SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 1995 Commission File Number 1-9751
CHAMPION ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
Michigan 38-2743168
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2701 University Drive, Suite 320, Auburn Hills, Michigan 48326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(810) 340-9090
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $1 par value New York Stock Exchange
Series A Preferred Stock Purchase Chicago Stock Exchange
Rights Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
Registrant has been required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes __X__ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of the Common Stock held by non-affiliates of
the Registrant as of March 8, 1996, based on the last sale price of $28.00 per
share for the Common Stock on the New York Stock Exchange on such date, was
approximately $381,913,504.
As of March 8, 1996, the Registrant had 15,372,366 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Report
Document into which it is incorporated
Proxy Statement for Annual Shareholders' Meeting
to be held April 29, 1996 .................... III
PART I
ITEM 1. BUSINESS.
Established in 1953, Champion Enterprises, Inc. and its subsidiaries
(collectively, the Registrant or the Company) operate in the manufactured
housing and commercial vehicle industries. In 1995 manufactured housing sales
were 93% of the Registrant's consolidated revenues and commercial vehicles
sales were the other 7%.
During the past two years the Registrant has significantly expanded its
manufactured housing operations through acquisitions and expansions. In
January 1994, the Registrant acquired Dutch Housing, Inc., a manufacturer of
standardized homes with three plants in Michigan. In April 1994, Dutch
operations were expanded by opening a new plant in Indiana. In February 1995,
the Registrant acquired Chandeleur Homes, Inc., with two plants in Alabama,
and Crest Ridge Homes, Inc., with one plant in Texas. Both companies are
manufacturers of standardized homes. In March 1995, Dutch opened a new plant
in Indiana. In October 1995, the Registrant acquired New Horizon Manufactured
Homes, Ltd., with one plant in Alberta, Canada. At the end of 1995, the
Registrant had 23 manufactured housing production facilities.
The Registrant's commercial vehicle manufacturing facilities consist of
two plants in Michigan which produce mid-size buses. One of these plants was
opened in 1995.
Certain financial information with respect to the Registrant's industry
segments is contained on page F-14 of this Form 10-K. At December 30, 1995
the Registrant had approximately 5,000 employees.
The Registrant's goal over the next three years is to achieve a minimum
compound annual growth in earnings per share of 20%, with 1995 results as the
base year. This goal is based on the growth in the manufactured housing
industry to date, the Registrant's increased manufacturing capacity, its
increased number of independent dealer locations, continued market share
improvement and its acquisitions. This goal is also based on a number of
assumptions, many of which are beyond the Registrant's control, including
continued growth in both the manufactured housing industry and the overall
general economy, only modest changes in interest rates and continued
availability of municipal funding for commercial vehicles. There can be no
assurance that these assumptions will prove accurate and actual results may
differ substantially from this goal.
HOUSING
Products
Manufactured housing is constructed to building standards in accordance
with the National Manufactured Home Construction and Safety Standards
promulgated by the U.S. Department of Housing and Urban Development. The homes
are manufactured in one or more sections on a permanently-affixed steel
support chassis. When completed the homes are sold and transported to dealer
retail sales lots. Upon retail sales by the dealers, the homes are
transported to the home sites, placed and readied for occupancy. The
Registrant's manufactured homes range in size from 650 to 2,600 square feet,
typically include two or three bedrooms, a living room or family room, dining
room, kitchen, and two full bathrooms. During 1995 the average wholesale
price was $25,200. Retail sales prices of the homes, without land, generally
range from $16,000 to $75,000, depending upon size, floor plan, features and
options.
The chief components and products used in manufactured housing are
generally the same kind and quality as those used by other housing builders,
including conventional site-builders. These components include lumber,
plywood, chipboard, drywall, steel, vinyl floor coverings, insulation,
exterior siding (wood, vinyl and metal), windows, shingles, home appliances
such as refrigerators and ranges, furnaces, plumbing and electrical fixtures
and hardware. These components are presently available from several sources
and the Registrant is not dependent upon any particular supplier. In 1992 and
1993, prices of lumber fluctuated significantly due to increased demand and
reductions in supply caused by environmental regulations in Canada and the
U.S. These fluctuations abated in 1994 as demand and supply reached an
equilibrium at prices 50% higher than in 1992. The industry and the
Registrant generally were able to pass these higher lumber costs on to the
consumer in the form of surcharges and increased base prices. It is not
certain, however, that any future price increases can be passed on to the
consumer without affecting demand.
The Registrant distributes its homes throughout over 90% of the
continental U.S. and in western Canada. The Registrant's homes are sold under
various trade names and brand names and in a variety of floor plans.
Production
The Registrant's homes are constructed in indoor facilities using an
assembly-line process employing approximately 150 to 200 production employees
at each facility. Each home is assembled in stages beginning with the
construction of the chassis and ending with a final quality control
inspection. The efficiency of the assembly-line process, protection from the
elements of weather and quantity discounts resulting from the Registrant's
purchasing power enable the Registrant to produce homes in one to two days at
substantially less cost than conventional site-built housing.
The Registrant's production schedule is based upon wholesale buyer
(dealer) orders which fluctuate from week to week, are subject to cancellation
at any time without penalty and are not necessarily an indication of future
business. Once such orders become firm, they are filled within 90 days. As of
the end of January 1996, unfilled orders for housing, although not firm,
totaled an estimated $30 million, which approximates last year's level,
including the 1995 acquisitions in both periods. Although manufactured homes
can be produced throughout the year in indoor facilities, demand for homes is
usually affected during the cold winter months, particularly in northern areas
of the U.S. and in Canada.
The Registrant produces homes to fill existing wholesale and retail
orders and, therefore, generally does not carry finished goods inventories
except for homes awaiting delivery. Typically one to three weeks' supply of
raw materials is maintained.
Charges to transport manufactured homes increase with the distance from
the factory to the dealer and home site. As a result, most of the retail
outlets for a manufacturer's homes are located within a 250 to 500-mile radius
of its manufacturing plants. Regional population and employment trends can
significantly affect demand for products of manufacturers whose plants are
located in the region; consequently, the Registrant considers current levels
of, and expected changes in, such demand when deciding whether to expand
existing facilities or open additional facilities.
Market
Manufactured housing competes for consumers' shelter dollars in suburban
and rural areas with other forms of new low-cost housing such as site-built
housing, prefabricated and modular homes, condominiums, and with existing
housing such as pre-owned homes and apartments. According to statistics
published by the Manufactured Housing Institute (MHI), an industry trade
association, manufactured housing accounted for an estimated 34% of new
single-family homes sold in 1995, up from 31% in 1994. Industry shipments of
manufactured housing increased 12% in 1995 to 339,601 homes.
The market for manufactured housing is affected by a number of different
factors, including consumer confidence, job creation, general economic growth
and the overall affordability of manufactured housing versus other forms of
housing. In addition, demographic trends such as changes in population growth
and competition affect the demand for housing products. The affordability of
manufactured housing is influenced by interest rates and the availability of
financing. Although the Registrant does not believe there is a direct
correlation between manufactured housing shipments and interest rate changes,
there can be no assurance that a rise in overall interest rates would not have
an adverse impact on the general economy and, therefore, the market for
manufactured housing. Generally, manufactured housing is less sensitive to
interest rate changes than other housing.
The Registrant believes the segment of the housing market in which
manufactured housing is most competitive includes consumers with household
incomes under $40,000. This segment has a high representation of young
singles and married couples, as well as elderly or retired persons. These
consumers are attracted by the comparatively low cost of fully or partially
furnished housing, together with the low down payment requirements and the
relative ease of financing. Persons in rural areas, where fewer housing
alternatives exist, and those who presently live in manufactured homes make up
a significant portion of the demand for new manufactured housing. The
Registrant believes that a much larger market may exist, including apartment
dwellers and persons who have traditionally purchased low-priced site-built
homes. In the past a number of factors have restricted demand for
manufactured housing, including less-favorable financing terms for
manufactured housing compared to site-built housing, the effects of
restrictive zoning on the availability of certain locations for home placement
and, in some cases, an unfavorable public image. These negative factors have
lessened considerably in recent years with improved quality and appearance,
increased financing availability and less restrictions.
Competition
The manufactured housing industry is highly competitive. According to
the MHI, in 1995 there were approximately 92 producers of manufactured homes
in the U.S. operating an estimated 285 production facilities. This total
compares to 269 plants a year ago and 400 plants in 1985. The industry has
continued to consolidate and the top six companies now have a combined market
share of 57%, up from 48% in 1991. Capital requirements for entry into the
manufactured housing industry are relatively small and product differentiation
and consumer brand recognition can be slight. As a result, the principal
method of competition is price, with product quality and features also
important factors.
In 1995 the Registrant sold 28,705 homes in the U.S. of which 56% were
multi-sectionals. The multi-section mix was down from 59% in 1994 due to
homes sold by Chandeleur and Crest Ridge in the Southern markets where single
section homes are more prevalent. Based on homes sold, in 1995 the Registrant
was the second largest producer of manufactured housing in the U.S. with a
market share of 8.5%, up from 6.7% in 1994. According to the MHI, the
industry's multi-section mix was 49% in 1995. A multi-section home, including
a double-section home, is counted as one home or "unit".
Distribution
The Registrant's products are distributed in the U.S. and Canada through
over 1,800 retail outlets operated by independent dealers, some of which are
operated by single firms having multiple outlets, as well as through twelve
Registrant-owned retail centers in the Northwest. As is common in the
industry, the majority of the Registrant's dealers are independent and sell
manufactured homes produced by other manufacturers in addition to those
produced by the Registrant. In 1995, no single independent dealer or
distributor accounted for more than 10% of the Registrant's sales and less
than 10% of the Registrant's manufactured housing production was shipped to
retail sales centers it owned. The majority of independent dealer purchases
are financed by lending institutions on a floor plan basis secured by a lien
on such units. In accordance with trade practice, the Registrant enters into
various repurchase agreements with the lending institutions providing such
financing, as is more fully described in Note 9 of Notes to Consolidated
Financial Statements on page F-12 of this Form 10-K.
During 1995 the Registrant expanded its independent dealer distribution
network by 42%. Acquisitions during 1995 accounted for 24 percentage points
of the increase, while existing operations increased dealer locations by 18%.
The Registrant is continuing its expansion efforts and expects continued sales
growth in 1996 from its existing dealer base as well as from new dealers.
COMMERCIAL VEHICLES
Products
The Registrant manufactures mid-size buses ranging in length from 20 to
33 feet with seating capacity for 10 to 37 passengers. Buses are offered with
a choice of interior or exterior storage areas, wheel-chair lifts, diesel,
gasoline and alternative fuel engines and various seat types, arrangements and
coverings. The Registrant's mid-size buses are marketed under the trade names
Centurion, Challenger, CTS, Crusader, Commander, Commodore, Contender and
Solo.
Production
The Registrant purchases chassis for its buses from motor vehicle
manufacturers and produces the final product using assembly-line production
techniques. A steel-cage frame consisting of steel tubes is attached to the
chassis and an adhesive bonding technique is used to fasten the smooth
exterior walls to the frame. This construction provides superior passenger
comfort and safety. The chief components and products used by the Registrant
in its vehicle manufacturing operations, with the exception of the chassis,
are presently available from several sources and the Registrant is not
dependent upon any particular supplier.
Orders for buses are subject to adjustment or cancellation until final
approval of specifications is received from customers. Once such orders become
firm, they are filled within 90 days unless a customer specifically requests
completion at a later date. As of the end of January 1996, the level of firm,
unfilled orders for buses totaled approximately $4.5 million, 50% less than
the January 1995 level. The Registrant believes this decrease is temporary.
Market
The demand for mid-size buses is affected by factors such as government
regulations and spending programs, the need for short distance shuttle
services, overall economic conditions and the general availability of
financing. The market for mid-size buses is expected to increase as demand
grows for mass transportation and specialty transport vehicles such as buses
for the physically challenged and the elderly. Lower operating costs, greater
flexibility, and reduced capital investment is believed to make the
Registrant's vehicles a practical alternative to larger mass-transit buses and
smaller vans. Demand for mid-size buses is not seasonal in nature. The
Registrant sells its buses to municipalities, public agencies and private
businesses, which include shuttle fleets, nursing homes, churches, hotels,
airports and universities.
Competition
Although there are several producers of mid-size buses, the three
largest producers together comprise about 55 percent of the market. The
Registrant believes that it is the second largest producer of mid-size buses
in the U.S.
Distribution
The Registrant distributes its buses through a network of independent
distributors and directly to municipalities and national accounts on a bid
basis. There are approximately 75 independent distributors of mid-size buses
in the U.S. and Canada.
____________________________
ITEM 2. PROPERTIES.
All of the Registrant's manufacturing facilities are one story with
concrete floors and wood and steel superstructures. The Registrant owns all of
its manufacturing facilities except for one housing facility which is leased,
and owns substantially all of the machinery and equipment used in each of its
facilities. The Registrant believes its plant facilities are generally well
maintained and, with completed and planned expansions, provide ample capacity
to meet expected demand.
The following table sets forth certain information with respect to the
Registrant's manufacturing facilities, all of which are assembly-line
operations.
Approximate
Location Square Feet
----------------------------------- -----------
Manufactured housing plants:
Alabama: Guin 110,000
Boaz(2 plants) 161,000
California: Lindsay 156,000
Colorado: Berthoud 103,000
Idaho: Weiser 130,000
Indiana: LaGrange(2 plants) 145,000
Ridgeville 105,000
Michigan: White Pigeon(3 plants) 190,000
Nebraska: Central City 130,000
York 126,000
New York: Sangerfield 114,000
North Carolina: Lillington (2 plants) 220,000
Pennsylvania: Claysburg 122,000
Tennessee: Henry 98,000
Texas: Breckenridge 82,000
Washington: Chehalis* 103,000
Canada:
Alberta: Medicine Hat 92,000
British Columbia: Penticton 74,000
Commercial vehicles plants:
Michigan: Imlay City (2 plants) 230,000
*Lease expires March 31, 1999.
The Registrant's executive offices are located in a leased office
building in Auburn Hills, Michigan. Other miscellaneous properties are also
owned and leased, including twelve locations used in the retail sale of
manufactured housing.
ITEM 3. LEGAL PROCEEDINGS.
At any point in time, the Registrant is ordinarily involved in routine
litigation incidental to its business. This litigation arises principally from
the sale of its products and in various governmental agency proceedings
arising from occupational safety and health, wage and hour, and similar
employment and workplace regulations. In the opinion of the Registrant's
management, none of such matters presently pending are material to the
Registrant's overall financial position or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the Registrant's security
holders during the fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
(a) The Registrant's common stock is listed on the New York, Chicago
and Pacific Stock Exchanges as ChampEnt and has a Ticker Symbol of CHB.
Quarterly stock prices were as follows:
HIGH LOW
1995
1st Quarter $19 1/2 $13 1/2
2nd Quarter 19 1/2 14
3rd Quarter 20 5/8 15
4th Quarter 31 18 1/2
1994
1st Quarter 14 8 3/4
2nd Quarter 17 4/9 11 3/8
3rd Quarter 19 4/5 13 1/3
4th Quarter $20 1/3 $13 3/8
Prior amounts have been restated for the effect of the two-for-one stock
split in May 1995.
(b) There were approximately 6,500 shareholders of record and 8,500
beneficial holders on March 8, 1996.
(c) The Registrant has not paid cash dividends during the past two
fiscal years.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
CHAMPION ENTERPRISES, INC.
FIVE-YEAR HIGHLIGHTS (UNAUDITED)
(In thousands, except per share amounts and units sold)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CALENDAR 44 WEEKS
YEAR ENDED ENDED FISCAL YEAR ENDED
FISCAL IN DECEMBER JAN. 1, IN FEBRUARY
1995 1994 1993 1992 1991 1993 1992 1991
OPERATIONS:
Net sales:*
Housing $741,230 $542,510 $296,547 $236,569 $207,237 $207,754 $208,333 $220,683
Commercial
vehicles 56,641 43,064 31,779 23,930 29,563 18,681 28,052 26,157
-------- --------- --------- --------- --------- --------- --------- ---------
797,871 585,574 328,326 260,499 236,800 226,435 236,385 246,840
-------- --------- --------- --------- --------- --------- --------- ---------
Segment income
(loss):
Housing 57,751 39,935 16,032 10,576 3,886 9,586 5,888 5,424
Commercial
vehicles 3,031 1,818 579 (943) (821) (654) (920) 270
-------- --------- --------- --------- --------- --------- --------- ---------
60,782 41,753 16,611 9,633 3,065 8,932 4,968 5,694
-------- --------- --------- --------- --------- --------- --------- ---------
General
corporate
expenses 5,829 5,113 4,933 3,986 3,934 3,549 3,837 3,647
Environmental
reserve - (2,700) - - - - - -
Interest (income)
expense, net 1,503 (150) (905) (505) (319) (568) (423) (574)
-------- --------- --------- --------- --------- --------- --------- --------
Pretax income
(loss) -
continuing
operations 53,450 34,090 12,583 6,152 (550) 5,951 1,554 2,621
--------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) -
continuing
operations 32,250 25,190 11,183 5,462 (1,950) 4,821 804 1,591
Income (loss) -
discontinued
operations - 1,908 - (2,593) (1,488) (2,010) (1,419) (3,372)
--------- --------- --------- --------- --------- --------- --------- ---------
Net income
(loss) 32,250 27,098 11,183 2,869 (3,438) 2,811 (615) (1,781)
--------- --------- --------- --------- --------- --------- --------- ---------
Per share amounts:**
Income (loss) -
continuing
operations 2.02 1.63 0.77 0.38 (0.14) 0.34 0.06 0.12
Income (loss) -
discontinued
operations - 0.12 - (0.18) ( 0.11) (0.14) (0.10) (0.25)
--------- --------- --------- --------- --------- --------- --------- ---------
Net income
(loss) 2.02 1.75 0.77 0.20 (0.25) 0.20 (0.04) (0.13)
--------- --------- --------- --------- --------- --------- --------- ---------
Per share
amounts fully
taxed (at 40%):**
Income (loss) -
continuing
operations 2.02 1.32 0.52 0.26 (0.02) 0.26 0.07 0.12
Income (loss) -
discontinued
operations - 0.12 - (0.11) (0.07) (0.09) (0.06) (0.15)
--------- --------- --------- --------- --------- --------- --------- ---------
Net income
(loss) $2.02 $1.44 $0.52 $0.15 ($0.09) $0.17 $0.01 ($0.03)
--------- --------- --------- --------- --------- --------- --------- ---------
Weighted average
shares
outstanding** 15,963 15,466 14,554 14,188 13,558 14,088 13,908 13,588
Depreciation
and
amortization $6,186 $3,895 $2,233 $1,948 $1,840 $1,637 $1,900 $2,026
Capital
expenditures $8,995 $10,619 $6,639 $3,379 $2,068 $2,820 $2,189 $1,461
FINANCIAL POSITION:
Working capital $3,986 $18,753 $31,969 $21,945 $16,472 $21,945 $17,504 $15,456
Property and
equipment, net 39,390 30,059 19,635 15,554 16,652 15,554 15,791 16,757
Total assets 235,939 171,230 94,912 76,146 81,884 76,146 81,293 84,878
Long-term
liabilities 18,349 12,857 6,880 5,868 11,261 5,868 10,740 12,447
Shareholders'
equity 113,103 79,294 45,922 34,037 31,157 34,037 31,355 31,964
Per share** $7.39 $5.25 $3.19 $2.43 $2.31 $2.43 $2.31 $2.36
Percentage return
(loss) on
equity*** 34% 43% 28% 9% (11)% 4% (2)% (5)%
OTHER STATISTICAL
INFORMATION:
Homes sold 29,398 20,986 12,488 11,011 10,455 9,526 10,241 10,864
Commercial
vehicles sold 1,289 1,046 789 657 736 549 705 714
* Prior amounts have been reclassified to conform to current period presentation.
**Prior amounts have been restated for the two-for-one stock split on May 30, 1995.
***Percentage return is based on average equity for each year.
In October 1992, the Company changed its year end from the end of February to the end of December.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
1995 versus 1994
Champion Enterprises, Inc. achieved record sales and profits in 1995. Pretax
income from continuing operations increased 57% to $53.5 million and income
from continuing operations increased 28%. Net income increased 19% to $32.3
million, even though the Company's effective income tax rate increased to
almost 40% from 26% in 1994. Assuming the same tax rate of 40% in both years,
net income would have increased 45% over 1994.
Sales increased by 36% to $798 million due to acquisitions and plant
expansions, growth in the manufactured housing and mid-size bus industries and
increases in market share. In February 1995, the Company acquired Chandeleur
Homes, Inc. in Alabama and Crest Ridge Homes, Inc. in Texas. Both companies
are manufacturers of standardized homes and are located in the Southeast and
Southwest, the current leading markets for manufactured housing. In March
1995, Dutch Housing, Inc. commenced operations at a newly constructed plant in
Indiana. In October 1995, Moduline International, Inc. completed its
acquisition of New Horizon Manufactured Homes, Ltd. in Alberta, Canada. Also,
in 1995, Champion Motor Coach, Inc. commenced operations at its second bus
manufacturing facility in Michigan.
Manufactured Housing
(Sales and income in millions)
%
1995 1994 Change
------ ------ ------
Net sales $741.2 $542.5 37%
Segment income $ 57.8 $ 39.9 45%
Segment margin % 7.8% 7.4%
Homes sold 29,398 20,986 40%
Average price $25,200 $25,850 (2%)
Internal growth and acquisitions in 1995 resulted in higher sales and
earnings. Sales from existing operations increased 18% on a 14% increase in
unit shipments. The companies acquired in 1995 added sales of $100 million or
19 percentage points of the sales increase and 26 percentage points of the
unit shipments increase. The decrease in average net selling price in 1995
was due to a lower mix of multi-section homes sold by Chandeleur and Crest
Ridge. As a result, the Company's multi-section mix decreased to 56% from
59% in 1994. According to the Manufactured Housing Institute (MHI), an
industry trade association, 1995 U.S. industry shipments rose 12% to 339,601
homes, of which 49% were multi-sectionals. The Company's 1995 U.S. market
share based on homes sold rose to 8.5% from 6.7% in 1994.
Segment income increased primarily due to higher sales volume and improved
margins. Chandeleur and Crest Ridge accounted for $9.8 million, or 25
percentage points of the increase. Improved margins resulted from higher
volumes per plant and greater production efficiencies due to increased demand
for the Company's manufactured homes and to plant expansions completed during
the last two years. In addition, as a percent of sales, segment general and
administrative costs were lower in 1995 than in 1994 due to higher volume.
Although dealer orders can be cancelled at anytime without penalty, and
unfilled orders are not necessarily an indication of future business, the
Company's unfilled orders for housing at the end of January 1996 totaled $30
million, which approximates last year's level, including the 1995 acquisitions
in both periods.
Commercial Vehicles
(Sales and income in millions)
%
1995 1994 Change
------ ------ ------
Net sales $56.6 $43.1 32%
Segment income $ 3.0 $ 1.8 67%
Segment margin % 5.4% 4.2%
Vehicles sold 1,289 1,046 23%
Average price $43,900 $41,200 7%
The commercial vehicles segment experienced strong growth in 1995. Sales to
municipalities represented 49% of total segment sales in each of the last two
years. The increase in average unit price was largely due to product mix.
Segment income increased significantly due to higher sales and improved
margins. Operating margins improved due to greater production efficiencies
and improved coverage of fixed manufacturing and general and administrative
costs due to higher volume.
As of the end of January 1996, the commercial vehicles segment had unfilled
orders of approximately $4.5 million or 50% less than in January 1995.
Management believes the decrease is temporary.
Other Expenses and Income Taxes
(Dollars in millions) %
1995 1994 Change
------ ------ ------
General corporate
expenses $ 5.8 $ 5.1 14%
Environmental
charge $ -- $ 2.7 (100%)
Interest expense
(income), net $ 1.5 $(0.2) --
Income taxes $ 21.2 $ 8.9 138%
Effective income
tax rate 40% 26%
Income from
discontinued
operations $ -- $ 1.9 (100%)
General corporate expenses increased due to higher stock exchange listing
fees, professional fees and compensation costs. The non-recurring 1994
environmental charge was recorded for the settlement of a potential
environmental claim. Interest expense increased in 1995 due to borrowings
associated with the purchase of Chandeleur and Crest Ridge in February 1995.
Non-recurring income from discontinued operations in 1994 was due to the
settlement of certain litigation.
Income tax expense in 1995 increased due to higher pretax earnings and a
higher effective tax rate. The 1994 tax provision reflected the utilization
of the remaining net operating loss (NOL) carryforwards, the benefit of which
equalled 16% of pretax income.
Results of Fourth Quarter
1995 versus 1994
(Dollars in millions)
%
1995 1994 Change
------ ------ ------
Net sales:
Housing $191.6 $145.0 32%
Commercial
vehicles 14.2 11.5 24%
------ ------
$205.8 $156.5 32%
====== ======
Segment income:
Housing $14.1 $8.9 59%
Commercial
vehicles 0.9 0.6 43%
----- ----
$15.0 $9.5 58%
===== ====
Pretax income from
continuing
operations $13.3 $5.8 129%
Net income $8.1 $4.3 88%
Manufactured housing sales increased due to a 36% increase in unit shipments.
