bird's expenses in examining and testing the product. In
the event that the product is defective, this amount will be returned to
claimant.
CLAIMS PROCEDURE
To make a claim under this Warranty, the owner must notify Bird within a
reasonable time after discovering the defect (Bird considers 30 days to be a
reasonable time), either in writing by registered or certified mail addressed
to Bird Vinyl Products, 1010 Withrow Court, P.O. Box 2329, Bardstown, Kentucky
40004, or by other means reasonably calculated to inform Bird's Claim
Department, at the above address, of the defect, provide Bird with satisfactory
proof of purchase and tender to Bird the fifty dollars ($50) check mentioned
earlier. The owner shall also afford Bird reasonable opportunity to inspect the
material and take samples before steps are taken to remedy the defect.
REGISTRATION & ACKNOWLEDGEMENT CARD
(This card is to be filled out and mailed within 30 days after application to
Bird Vinyl Products)
- -------------------
Registration Number
018887
Original purchaser's name:
-----------------------------------------------------
Original purchaser's address:
-------------------------------------------------
Applicator/Dealer name: AMRE REMODELING/AMERICAN REMODELING
-------------------------------------------------------
Applicator/Dealer address: 8585 NORTH STEMMONS FREEWAY SOUTH TOWER,
DALLAS, TEXAS, 75247
----------------------------------------------------
Product Installed: Color Squares Installed:
------------ ---------- ------------
Purchase Price: Date:
--------------------------------------- -----------------
<PAGE> 50
(BIRD VINYL PRODUCTS LOGO)
50 YEAR
VINYL SIDING
& SOFFIT
LIMITED WARRANTY
MAINTENANCE INSTRUCTIONS
1. Wash the siding with an ordinary long-handled car washing brush that
fastens to your hose, available at your local auto supply store. It
lets you wash the siding just like you wash your car.
2. If the dirt is hard to remove, such as soot and grime found in
industrial areas, wipe the siding with a solution of: 1/3 cup powder
detergent, 2/3 cup household cleaner, 1 gallon water.
3. If mildew is a problem in you area, use the solution above but
substitute 1 quart liquid laundry bleach for 1 quart of water.
4. If stubborn stains exist, see stain removal chart. Observe the
precautionary labeling instructions on the cleaning agent container.
Protect shrubs form direct contact with cleaning agents.
IMPORTANT: FIRE SAFETY INFORMATION
Exterior vinyl building materials require little maintenance for many
years. Nevertheless, common sense dictates that builders and suppliers
of vinyl products store, handle and install vinyl materials in a
manner that avoids damage to the product and/or the structure. Owners
and installers should take few a single steps to protect vinyl building
materials from fire.
NOTICE TO HOME AND BUILDING OWNERS:
Rigid vinyl siding is made from organic materials and will melt or
burn when exposed to a significant source of flame or heat. Building
owners, occupants and outside maintenance personnel should always take
normal precautions to keep sources of fire, such as barbecues, and
combustible materials, such as dry leaves, mulch and trash, away from
vinyl siding.
(BIRD VINYL PRODUCTS LOGO)
Bird Vinyl Products
1010 Withrow Court
P.O. Box 2329
Bardstown, KY 40004
STAIN REMOVAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
STAINING AGENTS CLEANING AGENTS PREPARATION SPECIAL CLEANING PROCEDURES
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Light oils and greases Solvents-- Remove excess with Use soft cloth to apply mineral
Heavy grease Mineral spirits plastic or wood scraper spirits. Avoid polishing stained
Caulking compound V.M.P., naphtha area by using too much pressure.
Wax, Crayon auto tar remover After removing stain, rinse area
Asphalt, tars, etc. with water.
- ----------------------------------------------------------------------------------------------------------------
Inks (marking) Cleaning fluid Remove excess with Use soft cloth to apply cleaning
Nail polish (trichloroethylene) plastic or wood scraper fluid (trichloroethylene). Avoid
Paint chill gum to remove polishing stained area by using
Gum, Lipstick excess. too much pressure. After removing
stain, rinse area with water.
- ----------------------------------------------------------------------------------------------------------------
Rust stains Oxalic acid-- Make solution of 1 Apply oxalic acid solution with soft
Auto radiator cleaner tablespoon of oxalic acid bristle brush, wipe with damp cloth,
crystals to 1 cup warm and then flush with rust-free water.
water (Use rubber gloves and protect eyes
and face.)
- ----------------------------------------------------------------------------------------------------------------
Stubborn stains Xylene Try above procedures Dampen small section of cloth with
(1-3). If they fail to Xylene, rub vigorously. Do not
remove spots, then use remove any more material than
this procedure. necessary. Rinse area with water.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Mail to:
Bird Vinyl Products
1010 Withrow Court
P.O. Box 2329
Bardstown, KY 40004
<PAGE> 51
VINYL SIDING WARRANTY
SEARS-AUTHORIZED SERVICES WARRANTY: In addition to any warranty
extended to you on the product(s) used in service, should the
workmanship (or application) of this Sears-authorized service
prove faulty within scheduled time in #28 on front of this
agreement, Sears-authorized contractor will, upon notice from
you, cause such faults to be corrected by repair at no
additional cost to you.
Service under this warranty is available by calling 1 (800) 442-4997. This
warranty gives you specific legal rights, and you may also have other rights
which vary from state to state.
<PAGE> 52
Registration Number
001375
(VARIFORM(R) LOGO)
50 YEAR NON-TRANSFERABLE
VINYL SIDING & SOFFIT LIMITED WARRANTY
Variform Inc. ("Variform") hereby warrants that subject to the terms,
conditions, and limitations set forth below. Variform's private label Better
Grade double 5 siding and double 5 soffit panels and related vinyl siding
accessories manufactured by Variform are free from manufacturing defects and
will not corrode, blister, peel or flake, will not conduct electricity so as
to require grounding, will not deteriorate as a result of salt spray, windblown
sand or termite activity, and meet the American Society of Testing Materials
Test D-635 for non combustibility.
WARRANTY COVERAGE ORIGINAL OWNER - if any defect covered hereby is discovered
by the original owner, Variform, at its option, will repair or replace the
defective material (providing all material and labor reasonably necessary to
remedy the covered defect). Any costs and expenses beyond Variform's liability
hereunder shall be the owner's responsibility.
COMMERCIAL/GOVERNMENT OR PUBLIC OWNERSHIP If the structure upon which the
product is applied is owned by an entity other than an individual, be it a
corporation, partnership, an unincorporated association, or by a government or
public entity, including, without limitation, a church or school, the warranty
period shall be a fifty (50) year prorated on the following basis: First three
years following installation 100% replacement, replacement in subsequent years
during the term of this warranty shall decline 10% per year, but Variform's
liability shall not be less than 10% unless Variform's obligation hereunder
shall cease sooner under the terms and conditions of this warranty.
COVERAGE EXCLUSIONS AND LIMITATIONS
This Warranty covers only manufacturing defects, and Variform shall not be
liable for material failures attributable in whole or in part to any other
causes, including but not limited to;
1. Faulty application or application not in accordance with Variform's
written instructions;
2. Impact of foreign objects;
3. Hurricane, tornado, gale, lightning, hail damage, flood or other
violent or unusual phenomena of the elements, or fire, or other
casualties;
4. Defect, deterioration, movement or casualty occurring in the substrate
wall on which the siding is applied or in any other structural part of
the building;
5. Normal surface weathering: normal surface weathering is defined as
exposure to sunlight and extremes of weather and atmosphere which will
cause any colored surface to gradually fade, chalk, or suffer an
accumulation of surface dirt or stains. The severity of any of these
conditions depends upon the geographical location of your home, the
cleanliness of the air in you area and many other local influences
over which Variform has no control, (if Variform determines that
fading other than normal weathering or disclaimers stated above has
occurred, warranty coverage shall be prorated on the following basis:
First five years following installation 100% replacement; replacement
in subsequent years during the term of this warranty shall decline 10%
per year, but Variform's liability shall not be less than 10% unless
Variform's obligation hereunder shall cease sooner under the terms and
conditions of this warranty.)
6. Surface discoloration due to air pollution;
7. Discoloration or damage caused by exposure to harmful chemicals;
8. Use of incompatible accessories or accessories not manufactured by
Variform;
9. Aluminum and PVC coated trim coil are not covered by this warranty;
10. Brown panels and brown trim are warranted only for soffit application.
VARIFORM SHALL IN NO EVENT BE LIABLE FOR INCIDENTAL, REMOTE OR CONSEQUENTIAL
DAMAGES (INCLUDING WITHOUT LIMITATION INJURY TO PERSONS OR DAMAGE TO ANY
BUILDING OR ANY CONTENT THEREOF) RESULTING FROM BREACH OF THIS OR ANY OTHER
WARRANTY, WITH RESPECT TO VARIFORM'S BETTER GRADE VINYL SIDING AND ACCESSORIES,
EXCEPT TO THE EXTENT THAT AN ALLOWANCE FOR INCIDENTAL DAMAGES IS MANDATED BY
APPLICABLE LAW. SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR EXCLUSION MAY
NOT APPLY TO YOU.
Variform reserves the right to discontinue and/or make changes to any of its
products. In the event that products identical to those covered by this
Warranty are not available for replacement purposes, Variform shall have the
right to substitute reasonably equivalent products.
This Warranty is the only express warranty made by Variform in connection with
the sale of Variform's Better Grade vinyl siding soffit panels and related
accessories. No representative of Variform and or any other person has any
authority whatsoever to accept for Variform any additional or different
liability or responsibility for vinyl panels or related accessories which
Variform has manufactured.
This warranty gives you specific legal rights, and you may also have other
rights which may vary from state to state.
REGISTRATION AND ACKNOWLEDGEMENT CARD
This Warranty is valid only after the REGISTRATION AND ACKNOWLEDGEMENT CARD is
completed, signed by the original owner and mailed to Variform within thirty
(30) days after installation has been completed. This warranty is
non-transferable to a successor owner. In the vent that the REGISTRATION AND
ACKNOWLEDGEMENT CARD is not mailed to Variform as set forth above, liability of
Variform to the original purchaser(s) shall be limited to providing replacement
material. Any claims made hereunder must be accompanied by claimant's check in
the amount of fifty dollars to cover Variform's expenses in examining and
testing the product. In the event that the product is defective, this amount
will be returned to claimant.
CLAIMS PROCEDURE To make a claim under this Warranty, the owner must notify
Variform within a reasonable time after discovering the defect (Variform
considers 30 days to be a reasonable time), either in writing by registered or
certified mail addressed to Lifetime Warranty Dept. Inc., P.O. Box 559 Kearney,
Missouri 64060, or by other means reasonably calculated to inform Variform's
Claim Department, at the above address, of the defect, provide Variform with
satisfactory proof of purchase or transfer of warranty right and tender to
Variform the fifty dollars ($50) check mentioned earlier. The owner shall also
afford Variform reasonable opportunity to inspect the material and take samples
before steps are taken to remedy the defect.
REGISTRATION & ACKNOWLEDGEMENT CARD
(This card is to be filled out and mailed to Veriform, Inc. within 30
days after installation)
- -------------------
Registration Number
001375
Original purchaser's name:
-----------------------------------------------------
Original purchaser's address:
-------------------------------------------------
Applicator/Dealer name: AMRE REMODELING/AMERICAN REMODELING
-------------------------------------------------------
Applicator/Dealer address: 8585 NORTH STEMMONS FREEWAY SOUTH TOWER,
DALLAS, TEXAS, 75247
----------------------------------------------------
Product Installed: Color
------------------- ---------------------------------
Purchase Price: Date:
--------------------------------------- -----------------
<PAGE> 53
(VARIFORM(R) LOGO)
50 YEAR
NON-TRANSFERABLE
VINYL SIDING
& SOFFIT
LIMITED WARRANTY
MAINTENANCE INSTRUCTIONS
1. Wash the siding with an ordinary long-handled car washing brush that
fastens to your hose, available at your local auto supply store. It
lets you wash the siding just like you wash your car.
2. If the dirt is hard to remove, such as soot and grime found in
industrial areas, wipe the siding with a solution of: 1/3 cup powder
detergent, 2/3 cup household cleaner, 1 gallon water.
3. If mildew is a problem in you area, use the solution above but
substitute 1 quart liquid laundry bleach for 1 quart of water.
4. If stubborn stains exist, see stain removal chart. Observe the
precautionary labeling instructions on the cleaning agent container.
Protect shrubs form direct contact with cleaning agents.
IMPORTANT: FIRE SAFETY INFORMATION
Exterior vinyl building materials require little maintenance for many years.
Nevertheless, common sense dictates that builders and suppliers of vinyl
products store, handle and install vinyl materials in a manner that avoids
damage to the product and/or the structure. Owners and installers should take
a few single steps to protect vinyl building materials from fire.
NOTICE TO HOME AND BUILDING OWNERS:
Rigid vinyl siding is made from organic materials and will melt or burn when
exposed to a significant source of flame or heat. Building owners, occupants
and outside maintenance personnel should always take normal precautions to keep
sources of fire, such as barbecues, and combustible materials, such as dry
leaves, mulch and trash, away from vinyl siding.
(VARIFORM(R) LOGO)
Lifetime Warranty Dept. Inc.
P.O. Box 559
Kearney, Missouri 64060
STAIN REMOVAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
STAINING AGENTS CLEANING AGENTS PREPARATION SPECIAL CLEANING PROCEDURES
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Light oils and greases Solvents-- Remove excess with Use soft cloth to apply mineral
Heavy greases Mineral spirits plastic or wood scraper spirits. Avoid polishing stained
Caulking compound V.M.P., naphtha area by using too much pressure.
Wax, Crayon auto tar remover After removing stain, rinse area
Asphalt, tars, etc. with water.
- ----------------------------------------------------------------------------------------------------------------
Inks (marking) Cleaning fluid Remove excess with Use soft cloth to apply cleaning
Nail polish (trichloroethylene) plastic or wood scraper fluid (trichloroethylene). Avoid
Paint chill gum to remove polishing stained area by suing
Gum, Lipstick excess. too much pressure. After removing
stain, rinse are with water.
- ----------------------------------------------------------------------------------------------------------------
Rust stains Oxalic acid-- Make solution of 1 Apply oxalic acid solution with soft
Auto radiator cleaner tablespoon of oxalic acid bristle brush, wipe with damp cloth,
crystals to 1 cup warm and then flush with rust-free water.
water (Use rubber gloves and protect eyes
and face.)
- ----------------------------------------------------------------------------------------------------------------
Stubborn stains Xylene Try above procedures Dampen small section of cloth with
(1-3). If they fail to Xylene, rub vigorously. Do not
remove spots, then use remove any more material than
this procedure. necessary. Rinse area with water.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Mail to:
Lifetime Warranty Dept. Inc.
P.O. Box 559
Kearney, Missouri 64060
<PAGE> 54
CUSTOM-FIT PREMIUM WINDOWS WARRANTY
SEARS-AUTHORIZED SERVICES WARRANTY: In addition to any warranty
extended to you on the product(s) used in service, should the
workmanship (or application) of this Sears-authorized service
prove faulty within scheduled time in #16 on front of this
agreement, Sears-authorized contractor will, upon notice from
you, cause such faults to be corrected by repair at no
additional cost to you.
Service under this warranty is available by calling 1 (800) 442-4997. This
warranty gives you specific legal rights, and you may also have other rights
which vary from state to state.
<PAGE> 55
Exhibit F
LICENSEE PERFORMANCE STANDARDS
Licensee's specifications and performance standards currently in
effect require first class installation and high quality products consistent
with the respective price of such product or service. All products offered by
Licensee shall be commercially acceptable for the purposes for which they are
sold.
42
<PAGE> 56
Exhibit G
REFERRAL SERVICE FEE
Licensee will pay a Referral Service Fee to Franchisees equal to ten
percent (10%) of the Contract Revenue realized by Licensee as a direct result
of referrals received in accordance with the Joint Referral Program. Licensor
and Century 21 shall use commercially reasonable efforts to establish a program
with Franchisees whereby the Referral Service Fee is equitably divided between
the Franchisee's agent or employee producing the referral and the owners of the
franchise, in order to encourage the production of referrals by the
Franchisees' agents and employees.
43
<PAGE> 57
Exhibit H
JOINT REFERRAL PROGRAM
Licensor and Century 21, in conjunction with the Franchisees, shall
use commercially reasonable efforts to establish a program whereby the agents
and employees of Franchisees will submit to Licensee the name, address, and
telephone number of any of their customers who have indicated in writing a
desire to have a sales representative make a presentation within an agreed upon
period of time with respect to one or more specified Licensed Products or
Licensed Services. In the event that Licensee has previously been contacted by
the customer with respect to the specific Licensed Product or Licensed Service,
the provision of such information shall not constitute a referral for purposes
of payment of a Referral Service Fee. Licensee agrees to use commercially
reasonable efforts to assist Licensor and Century 21 in establishing the Joint
Referral Program. The Joint Referral Program shall be developed in consultation
with, and subject to the approval of, legal counsel to ensure compliance with
RESPA and all other applicable laws and regulations.
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EXHIBIT 7.2
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (as amended, supplemented or
otherwise modified, this "Agreement"), dated as of October 17, 1995, by and
among AMRE, Inc., a Delaware corporation (the "Corporation") and HFS
Incorporated, a Delaware corporation (the "Investor").
RECITALS:
A. The Corporation desires to raise money by the sale of
the Corporation's Senior Convertible Preferred Stock ("Preferred Stock") to the
Investor.
B. The Investor desires to purchase shares of Preferred
Stock on the terms and subject to the conditions hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual agreements,
covenants, representations and warranties contained in this Agreement, the
parties hereto hereby agree as follows:
1. AUTHORIZATION AND SALE OF PREFERRED STOCK.
a. AUTHORIZATION. The Corporation will
authorize and, to the extent necessary, the Corporation's stockholders will
approve, on or before the Closing (as defined hereinafter) the sale and
issuance of that number of shares of Preferred Stock, having the rights,
privileges and preferences set forth in the Certificate of Designation, a copy
of which is attached hereto as Exhibit A (the "Certificate of Designation").
b. SALE OF PREFERRED STOCK. Subject to the
terms and conditions hereof, the Corporation will issue and sell to the
Investor, and the Investor will purchase from the Corporation an aggregate of
300,000 shares of Preferred Stock (the "Shares"), for an aggregate purchase
price of $3,000,000.
<PAGE> 2
2. ISSUANCE AND PAYMENT.
a. CLOSING. Subject to the terms and conditions
hereof, the closing of the purchase and sale of the Shares (the "Closing")
shall be held at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York on, or about, the date upon which the Term of the
License Agreement commences (as defined therein), or at such other time and
place upon which the Corporation and the Investor shall agree (the "Closing
Date").
b. DELIVERY. At the Closing, the Corporation
will deliver to the Investor certificates, registered in the name of the
Investor, representing the Shares, against payment of the purchase price
therefor, by cashier's check payable to the Corporation, or by wire transfer
per the Corporation's instruction.
c. RESTRICTIONS ON ACQUISITIONS OF SHARES.
For so long as the Investor owns the Securities, neither Investor nor any
affiliate which it directly controls shall directly, indirectly, as part of a
Group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) or otherwise, without the prior written consent of the Corporation,
acquire or make any proposal to acquire, directly or indirectly, more than 20%
of the shares of Common Stock of the Corporation.
3. CORPORATION'S REPRESENTATIONS AND WARRANTIES.
Except as set forth in the disclosure schedule attached hereto as Exhibit B
(the "Disclosure Schedule"), the Corporation hereby represents and warrants to
the Investor as follows:
a. CORPORATE ORGANIZATION AND STANDING.
The Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the State,of Delaware. The Corporation has the
requisite corporate power and authority to carry on its business as now
conducted, and as proposed or contemplated to be conducted in the future, and
to enter into and carry out the provisions of this Agreement and the
transactions contemplated hereby. The Corporation is qualified to do business
as a foreign corporation in all jurisdictions where the fail-
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ure to be so qualified would materially and adversely affect the Corporation's
business.
b. SUBSIDIARIES. The Corporation owns or
controls the subsidiaries or affiliated companies listed on Exhibit C and does
not otherwise own or control, directly or indirectly, any equity interest in
any corporation, association or business entity (collectively, the
"Subsidiaries"). Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of each Subsidiary's jurisdiction
of incorporation.
c. CORPORATE CAPITALIZATION.
(i) Simultaneously with, the Closing,
the Corporation's authorized capital stock shall consist only of (A) shares of
the Corporation's preferred stock (other than the Preferred Stock), none of
which is issued and outstanding, (3) 200,000 shares of the Corporation's Series
A Junior Participating Preferred Stock, (C) 20,000,000 shares of the
Corporation's common stock, par value $0.01 per share (the "Common Stock"), of
which 12,849,822 are issued and outstanding, (D) 2,562,381 shares of Common
Stock as may be issued by the Corporation pursuant to options outstanding as of
the date hereof (including options to be issued to David Moore) and (E) 300,000
shares of the Preferred Stock.
(ii) Except as set forth on the
Corporation's Form 10-K for the year ending December 31, 1994 (the "Form
10-K"), filed pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), there are no outstanding preemptive or other rights, options,
warrants, conversion rights or agreements for the purchase or acquisition from
the Corporation of any shares of its capital stock, nor does the Corporation
have any obligation to repurchase any outstanding capital stock of the
Corporation.
(iii) As of the date hereof, the
Corporation does not have any declared and unpaid dividends (whether payable in
cash, securities or other consideration).
d. AUTHORIZATION. All corporate action on the
part of the Corporation, its directors and stock-
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<PAGE> 4
holders necessary for the authorization, execution, delivery and performance of
this Agreement by the Corporation, the authorization, sale, issuance and
delivery of the Preferred Stock and the performance of all of the Corporation's
obligations hereunder has been taken or will be taken prior to the Closing.
This Agreement, when executed and delivered by the Corporation (and assuming
due execution and delivery by the Investor), shall constitute a valid and
binding obligation of the Corporation, enforceable in accordance with its
terms, except as may be limited by principles of public policy, and subject to
laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief
or other equitable remedies. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, will be fully paid and
nonassessable (except as provided herein), will have the rights, preferences
and privileges set forth in the Certificate of Designation and the Shares will
be free of any liens or encumbrances.
e. FINANCIAL STATEMENTS. The Corporation has
delivered to the Investor the audited consolidated financial statements for the
fiscal year ended December 31, 1994 and the unaudited consolidated financial
statements of the Corporation for the period ending on June 30, 1995
(collectively the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, except for the absence of
footnotes and except for normal year end adjustments. The Financial Statements
fairly present the Corporation's financial condition and operating results and
that of its Subsidiaries as of the dates, and during the periods, indicated
therein. Since June 30, 1995, there has not been any material change in the
assets, liabilities, financial condition or operations of the Corporation or
its Subsidiaries, from that reflected in the Financial Statements, except
changes in the ordinary course of business which have not been, either
individually or in the aggregate, materially adverse to the Corporation and its
Subsidiaries taken as a whole and any changes that may result from the series
of transactions contemplated hereby, by the License Agreement and by other
related agreements.
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<PAGE> 5
f. NO UNDISCLOSED LIABILITIES. Neither the
Corporation nor its Subsidiaries have any material liabilities or obligations,
absolute or contingent (individually or in the aggregate), except (i) the
liabilities and obligations set forth in the Financial Statements, and (ii)
liabilities and obligations which have been incurred subsequent to June 30,
1995, in the ordinary course of business which have not been, individually or
in the aggregate, materially adverse to the Corporation and its Subsidiaries
taken as a whole.
g. LITIGATION. There are no actions, proceedings
or, to the Corporation's best knowledge, governmental investigations pending,
or any threat thereof made by any person or agency, against the Corporation or
any of its Subsidiaries which, either individually or in the aggregate, might
result in any material adverse change in the business, prospects, condition,
affairs or operations of the Corporation or in any of its properties, assets or
Subsidiaries, or in any material impairment of the right or ability of the
Corporation or its Subsidiaries to carry on their respective businesses as
proposed to be conducted, nor which question the validity of this Agreement or
any action taken or to be taken in connection herewith. To the Corporation's
best knowledge, there is no reasonable basis for any material actions or
proceedings against the Corporation or its Subsidiaries that would have a
material adverse effect upon the Corporation or its Subsidiaries.
h. GOVERNMENTAL CONSENTS. No consent, approval,
order, authorization or registration, qualifications, designation, license,
declarations or filing with any Federal or state governmental authority is
required on the part of the Corporation in connection with the consummation of
the transactions contemplated herein to be consummated on the Closing Date
except for those set forth on the Disclosure Schedule, each of which are in
full force and effect as of the Closing Date. All filings of the Corporation
required by the Securities and "Exchange Commission have been made and since
January 1, 1993, such filings do not contain any untrue statement of a material
fact or omit to state a material fact necessary to make such filings not
misleading.
i. TITLE TO PROPERTY. The Corporation and its
Subsidiaries have good and marketable title to
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<PAGE> 6
all of their respective properties and assets, free and clear of restrictions
or conditions on transfer or assignment (other than restrictions or
prohibitions on the transfer or assignment of the Corporation's interests or
rights under leases and contracts) and free and clear of mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights of way,
covenants, conditions or restrictions, except for current taxes and assessments
not delinquent or are being contested in good faith and adequate reserves have
been taken therefor in accordance with generally accepted accounting
principles, as in effect from time to time, applied on a consistent basis
("GAAP") and for matters that, in the aggregate, are not substantial in amount
and do not materially detract from or interfere with the present or intended
use of any of these assets, nor materially impair the business or proposed
operation of the Corporation or the Subsidiaries. Neither the Corporation nor
its Subsidiaries are in material breach of any leasehold interest.
j. TAX RETURNS. All tax returns required by law
to be filed by the Corporation and its Subsidiaries have been timely filed
(including allowable extensions) and are materially accurate and complete, and
any taxes, assessments or governmental charges or levies upon the Corporation,
its Subsidiaries, or upon their respective properties, assets or income, which
are due and payable have been paid or are being contested in good faith and
adequate reserves have been taken therefor in accordance with GAAP. The
Corporation has also withheld all taxes required by law to be withheld by the
Corporation.
k. BOOKS AND RECORDS. All books and records of
the Corporation, including minute books, Bylaws, stock ledgers and books of
account, are accurate in all material respects and reflect all material matters
and transactions which should currently be reflected therein.
l. NO VIOLATION OF LAW. The Corporation is not
in violation of any law, statute, regulation, ordinance, judgment, order or
decree applicable to it which violation, either individually or in the
aggregate, would materially and adversely affect the Investor's rights under
this Agreement or the property, business, prospects, operations or condition
(financial or other-
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<PAGE> 7
wise) of the Company and its Subsidiaries taken as a whole.
m. CONTRACTS; COMPLIANCE WITH INSTRUMENTS.
Except as set forth on the Form 10-K, the Corporation and its Subsidiaries have
no contracts or commitments that are material to its business, financial
condition, operations or prospects. Neither the Corporation nor its
Subsidiaries are in violation, breach or default of any term of their
respective Certificate of Incorporation or Bylaws, or in any material respect,
of any material term or provision of any mortgage, indenture, contract,
agreement, instrument, judgment, decree, order, statute, rule or regulation
applicable to or binding upon the Corporation or its Subsidiaries. The
execution, delivery and compliance with and performance by the Corporation of
this Agreement does not and will not (1) conflict with or result in a breach of
the terms, conditions or provisions of, in any material respect,(2) constitute
a default under, (3) result in the creation of any material lien, security
interest, charge or encumbrance upon the Corporation's or its Subsidiaries,
capital stock or assets pursuant to, (4) give any third party the right to
accelerate any material obligation under, (5) result in a material violation
of, or (6) except as contemplated hereby, require any authorization, consent,
approval, permit, exemption or other action by or notice to any court or
administrative or governmental body pursuant to, the Certificate of
Incorporation or Bylaws of the Corporation or its Subsidiaries or any law,
statute, rule or regulation to which the Corporation or any Subsidiary is
subject or any material agreement, instrument, order, judgment or decree to
which the Corporation or any Subsidiary is subject. To the Corporation's best
knowledge, no third-party is in breach of any material agreement with the
Corporation or its Subsidiaries that would have a material adverse effect upon
the Corporation or its Subsidiaries taken as a whole.
n. INSURANCE. The Corporation and its
Subsidiaries maintain insurance with companies in such amounts and against such
risks as maintained by companies of similar size and in businesses similar to
the Corporation's business.
o. AGREEMENTS AMONG STOCKHOLDERS OR AFFILIATES.