Chandeleur and Crest Ridge accounted for 18 percentage points of the sales
increase and 26 percentage points of the unit shipments increase. Housing
sales, excluding Chandeleur and Crest Ridge, increased 14% over 1994's fourth
quarter on a 10% increase in unit shipments. Housing segment income increased
30% over the prior year at existing operations due to reduced material costs
and an increase in multi-section mix to 67% from 60% last year. Chandeleur
and Crest Ridge contributed $2.6 million of segment income in the quarter.
Commercial vehicles sales increased on an 11% rise in unit shipments.
Commercial vehicles segment income increased due to higher sales and improved
margins.
Excluding the $2.7 million environmental provision in 1994, pretax income from
continuing operations increased 56% in 1995 due to higher sales and improved
margins. Earnings per share from continuing operations increased 23% to $.49
in 1995 from $.40, excluding the environmental charge in 1994. Net income per
share increased 81% to $.49 from $.27 last year.
Manufactured Housing
Industry Outlook
Industry wholesale unit shipments of manufactured homes increased 12% in 1995,
20% in 1994, 21% in 1993 and 23% in 1992 according to the MHI. Management
estimates a 6-8% increase in industry shipments in 1996.
Management believes that moderate changes in interest rates will not have a
significant direct impact on demand for manufactured housing. However, to the
extent that increased interest rates reduce job growth, slow the U.S. economy,
or cause a loss in consumer confidence, demand for manufactured housing may be
adversely affected.
Long-term industry growth will be affected by, among other things, the
relative cost of manufactured housing versus other forms of housing, including
rental housing, general economic trends, changes in demographics including new
household formations and the number of Americans on fixed incomes, and the
availability and cost of financing. Changes in regional markets and the U.S.
economy as a whole will continue to affect overall housing industry cycles.
Management is encouraged by the favorable trends in these areas. The Company
is positioned to take advantage of these trends by implementing strategies of
serving particular market niches with broad geographic coverage, maintaining a
decentralized organization and making selective acquisitions and expansions.
Results of Operations
1994 versus 1993
The Company had significant increases in sales and profits in 1994 as compared
to 1993. Income from continuing operations increased 125% to $25.2 million,
even though the Company's effective income tax rate rose to 26% from 11% in
1993. The increased tax rate is primarily due to utilizing during 1994 the
remaining NOL carryforwards.
Sales grew by 78% to $586 million due to the acquisition of Dutch Housing,
Inc. in January 1994, growth in the manufactured housing and mid-size bus
industries, increases in market share and internal expansions. The Company
expanded its product line by acquiring Dutch, a manufacturer of standardized
homes with three plants in Michigan. In April 1994, Dutch operations were
expanded by opening a new plant in Indiana.
Manufactured Housing
(Sales and income in millions)
%
1994 1993 Change
------ ------ ------
Net sales $542.5 $296.5 83%
Segment income $ 39.9 $ 16.0 149%
Segment margin % 7.4% 5.4%
Homes sold 20,986 12,488 68%
Average price $25,850 $23,750 9%
Internal growth and the acquisition of Dutch in 1994 resulted in higher sales
and earnings. Sales from existing operations increased 32% on a 17% increase
in unit shipments. Dutch added sales of $152 million or 51 percentage points
of the sales increase and 51 percentage points of the unit shipments increase.
The increase in average net selling price was due to a higher mix of multi-
section homes and increased selling prices due to the pass through of
increased costs associated with new HUD regional energy and wind standards.
The Company's multi-section mix increased to 59% from 52% in 1993, and its
U.S. market share rose to 6.7% from 4.7% in 1993. According to the MHI, U.S.
industry shipments rose 20% to 303,932 homes in 1994 of which 49% were multi-
sectionals.
Segment income increased significantly due to higher sales and improved
margins. The improved margins resulted from higher volumes per plant, the
greater mix of multi-section homes, and to a lesser extent, reduced material
costs due to stabilized lumber prices in 1994.
Commercial Vehicles
(Sales and income in millions)
%
1994 1993 Change
------ ------ ------
Net sales $43.1 $31.8 36%
Segment income $ 1.8 $ 0.6 214%
Segment margin % 4.2% 1.8%
Vehicles sold 1,046 789 33%
Average price $41,200 $40,300 2%
Sales increased in 1994 primarily due to higher unit shipments. Sales to
municipalities represented 49% of segment sales versus 48% in 1993. Increased
segment income resulted from higher sales volume and improved margins due to
product mix along with production and labor efficiencies.
Other Expenses and Income Taxes
(Dollars in millions) %
1994 1993 Change
------ ------ ------
General corporate
expenses $5.1 $4.9 4%
Environmental
charge $2.7 $ -- 100%
Interest income,
net $0.2 $0.9 (83%)
Income taxes $8.9 $1.4 536%
Effective income
tax rate 26% 11%
Income from
discontinued
operations $1.9 $ -- 100%
General corporate expenses increased slightly over the prior year. In the
fourth quarter of 1994, the Company recorded a non-recurring charge of $2.7
million for the settlement of a potential environmental claim. Net interest
income decreased in 1994 due to interest expense on borrowings associated with
the purchase of Dutch in January 1994. In 1994, non-recurring income from
discontinued operations consisted of the settlement of litigation.
The Company's effective income tax rate increased primarily due to utilizing
during 1994 the remaining NOL carryforwards. The recognized NOL benefit as a
percent of pretax income was 16% in 1994 and 29% in 1993.
Liquidity and Capital Resources
Cash balances totaled $15 million at December 30, 1995, compared to $23
million at December 31, 1994. In 1995, cash of $43 million was generated from
operations, $44 million was used for acquisition related payments, $9 million
for capital improvements and $2 million for common stock repurchases. The
Company's current ratio was 1.0 to 1 at December 30, 1995 compared to 1.2
to 1 at December 31, 1994.
Accounts receivable and payable, inventories, and accrued dealer discounts and
warranty obligations have increased significantly in 1995 due to companies
acquired in 1995 and increased sales volumes.
During 1995, the Company established a new credit facility. The Company now
has a $70 million unsecured line of credit, which expires in three years, and
includes $10 million of availability to cover letters of credit. At December
30, 1995, the Company had $6.6 million of letters of credit outstanding,
generally to support insurance obligations and licensing and service bonding
required by various states. The Company had no bank borrowings outstanding at
December 30, 1995. However, borrowings are anticipated during 1996 for
capital improvements and to meet seasonal working capital needs, and $8.9
million cash was needed in January 1996 for payment of the deferred portion
of the Chandeleur and Crest Ridge purchase price.
The Company's 1996 plans include the opening of new manufactured housing
plants for Chandeleur in Alabama, Crest Ridge in Texas and Dutch in Indiana.
In addition, major plant expansions and improvements are planned at Champion
Home Builders Co. and Moduline International, Inc. In addition, Moduline's
retail sales operations will be expanded with the addition of four retail
centers. The Company plans to spend approximately $15 million in 1996 on
capital improvements, including $11 million for the three new manufactured
housing plants.
Consistent with its plan to improve shareholder value through investments in
sound operating businesses, the Company does not plan to pay cash dividends in
the near term.
The Company believes that existing cash balances, cash flow from operations
and additional availability under its line of credit are adequate to meet its
anticipated financing needs, operating requirements, capital expenditures and
common stock repurchases in the foreseeable future. However, management may
explore other opportunities to raise capital to finance the growth of the
Company.
Impact of Inflation
Inflation has not had a material effect on the Company's operations during the
last three years. Lumber prices fluctuate, but during periods of rising
lumber prices the Company has been able to pass the increased costs to its
customers in the form of surcharges and base price increases.
Impact of Recently Issued Accounting Standards
In October 1995 the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation", which estab-
lished new accounting and reporting requirements for stock-based employee
compensation programs such as stock option and stock award plans. As
permitted by the Statement, the Company will continue to account for such
plans under APB Opinion No. 25, but will make required additional disclosures
beginning in 1996, including pro forma information.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and schedules filed herewith are set forth on
the Index to Financial Statements and Financial Statement Schedules on page
F-1 of the separate financial section which follows page 17 of this Report
and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth in the first part of the section entitled
"Election of Directors" in the Registrant's 1995 Proxy Statement to
Shareholders (the "1995 Proxy Statement"), and under the caption "Certain
Information Regarding Nominees" in such section of the 1995 Proxy Statement
is incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant, their ages, and the position
or office held by each, are as follows:
Position or Office Name Age
Chairman of the Board of
Directors, President and
Chief Executive Officer Walter R. Young, Jr. 51
Executive Vice President
and Chief Financial Officer A. Jacqueline Dout 41
Vice President-Secretary
and General Counsel Louis M. Balius 59
Treasurer J. Craig Wiles 52
Controller Richard Hevelhorst 48
The executive officers of the Registrant serve at the pleasure of the
Registrant's Board of Directors except for Mr. Walter R. Young, Jr., who is
currently serving a three year term ending April 30, 1999, unless terminated
earlier in accordance with the terms of a certain Letter Agreement between the
Registrant and Mr. Young, dated April 27, 1990.
Mr. Young joined the Registrant in April 1990 as President and Chief
Executive Officer and was elected Chairman of the Board in April 1992.
Prior to joining the Registrant in April 1994, Ms. Dout served as Vice
President and Treasurer of Mallinkrodt Group, Inc., where she was employed for
six years.
Mr. Balius has served in various capacities since joining the Registrant
in 1972. Starting in 1980, he served as Secretary until becoming Vice
President-Legal and Governmental Affairs in 1982. Since that time, he has
served in various capacities as legal counsel and was elected as Vice
President-Secretary and General Counsel in 1988.
Mr. Wiles has served in various financial and accounting positions
including Assistant Treasurer and Controller beginning in 1990. In 1995 he
was elected as Treasurer.
Mr. Hevelhorst joined the Registrant as Controller in May 1995.
Previously for the past five years he was employed in various financial and
accounting positions at Evans Industries, Inc. and most recently was their
Treasurer and Chief Financial Officer.
There are no family relationships among any of the Registrant's
executive officers.
The information set forth under the caption "Compliance with Section
16(a) of The Exchange Act" in the section entitled "Additional Information" in
the Registrant's 1995 Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the section entitled "Executive
Compensation" in the Registrant's 1995 Proxy Statement is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the captions "Principal Shareholders"
and "Security Ownership of Management" in the section entitled "Additional
Information" in the Registrant's 1995 Proxy Statement is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The financial statements, supplementary financial information, and
financial statement schedules filed herewith are set forth on the Index to
Financial Statements and Financial Statement Schedules on page F-1 of the
separate financial section which follows page 17 of this Report, which is
incorporated herein by reference.
The following exhibits are filed as part of this Report. Those exhibits
with an asterisk(*) designate the Registrant's management contracts or
compensation plans or arrangements for its executive officers.
Exhibit No. Description
3.1 Restated Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant filed as Exhibit 3.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994 and incorporated therein by reference.
4.1 Article III of the Registrant's Restated Articles of Incorpora-
tion (defining the rights of the holders of shares of the
authorized classes of the Registrant's capital stock) - included
in the copy of the Registrant's Restated Articles of Incorpora-
tion filed as Exhibit 3.1 hereto.
4.2 The Registrant has issued certain receivable-backed notes (the
"Notes") pursuant to a Trust Indenture dated as of August 1, 1987
between CAC Funding Corporation, as issuer, and First of America
Bank - Detroit, N.A., as trustee. The Notes do not exceed 10
percent of the total assets of the Registrant and the Registrant
agrees to furnish a copy of the Trust Indenture to the Commission
upon request.
4.3 Form of Rights Certificate filed as Exhibit 1 to the Registrant's
Registration Statement on Form 8-A dated January 12, 1996 and
incorporated herein by reference.
4.4 Rights Agreement by and between the Registrant and Harris Trust
and Savings Bank filed as Exhibit 2 to the Registrant's
Registration Statement on Form 8-A dated January 12, 1996 and
incorporated herein by reference.
10.1 *Letter Agreement dated April 27, 1990 between the Registrant and
Walter R. Young, Jr., filed as Exhibit 10.3 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended March 2, 1990
and incorporated herein by reference.
10.2 *Champion Enterprises, Inc. 1987 Stock Option Plan, as amended,
filed as Exhibit 10.9 to the Registrant's Annual Report on Form
10-K for the fiscal year ended February 28, 1992 and incorporated
herein by reference.
10.3 *Champion Enterprises, Inc. Stock Plan for Directors, as amended,
filed as Exhibit 10.9 to the Registrant's Annual Report on Form
10-K for the fiscal year ended January 1, 1994 and incorporated
herein by reference.
10.4 Lease Agreement dated November 21, 1991 between the Registrant
and University Development Company relating to the premises
located at 2701 University Drive, Auburn Hills, Michigan, filed
as Exhibit 10.12 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended February 28, 1992 and incorporated
herein by reference.
10.5 *Change in Control Severance Agreement dated as of April 12, 1991
between the Registrant and Louis M. Balius, filed as Exhibit 10.15
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended January 1, 1993 and incorporated herein by reference.
10.6 *Champion Enterprises, Inc. 1993 Middle Management Stock Option
Plan, filed as Exhibit 10.14 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994 and
incorporated herein by reference.
10.7 *Letter Agreement dated March 15, 1994 between the Registrant and
A. Jacqueline Dout, filed as Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994 and incorporated herein by reference.
10.8 *Non-Qualified Stock Option Agreements dated April 18, 1994
between the Registrant and A. Jacqueline Dout, filed as Exhibit
10.13 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 and incorporated herein by
reference.
10.9 *Champion Enterprises, Inc. 1995 Stock Option and Incentive Plan,
filed as Exhibit 10.1 to the Registrant's Registration Statement
on Form S-8 dated May 1, 1995 and incorporated herein by
reference.
10.10 *Champion Enterprises, Inc. 1995 Stock Retainer Plan for Non-
employee Directors, filed as Exhibit 10.2 to the Registrant's
Registration Statement on Form S-8 dated May 1, 1995 and
incorporated herein by reference.
10.11 Credit Agreement dated September 29, 1995 between the Registrant,
Comerica Bank and The First National Bank of Chicago.
10.12 *First Amendment to the Champion Enterprises, Inc. 1995 Stock
Option and Incentive Plan.
10.13 *First Amendment to the Champion Enterprises, Inc. 1993 Middle
Management Stock Option Plan.
10.14 *Champion Enterprises, Inc. 1990 Non-Qualified Stock Option
Program, as amended.
10.15 *Amendment dated August 31, 1995 to the Letter Agreement dated
April 27, 1990 between the Registrant and Walter R. Young, Jr.
10.16 *Nonqualified Stock Option Agreement dated August 31, 1995
between the Registrant and Walter R. Young, Jr.
10.17 *Nonqualified Stock Option Agreement dated August 31, 1995
between the Registrant and Walter R. Young, Jr.
10.18 *Performance Share Award Agreement dated August 31, 1995 between
the Registrant and Walter R. Young, Jr.
10.19 *Resignation and Consulting Agreement dated April 14, 1995
between the Registrant and James M. Gurch.
10.20 *Letter Agreement dated August 25, 1995 between the Registrant
and Thomas J. Ensch.
10.21 *Change in Control and Covenant Not to Compete Agreement dated
August 25, 1995 between the Registrant and Thomas J. Ensch.
10.22 First Amendment, dated October 27, 1995, to Credit Agreement
dated September 29, 1995 between the Registrant, Comerica
Bank and The First National Bank of Chicago.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse LLP.
27.1 Financial Data Schedule.
99.1 Proxy Statement for the Registrant's 1996 Annual Meeting of
Shareholders - filed by the Registrant pursuant to Regulation 14A
and incorporated herein by reference.
(b) No reports on Form 8-K were filed during the last quarter of the
fiscal year ended December 30, 1995.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CHAMPION ENTERPRISES, INC.
By: /s/ A. JACQUELINE DOUT
-------------------------
A. Jacqueline Dout
Dated: March 22, 1996 Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/WALTER R. YOUNG, JR. Chairman of the Board of March 22, 1996
- ----------------------- Directors, President and
Walter R. Young, Jr. Chief Executive Officer
(Principal Executive Officer)
/s/A. JACQUELINE DOUT Executive Vice President March 22, 1996
- ----------------------- and Chief Financial Officer
A. Jacqueline Dout (Principal Financial Officer)
/s/RICHARD HEVELHORST Controller March 22, 1996
- ----------------------- (Principal Accounting Officer)
Richard Hevelhorst
/s/ROBERT W. ANESTIS Director March 22, 1996
- -----------------------
Robert W. Anestis
/s/SELWYN ISAKOW Director March 22, 1996
- -----------------------
Selwyn Isakow
/s/GEORGE R. MRKONIC Director March 22, 1996
- -----------------------
George R. Mrkonic
/s/JOHNSON S. SAVARY Director March 22, 1996
- -----------------------
Johnson S. Savary
/s/CARL L. VALDISERRI Director March 22, 1996
- ------------------------
Carl L. Valdiserri
<PAGE>
CHAMPION ENTERPRISES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULES
Page F-1
Description Page
Report of Independent Accountants F-2
Consolidated Statements of Income for the Periods
Ended December 30, 1995, December 31, 1994 and
January 1, 1994 F-3
Consolidated Statements of Shareholders' Equity for the
Periods Ended December 30, 1995, December 31, 1994
and January 1, 1994 F-4
Consolidated Balance Sheets as of December 30, 1995
and December 31, 1994 F-5
Consolidated Statements of Cash Flows for the Periods
Ended December 30, 1995, December 31, 1994 and
January 1, 1994 F-6
Notes to Consolidated Financial Statements F-7
Report of Independent Accountants
February 9, 1996
To the Board of Directors
and Shareholders of
Champion Enterprises, Inc.
In our opinion, the financial statements listed in the index appearing under
Item 14 (a) on page F-1 present fairly, in all material respects, the
financial position of Champion Enterprises, Inc. and its subsidiaries at
December 30, 1995 and December 31, 1994 and the results of their operations
and their cash flows for the years ended December 30, 1995, December 31, 1994
and January 1, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Detroit, Michigan
<PAGE>
CHAMPION ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C> <C>
YEAR ENDED
(In thousands, except per share amounts) DEC. 30, DEC. 31, JAN. 1,
1995 1994 1994
NET SALES* $797,871 $585,574 $328,326
--------- -------- --------
Cost of sales* 679,732 501,602 284,012
Selling, general and administrative
expenses 63,186 47,332 32,636
--------- -------- --------
742,918 548,934 316,648
--------- -------- --------
OPERATING INCOME 54,953 36,640 11,678
Other income (expense):
Interest income 810 966 1,391
Interest expense (2,313) (816) (486)
Environmental reserve - (2,700) -
--------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 53,450 34,090 12,583
Income taxes 21,200 8,900 1,400
--------- -------- --------
INCOME FROM CONTINUING OPERATIONS 32,250 25,190 11,183
Income from discontinued operations,
net of income taxes of $1,105 - 1,908 -
--------- -------- --------
NET INCOME $ 32,250 $ 27,098 $ 11,183
========= ========= ========
PER SHARE AMOUNTS:**
Income from continuing operations $2.02 $1.63 $0.77
Income from discontinued operations - 0.12 -
------ ----- --------
Net income $2.02 $1.75 $0.77
====== ====== ========
Weighted average shares outstanding** 15,963 15,466 14,554
</TABLE>
*Prior amounts have been reclassified to conform to current period
presentation.
**Prior amounts have been restated for the effect of the two-for-one stock
split.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
CHAMPION ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOREIGN
CAPITAL IN RETAINED CURRENCY
COMMON STOCK EXCESS OF EARNINGS TRANSLATION
SHARES AMOUNT PAR VALUE (DEFICIT) ADJUSTMENTS TOTAL
BALANCE JANUARY 1, 1993 6,995 $6,995 $30,064 $(2,452) $(570) $34,037
Net income - - - 11,183 - 11,183
Stock option and
benefit plans 213 213 795 - - 1,008
Translation adjustments - - - - (306) (306)
------ ------ ------- ------- ------- ---------
BALANCE JANUARY 1, 1994 7,208 7,208 30,859 8,731 (876) 45,922
Net income - - - 27,098 - 27,098
Stock option and
benefit plans 345 345 3,250 - - 3,595
Tax benefit of
stock options - - 2,872 - - 2,872
Translation adjustments - - - - (193) (193)
------ ------ ------- ------- ------- ---------
BALANCE DECEMBER 31, 1994 7,553 7,553 36,981 35,829 (1,069) 79,294
Net income - - - 32,250 - 32,250
Stock option and
benefit plans 229 229 1,668 - - 1,897
Common stock repurchases (109) (109) (1,815) - - (1,924)
Two-for-one stock split 7,629 7,629 (7,629) - - -
Tax benefit of stock
options - - 1,493 - - 1,493
Translation adjustments - - - - 93 93
------ ------ ------- ------- ------- ---------
BALANCE DECEMBER 30,
1995 15,302 $15,302 $30,698 $68,079 $(976) $113,103
======= ======= ======= ======= ====== =========
See accompanying Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
CHAMPION ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS DEC. 30, DEC. 31,
(In thousands, except par value) 1995 1994
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $14,995 $23,027
Accounts receivable, trade 35,973 24,277
Inventories 45,558 39,644
Deferred taxes and other 11,947 10,884
--------- ---------
Total current assets 108,473 97,832
--------- ---------
PROPERTY AND EQUIPMENT:
Land and improvements 6,300 4,298
Buildings and improvements 29,811 24,549
Machinery and equipment 24,023 18,798
--------- ---------
60,134 47,645
Less-accumulated depreciation 20,744 17,586
--------- ---------
39,390 30,059
--------- ---------
GOODWILL: 84,709 37,940
Less-accumulated amortization 2,964 864
--------- ---------
81,745 37,076
--------- ---------
OTHER ASSETS 6,331 6,263
--------- ---------
$235,939 $171,230
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $33,791 $29,098
Accrued dealer discounts 20,570 16,151
Accrued compensation and payroll taxes 12,886 11,285
Accrued warranty obligations 12,589 8,432
Accrued insurance 5,032 3,804
Deferred portion of purchase price 8,900 2,600
Other liabilities 10,719 7,709
--------- ---------
Total current liabilities 104,487 79,079
--------- ---------
LONG-TERM LIABILITIES 18,349 12,857
SHAREHOLDERS' EQUITY:
Preferred stock, no par value,
5,000 authorized, none issued - -
Common stock, $1 par value,
1995 - 30,000 authorized,
15,302 issued and outstanding;
1994 - 15,000 authorized,
7,553 issued and outstanding 15,302 7,553
Capital in excess of par value 30,698 36,981
Retained earnings 68,079 35,829
Foreign currency translation adjustments (976) (1,069)
--------- ---------
Total shareholders' equity 113,103 79,294
--------- ---------
$235,939 $171,230
========= =========
See accompanying Notes to Consolidated Financial Statements.
CHAMPION ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) YEAR ENDED
DEC. 30, DEC. 31, JAN. 1,
1995 1994 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $32,250 $25,190 $11,183
-------- -------- -------
Adjustments to reconcile income
from continuing operations
to net cash provided by operating
activities:
Depreciation and amortization 6,186 3,895 2,233
Deferred income taxes (2,375) (8,255) -
Increase/decrease, net of acquisition:
Accounts receivable (4,467) (11,661) (623)
Inventories (3,379) (10,439) (3,034)
Environmental reserve - 2,700 -
Accounts payable 24 10,193 2,330
Accrued liabilities 8,913 12,051 5,159
Other, net 6,120 3,574 (999)
------ ------- ------
Total adjustments 11,022 2,058 5,066
------ ------- ------
Net cash provided by continuing
operating activities 43,272 27,248 16,249
------ ------ ------
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Income from discontinued operations - 1,908 -
Decrease in net assets of discontinued
operations 672 696 429
------- ------ -----
Net cash provided by discontinued
operations 672 2,604 429
-------- ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (8,995) (10,619) (6,639)
Proceeds from disposal of property
and equipment 334 406 1,320
Acquisitions (41,303) (36,481) -
Deferred purchase price payment (2,600) - -
------- ------ ------
Net cash used for investing
activities (52,564) (46,694) (5,319)
------ ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued, net 1,106 2,556 976
Common stock repurchased (1,924) - -
Repayment of long-term debt (87) - -
Tax benefit of stock options
exercised 1,493 2,872 -
Decrease in restricted cash - - 1,376
------ ------- --------
Net cash provided by financing
activities 588 5,428 2,352
-------- ------- --------
Net increase (decrease) in cash
and cash equivalents (8,032) (11,414) 13,711
Cash and cash equivalents at
beginning of period 23,027 34,441 20,730
-------- ------- -------
Cash and cash equivalents at end
of period $14,995 $23,027 $34,441
======== ========= ========
ADDITIONAL CASH FLOW INFORMATION:
Cash paid for:
Interest $1,889 $677 $493
Income taxes, net of refunds $20,800 $14,854 $1,434
CASH FLOWS FROM ACQUISITIONS:
Purchase price $50,777 $40,000
Less: Deferred portion of
purchase price (9,635) (2,600)
Less: Cash acquired (827) (1,591)
Plus: Acquisition costs and
payoff of mortgage 988 672
-------- -------
$41,303 $36,481
======== =======
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Champion
Enterprises, Inc. and its wholly owned subsidiaries (the Company). All
significant intercompany transactions have been eliminated. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Business
The Company is a leading producer of manufactured housing and mid-size
commercial vehicles. The Company's manufactured housing operations and
markets are located throughout the U.S. and in western Canada. The Company's
commercial vehicles are marketed throughout the U.S. and Canada.
Reclassifications
Previously, the Company classified as sales revenue amounts charged on sales
invoices for delivery of its products, and related delivery expense was
included in cost of sales. Commencing in 1995, the Company is classifying
delivery revenue as a reduction of delivery expense. Prior net sales and cost
of sales have been reclassified accordingly. This change in classification
has no effect on previously reported net income or earnings per share.
Certain other amounts in prior financial statements have been reclassified to
conform to the current year presentation.
Revenue Recognition
Sales revenue is recognized when wholesale floor plan financing or dealer
credit approval is received and the product is shipped to independent dealers
or, for Company-owned sales locations, upon transfer of title.
Cash and Cash Equivalents
Cash and cash equivalents include investments which have original maturities
less than 90 days at the time of their purchase. Investments are carried at
cost which approximates market value because of their short maturities.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
under the first-in, first-out method.
Depreciation
Property and equipment are stated at cost. Depreciation is provided
principally on the straight-line method over the following estimated useful
lives:
Years
Land improvements 3-15
Buildings and improvements 8-33
Machinery and equipment 3-15
Goodwill
Goodwill is the excess of cost over fair value of net assets of businesses
acquired and is amortized on the straight-line method over the expected
periods to be benefited, which is generally 40 years. Amortization expense was
$2.1 million and $0.9 million in 1995 and 1994, respectively.
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, which addresses how and when impairment losses should be
measured and recognized for long-lived assets such as property and equipment
and goodwill. Adoption of Statement No. 121 during 1995 had no effect on the
Company's financial statements.
Warranty Obligations
The Company provides the retail consumer with a twelve-month warranty from the
date of retail purchase. Estimated warranty costs are accrued at the time of
sale.
Long-term Liabilities
Long-term liabilities consist of the portion of self-insurance and warranty
reserves, compensation programs and other reserves and accruals that are not
expected to be paid during the following year.
Income Taxes
Deferred tax assets and liabilities are determined based on the differences
between the financial statement amounts and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
Earnings Per Share
In calculating earnings per share, the weighted average shares outstanding
includes common stock equivalents. Earnings per share amounts and weighted
average shares outstanding for all periods presented, including pro forma
amounts, have been adjusted for the two-for-one stock split discussed in Note
5 of the Notes to Consolidated Financial Statements.
NOTE 2 - INVENTORIES
A summary of inventories by component at December 30, 1995 and December 31,
1994 follows:
(In thousands)
1995 1994
Raw materials $27,651 $25,449
Work-in-process 4,836 4,432
Finished goods 13,071 9,763
------- -------
$45,558 $39,644
======= =======
NOTE 3 - ACQUISITIONS
Chandeleur Homes, Inc. and Crest Ridge Homes, Inc.
On February 3, 1995 the Company purchased the assets and assumed certain
liabilities of Chandeleur Homes, Inc. and Crest Ridge Homes, Inc., privately-
held corporations with manufactured housing operations in Alabama and Texas.
The cash purchase price of approximately $46.9 million was financed from
existing cash and borrowings under the Company's bank line of credit. Under
the terms of the purchase agreements, the Company paid $38 million in 1995
and the remaining $8.9 million in January 1996. The acquisitions were
accounted for using the purchase method and resulted in $45.5 million of
goodwill. Chandeleur and Crest Ridge results of operations are included with
those of the Company commencing February 3, 1995.
Following are the summarized unaudited pro forma combined results of
operations for the years ended December 30, 1995 and December 31, 1994,
assuming the acquisitions had taken place on January 1, 1995 and January 2,
1994, respectively. The unaudited pro forma results are not necessarily
indicative of future earnings or earnings that would have been reported had
the acquisitions been completed when assumed.
(In thousands, except per share amounts)
1995 1994
Net sales $808,323 $677,572
======== ========
Income from continuing
operations before income taxes $54,410 $39,655
Income taxes 21,600 11,000
------- --------
Income from continuing operations $32,810 $28,655
======= ========
Per share $ 2.06 $ 1.85
======= ========
Dutch Housing, Inc.
On January 28, 1994 the Company purchased the assets and assumed the
liabilities of Dutch Housing, Inc., a corporation with manufactured housing
operations in Michigan and Indiana. The purchase price was $40 million. The
acquisition was accounted for using the purchase method and resulted in $38
million of goodwill. Dutch results of operations are included with the
Company from the acquisition date.
Other 1995 Acquisitions
New Horizon Manufactured Homes, Ltd., Alberta, Canada, was acquired in October
1995 for $3.2 million, $700,000 of which will be paid when certain earnings
levels are attained. In addition, a company which arranges transportation for
a portion of the Company's manufactured housing business was acquired for
$700,000 in February 1995. Prior year results for these acquisitions are
immaterial. These acquisitions were accounted for using the purchase method
and resulted in $2.5 million of goodwill.
NOTE 4 - DEBT
The Company has an agreement with two banks for an unsecured line of credit
for $70 million, including $10 million of availability to cover letters of
credit. At the Company's option, borrowings are subject to interest at either
the bank's prime rate or the bank's eurodollar rate plus 0.45% to 1.25%. In
addition, the Company pays a commitment fee ranging from 0.125% to 0.45% on
the unused portion of the facility and a letter of credit fee. The agreement
expires on September 29, 1998, but may be extended for additional one year
periods, subject to approval by the banks. The agreement contains covenants
which, among other things, require maintenance of certain financial ratios and
limit additional indebtedness and the payment of dividends without the prior
consent of the banks. Letters of credit outstanding at year end totalled $6.6
million, generally to support insurance obligations and licensing and service
bonding required by various states.
There were no bank borrowings outstanding at December 30, 1995 or December 31,
1994. The maximum amount of aggregate short-term bank borrowings outstanding
at any month end was $31 million and $9 million during 1995 and 1994,
respectively. During 1995 and 1994, aggregate short-term borrowings averaged
$15.1 million and $6.5 million with average interest rates of 7.4% and 6.1%,
respectively. There were no bank borrowings during 1993.
At December 30, 1995 and December 31, 1994, the Company had no material long-
term debt obligations.
NOTE 5 - SHAREHOLDERS' EQUITY
On May 1, 1995 the shareholders approved a proposal to increase the number of
authorized shares to 30 million from 15 million. In addition, the Board of
Directors approved a two-for-one split of the Company's common stock effective
May 30, 1995 to holders of record on May 15, 1995. A total of 7.6 million
shares of common stock was issued in connection with the split. The Board of
Directors also authorized a share repurchase program for up to $10 million,
$1.9 million of which was expended during 1995.
There are 5 million authorized shares of preferred stock, without par value,
the issuance of which is subject to approval by the Board of Directors. The
Board of Directors has authority to fix the number, rights, preferences and
limitations of the shares of each series, subject to applicable laws and the
provisions of the Articles of Incorporation. In January 1996, the Board of
Directors reserved 300,000 preferred shares for issuance in connection with
the Shareholders Rights Plan.
The Shareholders Rights Plan (Rights Plan) was adopted on January 9, 1996.
Pursuant to the Rights Plan, the Board of Directors declared a distribution of
one Preferred Stock Purchase Right on each outstanding share of common stock
on February 5, 1996, the record date. Each Right entitles shareholders to buy
one one-hundredth share of preferred stock for $140 and becomes exercisable
only if a third party acquires or announces an intention to acquire 20% or
more of the Company's common stock. The Rights expire on February 5, 2006
unless redeemed or exercised.
NOTE 6 - SAVINGS PLAN
Company contributions to the Savings Plan (the Plan) are a matching
contribution, in shares of Company stock or cash, equalling 35% of the first
4% of compensation contributed by participating employees. Participating
employees may make qualified cash or deferred arrangement contributions
ranging from 1% to 18% of compensation. The Company has no other retirement
or pension program.
Generally, all eligible full-time employees of the Company may participate in
the Plan after completing one year of service. Contributions to the Plan are
100% vested. Company contributions to the Plan were $586,000 in 1995,
$508,000 in 1994 and $285,000 in 1993.
NOTE 7 - INCOME TAXES
Pretax income from continuing operations for the fiscal years ended December
30, 1995, December 31, 1994 and January 1, 1994 was taxed under the following
jurisdictions:
(In thousands)
1995 1994 1993
Domestic $51,330 $31,962 $10,586
Foreign 2,120 2,128 1,997
-------- --------- ---------
Total $53,450 $34,090 $12,583
======== ========= =========
The provisions for income taxes from continuing operations were as follows:
(In thousands)
1995 1994 1993
Current tax expense:
Federal $19,530 $13,749 $ 250
Foreign 1,735 1,700 900
State 2,310 1,706 250
-------- --------- ---------
Total current 23,575 17,155 1,400
-------- --------- ---------
Deferred tax expense:
Federal (2,376) (7,213) -
Foreign 149 620 -
State (148) (1,662) -
-------- --------- ---------
Total deferred (2,375) (8,255) -
-------- --------- ---------
Total provision $21,200 $ 8,900 $1,400
======== ========= =========
The provisions for income taxes differ from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pretax income from continuing operations as a result of the following
differences:
(Dollars in thousands)
1995 1994 1993
Statutory U.S. tax rates $18,708 $11,932 $ 4,404
Increase (decrease) in
rates resulting from:
Higher rates on earnings
of foreign operations 1,142 1,575 201
Recognize net operating
loss - (5,609) (3,705)
State taxes, net of federal
benefit 1,469 - -
Other (119) 1,002 500
-------- -------- --------
Total provision $21,200 $ 8,900 $ 1,400
======== ======== ========
Effective tax rates 40% 26% 11%
==== ==== ====
Deferred tax assets and liabilities are comprised of the following as of
December 30, 1995 and December 31, 1994:
(In thousands) 1995 1994
Assets:
Warranty reserve $ 6,526 $ 4,488
Insurance accruals 3,905 3,440
Environmental 1,454 1,410
Dealer discounts 1,053 1,026
Other 3,040 2,022
Loss carryforwards 536 584
-------- --------
Gross deferred tax assets 16,514 12,970
-------- --------
Liabilities:
Inventory 193 391
Depreciation 947 724
Canadian withholding 625 476
Other 2,285 1,405
-------- -------
Gross deferred tax
liabilities 4,050 2,996
-------- --------
Net assets $12,464 $ 9,974
======== ========
Discontinued operations
The 1994 provision for income taxes for discontinued operations was $1.1
million, an effective rate of 37%. This amount was higher than the U.S.
statutory tax rate due to state tax charges.
NOTE 8 - DISCONTINUED OPERATIONS
In 1992 the Company sold certain assets and liabilities of its discontinued
recreational vehicle (RV) segment. Remaining assets and liabilities of the RV
segment are immaterial. During 1994 certain litigation was settled which
resulted in an after-tax gain of $1.9 million ($.12 per share).
NOTE 9 - CONTINGENT LIABILITIES
It is customary practice for companies in the manufactured housing industry to
enter into repurchase agreements with lending institutions which provide
wholesale floor plan financing to dealers. A majority of the Company's sales
are made pursuant to these agreements, which generally provide for repurchase
of the Company's products from the lending institutions for the balance due
them in the event of repossession upon a dealer's default. In addition, the
Company has guaranteed, on a limited basis, obligations of certain dealers to
a lending institution under a Company sponsored floor plan financing program.
The contingent liabilities under these agreements are spread over many dealers
and financial institutions and are reduced by the resale value of the homes
which are required to be repurchased or repossessed. Losses incurred in
connection with these agreements have been immaterial and estimated amounts
are provided for currently. The maximum potential repurchase commitments and
guarantees at December 30, 1995 and December 31, 1994 were approximately $175
million and $130 million, respectively, excluding any resale value.
Under the Company's insurance programs, coverage is obtained for catastrophic
exposures as well as those risks required to be insured by law. The Company
retains a significant portion of risk of certain losses related primarily to
medical benefits, workers' compensation and general, product and auto
liability.
The Company is subject to various legal proceedings and claims which arise in
the ordinary course of its business. Management believes the ultimate
liability with respect to these actions will not materially affect the
financial condition of the Company.
In addition, the Company is a party to environmental investigations and
remediations and, along with other companies, has been named a potentially
responsible party at one of these sites. In the fourth quarter of 1994, the
Company accrued $2.7 million for its estimated share of remediation costs.
The recorded liability has not been reduced by potential insurance recoveries.
The Company has established accruals for matters that are in its view probable
and reasonably estimable. Based on information presently available,
management believes that existing accruals are sufficient to satisfy any known
environmental liabilities. Further, any additional liability that may
ultimately result from the resolution of these matters is not expected to have
a material effect on the Company's financial position or operations.
NOTE 10 - STOCK OPTION AND INCENTIVE PLANS
Under the 1987 Stock Option Plan, 1,200,000 shares of common stock were
reserved for issuance to officers and key employees. During 1995, no options
were granted under this Plan. As of the current year end, options exercisable
and available for future grants were 195,080 and 28,492, respectively.
A total of 600,000 shares of common stock were reserved under the 1990
Nonqualified Stock Option Program. Options granted during 1995 totaled
33,000. At December 30, 1995, options exercisable totaled 34,300 and shares
available for future grants were 20,000.
Under the 1993 Middle Management Stock Option Plan, 500,000 shares of common
stock were reserved. Grants for 55,000 shares were made during 1995. A total
of 45,720 and 142,000 options were exercisable and available for future
grants, respectively, as of December 30, 1995.
Under the 1995 Stock Option and Incentive Plan, 650,000 shares of common stock
were reserved for options and awards. During the year, options for 200,000
shares were granted. Subject to shareholder approval of amendments to the
1995 Plan, options for an additional 550,000 shares were granted and 50,000
performance shares were awarded during 1995. The options were granted at fair
market value at grant date and none are currently exercisable.
In addition to these plans, other nonqualified stock options have been granted
to executive officers and key employees. During 1995 options for 380,000
shares were granted, which includes 175,000 granted to Chandeleur and Crest
Ridge key employees upon the acquisitions. Under these agreements options for
780,000 shares were outstanding at year end, 100,000 of which were
exercisable.
The Stock Plan for Directors provides for option grants of 300,000 shares of
common stock to non-employee directors upon first being elected by
shareholders. Grants for 16,000 shares were made during the current year and
there were 75,000 options exercisable and 108,000 available for future grants
as of December 30, 1995.
The 1995 Stock Retainer Plan for Non-employee Directors has 100,000 shares
authorized, 12,400 of which were awarded during the year. The Plan provides
for stock awards for directors' annual compensation.
Amounts charged to expense in connection with the grants and awards under
these plans and agreements totaled $780,000 in 1995, $633,000 in 1994 and
$111,000 in 1993.
Options granted under these option plans and agreements may be issued below,
at, or above fair market value and generally expire ten years from the grant
date. Some options became exercisable immediately and others over a period of
up to five years. The following is information with respect to stock options
under these plans and agreements:
Number Option
of shares price range
Outstanding at January 1, 1993 1,336,120 $1 - $5 1/4
Granted 468,000 2 1/8 - 11
Canceled (63,080) 1 1/3 - 3 3/4
Exercised (443,080) 1 - 5 1/4
----------
Outstanding at January 1, 1994 1,297,960 1 - 11
Granted 830,000 4 1/4 - 23 7/8
Canceled (34,000) 1 1/3 - 3 4/5
Exercised (685,220) 1 - 11
----------
Outstanding at December 31, 1994 1,408,740 1 - 23 7/8
Granted 1,234,000 5 2/3 - 29 7/8
Canceled (170,000) 1 4/5 - 23 7/8
Exercised (343,800) 1 - 13 4/5
----------
Outstanding at December 30, 1995 2,128,940 $1 1/3 - $29 7/8
Prior amounts have been restated for the effect of the two-for-one stock split.
NOTE 11-BUSINESS SEGMENT INFORMATION
Year Ended
Dec. 30, Dec. 31, Jan. 1,
(In thousands) 1995 1994 1994
NET SALES:
Housing $741,230 $542,510 $296,547
Commercial vehicles 56,641 43,064 31,779
--------- --------- ---------
$797,871 $585,574 $328,326
========= ========= =========
OPERATING INCOME:
Housing segment income $ 57,751 $ 39,935 $ 16,032
Commercial vehicles
segment income 3,031 1,818 579
--------- --------- ---------
Total segment income 60,782 41,753 16,611
General corporate
expenses (5,829) (5,113) (4,933)
--------- --------- ---------
$ 54,953 $ 36,640 $ 11,678
========= ========= =========
IDENTIFIABLE ASSETS:
Housing $184,169 $115,595 $ 45,678
Commercial vehicles 20,697 18,157 10,488
Corporate and other 31,073 37,478 38,746
--------- --------- ---------
$235,939 $171,230 $ 94,912
========= ========= =========
CAPITAL EXPENDITURES, NET
OF ACQUISITIONS:
Housing $ 8,299 $ 10,059 $ 6,217
Commercial vehicles 626 519 380
Corporate 70 41 42
--------- --------- ---------
$ 8,995 $ 10,619 $ 6,639
========= ========= =========
DEPRECIATION AND AMORTIZATION:
Housing:
Depreciation $ 3,607 $ 2,608 $ 1,884
Amortization 2,182 910 -
--------- --------- ---------
Total housing 5,789 3,518 1,884
Commercial vehicles 366 341 328
Corporate 31 36 21
--------- --------- ---------
$ 6,186 $ 3,895 $ 2,233
========= ========= =========
Segment income excludes the following: general corporate expenses, interest
income, interest expense, income taxes and environmental reserve.
Identifiable assets are those assets used in the Company's operations in each
industry segment. Corporate and other assets are principally cash and cash
equivalents, deferred taxes and other assets not specifically used in the
operations of any industry segment.
NOTE 12-QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands, except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
1995
Net sales $170,323 $206,594 $215,141 $205,813 $797,871
Cost of sales 147,534 174,355 182,753 175,090 679,732
Selling, general
and administrative
expenses 13,111 16,828 16,037 17,210 63,186
Interest expense,
net 114 771 430 188 1,503
Income before
income taxes 9,564 14,640 15,921 13,325 53,450
Net income 5,764 8,740 9,621 8,125 32,250
Net income per share $0.37 $0.55 $0.61 $0.49 $2.02
Homes sold 6,265 7,769 7,931 7,433 29,398
Commercial vehicles
sold 325 302 351 311 1,289
1994
Net sales $119,033 $149,689 $160,349 $156,503 $585,574
Cost of sales 101,717 126,440 137,170 136,275 501,602
Selling, general
and administrative
expenses 10,908 12,395 12,175 14,554 50,032
Interest (income)
expense, net (78) 127 (48) (151) (150)
Income from continuing
operations before
income taxes 6,486 10,727 11,052 5,825 34,090
Income from continuing
operations 4,786 7,927 8,152 4,325 25,190
Income from discontinued
operations 1,908 - - - 1,908
Net income 6,694 7,927 8,152 4,325 27,098
Per share amounts:
Income from continuing
operations 0.32 0.51 0.52 0.27 1.63
Income from discontinued
operations 0.13 - - - 0.12
Net income 0.45 0.51 0.52 0.27 1.75
Per share amounts
fully taxed (at 40%):
Income from continuing
operations 0.26 0.41 0.42 0.22 1.32
Income from discontinued
operations 0.12 - - - 0.12
Net income $0.38 $0.41 $0.42 $0.22 $1.44
Homes sold 4,405 5,400 5,735 5,446 20,986
Commercial vehicles
sold 232 254 279 281 1,046
First quarter 1994 income from discontinued operations includes a one-time
after-tax gain from the settlement of certain litigation. Fourth quarter
1994 selling, general and administrative expenses include a $2.7 million
environmental provision ($0.13 per share, net of taxes).
Per share amounts are based on the weighted average shares outstanding for
each period. Quarterly amounts may not add to annual amounts due to changes
in shares outstanding. Certain amounts, including net sales and cost of
sales, have been reclassified to conform to current period presentation.
Earnings per share have been restated for the effect of the two-for-one
stock split.
INDEX TO EXHIBITS
Exhibit No. Description
3.1 Restated Articles of Incorporation of the Registrant.
3.2 Bylaws of the Registrant filed as Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 and incorporated herein by
reference.
4.1 Article III of the Registrant's Restated Articles of
Incorporation (defining the rights of the holders of shares
of the authorized classes of the Registrant's capital stock)
- included in the copy of the Registrant's Restated Articles
of Incorporation filed as Exhibit 3.1 hereto.
4.2 The Registrant has issued certain receivable-backed notes
(the "Notes") pursuant to a Trust Indenture dated as of
August 1, 1987 between CAC Funding Corporation, as issuer,
and First of America Bank - Detroit, N.A., as trustee. The
Notes do not exceed 10 percent of the total assets of the
Registrant and the Registrant agrees to furnish a copy of
the Trust Indenture to the Commission upon request.
4.3 Form of Rights Certificate filed as Exhibit 1 to the
Registrant's Registration Statement on Form 8-A dated
January 12, 1996 and incorporated herein by reference.
4.4 Rights Agreement by and between the Registrant and Harris
Trust and Savings Bank filed as Exhibit 2 to the
Registrant's Registration Statement on Form 8-A dated
January 12, 1996 and incorporated herein by reference.
10.1 Letter Agreement dated April 27, 1990 between the Registrant
and Walter R. Young, Jr., filed as Exhibit 10.3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended March 2, 1990 and incorporated herein by reference.
10.2 Champion Enterprises, Inc. 1987 Stock Option Plan, as
amended, filed as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended February 28,
1992 and incorporated herein by reference>
10.3 Champion Enterprises, Inc. Stock Plan for Directors, as
amended, filed as Exhibit 10.9 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended January 1,
1994 and incorporated herein by reference.
10.4 Lease Agreement dated November 21, 1991 between the
Registrant and University Development Company relating to
the premises located at 2701 University Drive, Auburn Hills,
Michigan, filed as Exhibit 10.12 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended February 28,
1992 and incorporated herein by reference.
10.5 Change in Control Severance Agreement dated as of April 12,
1991 between the Registrant and Louis M. Balius, filed as
Exhibit 10.15 to the Registrant's Annual Report on Form
10-K for the fiscal year ended January 1, 1993 and
incorporated herein by reference.
10.6 Champion Enterprises, Inc. 1993 Middle Management Stock
Option Plan, filed as Exhibit 10.14 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
January 1, 1994 and incorporated herein by reference.
10.7 Letter Agreement dated March 15, 1994 between the Registrant
and A. Jacqueline Dout, filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 and incorporated herein by
reference.
10.8 Non-Qualified Stock Option Agreements dated April 18, 1994
between the Registrant and A. Jacqueline Dout, filed as
Exhibit 10.13 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 and incorporated
herein by reference.
10.9 Champion Enterprises, Inc. 1995 Stock Option and Incentive
Plan, filed as Exhibit 10.1 to the Registrant's Registration
Statement on Form S-8 dated May 1, 1995 and incorporated
herein by reference.
10.10 Champion Enterprises, Inc. 1995 Stock Retainer Plan for Non-
employee Directors, filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-8 dated May 1,
1995 and incorporated herein by reference.
10.11 Credit Agreement dated September 29, 1995 between the
Registrant, Comerica Bank and The First National Bank of
Chicago.
10.12 First Amendment to the Champion Enterprises, Inc. 1995
Stock Option and Incentive Plan.
10.13 First Amendment to the Champion Enterprises, Inc. 1993
Middle Management Stock Option Plan.
10.14 Champion Enterprises, Inc. 1990 Non-Qualified Stock Option
Program, as amended.
10.15 Amendment dated August 31, 1995 to the Letter Agreement
dated April 27, 1990 between the Registrant and Walter R.
Young, Jr.
10.16 Nonqualified Stock Option Agreement dated August 31, 1995
between the Registrant and Walter R. Young, Jr.
10.17 Nonqualified Stock Option Agreement dated August 31, 1995
between the Registrant and Walter R. Young, Jr.
10.18 Performance Share Award Agreement dated August 31, 1995
between the Registrant and Walter R. Young, Jr.
10.19 Resignation and Consulting Agreement dated April 14, 1995
between the Registrant and James M. Gurch.
10.20 Letter Agreement dated August 25, 1995 between the
Registrant and Thomas J. Ensch.
10.21 Change in Control and Covenant Not to Compete Agreement
dated August 25, 1995 between the Registrant and Thomas J.
Ensch.
10.22 First Amendment, dated October 27, 1995, to Credit Agree-
ment dated September 29, 1995 between the Registrant,
Comerica Bank and The First National Bank of Chicago.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse LLP.
27.1 Financial Data Schedule.
99.1 Proxy Statement for the Registrant's 1996 Annual Meeting of
Shareholders - filed by the Registrant pursuant to
Regulation 14A and incorporated herein by reference.
Champion Enterprises, Inc. will, for a nominal charge, provide a copy of any
of the above Exhibits to any shareholder upon written request addressed to
the Public Relations Department, Champion Enterprises, Inc., 2701 University
Drive, Suite 320, Auburn Hills, Michigan 48326.
Pursuant to the provisions of Act 284, Public Acts of 1972,
as amended, the undersigned corporation executes the following
Articles.
1. The present name of the corporation is Champion
Enterprises, Inc.