(i) Except as set forth on the Form 10-K,
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there are no agreements between the Corporation and its stockholders or (ii) to
the Corporation's best knowledge, between and among the Corporation's
stockholders which are applicable to the Corporation, its business or its
capital stock. There are no agreements between the Corporation's officers,
directors or stockholders. There are no loans to or from the Corporation with
any officer, director or stockholder of the Corporation.
p. DISCLOSURE. No representation or warranty
by the Corporation in this Agreement or the Disclosure Schedule or in any
written statement or certificate furnished or to be furnished to the Investor
pursuant hereto contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading in any material respect.
4. INVESTOR REPRESENTATIONS AND WARRANTIES. The
Investor represents and warrants to the Corporation that (i) the Investor is
acquiring the Shares, and any shares of Common Stock issuable pursuant to
conversion of the Shares (hereinafter collectively the "Securities") for
investment for its own account, and not with a view to, or resale in connection
with, any public distribution thereof and (ii) all corporate action on the part
of the Investor, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Investor and the performance of all of the Investor's obligations hereunder has
been taken or will be taken prior to the Closing; This Agreement, when executed
and delivered by the Investor (and assuming due execution and delivery by the
Corporation), shall constitute a valid and binding obligation of the Investor,
enforceable in accordance with its terms, except as may be limited by
principles of public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of
law,governing specific performance, injunctive relief or equitable remedies.
5. CERTIFICATE OF DESIGNATION. Prior to the Closing, the
Corporation shall file with the Secretary of State of the State of Delaware,
the Certificate of Designation to reflect the terms of the Preferred Stock and
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<PAGE> 9
the provisions of Section 7 hereof, which such Certificate of Designation shall
be satisfactory to the Investor.
6. COVENANTS PENDING CLOSING. From the date of this
Agreement until the Closing Date (or later as specified below), the parties
hereto hereby covenant as hereinafter set forth:
a. Except as contemplated by this Agreement, the
Corporation will conduct its business and operations according to its ordinary
and usual course of business. Without limiting the generality of the foregoing,
and, except as otherwise expressly provided in this Agreement, prior to the
Closing Date, without the prior written consent of the Investor, the
Corporation will not:
(i) create, incur or assume any indebtedness of
any nature, including obligations in respect of capital leases except
as would be permitted under the terms of the Credit Agreement dated as
of the date hereof between the Corporation, as borrower, and the
Investor, as lender;
(ii) declare, set aside or pay an dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of the Common Stock, or redeem or
otherwise acquire any shares of the Common Stock;
(iii) (a) increase in any manner the compensation
of any of its directors, officers or other employees, except such
increases as are granted (1) in the ordinary course of business in
accordance with its customary practices (which shall include normal
periodic performance review and related compensation and benefit
increases but not any general across-the-board increases) or (2) by
the Corporation's Compensation Committee and approved by a
representative of the Investor or (b) increase the rate or terms of
any bonus, insurance, pension or other employee benefit plan, payment
or arrangement made to, for or with any such directors, officers or
key employees except increases occurring in the ordinary course of
business in accordance with its customary practices (which shall
include normal
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periodic performance reviews and related compensation and benefit
increases) and except pursuant to any Corporation plans; or
(iv) enter into any agreement, commitment or
transaction (including without limitation any borrowing, capital
expenditure or capital financing) material to the business, operations
or financial condition of the Company, except agreements, commitments
or transactions in the ordinary course of business or as contemplated
hereby,
b. The Corporation will (i) give the Investor
and its authorized representatives reasonable access to all books, records,
plants, offices, warehouses and other facilities and properties of the
Corporation and its Subsidiaries, (ii) permit the Investor to make such
inspections thereof during normal business hours as the Investor may reasonably
request and (iii) cause its officers to furnish the Investor with such
financial and operating data and other information with respect to the business
and properties of the Corporation and its Subsidiaries as the Investor may from
time to time reasonably request; provided, however, that any such investigation
shall be conducted in such a manner as not to interfere unreasonably with the
operation of the business of the Corporation.
c. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Shares pursuant to this
Agreement. From time to time after the date hereof, without further
consideration, the Corporation will execute and deliver such documents to the
Investor as the Investor may reasonably request in order more effectively to
vest in the Investor good title to the Shares.
d. The Investor and the Corporation will make or
cause to be made all filings and submissions as may be required under
applicable laws and regulations, if any, for the consummation of the
transactions contemplated by this Agreement. The Investor and the Corporation
will coordinate and cooperate with one another in
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exchanging such information and reasonable assistance as another may request in
connection with all of the foregoing.
e. The Corporation shall, after the Closing
Date, ensure that it at all times maintains an adequate number of authorized
shares of Common Stock so as to allow the conversion of the Preferred Stock
pursuant to the terms of the Certificate of Designation.
7. INVESTOR DIRECTORS. For so long, as (i) the Investor
or any affiliate thereof holds 50% of the Securities, (ii) the Credit Agreement
is in full force and effect or (iii) any other loan is outstanding from the
Corporation or its Subsidiaries to the Investor, the Investor shall have the
right to designate two (2) members of the Corporation's Board of Directors and
the Corporation shall provide for the election of such designated members to
the Board of Directors.
8. CONDITIONS TO INVESTOR'S OBLIGATIONS. The obligation
of the Investor to purchase the Shares pursuant to this Agreement is subject to
the satisfaction at or prior to the Closing Date of the following conditions,
any or all of which may be waived by the Investor:
a. The representations and warranties of the
Corporation contained in Section 3 hereof shall be true and correct in all
material respects on and as of the Closing Date as if made on and as of such
date;
b. The Corporation shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it at or prior to the
Closing Date;
c. The Investor shall have received duly
executed certificates representing the Shares and duly registered in the name
of the Investor or its designated agent on the Closing Date;
d. The Investor shall have received certificates
dated the Closing Date signed on behalf of the Corporation by its duly
authorized officer or duly authorized officers to the effect that all of the
conditions to the Closing set forth in Sections 8a and 8b have been satisfied;
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e. The Investor shall have received opinions,
dated the Closing Date, from Akin, Gump, Strauss, Hauer & Feld, L.L.P., the
Corporation's counsel, acceptable to Investor's counsel;
f. There shall be no action or proceeding
commenced or, to the knowledge of the parties, threatened before any legal or
administrative tribunal or by any administrative organization, and no judgment,
order or injunction shall have been rendered by any such tribunal or
organization for the purpose of restraining or prohibiting the transactions
contemplated in this Agreement or otherwise adversely affecting Investor's
ownership of the shares; and
g. The conditions precedent contained in Section
3 of the Credit Agreement shall have been fulfilled.
9. CONDITIONS TO THE CORPORATION'S OBLIGATIONS.
The obligations of the Corporation to issue and sell the Shares pursuant to
this Agreement are subject to the satisfaction, at or prior to the Closing
Date, of the following conditions, any or all of which may be waived by the
Corporation:
a. The representations and warranties of the
Investor contained in Section 4 hereof shall be true and correct in all
material respects on and as of the Closing Date as if made on and as of such
date;
b. The Investor shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by the Investor at or prior to
the Closing Date; and
c. The Corporation shall have received
certificates dated the Closing Date signed on behalf of the Investor by a duly
authorized officer or duly authorized officers to the effect that all the
conditions to Closing set forth in Sections 9a and 9b have been satisfied.
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10. INVESTOR REGISTRATION RIGHTS.
a. DEMAND REGISTRATION. At any time after the
Preferred Stock is converted into Common Stock of the Corporation, the Investor
may make a written request for registration ("Demand Registration") under the
Securities Act of 1933 (the "Securities Act") of all or part of its Common
Stock into which its Preferred Stock has so been converted (the "Registrable
Securities"). Subject to the provisions of this paragraph, the Corporation
shall not be obligated to effect more than one such Demand Registration.
Notwithstanding the foregoing, (a) the Corporation shall not be obligated to
effect a registration pursuant to this Section 10a during the period starting
with the date thirty (30) days prior to the Corporation's estimated date of
filing of, and ending on a date ninety (90) days following the effective date
of, a registration statement pertaining to an underwritten public offering of
Common Stock for the account of the Corporation, and (b) if the Corporation is
required to effect a registration pursuant to this Section 10a and the
Corporation furnishes to the Investor a certificate signed by the President of
the Corporation stating that in the good faith judgment of the Board of
Directors of the Corporation it would be materially adverse to the Corporation
and its shareholders for such registration statement to be filed on or before
the date such filing would otherwise be required hereunder and it is therefor
necessary to defer the filing of such registration statement, then the
Corporation shall have the right to defer such filing for a period not to
exceed 90 days after receipt of the request for such registration from
Investor; provided that during such time the Corporation may not file a
registration statement for securities to be issued and sold for its own account
or that of anyone other than Investor other than on Form S-8, S-4 or any
successor similar forms or any other form not available for registering the
Registrable Securities for sale to the public. The Corporation shall at all
times use its best efforts to register such Registrable Securities. A
registration will not count as a Demand Registration until it has become
effective, unless the cause of such failure shall be directly attributable to
actions of the Investor. The Investor shall determine the method of
distribution for Registrable Securities. If, for any reason, Registrable
Securities requested to be registered are excluded from a Demand Registration,
the Investor
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shall have the right to one additional Demand Registration with respect to such
issue of Registrable Securities. If any Demand Registration is in the form of
an underwritten offering, the Investor shall have the right to designate the
underwriter(s) with the approval of the Corporation, which approval shall not be
unreasonably withheld.
If a requested registration pursuant to this Section 10a
involves an underwritten offering, and the managing underwriter shall advise
the Corporation in writing (with a copy to the Investor) that, in its opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering within a price range acceptable
to the Investor, then the Registrable Securities requested to be registered
pursuant to this Section 10a shall either (i) be reduced to the number of
Registrable Securities which the Corporation is so advised can be sold in (or
during the time of) such offering, or, (ii) in the alternative, the Investor
may elect to cancel the Demand Registration, which shall not then count as a
Demand Registration hereunder.
b. PIGGY-BACK REGISTRATION. If, at any time
prior to the third anniversary of the date of the issuance of the Preferred
Stock, the Corporation proposes to register any of its securities under the
Securities Act of 1933, as amended (the "Securities Act") (other than by a
registration on Form S-8, S-4 or any successor similar forms or any other form
not available for registering the Registrable Securities for sale to the public
and other than pursuant to Section 10a hereof), whether for sale for its own
account or other security holders, the Corporation will, each such time, at
least 30 days prior to filing the registration statement, give written notice
to the Investor of its intention to do so and upon the written request of the
Investor made within 15 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
the Investor), the Corporation will use best efforts to effect the registration
under the Securities Act of all Registrable Securities which the Corporation
has been so requested to register by the Investor, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided, however, that if at any time after giving written notice of its
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intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Corporation shall determine for any reason not to register or to delay
registration of such securities, the Corporation may, at its election, give
written notice of such determination to the Investor and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration,
without prejudice, however, to any rights of the Investor to request that such
registration be effected as a registration under Section 10a hereof, and (ii)
in the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities being registered pursuant to this
Section 10b for the same period as the delay in registering such other
securities. No registration effected under this Section 10b shall relieve the
Corporation of its obligation to effect any registration upon request required
under Section 10a hereof.
c. PRIORITY IN PIGGY-BACK REGISTRATIONS. If
(i) a registration pursuant to this Section 10b involves an underwritten
offering of the securities so being registered, whether or not for sale for the
account of the Corporation, to be distributed (on a firm commitment basis) by
or through one or more underwriters of recognized standing, whether or not the
Registrable Securities so requested to be registered for sale for the account
of the investor are also to be included in such underwritten offering, and (ii)
the managing underwriter of such underwritten offering shall inform the
Corporation and the Investor of its belief that the number of securities
requested to be included in such registration exceeds the number which can be
sold in (or during the time of) such offering, then the Corporation may include
in such offering all securities proposed by the Corporation to be sold for its
own account and all securities proposed to be sold by other holders of
Registrable Securities exercising demand registration rights (if any) and may
decrease the number of Registrable Securities and other securities of the
Corporation that requested to be included in such registration by decreasing
the Registrable Securities requested to be included in such registration (pro
rata among the holders requesting such registration on the basis of the number
of shares of such securities held by such holder immediately prior to the
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filing of the registration statement with respect to such registration). The
Corporation shall not be required under this Section 10c to include any of the
Investor's Registrable Securities in such underwriting unless Investor accepts
the terms of the underwriting as determined by the Corporation and the
underwriters selected by the Corporation.
d. PROCEDURES. If and whenever the Corporation
is required to use best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 10a and 10b hereof,
the Corporation will, subject to the limitations provided herein:
(i) promptly prepare and as soon as
practicable file with the Securities and Exchange Commission (the "SEC") the
requisite registration statement to effect such registration, and thereafter,
subject to the provisions of Section 10 hereof, use best efforts to cause such
registration statement to become promptly effective;
(ii) promptly prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement; provided,
however, that the Corporation shall not in any event be required to keep the
registration statement effective for a period of more than six months after
such registration statement becomes effective; and provided, further that the
Corporation may delay the filing or suspend the effectiveness of any
registration under this Agreement, or without suspending such effectiveness,
instruct the Investor not to sell any Registrable Securities included in any
such registration, only in the case of: (A) if the Corporation shall have
determined upon the advice of counsel that the Corporation would be required to
disclose any actions taken or proposed to be taken by the Corporation in good
faith and for valid business reasons, including without limitation,
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the acquisition or divestiture of assets, which disclosure would have a
material adverse effect on the Corporation or on such actions, or (B) if
required by law, to update the prospectus relating to any such registration to
include updated financial statements (a "Suspension Period") by providing the
Investor with written notice of such Suspension Period and the reasons
therefor. In addition, the Corporation shall not be required to keep any
registration effective, or may without suspending such effectiveness, instruct
the Investor if it has Registrable Securities included in such registration not
to sell such securities, during any period which the Corporation is instructed,
directed, ordered or otherwise requested by any governmental agency or
self-regulatory organization to stop or suspend such trading or sales
("Supplemental Extension Period"). The Corporation shall use its best efforts
to terminate any such Suspension Period or Supplemental Extension Period and in
any event, such periods shall end within 30 days thereafter. In the event of a
Suspension Period or Supplemental Extension Period, the period during which any
registration under this Agreement is to remain effective pursuant to this
Section 10d shall be tolled until the end of any such Suspension Period or
Supplemental Extension Period;
(iii) promptly furnish to the Investor
such number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus filed under Rule 424 under the Securities Act, and such other
documents, as the Investor may reasonably request;
(iv) use best efforts to register or
qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdiction as each seller thereof shall reasonably request and to keep such
registration or qualification in effect for so long as such registration
statement remains in effect (provided, however, that the Corporation shall not
in any event be required to keep such registration or qualification in effect
for a period of more than six months after such registration or qualification
becomes effective), and
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take any other action which may be reasonably necessary or advisable to enable
Investor to consummate the disposition in such jurisdictions of the securities
owned by Investor, except that the Corporation shall not for any such purpose
be required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this Section 10d
be obligated to be so qualified or to consent to general service of process in
any such jurisdiction, and further provided that (anything in this Agreement to
the contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification of the securities in
that jurisdiction be borne by Investor, then such expenses shall be payable by
Investor, to the extent required by such jurisdiction;
(v) use best efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other United States Federal or state governmental
agencies or authorities as may be necessary to enable the Investor to promptly
consummate the disposition of such Registrable Securities;
(vi) if Registrable Securities are
covered by such registration statement, promptly notify the Investor at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and at the request of the Investor prepare and furnish to the
Investor a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made;
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(vii) otherwise use best efforts to comply
with all applicable rules and regulations of the SEC and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act;
(viii) provide and cause to be maintained a
transfer agent for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and
(ix) use best efforts to list all
Registrable Securities covered by such registration statement on any securities
exchange on which any of the Corporation's Common Stock is then listed.
e. INVESTOR INFORMATION REQUIREMENTS. It shall
be a condition precedent to the obligations of the Corporation to take any such
action with respect to registering the Investor's Registrable Securities
pursuant to this Section 10 that the Investor furnish the Corporation in
writing such information regarding the Investor, the Registrable Securities and
the distribution of such securities as the Corporation may from time to time
reasonably request in writing. If the Investor fails to provide the Corporation
with any such information, the Corporation may exclude the Investor's
Registrable Securities from the registration statement unless the Investor
provides the Corporation with an opinion of Skadden, Arps, Slate, Meagher &
Flom or other counsel reasonably acceptable to the Corporation to the effect
that such information need not be included in the registration statement.
The Investor agrees that upon receipt of any notice from the
Corporation of the happening of any event of the kind described in Section
10d(v), the Investor will forthwith discontinue the Investor's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 10d(v) and,
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if so directed by the Corporation, will deliver to the Corporation copies,
other than permanent file copies then in the Investor's possession, of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
f. REQUESTED UNDERWRITTEN OFFERINGS. If
requested by the underwriters for any underwritten offering of Registrable
Securities pursuant to a registration requested under Section 10 hereof, the
Corporation will enter into an underwriting agreement with such underwriters
for such offering, such agreement to be reasonably satisfactory in substance
and form to the Investor and the underwriters and to contain such customary
representations and warranties, covenants and indemnities by the Corporation
and such other terms as are generally required in agreements of this type. The
Investor will cooperate with the Corporation in the negotiation of the
underwriting agreement and will give consideration to the reasonable requests
of the Corporation regarding the form thereof. If requested by the underwriters
of any underwritten offering pursuant to a registration under Section 10
hereof, provided the Corporation has complied with Section 10b, the Investor
agrees to enter into an agreement with such underwriters not to sell its shares
of stock in the Corporation for a period of time (not to exceed 90 days) after
the effectiveness of a registration statement equal to the period of time which
the sellers of securities in such registration have agreed not to sell their
shares after the effectiveness of such registration statement. The Investor
shall be a party to such underwriting agreement. The Investor shall not be
required to make any representations, warranties or agreements with the
Corporation other than representations, warranties or agreements regarding the
Investor, the Investor's Registrable Securities, the Investor's intended method
of distribution and any representations, warranties or agreements required by
law.
g. INCIDENTAL UNDERWRITTEN OFFERINGS. If the
Corporation at any time proposes to register any of its securities under the
Securities Act as contemplated by Section 10b hereof and such securities are to
be distributed by or through one or more underwriters, the Corporation will, if
requested by the Investor as provided in Section 10b hereof and subject to the
provisions of Section 10c hereof, use best efforts to arrange for such
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underwriters to include all the Registrable Securities to be offered and sold
by the Investor to be distributed by such underwriters, provided that the
Investor has accepted the terms of the underwriting as determined hereunder and
the Underwriter(s) selected by the Corporation. In such event, the Investor
shall be a party to the underwriting agreement between the Corporation and such
underwriters. The Investor shall not be required to make any representations or
warranties to or agreements with the Corporation other than representations,
warranties or agreements regarding the Investor, the Investor's Registrable
Securities, the Investor's intended method of distribution and any
representations, warranties or agreements required by law.
h. REASONABLE INVESTIGATION. In connection with
the preparation and filing of each registration statement under the Securities
Act pursuant to this Agreement, the Corporation will give the Investor and its
agent and advisors and the underwriters, if any, the reasonable opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Corporation with
its officers and the independent public accountants who have certified its
financial statements as shall be reasonably necessary to conduct a reasonable
investigation within the meaning of the Securities Act. Subject to the rights
and obligations of the Corporation under the Securities Act and other
applicable laws, the Investor shall have the right to review such registration
statement and to approve those portions of such registration statement that
directly pertain to the Investor.
i. EXPENSES AND INDEMNIFICATION. All expenses
incurred by the Corporation in connection with the registration of Registrable
Securities (excluding underwriters' discounts and commissions), including
without limitation, all registration and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Corporation and fees
and disbursements of counsel for the Investor (not to exceed $10,000) shall be
borne by the Corporation. In connection with any public offering of Securities
pursuant to this Section, the Corporation agrees to indemnify the Investor
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to the same extent as the Corporation indemnifies any underwriter participating
therein. If required pursuant to the terms of an underwritten offering, the
Investor shall indemnify the Corporation, but only to the same extent that an
underwriter participating therein indemnifies the Corporation and, in any
event, only with respect to information provided by the Investor in any event.
j. ASSIGNMENT OF REGISTRATION RIGHTS. The
registration rights of the Investor under this Section may be transferred to
any person or entity who acquires at least 25% of the Registrable Securities
and agrees in writing to be bound by the provisions of this Agreement;
provided, however, that the Corporation shall be given written notice by the
Investor at the time of such transfer stating the name and address of the
transferee and identifying the Securities with respect to which the rights
under this Section are being assigned and provided further, that any such
assignment shall only be to an affiliate of the Investor.
k. NO MORE FAVORABLE REGISTRATION RIGHTS.
The Corporation covenants and agrees that it has not granted to any other
securityholder any registration rights that are materially more favorable and
will not grant to any other securityholder any registration rights that are
more favorable than those granted to the Investor pursuant to this Section,
unless it also grants such additional registration rights to the Investor.
11. TERMINATION.
a. TERMINATION. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time (i) by
mutual agreement of the Investor and the Corporation or (ii) prior to the
Closing, by either the Corporation or the Investor if the Closing shall not
have occurred by January 2, 1996; provided, however, that a party who has
violated or breached this Agreement may not terminate this Agreement if such
violation or breach is continuing.
b. EFFECT OF TERMINATION. In the event of
termination of this Agreement pursuant to clause a. above, written notice
thereof shall forthwith be given by the party electing to terminate to the
other party and
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the transactions contemplated by this Agreement shall be terminated and
abandoned, without further action by or on the part of either the Investor or
the Corporation. Termination of this Agreement pursuant to this Section shall
not in any way limit or restrict the rights and remedies of any party hereto
against any other party hereto who has violated or breached any representation,
warranty, agreement or other provision of this Agreement prior to the
termination hereof.
12. MISCELLANEOUS.
a. SUCCESSORS AND ASSIGNS. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto; provided, however, that the Corporation
may not assign its rights hereunder without the prior written consent of the
Investor.
b. ENTIRE AGREEMENT. This Agreement and any
schedules and exhibits attached hereto and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between and among the parties with regard to the subjects hereof and thereof.
c. NOTICE. Any notice, payment, report or other
communication required or permitted to be given by one party to any other party
by this Agreement shall be in writing and either (i) served personally on the
other party or parties or (ii) sent by overnight courier, express, registered
or certified first class mail, postage prepaid, addressed as follows:
(a) If to the Corporation, at
AMRE, Inc.
8585 North Stemmons Freeway
South Tower, Suite 102
Dallas, Texas 75247
Attention: President
Telephone: (214) 658-6300
Fax: (214) 658-6101
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(b) If to the Investor, at
HFS Incorporated
339 Jefferson Road
Parsippany, NJ 07054
Attention: James E. Buckman
Executive Vice President and
General Counsel
Telephone: (201) 428-9700
Fax: (201) 428-3260
or to such other address as shall have theretofore furnished to the other party
by like notice. Such notice shall be deemed received on the date on which
personally delivered, or three (3) business days after the same shall have been
deposited in the United States mail.
d. FINDER'S AND BROKER'S FEES. Each party hereto
represents and warrants that it has retained no finder or broker in connection
with the transactions contemplated by this Agreement, other than the engagement
by the Investor of Bear Stearns & Co. and David Moore, and hereby agrees to
indemnify and to hold the other harmless from any liability for any finder's or
broker's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which such
indemnifying person, or any of its employees or representatives, are
responsible.
e. EXPENSES. All cost and expenses incurred in
connection with this Agreement shall be paid by the party incurring such costs
and expenses.
f. TITLE AND SUBTITLES. The titles of the
Sections and subsections of this Agreement are for the convenience of reference
only and are not to be considered in construing this Agreement.
g. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which may be executed by less than all
of the parties, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
h. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(i) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
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OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW).
(ii) Any legal action or proceeding with
respect to this Agreement and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the United States of America
for the Southern District of New York, and, by execution and delivery of this
Agreement, the Corporation hereby accepts for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts and appellate courts from any thereof. The Corporation
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Corporation at its
address set forth above. The Corporation hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
i. NO WAIVERS; AMENDMENTS. No failure or delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or future exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law. Any
provisions of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Corporation and the
Investor. No waiver of or consent to any departure by either party from any
provision of this Agreement shall be effective unless signed in writing by the
party entitled to the benefit of such provision. Any amendment, supplement or
modification of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure from the terms of
any
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provision to this Agreement, shall be effective only in the specific instance
and for the specific purpose for which made or given.
j. SEVERABILITY. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any other jurisdiction.
k. PUBLICITY. No public release, announcement
or other form of publicity concerning the transactions contemplated hereby
shall be issued by either party without the prior consent of the other party,
except to the extent that in the reasonable judgment of the Corporation or the
Investor, as the case may be, may be required to make such release or
announcement by law or the rules or regulations of any securities exchange.
l. WAIVER OF TRIAL BY JURY. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE CORPORATION AND THE INVESTOR HEREBY
IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER
ARISING HEREUNDER.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMRE, INC.
By: /s/ ROBERT M. SWARTZ
----------------------------------
Name: Robert M. Swartz
Title: President
HFS INCORPORATED
By: /s/ JAMES E. BUCKMAN
----------------------------------
Name: James E. Buckman
Title: Executive Vice President
Attachments
Exhibit A - Certificate of Designation
Exhibit B - Disclosure Schedule
Exhibit C - Subsidiaries
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EXHIBIT B
1. Corporate Capitalization:
There are no outstanding preemptive or other rights, options, warrants,
conversion rights or agreements for the purchase or acquisition from the
Corporation of any shares of its capital stock, nor does the Corporation have
any obligation to repurchase any outstanding capital stock of the Corporation,
except as follows:
1. There are outstanding options granted under the Corporation's
stock option plan to purchase an aggregate of 819,881 shares
of common stock of the Corporation at exercise prices ranging
from $3.00 to $8.50 per share.
2. There are outstanding options to purchase an aggregate of
1,342,500 shares of common stock of the Corporation which were
granted outside of the Corporation's stock option plan. These
options are held by directors (two of whom are also officers),
a former director, a former employee and the widow of a former
director, and are exercisable at prices ranging from $3.50 to
$7.875 per share.
3. Options to purchase an aggregate of 500,000 shares of common
stock of the Corporation may be granted to David Moore in
connection with transactions being entered into concurrently
with this Agreement. These options will be at prices ranging
from $4.00 to $7.00 per share.
2. Contracts: Compliance with instruments
Contracts material to the business, financial condition, operations or
prospects of the Corporation are listed below.
1. License Agreement dated as of January 1, 1995, with Sears,
Roebuck and Co.
2. Amended and restated Merchant Agreement with Household Bank
(Illinois), N.A. dated April 24, 1995.
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3. Agreements among stockholders or affiliates
1. Voting Trust Agreements with Steven D. Bedowitz and
with Robert and Olgn Levin, dated as of January 22,
1993.
2. Rights of First Refusal Agreements with Steven D.
Bedowitz and with Robert and Olgn Levin dated as of
January 22, 1993.
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EXHIBIT C
The Subsidiaries of the Corporation, all of which are wholly-owned, are as
follows:
1. American Remodeling, Inc., a Texas corporation
2. CANRE Remodeling, Corp., incorporated under the Canadian
Business Corporations Act
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EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
TO THE
SENIOR CONVERTIBLE PREFERRED STOCK
OF
AMRE, INC.