2. The corporation identification number (CID) assigned by
the Bureau is 419-343.
3. All former names of the corporation are: NONE
4. The date of filing the original Articles of
Incorporation was March 9, 1987.
5. The Restated Articles of Incorporation of the
corporation attached as Exhibit A supersede the
Articles of Incorporation as amended and shall be the
Articles of Incorporation for the corporation.
6. The Restated Articles of Incorporation of the
corporation attached as Exhibit A were duly adopted on
the 26th day of June, 1987, in accordance with the
provisions of Section 642 of the Act, by the written
consent of all the shareholders entitled to vote in
accordance with Section 407(3) of the Act.
Signed this 26th day of June, 1987
By: /S/ RODNEY A. KNIGHT
Rodney A. Knight, Vice President
EXHIBIT A
Restated Articles of Incorporation
of
CHAMPION ENTERPRISES, INC.
ARTICLE I
The name of the corporation is Champion Enterprises, Inc.
ARTICLE II
The purpose or purposes for which the corporation is
organized is to engage in any activity within the purposes for
which corporations may be organized under the Business
Corporation Act of Michigan.
ARTICLE III
The total number of shares of stock which the corporation
shall have the authority to issue is 20,000,000 shares, of which
15,000,000 shares shall be Common Stock of the par value of
$1.00 each ("Common Stock") and 5,000,000 shares shall be
Preferred Stock of no par value ("Preferred Stock").
Preferred Stock
The Board of Directors is authorized at any time and from
time to time to provide for the issuance of shares of Preferred
Stock in one or more series with such voting powers, full or
limited, or without voting powers, and with such designations,
preferences and relative participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof as shall be expressed in the resolution or resolutions
establishing such series and providing for the issuance thereof
adopted by the Board of Directors and as are not expressed in
these Articles of Incorporation as hereafter amended,
including, without limiting the generality of the foregoing, the
following:
(1) the designation and number of shares of such series;
(2) the dividend rate of such series, the conditions and
dates upon which such dividends shall be payable, the
preference or relation of such dividends to dividends
payable on any other class or classes of capital stock
of the corporation, and whether such dividends shall be
cumulative or noncumulative;
(3) whether the shares of such series shall be subject to
redemption by the corporation, and, if made subject to
such redemption, the times, prices, rates, adjustments
and other terms and conditions of such redemption;
(4) The terms and amount of any sinking or similar fund
provided for the purchase or redemption of the shares
of such series;
(5) whether the shares of such series shall be convertible
into or exchangeable for shares of capital stock or
other securities of the corporation or of any other
corporation, and, if provision be made for conversion
or exchange, the times, prices, rates, adjustments and
other terms and conditions of such conversion or
exchange;
(6) the extent, if any, to which the holders of the shares
of such series shall be entitled to vote as a class or
otherwise with respect to the election of directors or
otherwise;
(7) the restrictions and conditions, if any, upon the issue
or reissue of any additional Preferred Stock ranking on
a parity with or prior to such shares as to dividends
or upon dissolution;
(8) the rights of the holders of the shares of such series
upon the dissolution of, or upon the distribution of
assets of, the corporation, which rights may be
different in the case of voluntary dissolution than the
case of involuntary dissolution; and
(9) any other relative rights, preferences or limitations
of shares of such series consistent with this Article
and applicable law.
The powers, preferences and relative participating, optional
and other special rights of each series of Preferred Stock, and
the qualifications, limitations or restrictions thereof, if any,
may differ from those of any and all other series at any time
outstanding. All shares of any one series of Preferred Stock
shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereon
shall be cumulative. The terms of any series of Preferred Stock
may be amended without consent of the holders of any other
series of Preferred Stock or of the Common Stock, provided such
amendment does not adversely affect the holders of such other
series of Preferred Stock or the Common Stock.
Shares of any series of Preferred Stock which have been
issued and reacquired in any manner and are not held as treasury
shares, including shares redeemed by purchase (whether through
the operation of a retirement or sinking fund or otherwise),
will have the status of authorized and unissued Preferred Stock
and may be reissued as a part of the series of which they were
originally a part or may be reclassified into and reissued as
part of a new series.
Common Stock
Each holder of Common Stock shall be entitled to one vote
for each share of Common Stock held of record on all matters on
which shareholders generally are entitled to vote. Subject to
the provisions of law and the rights of the Preferred Stock and
any other class or series of stock having a preference as to
dividends over the Common Stock then outstanding, dividends may
be paid on the Common Stock at such times and in such amounts as
the Board of Directors shall determine. Upon the dissolution,
liquidation or winding up of the corporation, after any
preferential amounts to be distributed to the holders of the
Preferred Stock and any other class or series of stock having a
preference over the Common Stock then outstanding have been paid
or declared and set apart for payment, the holders of the Common
Stock shall be entitled to receive all the remaining assets of
the corporation available for distribution to its shareholders
ratably in proportion to the number of shares held by them,
respectively.
ARTICLE IV
The address of the registered office is:
615 Griswold Street
Detroit, Michigan 48226
The mailing address of the registered office is:
615 Griswold Street
Detroit, Michigan 48226
The name of the resident agent at the registered office is
The Corporation Company.
ARTICLE V
No director of the corporation shall be personally liable to
the corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director, provided that the
foregoing shall not eliminate or limit the liability of a
director for any of the following: (i) a breach of the
director's duty of loyalty to the corporation or its
shareholders; (ii) acts or omissions not in good faith or that
involve intentional misconduct or knowing violation of law;
(iii) a violation of Section 551(1) of the Michigan Business
Corporation Act; (iv) a transaction from which the director
derived an improper personal benefit; or (v) an act or omission
occurring before March 1, 1987. If the Michigan Business
Corporation Act hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then
the liability of a director of the corporation, in addition to
the limitation on personal liability contained herein, shall be
limited to the fullest extent permitted by the amended Michigan
Business Corporation Act. No amendment or repeal of this
Article V shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with
respect to any acts or omissions of such director occurring
prior to any such amendment or repeal.
ARTICLE VI
When a compromise or arrangement or a plan of reorganization
of this corporation is proposed between this corporation and its
creditors or any class of them or between this corporation and
its shareholders or any class of them, a court of equity
jurisdiction within the state, on application of a receiver
appointed for the corporation, may order a meeting of the
creditors or class of creditors or of the shareholders or class
of shareholders to be affected by the proposed compromise or
arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in
value of the creditors or class of creditors, or of the
shareholders or class of shareholders, to be affected by the
proposed compromise or arrangement or a reorganization, agree to
a compromise or arrangement or a reorganization of this
corporation as a consequence of the compromise or arrangement,
the compromise or arrangement and the reorganization, if
sanctioned by the court to which the application has been made,
shall be binding on all the creditors or class of creditors, or
on all the shareholders or class of shareholders, and also on
this corporation.
<PAGE>
ELECTION PURSUANT TO SECTION 2
OF ACT NO. 58 OF THE
PUBLIC ACTS OF 1988
1. The present name of the corporation is Champion Enterprises,
Inc.
2. The corporation identification number (CID) assigned by the
Bureau is 419-343.
3. The location of its registered office is: 615 Griswold
Street, Detroit, Michigan 48226.
Champion Enterprises, Inc., hereby files with the Department
of Commerce, pursuant to Section 2 of Act No. 58 of the Public
Acts of 1988, the following resolution adopted by the Board of
Directors of the Corporation on May 26, 1988:
RESOLVED, that the Board of Directors of Champion
Enterprises, Inc., a Michigan corporation that is an
"issuing public corporation" as defined in Section 793 of
the Michigan Business Corporation Act, hereby elects,
pursuant to Section 2 of Act No. 58 of the Public Acts of
1988, to have such Act apply to the Company effective as of
May 31, 1988.
CHAMPION ENTERPRISES, INC.
By: /S/ JOSEPH J. MORRIS
Joseph J. Morris, President
(Title and Name)
<PAGE>
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NY 10019
212 246 5070
May 5, 1993
Thomas Pierson, Deputy Director
Michigan Department of Commerce
Corporation & Security Bureau
6546 Mercantile Way
Lansing, Michigan 48909
RE: CHANGE OF REGISTERED OFFICE ADDRESS
Dear Mr. Pierson,
This letter is to certify that The Corporation Company has
changed its address from: 615 Griswold Street, Detroit, Michigan
48226 to: 30600 Telegraph Road, Bingham Farms, Michigan 48025.
We will notify all active corporations for which The Corporation
Company is the resident agent of this change of address.
Enclosed is our check for $52,000.00 to cover the filing fee for
the 10,294 active profit and non-profit corporations for which
your records indicate The Corporation Company is agent. This
payment will include the fee for providing us with an
alphabetical listing of the names of all the corporations for
which the registered office has been changed. Also included in
this payment is the fee for a clean-up list which we will
request within 30 days of the filing.
Please confirm in writing the date that this change was
effectuated on your records.
Thank you in advance for your cooperation in this matter.
Very truly yours,
/S/ KENNETH J. UVA
Kenneth J. Uva
Vice President
KJU:mh
encl.
Sworn before me this 5th day of May, 1993.
/S/ Theresa Alfieri
Theresa Alfieri
Notary Public, State of New York
No. 4703698
Qualified in Kings County
Certificate Filed In New York County
Commission Expires Dec. 31, 1993
<PAGE>
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
1. The present name of the corporation is Champion Enterprises,
Inc.
2. The corporation identification number (CID) assigned by the
Bureau is 419-343.
3. The location of its registered office is: 30600 Telegraph
Road, Bingham Farms, Michigan 48025.
4. Article III of the Articles of Incorporation is hereby
amended to read as follows:
As set forth on Exhibit A
5. b. The foregoing amendment to the Articles of
Incoproration was duly adopted on the 1st day of May,
1995. The amendment:
was duly adopted in accordance with Section 611(2) of
the Act by the vote of the shareholders if a profit
corporation, or by the vote of the shareohlders or
members if a nonprofit corporation, or by the vote of
the directors if a nonprofit corporation organized on a
nonstock directorship basis. The necessary votes were
cast in favor of the amendment.
Signed this 3rd day of May, 1995.
By: /S/ LOUIS M. BALIUS
Louis M. Balius
Vice President-Secretary and
General Counsel
EXHIBIT A
ARTICLE III
The total number of shares of stock which the corporation
shall have authority to issue is 35,000,000 shares, of which
30,000,000 shares shall be Common Stock of the par value of
$1.00 each ("Common Stock"), and 5,000,000 shares shall be
Preferred Stock of no par value ("Preferred Stock").
Preferred Stock
The Board of Directors is authorized at any time and from
time to time to provide for the issuance of shares of Preferred
Stock in one or more series with such voting powers, full or
limited, or without voting powers, and with such designations,
preferences and relative participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof as shall be expressed in the resolution or resolutions
establishing such series and providing for the issuance thereof
adopted by the Board of Directors and as are not expressed in
these Articles of Incorporation as hereafter amended, including,
without limiting the generality of the foregoing, the following:
(1) the designation and number of shares of such series;
(2) the dividend rate of such series, the conditions and
dates upon which such dividends shall be payable, the
preference or relation of such dividends to dividends
payable on any other class or classes of capital stock
of the corporation, and whether such dividends shall be
cumulative or noncumulative;
(3) whether the shares of such series shall be subject to
redemption by the corporation, and, if made subject to
such redemption, the times, prices, rates, adjustments
and other terms and conditions of such redemption;
(4) the terms and amount of any sinking or similar fund
provided for the purchase or redemption of the shares
of such series;
(5) whether the shares of such series shall be convertible
into or exchangeable for shares of capital stock or
other securities of the corporation or of any other
corporation, and, if provision be made for conversion
or exchange, the times, prices, rates, adjustments and
other terms and conditions of such conversion or
exchange;
(6) the extent, if any, to which the holders of the shares
of such series shall be entitled to vote as a class or
otherwise with respect to the election of directors or
otherwise;
(7) the restrictions and conditions, if any, upon the issue
or reissue of any additional Preferred Stock ranking on
a parity with or prior to such shares as to dividends
or upon dissolution;
(8) the rights of the holders of the shares of such series
upon the dissolution of, or upon the distribution of
assets of, the corporation, which rights may be
different in the case of voluntary dissolution than the
case of involuntary dissolution; and
(9) any other relative rights, preferences or limitations
of shares of such series consistent with this Article
and applicable law.
The powers, preferences and relative participating, optional
and other special rights of each series of Preferred Stock, and
the qualifications, limitations or restrictions thereof, if any,
may differ from those of any and all other series at any time
outstanding. All shares of any one series of Preferred Stock
shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereon
shall be cumulative. The terms of any series of Preferred Stock
may be amended without consent of the holders of any other
series of Preferred Stock or of the Common Stock, provided such
amendment does not adversely affect the holders of such other
series of Preferred Stock or the Common Stock.
Shares of any series of Preferred Stock which have been
issued and reacquired in any manner and are not held as treasury
shares, including shares redeemed by purchase (whether through
the operation of a retirement or sinking fund or otherwise),
will have the status of authorized and unissued Preferred Stock
and may be reissued as a part of the series of which they were
originally a part or may be reclassified into and reissued as a
part of a new series.
Common Stock
Each holder of Common Stock shall be entitled to one vote
for each share of Common Stock held of record on all matters on
which shareholders generally are entitled to vote. Subject to
the provisions of law and the rights of the Preferred Stock and
any other class or series of stock having a preference as to
dividends over the Common Stock then outstanding, dividends may
be paid on the Common Stock at such times and in such amounts as
the Board of Directors shall determine. Upon the dissolution,
liquidation or winding up of the corporation, after any
preferential amounts to be distributed to the holders of the
Preferred Stock and any other class or series of stock having a
preference over the Common Stock then outstanding have been paid
or declared and set apart for payment, the holders of the Common
Stock shall be entitled to receive all the remaining assets of
the corporation available for distribution to its shareholders
ratably in proportion to the number of shares held by them,
respectively.
<PAGE>
CERTIFICATE OF AMENDMENT TO
ARTICLES OF INCORPORATION DETERMINING
THE TERMS OF THE SERIES A PREFERRED STOCK
of
CHAMPION ENTERPRISES, INC.
Pursuant to the provisions of Act 284, Public Acts of 1972,
the undersigned corporation executes the following Certificate:
1. The present name of the corporation is Champion
Enterprises, Inc. (the "Corporation").
2. The Corporation Identification Number (CID) assigned by
the Bureau is 419-343.
3. The location of the registered office is Suite 3275,
30600 Telegraph Road, Bigham Farms, Michigan 48025.
4. Article III of the Amended and Restated Articles of
Incorporation of the Corporation is hereby amended by adding the
following:
Series A Preferred Stock, No Par Value
A. Designation and Amount. The shares of such series
shall be designated as "Series A Preferred Stock, no par value,"
and the number of shares constituting such series shall be
300,000.
B. Dividends and Distributions.
(1) Subject to any prior and superior rights of the
holders of any series of Preferred Stock ranking prior and
superior to the shares of Series A Preferred Stock with respect
to dividends that may be authorized by the Articles of
Incorporation, the holders of shares of Series A Preferred Stock
shall be entitled prior to the payment of any dividends on
shares ranking junior to the Series A Preferred Stock to
receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, quarterly dividends
payable in cash on the last day of January, April, July and
October in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the
greater of (a) $1.00 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or
other distributions other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $1.00 per share, of the Corporation (the
"Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event
the Corporation shall at any time after February 5, 1996 (the
"Rights Declaration Date") (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.
(2) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (1) above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable
in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(3) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue
of such shares of Series A Preferred Stock, unless the date of
issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series
A 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 of Directors may
fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date
shall be no more than 30 days prior to the date fixed for the
payment thereof.
(4) Dividends in full shall not be declared or paid or
set apart for payment on the Series A Preferred Stock for a
dividend period terminating on the Quarterly Dividend Payment
Date unless dividends in full have been declared or paid or set
apart for payment on the Preferred Stock of all series (other
than series with respect to which dividends are not cumulative
from a date prior to such dividend date) for the respective
dividend periods terminating on such dividend date. When the
dividends are not paid in full on all series of the Preferred
Stock, the shares of all series shall share ratably in the
payment of dividends, including accumulations, if any, in
accordance with the sums which would be payable on said shares
if all dividends were declared and paid in full.
C. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(1) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred
Stock shall entitle the holder thereof to 100 votes on all
matters voted on at a meeting of the shareholders of the
Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend
on Common Stock payable in shares of Common Stock, or (ii)
subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to
which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
(2) Except as otherwise provided herein or by law, the
holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock shall vote together as one
voting group on all matters voted on at a meeting of
shareholders of the Corporation.
(3) Except as set forth herein, holders of Series A
Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
D. Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as
provided in Section B. are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:
(a) declare or pay dividends on, make any other
distributions on, 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 Series A Preferred Stock;
(b) declare or pay dividends on or make any other
distributions on any shares or stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A 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;
(c) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock;
(d) purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock or any shares of
stock ranking on a parity with the Series A 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.
(2) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the
Corporation could, under paragraph (A) of this Section 5,
purchase or otherwise acquire such shares at such time and in
such manner.
E. Liquidation, Dissolution or Winding Up.
(1) Upon any liquidation, dissolution or winding up of
the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received $100.00 per share,
plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the
holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to
the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth
in subparagraph (3) below to reflect such events as stocks
splits, stock dividends and recapitalizations with respect to
the Common Stock (such number in clause (ii), the "Adjustment
Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Preferred Stock
and Common Stock, respectively, holders of Series A Preferred
Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be
distributed.
(2) In the event, however, that there are not
sufficient assets available to permit payment in full of the
Series A Liquidation Preference and the liquidation preferences
of all other series of Preferred Stock, if any, which rank on a
parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(3) In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by
a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
F. Merger, Consolidation. etc. In case the Corporation
shall enter into any merger, consolidation, combination or other
transaction in which the shares of Common Stock are exchanged or
changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A Preferred
Stock shall at the same time be similarly exchanged or changed
in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount
of stock, securities, cash and/or any other property (payable in
kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of
shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior
to such event.
G. Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
H. Ranking. The Series A Preferred Stock shall rank on a
parity with all other series of the Corporation's Preferred
Stock as to the payment of dividends and other distribution of
assets, unless, in accordance with authorization in the Articles
of Incorporation, the terms of any such series shall provide
otherwise.
I. Amendment. The Articles of Incorporation of the
Corporation shall not be further amended in any manner which
would alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting
separately as one voting group.
J. Fractional Shares. Series A Preferred Stock may be
issued in fractions of a share which shall entitle the holder,
in proportion to such holder's fractional shares, to exercise
voting rights, receive dividends, participate in distributions
and to have the benefit of all other rights of holders of Series
A Preferred Stock.
5. The foregoing Amendment to the Amended and Restated
Articles of Incorporation of the Corporation was adopted on
January 9, 1996. The Amendment to the Amended and Restated
Articles of Incorporation of the Corporation was duly adopted by
the Board of Directors of the Corporation, without shareholder
action, pursuant to Sections 302(3) and 523 of the Act and
Article III of the Amended and Restated Articles of
Incorporation of the Corporation.
Signed this 8th day of February, 1996.
CHAMPION ENTERPRISES, INC.
By: /S/ A. JACQUELINE DOUT
A. Jacqueline Dout
Executive Vice President and
Chief Financial Officer
EXECUTION COPY
CHAMPION ENTERPRISES, INC.
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 29, 1995
COMERICA BANK, AS AGENT
TABLE OF CONTENTS
Page
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. REVOLVING CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Accrual of Interest and Maturity; Margin Adjustments. . . . . . 13
2.3 Prime-based Interest Payments . . . . . . . . . . . . . . . . . 14
2.4 Eurodollar-based Interest Payments. . . . . . . . . . . . . . . 15
2.5 Interest Payments on Conversions. . . . . . . . . . . . . . . . 15
2.6 Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7 Requests for Advances and Requests for
Refundings and Conversions of Advances. . . . . . . . . . . . . 15
2.8 Disbursement of Revolving Credit Advances . . . . . . . . . . . 17
2.9 Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.10 Prime-based Advance in Absence of Election
or Upon Default . . . . . . . . . . . . . . . . . . . . . . . . 18
2.11 Revolving Credit Commitment Fee . . . . . . . . . . . . . . . . 18
2.12 Reduction of Indebtedness . . . . . . . . . . . . . . . . . . . 19
2.13 Optional Reduction or Termination of
Revolving Credit Commitment . . . . . . . . . . . . . . . . . . 19
2.14 Extension of Revolving Credit Maturity Date . . . . . . . . . . 20
2.15 Application of Advances . . . . . . . . . . . . . . . . . . . . 21
2A. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . 21
2A.1 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 21
2A.2 Conditions to Issuance. . . . . . . . . . . . . . . . . . . . . 21
2A.3 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2A.4 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . 23
2A.5 Issuance Fees . . . . . . . . . . . . . . . . . . . . . . . . . 24
2A.6 Draws and Demands for Payment Under
Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 24
2A.7 Obligations Irrevocable . . . . . . . . . . . . . . . . . . . . 25
2A.8 Risk Under Letters of Credit. . . . . . . . . . . . . . . . . . 26
2A.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 27
2A.10 Right of Reimbursement. . . . . . . . . . . . . . . . . . . . . 28
2A.11 Existing Letters of Credit. . . . . . . . . . . . . . . . . . . 29
2B. SWING LINE CREDIT.. . . . . . . . . . . . . . . . . . . . . . . 29
2B.1 Swing Line Advances.. . . . . . . . . . . . . . . . . . . . . . 29
2B.2 Accrual of Interest . . . . . . . . . . . . . . . . . . . . . . 29
2B.3 Requests for Swing Line Advances. . . . . . . . . . . . . . . . 30
2B.4 Disbursement of Swing Line Advances.. . . . . . . . . . . . . . 31
2B.5 Refunding of or Participation Interest in
Swing Line Advances . . . . . . . . . . . . . . . . . . . . . . 31
2B.6 Quoted Rate Advance Interest Payments . . . . . . . . . . . . . 32
2B.7 Prime-based Advance Interest Payments . . . . . . . . . . . . . 33
2B.8 Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3. SPECIAL PROVISIONS, CHANGES IN CIRCUMSTANCES AND YIELD
PROTECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.1 Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . 33
3.2 Eurodollar Lending Office . . . . . . . . . . . . . . . . . . . 34
3.3 Change in Circumstances . . . . . . . . . . . . . . . . . . . . 34
3.4 Regulatory Changes. . . . . . . . . . . . . . . . . . . . . . . 34
3.5 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . 34
3.6 Capital Requirements. . . . . . . . . . . . . . . . . . . . . . 35
4. CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1 Execution of Notes and this Agreement . . . . . . . . . . . . . 36
4.2 Execution of Guaranty . . . . . . . . . . . . . . . . . . . . . 36
4.3 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . 36
4.4 Representations and Warranties -- All Parties. . . . . . . . . 36
4.5 Compliance with Certain Documents and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.6 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . 37
4.7 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.8 No Material Adverse Change. . . . . . . . . . . . . . . . . . . 37
4.9 Termination of Prior Agreement. . . . . . . . . . . . . . . . . 37
4.10 Facility Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 37
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 37
5.1 Organization, etc . . . . . . . . . . . . . . . . . . . . . . . 37
5.2 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . 38
5.5 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.6 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . . 38
5.8 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.9 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 39
5.10 Representations . . . . . . . . . . . . . . . . . . . . . . . . 39
5.11 Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 39
5.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 40
5.14 Environmental Liabilities . . . . . . . . . . . . . . . . . . . 40
5.15 Environmental Permits . . . . . . . . . . . . . . . . . . . . . 40
6. COMPANY'S AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . 40
6.1 Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.4 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.5 Notification of Default . . . . . . . . . . . . . . . . . . . . 42
6.6 Legal Existence . . . . . . . . . . . . . . . . . . . . . . . . 42
6.7 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 42
6.8 Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.9 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 43
6.10 Notification of ERISA Matters . . . . . . . . . . . . . . . . . 43
6.11 Consolidated Funded Debt Ratio. . . . . . . . . . . . . . . . . 43
6.12 Consolidated Fixed Charge Coverage Ratio. . . . . . . . . . . . 43
6.13 Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . 43
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.1 Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.2 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.2A Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . 44
7.3 Guarantee Obligations . . . . . . . . . . . . . . . . . . . . . 44
7.4 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.5 Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.6 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.7 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.8 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.9 Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.10 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 46
8. ENVIRONMENTAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . 46
8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.2 Copies of Pleadings . . . . . . . . . . . . . . . . . . . . . . 46
8.3 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.4 Retention of Expert . . . . . . . . . . . . . . . . . . . . . . 46
8.5 Environmental Audit . . . . . . . . . . . . . . . . . . . . . . 46
8.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 47
8.7 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9. DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.1 Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.2 Exercise of Remedies. . . . . . . . . . . . . . . . . . . . . . 49
9.3 Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . 50
9.4 Waiver by Company of Certain Laws . . . . . . . . . . . . . . . 50
9.5 Waiver of Defaults. . . . . . . . . . . . . . . . . . . . . . . 50
9.6 Interest on Default . . . . . . . . . . . . . . . . . . . . . . 50
10. PAYMENTS, RECOVERIES AND COLLECTIONS. . . . . . . . . . . . . . . . . 51
10.1 Payment Procedure . . . . . . . . . . . . . . . . . . . . . . . 51
10.2 Pro-rata Recovery . . . . . . . . . . . . . . . . . . . . . . . 52
10.3 Application of Proceeds . . . . . . . . . . . . . . . . . . . . 52
11. Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
11.1 Appointment of Agent. . . . . . . . . . . . . . . . . . . . . . 52
11.2 Deposit Account with Agent. . . . . . . . . . . . . . . . . . . 53
11.3 Scope of Agent's Duties . . . . . . . . . . . . . . . . . . . . 53
11.4 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . 54
11.5 Loans by Agent. . . . . . . . . . . . . . . . . . . . . . . . . 54
11.6 Credit Decisions. . . . . . . . . . . . . . . . . . . . . . . . 54
11.7 Agent's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.8 Authority of Agent to Enforce Notes and This Agreement. . . . . 55
11.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 55
11.10 Knowledge of Default. . . . . . . . . . . . . . . . . . . 56
11.11 Agent's Authorization; Action by Banks. . . . . . . . . . 56
11.12 Enforcement Actions by the Agent. . . . . . . . . . . . . 56
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.1 Accounting Principles . . . . . . . . . . . . . . . . . . . . . 57
12.2 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . 57
12.3 Law of Michigan . . . . . . . . . . . . . . . . . . . . . . . . 57
12.4 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.5 Closing Costs and Other Costs . . . . . . . . . . . . . . . . . 58
12.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.7 Further Action. . . . . . . . . . . . . . . . . . . . . . . . . 59
12.8 Successors and Assigns; Participations. . . . . . . . . . . . . 59
12.9 Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.11 Amendment and Waiver. . . . . . . . . . . . . . . . . . . . . . 62
12.12 Taxes and Fees. . . . . . . . . . . . . . . . . . . . . . . . . 63
12.13 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 63
12.14 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . 64
12.15 Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.16 Effective Upon Execution. . . . . . . . . . . . . . . . . . . . 64
12.17 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . 64
12.18 Complete Agreement; Conflicts . . . . . . . . . . . . . . . . . 64
12.19 Severability 65
12.20 Table of Contents and Headings. . . . . . . . . . . . . . . . . 65
12.21 Construction of Certain Provisions. . . . . . . . . . . . . . . 65
12.22 Independence of Covenants . . . . . . . . . . . . . . . . . . . 65
12.23 Reliance on and Survival of Various
Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
TABLE OF CONTENTS
(Continued)
EXHIBITS
EXHIBIT "A" - REQUEST FOR REVOLVING CREDIT ADVANCE
EXHIBIT "B" - REVOLVING CREDIT NOTE
EXHIBIT "C" - PERMITTED LIENS
EXHIBIT "D" - STATES OF INCORPORATION AND QUALIFICATION/LIST OF
SUBSIDIARIES
EXHIBIT "E" - PENSION PLANS
EXHIBIT "F" - FLOOR PLAN FINANCING AND REPURCHASE ARRANGEMENTS
EXHIBIT "G" - PERMITTED INDEBTEDNESS
EXHIBIT "H" - REQUEST FOR SWING LINE ADVANCE
EXHIBIT "J" - SWING LINE NOTE
EXHIBIT "K" - FORM OF SWING LINE LOAN PARTICIPATION CERTIFICATE
EXHIBIT "L" - FORM OF ASSIGNMENT AGREEMENT
SCHEDULES
SCHEDULE 1.1 - EXISTING LETTERS OF CREDIT
SCHEDULE 5.12 - ENVIRONMENTAL MATTERS
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") is made as of the 29th
day of September, 1995, by and among Comerica Bank and the other
financial institutions from time to time parties hereto as
lenders of the Revolving Credit (individually, "Revolving Credit
Bank", and collectively "Revolving Credit Banks"), Comerica
Bank, as lender of the Swing Line Credit ("Swing Line Bank" and
together with the Revolving Credit Banks, collectively referred
to as the "Banks"), Comerica Bank, as agent for the Banks (in
such capacity, "Agent"), and Champion Enterprises, Inc., a
Michigan corporation ("Company").
1. DEFINITIONS
For the purposes of this Agreement the following terms will
have the following meanings:
"Advance(s)" shall mean Revolving Credit Advances and Swing
Line Advances.
"Affiliate" shall mean, with respect to any Person, any
other Person or group acting in concert in respect of the first
Person that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under
common control with such first Person. For purposes of this
definition, "control" (including, with correlative meanings, the
terms "controlled by" and "under common control with"), as used
with respect to any Person or group of Persons, shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of such Person,
whether through the ownership of voting securities or by
contract or otherwise.
"Agent" shall mean Comerica Bank, in its capacity as agent
hereunder and issuer of the Letters of Credit, or any successor
Agent appointed in accordance with Section 11.4 hereof.
"Alternate Base Rate" shall mean for any day a rate per
annum (rounded upwards, if necessary, to the next higher 1/16 of
1%) equal to the Federal Funds Effective Rate in effect on such
day plus one percent (1%).
"Applicable Interest Rate" shall mean (i) in respect of a
Revolving Credit Advance, the Eurodollar-based Rate or the
Prime-based Rate, applicable to such Advance (in the case of a
Eurodollar-based Advance, for the relevant Interest Period), and
(ii) in respect of a Swing Line Advance, the Prime-based Rate or
the Quoted Rate, applicable to such Advance, for the relevant
Interest Period, as selected by Company from time to time
subject to the terms and conditions of this Agreement.
"Applicable Margin" shall mean, as of the date of
determination thereof, the following margins:
If Consolidated Funded The Applicable Margin is:
Debt Ratio ("x") is: Prime-based Rate Eurodollar-based
rate
equal to or greater than
1.75 .00 1.25%
equal to or greater than
1.25 but less than 1.75 .00 1.0%
equal to or greater than
.75 but less than 1.25 .00 .75%
equal to or greater than
.40 but less than .75 .00 .60%
less than .40 .00 .45%
"Banks" shall mean Comerica Bank and such other financial
institutions from time to time parties hereto as lenders and
shall include the Revolving Credit Banks and the Swing Line Bank
and any assignee which becomes a Bank pursuant to Section 12.8
hereof.
"Business Day" shall mean any day (other than a Saturday or
Sunday) on which commercial banks are open for domestic and
international business (including dealings in foreign exchange)
in Detroit, London and New York.
"Capital Expenditures" shall mean, in respect of any Person
and without duplication, any amounts paid or accrued for a
period in respect of any purchase or other acquisition for value
of fixed or capital assets which, in accordance with GAAP, would
be capitalized in preparing a balance sheet of such Person.
"Capital Stock" means, with respect to any Person, any and
all shares, share capital, interests, participations, warrants,
options or other equivalents (however designated) of capital
stock of a corporation and any and all equivalent ownership
interests in a Person (other than a corporation), in each case
whether now outstanding or hereafter issued.
"Capitalized Lease" means, as applied to any Person, any
lease of any property (whether real, personal or mixed) which,
in conformity with GAAP, is required to be capitalized on the
balance sheet of such Person.
"Capitalized Lease Obligation" means the discounted present
value of the rental obligations of any Person under any
Capitalized Lease, determined in accordance with GAAP.
"Chandeleur" shall mean Chandeleur Homes, Inc., the seller
of the assets purchased by a Subsidiary pursuant to the Asset
Purchase Agreement dated January 5, 1995 among such Subsidiary,
Company, Chandeleur, and certain shareholders of Chandeleur.
"Commission" shall mean the Securities and Exchange
Commission.
"Consolidated" or "Consolidating" shall, when used with
reference to any financial information pertaining to (or when
used as a part of any defined term or statement pertaining to
the financial condition of) Company and its Subsidiaries, mean
the accounts of Company and its Subsidiaries determined on a
consolidated or consolidating basis, as the case may be, all
determined as to principles of consolidation and, except as
otherwise specifically required by the definition of such term
or by such statements, as to such accounts, in accordance with
GAAP.
"Consolidated EBITDA" shall mean as of the last day of each
fiscal quarter, the sum of Consolidated Net Income for the four
fiscal quarters then ended, plus Consolidated Interest Expense,
Consolidated Income Taxes and Consolidated depreciation and
amortization for such four fiscal quarters (to the extent such
depreciation and amortization were included in computing
Consolidated Net Income).
"Consolidated Fixed Charge Coverage Ratio" shall mean as of
the last day of each fiscal quarter, a ratio, the numerator of
which shall be Consolidated EBITDA for the four fiscal quarters
then ended, and the denominator of which shall be the sum of
Consolidated Interest Expense for such period, plus Consolidated
Capital Expenditures for such period, plus the total of all
principal payments paid or payable under loan obligations and
Capitalized Leases of Company and its Consolidated Subsidiaries
during such period.
"Consolidated Funded Debt" shall mean as of any applicable
date of determination, all indebtedness and liabilities of
Company and its Consolidated Subsidiaries for borrowed money or
which has been incurred in connection with the acquisition of
assets (other than notes payable to Dutch and obligations to
Chandeleur or Crest Ridge) in each case having a final maturity
of one year or longer from the date of origin thereof (but
including in any case all amounts outstanding under the
Revolving Credit Notes), including all payments in respect
thereof that are required within one year from the date of any
determination of Consolidated Funded Debt.
"Consolidated Funded Debt Ratio" shall mean as of the last
day of each fiscal quarter, a ratio, the numerator of which
shall be Consolidated Funded Debt and the denominator of which
shall be Consolidated EBITDA.
"Consolidated Income Taxes" shall mean for any period the
aggregate amount of taxes based on income or profits for such
period of the operations of Company and its Consolidated
Subsidiaries determined in accordance with GAAP (to the extent
such income and profits were included in computing Consolidated
Net Income).
"Consolidated Interest Expense" shall mean for any period
the aggregate gross interest expense (including amortization of
original issue discount and non-cash interest payments or
accruals and the interest component of Capitalized Lease
Obligations) of Company and its Consolidated Subsidiaries for
such period as determined in accordance with GAAP.
"Consolidated Net Income" for any period means the Net
Income of Company and its Consolidated Subsidiaries for such
period.
"Consolidated Net Worth" means as of any date all amounts
that would be included under stockholders' equity on a
Consolidated balance sheet of Company and its Consolidated
Subsidiaries determined in accordance with GAAP.
"Consolidated Subsidiary(ies)" shall mean those subsidiaries
of Company which are treated as Consolidated for purposes of
GAAP.
"Consolidated Tangible Net Worth" shall mean as of any date,
Consolidated Net Worth less Consolidated intangible assets, all
as determined in accordance with GAAP.
"Crest Ridge" shall mean Crest Ridge Homes, Inc., a Texas
corporation, the seller of the assets purchased by a Subsidiary
pursuant to the Asset Purchase Agreement dated January 5, 1995
among such Subsidiary, Company, Crest Ridge, and certain
shareholders of Crest Ridge.
"De Minimis Matters" shall mean environmental or other
matters, the existence of which and any liability which may
result therefrom, would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
financial condition or businesses of the Company and its
Subsidiaries (taken as a whole) or on the ability of the Company
and Subsidiaries (taken as a whole) to pay their debts, as such
debts become due.
"Dutch" shall mean Dutch Housing, Inc., the seller of the
assets purchased by a Subsidiary pursuant to the Asset Purchase
Agreement dated as of January 31, 1994 among such Subsidiary,
Dutch, Company and certain shareholders of Dutch.
"Environmental Laws" shall mean all federal, state and local
laws including statutes, regulations, ordinances, codes, rules,
and other governmental restrictions and requirements, relating
to environmental pollution, contamination or other impairment of
any nature, any hazardous or other toxic substances of any
nature, whether liquid, solid and/or gaseous, including smoke,
vapor, fumes, soot, acids, alkalis, chemicals, wastes, by-
products, and recycled materials. These Environmental Laws shall
include but not be limited to the Federal Solid Waste Disposal
Act, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976, the
Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and
Reauthorization Act of 1986, regulations of the Environmental
Protection Agency, regulations of the Nuclear Regulatory Agency,
regulations of any state department of natural resources or
state environmental protection agency now or at any time
hereafter in effect and local health department ordinances.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, or any successor act or code.
"Eurodollar-based Advance" shall mean an Advance which bears
interest at the Eurodollar-based Rate.
"Eurodollar-based Rate" shall mean, with respect to any
Eurodollar-Interest Period, a per annum interest rate which is
equal to the Applicable Margin plus the quotient of:
(a) the per annum interest rate at which Agent's Eurodollar
Lending Office offers deposits to prime banks in the
eurodollar market in an amount comparable to the
relevant Eurodollar-based Advance and for a period
equal to the relevant Eurodollar-Interest Period at
approximately 11:00 a.m. Detroit time two (2) Business
Days prior to the first day of such Eurodollar-
Interest Period; divided by
(b) an amount equal to one minus the stated maximum rate
(expressed as a decimal) of all reserve requirements
(including, without limitation, any marginal,
emergency, supplemental, special or other reserves)
that is specified on the first day of such Interest
Period by the Board of Governors of the Federal Reserve
System (or any successor agency thereto) for
determining the maximum reserve requirement with
respect to Eurodollar funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of such
Board) maintained by a member bank of such System, such
sum to be rounded upward, if necessary, to the nearest
whole multiple of 1/16 of 1%.
"Eurodollar-Interest Period" shall mean the Interest Period
applicable to a Eurodollar-based Advance.
"Eurodollar Lending Office" shall mean (a) Agent's office
located at Grand Cayman Islands, British West Indies, or such
other branch of Agent, domestic or foreign, as it may hereafter
designate as its Eurodollar Lending Office by notice to Company
and the Banks and (b) as to each of the Banks, its office,
branch or affiliate located at its address set forth on the
signature pages hereof (or identified thereon as a Eurodollar
Lending Office), or at such other office, branch or affiliate of
such Bank as it may designate as its Eurodollar Lending Office
by notice to Company and Agent.
"Event of Default" shall mean any of those conditions or
events listed in Section 9.1 of this Agreement.
"Existing Letters of Credit" shall mean the letters of
credit described on Schedule 1.1.
"Federal Funds Effective Rate" shall mean, for any day, a
fluctuating interest rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not
a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by
Bank from three Federal funds brokers of recognized standing
selected by it, all as conclusively determined by Agent, such
sum to be rounded upward, if necessary, to the nearest whole
multiple of 1/16 of 1%.
"Fees" shall mean the Letter of Credit Fee and the Revolving
Credit Commitment Fee.
"GAAP" shall mean generally accepted accounting principles
as in effect on December 31, 1994 as such generally accepted
accounting principles were applied in the preparation of the
financial statements of Company and its Consolidated
Subsidiaries dated as of December 31, 1994.
"Guaranty" shall mean the Guaranty of the Indebtedness dated
as of the date hereof, executed and delivered by the Guarantors
to the Banks.
"Guarantors" shall mean Champion Home Builders Co., Moduline
International, Inc., Lamplighter Homes, Inc., Champion Motor
Coach, Inc., Dutch Housing, Inc., Chandeleur Homes, Inc., Crest
Ridge Homes, Inc., Builders Credit Corporation, Champion
Financial Corporation, and any other Person guaranteeing the
obligations of Company to Banks.
"Indebtedness" shall mean all indebtedness and liabilities
(including interest, Fees, obligations under indemnities and all
other charges) arising under this Agreement or the Loan
Documents, of Company to the Banks or the Agent, now owing or
that may be hereafter by Company to the Banks or the Agent, with
interest thereon according to the rates and terms specified, or
as provided by law, and any and all consolidations, amendments,
renewals, replacements or extensions of the foregoing.
"Interest Period" shall mean (i) with respect to a
Eurodollar-based Advance, one (1), two (2), three (3) or six (6)
months as selected by Company pursuant to Section 2.7, provided,
however, that any Eurodollar-Interest Period which commences on
the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month and
(ii) with respect to a Swing Line Advance, shall mean a period
of one (1) to thirty (30) days agreed to in advance by Company
and the Swing Line Bank as selected by Company pursuant to
Section 2B.3. Each Interest Period which would otherwise end on
a day which is not a Business Day shall end on the next
succeeding Business Day or, if such next succeeding Business Day
falls in the next succeeding calendar month, on the next
preceding Business Day, and no Interest Period which would end
after the Revolving Credit Maturity Date shall be permitted with
respect to any Advance.
"Issuing Office" shall mean Agent's office located at 500
Woodward Avenue, Detroit, Michigan 48226 or such other office as
Agent shall designate as its Issuing Office.
"Letter of Credit Agreement" shall mean any and all standby
letter of credit applications and agreements and any and all
similar documents and agreements, executed and delivered by
Company to Agent with respect to any Letter of Credit and any
and all present and future amendments thereto.
"Letters of Credit" shall mean any and all present and
future standby letters of credit issued by Agent for the account
of Company, or which Agent is committed or otherwise obligated
to issue for the account of Company, in accordance with the
terms of this Agreement and as further governed by and subject
to any Letter of Credit Agreement(s) executed by Company with
respect thereto.
"Letter of Credit Cash Collateral" shall mean cash deposited
by Company to secure Reimbursement Obligations in the full
amount of all outstanding Letters of Credit pursuant to
agreements in form and substance satisfactory to Agent.
"Letter of Credit Documents" is defined in Section 2A.7(a)
hereof.
"Letter of Credit Fee" shall mean a per annum fee on the
aggregate face amount of all Letters of Credit, determined as
follows:
If Consolidated Funded The Letter of Credit Fee is:
Debt Ratio ("x") is:
equal to or greater than
1.75 1.25%
equal to or greater than
1.25 but less than 1.75 1.00%
equal to or greater than
.75 but less than 1.25 .75%
equal to or greater than
.40 but less than .75 .60%
less than .40 .45%
"Letter of Credit Maximum Amount" shall mean Ten Million
Dollars ($10,000,000).
"Lien" shall mean any mortgage, pledge, encumbrance,
security interests, lien or charge of any kind.
"Loan Documents" shall mean this Agreement, the Notes, the
Guaranty, the Letter of Credit Documents, and any other
documents, certificates, instruments or agreements executed
pursuant to or in connection with any such document or this
Agreement as such documents may be amended from time to time.
"Majority Banks" shall mean at any time Banks holding not
less than sixty-six and two thirds percent (66-2/3%) of the
Percentages, or, if the commitment of the Banks to make Advances
has been terminated, Banks holding not less than sixty-six and
two thirds percent (66-2/3%) of the Indebtedness outstanding
under the Notes.
"Maximum Commitment" shall mean Seventy Million Dollars
($70,000,000).
"Net Income" of any Person for any period means the net
income (loss) of such Person for such period, determined in
accordance with GAAP.
"Notes" shall mean the Revolving Credit Notes and the Swing
Line Notes.
"Percentage" shall mean sixty-four and 2857/10000 percent
(64.2857%) with respect to Comerica Bank and Thirty-Five and
7143/10000 percent (35.7143%) with respect to The First National
Bank of Chicago, as adjusted from time to time to account for
assignments permitted by Section 12.8.
"Permitted Acquisition" shall mean any acquisition by the
Company or any Subsidiary of all or substantially all of the
assets of another Person, or of a division or line of business
of another Person, or shares of stock or other ownership
interests of another Person, which satisfies and/or is conducted
in accordance with the following requirements:
(a) Such acquisition is of a business or Person engaged in
a line of business which is compatible with, or
complementary to, the business of the Company, or is
engaged in a manufacturing or assembly business using
systems or techniques not unlike those of the Company
or any Subsidiary;
(b) Both immediately before and after such acquisition no
Event of Default, or event which with the giving of
notice or the passage of time or both would constitute
an Event of Default, shall have occurred and be
continuing;
(c) Based upon financial statements of the business or
Person being acquired in a form reasonably satisfactory
to the Agent and the Banks, the Company has
demonstrated that on a pro forma basis after giving
effect to such acquisition, it will continue to comply
with all of the terms and conditions of this Agreement
and the Loan Documents for a period of not less than
one year following the date of such acquisition; and
(d) The Board of Directors (or other Person(s) exercising
similar functions) of the seller of the assets or
issuer of the shares of stock or other ownership
interests being acquired shall not have disapproved
such transaction or recommended that such transaction
be disapproved.
"Permitted Liens" shall mean with respect to Company and all
Guarantors:
(a) liens for taxes not yet due and payable or which
are being contested in good faith by appropriate proceedings
diligently pursued, provided that such provision for the
payment of all such taxes has been made on the books of such
Person as may be required by generally accepted accounting
principles, consistently applied;
(b) mechanics', materialmen's, banker's, carriers',
warehousemen's and similar liens and encumbrances arising in
the ordinary course of business and securing obligations of
Company or any Guarantor that are not overdue for a period
of more than 60 days or are being contested in good faith by
appropriate proceedings diligently pursued, provided that in
the case of any such contest (i) any proceedings commenced
for the enforcement of such liens and encumbrances shall
have been duly suspended; and (ii) such provision for the
payment of such liens and encumbrances has been made on the
books of Company and Guarantors as may be required by GAAP;
(c) liens arising in connection with worker's
compensation, unemployment insurance, old age pensions and
social security benefits and similar statutory obligations
which are not overdue or are being contested in good faith
by appropriate proceedings diligently pursued, provided that
in the case of any such contest (i) any proceedings
commenced for the enforcement of such liens shall have been
duly suspended; and (ii) such provision for the payment of
such liens has been made on the books of Company and
Guarantors as may be required by GAAP;
(d)(i) liens incurred in the ordinary course of
business to secure the performance of statutory obligations
arising in connection with progress payments or advance
payments due under contracts with the United States
government or any agency thereof entered into in the
ordinary course of business and (ii) liens incurred or
deposits made in the ordinary course of business to secure
the performance of statutory obligations, bids, leases, fee
and expense arrangements with trustees and fiscal agents and
other similar obligations (exclusive of obligations incurred
in connection with the borrowing of money, any lease-
purchase arrangements or the payment of the deferred
purchase price of property), provided that full provision
for the payment of all such obligations set forth in clauses
(i) and (ii) has been made on the books of Company and
Guarantors as may be required by GAAP;
(e) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for rights-
of-way, utilities and other similar purposes, or zoning or
other restrictions as to the use of real properties, which
do not materially interfere with the business of Company or
any Guarantor;
(f) purchase money security interests in any inventory
and equipment to secure the indebtedness referred to in
Section 7.4(d) hereof, provided that such security interest
is created contemporaneously with the acquisition of an
asset and does not extend to any property other than the
asset so purchased; and
(g) the liens, mortgages and encumbrances described on
Exhibit "C" attached hereto.
"Pension Plans" shall mean all pension plans of Company and
Guarantors which are subject to Title IV of ERISA.
"Person" shall mean an individual, corporation, partnership,
trust, incorporated or unincorporated organization, joint
venture, joint stock company, or a government or any agency or
political subdivision thereof or other entity of any kind.
"Prime Rate" shall mean the per annum interest rate
established by Comerica Bank as its prime rate for its borrowers
as such rate may vary from time to time, which rate is not
necessarily the lowest rate on loans made by Agent at any such
time.
"Prime-based Advance" shall mean an Advance which bears
interest at the Prime-based Rate.
"Prime-based Rate" shall mean a per annum interest rate
which is the greater of (i) the Prime Rate plus the Applicable
Margin or (ii) the Alternate Base Rate.
"Prohibited Transaction" is defined in Section 7.2.
"Quoted Rate" shall mean the rate of interest per annum
offered by the Swing Line Bank in its sole discretion with
respect to a Swing Line Advance.
"Quoted Rate Advance" shall mean any Swing Line Advance
which bears interest at the Quoted Rate.
"Regulatory Change" shall mean any change after the date of
this Agreement in United States federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the
adoption or making after such date of any official or
governmental interpretation, directive or request applying to a
class of banks including any Bank of or under any United States
federal, state or foreign law or regulations (whether or not
having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or
monetary authority charged with the interpretation or
administration thereof.
"Reimbursement Obligation" shall mean the obligation of
Company to pay and reimburse Agent for any and all drafts and
other requests for payment duly and properly honored by Agent
under any Letters of Credit in accordance with the terms and
conditions of the respective Letter of Credit Agreement(s).
"Request for Revolving Credit Advance" shall mean a Request
for Revolving Credit Advance issued by Company under this
Agreement in the form annexed to this Agreement as Exhibit "A".
"Request for Swing Line Advance" shall mean a Request for
Swing Line Advance issued by Company under Section 2B.3 of this
Agreement in the form attached hereto as Exhibit "H".
"Revolving Credit" shall mean the revolving credit loans to
be advanced to the Company by the Revolving Credit Banks
pursuant to Article 2 hereof.
"Revolving Credit Advance" shall mean a borrowing requested
by Company and made by Banks under this Agreement, including any
refunding or conversions of such borrowing pursuant to Section
2.7 hereof, and any Advance in respect of a Letter of Credit
under Section 2A.6 hereof, and shall include, as applicable, a
Eurodollar-based Advance and a Prime-based Advance.
"Revolving Credit Banks" shall mean Comerica Bank, The First
National Bank of Chicago, and such other financial institutions
from time to time parties hereto as lenders of the Revolving
Credit.