Amre, Inc., a corporation duly organized and existing under the laws
of the State of Delaware (the "COMPANY"), DOES HEREBY CERTIFY:
That pursuant to authority conferred upon the Board of Directors of
the Company (the "BOARD") by Article FOURTH of the Certificate of
Incorporation, as amended, and as it may be amended or restated from time to
time, of the Company (the "CERTIFICATE OF INCORPORATION") and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board has duly adopted the following resolution at a meeting held
on October 11, 1995:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board by the provisions of the Certificate of Incorporation, the
Board hereby creates the Senior Convertible Preferred Stock from the authorized
but unissued preferred stock, $.10 par value, of the Company, which shall
consist of 400,000 shares:
RESOLVED, that the Board hereby fixes the designation, powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof, of the shares of such
Senior Convertible Preferred Stock (in addition to the powers, designation,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation which are applicable to any series of preferred
stock) as follows:
SECTION I. DESIGNATION, NUMBER AND RANKING
The series of 400,000 shares of preferred stock created by these
resolutions shall be designated the Senior Convertible Preferred Stock, par
value $0.10 per share of the Company (the "SENIOR CONVERTIBLE PREFERRED
STOCK"), and such Senior Convertible Preferred Stock shall rank senior to all
other series of preferred stock issued or hereinafter to be issued by the
Company with respect to dividends and the distribution of assets.
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SECTION II. DEFINITIONS
A. For purposes of this resolution, the following terms
shall have the meanings indicated:
The term "COMMON STOCK" means shares of Company common stock,
par value $.01, both currently outstanding and as may be issued from
time to time pursuant to the terms of the Certificate of
Incorporation.
The term "CONVERSION DATE" has the meaning set forth in
Section VI.C. hereof.
The term "CONVERSION PRICE" has the meaning set forth in
Section VI.B. hereof.
B. All capitalized terms used herein and not expressly
defined herein shall have the meanings given to them in the
Certificate of Incorporation.
SECTION III. DIVIDENDS
The holders of the then outstanding Senior Convertible Preferred Stock
shall be entitled to receive, when, as and if declared by the Board, and out of
any funds legally available therefor, cumulative dividends at the rate per
share of 8% of the liquidation preference of the Senior Convertible Preferred
Stock per annum, payable quarterly in cash on the last day of March, June,
September and December of each year commencing March 1, 1996 (each such date
being referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"). Dividends on
the Senior Convertible Preferred Stock shall be fully cumulative and accrue on
each such share from the date of its original issue and shall accrue from day
to day thereafter, whether or not earned or declared. The amount of dividends
so payable shall be determined on the basis of twelve 30-day months and a
360-day year. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Senior Convertible Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board may fix a record date for the
determination of holders of shares of Senior Convertible Preferred Stock
entitled to receive payment of a dividend declared thereon, which record date
shall be no more than 60 days prior to the date fixed for the payment thereof.
No dividends shall be declared or paid or set apart for payment on any class of
Common Stock or any other class or series of preferred stock of the Company
unless full cumulative dividends have been or contemporaneously are declared
and paid on the Senior Convertible Preferred Stock for all dividend payment
periods terminating on or prior to the date of payment of such common stock
dividends.
SECTION IV. LIQUIDATION PREFERENCE
A. In the event of any involuntary or voluntary
liquidation, dissolution or winding up of the affairs of the Company,
before any payment or distribution of the assets of the Company, the
holders of Senior Convertible Preferred Stock shall be entitled, after
provision for the payment of the Company's debts and other
liabilities, to
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be paid out of the assets of the Company (x) $10 per share of Senior
Convertible Preferred Stock, before any distribution is made to any
holder of shares of any class of Common Stock or any other class or
series of preferred stock of the Company and (y) an amount equal to
all accrued and unpaid dividends on the Senior Convertible Preferred
Stock through and including such date.
B. Except as provided herein, holders of Senior
Convertible Preferred Stock shall not be entitled to any distribution
in the event of any liquidation, dissolution or winding up of the
affairs of the Company.
SECTION V. VOTING RIGHTS; DIRECTORS
A. In addition to any voting rights provided elsewhere
in this Certificate of Designation, Preferences and Rights to the
Senior Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"),
the Certificate of Incorporation, and by applicable law, the holders
of shares of Senior Convertible Preferred Stock shall be entitled to
vote upon all matters upon which holders of the Common Stock have the
right to vote, and shall be entitled to the number of votes equal to
the largest number of full shares of Common Stock into which such
shares of Senior Convertible Preferred Stock could be converted
pursuant to the provisions of Section VI hereof at the record date for
the determination of the stockholders entitled to vote on such matters
or, if no such record date is established, at the date such vote is
taken or any written consent of stockholders is solicited, such votes
to be counted together with all other shares of capital stock having
general voting powers and not separately as a class. In all cases
where the holders of shares of Senior Convertible Preferred Stock have
the right to vote separately as a class, all such holders shall be
entitled to the number of votes equal to the largest number of full
shares of Common Stock into which such shares of Senior Convertible
Preferred Stock could be converted pursuant to the provisions of
Section VI hereof at the record date for the determination of the
stockholders entitled to vote on such matters or, if no such record
date is established, at the date such vote is taken or any written
consent of stockholders is solicited.
B. Holders of Senior Convertible Preferred Stock shall
have a right to a separate class vote with respect to the election of
two members of the Board of Directors of the Company. Upon the failure
by the Company to pay dividends on any two consecutive Quarterly
Dividend Payment Dates (any such period a "NON-PAYMENT PERIOD") and
provided that the earlier of such Quarterly Dividend Payment Dates is
not part of a previous Non-Payment Period, then thereafter until such
time as such unpaid dividends are paid (i) the number of members of
the Board of Directors shall be increased by one and (ii) the holder
of the Senior Convertible Preferred Stock shall have the right to
elect an additional member to the Board of Directors.
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SECTION VI. CONVERSION RIGHTS.
The Senior Convertible Preferred Stock shall be convertible into
Common Stock as follows:
A. Optional Conversion. Subject to and upon compliance
with the provisions of this Section VI, the holder of any shares of
Senior Convertible Preferred Stock shall have the right at such
holder's option, at any time, to convert any or all of such shares of
Senior Convertible Preferred Stock into the number of fully paid and
nonassessable shares of Common Stock set forth in paragraph "B" of
this Section VI.
B. Conversion Price. Each share of Senior Convertible
Preferred Stock converted pursuant to Paragraph A of this Section VI
shall be converted, at the election of the holder, into such number of
shares of Common Stock as is determined by dividing $10 by the
Conversion Price (as defined below) per share in effect on the
Conversion Date (as defined below). The initial "CONVERSION PRICE"
shall be $5.90. The initial Conversion Price shall be subject to
adjustment as set forth in paragraph "E" of this Section VI. No
payment or adjustment shall be made for any dividends on the Common
Stock issuable upon such conversion.
C. Mechanics of Conversion. The holder of any shares of
Senior Convertible Preferred Stock may exercise the conversion right
specified in paragraph "A" of this Section VI by surrendering to the
Company or any transfer agent of the Company the certificate or
certificates for the shares to be converted, accompanied by written
notice stating that the holder elects to convert any or all of the
shares represented thereby. Conversion shall be considered to have
been effected on the date when delivery of notice of an election to
convert and certificates for the shares to be converted is made and
such date is referred to herein as the "CONVERSION DATE." Subject to
the provisions of paragraph "E" of this Section VI, as promptly as
practicable thereafter (and after surrender of the certificate or
certificates representing shares of the Senior Convertible Preferred
Stock to the Company or any transfer agent of the Company or delivery
to the Company of the affidavit and indemnity referenced in paragraph
"E" of Section XI hereof with respect to such certificates), the
Company shall issue and deliver to or upon the written order of such
holder a certificate or certificates for the number of full shares of
Common Stock to which such holder is entitled. Subject to the
provisions of paragraph "E" of this Section VI, the Person in whose
name the certificate or certificates for Common Stock are to be issued
shall be considered to have become a holder of record of such Common
Stock on the Conversion Date.
D. Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of shares of Senior Convertible
Preferred Stock. If the Senior Convertible Preferred Stock held by any
one holder shall be surrendered for conversion at any one time by the
same holder, the number of full shares of Common Stock (as specified
in the notice required by paragraph "G" of this Section VI) issuable
upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Senior Convertible Preferred Stock so
surrendered. Instead of any fractional shares of Common Stock which
would otherwise be issuable upon conversion of any shares of
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Senior Convertible Preferred Stock, the Company shall round such
fractional interest up to the next highest integral number.
E. Conversion Price Adjustments. The Conversion Price
shall be subject to adjustment from time to time as follows:
1. Other Issuances of Common Stock. If the
Company shall issue any Common Stock for a consideration per
share less than the Conversion Price (other than (i) shares
issued pursuant to options outstanding on and as of the date
hereof, (ii) any options which may in the future be granted
under the AMRE, Inc. Stock Option Plan with Limited Stock
Appreciation Rights and (iii) any options issued pursuant to
agreements with David Moore) immediately prior to such
issuance, the Conversion Price shall immediately be reduced to
such consideration. For the purpose of any adjustment of the
Conversion Price pursuant to this paragraph "E", the following
provisions shall be applicable:
a. Cash. In the case of the issuance of
Common Stock for cash, the amount of the
consideration received by the Company shall be
considered to be the amount of the cash proceeds
received by the Company for such Common Stock before
deducting therefrom any discounts, commissions, taxes
or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
b. Consideration Other Than Cash. In
the case of the issuance of Common Stock (otherwise
than upon the conversion of shares of capital stock
or other securities of the Company) for a
consideration in whole or in part other than cash,
including securities acquired in exchange therefor
(other than securities by their terms so
exchangeable), the consideration other than cash
shall be deemed to be the fair value thereof as
reasonably determined by the Board, irrespective of
any accounting treatment; provided, however, that
such fair value as reasonably determined by the Board
shall not exceed the aggregate market price of the
shares of Common Stock being issued as of the date
the Board authorizes the issuance of such shares.
c. Options and Convertible Securities.
In the case of options, warrants or other rights to
purchase or acquire Common Stock (whether or not at
the time exercisable), and securities by their terms
convertible into or exchangeable for Common Stock
(whether or not at the time so convertible or
exchangeable):
(1) the aggregate maximum number of
shares of Common Stock deliverable upon
exercise of such options, warrants or other
rights to purchase or acquire Common Stock
shall be considered to have been issued at
the time such options, warrants or rights
were issued and for a consideration equal to
the
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<PAGE> 36
consideration (determined in the manner
provided in subclauses "a" and "b" of this
clause "1"), if any, received by the Company
upon the issuance of such options, warrants
or rights plus the minimum purchase price
provided for in such options, warrants or
rights for the Common Stock covered thereby;
(2) the aggregate maximum number of
shares of Common Stock deliverable upon
conversion of or in exchange for any such
convertible or exchangeable securities, or
upon the exercise of options, warrants or
other rights to purchase or acquire such
convertible or exchangeable securities and
the subsequent conversion or exchange
thereof, shall be considered to have been
issued at the time such securities were
issued or such options, warrants or rights
were issued and for a consideration equal to
the consideration, if any, received by the
Company for any such securities and related
options, warrants or rights (excluding any
cash received on account of accrued interest
or accrued dividends), plus the minimum
additional consideration, if any, to be
received by the Company upon the conversion
or exchange of such securities and the
exercise of any related options, warrants or
rights (the consideration in each case to be
determined in the manner provided in
subclauses "a" and "b" of this clause "1");
(3) on any change in the number of
shares of Common Stock deliverable upon
exercise of any such options warrants or
rights or conversion of or exchange for such
convertible or exchangeable securities or any
change in the consideration to be received by
the Company upon such exercise, conversion or
exchange, including, but not limited to, a
change resulting from the anti-dilution
provisions thereof, the Conversion Price as
then in effect shall forthwith be readjusted
to such Conversion Price as would have been
obtained had an adjustment been made upon the
issuance of such options, warrants or rights
not exercised prior to such change, or
securities not converted or exchanged prior
to such change, on the basis of such change;
(4) on the expiration or
cancellation of any such options, warrants or
rights, or the termination of the right to
convert or exchange such convertible or
exchangeable securities, if the Conversion
Price shall have been adjusted upon the
issuance thereof, the Conversion Price shall
forthwith be readjusted to such Conversion
Price as would have been obtained had an
adjustment been made upon the issuance of
such options, warrants, rights or securities
on the basis of the issuance of only the
number of shares of Common Stock actually
issued upon the exercise of such options,
warrants or rights, or upon the conversion or
exchange of such securities; and
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(5) If the Conversion Price shall
have been adjusted upon the issuance of any
such options, warrants, rights or convertible
or exchangeable securities, no further
adjustment of the Conversion Price shall be
made for the actual issuance of Common Stock
upon the exercise, conversion or exchange
thereof;
provided, however, that no increase in the Conversion
Price shall be made pursuant to subclauses "1", "2"
or "3" of this subclause "c".
2. Common Stock Dividends. In case the Company
shall pay or make a dividend or other distribution on any
class or series of capital stock of the Company exclusively in
Common Stock, the Conversion Price in effect at the opening of
business on the day following the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying
such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination
and the denominator shall be the sum of such number of shares
and the total number of shares constituting such dividend or
other distribution, such reduction to become effective
immediately after the opening of business on the day following
the date fixed for such determination. For the purposes of
this subparagraph (2), the number of such shares of Common
Stock at any time outstanding shall not include shares held in
the treasury of the Company. The Company shall not pay any
dividend or make any distribution exclusively in Common Stock
on shares of any class or series of capital stock of the
Company held in the treasury of the Company.
3. Common Stock Splits. In case outstanding
shares of Common Stock shall be subdivided into a greater
number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day
upon which such subdivision becomes effective shall be
proportionately reduced and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day
upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening
of business on the day following the day upon which such
subdivision or combination becomes effective.
4. Partial Liquidation. Subject to the last
sentence of this subparagraph (4), in case the Company shall,
by dividend or otherwise, distribute to all holders of its
Common Stock evidences of its indebtedness, shares of any
class or series of capital stock, cash or assets (including
securities, but excluding any rights or warrants referred to
in subparagraph (1), any dividend or distribution paid
exclusively in cash and any dividend or distribution referred
to in subparagraph (1) of this paragraph E., the Conversion
Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion
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Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subparagraph
(4) by a fraction of which the numerator shall be the current
market price per share (determined as provided in subparagraph
6(a)) of the Common Stock on the date fixed for the payment of
such distribution (the "REFERENCE DATE") less the fair market
value (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a
resolution of the Board of Directors), on the Reference Date,
of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to
one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such
reduction to become effective immediately prior to the opening
of business on the day following the Reference Date. In the
event that such dividend or distribution is not so paid or
made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect is such
dividend or distribution had not occurred. If the Board of
Directors determines the fair market value of any distribution
for purposes of this subparagraph (4) by reference to the
actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider the
prices in such market over the same period used in computing
the current market price per share of Common Stock (determined
as provided in subparagraph 6(a)). For purposes of this
subparagraph (4), any dividend or distribution that includes
shares of Common Stock or rights or warrants to subscribe for
or purchase shares of Common Stock shall be deemed instead to
be (a) a dividend or distribution of the evidences of
indebtedness, shares of capital stock, cash or assets other
than such shares of Common Stock or such rights or warrants
(making any Conversion Price reduction required by this
subparagraph (4)) immediately followed by (b) a dividend or
distribution of such shares of Common Stock or such rights or
warrants (making any further Conversion Price reduction
required by subparagraph (2), except (i) the Reference Date of
such dividend or distribution as defined in this subparagraph
(4) shall be substituted as (A) "the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution," (B) "the date fixed for the
determination of stockholders entitled to receive such
dividend or other distribution," and (C) "the date fixed for
the determination of stockholders entitled to receive such
determination" within the meaning of subparagraphs (1) and (2)
and (ii) any shares of Common Stock included in such dividend
or distribution shall not be deemed "outstanding at the close
of the business on the date fixed for such determination"
within the meaning of subparagraph (4).
5. Cash Dividends. In case the Company shall pay
or make a dividend or other distribution on its Common Stock
exclusively in cash (excluding, in the case of any regular
cash dividend on the Common Stock, the portion thereof that
does not exceed the per share amount of the next preceding
regular cash dividend on the Common Stock (as adjusted to
appropriately reflect any of the events referred to in
subparagraphs (1), (2), (3), (4), (5) and (6)), or all of such
regular cash dividend if the annualized amount thereof per
share of Common Stock does not exceed 15% of the current
market price per share
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<PAGE> 39
(determined as provided in subparagraph 6(a)) of the Common
Stock on the business day next preceding the date of
declaration of such dividend, the Conversion Price shall be
reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction
contemplated by this subparagraph (5) by a fraction of which
the numerator shall be the current market price per share
(determined as provided in subparagraph (7)) of the Common
Stock on the date fixed for the payment of such distribution
less the amount of cash so distributed and not excluded as
provided applicable to one share of Common Stock and the
denominator shall be such current market price per share of
the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day
following the date fixed for the payment of such distribution;
provided, however, that in the event the portion of the cash
so distributed applicable to one share of Common Stock is
equal to or greater than the current market price per share
(as defined in subparagraph 6(a)) of the Common Stock on the
record date mentioned above, in lieu of the foregoing
adjustment, adequate provision shall be made so that each
holder of shares of Senior Convertible Preferred Stock shall
have the right to receive upon conversion the amount of cash
such holder would have received had such holder converted each
share of the Senior Convertible Preferred Stock immediately
prior to the record date for the distribution of the cash. In
the event that such dividend or distribution is not so paid or
made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such record
date had not been fixed.
6. Tender Offer; Exchange Offer. In case a tender or
exchange offer (other than an odd-lot offer) made by the Company or
any Subsidiary of the Company for all or any portion of the Company's
Common Stock shall expire and such tender or exchange offer shall
involved the payment by the Company or such Subsidiary of
consideration per share of Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) at the last time (the "EXPIRATION TIME") tenders
or exchanges may be made pursuant to such tender or exchange offer (as
it shall have been amended) that exceeds 110% of the current market
price per share (determined as provided in subparagraph 6(a)) of the
Common Stock on the business day next succeeding the expiration date
of any such offer, the Conversion Price shall be reduced so that the
same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subparagraph (6) by a
fraction of which the numerator shall be the number shares of Common
Stock outstanding (including any tendered or exchanged shares) at the
expiration time multiplied by the current market price per share
(determined as provided in subparagraph 6(a)) of the Common Stock on
the business day next succeeding the Expiration Date of such offer and
the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the expiration date of
such offer (the shares deemed so accepted, up
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<PAGE> 40
to any such maximum, being referred to as the "Purchased Shares") and
(y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the expiration date of such offer and
the current market price (determined as provided in subparagraph 6(a))
of the Common Stock on the business day next succeeding the expiration
time, such reduction to become effective immediately prior to the
opening of business on the day following the expiration date of such
offer.
a. Current Market Price. For the purpose of any
computation under subparagraphs (1), (2), (3), (4), (5), (6)
and (7), the "current market price" per share of Common Stock
on any date in question shall be deemed to be the average of
the daily Closing Prices for the five consecutive business
days selected by the Company commencing not more than 20
business days before, and ending not later than, the earlier
of the day in question and, if applicable, the day before the
"ex" date with respect to the issuance or distribution
requiring such computation; provided, however, that if another
event occurs that would required an adjustment pursuant to
subparagraphs (1) through (6), inclusive, the Board of
Directors may make such adjustments to the closing prices
during such five business day period as it deems appropriate
to effectuate the intent of the adjustments in this paragraph
6(a), in which case any such determination by the Board of
Directors shall be set forth in a Board Resolution and shall
be conclusive. For purposed of this paragraph, the term "ex"
date, (1) when used with respect any issuance or distribution,
means the first date on which the Common Stock trades regular
way on the New York Stock Exchange or on such successor
securities exchange as the Common Stock may be listed or in
the relevant market from which the Closing Prices were
obtained without the right to receive such issuance or
distribution, and (2) when used with respect to any tender or
exchange offer means the first date on which the Common Stock
trades regular way on such securities exchange or in such
market after the expiration date of such offer.
b. Other Reductions. The Company may make such
reductions in the Conversion Price, in addition to those
required by subparagraphs (1), (2), (3), (4), (5) and (6), as
it considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common
Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for
income tax purposes. The Company from time to time may reduce
the Conversion Price by any amount for any period of time if
the period is at least twenty (20) days, the reduction is
irrevocable during the period, and the Board of Directors of
the Company shall have made a determination that such
reduction would be in the best interest of the Company, which
determination shall be conclusive. Whenever the Conversion
Price is reduced pursuant to the preceding sentence, the
Company shall mail to holders of record of the Senior
Convertible Preferred Stock a notice of the reduction at least
fifteen (15) days prior to the date the reduced Conversion
Price takes effect, and such notice shall state the reduced
Conversion Price and the period it will be in effect.
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c. Minimum Adjustment. No adjustment to the
Conversion Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in the
Conversion Price; provided, however, that any adjustments
which be reason of this subparagraph (c) are not required to
be made shall be carried froward and taken into account in
determining whether any subsequent adjustment shall be
required.
7. Reclassification, Consolidation, Merger or
Sale of Assets. In the event that the Company shall be a party
to any transaction (including without limitations (a) any
recapitalization or reclassification of the Common Stock
(other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a
subdivision or combination of the Common Stock), (b) any
consolidation of the Company with, or merger of the Company
into, any other person, any merger of another person into the
Company (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), (c) any
sale or transfer of all or substantially all of the assets of
the Company or (d) any compulsory share exchange) pursuant to
which the Common Stock is converted into the right to receive
other securities, cash or other property, then lawful
provision shall be made as a part of the terms of such
transaction whereby the holder of the Senior Convertible
Preferred Stock shall have the right thereafter to convert the
Senior Convertible Preferred Stock only into, the kind and
amount of securities, cash and other property receivable upon
consummation of such transaction by a holder of the number of
shares of Common Stock of the Company into which such Senior
Convertible Preferred Stock could have been converted
immediately prior to such transaction, after giving effect to
any adjustment in the Conversion Price required by the
provision hereof.
The Company or the person formed by such
consolidation or resulting from such merger or which acquired
such assets or which acquires the Company's shares, as the
case may be, shall make provision in this certificate or
articles of incorporation or other constituent document to
establish such right. Such certificate or articles of
incorporation or other constituent document shall provide for
adjustments which, for events subsequent to the effective date
of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section
VI. The above provisions shall similarly apply to successive
transactions of the foregoing type.
8. Adjustments in Case of Fundamental Changes.
a. Notwithstanding any other provision
in this Section VI to the contrary, if any Fundamental Change
occurs, then the Conversion Price in effect will be adjusted
immediately after such Fundamental Change as described below.
In addition, in the event of a Common Stock Fundamental
Change, the Senior Convertible Preferred Stock shall be
convertible solely into Common Stock of the kind and amount
received by holders of Common Stock as the result of
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such Common Stock Fundamental Change as more specifically
provided in the following clauses (i) and (ii).
For purposes of calculating any adjustment to be made
pursuant to this Section VI in the event of a Fundamental
Change, immediately after such Fundamental Change:
(i) in the case of a Non-Stock
Fundamental Change, the Conversion Price of the Senior
Convertible Preferred Stock shall thereupon become the
Conversion Price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to this Section VI; and
(ii) in the case of a Common Stock
Fundamental Change, the Conversion Price of the Senior
Convertible Preferred Stock in effect immediately prior to
such Common Stock Fundamental Change, but after giving effect
to any other prior adjustments effected pursuant to this
Section VI, shall thereupon be adjusted by multiplying such
Conversion Price by a fraction of which the numerator shall be
the Purchaser Stock Price and the denominator shall be the
Applicable Price; provided, however, that in the event of a
Common Stock Fundamental change in which (A) 100% of the value
of the consideration received by a holder of Common Stock is
common stock of the successor, acquiror or other third party
(and cash, if any, is paid only with respect to any fractional
interests in such common stock resulting from such Common
Stock Fundamental Change) and (B) all of the Common Stock
shall have been exchanged for, converted into or acquired for
common stock (and cash with respect to fractional interests)
of the successor, acquiror or other third party, the
Conversion Price of the Senior Convertible Preferred Stock in
effect immediately prior to such Common Stock Fundamental
Change shall thereupon be adjusted by multiplying such
conversion price by a fraction of which the numerator shall be
one and the denominator shall be the number of shares of
common stock of the successor, acquiror, or other third party
received by a stockholder for one share of Common Stock as a
result of such Common Stock Fundamental Change.
b. Definitions. The following definitions shall
apply to terms used in this subparagraph 8:
(1) "Applicable Price" shall mean (i) in
the event of a Non-Stock Fundamental Change in which the
holders of the Common Stock receive only cash, the amount of
cash received by a stockholder for one share of Common Stock
and (ii) in the event of any other Non-Stock Fundamental
Change or any Common Stock Fundamental Change, the average of
the daily Closing Prices of the Common Stock for the ten (10)
consecutive Trading Days prior to and including the record
date for the determination of the holders of Common Stock
entitled to receive securities, cash or other property (such
record date or distribution date being hereinafter referred to
as the "ENTITLEMENT DATE"), in each
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<PAGE> 43
case, as adjusted in good faith by the Company to
appropriately reflect any of the events referred to in
subparagraphs (1) - (8) of this Paragraph E.
(2) "Closing Price" of any common stock
on any day shall mean the last reported sale price regular way
on such day or, in case no such sale takes place on such day,
the average of the reported closing bid and asked prices
regular way of such common stock, in each case on the NYSE
Composite Tape or, if the common stock is not listed or
admitted to trading, or, if not listed or admitted to trading
on any national securities exchange, the average of the
closing bid and asked prices as furnished by any New York
Stock Exchange, Inc. member firm selected from time to time by
the Board of Directors of the Company for that purpose or, if
not so available in such manner, as otherwise determined in
good faith by the Board of Directors.
(3) "Common Stock Fundamental Change"
shall mean any Fundamental Change in which more than 50% of
the value (as determined in good faith by the Board of
Directors) of the consideration received by holders of Common
Stock consists of common stock that for each of the ten
consecutive Trading Days prior to the Entitlement Date has
been admitted for listing or admitted for listing subject to
notice of issuance on a national securities exchange or quoted
on the National Market System of the National Association of
Securities Dealers, Inc.; provided, however, that a
Fundamental Change shall not be a Common Stock Fundamental
Change unless the Company continues to exist after the
occurrence of such Fundamental Change and the outstanding
Senior Convertible Preferred Stock continue to exist as
outstanding Senior Convertible Preferred Stock.
(4) "Fundamental Change" shall mean the
occurrence of any transaction or event in connection with a
plan pursuant to which all or substantially all of the Common
Stock shall be exchanged for, converted into, acquired for or
constitute solely the right to receive securities, cash or
other property (whether by means of an exchange offer,
liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise); provided,
however, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the
Conversion Price, such Fundamental Change shall be deemed to
have occurred when substantially all of the Common Stock of
the Company shall be exchanged for, converted into, or
acquired for or constitute solely the right to receive
securities, cash or other property, but the adjustment shall
be based upon the highest weighted average of consideration
per share that a holder of Common Stock could have received in
such transactions or events as a result of which more than 50%
of the Common Stock of the Company shall have been exchanged
for, converted into, or acquired for or constitute solely the
right to receive securities, cash or other property.
(5) "Non-Stock Fundamental Change" shall
mean any Fundamental Change other than a Common Stock
Fundamental Change.
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(6) "Purchaser Stock Price" shall mean,
with respect to any Common Stock Fundamental Change, the
average of the daily Closing Prices of the common stock
received in such Common Stock Fundamental Change for the ten
consecutive Trading Days prior to and including the
Entitlement Date, as adjusted in good faith by the Board of
Directors to appropriately reflect any of the events referred
to in subparagraphs (1) - (8) of this Paragraph E.
(7) "Trading Day" shall mean a day on
which the Common Stock is traded on the national securities
exchange or quotation system used to determine the Closing
Price.
9. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance of any
shares of Common Stock pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of
the Company and the investment of additional optional amounts
in shares of Common Stock under any such plan, and the
issuance of any shares of Common Stock options or rights to
purchase such shares pursuant to any employee benefit plan or
program of the Company or pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security
outstanding as of the date of the Senior Convertible Preferred
Stock were first issued, shall not be deemed to constitute an
issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the
adjustment provisions described above applies. There shall
also be no adjustment of the Conversion Price in case of the
issuance of any stock (or securities convertible into or
exchangeable for stock) of the Company except as specifically
described in this Section VI.
10. Certain Additional Rights. In case the
Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in subparagraphs
2 or 3 of this Paragraph E, the holder of the Senior
Convertible Preferred Stock, upon the conversion thereof
subsequent to the close of business on the date fixed for the
determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the Conversion
Price adjustment in respect of such distribution, shall also
be entitled to receive for each share of Common Stock into
which the Senior Convertible Preferred Stock are converted,
the portion of the shares of Common Stock, rights, warrants,
evidences of indebtedness, shares of capital stock, cash and
assets so distributed applicable to one share of Common Stock;
provided, however, that, at the election of the Company (whose
election shall be evidenced by a resolution of the Board of
Directors), the Company may, in lieu of distributing to the
holders of the Senior Convertible Preferred Stock any such
portion of such distribution not consisting of cash or
securities of the Company, pay such holder of the Senior
Convertible Preferred Stock an amount in cash equal to the
fair market value thereof (as determined in good faith by the
Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors). If
any conversion of Senior Convertible Preferred Stock described
in the immediately preceding sentence occurs prior to the
payment date for a distribution to holders
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<PAGE> 45
of Common Stock which the holder of Senior Convertible
Preferred Stock so converted is entitled to receive in
accordance with the immediately preceding sentence, the
Company may elect (such election to be evidenced by a
resolution of the Board of Directors) to distribute to such
holder a due bill for the shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock,
cash or assets to which such holder is so entitled, provided,
that such due bill (i) meets any applicable requirements of
the principal national securities exchange or other market on
which the Common Stock is then traded and (ii) requires
payment or delivery of such shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock,
cash or assets no later than the date of payment or delivery
thereof to holders of shares of Common Stock receiving such
distribution.
11. Rounding of Calculations. All calculations
under this Section VI shall be made to the nearest cent. Any
provision of this Section VI to the contrary notwithstanding,
no adjustment in the Conversion Price applicable to any share
of Senior Convertible Preferred Stock shall be made if the
amount of such adjustment would be less than $0.01, but any
such amount shall be carried forward and an adjustment with
respect thereto shall be made at the time of and together with
any subsequent adjustment which, together with such amount and
any other amount or amounts so carried forward, shall
aggregate $0.01 or more. Pursuant to the terms of paragraph
"D" of Section VI, no fractional shares of Common Stock shall
be issued, and any fractional interests shall be rounded up to
the next highest integral number.
12. Timing of Issuance of Additional Common Stock
Upon Certain Adjustments. In any case in which the provisions
of this Section VI shall require that an adjustment shall
become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event
issuing to the holder of any shares of Senior Convertible
Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of
Common Stock issuable upon such conversion before giving
effect to such adjustment provided, however, that the Company
upon request shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to
receive such additional shares, upon the occurrence of the
event requiring such adjustment.
F. Statement Regarding Adjustments. Whenever the
Conversion Price shall be adjusted as provided in this Section VI, the
Company shall forthwith file at the principal office of the Company, a
statement showing in detail the facts requiring such adjustment and
the Conversion Price that shall be in effect after such adjustment,
and the Company shall also cause a copy of such statement to be sent
by mail, first class postage prepaid, to each holder of shares of
Senior Convertible Preferred Stock at the address appearing on the
Company's records. Each such statement shall be signed by the
Company's independent public accountants. Where appropriate, such copy
may be given
15
<PAGE> 46
in advance and may be included as part of a notice required to be
mailed under the provisions of paragraph "G" of this Section VI.
G. Notice to Holders. In the event the Company shall
propose to take any action of the type described in clauses "1" (but
only if the action of the type described in clause "1" would result in
an adjustment in the Conversion Price), "2", "3", "4", "5" "6", "7" or
"8" of paragraph "E" of this Section VI, the Company shall give notice
to each holder of shares of Senior Convertible Preferred Stock
affected by such action in the manner set forth in this paragraph "G"
of this Section VI which notice shall specify the record date, if any,
with respect to any such action and the approximate date on which such
action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the
effect of such action (to the extent such effect may be known at the
date of such notice) on the Conversion Price and the number, kind or
class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Senior Convertible Preferred
Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least ten (10) days prior
to the date so fixed, and in the case of any other action, such notice
shall be given at least ten (10) days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein,
shall not affect the legality or validity any such action.
H. Treasury Stock. For the purpose of this Section VI,
the sale or other disposition of any Common Stock theretofore held in
its treasury shall be deemed to be an issuance thereof.
I. Costs. The Company shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or
delivery of shares of Common Stock of the Company upon conversion of
any shares of Senior Convertible Preferred Stock; provided, however,
that the Company shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than that
of the holder of the shares of Senior Convertible Preferred Stock in
respect of which such shares are being issued.
SECTION VII. REDEMPTION
A. Optional Redemption. From the period commencing
January 1, 1999 and extending through December 31, 2000, the Company
may redeem the Senior Convertible Preferred Stock at any time in
whole, or from time to time in part, at the liquidation price plus
accrued and unpaid dividends on the Senior Convertible Preferred Stock
as of such date.
1. Selection of Senior Convertible Preferred
Stock to be Redeemed. If less than all of the shares of Senior
Convertible Preferred Stock are to be redeemed, the Company
shall select the shares of Senior Convertible Preferred Stock
to be redeemed on a pro rata basis or in such other fair and
equitable manner as may be prescribed by resolution of the
Board.
16
<PAGE> 47
2. Procedure for Redemption.
(a) In the event the Company shall
redeem shares of Senior Convertible Preferred Stock, notice of
such redemption shall be given by first class mail, postage
prepaid, mailed not less than thirty (30) days nor more than
sixty (60) days prior to the redemption date, to each holder
of record of the shares to be redeemed at such holder's
address as the same appears on the stock register of the
Company; provided, however, that no failure to mail such
notice nor any defect therein shall affect the validity of the
proceeding for the redemption of any shares of Senior
Convertible Preferred Stock to be redeemed except as to the
holder to whom the Company has failed to mail said notice or
except as to the holder whose notice was defective. Each such
notice shall state: (a) the redemption date; (b) the number of
shares of Senior Convertible Preferred Stock to be redeemed
and, if less than all the shares held by such holder are to be
redeemed from such holder, the number of shares to be redeemed
from such holder; (c) the redemption price; (d) the place or
places where certificates for such shares are to be
surrendered for payment of the redemption price; and (e) that
dividends on the shares to be redeemed will cease to accrue on
such redemption date unless the Company defaults in making
such payment.
(b) Notice having been mailed as
aforesaid, from and after the redemption date (unless the
Company shall fail to provide money for the payment of the
redemption price of the shares called for redemption)
dividends on the shares of Senior Convertible Preferred Stock
so called for redemption shall cease to accrue, and said
shares shall no longer be deemed to be outstanding, and all
rights of the holders thereof as stockholders of the Company
(except the right to receive from the Company the redemption
price and an amount equal to any accrued and unpaid dividends)
shall cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Board shall so require and
the notice shall so state), such shares shall be redeemed by
the Company at the redemption price aforesaid. In case fewer
than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(c) Notice having been mailed as
aforesaid, each holder of record of the shares of Senior
Convertible Preferred Stock shall have until five (5) business
days prior to the date of redemption to exercise their
conversion rights as provided for in Section VI herein, or
such rights shall expire.
B. Mandatory Redemption. On January 1, 2001, the Company
must redeem and the holders must surrender the Senior Convertible
Preferred Stock in whole at the liquidation price provided in Section
IV herein, provided, however, that immediately prior to authorizing or
making any such redemption, the Company by resolution of the Board
shall declare a dividend on the Senior Convertible Preferred Stock
payable on the redemption date in an amount equal to any accrued and
unpaid dividends on the Senior
17
<PAGE> 48
Convertible Preferred Stock as of such date. The procedures for such
redemption shall be as described in clause "2" of paragraph "A" of
this Section VII.
SECTION VIII. REACQUIRED SHARES
Any shares of Senior Convertible Preferred Stock converted, redeemed,
purchased or otherwise acquired by the Company in any manner whatsoever shall
not be reissued and shall be cancelled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of preferred stock, par value $.10 per share, of the Company and may be
reissued as part of another series of preferred stock, par value $.10 per
share, of the Company to be created by resolution or resolutions of the Board,
subject to the conditions or restrictions on issuance set forth herein.
SECTION IX. RESTRICTIONS ON TRANSFER
The Senior Convertible Preferred Stock is restricted. Except as
otherwise required by law, no holder of shares of Senior Convertible Preferred
Stock of record may sell, transfer or assign, and the Company shall not
register the sale, transfer or assignment of, any shares of Senior Convertible
Preferred Stock or any interest therein, whether by sale, assignment, gift,
bequest, appointment or otherwise. Any attempted sale, transfer or assignment
shall be void and without effect; provided, however, that the Senior
Convertible Preferred Stock may be transferred to any affiliate of HFS
Incorporated.
SECTION X. CERTAIN RESTRICTIONS
Whenever quarterly dividends or other dividends or distributions
payable on the Senior Convertible Preferred Stock (as provided in the forgoing
paragraphs of this certificate) are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
shares of Senior Convertible Preferred Stock outstanding shall have been paid
in full, the Company shall not:
(i) declare or pay dividends on, make any other
distributions on (other than dividends or distributions in shares of
stock junior to the Senior Convertible Preferred Stock), or redeem or
purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Senior Convertible Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on (other than dividends or distributions in shares of
stock junior to the Senior Convertible Preferred Stock) any shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Senior Convertible Preferred
Stock, except dividends paid ratably on the Senior Convertible
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) except as permitted by subparagraph (iv) immediately
below, redeem or purchase or otherwise acquire for consideration
shares of any stock ranking
18
<PAGE> 49
on a parity (either as to dividends or upon liquidation, dissolution
or winding up) with the Senior Convertible Preferred Stock, provided
that the Company may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of
the Company ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Senior Convertible
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Senior Convertible Preferred Stock, or any shares of stock
ranking on a parity with the Senior Convertible Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company
unless the Company could, under the immediately preceding paragraph of this
resolution purchase or otherwise acquire such shares at such time and in such
manner.
SECTION XI. GENERAL
A. All shares of Common Stock which may be issued upon
conversion of the shares of Senior Convertible Preferred Stock will,
upon issuance by the Company, be duly and validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof and the Company shall take no action
which will cause a contrary result.
B. The section headings contained in this certificate
are for reference purposes only and shall not affect in any way the
meaning of this certificate.
C. The Company shall reserve at all times so long as any
shares of Senior Convertible Preferred Stock remain outstanding, free
from preemptive rights, out of its treasury stock or its authorized
but unissued shares of Common Stock, or both, solely for the purpose
of effecting the conversion of the shares of Senior Convertible
Preferred Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Senior Convertible Preferred
Stock.
D. Shares of Senior Convertible Preferred Stock which
have been issued and have been converted, redeemed, repurchased or
reacquired in any manner by the Company shall become authorized and
unissued shares of the Company's undesignated preferred stock, par
value $.10 per share, but shall not be reissued as shares of Senior
Convertible Preferred Stock.
E. Upon receipt by the Company of (i) an affidavit in
term and content reasonably acceptable to the Company stating that the
stock certificate or certificates representing Senior Convertible
Preferred Stock have been lost, stolen or destroyed, and
19
<PAGE> 50
(ii) an indemnity in form and content reasonably acceptable to the
Company that indemnifies the Company against any claim that may be
made against the Company with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed, the
Company shall issue a new certificate or certificates in place of any
certificate or certificates alleged to have been lost, stolen or
destroyed.
[The rest of this page is intentionally left blank.]
20
<PAGE> 51
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by its __________________ and attested by its _________________ this
_______ day of ____________________, 199__.
AMRE, INC.
------------------------------
Name:
------------------------
Title:
-----------------------
ATTEST:
- ------------------------------
Name:
------------------------
Title:
-----------------------
21
<PAGE> 1
EXHIBIT 7.3
________________________________________________________________________________
CREDIT AGREEMENT
between
AMRE, INC.
as Borrower,
and
HFS INCORPORATED
as Lender
Dated as of October 17, 1995
$4,000,000
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . .
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITY . . . . . . . . . . . 10
Section 2.1 Revolving Loans . . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Notice of Borrowing . . . . . . . . . . . . . . . . . . . 10
Section 2.3 Disbursement of Funds . . . . . . . . . . . . . . . . . . 10
Section 2.4 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.5 Interest . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.6 Voluntary and Mandatory Reductions of Commitments . . . . 12
Section 2.7 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . 12
Section 2.8 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . 12
Section 2.9 Method and Place of Payment . . . . . . . . . . . . . . . 13
Section 2.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.11 Increased Costs. . . . . . . . . . . . . . . . . . . . . . 13
Section 2.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.13 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 15
Section 3.1 Conditions Precedent to Initial Loans . . . . . . . . . . 15
Section 3.2 Conditions Precedent to All Loans . . . . . . . . . . . . 16
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 17
Section 4.1 Corporate Status . . . . . . . . . . . . . . . . . . . . . 17
Section 4.2 Corporate Power and Authority . . . . . . . . . . . . . . 18
Section 4.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.5 Financial Conditions; Material Adverse Change . . . . . . . 18
Section 4.6 Use of Proceeds; Margin Regulations . . . . . . . . . . . 19
Section 4.7 Governmental Approvals . . . . . . . . . . . . . . . . . . 19
Section 4.8 No Default . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.9 Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.10 Compliance With Law . . . . . . . . . . . . . . . . . . . 19
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 20
Section 5.1 Information Covenants . . . . . . . . . . . . . . . . . . 20
Section 5.2 Books, Records and Inspections. . . . . . . . . . . . . . 24
Section 5.3 Maintenance of Insurance . . . . . . . . . . . . . . . . . 24
Section 5.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.5 Corporate Franchises . . . . . . . . . . . . . . . . . . . 25
Section 5.6 Compliance with Law. . . . . . . . . . . . . . . . . . . . 25
Section 5.7 Performance of Obligations . . . . . . . . . . . . . . . . 25
Section 5.8 Compliance with Preferred Stock . . . . . . . . . . . . . 25
Section 5.9 Maintenance of Properties . . . . . . . . . . . . . . . . 25
Section 5.10 Additional Guarantors . . . . . . . . . . . . . . . . . . 26
SECTION 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 26
Section 6.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.3 Restriction on Fundamental Changes . . . . . . . . . . . . 27
Section 6.4 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.5 Dividends . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.6 Transactions with Affiliates . . . . . . . . . . . . . . . 28
Section 6.7 Changes in Business . . . . . . . . . . . . . . . . . . . 28
Section 6.8 Certain Restrictions . . . . . . . . . . . . . . . . . . . 28
Section 6.9 Investments . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.10 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 29
Section 7.1 Events of Default . . . . . . . . . . . . . . . . . . . . 29
Section 7.2 Rights and Remedies . . . . . . . . . . . . . . . . . . . 32
SECTION 8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.1 Payment of Expenses, Indemnity, etc. . . . . . . . . . . . 32
Section 8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.3 Successors and Assigns; Participation; Assignments . . . . 34
Section 8.4 Amendments and Waivers . . . . . . . . . . . . . . . . . . 34
Section 8.5 Not Waiver; Remedies Cumulative . . . . . . . . . . . . . 34
Section 8.6 Governing Law; Submission to Jurisdiction . . . . . . . . . 35
Section 8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.8 Effectiveness . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.9 Headings Descriptive . . . . . . . . . . . . . . . . . . . 36
Section 8.10 Marshalling; Recapture . . . . . . . . . . . . . . . . . . 36
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 8.11 Severability . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.12 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.13 Limitation of Liability . . . . . . . . . . . . . . . . . 36
Section 8.14 Calculations; Computations . . . . . . . . . . . . . . . . 37
Section 8.15 Waiver of Trial by Jury . . . . . . . . . . . . . . . . . 37
Schedule 6.1 -- Existing Indebtedness
Schedule 6.2 -- Existing Liens
Schedule 6.9 -- Existing Investments
Exhibit A -- Form of Note
Exhibit B -- Form of Subsidiary Guaranty
</TABLE>
<PAGE> 5
CREDIT AGREEMENT, dated as of October 17, 1995 between AMRE,
Inc., a Delaware corporation (the "Borrower"), and HFS Incorporated, a Delaware
corporation (the "Lender").
WHEREAS, Borrower and the Lender have entered into a License
Agreement, dated as of the date hereof (as the same may hereafter be amended,
modified or supplemented from time to time, the "License Agreement"), pursuant
to which, among other things, an affiliate of the Lender will license to
Borrower the Trademark (as defined in the License Agreement); and
WHEREAS, in connection with the transactions contemplated by
the License Agreement, the Lender is willing to make loans to the Borrower upon
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and intending to be legally
bound hereby, Borrower and the Lender hereby agree as follows:
SECTION 1. DEFINITIONS.
Section 1.1 Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural number the singular.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to (i)
vote 10% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) direct or cause the direction
of the management and policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise. The term "Affiliate"
shall not include the Lender or any of its Subsidiaries.
"Agreement" shall mean this Credit Agreement as the same may
from time to time hereafter be modified, supplemented or amended.
<PAGE> 6
"Applicable LIBOR Rate" shall mean for each Interest Period
the LIBOR Rate determined by the Lender as of the first day of such Interest
Period.
"Applicable Margin" shall mean one and one-half percent
(1-1/2%).
"Assignee" shall have the meaning provided in Section 8.4(c).
"Bankruptcy Code" shall mean Title 11 of the United States
Code entitled "Bankruptcy", as amended from time to time, and any successor
statute or statutes.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrowing" shall mean the incurrence of a Loan from the
Lender on a given date.
"Business Day" shall mean any day excluding Saturday, Sunday
and any day which shall be in New York City or in New Jersey a legal holiday or
a day on which banking institutions are authorized or required by law or other
government actions to close.
"Capitalized Lease" shall mean (i) any lease of property, real
or personal, the obligations under which are capitalized on the consolidated
balance sheet of the Borrower and its Subsidiaries, and (ii) any other such
lease to the extent that the then present value of the minimum rental
commitment thereunder should, in accordance with GAAP, be capitalized on a
balance sheet of the lessee.
"Capitalized Lease Obligations" shall mean all obligations of
the Borrower and its Subsidiaries under or in respect of Capitalized Leases.
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities
of not more than 90 days from the date of acquisition, (ii) demand deposits,
time deposits and certificates of deposit of any Bank or any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500,000,000 with maturities of not more than 90 days from the date of
acquisition, (iii) fully secured repurchase
2
<PAGE> 7
obligations with a term of not more than 7 days for underlying securities of
the types described in clause (i) entered into with any bank meeting the
qualifications specified in clause (ii) above, and (iv) commercial paper issued
by the parent corporation of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500,000,000 and commercial
paper rated at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by Moody's Investor
Services, Inc. and in each case maturing within 90 days after the date of
acquisition.
"Closing Date" shall mean the date on which the conditions
precedent to the making of the initial Loans pursuant to Section 3.1 hereof are
satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute.
"Contingent Obligation" as to any Person shall mean any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the owner of such primary obligation against loss in respect
thereof; provided, however, that the term Contingent Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
3
<PAGE> 8
"Default Rate" shall have the meaning provided in Section
2.5(b).
"Dividends" shall have the meaning provided in Section 6.6.
"Environmental Affiliate" shall mean, with respect to any
Person, any other Person whose liability for any Environmental Claim such
Person has or may have retained, assumed or otherwise become liable for
(contingently or otherwise), either contractually or by operation of law.
"Environmental Approvals" shall mean any permit, license,
approval, ruling, variance, exemption or other authorization required under
applicable Environmental Laws.
"Environmental Claim" shall mean, with respect to any Person,
any notice, claim demand or similar communication (written or oral) by any other
Person alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
"Environmental Laws" shall mean all federal, state, local and
foreign laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, asamended from time to time. Section references to ERISA are to
ERISA, as in effect at the date of this Agreement and any subsequent provisions
of ERISA, amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Controlled Group" means a group consisting of any ERISA
Person and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with
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such Person that, together with such Person, are treated, as a single employer
under regulations of the PBGC.
"ERISA Person" shall have the meaning set forth in Section
3(9) of ERISA for the term "person."
"Event of Default" shall have the meaning provided in
Section 7.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System as constituted from time to time.
"Fees" shall mean all amounts payable pursuant to Section 2.10.
"Final Maturity Date" shall mean the earlier of (i) the 3rd
anniversary of the date hereof or (ii) such time as the Loan Commitment is
reduced to zero pursuant to the terms hereof.
"Financial Officer" of any Person shall mean such Person's
chief financial officer, treasurer or assistant treasurer.
"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date hereof and consistent with those utilized
in the preparation of the financial statements referred to in Section 3.1(h).
"Guarantors" shall mean each of the Borrower's Subsidiaries
who on the Closing Date are, or at any time thereafter pursuant to the
provisions of Section 5.10 become, parties to the Subsidiary Guaranty.
"Indebtedness" of any Person shall mean, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than trade payable on terms of 90
days or less incurred in the ordinary course of business of such Person), (ii)
all indebtedness of such Person evidenced by a note, bond, debenture or similar
instrument, (iii) the principal component of all Capitalized Lease Obligations
of such Person, (iv) the face amount of all letters of credit issued for the
account of such Person and, without duplication, all unreimbursed amounts drawn
thereunder, (v) all indebtedness of any other Person secured by any Lien on any
property owned by such Person, whether or not such indebtedness has been
assumed, (vi) all Contingent Obligations of such Person, and (vii) all payment
obligations of such Person under any interest rate protection agreement
(including, without limitation, any
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interest rate swaps, caps, floors, collars and similar agreements) and currency
swaps and similar agreements.
"Interest Period" shall mean the period from the Closing Date
to but excluding the first Payment Date and thereafter each period from and
including a Payment Date to but excluding the next succeeding Payment Date.
"Investment" shall mean all investments in and all loans,
advances and extensions of credit to any Person, all stock, notes, bonds,
leases or other securities or evidences of indebtedness of or any capital
contribution to any corporation, partnership, firm, joint venture or other
business entity.
"Lender's Office" shall mean the office of the Lender located
at 339 Jefferson Road, Parsippany, New Jersey 07054-0278, or such other office
as the Lender may hereafter designate in writing as such to the Borrower.
"LIBOR Rate" with respect to each Interest Period shall mean
for any day, as determined by the Lender, the interest rate per annum offered
for deposits in U.S. Dollars for the Interest Period in the London interbank
market which appears on Telerate Page 3750 or such other page as may replace
Page 3750 on that service or such other service or services as may be nominated
by the British Bankers' Association for the purpose of displaying such rate
(collectively, "Telerate Page 3750") as of 11:00 A.M. London time on the second
Business Day prior to any such date (the "LIBOR Determination Date"). If the
Interest Period is of a duration failing between the interest periods for which
such rates appear on Telerate Page 3750, the LIBOR Rate shall be the rate
determined by interpolation between the rates for the next shorter and the next
longer interest periods for which such rate appears on Telerate Page 3750, as
determined by the Lender, whose determination shall be conclusive in the
absence of manifest error. In the event that (i) more than one such LIBOR Rate
is provided, the average of such rates shall apply or (ii) no such LIBOR Rate
is published, then the LIBOR Rate shall be determined from such comparable
financial reporting company as the Lender, in its discretion, shall determine.
"License Agreement" shall have the meaning provided in the
recitals hereto.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement of any kind or nature
whatsoever, including,
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without limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same effect as any of the
foregoing and the filing of any financing statement or similar instrument under
the Uniform Commercial Code or comparable law of any jurisdiction, domestic or
foreign.
"Loan Commitment" shall mean $4,000,000, as such amount may be
reduced from time to time pursuant to Sections 2.6, 2.8 and 8.3(b).
"Loan Documents" shall mean this Agreement and the Note.
"Loan Party" shall mean and include the Borrower and the
Guarantors.
"Loans" shall have the meaning provided in 2.1(a).
"Margin Stock" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" shall mean a material adverse effect
upon (i) the business, operations, properties, assets or condition (financial
or otherwise) of the Borrower and its Subsidiaries, taken as a whole, (ii) the
ability of any Loan Party to perform, or of the Lender to enforce, any of the
Obligations or (iii) the ability of the Borrower to perform its obligations
under the License Agreement.
"Materials of Environmental Concern" shall mean and include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products.
"Multiemployer Plan" shall mean a Plan which is a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
"Net Proceeds" shall mean all cash proceeds of (x) each sale
or other disposition (or any subsequent collection of proceeds) of assets by
the Borrower or its Subsidiaries (other than sales of inventory, sales of
obsolete equipment in the ordinary course of business and factoring of
receivables in the ordinary course of business), in each case net of (i)
reasonable expenses incurred or reasonably expected to be incurred directly in
connection with such sale or disposition and (ii) any income, franchise,
transfer or other tax payable by any Loan Party in connection with such sale or
disposition and (y) each issuance by
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Borrower or its Subsidiaries of debt or equity securities excluding equity
securities issued pursuant to outstanding stock options, in each case net of
(i) any underwriting discounts or commissions and (ii) reasonable expenses
incurred or reasonably expected to be incurred directly in connection with such
issuance.
"Note" shall have the meaning provided in Section 2.4.
"Notice of Borrowing" shall have the meaning provided in
Section 2.2.
"Obligations" shall mean all obligations, liabilities and
Indebtedness of every nature of the Borrower and the Guarantors from time to
time owing to the Lender under or in connection with this Agreement or any
other Loan Document.
"Payment Date" shall mean the last day of March, June,
September and December of each year.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"Person" shall mean and include any individual, partnership,
joint venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Plan" means any employee benefit plan covered by Title IV of
ERISA, the funding requirements of which:
(i) were the responsibility of the
Borrower or a member of its ERISA Controlled Group at any time within
the five years immediately preceding the date hereof,
(ii) are currently the responsibility of
the Borrower or a member of its ERISA Controlled Group, or,
(iii) hereafter become the responsibility
of the Borrower or a member of its ERISA Controlled Group,
including any such plans as may have been, or may hereafter be, terminated for
whatever reason.
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"Preferred Stock" shall mean the 300,000 shares of the
Borrower's Senior Convertible Preferred Stock issued by the Borrower to the
Lender pursuant to the Stock Purchase Agreement.
"Reportable Event" has the meaning set forth in Section
4043(b) of ERISA (other than a Reportable Event as to which the provision of 30
days notice to the PBGC is waived under applicable regulations), or is the
occurrence of any of the events described in section 4068(f) or 4063(a) of
ERISA.
"Stock Purchase Agreement" shall mean that certain Stock
Purchase Agreement dated as of the date hereof pursuant to which the Lender
shall purchase the Preferred Stock, as the same may hereafter be amended,
modified or supplemented from time to time.
"Subsidiary" of any Person shall mean and include (i) any
corporation 50% or more of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture, limited liability company or other entity in which
such Person, directly or indirectly through Subsidiaries, is either a general
partner or has a 50% or more equity interest at the time.
"Subsidiary Guaranty" shall mean the Subsidiary Guaranty dated
the date hereof and substantially in the form of Exhibit B hereto, as the same
may hereafter be amended, modified or supplemented from time to time.
"Termination Event" shall mean (i) a Reportable Event, or (ii)
the initiation of any action by the Borrower, any member of the Borrower's
ERISA Controlled Group or any Plan fiduciary to terminate a Plan or the
treatment of an amendment to a Plan as a termination under ERISA or (iii) the
institution of proceedings by the PBGC under Section 4042 of ERISA to terminate
a Plan or the appointment of a trustee to administer any Plan.
"Transactions" shall mean each of the transactions
contemplated by the Loan Documents and the License Agreement.
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"Unfunded Benefit Liabilities" means with respect to any Plan
at any time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan (on the
basis of assumptions prescribed by the PBGC for the purpose of Section 4044 of
ERISA).
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITY.
Section 2.1 Revolving Loans. (a) Subject to and upon the terms
and conditions herein set forth, the Lender agrees, at any time and from time
to time on and after the Closing Date and prior to the Final Maturity Date, to
make revolving loans (collectively, "Loans") to the Borrower, which Loans shall
not at any time exceed in aggregate principal amount at any time outstanding
the Loan Commitment at such time.
(b) Loans may be voluntarily prepaid pursuant to
Section 2.7, and, subject to the other provisions of this Agreement, any
amounts so prepaid may be reborrowed. The Loan Commitment shall expire, and the
Loan shall mature on, the Final Maturity Date, without further action on the
part of the Lender.
(c) Each Borrowing of Loans shall be in the
aggregate minimum amount of $250,000 or any integral multiple of $100,000 in
excess thereof.