"Revolving Credit Commitment Fee" shall mean a per annum fee
on the unused portion of the Revolving Credit provided by the
Revolving Credit Banks under this Agreement (determined as
provided in Section 2.11), as follows:
If Consolidated Funded The Revolving Credit Commitment
Debt Ratio ("x") is: Fee is:
equal to or greater than
1.75 .45%
equal to or greater than
1.25 but less than 1.75 .375%
equal to or greater than
.75 but less than 1.25 .25%
equal to or greater than
.40 but less than .75 .15%
less than .40 .125%
"Revolving Credit Maturity Date" shall mean the earlier to
occur of (i) September 29, 1998, as such date may be extended
from time to time pursuant to Section 2.14 hereof, or (ii) the
date on which the commitment of the Banks to make Advances shall
be terminated pursuant to Sections 2.13 or 9.2 hereof.
"Revolving Credit Notes" shall mean Revolving Credit Notes
issued by Company under this Agreement in the form annexed to
this Agreement as Exhibit "B".
"Subsidiary(ies)" shall mean any other corporation,
association, joint stock company, or business trust of which
more than fifty percent (50%) of the outstanding voting stock is
owned either directly or indirectly by Company or one or more of
its Subsidiaries or by Company and one or more of its
Subsidiaries, or the management of which is otherwise
controlled, directly, or indirectly through one or more
intermediaries, or both, by Company and/or its Subsidiaries.
"Substantial Portion" means, with respect to the property of
Company and it Subsidiaries, property which (i) represents more
than 10% of the consolidated assets of Company and its
Subsidiaries as would be shown in the Consolidated financial
statements of Company and its Subsidiaries as at the beginning
of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10%
of the Consolidated net sales or of Consolidated Net Income as
reflected in the financial statements referred to in clause (i)
above.
"Swing Line Advance" shall mean an Advance made by the Swing
Line Bank to Company pursuant to Section 2B.1 hereof.
"Swing Line Bank" shall mean Comerica Bank, in its capacity
as lender under Article 2B of this Agreement, and its successors
and assigns.
"Swing Line Note" shall mean the Swing Line Note described
in Section 2B.1 hereof, made by Company to Swing Line Bank in
the form annexed hereto as Exhibit "I".
2. REVOLVING CREDIT
2.1 Commitment. Subject to the terms and conditions of this
Agreement, each Revolving Credit Bank severally and for itself
alone agrees to make Advances of the Revolving Credit to Company
from time to time on any Business Day during the period from the
effective date hereof until (but excluding) the Revolving Credit
Maturity Date in an aggregate amount not to exceed at any one
time outstanding each such Revolving Credit Bank's Percentage of
the Maximum Commitment. All of such Advances hereunder shall be
evidenced by the Revolving Credit Notes, under which advances,
repayments and readvances may be made, subject to the terms and
conditions of this Agreement.
2.2 Accrual of Interest and Maturity; Margin Adjustments.
(a) The Revolving Credit Notes, and all principal and interest
outstanding thereunder, shall mature and become due and payable
in full on the Revolving Credit Maturity Date. Each Advance
evidenced by the Revolving Credit Notes from time to time
outstanding hereunder shall, from and after the date of such
Advance, bear interest at its Applicable Interest Rate. The
amount and date of each Revolving Credit Advance, its Applicable
Interest Rate, its Interest Period, and the amount and date of
any repayment shall be noted on Agent's records, which records
will be conclusive evidence thereof, absent manifest error;
provided, however, that any failure by the Agent to record any
such information shall not relieve Company of its obligation to
repay the outstanding principal amount of such Advance, all
interest accrued thereon and any amount payable with respect
thereto in accordance with the terms of this Agreement.
(b) The Applicable Margins shall initially be .60% for
Eurodollar-based Advances and 0% for Prime-based Advances.
Adjustments to the Applicable Margin based on the Consolidated
Funded Debt Ratio shall be implemented as follows:
(i) Such Applicable Margin adjustments shall be given
prospective effect only, effective forty five (45)
days after the end of each of the first three
fiscal quarters of each year, and ninety (90) days
after the end of the last fiscal quarter of each
year, as to any Prime-based Advance, and as to any
Eurodollar-based Advance, effective upon the
expiration of the applicable Interest Period(s),
if any, in effect on the date of delivery of the
quarterly financial certificate required under
Section 6.1(c) hereof, as the case may be,
establishing applicability of the appropriate
adjustments, with no retroactivity or claw-back;
provided, however, that if Company fails to timely
deliver such financial certificate, the Applicable
Margins shall be 1.25% for Eurodollar-based
Advances and 0% for Prime-based Advances for the
number of days such financial certificate was not
timely delivered.
(ii) An adjustment hereunder, after becoming effective,
shall remain in effect only through the end of the
applicable Interest Period(s) in effect on the
delivery of subsequent quarterly financial
statements, as aforesaid, demonstrating any change
in such Consolidated Funded Debt Ratio or the
occurrence of any event which under the terms
hereof causes such adjustment no longer to be
applicable; and, any such subsequent adjustment or
no adjustment, as the case may be, shall apply
(and said pricing shall thereby be adjusted up or
down, as applicable), effective with the
commencement of the Interest Period immediately
following such change or event.
(iii) Such Applicable Margin adjustments under this
Section 2.2(b) shall be made irrespective of,
and in addition to, any other interest rate
adjustments hereunder.
2.3 Prime-based Interest Payments. Interest on the unpaid
balance of all Prime-based Advances from time to time
outstanding shall accrue from the date of such Advance to the
Revolving Credit Maturity Date (and until paid) at a per annum
interest rate equal to the Prime-based Rate, and shall be
payable in immediately available funds quarterly commencing on
December 30, 1995, and on the last day of each fiscal quarter
thereafter. Interest accruing at the Prime-based Rate shall be
computed on the basis of a 360 day year and assessed for the
actual number of days elapsed, and in such computation effect
shall be given to any change in the interest rate resulting from
a change in the Prime-based Rate on the date of such change in
the Prime-based Rate.
2.4 Eurodollar-based Interest Payments. Interest on each
Eurodollar-based Advance shall be payable in immediately
available funds on the last day of the Interest Period
applicable thereto and if such Interest Period is longer than
three months, interest shall be payable at intervals of three
months after the first day thereof. Interest accruing at the
Eurodollar-based Rate shall be computed on the basis of a 360
day year and assessed for the actual number of days elapsed from
the first day of the Interest Period applicable thereto to but
not including the last day thereof.
2.5 Interest Payments on Conversions. Notwithstanding
anything to the contrary in Sections 2.2, 2.3 and 2.4, all
accrued and unpaid interest on any Revolving Credit Advance
refunded or converted pursuant to Section 2.7 hereof shall be
due and payable in full on the date such Advance is refunded or
converted.
2.6 Reserved.
2.7 Requests for Advances and Requests for Refundings and
Conversions of Advances. Company may request a Revolving Credit
Advance, refund any Revolving Credit Advance in the same type of
Revolving Credit Advance or convert any Revolving Credit Advance
to any other type of Revolving Credit Advance only after
delivery to Agent of a Request for Revolving Credit Advance
executed by an authorized officer of Company, subject to the
following and to the remaining provisions hereof:
(a) each such Request for Revolving Credit Advance
shall set forth the information required on the Request for
Revolving Credit Advance form annexed hereto as Exhibit "A",
including without limitation:
(i) the proposed date of Revolving Credit Advance,
which must be a Business Day;
(ii) whether the Revolving Credit Advance is a
refunding or conversion of an outstanding
Revolving Credit Advance; and
(iii) whether such Revolving Credit Advance is to be a
Prime-based Advance or a Eurodollar-based Advance,
and, except in the case of a Prime-based Advance,
the first Interest Period applicable thereto;
(b) each such Request for Revolving Credit Advance
shall be delivered to Agent by 11:00 a.m. (Detroit time)
three (3) Business Days prior to the proposed date of
Revolving Credit Advance, except in the case of a Prime-
based Advance, for which the Request for Revolving Credit
Advance must be delivered by 11 a.m. (Detroit time) on such
proposed date;
(c) (i) the principal amount of such requested
Revolving Credit Advance, plus the principal amount of all
other Advances then outstanding hereunder, the aggregate
undrawn portion of any Letters of Credit which shall be
outstanding as of the date of the requested Revolving Credit
Advance and the aggregate face amount of Letters of Credit
requested but not yet issued, shall not exceed the Maximum
Commitment;
(d) the principal amount of such Revolving Credit
Advance, plus the amount of any other outstanding Revolving
Credit Advance to be then combined therewith having the same
Applicable Interest Rate and Interest Period, if any, shall
be (i) in the case of a Prime-based Advance at least One
Hundred Thousand Dollars ($100,000), and (ii) in the case of
a Eurodollar-based Advance at least Three Million Dollars
($3,000,000) in multiples of One Million Dollars
($1,000,000);
(e) each Request for Revolving Credit Advance, once
delivered to Agent, shall not be revocable by Company, and
shall constitute and include a certification by the Company,
as of the date thereof that:
(i) both before and after the Revolving Credit
Advance, the obligations of the Company set forth
in this Agreement and the Loan Documents are
valid, binding and enforceable obligations of the
Company;
(ii) to the best knowledge of Company, all conditions
to Revolving Credit Advances have been satisfied;
(iii) there is no Event of Default in existence, and no
event which, with the giving of notice or the
lapse of time, or both, would constitute an Event
of Default; and
(iv) the representations and warranties contained in
this Agreement and the Loan Documents are true and
correct in all material respects.
2.8 Disbursement of Revolving Credit Advances.
(a) Upon receiving any Request for Revolving Credit
Advance from Company under Section 2.7 hereof, Agent shall
promptly notify each Revolving Credit Bank by wire, telex or
by telephone (confirmed by wire, telecopy or telex) of the
amount of such Revolving Credit Advance to be made and the
date such Revolving Credit Advance is to be made by said
Revolving Credit Bank pursuant to its Percentage of the
Revolving Credit Advance. Unless such Revolving Credit
Bank's commitment to make Revolving Credit Advances
hereunder shall have been suspended or terminated in
accordance with this Agreement, each Revolving Credit Bank
shall make available the amount of its Percentage of the
Revolving Credit Advance in same day funds in Dollars to
Agent at the office of Agent not later than 2:00 p.m.
(Detroit time) on the date of such Revolving Credit Advance.
(b) Subject to submission of an executed Request for
Revolving Credit Advance by Company, Agent shall make
available to Company the aggregate of the amounts so
received by it from the Banks in respect of Section 2.7
hereof, in like funds, not later than 4:00 p.m. (Detroit
time) on the date of such Revolving Credit Advance by credit
to an account of Company maintained with Agent or to such
other account or third party as Company may reasonably
direct.
(c) Unless Agent shall have been notified by any
Revolving Credit Bank prior to the date of any proposed
Revolving Credit Advance that such Revolving Credit Bank
does not intend to make available to Agent such Revolving
Credit Bank's Percentage of the Revolving Credit Advance,
Agent may assume that such Bank has made such amount
available to Agent on such date, as aforesaid and may, in
its sole discretion and without obligation to do so, in
reliance upon such assumption, make available to Company a
corresponding amount. If such amount is not in fact made
available to Agent by such Revolving Credit Bank in
accordance with Section 2.8(a), as aforesaid, Agent shall be
entitled to recover such amount on demand from such
Revolving Credit Bank. If such Revolving Credit Bank does
not pay such amount forthwith upon Agent's demand therefor,
the Agent shall promptly notify Company, and Company shall
pay such amount to Agent. Agent shall also be entitled to
recover from such Bank or from Company, interest on such
amount in respect of each day from the date such amount was
made available by Agent to Company to the date such amount
is recovered by Agent, at a rate per annum equal to:
(i) in the case of such Revolving Credit Bank, the
Federal Funds Effective Rate; or
(ii) in the case of Company, the rate of interest then
applicable to the Revolving Credit Advance.
The obligation of any Revolving Credit Bank to make any
Revolving Credit Advance hereunder shall not be affected by
the failure of any other Revolving Credit Bank to make any
Revolving Credit Advance hereunder, and no Revolving Credit
Bank shall have any liability to the Company, the Agent, any
other Revolving Credit Bank, or any other party for another
Bank's failure to make any loan or Advance hereunder.
2.9 Prepayment. Company may prepay all or part of the
outstanding balance of any Prime-based Advance(s) under the
Revolving Credit Notes at any time (subject to not less than one
(1) Business Day's notice to Agent), provided that the amount of
any partial prepayment shall be at least Five Hundred Thousand
Dollars ($500,000) and the aggregate balance of Prime-based
Advance(s) of the Revolving Credit remaining outstanding shall
be at least Five Hundred Thousand Dollars ($500,000). Company
may prepay all or part of any Eurodollar-based Advance (subject
to not less than three (3) Business Day's notice to Agent) only
on the last day of the Interest Period therefor, provided that
the amount of any such partial prepayment shall be at least Five
Hundred Thousand Dollars ($500,000), and the unpaid portion of
such Advance which is refunded or converted under Section 2.7
shall be at least Three Million Dollars ($3,000,000). Any
prepayment made in accordance with this Section shall be without
premium, penalty or prejudice to the right to reborrow under the
terms of this Agreement. Any other prepayment of all or any
portion of the Revolving Credit, whether by acceleration,
required prepayment or otherwise, shall be subject to Section
3.1, hereof, but otherwise without premium, penalty or
prejudice.
2.10 Prime-based Advance in Absence of Election or Upon
Default. If, as to any outstanding Eurodollar-based Advance,
Agent has not received payment on the last day of the Interest
Period applicable thereto, or does not receive a timely Request
for Revolving Credit Advance meeting the requirements of Section
2.7 hereof with respect to the refunding or conversion of such
Revolving Credit Advance, or, subject to Section 2.6 hereof, if
on such day an Event of Default or event which, with notice or
lapse of time or both, would constitute an Event of Default
shall have occurred and be continuing, the principal amount
thereof which is not then prepaid shall be converted
automatically to a Prime-based Advance of the Revolving Credit
and the Agent shall thereafter promptly notify Company of said
action.
2.11 Revolving Credit Commitment Fee. From the date hereof
to the Revolving Credit Maturity Date, Company shall pay to the
Agent, for distribution to the Revolving Credit Banks ratably
according to their Percentages, the Revolving Credit Commitment
Fee on the daily average amount by which the Maximum Commitment,
less the aggregate daily undrawn amount of any Letters of Credit
which shall be outstanding during such period, exceeds the
aggregate amount of Revolving Credit Advances outstanding from
time to time. Solely for purposes of computing the Revolving
Credit Commitment Fee, Swing Line Advances shall be considered
to be Revolving Credit Advances and shall decrease the Revolving
Credit Commitment Fee of the Swing Line Bank accordingly. The
Revolving Credit Commitment Fee shall be payable quarterly in
arrears commencing with the quarter beginning October 1, 1995,
and at the Revolving Credit Maturity Date, and shall be computed
on the basis of a year of 360 days and assessed for the actual
number of days elapsed. Whenever any payment of the Revolving
Credit Commitment Fee shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to
the next Business Day. The Revolving Credit Commitment Fee shall
not be refundable under any circumstances. The Revolving Credit
Commitment Fee shall initially be .15% per annum. Adjustments
thereto shall be given prospective effect only, effective on the
first day of the calendar quarter following delivery of the
quarterly financial certificate required under Section 6.1(c)
establishing applicability of the appropriate adjustments, with
no retroactivity or claw-back; provided, that if Company fails
to timely deliver such financial certificate, the Revolving
Credit Commitment Fee shall be .45% per annum for the number of
days such financial certificate was not timely delivered,
commencing on the first day of the following quarter. Upon
receipt of such payment Agent shall make prompt payment to each
Revolving Credit Bank of its share of the Revolving Credit
Commitment Fee based upon its respective Percentage.
2.12 Reduction of Indebtedness. If at any time and for any
reason the aggregate principal amount of all Advances hereunder
to Company, plus the aggregate undrawn amount of any Letters of
Credit which shall be outstanding at such time, exceeds the
Maximum Commitment, Company shall immediately reduce any pending
request for an Advance on such day by the amount of such excess
and, to the extent any excess remains thereafter, immediately
repay an amount of the Indebtedness equal to such excess.
Company acknowledges that, in connection with any repayment
required hereunder, it shall also be responsible for the
reimbursement of any prepayment or other costs required under
Section 3.1 hereof.
2.13 Optional Reduction or Termination of Revolving Credit
Commitment. The Company may upon at least twenty Business Days'
prior written notice to the Agent, permanently reduce the
Maximum Commitment in whole at any time, or in part from time to
time, without premium or penalty, provided that: (i) each
partial reduction of the Maximum Commitment shall be in an
aggregate amount equal to Five Million Dollars ($5,000,000) or
an integral multiple thereof; (ii) each reduction shall be
accompanied by the payment of the Revolving Credit Commitment
Fee, if any, accrued to the date of such reduction; (iii) the
Company shall prepay in accordance with the terms hereof the
amount, if any, by which the aggregate unpaid principal amount
of Swing Line Advances and Revolving Credit Advances, plus the
aggregate amount of outstanding Letters of Credit, exceeds the
amount of the Maximum Commitment, taking into account the
aforesaid reductions thereof, together with interest thereon to
the date of prepayment; (iv) if the termination or reduction of
the Maximum Commitment requires the prepayment of a Eurodollar-
based Advance or Quoted Rate Advance, the termination or
reduction may be made only on the last Business Day of the then
current Interest Period applicable to such Advance; and (v) no
reduction shall reduce the amount of the Maximum Commitment to
an amount which is less than the sum of the aggregate undrawn
amount of any Letters of Credit outstanding at such time.
Reductions of the Maximum Commitment and any accompanying
prepayments of the Revolving Credit Notes shall be distributed
by Agent to each Revolving Credit Bank in accordance with such
Revolving Credit Bank's Percentage thereof, and will not be
available for reinstatement by or readvance to the Company and
any accompanying prepayments of Swing Line Advances shall be
distributed by Agent to the Swing Line Bank and will not be
available for reinstatement by or readvance to the Company. Any
reductions of the Maximum Commitment hereunder shall reduce each
Revolving Credit Bank's portion thereof proportionately (based
upon the applicable Percentages), and shall be permanent and
irrevocable. Any payments made pursuant to this Section shall be
applied first to outstanding Prime-based Advances under the
Revolving Credit, next to Eurodollar-based Advances which have
Interest Periods ending on the date of payment, next to Swing
Line Advances which bear interest at the Prime-based Rate, next
to Quoted Rate Advances and then to all remaining Eurodollar-
based Advances.
2.14 Extension of Revolving Credit Maturity Date. Provided
that no Event of Default has occurred and is continuing, Company
may, by written notice to Agent and each Bank (which notice
shall be irrevocable and which shall not be deemed effective
unless actually received by Agent and each Bank) prior to March
1, but not before April 1, of each year (commencing with
calendar year 1998), request that the Banks extend the then
applicable Revolving Credit Maturity Date to a date that is one
year later than the Revolving Credit Maturity Date then in
effect (each such request, a "Request"). Company shall deliver
with each Request Consolidated financial projections for the
current and the following two fiscal years, including income
statements and balance sheets. Each Bank shall, not later than
forty-five (45) calendar days following the date of its receipt
of the Request, give written notice to the Agent stating whether
such Bank is willing to extend the Revolving Credit Maturity
Date as requested. If Agent has received the aforesaid written
approvals of such Request from each of the Banks, then,
effective upon the date of Agent's receipt of all such written
approvals from the Banks, as aforesaid, the Revolving Credit
Maturity Date shall be so extended for an additional one year
period, the term Revolving Credit Maturity Date shall mean such
extended date and Agent shall promptly notify the Company and
the Banks that such extension has occurred. If (i) any Bank
gives the Agent written notice that it is unwilling to extend
the Revolving Credit Maturity Date as requested or (ii) any Bank
fails to provide written approval to Agent of such a Request
within forty-five (45) calendar days of the date of Agent's
receipt of the Request, then (x) the Banks shall be deemed to
have declined to extend the Revolving Credit Maturity Date, (y)
the then-current Revolving Credit Maturity Date shall remain in
effect (with no further right on the part of Company to request
extensions thereof under this Section 2.14) and (z) the
commitments of the Banks to make Advances of the Revolving
Credit hereunder shall terminate on the Revolving Credit
Maturity Date then in effect, and Agent shall promptly notify
Company and the Banks thereof.
2.15 Application of Advances. Advances of the Revolving
Credit shall be available, subject to the terms hereof, to fund
working capital needs and for other general corporate purposes
of the Company.
2A. LETTERS OF CREDIT.
2A.1 Letters of Credit. Subject to the terms and conditions
of this Agreement, Agent may through its Issuing Office, at any
time and from time to time from and after the date hereof until
thirty (30) days prior to the Revolving Credit Maturity Date,
upon the written request of the Company accompanied by a duly
executed Letter of Credit Agreement and such other documentation
related to the requested Letter of Credit as the Agent may
reasonably require, issue standby Letters of Credit for the
account of the Company, in an aggregate amount for all Letters
of Credit issued hereunder at any one time outstanding not to
exceed the Letter of Credit Maximum Amount. Each Letter of
Credit shall have an initial expiration date not later than one
(1) year from its date of issuance (and may, in the sole
discretion of the Agent, contain customary evergreen provisions
acceptable to Agent); provided, however that each Letter of
Credit shall expire (notwithstanding any renewals thereof or
evergreen provisions contained therein) not later than ten (10)
Business Days prior to the Revolving Credit Maturity Date.
2A.2 Conditions to Issuance. No Letter of Credit shall be
issued unless, as of the date of issuance of such Letter of
Credit:
(a) the face amount of the Letter of Credit requested,
plus the undrawn portion of all other outstanding
Letters of Credit does not exceed the Letter of
Credit Maximum Amount;
(b) (i) the face amount of the Letter of Credit
requested, plus the aggregate principal amount of
all Advances outstanding under the Notes, plus the
aggregate undrawn portion of all other outstanding
Letters of Credit, does not exceed the Maximum
Commitment;
(c) the obligations of Company set forth in this
Agreement and any of the Loan Documents are valid,
binding and enforceable obligations of such
parties, as the case may be and the valid, binding
and enforceable nature of this Agreement and the
Loan Documents has not been disputed by Company;
(d) both immediately before and immediately after
issuance of the Letter of Credit requested, no
Event of Default exists and no event which, with
the giving of notice or lapse of time, or both,
would constitute an Event of Default, exists;
(e) the representations and warranties contained in
this Agreement and the Loan Documents are true in
all material respects as if made on such date;
(f) the Company shall have delivered to Agent at its
Issuing Office, not less than five (5) Business
Days prior to the requested date for issuance (or
such shorter time as the Agent, in its sole
discretion, may permit), the Letter of Credit
Agreement related thereto, together with such
other documents and materials as may be required
pursuant to the terms thereof, and the terms of
the proposed Letter of Credit shall be
satisfactory to Agent and its Issuing Office; and
(g) Agent shall have received the issuance fee
required in connection with the issuance of such
Letter of Credit pursuant to Section 2A.5 hereof.
Each Letter of Credit Agreement submitted to Agent pursuant
hereto shall constitute the certification by the Company of the
matters set forth in this Section 2A.2 (a) through (g). The
Agent shall be entitled to rely on such certification without
any duty of inquiry.
2A.3 Notice. Agent shall give notice to each Revolving
Credit Bank of the issuance of each Letter of Credit, not later
than three (3) Business Days after issuance of each Letter of
Credit, specifying the amount thereof and the amount of such
Revolving Credit Bank's participation interest thereof.
2A.4 Letter of Credit Fees. (a) Company agrees to pay to
Agent, for distribution to the Revolving Credit Banks ratably
according to their Percentages, the Letter of Credit Fee on the
aggregate face amount of all Letters of Credit, determined on a
daily basis, payable quarterly in advance. For any Existing
Letter of Credit for which a fee has been paid in advance, the
Letter of Credit Fee will commence at the time such advance
payment expires. For any other Letter of Credit, the Letter of
Credit Fee will commence upon issuance. The Letter of Credit Fee
shall be computed on the basis of a year of 360 days and
assessed for the actual number of days elapsed. Whenever any
payment of the Letter of Credit Fee shall be due on a day which
is not a Business Day, the date for payment thereof shall be
extended to the next Business Day. The Letter of Credit Fee
shall not be refundable under any circumstances. The Letter of
Credit Fee shall initially be .60% per annum. Adjustments
thereto shall be given prospective effect only, effective on the
first day of the next fiscal quarter following the delivery of
the quarterly financial certificate required under Section
6.1(c) establishing applicability of the appropriate
adjustments, with no retroactivity or claw-back; provided, that
if Company fails to timely deliver such financial certificate,
commencing on the first day of the next fiscal quarter the
Letter of Credit Fee shall be 1.25% per annum for the number of
days such financial certificate was not timely delivered, and
thereafter shall be at the rate otherwise applicable under this
Section 2A.4. Upon receipt of such payment Agent shall make
prompt payment to each Revolving Credit Bank of its share of the
Letter of Credit Fee based upon its respective Percentage.
(b) If any change in any law or regulation or in the
interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof
shall either (i) impose, modify or cause to be deemed applicable
any reserve, special deposit, limitation or similar requirement
against letters of credit issued by, or assets held by, or
deposits in or for the account of, Agent or the Revolving Credit
Banks or (ii) impose on Agent or the Revolving Credit Banks any
other condition regarding this Agreement or the Letters of
Credit, and the result of any event referred to in clause (i) or
(ii) above shall be to increase the cost or expense to Agent or
the Revolving Credit Banks of issuing or maintaining or
participating in any of the Letters of Credit (which increase in
cost or expense shall be determined by the Agent's or such
Revolving Credit Bank's reasonable allocation of the aggregate
of such cost increases and expense resulting from such events),
then, upon demand by the Agent or such Revolving Credit Bank, as
the case may be, the Company shall, within ten days following
demand for payment, pay to Agent or such Revolving Credit Bank,
as the case may be, from time to time as specified by the Agent
or such Revolving Credit Bank, additional amounts which shall be
sufficient to compensate the Agent or such Revolving Credit Bank
for such increased cost and expense, together with interest on
each such amount from ten days after the date demanded until
payment in full thereof at the Prime-based Rate. A certificate
as to such increased cost or expense incurred by the Agent or
such Revolving Credit Bank, as the case may be, as a result of
any event mentioned in clause (i) or (ii) above, submitted to
the Company, shall be conclusive, absent manifest error, as to
the amount thereof.
2A.5 Issuance Fees. In connection with the Letters of
Credit, and in addition to the Letter of Credit Fees, the
Company shall pay, for the sole account of the Agent, letter of
credit issuance fees and standard documentation, administration,
payment and cancellation charges assessed by Agent or its
Issuing Office, at the times, in the amounts and on the terms
set forth or to be set forth from time to time in the standard
fee schedule of Agent's Issuing office in effect from time to
time.
2A.6 Draws and Demands for Payment Under Letters of Credit.
(a) The Company agrees to pay to the Agent, on the day
on which the Agent shall honor a draft or other demand for
payment presented or made under any Letter of Credit, an amount
equal to the amount paid by the Agent in respect of such draft
or other demand under such Letter of Credit and all expenses
paid or incurred by the Agent relative thereto. Unless the
Company shall have made such payment to the Agent on such day,
upon each such payment by the Agent, the Agent shall be deemed
to have disbursed to the Company, and the Company shall be
deemed to have elected to substitute for its Reimbursement
Obligation, a Prime-based Advance for the account of the
Revolving Credit Banks in an amount equal to the amount so paid
by the Agent in respect of such draft or other demand under such
Letter of Credit. Such Prime-based Advance shall be disbursed
notwithstanding any failure to satisfy any conditions for
disbursement of any Revolving Credit Advance set forth in
Section 2 hereof and, to the extent of the Prime-based Advance
so disbursed, the Reimbursement Obligation of the Company under
this Section 2A.6 shall be deemed satisfied.
(b) If the Agent shall honor a draft or other demand for
payment presented or made under any Letter of Credit, the Agent
shall provide notice thereof to the Company on the date such
draft or demand is honored, and to each Revolving Credit Bank on
such date unless the Company shall have satisfied its
Reimbursement Obligation under Section 2A.6(a) by payment to the
Agent on such date.
(c) Upon issuance by the Agent of each Letter of Credit
hereunder, each Revolving Credit Bank shall automatically
acquire a pro rata risk participation interest in such Letter of
Credit and related Letter of Credit Payment based on its
respective Percentage. Each Revolving Credit Bank, on the date a
draft or demand under any Letter of Credit is honored, shall
make its Percentage share of the amount paid by the Agent, and
not reimbursed by the Company on such day, available in
immediately available funds at the principal office of the Agent
for the account of the Agent. If and to the extent such
Revolving Credit Bank shall not have made such pro rata portion
available to the Agent, such Revolving Credit Bank and the
Company severally agree to pay to the Agent forthwith on demand
such amount together with interest thereon, for each day from
the date such amount was paid by the Agent until such amount is
so made available to the Agent at a per annum rate equal to (in
the case of the Company) the interest rate applicable during
such period to the related Advance disbursed under Section
2A.6(a) in respect of the Reimbursement Obligation of the
Company, or (in the case of a Revolving Credit Bank) the Federal
Funds Effective Rate. If such Revolving Credit Bank shall pay
such amount to the Agent together with such interest, such
amount so paid shall constitute a Prime-based Advance of the
Revolving Credit by such Revolving Credit Bank disbursed in
respect of the Reimbursement Obligation of the Company under
Section 2A.6(a) for purposes of this Agreement, effective as of
the date such amount was paid by the Agent. The failure of any
Revolving Credit Bank to make its pro rata portion of any such
amount paid by the Agent available to the Agent shall not
relieve any other Revolving Credit Bank of its obligation to
make available its pro rata portion of such amount, but no
Revolving Credit Bank shall be responsible for failure of any
other Revolving Credit Bank to make such pro rata portion
available to the Agent.
(d) Nothing in this Agreement shall be construed to require
or authorize any Bank to issue any Letter of Credit, it being
recognized that the Agent shall be the issuer of Letters of
Credit under this Agreement.
2A.7 Obligations Irrevocable. The obligations of Company to
make payments to Agent with respect to Reimbursement Obligations
under Section 2A.6 hereof shall be unconditional and irrevocable
and not subject to any qualification or exception whatsoever,
including, without limitation:
(a) Any lack of validity or enforceability of any
Letter of Credit or any documentation relating to any Letter of
Credit or to any transaction related in any way to such Letter
of Credit (the "Letter of Credit Documents");
(b) Any amendment, modification, waiver, consent, or
any substitution, exchange or release of or failure to perfect
any interest in collateral or security, with respect to any of
the Letter of Credit Documents;
(c) The existence of any claim, setoff, defense or
other right which the Company may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any
persons or entities for whom any such beneficiary or any such
transferee may be acting), the Agent or any Bank or any other
person or entity, whether in connection with any of the Letter
of Credit Documents, the transactions contemplated herein or
therein or any unrelated transactions;
(d) Any draft or other statement or document presented
under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(e) Payment by the Agent to the beneficiary under any
Letter of Credit against presentation of documents which do not
comply with the terms of the Letter of Credit, including failure
of any documents to bear any reference or adequate reference to
such Letter of Credit;
(f) Any failure, omission, delay or lack on the part
of the Agent or any Bank or any party to any of the Letter of
Credit Documents to enforce, assert or exercise any right, power
or remedy conferred upon the Agent, any Bank or any such party
under this Agreement, any of the Loan Documents or any of the
Letter of Credit Documents, or any other acts or omissions on
the part of the Agent, any Bank or any such party; or
(g) Any other event or circumstance that would, in the
absence of this Section 2A.7, result in the release or discharge
by operation of law or otherwise of Company from the performance
or observance of any obligation, covenant or agreement contained
in Section 2A.6.
No setoff, counterclaim, reduction or diminution of any
obligation or any defense of any kind or nature which Company
has or may have against the beneficiary of any Letter of Credit
shall be available hereunder to Company against the Agent or any
Bank. Nothing contained in this Section 2A.7 shall be deemed to
prevent Company after satisfaction in full of the absolute and
unconditional obligations of Company hereunder, from asserting
in a separate action any claim, defense, set off or other right
which they (or any of them) may have against Agent or any Bank.
2A.8 Risk Under Letters of Credit. (a) In assigning and the
handling of Letters of Credit and any security therefor, or any
documents or instruments given in connection therewith, Agent
shall have the sole right to take or refrain from taking any and
all administrative actions under or upon the Letters of Credit.
(b) Subject to other terms and conditions of this
Agreement, Agent shall issue the Letters of Credit and shall
hold the documents related thereto in its own name and shall
make all collections thereunder and otherwise administer the
Letters of Credit in accordance with Agent's regularly
established practices and procedures and, except pursuant to
Section 11.3 hereof, Agent will have no further obligation with
respect thereto. In the administration of Letters of Credit,
Agent shall not be liable for any action taken or omitted on the
advice of counsel, accountants, appraisers or other experts
selected by Agent and Agent may rely upon any notice,
communication, certificate or other statement from Company, any
beneficiaries of Letters of Credit, or any other Person which
Agent believes to be authentic. Agent will promptly furnish the
Revolving Credit Banks with copies of Letter of Credit
Agreements, Letters of Credit and documents related thereto.
(c) In connection with the issuance and administration
of Letters of Credit and the assignments hereunder, Agent makes
no representation and shall have no responsibility with respect
to (i) the obligations of Company or the validity, sufficiency
or enforceability of any document or instrument given in
connection therewith, or the taking of any action with respect
to same, (ii) the financial condition of, any representations
made by, or any act or omission of Company or any other Person,
or (iii) any failure or delay in exercising any rights or powers
possessed by Agent in its capacity as issuer of Letters of
Credit.
(d) If at any time Agent shall recover any part of any
unreimbursed amount for any draw or other demand for payment
under a Letter of Credit, or any interest thereon, Agent shall
receive same for the pro rata benefit of the Revolving Credit
Banks in accordance with their respective Percentage interests
therein and shall promptly deliver to each Revolving Bank its
share thereof, less such Revolving Credit Bank's pro rata share
of the costs of such recovery, including court costs and
attorney's fees. If at any time any Revolving Credit Bank shall
receive from any source whatsoever any payment on any such
unreimbursed amount or interest thereon in excess of such
Revolving Credit Bank's Percentage share of such payment, such
Revolving Credit Bank will promptly pay over such excess to
Agent, for redistribution in accordance with this Agreement.
2A.9 Indemnification. (a) The Company hereby indemnifies and
agrees to hold harmless the Banks and the Agent, and their
respective officers, directors, employees and agents, from and
against any and all claims, damages, losses, liabilities, costs
or expenses of any kind or nature whatsoever which the Banks or
the Agent or any such person may incur or which may be claimed
against any of them by reason of or in connection with any
Letter of Credit, and neither any Bank nor the Agent or any of
their respective officers, directors, employees or agents shall
be liable or responsible for: (i) the use which may be made of
any Letter of Credit or for any acts or omissions of any
beneficiary in connection therewith; (ii) the validity,
sufficiency or genuineness of documents or of any endorsement
thereon, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged;
(iii) payment by the Agent to the beneficiary under any Letter
of Credit against presentation of documents which do not comply
with the terms of any Letter of Credit (unless such payment
resulted from the gross negligence or willful misconduct of the
Agent), including failure of any documents to bear any reference
or adequate reference to such Letter of Credit; (iv) any error,
omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in
connection with any Letter of Credit; or (v) any other event or
circumstance whatsoever arising in connection with any Letter of
Credit; provided, however, that Company shall not be required to
indemnify the Banks and the Agent and such other Persons, and
the Agent shall be liable to the Company to the extent, but only
to the extent, of any direct, as opposed to consequential or
incidental, damages suffered by Company which were caused by the
Agent's wrongful dishonor of any Letter of Credit after the
presentation to it by the beneficiary thereunder of a draft or
other demand for payment and other documentation strictly
complying with the terms and conditions of such Letter of
Credit.
(b) It is understood that in making any payment under a
Letter of Credit the Agent will rely on documents presented to
it under such Letter of Credit as to any and all matters set
forth therein without further investigation and regardless of
any notice or information to the contrary. It is further
acknowledged and agreed that Company may have rights against the
beneficiary or others in connection with any Letter of Credit
with respect to which the Banks are alleged to be liable and it
shall be a condition of the assertion of any liability of the
Banks under this Section that Company shall contemporaneously
pursue all remedies in respect of the alleged loss against such
beneficiary and any other parties obligated or liable in
connection with such Letter of Credit and any related
transactions.
2A.10 Right of Reimbursement. Each Revolving Credit Bank
agrees to reimburse the Agent on demand, pro rata in accordance
with their Percentages, for (i) the out-of-pocket costs and
expenses of the Agent to be reimbursed by Company pursuant to
any Letter of Credit Agreement or any Letter of Credit, to the
extent not reimbursed by Company and (ii) to the extent not
reimbursed by the Company, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
fees, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted
against Agent (in its capacity as issuer of any Letter of
Credit) in any way relating to or arising out of this Agreement,
any Letter of Credit, any documentation or any transaction
relating thereto, or any Letter of Credit Agreement, except to
the extent that such liabilities, losses, costs or expenses were
incurred by Agent solely as a result of Agent's gross negligence
or willful misconduct.
2A.11 Existing Letters of Credit. Each Existing Letter
of Credit shall be deemed for all purposes of this Agreement to
be a Letter of Credit, and each application submitted in
connection with each Existing Letter of Credit shall be deemed
for all purposes of this Agreement to be a Letter of Credit
Application. On the date of execution of this Agreement, the
Agent shall be deemed automatically to have sold and
transferred, and each other Revolving Credit Bank shall be
deemed automatically, irrevocably, and unconditionally to have
purchased and received from the Agent, without recourse or
warranty, an undivided interest and participation, to the extent
of such other Revolving Credit Bank's Percentage, in each
Existing Letter of Credit and the applicable Reimbursement
Obligations with respect thereto and any security therefor or
guaranty pertaining thereto.
2B. SWING LINE CREDIT.
2B.1 Swing Line Advances. The Swing Line Bank shall, on the
terms and subject to the conditions hereinafter set forth, make
one or more advances (each such advance being a "Swing Line
Advance") to Company from time to time on any Business Day
during the period from the date hereof to (but excluding) the
Revolving Credit Maturity Date in an aggregate amount not to
exceed Five Million Dollars ($5,000,000) at any time
outstanding; provided, however, that after giving effect to all
Swing Line Advances and all Revolving Credit Advances requested
to be made on such date, the aggregate principal amount of all
outstanding Swing Line Advances and Revolving Credit Advances
and the undrawn portion of all outstanding Letters of Credit
shall not exceed the Maximum Commitment. All Swing Line Advances
shall be evidenced by the Swing Line Note, under which advances,
repayments and readvances may be made, subject to the terms and
conditions of this Agreement. Each Swing Line Advance shall
mature and the principal amount thereof shall be due and payable
by Company on the last day of the Interest Period applicable
thereto. In no event whatsoever shall any outstanding Swing Line
Advance be deemed to reduce, modify or affect any Bank's
commitment to make Advances based upon its Percentage.
2B.2 Accrual of Interest. Each Swing Line Advance shall bear
interest at its Applicable Interest Rate. The amount and date of
each Swing Line Advance, its Applicable Interest Rate, its
Interest Period, and the amount and date of any repayment shall
be noted on Swing Line Bank's records, which records will be
conclusive evidence thereof, absent manifest error; provided,
however, that any failure by the Swing Line Bank to record any
such information shall not relieve Company of its obligation to
repay the outstanding principal amount of such Swing Line
Advance, all interest accrued thereon and any amount payable
with respect thereto in accordance with the terms of this
Agreement and the Loan Documents.
2B.3 Requests for Swing Line Advances. Company may request a
Swing Line Advance only after delivery to Swing Line Bank of a
Request for Swing Line Advance executed by an authorized officer
of Company, subject to the following and to the remaining
provisions hereof:
(a) each such Request for Swing Line Advance shall set
forth the information required on the Request for Swing Line
Advance form annexed hereto as Exhibit "H", including without
limitation:
(i) the proposed date of Swing Line Advance,
which must be a Business Day;
(ii) whether such Swing Line Advance is to be a
Prime-based Advance or Quoted Rate Advance; and
(iii) the duration of the Interest Period
applicable thereto;
(b) each such Request for Swing Line Advance shall be
delivered to Swing Line Bank by noon (Detroit time) on the
proposed date of the Swing Line Advance;
(c) the principal amount of such requested Swing Line
Advance, plus the principal amount of all other Advances then
outstanding hereunder, plus the aggregate undrawn portion of all
Letters of Credit, plus the aggregate face amount of Letters of
Credit requested but not yet issued, shall not exceed the
Maximum Commitment;
(d) the principal amount of such Swing Line Advance
shall be at least One Hundred Thousand Dollars ($100,000);
(e) each Request for Swing Line Advance, once
delivered to Swing Line Bank, shall not be revocable by Company,
and shall constitute and include a certification by the Company
as of the date thereof that:
(i) both before and after the Swing Line Advance,
the obligations of the Company set forth in this Agreement
and the Loan Documents, as applicable, are valid, binding
and enforceable obligations;
(ii) to the best knowledge of Company, all
conditions to Advances have been satisfied;
(iii) both before and after the Swing Line Advance,
there is no Event of Default in existence and no event
which, with the giving of notice, the running of time, or
both, would constitute an Event of Default; and
(iv) both before and after the Swing Line Advance,
the representations and warranties contained in this
Agreement and the Loan Documents are true and correct in all
material respects.
Swing Line Bank shall promptly deliver to Agent by telecopier a
copy of any Request for Swing Line Advance received.
2B.4 Disbursement of Swing Line Advances. Subject to
submission of an executed Request for Swing Line Advance by
Company without exceptions noted in the compliance certification
therein and to the other terms and conditions hereof, Swing Line
Bank shall make available to Company the amount so requested, in
same day funds, not later than 4:00 p.m. (Detroit time) on the
date of such Swing Line Advance by credit to an account of
Company maintained with Swing Line Bank or to such other account
or third party as Company may reasonably direct. Swing Line Bank
shall promptly notify Agent of any Swing Line Advance by
telephone, telex or telecopier.
2B.5 Refunding of or Participation Interest in Swing Line
Advances.
(a) The Agent, at any time in its sole and absolute
discretion, may (or, upon the request of the Swing Line Bank,
shall) on behalf of the Company (which hereby irrevocably
directs the Agent to act on its behalf) request each Revolving
Credit Bank (including the Swing Line Bank in its capacity as a
Revolving Credit Bank) to make a Revolving Credit Advance in an
amount equal to such Revolving Credit Bank's Percentage of the
principal amount of the Swing Line Advances (the "Refunded Swing
Line Advances") outstanding on the date such notice is given;
provided that (i) at any time as there shall be a Swing Line
Advance outstanding for more than thirty days, the Agent shall,
on behalf of the Company (which hereby irrevocably directs the
Agent to act on its behalf), promptly request each Revolving
Credit Bank (including the Swing Line Bank) to make a Prime-
based Advance of the Revolving Credit in an amount equal to such
Revolving Credit Bank's Percentage of the principal amount of
such outstanding Swing Line Advance, and (ii) Swing Line
Advances shall be prepaid by the Borrower in accordance with the
provisions of Section 2B.8 hereof. Unless any of the events
described in Section 9.1(k) shall have occurred (in which event
the procedures of paragraph (b) of this Section 2B.5 shall
apply) and regardless of whether the conditions precedent set
forth in this Agreement to the making of a Revolving Credit
Advance are then satisfied, each Revolving Credit Bank shall
make the proceeds of its Revolving Credit Advance available to
the Agent for the benefit of the Swing Line Bank at the office
of the Agent specified in Section 2.8(a) prior to 11:00 a.m.
Detroit time, in funds immediately available on the Business Day
next succeeding the date such notice is given. The proceeds of
such Revolving Credit Advances shall be immediately applied to
repay the Refunded Swing Line Advances.
(b) If, prior to the making of a Revolving Credit
Advance pursuant to paragraph (a) of this Section 2B.5, one of
the events described in Section 9.1(k) shall have occurred, each
Revolving Credit Bank will, on the date such Revolving Credit
Advance was to have been made, purchase from the Swing Line Bank
an undivided participating interest in the Refunded Swing Line
Advance in an amount equal to its Percentage of such Refunded
Swing Line Advance. Each Revolving Credit Bank will immediately
transfer to the Agent, in immediately available funds, the
amount of its participation and upon receipt thereof the Agent
will deliver to such Revolving Credit Bank a Swing Line Bank
Participation Certificate in the form of Exhibit "K" dated the
date of receipt of such funds and in such amount.
(c) Each Revolving Credit Bank's obligation to make
Revolving Credit Advances and to purchase participation
interests in accordance with clauses (a) and (b) above shall be
absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such
Revolving Credit Bank may have against Swing Line Bank, the
Company or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of any Event of Default; (iii) any
adverse change in the condition (financial or otherwise) of the
Company or any other Person; (iv) any breach of this Agreement
by the Company or any other Person; (v) any inability of the
Company to satisfy the conditions precedent to borrowing set
forth in this Agreement on the date upon which such
participating interest is to be purchased, or (vi) any other
circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing. If any Revolving Credit Bank
does not make available to the Swing Line Bank the amount
required pursuant to clause (a) or (b) above, as the case may
be, the Agent shall be entitled to recover such amount on demand
from such Revolving Credit Bank, together with interest thereon
for each day from the date of non-payment until such amount is
paid in full at the Federal Funds Effective Rate.
2B.6 Quoted Rate Advance Interest Payments. Interest on each
Quoted Rate Advance shall accrue at its Quoted Rate and shall be
payable in immediately available funds on the last day of the
Interest Period applicable thereto. Interest accruing at the
Quoted Rate shall be computed on the basis of a 360 day year and
assessed for the actual number of days elapsed from the first
day of the Interest Period applicable thereto to, but not
including, the last day thereof.
2B.7 Prime-based Advance Interest Payments. Interest on each
Prime-based Advance shall accrue at the Prime-based Rate from
the date of such Advance until paid, and shall be payable in
immediately available funds quarterly commencing on December 31,
1995, and on the last day of each fiscal quarter thereafter.
Interest accruing at the Prime-based Rate shall be computed on
the basis of a 360 day year and assessed for the actual number
of days elapsed, and in such computation effect shall be given
to any change in the interest rate resulting from a change in
the Prime-based Rate on the date of such change in the Prime-
based Rate.
2B.8 Prepayment. Company may prepay all or part of the
outstanding balance of any Prime-based Advance(s) under the
Swing Line Note (subject to not less than one (1) Business Day's
notice to Agent) at any time, provided that the amount of any
partial prepayment shall be at least One Hundred Thousand
Dollars ($100,000) and the aggregate balance of all Swing Line
Advances shall be at least Five Hundred Thousand Dollars
($500,000). Company may prepay Quoted Rate Advances only on the
last day of the Interest Period applicable thereto. Any
prepayment made in accordance with this Section shall be without
premium, penalty or prejudice to the right to reborrow under the
terms of this Agreement. Any other prepayment, whether by
acceleration, mandatory or required prepayment or otherwise,
shall be subject to Section 3.1 hereof, but otherwise without
premium, penalty or prejudice.
3. SPECIAL PROVISIONS, CHANGES IN CIRCUMSTANCES AND YIELD
PROTECTION.
3.1 Reimbursement of Expenses. As to any Eurodollar-based
Advance or any Quoted Rate Advance, if any prepayment thereof
shall occur on any day other than the last day of an Interest
Period (whether pursuant to this Article, or by acceleration, or
otherwise), or if an Applicable Interest Rate shall be changed
during any Interest Period pursuant to this Article, or if
Company fails to borrow any Eurodollar-based Advance or Quoted
Rate Advance after notice has been given by Company to Agent in
accordance with the terms hereof requesting such Advance,
Company shall reimburse Banks on demand for any actual (hard)
costs incurred by Banks as a result of the timing thereof
including but not limited to any costs incurred in liquidating
or employing deposits from third parties, provided that Banks
shall have delivered to Company a certificate setting forth the
basis for determining such costs, which certificate shall be
conclusively presumed correct save for manifest error.
3.2 Eurodollar Lending Office. For any Interest Period for
which the Applicable Interest Rate is the Eurodollar-based Rate,
if Agent shall designate a Eurodollar Lending Office which
maintains books separate from those of the rest of Agent, Agent
shall have the option of maintaining and carrying the relevant
Advance on the books of such Eurodollar Lending Office.
3.3 Change in Circumstances. If with respect to any
Interest Period Agent determines in good faith that, by reason
of circumstances affecting the foreign exchange and interbank
markets generally, deposits in eurodollars in the applicable
amounts are not being offered to the Agent for such Interest
Period, then Agent shall forthwith give notice thereof to
Company and Banks. Thereafter, until Agent notifies Company that
such circumstances no longer exist, the obligation of Banks to
make Eurodollar-based Advances, and the right of Company to
convert an Advance to or refund an Advance as a Eurodollar-based
Advance shall be suspended.
3.4 Regulatory Changes. If any Regulatory Change shall make
it unlawful or impossible for any Bank (or its Eurodollar
Lending Office) to honor its obligations hereunder to make or
maintain any Advance at the Eurodollar-based Rate, Agent shall
forthwith give notice thereof to Company. Thereafter (a) the
obligations of Banks to make Eurodollar-based Advances and the
right of Company to convert an Advance or refund an Advance as a
Eurodollar-based Advance shall be suspended and thereafter
Company may select as Applicable Interest Rates only those which
remain available, and (b) if Banks may not lawfully continue to
maintain an Advance to the end of the then current Interest
Period applicable thereto, the Prime-based Rate shall be the
Applicable Interest Rate for the remainder of such Interest
Period.