Section 2.2 Notice of Borrowing. Whenever the Borrower desires
to borrow hereunder, a Financial Officer of the Borrower shall give a Financial
Officer of the Lender, at the Lender's Office prior to 10:00 A.M., New York
City time, at least five Business Days' prior written notice of each Loan;
provided that the Borrower shall not borrow Loans hereunder more than once in
any period of thirty consecutive calendar days. Each such notice (a "Notice of
Borrowing") shall be irrevocable and shall specify (i) the aggregate principal
amount of the requested Loans, and (ii) the date of Borrowing (which shall be a
Business Day).
Section 2.3 Disbursement of Funds. On the date specified in
each Notice of Borrowing, the Lender will make available the Loans requested to
be made on such date, in U.S. dollars by wire transfer in immediately
available funds to an account specified in a written instrument signed by a
Financial
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Officer of Borrower and delivered to a Financial Officer of the Lender together
with any Notice of Borrowing.
Section 2.4 Note. (a) The Borrower's obligation to pay the
principal of, and interest on, the Loans shall be evidenced by a promissory
note (a "Note") duly executed and delivered by the Borrower substantially in
the form of Exhibit A hereto in a principal amount equal to the Loan
Commitment, with blanks appropriately completed in conformity herewith. The
Note issued to the Lender shall (x) be payable to the order of the Lender, (y)
be dated the Closing Date, and (z) mature on the Final Maturity Date.
(b) The Lender is hereby authorized, at its
option, either (i) to endorse on the schedule attached to its Note (or on a
continuation of such schedule attached to such Note and made a part thereof) an
appropriate notation evidencing the date and amount of each Loan evidenced
thereby and the date and amount of each principal and interest payment in
respect thereof, or (ii) to record such Loans and such payments in its books
and records. Such schedule or such books and records, as the case may be, shall
constitute prima facie evidence of the accuracy of the information contained
therein.
Section 2.5 Interest. (a) The Borrower agrees to pay interest
in respect of the unpaid principal amount of each Loan from the date of the
making of such Loan until such Loan shall be paid in full at a rate per annum
which shall be equal to the sum of the Applicable Margin plus the Applicable
LIBOR Rate in effect from time to time, such interest to be computed on the
basis of a 360 day year and the actual number of days elapsed.
(b) In the event that, and for so long as, any
Event of Default shall have occurred and be continuing pursuant to Sections
7.1(a) or 7.1(e), the outstanding principal amount of all Loans and, to the
extent permitted by law, overdue interest in respect of all Loans, shall bear
interest at a rate per annum (the "Default Rate") equal to the sum of two
percent (2%) plus the interest rate otherwise applicable hereunder to such
principal amount in effect from time to time; provided that nothing in any Loan
Document shall permit the Lender to receive interest in excess of the maximum
rate of interest permitted by law.
(c) Interest on each Loan shall accrue from and
including the date of the Borrowing thereof to but excluding the date of any
repayment thereof (provided that any Loan borrowed and repaid on the same day
shall
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accrue one day's interest) and shall be payable on each Payment Date and on the
Final Maturity Date.
Section 2.6 Voluntary and Mandatory Reductions of Commitments.
(a) Upon at least three Business Days' prior irrevocable written notice (or
telephonic notice promptly confirmed in writing) to the Lender the Borrower
shall from time to time, have the right, without premium or penalty, to
permanently reduce the Loan Commitment, provided that any such partial
reduction shall be in the minimum aggregate amount of $250,000 or any integral
multiple of $100,000 in excess thereof.
(b) The Loan Commitment shall be reduced in an
amount, to the extent, and for the duration required by Sections 2.8(b).
Section 2.7 Voluntary Prepayments. The Borrower shall have the
right to prepay the Loans in whole or in part at any time and from time to time
without premium or penalty on the following terms and conditions: (i) the
Borrower shall give the Lender written notice (or telephonic notice promptly
confirmed in writing), which notice shall be irrevocable, of its intent to
prepay the Loans, at least one Business Day prior to a prepayment, which notice
shall specify the date (which shall be a Business Day) and the amount of such
prepayment and (ii) each prepayment shall be in an aggregate principal amount
of $250,000 or any integral multiple of $100,000 in excess thereof.
Section 2.8 Mandatory Prepayments. (a) On each date after the
Closing Date on which the Borrower or any of its Subsidiaries receives any Net
Proceeds, the Borrower shall prepay any outstanding Loans in an amount equal to
the lesser of (i) 100% of the amount of such Net Proceeds or (ii) the amount of
outstanding Loans at that time.
(b) In the event any prepayments are or would be
required pursuant to Section 2.8(a) hereof, whether or not any Loans are then
outstanding, the Loan Commitment shall be permanently reduced in an amount
equal to 100% of such Net Proceeds.
(c) During each 12-month period commencing with
the date which is 18 months after the first date upon which a Loan is made
hereunder, for a period of 30 consecutive days, the Borrower shall prepay any
outstanding Loans or refrain from making any Borrowings so as to reduce the
balance of outstanding Loans during each such consecutive 30-day period to
zero.
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Section 2.9 Method and Place of Payment. (a) Except as
otherwise specifically provided herein, all payments and prepayments under this
Agreement and the Note shall be made to the Lender not later than 2:00 p.m.,
New York City time, on the date when due and shall be made in lawful money of
the United States of America by wire transfer in immediately available funds to
the account specified in a written instrument signed by the Treasurer or an
Assistant Treasurer of the Lender and delivered to the Treasurer of Borrower,
and any funds received by the Lender after such time shall, for all purposes
hereof, be deemed to have been paid on the next succeeding Business Day.
(b) Whenever any payment to be made hereunder or
under the Note shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest shall be payable at the
applicable rate during such extension.
(c) All payments made by the Borrower hereunder
and under the Note shall be made irrespective of, and without any reduction
for, any setoff or counterclaims, including, without limitation, any setoff or
counterclaims arising due to a breach or alleged breach by the Lender or its
Subsidiaries of any other agreement to which the Lender or its Subsidiaries and
any of the Loan Parties are parties.
Section 2.10 Fees. The Borrower agrees to pay to the Lender a
commitment fee, computed at the per annum rate of 1/2 of 1% on the average
daily unused portion of the Loan Commitment, from and including the Closing
Date to the Final Maturity Date, payable in arrears on each Payment Date and on
the Final Maturity Date or such earlier date, if any, on which the Loan
Commitment shall terminate in accordance with the terms hereof.
Section 2.11 Increased Costs. In the event that the Lender
shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto) at any time, that the
Applicable LIBOR Rate applicable to the Loans shall not represent the effective
cost to the Lender for funding or maintaining Loans, or the Lender shall incur
increased costs or reductions in the amounts received or receivable hereunder
in respect of any Loan, in any such case because of (x) any change since the
date of this Agreement in any applicable law or governmental rule, regulation,
guideline or order or any interpretation thereof and including the introduction
of any new law or governmental rule, regulation, guideline or order, whether or
not having the
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force of law and whether or not failure to comply therewith would be unlawful,
and/or (y) other circumstances affecting the Lender, including, without
limitation, any of the foregoing circumstances affecting the provider of funds
to the Lender or any of its Affiliates to enable Lender to make or maintain the
Loans, then, and in any such event, the Lender shall, promptly after making
such determination, give notice (by telephone promptly confirmed in writing) to
the Borrower of such determination. Thereafter, the Borrower shall pay to the
Lender, upon the Lender's delivery of written demand therefor to the Borrower,
such additional amounts (in the form of an increased rate of interest, or a
different method of calculating interest, or otherwise, as the Lender in its
sole discretion shall determine) as shall be required to compensate the Lender
for such increased costs or reduction in amounts received or receivable
hereunder.
Section 2.12 Taxes. All payments made by the Borrower under
this Agreement shall be made free and clear of, and without reduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
governmental authority excluding, in the case of the Lender, net income and
franchise taxes imposed on the Lender by the jurisdiction under the laws of
which the Lender is organized or any political subdivision or taxing authority
thereof or therein (all such non-excluded taxes, levies, imposts, deductions,
charges or withholdings being hereinafter called "Taxes"). If any Taxes are
required to be withheld from any amounts payable to the Lender hereunder or
under the Note, the amounts so payable to the Lender shall be increased to the
extent necessary to yield to the Lender (after payment of all Taxes) interest
or any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Note. Whenever any Taxes are payable by the
Borrower, as promptly as possible thereafter, the Borrower shall send to the
Lender a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any Taxes when
due to the appropriate taxing authority or fails to remit to the Lender the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Lender for any incremental taxes, interest or penalties that may
become payable by the Lender as a result of any such failure. The agreements in
this Section 2.12 shall survive the termination of this Agreement and the
payment of the Note and all other Obligations.
Section 2.13 Use of Proceeds. The proceeds of the Loans shall
be used for the Borrower's general corporate purposes.
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SECTION 3. CONDITIONS PRECEDENT.
Section 3.1 Conditions Precedent to Initial Loans. The
obligation of the Lender to make its initial Loans is subject to the
satisfaction on the Closing Date of the following conditions precedent:
(a) License Agreement. Borrower's subsidiary
American Remodeling, Inc. and an affiliate of the Lender shall have entered
into the License Agreement and the Term (as defined therein) shall have
commenced.
(b) Loan Documents.
(i) Credit Agreement. The Borrower
shall have executed and delivered this Agreement to the Lender.
(ii) Note. The Borrower shall have
executed and delivered to the Lender the appropriate Note in the
amount, maturity and as otherwise provided herein.
(iii) Subsidiary Guaranty. The
Guarantors shall have executed and delivered the Subsidiary Guaranty
to the Lender.
(c) Preferred Stock. The Borrower and Lender
shall have executed and delivered the Stock Purchase Agreement and the
Preferred Stock shall have been duly and validly issued to the Lender (or its
designee) thereunder.
(d) Opinion of Counsel. The Lender shall have
received a legal opinion from Akin, Gump Strauss Hauer & Feld, dated the
Closing Date, from counsel to the Borrower and the Guarantors, in form and
substance reasonably satisfactory to Lender.
(e) Corporate Documents. The Lender shall have
received the Certificate of Incorporation of each Loan Party, certified to be
true, correct and complete by the appropriate Secretary of State.
(f) Certified Resolutions, etc. The Lender shall
have received a certificate of the Secretary or Assistant Secretary of each of
the Loan Parties and dated the Closing Date certifying (i) the names and true
signatures of
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the incumbent officers of such Person authorized to sign the applicable Loan
Documents, (ii) the By-Laws of such Person as in effect on the Closing Date,
(iii) the resolutions of such Person's Board of Directors approving and
authorizing the execution, delivery and performance of the Loan Documents
executed by such Person, and (iv) that there have been no changes in the
Certificate of Incorporation of such Person since the date of the most recent
certification thereof by the appropriate Secretary of State.
(g) Insurance. The Lender shall have received a
certificate of insurance demonstrating insurance coverage in respect of the
Borrower and its Subsidiaries of types, in amounts, with insurers and with
other terms satisfactory to the Lender.
(h) Financial Statements. The Lender shall have
received the Borrower's audited consolidated financial statements for the
fiscal year ended December 31, 1994 and the unaudited consolidated financial
statements of the Borrower for the fiscal period ending on June 30, 1995.
(i) Additional Matters. The Lender shall have
received such other certificates, opinions, documents and instruments relating
to the Transactions as may have been reasonably requested by the Lender, and
all corporate and other proceedings and all other documents (including, without
limitation, all documents referred to herein and not appearing as exhibits
hereto) and all legal matters in connection with the Transactions shall be
satisfactory in form and substance to the Lender.
Section 3.2 Conditions Precedent to All Loans. The obligation
of the Lender to make any Loan (including any initial Loan made on the Closing
Date) is subject to the satisfaction on the date such Loan is made of the
following conditions precedent:
(a) Representations and Warranties. The
representations and warranties contained herein and in the other Loan
Documents, the License Agreement and the Stock Purchase Agreement (other than
representations and warranties which expressly speak only as of a different
date) shall be true and correct in all material respects on such date both
before and after giving effect to the making of such Loans.
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(b) No Default or Event of Default. No Default or
Event of Default shall have occurred and be continuing on such date either
before or after giving effect to the making of such Loans.
(c) No Material Adverse Change. No event, act or
condition shall have occurred which, in the judgment of the Lender, has had or
could have a Material Adverse Effect; provided, however, that no Material
Adverse Effect shall be deemed to have occurred to the extent the Borrower does
not perform as contemplated in that certain pro forma statement delivered to
the Lender dated as of October 17, 1995.
(d) No Injunction. No law or regulation shall
have been adopted, no order, judgment or decree of any governmental authority
shall have been issued, and no litigation shall be pending or threatened, which
in the judgment of the Lender would enjoin, prohibit or restrain, or impose or
result in the imposition of any material adverse condition upon, the making or
repayment of the Loans.
(e) Notice of Borrowing. The Lender shall have
received a fully executed Notice of Borrowing in respect of the Loans to be
made on such date.
The providing of a Notice of Borrowing and the acceptance of
the proceeds of each Loan shall each constitute a representation and warranty
by the Borrower to the Lender that all of the conditions required to be
satisfied under this Section 3 in connection with the making of such Loan have
been satisfied.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender to enter into this Agreement and
to make the Loans, the Borrower makes the following representations and
warranties, which shall survive the execution and delivery of this Agreement
and the Note and the making of the Loans:
Section 4.1 Corporate Status. Each Loan Party and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own its property and assets and to transact
the business in which it is engaged or presently proposes to engage and (iii)
is duly qualified and is authorized to do business and is in good standing as a
foreign corporation in
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every jurisdiction in which it owns or leases real property or in which the
nature of its business requires it to be so qualified, except where the failure
to so qualify, individually or in the aggregate, could not have a Material
Adverse Effect.
Section 4.2 Corporate Power and Authority. Each Loan Party has
the corporate power and authority to execute, deliver and carry out the terms
and provisions of each of the Loan Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of such Loan Documents. Each Loan Party has duly executed
and delivered each such Loan Document, and each such Loan Document constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms.
Section 4.3 No Violation. Neither the execution, delivery or
performance by any Loan Party of the Loan Documents to which it is a party, nor
compliance by it with the terms and provisions thereof nor the consummation of
the Transactions, (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality or (ii) will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of any Loan Party pursuant to the terms of any indenture, mortgage, deed
of trust, agreement or other instrument to which such Loan Party is a party or
by which it or any of its property or assets is bound or to which it may be
subject, or (iii) will violate any provision of the Certificate of
Incorporation or By-Laws of any Loan Party.
Section 4.4 Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened with
respect to any of the Transactions or Loan Documents or that could,
individually or in the aggregate, result in a Material Adverse Effect.
Section 4.5 Financial Conditions; Material Adverse Change. (a)
The financial statements delivered to Lender pursuant to Section 3.1(h) were
prepared in accordance with GAAP and fairly present the financial condition of
the Borrower and its Subsidiaries on the dates and for the periods covered
thereby, subject, in the case of interim financial statements, to normally
recurring year-end adjustments. Neither the Borrower nor any of its
Subsidiaries have any material contingent liabilities not reflected on such
financial statements (or in the
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footnotes thereto), (b) since June 30, 1995, there has occurred no event, act
or condition which has had, or could have, a Material Adverse Effect.
Section 4.6 Use of Proceeds, Margin Regulations. All proceeds
of each Loan will be used by the Borrower only in accordance with the
provisions of Section 2.13. No part of the proceeds of any Loan will be used by
the Borrower to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock. Neither the
making of any Loan nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulations G, T, U or X of the Federal
Reserve Board.
Section 4.7 Governmental Approvals. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is required
in connection with (i) the execution, delivery and performance of any Loan
Document or the consummation of any of the Transactions or (ii) the legality,
validity, binding effect or enforceability of any Loan Document.
Section 4.8 No Default. No Loan Party is in default under or
with respect to any agreement, instrument or undertaking to which it is a party
or by which it or any of its property is bound in any respect which could
result in a Material Adverse Effect. No Default or Event of Default exists.
Section 4.9 Licenses, etc. The Loan Parties have obtained and
hold in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted, except where the failure to
so obtain the foregoing could not, individually or in the aggregate, have a
Material Adverse Effect.
Section 4.10 Compliance With Law. Each Loan Party is in
compliance with all laws, rules, regulations, orders, judgments, writs and I
decrees, except where the failure to so comply, individually or in the
aggregate, could not have a Material Adverse Effect.
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SECTION 5. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that on and after the
Closing Date and until the Loan Commitment has terminated, and the Obligations
are paid in full:
Section 5.1 Information Covenants. The Borrower will furnish
to the Lender.
(a) Quarterly Financial Statements. Within 45
days after the close of each quarterly accounting period in each fiscal year of
the Borrower (other than the fourth quarter), the consolidated balance sheet of
the Borrower and its Subsidiaries as at the end of such quarterly period and
the related consolidated statements of income, cash flow and retained earnings
for such quarterly period and for the elapsed portion of the fiscal year ended
with the last day of such quarterly period, in each case setting forth
comparative figures for the related periods in the prior fiscal year and in
each case certified by the Borrower's chief financial officer (which
certification may be subject to year-end audit adjustments).
(b) Annual Financial Statements. Within 90 days
after the close of each fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such fiscal year
and the related consolidated statements of income, cash flow and retained
earnings for such fiscal year, setting forth comparative figures for the
preceding fiscal year and, with respect to such consolidated financial
statements, certified without qualification by Arthur Anderson, L.L.P. or other
independent certified public accountants of recognized national standing
reasonably acceptable to the Lender, in each case together with a report of
such accounting firm stating that in the course of its regular audit of the
consolidated financial statements of the Borrower, which audit was conducted in
accordance with generally accepted auditing standards, such accounting firm has
obtained no knowledge of any Default or Event of Default then continuing, or if
in the opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof.
(c) Officer's Certificates. At the time of the
delivery of the financial statements under clauses (a) and (b) above, a
certificate of the chief financial officer of the Borrower which certifies (x)
that such financial statements fairly present the financial condition and the
results of operations of the Borrower
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and its Subsidiaries on the dates and for the periods indicated, subject, in
the case of interim financial statements, to normally recurring year-end
adjustments and (y) that such officer has reviewed the terms of the Loan
Documents and has made, or caused to be made under his or her supervision, a
review in reasonable detail of the business and condition of the Borrower and
its Subsidiaries during the accounting period covered by such financial
statements, and that as a result of such review such officer has concluded that
no Default or Event of Default has occurred during the period commencing at the
beginning of the accounting period covered by the financial statements
accompanied by such certificate and ending on the date of such certificate or,
if any Default or Event of Default has occurred, specifying the nature and
extent thereof and, if continuing, the action the Borrower proposes to take in
respect thereof.
(d) Notice of Default or Litigation. Promptly and
in any event within three Business Days after any Loan Party obtains knowledge
thereof, notice of (i) the occurrence of any Default or Event of Default, (ii)
any litigation or governmental proceeding pending or threatened against any
Loan Party which could result in a Material Adverse Effect and (iii) any other
event, act or condition which could result in a Material Adverse Effect.
(e) ERISA.
(i) As soon as possible and in any
event within 10 days after the Borrower or any member
of its ERISA Controlled Group knows, or has reason to
know, that:
(A) any Termination Event
with respect to a Plan has occurred or will occur, or
(B) any condition exists with
respect to a Plan which presents a material risk of
termination of the Plan or imposition of an excise
tax or other liability (other than variable premium
payments to the PBGC) on the Borrower or any member
of its ERISA Controlled Group, or
(C) the Borrower or any member of
its ERISA Controlled Group has applied for a waiver
of the minimum funding standard under Section 412 of
the Code or Section 302 of ERISA, or
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(D) the Borrower or any member of
its ERISA Controlled Group has engaged in a
"prohibited transaction," as defined in Section 4975
of the Code or as described in Section 406 of ERISA,
that is not exempt under Section 4975 of the Code and
Section 408 of ERISA, or
(E) the aggregate present value of
the Unfunded Benefit Liabilities under all Plans has
in any year increased by $100,000 or to an amount in
excess of $500,000, or
(F) any condition exists with
respect to a Multi- employer Plan which presents a
material risk of a partial or complete withdrawal (as
described in Section 4203 or 4205 of ERISA) by the
Borrower or any member of its ERISA Controlled Group
from a Multiemployer Plan, or
(G) the Borrower or any member of
its ERISA Controlled Group is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect
to payments to a Multiemployer Plan, or
(H) a Multi-employer Plan is in
"reorganization" (as defined in Section 418 of the
Code or Section 4241 of ERISA) or is "insolvent" (as
defined in Section 4245 of ERISA), or
(I) the potential withdrawal
liability (as determined in accordance with Title IV
of ERISA) of the Borrower and the members of its
ERISA Controlled Group with respect to all
Multiemployer Plans has in any year increased by
$5,000,000 or to an amount in excess of $10,000,000,
or
(J) there is an action brought
against the Borrower or any member of its ERISA
Controlled Group under Section 502 of ERISA with
respect to its failure to comply with Section 515 of
ERISA,
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a certificate of the president or chief financial officer of the Borrower
setting forth the details of each of the events described in clauses (A)
through (J) above as applicable and the action which the Borrower or the
applicable member of its ERISA Controlled Group proposes to take with respect
thereto, together with a copy of any notice or filing from the PBGC or which
may be required by the PBGC or other agency of the United States government
with respect to each of the events described in clauses (A) through (J) above,
as applicable.
(ii) As soon as possible and in any
event within two Business Days after the
receipt by the Borrower or any member of its
ERISA Controlled Group of a demand letter
from the PBGC notifying the Borrower or such
member of its ERISA Controlled Group of its
final decision finding liability and the date
by which such liability must be paid, a copy
of such letter, together with a certificate
of the president or chief financial officer
of the Borrower setting forth the action
which the Borrower or such member of its
ERISA Controlled Group proposes to take with
respect thereto.
(f) Environmental. Promptly and in any event
within 10 Business Days after the existence of any of the following conditions,
a certificate of the chief executive officer or chief financial officer of the
Borrower specifying in detail the nature of such condition and the proposed
response thereto: (i) the receipt by any Loan Party or any of its Subsidiaries
of any communication, whether from a governmental authority, citizens group,
employee or otherwise, that alleges that such Loan Party, Subsidiary or an
Environmental Affiliate is not in compliance with applicable Environmental Laws
and such noncompliance, individually or in the aggregate, could have a Material
Adverse Effect, (ii) any Loan Party, any of its Subsidiaries or any of its
Environmental Affiliates shall obtain actual knowledge that there exists any
Environmental Claim pending or threatened against such Loan Party Subsidiary,
or such Environmental Affiliate, which, individually or in the aggregate, could
have a Material Adverse Effect, or (iii) any release, emission, discharge or
disposal of any Material of Environmental Concern that could form the basis of
any Environmental Claim against any Loan Party, any of its Subsidiaries or any
of their Environmental Affiliates, which Environmental Claim, individually or
in the aggregate could have a Material Adverse Effect.
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(g) SEC Filings. As soon as available, copies of
all regular and periodic reports and registration statements which it or any
Subsidiary files with the Securities and Exchange Commission or with any
securities exchange.
(h) Other Information. From time to time, such
other information or documents (financial or otherwise) as the Lender may
reasonably request.
Section 5.2 Books, Records and Inspections. The Borrower
shall, and shall cause each of its Subsidiaries to, keep proper books
of record and account in which full, true and correct entries in conformity
with GAAP and all requirements of law shall be made of all dealings and
transactions in relation to its business and activities. The Borrower shall,
and shall cause each of its Subsidiaries to, permit officers and designated
representatives of the Lender to visit and inspect any of the properties of the
Borrower or any of its Subsidiaries, and to examine the books of record and
account of the Borrower or any of its Subsidiaries, and discuss the affairs,
finances and accounts of the Borrower or any of its Subsidiaries with, and be
advised as to the same by, its and their officers and independent accountants,
all upon reasonable notice and at such reasonable times as the Lender may
reasonably request.
Section 5.3 Maintenance. The Borrower shall, and shall cause
each of its Subsidiaries to, (a) maintain with financially sound and reputable
insurance companies insurance on itself and its properties in at least such
amounts and against at least such risks as are customarily insured against in
the same general area by companies engaged in the same or a similar business,
which insurance shall in any event not provide for materially less coverage than
the insurance in effect on the Closing Date, and (b) furnish to the Lender from
time to time, upon written request, the policies under which such insurance is
issued, certificates of insurance and such other information relating to such
insurance as the Lender may request.
Section 5.4 Taxes. (a) The Borrower shall pay or cause to be
paid, and shall cause each of its Subsidiaries to pay or cause to be paid, when
due, all taxes, charges and assessments and all other lawful claims required to
be paid by the Borrower or such Subsidiaries, except as contested in good faith
and by appropriate proceedings diligently conducted, if adequate reserves have
been established with respect thereto in accordance with GAAP.
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<PAGE> 29
(b) The Borrower shall not, and shall not permit
any of its Subsidiaries to, file or consent to the filing of any consolidated
tax return with any Person (other than the Borrower and its Subsidiaries).
Section 5.5 Corporate Franchises. The Borrower shall, and
shall cause each of its Subsidiaries to, do or cause to be done, all things
necessary to preserve and keep in full force and effect its existence and its
patents, trademarks, servicemarks, tradenames, copyrights, franchises, licenses
(other than the Sears License Agreement), permits, certificates,
authorizations, qualifications, accreditation, easements, rights of way and
other rights, consents and approvals except where the failure to so preserve
any of the foregoing (other than existence) could not, individually or in the
aggregate, result in a Material Adverse Effect.
Section 5.6 Compliance with Law. The Borrower shall, and shall
cause each of its Subsidiaries to, comply with all applicable laws, rules,
statutes, regulations, decrees and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of their business and the ownership of their property, including,
without limitation, all Environmental Laws, except such non-compliance as could
not, individually or in the aggregate, result in a Material Adverse Effect.
Section 5.7 Performance of Obligations. The Borrower shall,
and shall cause each of its Subsidiaries to, perform all of its obligations
under the terms of (i) each mortgage, indenture, security agreement, debt
instrument, lease, undertaking and contract by which it or any of its
properties is bound or to which it is a party if the failure to so perform,
individually or in the aggregate, could result in a Material Adverse Effect,
(ii) the License Agreement and (iii) the Certificate of Incorporation
(including Certificates of Designation) and By-Laws of the Borrower.
Section 5.8 Compliance with Preferred Stock. The Borrower
shall, and shall cause each of its Subsidiaries to, comply with all financial
and other covenants contained in the Preferred Stock to be issued by the
Borrower to the Lender.
Section 5.9 Maintenance of Properties. The Borrower shall, and
shall cause each of its Subsidiaries to, ensure that its properties used or
useful in its business are kept in good repair, working order and condition,
normal wear and tear excepted.
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Section 5.10 Additional Guarantors. Borrower shall give Lender
prompt written notice of the creation or acquisition of any Subsidiary after
the Closing Date. Upon request of the Lender, the Borrower shall cause such
Subsidiary to become a party to the Subsidiary Guaranty and in connection
therewith to deliver to the Lender such documents or opinions as Lender may
reasonably request.
SECTION 6. NEGATIVE COVENANTS.
The Borrower covenants and agrees that on and after the
Closing Date until the Loan Commitment has terminated, and the Obligations are
paid in full, without the prior written consent of Lender:
Section 6.1 Indebtedness. The Borrower shall not, and shall
not permit any of its Subsidiaries to, create, incur, assume, suffer to exist
or otherwise become or remain directly or indirectly liable with respect to,
any Indebtedness, other than (i) Indebtedness existing on the Closing Date and
described on Schedule 6.1 (but not any refinancing or renewal thereof), (ii)
Indebtedness under the Loan Documents and the License Agreement, (iii)
Indebtedness with respect to purchase-money Indebtedness not in excess of
$1,000,000 in the aggregate outstanding per year and (iv) Indebtedness with
respect to letters of credit issued for the Borrower's account and, without
duplication, all unreimbursed amounts drawn thereunder not in excess of
$1,300,000 in the aggregate at any one time outstanding.
Section 6.2 Liens. The Borrower shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist,
directly or indirectly, any Lien on any of its property now owned or hereafter
acquired, other than:
(a) Liens existing on the Closing Date and
described on Schedule 6.2 hereto;
(b) Liens for taxes not yet due or which are
being, contested in good faith by appropriate proceedings diligently conducted
and with respect to which adequate reserves are being maintained in accordance
with GAAP;
(c) Statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other Liens imposed by Law
(other
26
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than any Lien imposed by ERISA or pursuant to any Environmental Law) created in
the ordinary course of business for amounts not yet due or which are being
contested in good faith by appropriate proceedings diligently conducted and
with respect to which adequate bonds have been posted; and
(d) Liens created to secure purchase-money
Indebtedness permitted pursuant to Section 6.1 (iii) provided that such Liens
are only in respect of the property or assets subject to, and secure only, the
respective purchase money Indebtedness.
Section 6.3 Restriction on Fundamental Changes.
(a) The Borrower shall not, and shall not permit
any of its Subsidiaries to, enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution),
discontinue its business or convey, lease, sell, transfer or otherwise dispose
of, in one transaction or series of transactions, all or any substantial part
of its business or property, whether now or hereafter acquired, except as
otherwise permitted under Section 6.5.
(b) The Borrower shall not and shall not permit
any of its Subsidiaries to, amend its certificate of incorporation or by-laws
or its accounting policies or reporting practices if such amendment could have
a Material Adverse Effect.
Section 6.4 Sale of Assets. The Borrower shall not, and shall
not permit any of its Subsidiaries to, convey, lease, sell, transfer or
otherwise dispose of (or agree to do so at any future time) all or any part of
its property or assets, except (i) sales of inventory, sales of obsolete
equipment and factoring of receivables in the ordinary course of business and
(ii) sales of equipment which in the reasonable judgment of the Borrower is
uneconomic, obsolete or no longer useful in its business.
Section 6.5 Dividends. The Borrower shall not, and shall not
permit any of its Subsidiaries to, declare or pay any dividends (other than
dividends payable solely in common stock), or return any capital to, its common
or preferred stockholders or authorize or make any other distribution, payment
or delivery of property or cash to its common or preferred stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
any shares of any class of its capital stock now or hereafter outstanding (or
any options or warrants issued with respect to its capital stock), or set aside
any funds for any of
27
<PAGE> 32
the foregoing purposes (all the foregoing "Dividends") except that (i) any
Subsidiary of the Borrower may declare and pay Dividends to the Borrower or any
other wholly-owned Subsidiary of the Borrower, (ii) the Borrower may pay
dividends on the Preferred Stock and (iii) the Borrower may pay Dividends on
its common stock if (x) no Default or Event of Default shall have occurred and
be continuing, (y) there have been no outstanding Loans for the three
consecutive calendar months preceding the date such Dividends are payable and
(z) the aggregate total amount of such Dividends shall not exceed $400,000 per
quarter.
Section 6.6 Transactions with Affiliates. The Borrower shall
not, and shall not permit any of its Subsidiaries to, enter into any
transaction or series of related transactions, whether or not in the ordinary
course of business, with any Affiliate, other than on terms and conditions
substantially as favorable to the Borrower or such Subsidiary as would be
obtainable at the time in a comparable arm's-length transaction with a Person
other than an Affiliate.
Section 6.7 Changes in Business. The Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any business which is
substantially different from that conducted by the Borrower or such Subsidiary,
as the case may be, on the Closing Date and which is not being conducted
pursuant to, or contemplated by, the License Agreement.
Section 6.8 Certain Restrictions. The Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any agreement which
restricts the ability of the Borrower or any of its Subsidiaries to (a) enter
into amendments, modifications or waivers of the Loan Documents, (b) sell,
transfer or otherwise dispose of its assets, (c) create, incur, assume or
suffer to exist any Lien upon any of its property, (d) create, incur, assume,
suffer to exist or otherwise become liable with respect to any Indebtedness, or
(e) pay any Dividend.
Section 6.9 Investments. Other than those Investments existing
as of the Closing Date and described on Schedule 6.9 hereto, the Borrower shall
not, and shall not permit any of its Subsidiaries to make any Investment except
that the Borrower and its Subsidiaries may acquire and hold Cash Equivalents.
Section 6.10 Fiscal Year. The Borrower shall not, and shall
not permit any of its Subsidiaries to, change its fiscal year.
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SECTION 7. EVENTS OF DEFAULT
Section 7.1 Events of Default. Each of the following events,
acts, occurrences or conditions shall constitute an Event of Default under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or
as a result of compliance by any Person with any judgment, decree, order, rule
or regulation of any court or administrative or governmental body:
(a) Failure to Make Payments. The Borrower shall
(i) default in the payment when due of any principal of the Loans or (ii)
default, and such default shall continue unremedied for 10 or more calendar
days, in the payment when due of any interest on the Loans or in the payment
when due of any Fees or any other amounts owing hereunder.
(b) Breach of Representation or Warranty. Any
representation or warranty made by any Loan Party herein or in any other Loan
Document or in any certificate or statement delivered pursuant hereto or
thereto shall prove to be false or misleading in any material respect on the
date as of which made or deemed made.
(c) Breach of Covenants.
(i) The Borrower shall fail to perform
or observe any agreement, covenant or obligation arising under
Sections 5.1(f) or 6.
(ii) The Borrower shall fail to perform
or observe any agreement, covenant or obligation arising under this
Agreement (except those described in subsections (a), (b) and (c)(i)
above), and such failure shall continue for 15 days.
(d) Default Under Other Agreements. Any Loan
Party shall default in the payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) of any amount owing in
respect of any Indebtedness (other than the Obligations) in the aggregate
principal amount of $250,000 or more; or any Loan Party shall default in the
performance or observance of any obligation or condition with respect to any
such Indebtedness or any other event shall occur or condition exist, if the
effect of such default, event or condition is to accelerate the maturity of any
such Indebtedness or to
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permit (without regard to any required notice or lapse of time) the holder or
holders thereof, or any trustee or agent for such holders, to accelerate the
maturity of any such Indebtedness, or any such Indebtedness shall become or be
declared to be due and payable prior to its stated maturity other than as a
result of a regularly scheduled payment.
(e) Bankruptcy, etc. (i) The Borrower or any of
its Subsidiaries shall commence a voluntary case concerning itself under the
Bankruptcy Code; or (ii) an involuntary case is commenced against the Borrower
or any of its Subsidiaries and the petition is not controverted within 10 days,
or is not dismissed within 30 days, after commencement of the case; or (iii) a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of the Borrower or any of its
Subsidiaries or the Borrower or any of its Subsidiaries commences any other
proceedings under any reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Subsidiaries or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 30
days; or (iv) any order of relief or other order approving any such case or
proceeding is entered; or (v) the Borrower or any of its Subsidiaries is
adjudicated insolvent or bankrupt; or (vi) the Borrower or any of its
Subsidiaries suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 30 days; or (vii) the Borrower or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or (viii) the Borrower or any
of its Subsidiaries shall fail to pay, or shall state that it is unable to pay,
or shall be unable to pay, its debts generally as they become due; or (ix) the
Borrower or any of its Subsidiaries shall call a meeting of its creditors with
a view to arranging a composition or adjustment of its debts; or (x) the
Borrower or any of its Subsidiaries shall by any act or failure to act consent
to, approve of or acquiesce in any of the foregoing; or (xi) any corporate
action is taken by the Borrower or any of its Subsidiaries for the purpose of
effecting any of the foregoing.
(f) ERISA. (i) Any Termination Event shall occur,
or (ii) any Plan shall incur an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived or
(iii) the Borrower or a member of its ERISA Controlled Group shall have engaged
in a transaction which is prohibited under Section 4975 of the Code or Section
406 of ERISA which could result in the imposition of liability in excess of
$100,000
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on the Borrower or any member of its ERISA Controlled Group, or (iv) the
Borrower or any member of its ERISA Controlled Group shall fail to pay when due
an amount which it shall have become liable to pay to the PBGC, any Plan or a
trust established under Title IV of ERISA, or (v) a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
a Plan must be terminated or have a trustee appointed to administer any Plan,
or (vi) the Borrower or a member of its ERISA Controlled Group suffers a
partial or complete withdrawal from a Multiemployer Plan or is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan, or (vii) a proceeding shall be instituted against the
Borrower or any member of its ERISA Controlled Group to enforce Section 515 of
ERISA, or (viii) any other event or condition shall occur or exist with respect
to any Plan which could subject the Borrower or any member of its ERISA
Controlled Group to any tax, penalty or other liability in excess of $250,000.
(g) Change of Control. Any Person or Persons or
affiliated group of Persons (other than the Lender and its Subsidiaries and
Affiliates) shall become the beneficial owner of 25% or more of the issued and
outstanding shares of common stock of the Borrower or during any period of two
consecutive calendar years, individuals who at the beginning of such period
constituted the Borrower's Board of Directors (together with any new directors
whose election by the Borrower's Board of Directors or whose nomination for
election by the Borrower's shareholders was approved by a vote of at least two
thirds of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors then in office.
(h) Judgments. One or more judgments or decrees
in an aggregate amount of $250,000 or more shall be entered by a court or
courts of competent jurisdiction against the Borrower or any of its
Subsidiaries (other than any judgment as to which, and only to the extent, a
reputable insurance company has acknowledged coverage of such claim in writing)
and (i) any such judgments or decrees shall not be stayed, discharged, paid,
bonded or vacated within 30 days or (ii) enforcement proceedings shall be
commenced by any creditor on any such judgments or decrees.
(i) Subsidiary Guaranty. The Subsidiary Guaranty
or any material provision thereof shall cease to be in full force and effect,
or any
31
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Guarantor or any Person acting on behalf of a Guarantor shall deny or disaffirm
all or any portion of such Guarantor's obligations under the Subsidiary
Guaranty.
(j) License Agreement. The Borrower shall have
defaulted in the performance of any of its obligations or agreements under the
License Agreement or the License Agreement shall terminate for any reason other
than as a result of the scheduled expiration thereof in accordance with its
terms.
Section 7.2 Rights and Remedies. Upon the occurrence of any
Event of Default described in Section 7.1(e), the Commitments shall
automatically and immediately terminate and the unpaid principal amount of and
any and all accrued interest on the Loans and any and all accrued Fees and
other Obligations shall automatically become immediately due and payable, with
all additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence, presentment, notice
of intent to demand or accelerate and notice of acceleration), all of which are
hereby expressly waived by the Borrower, and the obligation of the Lender to
make any Loan hereunder shall thereupon terminate; and upon the occurrence and
during the continuance of any other Event of Default, the Lender may, by
written notice to the Borrower, (i) declare that the Loan Commitment is
terminated, whereupon the Loan Commitment and the obligation of the Lender to
make any Loan hereunder shall immediately terminate, and (ii) declare the
unpaid principal amount of and any and all accrued and unpaid interest on the
Loans and any and all accrued Fees and other Obligations to be, and the same
shall thereupon be, immediately due and payable with all additional interest
from time to time accrued thereon and without presentation, demand, or protest
or other requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by
Borrower.
SECTION 8. MISCELLANEOUS
Section 8.1 Payment of Expenses. Indemnity, etc. The Borrower
shall:
(a) pay all reasonable out-of-pocket costs and
expenses of the Lender in connection with the negotiation, preparation,
execution and delivery of the Loan Documents and the documents and instruments
referred to therein in an amount not to exceed $20,000, and any amendment,
waiver or
32
<PAGE> 37
consent relating to any of the Loan Documents, which costs and expenses shall
accrue as of the Closing Date but shall be payable at such time, if any, as the
first Loan is made.
(b) pay all reasonable out-of-pocket costs and
expenses of the Lender in connection with the preservation of rights under, and
enforcement of, the Loan Documents and the documents and instruments referred
to therein or in connection with any restructuring or rescheduling of the
Obligations (including, without limitation, the reasonable fees and
disbursements of counsel for the Lender);
(c) pay, and hold the Lender harmless from and
against, any and all present and future stamp, excise and other similar taxes
with respect to the foregoing matters and hold the Lender harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to the Lender) to pay such
taxes; and
(d) indemnify the Lender, its officers,
directors, employees, representatives and agents (each an "Indemnitee") from,
and hold each of them harmless against, any and all losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements of any kind or nature whatsoever (including, without
limitation, the fees and disbursements of counsel for such Indemnitee in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may at any time (including, without limitation, at any time
following the payment of the Obligations) be imposed on, asserted against or
incurred by any Indemnitee as a result of, or arising out of, or in any way
related to or by reason of, any of the Transactions or the execution, delivery
or performance of any Loan Document.
Section 8.2 Notices. Except as otherwise expressly provided
herein, all notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and shall
be deemed to have been duly given or made when delivered by hand, or five days
after being sent by certified or registered United States mail, postage
prepaid, or, in the case of telecopy notice, when sent, or, in the case of a
nationally recognized overnight courier service, one Business Day after
delivery to such courier services, addressed, in the case of each party hereto,
at its address specified opposite its signature below, or to such other address
as may be designated by any party in a written notice to the other party
hereto.
33
<PAGE> 38
Section 8.3 Successors and Assigns Participation; Assignments.
(a) Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the Borrower, the Lender, all
future holders of the Note and their respective successors and assigns, except
that the Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the Lender.
(b) Assignments. The Lender may, in accordance
with applicable law, at any time assign to any of its affiliates (each an
"Assignee") all or any part of its interests in any Loan owing to the Lender,
any Note held by the Lender, any Loan Commitment of the Lender or any other
interest of the Lender hereunder. The Borrower and the Lender agree that to the
extent of any assignment the Assignee shall be deemed to have the same rights
and benefits under the Loan Documents as the Lender hereunder.
Section 8.4 Amendments and Waivers. Neither this Agreement,
any other Loan Document nor any terms hereof or thereof may be amended,
supplemented, modified or waived except in accordance with the provisions of
this Section. The Lender and the Borrower may, from time to time, enter into
written amendments, supplements, modifications or waivers for the purpose of
adding, deleting, changing or waiving any provisions to this Agreement or the
Notes. Any such amendment, supplement, modification or waiver shall be in
writing and shall apply to and shall be binding upon the Borrower, the Lender
and all future holders of the Notes. In the case of any waiver, the Borrower
and the Lender shall be restored to their former position and rights hereunder
and under the outstanding Notes, and any Default or Event of Default waived
shall be deemed to be cured and not continuing, but no such waiver shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereon.
Section 8.5 No Waiver; Remedies Cumulative. No failure or
delay on the part of the Lender or any holder of a Note in exercising any
right, power or privilege hereunder or under any other Loan Document and no
course of dealing between any Loan Party and the Lender or the holder of any
Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Loan
Document preclude any other or further exercise thereof of the exercise of any
other right, power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the
34
<PAGE> 39
Lender or the holder of any Note would otherwise have. No notice to or demand
on any Loan Party in any case shall entitle any Loan Party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Lender or the holder of any Note to any other or
further action in any circumstances without notice or demand.
Section 8.6 Governing Law; Submission to Jurisdiction. (a)
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect
to this Agreement or any other Loan Document and any action for enforcement of
any judgment in respect thereof may be brought in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and, by execution and delivery of this Agreement, the Borrower hereby
accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. The Borrower irrevocably consents to the
service of process out of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, the Borrower at its address set forth opposite its signature
below. The Borrower hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Loan Document brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of the Lender or any
holder of a Note to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction,
Section 8.7 Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
35
<PAGE> 40
Section 8.8 Effectiveness. This Agreement shall become
effective on the date on which the Lender and the Borrower shall have each
signed a counterpart hereof and the Borrower shall have delivered the same to
the Lender.
Section 8.9 Headings Descriptive. The headings of the several
Sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision of
this Agreement.
Section 8.10 Marshalling; Recapture. The Lender shall be
under no obligation to marshall any assets in favor of any Loan Party or any
other party or against or in payment of any or all of the Obligations. To the
extent the Lender receives any payment by or on behalf of any Loan Party, which
payment or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to such Loan
Party or its estate, trustee, receiver, custodian or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such payment or repayment, the obligation or part thereof which
has been paid, reduced or satisfied by the amount so repaid shall be reinstated
by the amount so repaid and shall be included within the liabilities of such
Loan Party to the Lender as of the date such initial payment, reduction or
satisfaction occurred.
Section 8.11 Severability. In case any provision in or
obligation under this Agreement or the Notes shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
Section 8.12 Survival. All indemnities set forth herein
including, without limitation, in Sections 2.11, 2.12 and 8.1 shall survive the
execution and delivery of this Agreement and the Note and the making and
repayment of the Loans hereunder.
Section 8.13 Limitation of Liability. No claim may be made by
any Loan Party or any other Person against the Lender or any of its Affiliates,
directors, officers, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any act, omission or event
occurring in connection herewith; and each Loan Party hereby waives, releases
and agrees not
36
<PAGE> 41
to sue upon any claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor.
Section 8.14 Calculations; Computations. The financial
statements to be furnished to the Lender pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved and consistent with GAAP as used in the preparation of the financial
statements referred to in Section 3.1(h).
Section 8.15 Waiver of Trial by Jury. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY
WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
37
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
AMRE, INC.
By: /s/ ROBERT M. SWARTZ
-----------------------------------
Title: Robert M. Swartz, President
Notice Address:
HFS INCORPORATED
By: /s/ JAMES E. SANDER
-----------------------------------
Title: Executive Vice President
Notice Address:
38
<PAGE> 43
EXHIBIT A
FORM OF PROMISSORY NOTE
$4,000,000 Dated: October __, 1995
FOR VALUE RECEIVED, AMRE, INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of HFS INCORPORATED, a
Delaware corporation (the "Lender"), the principal sum of FOUR MILLION DOLLARS
(or such lesser amount as shall equal the aggregate unpaid principal amount of
the Loans made by the Lender to the Borrower under the Credit Agreement (as
defined below)), in lawful money of the United States of America and in
immediately available funds, on the Final Maturity Date and to pay interest on
the unpaid principal amount of such Loan, in like money and funds, for the
period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
The Lender is hereby authorized by the Borrower, prior to any
transfer hereof, to endorse on the schedule attached to this Note (or any
continuation thereof) the amount of each Loan made by the Lender to the
Borrower under the Credit Agreement, the date such Loan is made, and the amount
of each payment of principal or interest of such Loan received by the Lender.
This Note is the Note referred to in the Credit Agreement (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") dated as of October _, 1995, between the Borrower and the Lender,
and evidences Loans made by the Lender thereunder. Capitalized terms used in
this Note have the respective meanings assigned to them in the Credit
Agreement. This Note is entitled to the benefits of the Subsidiary Guaranty
referred to in the Credit Agreement.
Upon the occurrence of an Event of Default, the principal
hereof and accrued interest hereon shall become, or may be declared to be,
forthwith due and payable in the manner, upon the conditions and with the
effect provided in the Credit Agreement.
<PAGE> 44
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK. THE BORROWER HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE.
AMRE, INC.
By
-----------------------------------
Title:
A-2
<PAGE> 45
SCHEDULE TO PROMISSORY NOTE
This Note evidences Loans made by the Lender to the Borrower
under the Credit Agreement referred to above, in the principal amounts set
forth below, which Loans were made on the dates set forth below, subject to the
payment of principal and interest set forth below.
<TABLE>
<CAPTION>
Principal Balance Notation
Date Amount of Principal Interest Out- Made
Made Loan Payment Payment Standing By
- ----------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
- ----------- --------- --------- -------- -------- --------
</TABLE>
A-3
<PAGE> 46
EXHIBIT B
SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY, dated as of October _, 1995 (as the same
may be amended, modified or supplemented from time to time, the "Subsidiary
Guaranty"), made by each of the corporations listed on Annex A attached hereto
(individually, a "Guarantor" and collectively, the "Guarantors"), in favor of
HFS Incorporated (the "Lender") and its successors and assigns under the Credit
Agreement hereinafter referred to (such successors and assigns, together with
the Lender, the "Guaranteed Parties"). All capitalized terms used herein and
defined in the Credit Agreement shall be used herein as so defined. The annexes
hereto are incorporated herein by reference and this Agreement together with
all annexes shall constitute the "Subsidiary Guaranty" referred to in the
Credit Agreement.
W I T N E S S E T H:
WHEREAS, AMRE, Inc., a Delaware corporation (the "Borrower"),
and the Lender have entered into the Credit Agreement, dated as of October __,
1995, providing for the making of Loans as contemplated therein (as used
herein, the term "Credit Agreement" means the Credit Agreement described above
in this paragraph, as the same may be amended, modified, extended, renewed,
restated or supplemented from time to time, and including any agreement
extending the maturity of, or restructuring (including, but not limited to, any
increase in the amount borrowed) all or any portion of the Indebtedness under
such agreement or any successor agreements);
WHEREAS, the Borrower and the Guarantors share an identity of
interests as members of a consolidated group of companies engaged in
substantially similar businesses, the Borrower provides centralized financial,
accounting and management services to each of the Guarantors and the making of
the loans under the Credit Agreement will facilitate expansion of, and enhance
the overall financial strength and stability of the Borrower's corporate group;
and
WHEREAS, it is a condition precedent to the above-described
extensions of credit to the Borrower that the Guarantors shall have executed
and delivered this Agreement; and
<PAGE> 47
WHEREAS, the Guarantors desire to execute and deliver this
Agreement to satisfy the conditions described in the preceding paragraph.
NOW, THEREFORE, in consideration of the premises contained
herein and in order to induce the Lender to make loans under the Credit
Agreement, the Guarantors hereby jointly and severally agree as follows:
SECTION 1. Guaranty. (a) The Guarantors hereby jointly and
severally unconditionally guarantee the punctual payment when due, whether at
stated maturity, by acceleration or otherwise, of (i) all Obligations of the
Borrower and its Subsidiaries now or hereafter existing, whether for principal,
interest (including any interest accruing during a Proceeding (as hereinafter
defined) whether or not the claim for such interest is allowable or discharged
in such Proceeding), fees, expenses or otherwise, and (ii) any and all
reasonable expenses (including counsel fees and expenses) incurred by any
Guaranteed Party in enforcing any rights under this Subsidiary Guaranty (all of
the foregoing, collectively, the "Guaranteed Obligations"). It is the intention
of the parties hereto that in no event shall any Guarantor's obligations under
this Subsidiary Guaranty constitute or result in a violation of any applicable
fraudulent conveyance or similar law of any relevant jurisdiction. Therefore,
in the event that this Subsidiary Guaranty would, but for the preceding
sentence, constitute or result in such violation, then the liability of a
Guarantor under this Subsidiary Guaranty shall be reduced to the maximum amount
permissible under the applicable fraudulent conveyance or similar laws. Any and
all payments by the Guarantors hereunder shall be made free and clear of and
without deduction for any set-off or counterclaim.
(b) Additionally, each Guarantor unconditionally
and irrevocably, jointly and severally, guarantees the payment of any and all
of the Guaranteed Obligations to the Guaranteed Parties whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of any
Proceeding, and unconditionally and irrevocably, jointly and severally,
promises to pay such Guaranteed Obligations to the Guaranteed Parties, or
order, on demand, in lawful money of the United States.
SECTION 2. Guaranty Absolute. Each Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms
of the Credit Agreement and the other Loan Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of any Guaranteed Party with respect thereto.
This is a
2
<PAGE> 48
guaranty of payment and not of collection, and the liability of the Guarantors
under this Subsidiary Guaranty shall be joint, several, absolute and
unconditional, in accordance with its terms and shall remain in full force and
effect without regard to, and shall not be released, suspended, discharged,
terminated or otherwise affected by, any circumstance or occurrence whatsoever,
including, without limitation: (a) any change in the time, place or manner of
payment of, or in any other term of, all or any of the Guaranteed Obligations,
any waiver, indulgence, renewal, extension, amendment or modification of, or
addition, consent or supplement to, or deletion from, or any other action or
inaction under, or in respect of the Credit Agreement, any other Loan Document
or any documents, instruments or agreements relating to the Guaranteed
Obligations or any other instrument or agreement referred to therein or any
assignment or transfer of any thereof; (b) any lack of validity or
enforceability of the Credit Agreement, any other Loan Document or any other
documents, instruments or agreements referred to therein or any assignment or
transfer of any thereof; (c) any furnishing of any additional security to the
Guaranteed Parties or their assignees or any acceptance thereof or any release
of any security by the Guaranteed Parties, or their assignees; (d) any
limitation on any party's liability or obligations under any such instrument or
agreement (other than as set forth in Section I hereof) or any invalidity or
unenforceability, in whole or in part, of any such instrument or agreement, or
any term thereof; (e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
Borrower, or any action taken with respect to this Subsidiary Guaranty by any
trustee or receiver, or by any court, in any such proceeding, whether or not
any Guarantor shall have notice or knowledge of any of the foregoing and each
Guarantor waives any right to the deferral or modification of its obligations
hereunder by reason of any such proceeding; (f) any exchange, release or
nonperfection of any other collateral, or any release, or amendment or waiver
of, or consent to, departure from any guaranty or security, for all or any of
the Guaranteed Obligations; (g) any direction as to application of payment by
the Borrower or by any other party; (h) any dissolution, termination or
increase, decrease or change in personnel by the Borrower; or (i) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, any Guarantor. This Subsidiary Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Guaranteed Obligations is rescinded or must otherwise be returned by
any Guaranteed Party upon the insolvency, bankruptcy or reorganization of the
Borrower or any Guarantor or otherwise, all as though such payment had not been
made.
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<PAGE> 49
SECTION 3. Waiver. To the extent permitted by applicable law,
the Guarantors hereby waive promptness, diligence, notice of acceptance and any
other notice with respect to the Guaranteed Obligations and this Subsidiary
Guaranty and any requirement that any Guaranteed Party protect, secure, perfect
or insure any security interest or lien or any property subject thereto or
exhaust any right or take any action against the Borrower, or any other Person
or any collateral. The Guarantors waive, to the fullest extent permitted by
law, the benefit of any statute of limitations affecting its liability
hereunder or the enforcement thereof. Any payment by the Borrower or other
circumstance which operates to toll any statute of limitations as to the
Borrower shall operate to toll the statute of limitations as to each Guarantor.
SECTION 4. Subordination of Subrogation. Each Guarantor hereby
irrevocably agrees to subordinate any Subrogation Rights (as defined below) to
the rights of any Guaranteed Party to recover from the Borrower all Guaranteed
Obligations. "Subrogation Rights" shall mean any and all rights of subrogation,
reimbursement, exoneration, contribution or indemnification, any right to
participate in any claim or remedy of the Guaranteed Parties or any collateral
which any Guaranteed Party now has or hereafter acquires in connection with the
payment, performance or enforcement of such Guarantor's obligations under this
Subsidiary Guaranty or any Loan Document, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including the
right to take or receive, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security on account of such claim
or other rights. To effectuate such subordination, each Guarantor hereby agrees
that it shall not be entitled to any payment by the Borrower in respect of any
Subrogation Right until all of the Guaranteed Obligations have been
indefeasibly paid in full. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and the Guaranteed Obligations shall not
have been paid in full or any commitment of any Guaranteed Party under the
Credit Agreement shall not have been irrevocably terminated, such amount shall
be deemed to have been paid to such Guarantor for the benefit of, and held in
trust for, the benefit of the Guaranteed Parties, and shall forthwith be paid
to the Guaranteed Parties to be credited and applied to the Guaranteed
Obligations, whether matured or unmatured. Each Guarantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by the Credit Agreement and that the subordination set forth in
this Section is knowingly made in contemplation of such benefits.
4
<PAGE> 50
SECTION 5. Representations and Warranties. Each Guarantor
hereby represents and warrants as follows:
(a) Each representation, warranty and agreement
made by the Borrower in Section 4 of the Credit Agreement is confirmed to be
true and correct.
(b) On the Closing Date, after giving effect to
all the transactions contemplated by the Credit Agreement, including, without
limitation, the execution and delivery of the Credit Agreement, and the
incurrence by such Guarantor of liabilities under this Subsidiary Guaranty, (i)
the assets of such Guarantor, at a fair valuation, will exceed its liabilities,
including contingent liabilities (but excluding any intercompany liabilities,
including contingent intercompany liabilities), (ii) the remaining capital of
such Guarantor will not be unreasonably small to conduct its business and (iii)
such Guarantor has not incurred debts, and does not intend to incur debts,
beyond its ability to pay such debts as they mature. For purposes of this
Section 5(b), "debt" means any liability on a claim, and "claim" means (x)
right to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, or (y) right to an equitable remedy
for breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.
SECTION 6. Additional Guarantors. In accordance with the
provisions of Section 5.10 of the Credit Agreement, any Person that becomes a
Subsidiary of the Borrower after the Closing Date (an "Additional Guarantor")
shall, upon the request of the Lender, execute and deliver to the Lender a
counterpart (substantially in the form of Annex B hereto) of this Subsidiary
Guaranty. Upon such execution, such Additional Guarantor shall be liable to the
Guaranteed Parties pursuant to Section 1 hereof and Annex A hereto shall be
deemed to be amended to include such Additional Guarantor.
SECTION 7. Notices. All notices and other communications
provided for hereunder shall be given to the Borrower (on behalf of any
relevant Guarantor) and the Lender at the addresses and in the manner specified
in the Credit Agreement.
5
<PAGE> 51
SECTION 8. No Waiver; Remedies, Enforcement. No failure on the
part of any Guaranteed Party to exercise, and no delay in exercising, 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 remedies provided by law.
SECTION 9. Right of Set-Off. In addition to, and not in
limitation of, all rights of set-off that any Guaranteed Party may have under
applicable law, each Guaranteed Party shall, upon the occurrence of any Event
of Default and whether or not such Guaranteed Party has made any demand or any
Guarantor's obligations hereunder have matured, have the right to appropriate
and apply to the payment of the Guaranteed Obligations, all deposits (general
or special, time or demand, provisional or final) then or thereafter held by,
and other indebtedness or property then or thereafter owing by, such Guaranteed
Party, whether or not related to this Subsidiary Guaranty or any transaction
hereunder.
SECTION 10. Continuing Guaranty; Transfer of Obligations. This
Subsidiary Guaranty is a continuing guaranty and shall (i) remain in full force
and effect until indefeasible payment in full of the Guaranteed Obligations and
all other amounts payable under this Subsidiary Guaranty, (ii) be binding upon
each Guarantor, its successors and assigns, and (iii) inure to the benefit of
and be enforceable by each Guaranteed Party and its permitted successors,
transferees and assigns; provided that each Guarantor may not assign or
transfer any of its interests or obligations hereunder without the prior
written consent of the Lender. Without limiting the generality of the foregoing
clause (iii), the Lender and any other Guaranteed Party may, in accordance with
the terms and provisions of the Credit Agreement, assign to one or more banks
or other entities all or any part of, or may grant participations to one or
more banks or other entities in or to all or any part of, any of the Guaranteed
Obligations, whereupon each such bank or entity shall become vested with all
the rights in respect of all or such portion thereof granted to the Lender or
such Guaranteed Party herein or otherwise in respect hereof.
SECTION 11. Governing Law, Submission to Jurisdiction. (a)
THIS SUBSIDIARY GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
6
<PAGE> 52
PRINCIPLES THEREOF). Any legal action or proceeding with respect to this
Subsidiary Guaranty or any other Loan Document may be brought in the courts of
the State of New York or of the United States for the Southern District of New
York, and, by execution and delivery of this Subsidiary Guaranty, each
Guarantor hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each
Guarantor irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to the Borrower (on
behalf of the Guarantors) at its address set forth in the Credit Agreement.
Nothing herein shall affect the right of the Lender or any other Guaranteed
Party to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Guarantors in any other
jurisdiction.
(b) Each Guarantor hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Subsidiary Guaranty or any other Loan Document brought in the courts referred
to in clause (a) above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
SECTION 12. Subordination of Borrower's Obligations To
Guarantors. As an independent covenant, each Guarantor hereby expressly
covenants and agrees for the benefit of each Guaranteed Party that all
obligations and liabilities of the Borrower to such Guarantor of whatsoever
description including, without limitation, all intercompany receivables of such
Guarantor from the Borrower ("Junior Claims") shall be subordinate and junior
in right of payment to all obligations of the Borrower to the Guaranteed
Parties, including, without limitation, interest accrued during any Proceeding
(as hereinafter defined) on the Guaranteed Obligations whether or not the claim
for such interest is allowable or discharged in such Proceeding) ("Senior
Claims").
If an Event of Default shall occur and the Lender so requests,
then no direct or indirect payment (in cash, property, securities by setoff or
otherwise) shall be made by the Borrower to any Guarantor on account of, or in
any manner in respect of, any Junior Claim except such payments and
distributions the proceeds of which shall be applied to the Senior Claims.
7
<PAGE> 53
Notwithstanding anything to the contrary, set forth in the
immediately preceding paragraph of this Section 12, in the event of a
Proceeding, all Senior Claims shall first be paid in full before any direct or
indirect payment or distribution (in cash, property, or securities, by setoff
or otherwise) shall be made to any Guarantor on account of or in any manner in
respect of any Junior Claim except such payments and distributions the proceeds
of which shall be applied to the Senior Claims. "Proceeding" means the
occurrence of any of the following: the Borrower shall commence a voluntary
case concerning itself under Title II of the United States Code entitled
"Bankruptcy" as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or any involuntary case is commenced against the Borrower;
or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes
charge of, all or any substantial part of the property of the Borrower, or the
Borrower commences any other proceedings under any reorganization arrangement,
adjustment of debt, relief of debtor, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect relating to
the Borrower, or the Borrower is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is
entered; or the Borrower suffers any appointment of any custodian or the like
for it or any substantial part of its property; or the Borrower makes a general
assignment for the benefit of creditors; or the Borrower shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Borrower shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts; or
the Borrower shall by any act or failure to act indicate its consent to,
approval of, or acquiescence in, any of the foregoing; or any corporate action
shall be taken by the Borrower for the purpose of effecting any of the
foregoing.
In the event any direct or indirect payment or distribution is
made to a Guarantor in contravention of this Section 12, such payment or
distribution shall be deemed received in trust for the benefit of the
Guaranteed Parties and shall be immediately paid over to the Lender for
application in accordance with the terms of the Credit Agreement.
Prior to the transfer by any Guarantor of any note or
negotiable instrument evidencing any indebtedness of the Borrower to such
Guarantor, such Guarantor shall mark such note or negotiable instrument with a
legend that the same is subject to this subordination.
Each Guarantor agrees to execute such additional documents as
the Lender may request to evidence the subordination provided for in this
Section 12.
8
<PAGE> 54
By its execution and delivery of this Subsidiary Guaranty, the
Lender hereby acknowledges and agrees to the subordination provided for in this
Section 12.
SECTION 13. Severability. To the extent permitted by
applicable law, any provision of this Subsidiary Guaranty which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 14. Amendments. Etc. No amendment or waiver of any
provision of this Subsidiary Guaranty nor consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
executed in accordance with the terms of the Credit Agreement.
SECTION 15. Waiver of Trial by Jury. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY WAIVE ALL
RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF, OR IN CONNECTION WITH, THIS SUBSIDIARY GUARANTY OR ANY OTHER LOAN DOCUMENT
OR ANY MATTER ARISING IN CONNECTION HEREUNDER OR THEREUNDER.
9
<PAGE> 55
IN WITNESS WHEREOF, each of the Guarantors and the Borrower
has caused this Subsidiary Guaranty to be duly executed and delivered by its
officer thereunto duly authorized as of the date first above written.
GUARANTORS:
By
-----------------------------------
______________, in his/her capacity
as ___________ for the corporations
listed on Annex A hereto.
ACKNOWLEDGED AND AGREED TO
AS APPLICABLE TO THE BORROWER:
AMRE, INC.
By
-----------------------------------
Name:
Title:
10
<PAGE> 56
ANNEX A
SUBSIDIARY GUARANTY
11
<PAGE> 57
ANNEX B
ADDITIONAL GUARANTOR
The undersigned hereby acknowledges that it has read this
Subsidiary Guaranty and agrees to be liable to the Guaranteed Parties pursuant
to Subsidiary Guaranty and to be bound by the terms and provisions thereof.
IN WITNESS WHEREOF, the undersigned has caused this Subsidiary
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the ____ day of_____________, 19__.
Notice Address: [Name of Guarantor], a
[State of Incorporation]
Corporation
By
-----------------------------------
Title:
12
<PAGE> 1
EXHIBIT 7.4
DAVID MOORE
1050 PARK AVENUE
NEW YORK, NEW YORK 10128
October 17, 1995
AMRE, Inc.
8585 North Stemmons Freeway
South Tower, Suite 102
Dallas, Texas 75247
Attention: Robert Swartz, President
Gentlemen:
1. Reference is made to the letter agreement between AMRE, Inc. ("AMRE")
and David Moore ("MOORE"), dated June 17, 1994 (the "LETTER AGREEMENT"), the
Plan of Compensation and Indemnification Agreement entered into by such parties
as of August 1, 1994 (the "COMPENSATION PLAN"), the reinstatement letter
between the parties dated September 12, 1995 (the "REINSTATEMENT LETTER") and
all amendments thereto.
2. Pursuant to paragraph 6 of the Letter Agreement, AMRE's right to
consummate the Strategy (as defined in the Letter Agreement) expired on June
17, 1995. Such right was reinstated pursuant to the Reinstatement Letter
through October 15, 1995, which was terminated due to a failure of condition on
or about September 27, 1995. At AMRE's request, Moore hereby again reinstates
AMRE's right to consummate the Strategy as of the date hereof through November
15, 1995 (the "REINSTATEMENT PERIOD"); on condition and in consideration of the
following actions and undertakings by AMRE as set forth herein:
3. The Board of Directors of AMRE shall or shall cause AMRE to: (a) on
or before November 15, 1995 increase the size of the AMRE Board of Directors by
one seat and shall appoint Moore to fill such new director's seat for an
interim term commencing on the earlier of (i) November 15, 1995 and (ii)
immediately prior to the next AMRE Board of Directors meeting, and running
until the general election of directors at the next meeting held for the
purpose of such election; (b) prior to the next such meeting, the AMRE Board of
Directors shall nominate Moore as a member of the directors' slate for a
subsequent one year term as director and the AMRE Board of Directors will vote
all shares of Common Stock which they have the right to so vote as a body (if
any) at such meeting in favor of Moore's election to such one year term; (c)
during his term as a director of AMRE, AMRE shall pay to Moore the same
compensation and benefits, including without limitation director and officer
insurance, available to other AMRE outside directors; (d) promptly upon notice
from Moore of the identity of the parties thereof, execute and deliver a Stock
Purchase Agreement in the form annexed hereto as Exhibit A; (e) on or before
November 15, 1995 deliver to Moore 200,000 shares of AMRE common stock (the
"MOORE SHARES"); (f) simultaneously with the execution hereof execute and
<PAGE> 2
AMRE, Inc.
October 17, 1995
Page 2
deliver the Stock Option Agreement in the form annexed hereto as Exhibit B; (g)
simultaneously with the execution hereof execute and deliver the Stock Option
Agreement in the form annexed hereto as Exhibit C; and (h) promptly pay to
Moore $900,000 in cash if Moore does not receive such cash payment from HFS
Incorporated on or before November 15, 1995; and (i) on or before November 15,
1995 AMRE shall execute and deliver a sub-license agreement between AMRE and
Garden State Exterior Remodeling, Inc., reasonably satisfactory to the parties
and containing the material terms set forth in the term sheet annexed hereto as
Exhibit D. The Moore Shares shall have registration rights as a separate block
of registerable securities, not contingent on any conversion of the HFS Senior
Convertible Preferred Stock, identical to the registration rights set forth in
paragraph 10 of that certain Stock Purchase Agreement, dated as of the date
hereof, between AMRE and HFS Incorporated, except that the demand and
incidental registration rights shall be exercisable for five years from the
date hereof. Notwithstanding anything to the contrary herein, all payments and
other obligations in favor of Moore set forth in (a) - (i) above shall be
deemed to have been earned and Moore's rights thereto established irrevocably
as of the execution of the License Agreement between AMRE and an affiliate of
HFS Incorporated and shall be payable as described above.
4. If AMRE does not consummate the Strategy, execute and deliver the
aforementioned documents and perform the foregoing actions, and if Moore does
not receive such $900,000 in accordance with and within the time frames set
forth in the foregoing paragraph during the Reinstatement Period, AMRE shall
immediately return to Moore all information furnished to AMRE with respect to
the Strategy and shall not implement and/or use any part of the Strategy until
June 17, 1999.
5. By granting this reinstatement, Moore is in no way agreeing,
representing or implying that he will grant any further reinstatement or
extension in the future. The decision to grant or withhold any such future
reinstatements or extensions shall be within Moore's absolute discretion.
6. Each of paragraph 3 of the Letter Agreement and paragraphs 1, 2, 3, 4,
5 and 6 of the Compensation Plan is hereby terminated in its entirety and shall
be of no further force or effect. Moore hereby irrevocably releases and
forever discharges AMRE, its officers, directors, agents, representatives and
affiliates of and from any and all claims, actions, demands, lawsuits, causes
of action, losses, costs or liability of whatever kind or nature, now existing
or which may hereafter accrue, whether known or unknown, that have been or
might be asserted, whether or not heretofore asserted, arising from paragraph 3
of the Letter Agreement and paragraphs 1, 2, 3, 4, 5, and 6 of the Compensation
Plan.
7. Other than as expressly provided herein, this Agreement does not
supersede the Letter Agreement, the Compensation Plan, the Reinstatement
Letter, the Agreement of Consent, Waiver and Release, dated December 5, 1994
between David Moore and AMRE, or the Second Agreement of Consent, Waiver and
Release dated December 28, 1994, between David Moore
<PAGE> 3
AMRE, Inc.
October 17, 1995
Page 3
and AMRE, or any amendments thereto all of which, except as specifically
modified hereby, remain in full force and effect as described therein.
8. AMRE has all requisite corporate power and authority to enter into
this Agreement and the Agreements annexed hereto and the actions contemplated
thereby. This Agreement and the Exhibits annexed hereto and the actions
contemplated thereby have been duly and validly authorized by all necessary
corporate action on the part of AMRE, and with respect to the documents being
executed and delivered simultaneously herewith, such documents have been duly
executed and delivered by AMRE and constitute legal, valid and binding
agreements of AMRE, enforceable in accordance with their respective terms and,
with respect to the documents to be executed hereafter, such documents shall,
upon execution and delivery by a duly authorized officer of AMRE, constitute
legal, valid and binding agreements of AMRE, enforceable in accordance with
their respective terms.
Sincerely,
/s/ DAVID MOORE
-----------------------------------
DAVID MOORE
<PAGE> 4
AMRE, Inc.
October 17, 1995
Page 4
ACCEPTED AND AGREED:
AMRE, INC.
By: /s/ ROBERT M. SWARTZ
-------------------------------
THE FOLLOWING INDIVIDUALS ARE SIGNATORIES TO THIS LETTER AGREEMENT FOR PURPOSES
OF THE FOLLOWING PARAGRAPH ONLY:
EACH OF THE UNDERSIGNED HEREBY AGREES TO VOTE ANY AND ALL SHARES OF COMMON
STOCK OF AMRE OVER WHICH THEY HAVE VOTING POWER IN FAVOR OF DAVID MOORE AT
AMRE'S NEXT ANNUAL MEETING OF STOCKHOLDERS.
/s/ RONALD WAGNER
- -----------------------------------
Ronald Wagner
/s/ ROBERT SWARTZ
- -----------------------------------
Robert Swartz
<PAGE> 5
EXHIBIT A
TO LETTER
AGREEMENT
FORM OF
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
________________ __, 1995, by and among AMRE, Inc., a Delaware corporation (the
"CORPORATION") and [INSERT NAME(S) OF INDIVIDUAL PURCHASERS], an individual
residing in [INSERT PLACE OF RESIDENCE] (the "INVESTOR").
RECITALS:
A. The Corporation desires to raise money by the sale of shares
of the Corporation's Common Stock, $0.01 par value per share ("COMMON STOCK")
to the Investor and to satisfy its obligations under that certain Plan of
Compensation and Indemnification Agreement between the Corporation and David
Moore. The closing of the transactions contemplated hereby shall be
simultaneous with, and subject to, the closing of the sale of shares of Common
Stock to HFS Incorporated ("the "HFS CLOSING")
B. The Investor desires to purchase shares of Common Stock on the
terms and subject to the conditions hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained in this Agreement, the parties hereto
hereby agree as follows:
1. SALE OF COMMON STOCK. Subject to the terms and conditions
hereof, the Corporation will issue and sell to the Investor, and the Investor
will purchase from the Corporation an aggregate of 200,000 shares of Common
Stock (the "SHARES") at $5.00 per share, for an aggregate purchase price of
$1,000,000.
2. ISSUANCE AND PAYMENT.
a. CLOSING. Subject to the terms and conditions hereof,
the closing of the purchase and sale of the Shares (the "CLOSING") shall be
held at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue,
New York, New York on, or about January 2, 1996, or at such other time and
place upon which the Corporation and the Investor shall agree (the "CLOSING
DATE").
b. DELIVERY. At the Closing, the Corporation will
deliver to the Investor certificates, registered in the name of the Investor,
representing the Shares, against payment of
<PAGE> 6
the purchase price therefor, by certified bank check payable to the
Corporation, or by wire transfer per the Corporation's instruction.
3. CORPORATION'S REPRESENTATIONS AND WARRANTIES. Except as set
forth in the disclosure schedule attached hereto as Exhibit A (the "DISCLOSURE
SCHEDULE"), the Corporation hereby represents and warrants to the Investor as
follows:
a. CORPORATE ORGANIZATION AND STANDING. The Corporation
is a corporation duly formed, validly existing and in good standing under the
laws of the State of Delaware and has the power and authority as a corporation
to own, operate or lease the properties and assets now owned, operated or
leased by the Corporation and to carry on its business in all material respects
as currently conducted; and is duly qualified as a foreign corporation to do
business in each jurisdiction where the failure to be so qualified would
materially and adversely affect the business and operations of the Corporation
and its Subsidiaries taken as a whole.
b. SUBSIDIARIES. The Corporation owns or controls the
subsidiaries or affiliated companies listed on Exhibit B hereto and does not
otherwise own or control, directly or indirectly, any equity interest in any
corporation, association or business entity (collectively, the "SUBSIDIARIES").
Each Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of each Subsidiary's jurisdiction of incorporation.
c. AUTHORITY RELATIVE TO THIS AGREEMENT. The
Corporation has the necessary power and authority to execute and deliver this
Agreement and to perform its obligations and to consummate the transactions
contemplated hereunder. The execution, delivery and performance of this
Agreement by the Corporation has been duly and validly authorized by all
necessary action of the Corporation and no other proceedings on the part of the
Corporation are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement. This Agreement has been duly and
validly executed and delivered by the Corporation and, assuming the due
authorization, execution and delivery hereof by the Investor and payment for
the Shares as contemplated by this Agreement, constitutes the legal, valid and
binding obligation of the Corporation enforceable against the Corporation in
accordance with its terms, except as may be limited by principles of public
policy, and subject to the effect of any applicable bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity). The Shares, when issued in compliance with
the provisions of this Agreement, will be validly issued, fully paid and
nonassessable (except as provided herein), free of pre-emptive rights and will
be free of any liens or encumbrances.
d. MATERIAL AGREEMENTS; NO CONFLICT; REQUIRED FILINGS
AND CONSENTS.
(1) The execution and delivery of this Agreement
by the Corporation does not, and the performance of this Agreement by
the Corporation shall not, (i) conflict with or violate any provisions
of the Certificate of Incorporation or the Bylaws of the Corporation,
(ii) conflict with or violate any provision of any law, rule,
regulation, order, judgment or decree applicable to the Corporation or
(iii) result in any breach of
2
<PAGE> 7
or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or
result in the creation of any lien on any of the properties or assets
of the Corporation pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license (including, but not limited to,
the License Agreement between the Corporation and an affiliate of HFS
Incorporated (the "LICENSE AGREEMENT")), permit, insurance policy or
other instrument or obligation to which the Corporation is a party, or
by which the Corporation is bound or affected, except, in the case of
clauses (ii) and (iii) above, for such conflicts which would not,
individually or in the aggregate, have a material adverse effect on
the business and operations of the Corporation and its Subsidiaries
taken as a whole. The Corporation is not in material breach of the
License Agreement.
(2) The execution and delivery of this Agreement
by the Corporation does not, and the performance of this Agreement by
the Corporation shall not, require any consent, approval,
authorization or permit of, filing with or notification to, any
governmental or regulatory authority, domestic or foreign, on the part
of the Corporation where the failure to do so which has not been
obtained or would not have a material adverse effect on the business
or operations of the Corporation and its Subsidiaries taken as a
whole.
e. COMPLIANCE WITH LAWS. Neither the Corporation nor
its Subsidiaries are in conflict with, or in material violation of, any law,
rule, regulation, order, judgment or decree applicable to the Corporation or
its Subsidiaries or by which the Corporation or its Subsidiaries are bound or
affected, except for any such conflicts or violations which would not,
individually or in the aggregate, have a material adverse effect on the
business or operations Corporation and its Subsidiaries taken as a whole.
f. FINANCIAL STATEMENTS; OTHER FINANCIAL MATTERS. (1)
The Corporation has made available to the Investor complete, true and correct
copies of the audited consolidated financial statements of the Corporation for
the fiscal year ended December 31, 1994 and the unaudited consolidated
financial statements of the Corporation for the period ending on June 30, 1995
(collectively the "FINANCIAL STATEMENTS"). The Financial Statements, including
the related notes thereto, (i) present fairly the financial condition and
results of operations for the Corporation as of the dates thereof and for the
periods indicated therein and (ii) except as disclosed in the related notes
thereto, have been prepared in accordance with generally accepted accounting
principles.
g. NO UNDISCLOSED LIABILITIES. Neither the Corporation
nor its Subsidiaries have any material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except (i) the liabilities and
obligations set forth in the Financial Statements, and (ii) liabilities and
obligations which have been incurred subsequent to June 30, 1995, in the
ordinary course of business which have not been, individually or in the
aggregate, materially adverse to the Corporation and its Subsidiaries taken as
a whole.
h. TITLE TO PROPERTY. Except as would not, in the
aggregate, have a material adverse effect on the Corporation or its
Subsidiaries taken as a whole, the Corporation has valid
3
<PAGE> 8
fee interests in all of its real property and insurable title thereto, and such
real property is owned by the Corporation free and clear of all liens other
than (i) liens for current taxes not yet due and payable or being contested in
good faith by appropriate proceedings and (ii) imperfections of title,
easements, pledges, charges and encumbrances which do not materially interfere
with the Corporation's ability to use the real property.
i. LITIGATION. There is no pending or, to the knowledge
of the Corporation, threatened litigation, arbitration or governmental
investigation or legal, administrative or regulatory proceeding against the
Corporation or to which any of its properties is or would be subject that (a)
if adversely determined, would have a material adverse effect on the business
or operation of the Corporation or the Subsidiaries taken as a whole or (b)
relates to this Agreement.
j. TAX MATTERS. (1) All tax returns required to be
filed by the Corporation and its Subsidiaries have been or shall be timely
filed and all taxes for which the Corporation and its Subsidiaries may be held
liable have been or shall be paid or accrued within the prescribed period or
any extension thereof, except for taxes which are being contested in good
faith.
(2) Except as would not have a material adverse
effect on the Corporation or the Subsidiaries taken as a whole, there
are no tax liens upon any property of the Corporation except for liens
for current taxes not yet due and payable. All material employee
payroll taxes required to be withheld by the Corporation have been
withheld by the Corporation.
k. NO OUTSTANDING SECURITIES. There are no outstanding
options, warrants, calls, rights or commitments or any other agreements of any
character for the purchase or acquisition from the Corporation of any shares of
its capital stock, nor does the Corporation have any obligation to repurchase
any outstanding capital stock of the Corporation.
l. BOOKS AND RECORDS. The minute books, Bylaws, stock
ledgers and books of account of the Corporation have been made available to the
Investor and are accurate in all material respects and reflect all material
matters and transactions which should currently be reflected therein.
m. INSURANCE. The Corporation and its Subsidiaries
maintain insurance in such amounts and against such risks as maintained by
companies of similar size and in businesses similar to that of the Corporation.
n. DISCLOSURE. No representation or warranty by the
Corporation in this Agreement or the Disclosure Schedule or in any written
statement or certificate furnished or to be furnished to the Investor pursuant
hereto contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading in any material respect.
4
<PAGE> 9
4. INVESTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
a. ACQUISITION FOR OWN ACCOUNT. The Investor represents
and warrants to the Corporation that the Investor is acquiring the Shares for
investment for its own account, and not with a view to, or resale in connection
with, any public distribution thereof.
b. DISCLOSURE. No representation or warranty by the
Investor in this Agreement or in any written statement or certificate furnished
or to be furnished to the Corporation pursuant hereto contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading in any material
respect.
c. RESTRICTION ON ACQUISITION OF SHARES. During the
period five years from the date hereof, neither Investor nor any of its
Affiliates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended) shall directly or indirectly, as part of a Group (as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) or
otherwise, without the prior written consent of the Corporation, acquire or
make any proposal to acquire more than 20% of the outstanding shares of Common
Stock of the Corporation.
5. COVENANTS PENDING CLOSING. From the date of this Agreement
until the Closing Date (or later as specified below), the parties hereto hereby
covenant as hereinafter set forth:
a. Except as previously disclosed to Purchaser, the
Corporation will conduct its business and operations according to its ordinary
and usual course of business. Without limiting the generality of the
foregoing, and, except as otherwise expressly provided in this Agreement, prior
to the Closing Date, without the prior written consent of the Investor, the
Corporation will not:
(i) declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of the Common Stock, or redeem or
otherwise acquire any shares of the Common Stock;
(ii) (a) increase in any manner the compensation of
any of its directors, officers or other employees, except such
increases as are granted (1) in the ordinary course of business in
accordance with its customary practices (which shall include normal
periodic performance review and related compensation and benefit
increases but not any general across-the-board increases) or (2) by
the Corporation's Compensation Committee and approved by a
representative of the Investor or (b) increase the rate or terms of
any bonus, insurance, pension or other employee benefit plan, payment
or arrangement made to, for or with any such directors, officers or
key employees except increases occurring in the ordinary course of
business in accordance with its customary practices (which shall
include normal periodic performance reviews and related compensation
and benefit increases) and except pursuant to any Corporation plans;
or
(iii) enter into any agreement, commitment or
transaction (including without limitation any borrowing, capital
expenditure or capital financing) material to the business, operations
or financial condition of the Corporation, except agreements,
5
<PAGE> 10
commitments or transactions in the ordinary course of business or as
contemplated hereby.
b. The Corporation will (i) give the Investor and its
authorized representatives reasonable access to all books, records, plants,
offices, warehouses and other facilities and properties of the Corporation and
its Subsidiaries, (ii) permit the Investor to make such inspections thereof
during normal business hours as the Investor may reasonably request and (iii)
cause its officers to furnish the Investor with such financial and operating
data and other information with respect to the business and properties of the
Corporation and its Subsidiaries as the Investor may from time to time
reasonably request; provided, however, that any such investigation shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the business of the Corporation.
c. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Shares pursuant to this
Agreement. From time to time after the date hereof, without further
consideration, the Corporation will execute and deliver such documents to the
Investor as the Investor may reasonably request in order more effectively to
vest in the Investor good title to the Shares.
d. The Investor and the Corporation will make or cause
to be made all filings and submissions as may be required under applicable laws
and regulations, if any, for the consummation of the transactions contemplated
by this Agreement. The Investor and the Corporation will coordinate and
cooperate with one another in exchanging such information and reasonable
assistance as another may request in connection with all of the foregoing.
6. CONDITIONS TO INVESTOR'S OBLIGATIONS. The obligation of the
Investor to purchase the Shares pursuant to this Agreement is subject to the
satisfaction at or prior to the Closing Date of the following conditions, any
or all of which may be waived by the Investor:
a. The representations and warranties of the Corporation
contained in Section 3 hereof shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date;
b. The Corporation shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date;
c. The Investor shall have received duly executed
certificates representing the Shares and duly registered in the name of the
Investor or its designated agent on the Closing Date;
d. The Investor shall have received certificates dated
the Closing Date signed on behalf of the Corporation by its duly authorized
officer or duly authorized officers to the effect that all of the conditions to
the Closing set forth in Sections 6(a) and 6(b) have been satisfied;
6
<PAGE> 11
e. The Investor shall have received opinions, dated the
Closing Date, from Akin, Gump, Strauss, Hauer & Feld, L.L.P., the Corporation's
counsel, reasonably acceptable to Investor;
f. There shall be no action or proceeding commenced or,
to the knowledge of the parties, threatened before any legal or administrative
tribunal or by any administrative organization, and no judgment, order or
injunction shall have been rendered by any such tribunal or organization for
the purpose of restraining or prohibiting the transactions contemplated in this
Agreement or otherwise adversely affecting Investor's ownership of the Shares;
and
g. The conditions precedent to the HFS Closing shall
have been fulfilled and such closing shall take place simultaneously with the
Closing.
7. CONDITIONS TO THE CORPORATION'S OBLIGATIONS. The obligations
of the Corporation to issue and sell the Shares pursuant to this Agreement are
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions, any or all of which may be waived by the Corporation:
a. The representations and warranties of the Investor
contained in Section 4 hereof shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date;
b. The Investor shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by the Investor at or prior to the Closing
Date; and
c. The Corporation shall have received certificates
dated the Closing Date signed on behalf of the Investor by a duly authorized
officer or duly authorized officers to the effect that all the conditions to
Closing set forth in Sections 7a and 7b have been satisfied.
8. INVESTOR REGISTRATION RIGHTS. The Investor shall have
registration rights with respect to the Shares, as a separate block of
registerable securities not contingent on the conversion of the HFS Senior
Convertible Preferred Stock, identical to the registration rights described in
Section 10 of that certain Stock Purchase Agreement, dated the date hereof,
between the Company and HFS Incorporated, except that the demand and incidental
registration rights shall be exercisable for five years from the date hereof.
9. TERMINATION.
a. TERMINATION. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time (i) by mutual
agreement of the Investor and the Corporation or (ii) prior to the Closing, by
either the Corporation or the Investor if the Closing shall not have occurred
by January 15, 1996; provided, however, that a party who has violated or
breached this Agreement may not terminate this Agreement if such violation or
breach is continuing and such party is not using its best efforts to diligently
cure such breach. Notwithstanding the foregoing, in the event that the
Corporation and HFS Incorporated shall have agreed to extend the termination
provision of Section 11 of the HFS Stock Purchase
7
<PAGE> 12
Agreement, then the date set forth in (ii) above shall be deemed extended by a
like period of time.
b. EFFECT OF TERMINATION. In the event of termination
of this Agreement pursuant to clause a. above, written notice thereof shall
forthwith be given by the party electing to terminate to the other party and
the transactions contemplated by this Agreement shall be terminated and
abandoned, without further action by or on the part of either the Investor or
the Corporation. Termination of this Agreement pursuant to this Section shall
not in any way limit or restrict the rights and remedies of any party hereto
against any other party hereto who has violated or breached any representation,
warranty, agreement or other provision of this Agreement prior to the
termination hereof. The representatives and warranties of the Corporation and
the Investor shall survive the Closing.
10. MISCELLANEOUS.
a. REFORMATION AND SEVERABILITY. If any provision of
this Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof:
(1) in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as
a part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable; and
(2) the legality, validity and enforceability of
the remaining provisions hereof shall not in any way be
affected or impaired thereby.
b. NOTICES. Any notice, payment, report or other
communication required or permitted to be given by one party to any other party
by this Agreement shall be in writing and either (i) served personally on the
other party or parties or (ii) sent by overnight courier, express, registered
or certified first class mail, postage prepaid, addressed as follows:
(a) If to the Corporation, at
AMRE, Inc.
8585 North Stemmons Freeway
South Tower, Suite 102
Dallas, Texas 75247
Attention: President
Telephone: (214) 658-6300
Fax: (214) 658-6101
8
<PAGE> 13
(b) If to the Investor(s), at
-------------------------------
-------------------------------
-------------------------------
Telephone:
Fax:
or to such other address as shall have theretofore been furnished to the other
party by like notice. Such notice shall be deemed received on the date on
which personally delivered, or three (3) business days after the same shall
have been deposited in the United States mail.
c. HEADINGS. The headings of sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
d. WAIVER. The failure of any party to insist, in any
one or more instances, upon performance of any of the terms, covenants or
conditions of this Agreement shall not be construed as a waiver or a
relinquishment of any right or claim granted or arising hereunder or of the
future performance of any such term, covenant, or condition, and such failure
shall in no way affect the validity of this Agreement or the rights and
obligations of the parties hereto.
e. GOVERNING LAW. THIS AGREEMENT INCLUDING, BUT NOT
LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF, SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS RULES OR CHOICE OF LAWS RULES
THEREOF.
f. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all of which together shall constitute one and the same instrument
notwithstanding that all parties are not signatories to each counterpart.
g. ASSIGNABILITY AND BINDING EFFECT. This Agreement may
not be assigned by the Investor without the prior written consent of the
Corporation. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
h. AMENDMENTS. This Agreement may not be amended,
supplemented or modified except by an agreement in writing signed by all of the
parties hereto.
i. EXPENSES. Except as otherwise provided in this
Agreement, each party hereto shall pay its own expenses, including, without
limitation, fees and disbursements of legal counsel, financial advisors and
accountants incurred in connection with this Agreement.
j. CONSTRUCTION OF AGREEMENT; MODIFICATIONS. This
Agreement and any schedules and exhibits attached hereto and the other
documents delivered pursuant hereto
9
<PAGE> 14
represent the final agreement of the parties and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the parties.
Furthermore, this Agreement supersedes all prior written agreements and
understandings, if any.
k. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE CORPORATION AND THE INVESTOR HEREBY IRREVOCABLY
WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING
HEREUNDER.
l. PUBLICITY. No public release, announcement or other
form of publicity concerning the transactions contemplated hereby shall be
issued by either party without the prior consent of the other party, except to
the extent that such release or announcement is required by law or the rules or
regulations of the Securities and Exchange Commission or any securities
exchange.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMRE, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
[INVESTOR]
[OTHER INVESTORS, IF ANY]
10
<PAGE> 15
EXHIBIT A
j. Corporate Capitalization:
There are no outstanding options, warrants, calls, rights or commitments, or
any other agreements of any character for the purchase or acquisition from the
Corporation of any shares of its capital stock, nor does the Corporation have
any obligation to repurchase any outstanding capital stock of the Corporation,
except as follows:
1. There are outstanding options under the Corporation's stock
option plan to purchase an aggregate of 819,881 shares of
common stock of the Corporation at exercise prices ranging
from $3.00 to $8.50 per share.
2. There are outstanding options to purchase an aggregate of
1,342,500 shares of common stock of the Corporation which were
granted outside of the Corporation's stock option plan. These
options are held by directors (two of whom are also officers),
a former director, a former employee and the widow of a former
director, and are exercisable at prices ranging from $3.50 to
$7.875 per share.
3. Options to purchase an aggregate of 400,000 shares of common
stock of the Corporation may be granted to David Moore in
connection with transactions being entered into concurrently
with this agreement. These options will be at prices ranging
from $5.00 to $5.50 per share.
11
<PAGE> 16
EXHIBIT B
The subsidiaries of the Corporation, all of which are wholly-owned, are as
follows:
American Remodeling, Inc., a Texas corporation
CANRE Remodeling, Corp., incorporated under the Canadian Business
Corporations Act
12
<PAGE> 17
EXHIBIT B
TO LETTER
AGREEMENT
FORM OF AMRE, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made as of the 17th day of October,
1995, between AMRE, Inc., a Delaware corporation (the "COMPANY"), and David
Moore, an individual resident of New York, New York (the "OPTIONEE").
The Company wishes to grant to the Optionee an option to purchase
shares of common stock of the Company pursuant to the Plan of Compensation and
Indemnification Agreement dated as of August 1, 1994 (as amended to date),
between the Company and the Optionee, and the Optionee wishes to accept the
Option (as defined below). Therefore, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I. GRANT AND EXERCISE OF OPTION
1.1 GRANT OF OPTION. The Company grants to the Optionee an option
(the "OPTION") to purchase an aggregate of 200,000 shares of Common Stock,
$0.01 par value, of the Company (the "SHARES"), at a price of $5.50 per share
(the "EXERCISE PRICE"), subject to the terms and conditions hereinafter set
forth. The Option is a non-qualified option and is not intended to constitute
an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. The Option shall be irrevocable.
1.2 VESTING OF OPTION. All or any part of the Shares may be
purchased at any time or times during the term of the Option.
1.3 TERM OF OPTION. The term of the Option is five years from
the date hereof.
1.4 EXERCISE OF OPTION. The Option may be exercised by giving
written notice to the Company, addressed to its corporate headquarters,
attention of the Secretary, specifying the number of Shares to be purchased,
accompanied by payment in full of the Exercise Price, either in cash or by
check, bank draft or money order; provided, however, that in lieu of cash the
Optionee may exercise the Option by instructing the Company to withhold from
the Shares otherwise issuable upon the exercise of the Option that number of
Shares having a fair market value equal to the cash Exercise Price of the
Shares being purchased. For this purpose, the per share value of the Shares
shall be the fair market value on the date of exercise (or, if the date of
exercise is not a trading date, on the first trading date immediately preceding
the date of exercise), which shall be the average of the highest and lowest
sales prices of shares of common stock of the Company on the New York Stock
Exchange (or, if the shares of common stock of the Company are not listed on
the New York Stock Exchange, Inc., on the principal national stock exchange or,
if not so listed, on the quotation service on which such shares are listed) as
reported in The Wall Street Journal--Southwest Edition, on such date.
<PAGE> 18
1.5 RESTRICTIONS ON EXERCISE. Any exercise of the Option by the
Optionee is subject to the representation by the Optionee that he is acquiring
the Shares solely for his own account for investment and not with a view to, or
for offer or sale in connection with, the distribution of all or any part of
the Shares within the meaning of the Securities Act of 1933, as amended (the
"ACT"), and it is understood that a legend to the following effect will be
placed on any certificates representing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
SUCH SHARES ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL IS
OBTAINED SATISFACTORY TO AMRE, INC. TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
The Optionee understands and agrees that the Shares may not be sold, pledged,
hypothecated or otherwise transferred unless they are registered under the Act
and applicable state securities laws or an opinion of counsel is obtained
satisfactory to the Company to the effect that said registration is not
required. The Optionee further understands that stop transfer instructions
will be placed with the Transfer Agent of the Shares so as to restrict resale,
pledge, hypothecation or other transfer thereof subject to the provisions
hereof, including the provisions of the legend referred to above. The Optionee
understands and agrees that he shall have no registration rights of any kind or
character with respect to the Shares.
1.6 LIMITATIONS ON EXERCISE. The provisions of Paragraph 3.1
hereof notwithstanding, the Option shall not be exercisable following
expiration of the term of the Option as set forth in Paragraph 1.3 hereof.
ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The Company represents, warrants and agrees as follows:
2.1 The Shares to be issued under the Option will be validly
issued, fully paid and non-assessable and will be free of any liens and
encumbrances. The Shares subject to the Option are not subject to any
pre-emptive rights.
2.2 Upon the occurrence of any event requiring an adjustment
pursuant to Section 3.3 hereto, the Company shall give written notice to
Optionee of any adjustment thereunder and shall set forth the calculations and
basis therefor. Optionee shall have ten days within receipt of such notice to
object to the proposed adjustment. In the event Optionee objects to such
adjustment, the dispute shall be resolved by an independent accountant mutually
agreed to, and whose expenses shall be shared equally by, the Company and
Optionee.
2.3 Within 60 days of the date hereof, Company shall file a
listing application for the Shares with the New York Stock Exchange, Inc.
2
<PAGE> 19
2.4 Optionee shall be entitled to registration rights with respect
to the Shares, as a separate block of registerable securities not contingent on
the conversion of the HFS Senior Convertible Preferred Stock, to the same
extent as set forth in Section 10 of that certain Stock Purchase Agreement,
dated as of the date hereof, between the Company and HFS Incorporated, except
that the demand and incidental registration rights shall be exercisable for
five years from the date hereof and that Optionee shall pay all expenses of any
such registration applicable to the Shares, but not the fees and expenses of
Company counsel or auditors.
ARTICLE III. MISCELLANEOUS
3.1 DEATH. In the event of the death of the Optionee, the
personal representatives, heirs, legatees or distributees of the Optionee, as
appropriate, shall have the right at any time or times during the term of the
Option to exercise the Option to the extent that the Option had not been
exercised.
3.2 NONTRANSFERABILITY OF OPTION. The Option shall not be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution or a transfer to the Optionee's immediate family or a transfer
with the prior consent of the Company, which consent shall not be unreasonably
withheld. During the lifetime of the Optionee, the Option shall be exercisable
only by the Optionee. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the option, or the levy of an execution,
attachment or similar process upon the Option, shall be null and void and
without effect.
3.3 CHANGES IN CAPITAL STRUCTURE. In the event that the number of
shares of common stock of the Company shall be changed by reason of stock
splits, combinations of shares, recapitalizations, mergers, consolidations or
stock dividends, the number of Shares then subject to the Option shall be
proportionately adjusted so as to reflect such change; and, in such event, the
Exercise Price shall be proportionately increased or decreased, as the case may
be, all to prevent dilution or enlargement of the rights of the Optionee. No
adjustment provided for in this Paragraph 3.3 shall require the issuance of any
fractional shares.
3
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMRE, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
OPTIONEE:
---------------------------------------
David Moore
4
<PAGE> 21
EXHIBIT C
TO LETTER
AGREEMENT
FORM OF AMRE, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made as of the 17th day of October,
1995, between AMRE, Inc., a Delaware corporation (the "COMPANY"), and David
Moore, an individual resident of New York, New York (the "OPTIONEE").
Pursuant to the participation by Optionee in the transactions referred
to by the Board of Directors of the Company as "Project Blackjack" and in
consideration of the benefit received by the Company therefor, the Company
desires to grant to Optionee the Option (as defined herein) and Optionee
desires to accept the Option.
Therefore, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
ARTICLE I. GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. The Company has granted to the Optionee an
option (the "OPTION") to purchase an aggregate of 200,000 shares (the "SHARES")
of common stock, $0.01 par value, of the Company (the "COMMON STOCK") at a
price of $5.00 per share (the "EXERCISE PRICE"), subject to the terms and
conditions hereinafter set forth. The Option is a non-qualified option and is
not intended to constitute an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended. The Option shall
be irrevocable.
1.2 Vesting to Option. All or any part of the Shares may be
purchased at any time during the term of the Option.
1.3 Term of Option. The term of the Option is five years from
the date hereof.
1.4 Exercise of Option. The Option may be exercised by giving
written notice to the Company, addressed to its corporate headquarters,
attention of the Secretary, specifying the number of shares to be purchased,
accompanied by payment in full of the Exercise Price, either in cash or by
check, bank draft or money order; provided, however, that in lieu of cash the
Optionee may exercise the Option by instructing the Company to withhold from
the Shares otherwise issuable upon the exercise of the Option that number of
Shares having a fair market value equal to the Exercise Price of the Shares
being purchased. For this purpose, the per share value of the Shares shall be
the fair market value on the date of exercise (or, if the date of exercise is
not a trading date, on the first trading date immediately preceding the date of
exercise), which shall be the average of the highest and lowest sales prices of
shares of Common Stock listed on the New York Stock Exchange, Inc. (or, if the
Common Stock is not listed
<PAGE> 22
thereon, on the principal national stock exchange on which such shares are
listed) as reported in The Wall Street Journal--Southwest Edition, on such
date.
1.5 Restrictions on Exercise. Any exercise of the Option by the
Optionee is subject to the representation by the Optionee that he is acquiring
the Shares solely for his own account for investment and not with a view to, or
for offer or sale in connection with, the distribution of all or any part of
the Shares within the meaning of the Securities Act of 1933, as amended (the
"ACT"), and it is understood that a legend to the following effect will be
placed on any certificates representing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
SUCH SHARES ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL IS
OBTAINED SATISFACTORY TO AMRE, INC. TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED.
The Optionee understands and agrees that the Shares may not be sold, pledged,
hypothecated or otherwise transferred unless they are registered under the Act
and applicable state securities laws or an opinion of counsel is obtained
satisfactory to the Company to the effect that said registration is not
required. The Optionee further understands that stop transfer instructions
will be placed with the Transfer Agent of the Shares so as to restrict resale,
pledge, hypothecation or other transfer thereof subject to the provisions
hereof, including the provisions of the legend referred to above. The Optionee
understands and agrees that he shall have no registration rights of any kind or
character with respect to the Shares.
1.6 LIMITATIONS ON EXERCISE. The provisions of Paragraph 3.1
hereof notwithstanding, the Option shall not be exercisable following
expiration of the term of the Option as set forth in Paragraph 1.3 hereof.
ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
The Company represents, warrants and agrees as follows:
2.1 The shares to be issued under the Option will be validly
issued, fully paid and non-assessable and will be free of any liens and
encumbrances. The shares subject to the Option are not subject to any
pre-emptive rights.
2.2 Upon the occurrence of any event requiring an adjustment
pursuant to Section 3.3 hereto, the Company shall give written notice to
Optionee of any adjustment thereunder and shall set forth the calculations and
basis therefor. Optionee shall have ten days within receipt of such notice to
object to the proposed adjustment. In the event Optionee objects to such
adjustment, the dispute shall be resolved by an independent accountant mutually
agreed to, and whose expenses shall be shared equally by, the Company and
Optionee.
<PAGE> 23
2.3 Within 60 days of the date hereof, Company shall file a
listing application for the shares subject to the Option with the New York
Stock Exchange, Inc.
2.4 Optionee shall be entitled to registration rights with respect
to the Shares, as a separate block of registerable securities not contingent on
the conversion of the HFS Senior Convertible Preferred Stock, to the same
extent as set forth in Section 10 of that certain Stock Purchase Agreement,
dated as of the date hereof, between the Company and HFS Incorporated, except
that the demand and incidental registration rights shall be exercisable for
five years from the date hereof and that Optionee shall pay all expenses of any
such registration applicable to the Shares, but not the fees and expenses of
Company counsel and auditors.
ARTICLE III. MISCELLANEOUS
3.1 Death. In the event of the death of the Optionee, the
personal representatives, heirs, legatees or distributees of the Optionee, as
appropriate, shall have the right at any time or times during the term of the
Option to exercise the Option to the extent that the Option had not been
exercised.
3.2 Nontransferability of Option. The Option shall not be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution or a transfer to Optionee's immediate family or a transfer with
the prior consent of the Company, which consent shall not be unreasonably
withheld. During the lifetime of the Optionee, the Option shall be exercisable
only by the Optionee. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option, or the levy of any execution,
attachment or similar process upon the Option, shall be null and void and
without effect.
3.3 Changes in Capital Stock Structure. In the event that the
number of shares of common stock of the Company shall be changed by reason of
stock splits, combinations of shares, recapitalizations, mergers,
consolidations or stock dividends, the number of shares then subject to the
Option shall be proportionately adjusted so as to reflect such change; and, in
such event, the Exercise Price shall be proportionately increased or decreased,
as the case may be, all to prevent dilution or enlargement of the rights of the
Optionee. No adjustment provided for in this Section 3.3 shall require the
issuance of any fractional shares.
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMRE, INC.
By:
-------------------------------------
Robert M. Swartz
President
OPTIONEE:
----------------------------------------
David Moore
<PAGE> 25
EXHIBIT D
TO LETTER
AGREEMENT
TERM SHEET FOR SUB-LICENSE AGREEMENT
A Sub-License Agreement between AMRE, Inc. (Sub-Licensor) and Garden State
Exterior Remodeling, Inc. (Sub-Licensee) shall be executed on or before
November 15, 1995 which shall substantially parallel AMRE/Century 21 License
Agreement (the "License") containing among other things the following terms:
1. SUBJECT
License shall be for use of the Trade Mark as defined in the License.
2. PRODUCTS
1. Siding and related products, which related products
include, but are not limited to, overhang and trim.
2. Continuous guttering.
3. Windows and related products, which related products
include, but are not limited to, storm windows (interior and
exterior), shutters, awnings, screens and skylights.
4. Exterior coating.
5. Brick, stucco and decorative stone facing.
6. Doors, including, but not limited to, entry doors and
patio doors.
3. GEOGRAPHIC AREA (NEW YORK METROPOLITAN AREA)
Zone 1: (All Products) New York-Westchester, Rockland, Putnam, Nassau
and Suffolk counties, New York City; New Jersey-Sussex, Passaic,
Bergen, Morris, Essex, Warren, Somerset, Hunterdon, Monmouth, Ocean,
Union and Hudson counties.
Zone 2: (Brickface, Stucco, decorative Stone Facing and Exterior
Coating only). New Jersey-Atlantic, Cumberland, Cape May, Salem,
Gloucester, Camden, Middlesex, Mercer counties;
Pennsylvania-Philadelphia, Delaware, Chester, Montgomery, Bucks,
Lehigh and Burkes counties; Delaware-New Castle county. New
York-Orange, Dutchess counties; Connecticut-Fairfield county.
-1-
<PAGE> 26
4. TERM
Commencing January 1, 1996 and ending December 31, 1996.
5. FEE
3% of installation revenue (defining installation revenue in a manner
consistent with the license agreement between AMRE, Inc. and Century
21.)
6. EXCLUSIVE
For the products listed in the territories for the term of the
agreement.
7. MARKETING SUPPORT
Customer lists, access to Century 21 brokers, joint marketing efforts
and other similar marketing support will be available from both
Century 21 and AMRE, Inc. (Century 21 support subject to Century 21
approval.) All other marketing support similar to that described in
the AMRE, Inc./Century 21 license agreement will be made available to
Garden State Exterior Remodeling, Inc. as is practical. Also, AMRE,
Inc. and Garden State Exterior Remodeling, Inc. will establish a
program to either trade leads or sell and buy leads that are generated
in each others territories, consistent with AMRE, Inc.'s current
practices.
-2-
<PAGE> 1
EXHIBIT 7.8
AMRE, INC. PRESS RELEASE
- --------------------------------------------------------------------------------
CONTACT: Stephen P. Holmes FOR IMMEDIATE RELEASE
HFS Incorporated
Chief Financial Officer
(201) 952-8423
Larry H. Lattig
AMRE, Inc.
Vice President & Treasurer
(214) 658-6411
HFS INCORPORATED AND AMRE, INC. ENTER INTO
CENTURY 21(R) HOME IMPROVEMENT LICENSE PACT
AGREEMENT LICENSES #1 NAME IN REAL ESTATE TO THE
AMERICA'S LARGEST HOME IMPROVEMENT COMPANY
OCTOBER 18, 1995, PARSIPPANY, NJ AND DALLAS, TX - HFS Incorporated
(NYSE:HFS) and AMRE, Inc. (NYSE:AMM) today announced that AMRE has entered into
a 20 year licensing agreement with HFS for use of the name: CENTURY 21 HOME
IMPROVEMENTS. For the past 13 years, AMRE has marketed its home improvement
services under the Sears name, as the largest licensee of Sears, Roebuck & Co.
and has notified Sears of its intention not to renew its license when it
expires on December 31, 1995.
Under the terms of the agreement, AMRE will receive the exclusive
license and sublicensing rights for the name CENTURY 21 HOME IMPROVEMENTS in
the United States, Canada and Mexico for a range of home improvement products.
AMRE will pay fees to HFS equal to the greater of 3 percent of revenues or
certain guaranteed minimums starting at $11 million in 1996 and escalating to
approximately $40 million during the term of the license agreement. AMRE's
revenues for the past twelve months were approximately $285 million.
By combining forces with AMRE, the advertising and promotional
commitment to support the Century 21 brand will be more than doubled. AMRE
spends over $65 million annually to market its products and services to
consumers which in the future will be devoted to promoting the CENTURY 21 HOME
IMPROVEMENTS name. AMRE will contribute $10 million annually into the CENTURY
21 National Advertising Fund to promote the CENTURY 21 name.
-MORE-
<PAGE> 2
INCREASED PROFITS FOR BROKERS/AGENTS
AMRE, as CENTURY 21 HOME IMPROVEMENTS, will also provide a new source
of revenue and profits for CENTURY 21 brokers and agents by paying fees for
referral business generated from the CENTURY 21 real estate system.
Additionally, through its extensive marketing efforts, CENTURY 21 HOME
IMPROVEMENTS will provide a unique source of home ownership lead generation for
CENTURY 21 real estate offices that can not be duplicated by any other real
estate company.
MAXIMIZING THE POWER OF CENTURY 21 BRAND NAME
"CENTURY 21 HOME IMPROVEMENTS will help our brokers maximize the power
of the industry's dominant brand name," said Robert W. Pittman, Managing
Partner and CEO of Century 21 Real Estate Corporation. "It's a terrific
opportunity for brokers and agents to enhance their relationship with housing
consumers, while at the same time increasing their profitability through
referral fees as well as through a new, unique source of lead generation. This
is the first of several high-quality, value-added services we plan to make
available as we move CENTURY 21 toward a "one-stop shopping" concept for home
buyers and sellers."
Continued Pittman, "AMRE is the ideal partner for this venture. AMRE
brings to the relationship a long, successful history of providing quality home
improvement products and services, supported by a strong service warranty. It
will greatly support this business, as well as increase the marketing
impressions of the CENTURY 21 name, with a substantial advertising and
promotional commitment. AMRE's decision to switch to CENTURY 21 from SEARS
validates the strength of the CENTURY 21 name and our aggressive vision to
transform the residential real estate and related services industry."
AMRE GROWTH OPPORTUNITY
"AMRE is excited to be joining forces with CENTURY 21 - by far the #1
name in real estate," said Robert M. Swartz, President and CEO of AMRE.
"Their vast network of brokers and potential for lead generation will create an
unparalleled resource of opportunity to continue to build this business.
CENTURY 21 HOME IMPROVEMENTS continues AMRE's long-standing tradition of
quality in providing high value products and services to our customers."
"We tested the power of the CENTURY 21 name in connection with
potential home improvement customers and have found that it imparts a powerful
seal of approval. The opportunities for the growth of CENTURY 21 HOME
IMPROVEMENTS are substantial, as we expand throughout North America and add new
products to enhance our long-term profitability and shareholder value," said
Mr. Swartz.
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<PAGE> 3
In conjunction with this agreement, CENTURY 21 HOME IMPROVEMENTS
kiosks will be opened in shopping malls around the country and a toll free
number will be established to service customers interested in home improvements
and to generate leads for CENTURY 21 real estate offices.
This agreement becomes effective January 1, 1996. AMRE will record a
one-time non-recurring charge of up to $5 million in its fourth quarter ending
December 31, 1995, for expenses associated with the brand name change from
Sears to CENTURY 21 HOME IMPROVEMENTS.
HFS and an investor, David L. Moore, President and CEO of Garden State
Brickface, Windows & Exteriors will provide $8 million to AMRE through a
combination of a credit facility and common and preferred stock purchase to
assist AMRE in its efforts to further increase its leading position in the home
improvement industry. In connection with these agreements, Mr. Moore, Robert
W. Pittman, Managing Partner and CEO of CENTURY 21, and Stephen P. Holmes,
Chief Financial Officer of HFS, have agreed to join AMRE's Board of Directors.
AMRE, Inc. is the country's leading provider of high-quality home
improvement products and services. AMRE provides a range of premium home
improvement products including vinyl siding, vinyl and aluminum windows,
cabinet refacing, and textured coating. Under the CENTURY 21 HOME IMPROVEMENTS
agreement, AMRE will be licensed for 14 additional product categories including
roofing, heating and air conditioning, fencing, decks, and patios. AMRE's
products are of the highest quality, engineered to exacting qualifications and
passing stringent testing. AMRE has 62 offices in 48 markets across the United
States and more than 800 sales representatives. AMRE, Inc.'s stock is listed on
the New York Stock Exchange under the symbol "AMM."
HFS Incorporated is the world's largest franchisor of hotels and
residential real estate brokerage offices. Its stock is listed on the New York
Stock Exchange under the symbol "HFS." In lodging, the Company has over 4,600
Days Inn, Howard Johnson, Knights Inn, Park Inn International, Ramada, Super 8
and Villager Lodge franchised hotels with approximately 450,000 rooms in the
United States, Canada, Latin America and Europe. In residential real estate,
HFS has approximately 6,000 CENTURY 21 franchised offices in the United States
and twelve other countries.
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