3.5 Increased Costs. If any Regulatory Change:
(a) shall subject any Bank (or its Eurodollar Lending
Office) to any tax, duty or other charge with respect
to any Advance or any Note or shall change the basis of
taxation of payments to any Bank (or its Eurodollar
Lending Office) of the principal of or interest on any
Advance or any Note or any other amounts due under this
Agreement in respect thereof (except for changes in the
rate of tax on the overall net income of such Bank or
its Eurodollar Lending Office imposed by the
jurisdiction in which such Bank's principal executive
office or Eurodollar Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets
of, deposits with or for the account of, or credit
extended by any Bank (or its Eurodollar Lending Office)
or shall impose on any Bank (or its Eurodollar Lending
Office) or the foreign exchange and interbank markets
any other condition affecting any Advance or any Note;
or
(c) shall impose, modify or deem applicable any tax,
reserve, special deposit, assessment, capital adequacy
or similar requirement against or with respect to or
measured by reference to Eurodollar-based Advances or
to letters of credit issued or to be issued by any
Bank;
and the result of any of the foregoing is to increase the costs
to such Bank of issuing or maintaining any Letter of Credit or
any part of the Indebtedness hereunder or to reduce the amount
of any sum received or receivable by such Bank under this
Agreement or under any Letter of Credit or any Note, by an
amount deemed by such Bank to be material, then such Bank shall
promptly notify Company of such fact and demand compensation
therefor and, within fifteen days after demand by such Bank,
Company agrees to pay to such Bank such additional amount or
amounts as will compensate such Bank for such increased cost or
reduction; provided, however, that such Bank shall not be
entitled to any such compensation attributable to any such event
to the extent that such compensation relates to a period of time
more than 90 days prior to the date upon which such Bank first
notified Company of such event. A certificate of such Bank
setting forth the basis for determining such additional amount
or amounts necessary to compensate such Bank shall be
conclusively presumed to be correct save for manifest error.
3.6 Capital Requirements. If any Regulatory Change affects
or would affect the amount of capital required to be maintained
by any Bank (or any corporation controlling such Bank) and such
Bank determines that the amount of such capital is increased by
or based upon the existence of a Letter of Credit or such Bank's
obligations or Advances hereunder and such increase has the
effect of reducing the rate of return on such Bank's (or such
controlling corporation's) capital as a consequence of any
Letter of Credit or such obligations or Advances hereunder to a
level below that which such Bank (or such controlling
corporation) could have achieved but for such circumstances
(taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then
Company shall pay to such Bank from time to time, upon request
by such Bank, additional amounts sufficient to compensate such
Bank (or such controlling corporation) for any increase in the
amount of capital and reduced rate of return which such Bank
reasonably determines to be allocable to the existence of any
Letter of Credit or such Bank's obligations or Advances
hereunder; provided, however, that such Bank shall not be
entitled to any such compensation attributable to any such event
to the extent that such compensation relates to a period of time
more than 90 days prior to the date upon which such Bank
notified Company of such event. A statement as to the amount of
such compensation, prepared in good faith and in reasonable
detail by any Bank, shall be submitted by such Bank to Company
and shall be conclusive, absent manifest error in computation.
4. CONDITIONS
The obligations of Banks to make Advances or loans or to
issue Letters of Credit pursuant to this Agreement are subject
to the following conditions:
4.1 Execution of Notes and this Agreement. Company shall
have executed and delivered to Agent for the account of Comerica
Bank the Swing Line Note and for the account of each Bank, the
Revolving Credit Notes and this Agreement (including all
schedules, exhibits, certificates, opinions, financial
statements and other documents to be delivered pursuant hereto),
and, as applicable, the Loan Documents, and such Notes, the Loan
Documents and this Agreement shall be in full force and effect.
4.2 Execution of Guaranty. Guarantors shall have executed
and delivered to Agent for the account of each Bank the
Guaranty.
4.3 Corporate Authority. Agent shall have received, with a
counterpart thereof for each Bank: (i) an incumbency certificate
and certified copies of resolutions of the Board of Directors of
Company evidencing approval of the form of this Agreement and
the Notes and authorizing the execution and delivery thereof and
the borrowing of Advances hereunder; and (ii) (A) certified
copies of Company's and each Guarantor's articles of
incorporation and bylaws or other constitutional documents
certified as true and complete as of a recent date by the
appropriate official of the jurisdiction of incorporation of
each such entity; and (B) a certificate of good standing from
the state or other jurisdictions of Company's and each
Guarantor's incorporation, and from every state or other
jurisdiction in which Company or any Guarantor is qualified to
do business
4.4 Representations and Warranties -- All Parties. The
representations and warranties made by Company or any other
party to any of the Loan Documents under this Agreement or any
of the Loan Documents (excluding the Banks), and the
representations and warranties of any of the foregoing which are
contained in any certificate, document or financial or other
statement furnished at any time hereunder or thereunder or in
connection herewith or therewith shall have been true and
correct in all material respects when made and shall be true and
correct in all material respects on and as of the date of the
making of any Advance hereunder.
4.5 Compliance with Certain Documents and Agreements. The
Company and the Guarantors shall have each performed and
complied with all agreements and conditions contained in this
Agreement, the Loan Documents, or any agreement or other
document executed thereunder and required to be performed or
complied with by it (as of the applicable date) and Company
shall not be in default in the performance or compliance with
any of the terms or provisions hereof or thereof.
4.6 Opinion of Counsel. Company shall furnish Agent prior
to the initial Advance under this Agreement, and with signed
copies for each Bank, opinions of counsel to the Company and the
Guarantors, dated the date hereof, and covering such matters as
required by and otherwise satisfactory in form and substance to
the Agent and each of the Banks.
4.7 No Default. No Event of Default or event which with the
lapse of time or giving of notice or both would constitute an
Event of Default shall have occurred and be continuing.
4.8 No Material Adverse Change. There shall have been no
material adverse change in the condition (financial or
otherwise), properties, business, prospects of, results or
operations of the Company and the Guarantors (taken as a whole)
from July 1, 1995 to the date of the making of the first
borrowing hereunder.
4.9 Termination of Prior Agreement. The Company and
Comerica Bank shall have terminated the Second Amended and
Restated Loan Agreement dated March 2, 1994, as amended, and all
amounts payable thereunder shall have been paid or shall be paid
with the proceeds of the first Advance.
4.10 Facility Fee. Company shall have paid to the Agent, for
distribution ratably to the Banks in accordance with their
Percentages, a facility fee in the amount of $21,000.
5. REPRESENTATIONS AND WARRANTIES
Company represents and warrants and such representations and
warranties shall be deemed to be continuing representations and
warranties during the entire life of this Agreement:
5.1 Organization, etc. Company and each Guarantor is a
corporation duly organized and existing and in good standing
under the laws of the state of its incorporation as identified
on Exhibit "D" attached hereto; Company and each Guarantor is
duly qualified and authorized to do business as a foreign
corporation in each jurisdiction where the character of its
assets or the nature of its activities makes such qualification
necessary; the execution, delivery and performance of this
Agreement, and any other documents and instruments required
under this Agreement (including, without limitation, and the
issuance of the Notes by Company and the Guaranty by
Guarantors), are within the corporate powers of the Company or
Guarantor executing and/or delivering same, have been duly
authorized, are not in contravention of any law applicable to
Company or Guarantor or the terms of either of the articles of
incorporation or bylaws of Company or Guarantor, and do not
require (with respect to Company or Guarantor) the consent or
approval of any governmental body, agency or authority; and this
Agreement and any other documents and instruments required under
this Agreement, when issued and delivered under this Agreement,
will be valid and binding in accordance with their terms.
5.2 No Conflict. The execution, delivery and performance of
this Agreement and any other documents and instruments required
under this Agreement, and the issuance of the Notes by Company,
are not in contravention of the unwaived terms of any indenture,
agreement or undertaking to which Company or any Guarantor is a
party or by which Company or any Guarantor is bound, the
violation of which could materially impair Company's or any
Guarantor's financial condition or ability to carry on its
business.
5.3 Litigation. No litigation or other proceeding before
any court or administrative agency is pending, or to the
knowledge of the officers of Company is threatened against
Company or any Guarantor, the outcome of which could materially
impair Company's or any Guarantor's financial condition or
ability to carry on its business.
5.4 Title to Assets. Company and Guarantors have good and
marketable title to all of the properties and assets reflected
on the balance sheets referred to in Section 5.7 hereof and
there are no security interests in or liens, mortgages or other
encumbrances on any assets of any Company or Guarantor, except
to Bank and except for Permitted Liens.
5.5 Subsidiaries. There are no Subsidiaries of Company
other than those listed on Exhibit "D".
5.6 Pension Plans. Neither Company nor any Guarantor
maintains or contributes to any employee pension benefit plan
subject to Title IV of ERISA except the Pension Plans described
in Exhibit "E" attached hereto. There was no "unfunded past
service liability" of the Pension Plans as of June 30, 1995, and
there is no accumulated funding deficiency within the meaning of
ERISA, or any existing liability with respect to any of the
Pension Plans owed to the Pension Benefit Guaranty Corporation
or any successor thereto.
5.7 Financial Statements. The audited Consolidated
financial statements dated December 31, 1994, previously
furnished Banks, are complete and correct and fairly present the
financial condition of Company and its Consolidated Subsidiaries
and the results of their operations in accordance with GAAP;
since said date there have been no material adverse changes in
the financial condition of Company or any Guarantor; to the
knowledge of Company's officers, Company and Guarantors have no
contingent obligations (including any liability for taxes) not
disclosed by or reserved against in such financial statements,
and at the present time there are no material unrealized or
anticipated losses from any present commitment of Company and
Guarantors required by GAAP to be disclosed.
5.8 Tax Returns. All tax returns and tax reports of Company
and Guarantors, required by law to be filed, have been duly
filed or extensions obtained, and all taxes, assessments and
other governmental charges or levies (other than those presently
payable without penalty and those currently being contested in
good faith for which adequate reserves have been established)
upon Company and Guarantors (or any of their properties) which
are due and payable have been paid. The charges, accruals and
reserves on the books of Company and Guarantors in respect of
the Federal income tax for all periods are adequate in the
opinion of Company.
5.9 Compliance with Laws. Company and each Guarantor is, in
the conduct of its business, in compliance in all material
respects with all federal, state or local laws, statutes,
ordinances and regulations applicable to it, the enforcement of
which, if such Company or Guarantor were not in compliance,
would materially and adversely affect its business or the value
of its property or assets taken as a whole. Company and each
Guarantor has all approvals, authorizations, consents, licenses,
orders and other permits of all governmental agencies and
authorities, whether federal, state or local, required to permit
the operation of its business as presently conducted, except
such approvals, authorizations, consents, licenses, orders and
other permits with respect to which the failure to obtain can be
cured without having a material and adverse effect on the
operation of Company's or such Guarantor's business taken as a
whole.
5.10 Representations. No representation or warranty by
Company in this Agreement, nor any statement or certificate
(including financial statements) furnished or to be furnished to
Banks pursuant hereto contains or will contain any untrue
statement of any fact or omits or will omit to state a fact
necessary to make such representation, warranty, statement or
certificate not misleading.
5.11 Reserved.
5.12 Environmental Matters. Except for De Minimis Matters or
as described on Schedule 5.12, neither Company nor any Guarantor
is a party to any litigation or administrative proceeding, nor
so far as is known by Company is any litigation or
administrative proceeding threatened against Company or any
Guarantor, which in either case (A) asserts or alleges that
Company or any Guarantor violated Environmental Laws, (B)
asserts or alleges that any Company or Guarantor is required to
clean up, remove or take remedial or other response action due
to the disposal, depositing, discharge, leaking or other release
of any hazardous substances or materials, or (C) asserts or
alleges that Company or any Guarantor is required to pay all or
a portion of the cost of any past, present or future cleanup,
removal or remedial or other response action which arises out of
or is related to the disposal, depositing, discharge, leaking or
other release of any hazardous substances or materials.
5.13 Environmental Matters. Except for De Minimis Matters or
as described in Schedule 5.12, to the best knowledge of Company,
after due inquiry, there are no conditions existing currently or
likely to exist during the term of this Agreement which would
subject Company or any Guarantor to damages, penalties,
injunctive relief or cleanup costs under any applicable
Environmental Laws or which require or are likely to require
cleanup, removal, remedial action or other response pursuant to
applicable Environmental Laws by Company or any Guarantor.
5.14 Environmental Liabilities. Except as described in
Section 5.12, neither Company nor any Guarantor is subject to
any judgment, decree, order or citation related to or arising
out of applicable Environmental Laws and to the best knowledge
of Company, after due inquiry, neither Company nor any Guarantor
has been named or listed as a potentially responsible party by
any governmental body or agency in a matter arising under any
applicable Environmental Laws.
5.15 Environmental Permits. Company and Guarantors have all
permits, licenses and approvals required under applicable
Environmental Laws.
6. COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that it will, so long as Banks
are committed to make any Advances under this Agreement and so
long as any Letter of Credit or other indebtedness remains
outstanding under this Agreement, unless the Majority Banks
shall otherwise consent in writing:
6.1 Deliveries. Furnish, to Agent, with copies for each
Bank:
(a) as soon as available and in any event within 90 days
after the end of each fiscal year of Company, the
Consolidated financial statements of Company and its
Consolidated Subsidiaries for such fiscal year
including balance sheet as of the end of such fiscal
year and the related statements of income and retained
earnings for such fiscal year, each prepared in
accordance with GAAP and audited by independent
certified public accountants reasonably acceptable to
Bank;
(b) Reserved
(c) as soon as available and in any event within 45 days
after the end of the first three fiscal quarters of
each year, and 90 days after the end of the last fiscal
quarter of each year, a Consolidated balance sheet and
related statements of income and retained earnings for
such quarter and year-to-date, each prepared in
accordance with GAAP and certified on behalf of Company
(subject to year-end audit adjustments) by an officer
of Company; together with a certificate signed on
behalf of Company by an officer of Company (i) to the
effect that there has been no Event of Default and no
event exists which, with the giving of notice, the
passage of time, or both, would constitute an Event of
Default, under this Agreement and that the
representations and warranties set forth in this
Agreement are true as of the date of such
certification, and (ii) stating in reasonable detail
the information and calculations necessary to establish
compliance with the provisions of Section 6.11 through
6.13 hereof as of the end of such fiscal quarter;
(d) as soon as possible and in any event within 150 days
after the end of each fiscal year of Company, a copy of
each management letter received from its accountants;
(e) within 7 Business Days of filing with the Commission,
copies of each Form 10-K, Form 10-Q and Form 8-K filed
with the Commission; and within 7 Business Days of
mailing to Company's shareholders, a copy of its annual
report and proxy statement; and
(f) from time to time, such further information regarding
the business affairs and financial condition of Company
and Guarantors as any Bank may reasonably request.
6.2 Taxes. Pay and discharge, and cause all Subsidiaries to
pay and discharge, all taxes and other governmental charges and
all contractual obligations calling for the payment of money,
before any interest or penalty for nonpayment thereof becomes
payable, unless and to the extent only that such payment is
being contested in good faith.
6.3 Insurance. Maintain, and cause all Subsidiaries to
maintain, insurance coverage on their physical assets and
against other business risks in such amounts and of such types
as are customarily carried by companies similar in size and
nature, and in the event of acquisition of additional property,
real or personal, or of incurrence of additional risks of any
nature, increase such insurance coverage in such manner and to
such extent as prudent business judgment and present practice
would dictate. In the case of all policies covering property
mortgaged or pledged to Banks or property in which Banks shall
have a security interest of any kind whatsoever, other than
those policies protecting against casualty liabilities to
strangers, all such insurance policies shall name Bank as loss
payee whose interest shall not be invalidated by the acts or
neglect of the insured and provide that the loss payable
thereunder shall be payable to Company or Subsidiaries and Bank,
as their respective interests may appear. All said policies or
copies thereof, including all endorsements thereon and those
required hereunder, shall be deposited with Agent upon request
of Agent.
6.4 Inspection. Permit Agent and the Banks, through the
authorized attorneys, accountants and representatives, to
examine Company's and Subsidiaries' books, accounts, records,
ledgers and assets of every kind and description at all
reasonable times during normal business hours upon oral or
written request of Agent or any Bank.
6.5 Notification of Default. Promptly notify Agent and the
Banks of any condition or event which constitutes or with the
running of time and/or the giving of notice would constitute a
default or Event of Default under this Agreement, and promptly
inform Agent and the Banks of any material adverse change in the
financial condition of Company or any Subsidiary.
6.6 Legal Existence. Preserve and maintain the legal
existence of Company and each Subsidiary and such of their
rights, licenses and privileges as are material to their
business and operations, except for mergers permitted by Section
7.2; and qualify and remain qualified to do business in each
jurisdiction in which such qualification is material to its
business and operations or the ownership of their properties.
6.7 Compliance with Laws. Comply, and cause all
Subsidiaries to comply, in all material respects with all
applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which could
materially and adversely affect the financial condition or
operations of Company or any Subsidiary, except to the extent
that compliance with any of the foregoing is then being
contested in good faith and by appropriate legal proceedings and
with respect to which adequate financial reserves have been
established.
6.8 Reserved.
6.9 Compliance with ERISA. Comply, and cause all
Subsidiaries to comply, with all requirements (except for De
Minimis Matters) imposed by ERISA as presently in effect or
hereafter promulgated including, but not limited to, the minimum
funding requirements of the Pension Plans.
6.10 Notification of ERISA Matters. Promptly notify Agent
and the Banks upon the occurrence of any of the following
events:
(a) the termination of any of the Pension Plans pursuant to
Subtitle C of Title IV of ERISA or otherwise;
(b) the appointment of a trustee by a United States
District Court to administer any of the Pension Plans;
(c) the commencement by the Pension Benefit Guaranty
Corporation, or any successor thereto of any proceeding
to terminate any of the Pension Plans;
(d) the failure of any of the Pension Plans to satisfy the
minimum funding requirements for any plan year as
established in Section 412 of the Internal Revenue Code
of 1954, as amended, or any successor provision of the
Internal Revenue Code of 1986;
(e) the withdrawal of Company or any Subsidiary from any
Pension Plan; or
(f) a reportable event, within the meaning of Title IV of
ERISA.
6.11 Consolidated Funded Debt Ratio. Maintain, as of the
last day of each fiscal quarter, a Consolidated Funded Debt
Ratio of not more than 2.25 to 1.
6.12 Consolidated Fixed Charge Coverage Ratio. Maintain, as
of the last day of each fiscal quarter, a Consolidated Fixed
Charge Coverage Ratio of not less than 1.75 to 1.
6.13 Consolidated Tangible Net Worth. Maintain, as of the
last day of each fiscal quarter, Consolidated Tangible Net Worth
of not less than a deficit of ($5,000,000) plus 50% of Company's
cumulative Consolidated Net Income (not reduced by losses) for
the period (taken as one accounting period) beginning on July 2,
1995 and ending on the date of determination.
7. NEGATIVE COVENANTS
Company covenants and agrees that so long as Banks are
committed to make any Advances under this Agreement and
thereafter so long as any Letter of Credit or other Indebtedness
remains outstanding under this Agreement, neither Company nor
any Subsidiary will, without the prior written consent of the
Majority Banks:
7.1 Redemptions. Purchase, acquire or redeem any of its
Capital Stock or make any material change in its capital
structure or general business objects or purposes except that so
long as no Event of Default has occurred and is continuing,
either before or after giving effect thereto, Company may redeem
its stock for an amount not to exceed $10,000,000 in the
aggregate in any two year period.
7.2 Merger. Merge or consolidate with or into any other
Person, except that a Subsidiary may merge with Company or any
other Subsidiary, and except for mergers in which Company or any
Guarantor is the surviving entity in a Permitted Acquisition.
7.2A Sale of Assets. Lease, sell or otherwise dispose of any
of its property to any other Person except for (i) sales of
inventory in the ordinary course of its business and (ii)
leases, sales or other dispositions of its property that,
together with all other property of Company and its Subsidiaries
previously leased, sold or disposed of (other than inventory in
the ordinary course of its business) as permitted by this
Section during the twelve-month period ending with the month in
which any such lease, sale or other disposition occurs, do not
constitute a Substantial Portion of the property of Company and
its Subsidiaries.
7.3 Guarantee Obligations. Guarantee or otherwise in any
way become or be responsible for the obligations of any other
Person (whether by agreement or otherwise) to purchase the
indebtedness of any other person through the purchase of goods,
supplies or services, or by way of stock purchase, capital
contribution, advance or loan for the purpose of paying or
discharging the indebtedness of any other Person, or agree to
maintain the net worth or working capital of any other Person,
or otherwise assure any creditor of such Person against loss,
except for (i) loans to dealers consistent with prior practice
in aggregate amounts not to exceed $1,500,000 at any time
outstanding, (ii) the endorsement of negotiable instruments by
Company and Guarantors in the ordinary course of business for
collection, (iii) guarantees in favor of Banks, (iv) the current
Account Purchase Agreement with General Electric Capital
Corporation, which Agreement has been assigned to and assumed by
Transamerica Commercial Finance Corporation, and (v) all floor
plan financing and/or repurchase arrangements described in
Exhibit "F" attached hereto.
7.4 Debt. Incur, create, assume or permit to exist any
indebtedness or liability for borrowed money, or any other
indebtedness or liability evidenced by notes, capital leases,
bonds, debentures or similar obligations, or enter into any
application for or reimbursement agreement relating to any
letter of credit, except:
(a) Indebtedness to the Banks;
(b) current unsecured trade, utility or non-extraordinary
accounts payable arising in the ordinary course of the
business of Company or Subsidiaries;
(c) the indebtedness described in Exhibit "G" attached; and
(d) other indebtedness or liabilities not to exceed
$3,000,000 in the aggregate at any time outstanding.
7.5 Acquisitions. Purchase or otherwise acquire all or
substantially all of the assets or business interests of any
Person, firm or corporation or any shares of stock of any
corporation, trusteeship or association or in any other manner
effectuate or attempt to effectuate an expansion of present
business by acquisition, except for Permitted Acquisitions.
7.6 Dividends. Declare or pay any dividends on, or make any
other distribution (whether by reduction of capital or
otherwise) with respect to any shares of any of its Capital
Stock (other than cash dividends paid by Subsidiaries to Company
or to any other Subsidiary), except that so long as no Event of
Default has occurred and is then continuing, either before or
after taking into account the following described dividends,
Company may declare and pay dividends in an amount not to exceed
10% of Company's Consolidated Net Income for the year in which
such dividend is declared and paid.
7.7 Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property or assets whether now owned or
hereafter acquired except to Banks and except for (i) Liens
encumbering assets having a value of not greater than 10% of
Consolidated Net Tangible Assets, and (ii) the Permitted Liens.
7.8 Loans. Make any loans, advances of credit or extension
of credit to any person, except sales on open account or in the
ordinary course of business and, so long as no Event of Default
has occurred and is continuing, advances to officers and other
employees of Company or any Guarantor not to exceed $500,000 per
person in the aggregate and $1,500,000 for all officers and
employees in the aggregate at any time outstanding, for the sole
purpose of (i) payment of income taxes associated with the
exercise of options to purchase stock of Company, and (ii)
providing inducement to become or remain an employee of Company
or any Guarantor.
7.9 Pension Plans. Enter into, maintain or make
contribution to, directly or indirectly, any employee pension
plan that is subject to Title IV or ERISA, except any Pension
Plan heretofore described.
7.10 Subsidiaries. Create or acquire any Subsidiary except
for (i) the acquisition of a Subsidiary permitted by Section
7.5, and (ii) the creation of a Subsidiary in the ordinary
course of business and upon prior written notice to Agent. Any
Bank may at its option require Company to cause any such
Subsidiary to become a Guarantor.
8. ENVIRONMENTAL PROVISIONS
8.1 General. Company shall timely comply, and cause
Guarantors to timely comply, with all applicable Environmental
Laws.
8.2 Copies of Pleadings. Company shall provide to Agent,
immediately upon receipt, copies of any correspondence, notice,
pleading, citation, indictment, complaint, order, decree or
other document from any source asserting or alleging a
circumstance or condition which requires or may require a
financial contribution by Company or any Guarantor or a cleanup,
removal, remedial action or other response by or on the part of
Company or any Guarantor under applicable Environmental Laws or
which seeks damages or civil, criminal or punitive penalties
from Company or any Guarantor for an alleged violation of
Environmental Laws.
8.3 Notification. Company shall promptly notify Bank in
writing as soon as Company becomes aware of any condition or
circumstance (except for De Minimis Matters) which makes the
environmental warranties or representations in this Agreement
incomplete or inaccurate as of any date.
8.4 Retention of Expert. In the event of any condition or
circumstance that makes any environmental warranty,
representation and/or agreement incomplete or inaccurate as of
any date (except for De Minimis Matters), Company shall, at its
sole expense, retain an environmental professional consultant,
reasonably acceptable to Banks, to conduct a thorough and
complete environmental audit regarding the changed condition
and/or circumstance and any environmental concerns arising from
that changed condition and/or circumstance. A copy of the
environmental consultant's report will be promptly delivered to
Agent upon completion.
8.5 Environmental Audit. At any time Company, directly or
indirectly through any professional consultant or other
representative, determines to undertake an environmental audit,
assessment or investigation (except for De Minimis Matters),
Company shall promptly provide Agent with written notice of the
initiation of the environmental audit, fully describing the
purpose and intended scope. Upon receipt, Company will promptly
provide to Agent copies of all final findings and conclusions of
any such environmental investigation. Preliminary findings and
conclusions shall be provided if final reports have not been
completed and delivered to Agent with 60 days following
completion of the preliminary findings and conclusions.
8.6 Indemnification. Company hereby indemnifies and holds
the Agent and each Bank and any of its or their past, present
and future officers, directors, shareholders and employees
harmless from any and all loss, damages, suits, penalties,
costs, liabilities and expenses (including but not limited to
reasonable investigation, environmental audit and legal
expenses) arising out of any claim, loss or damage of any
property, injuries to or death of persons, contamination of or
adverse affects on the environment, or any violation of any
applicable Environmental Laws, due to any acts of Company or any
Guarantor, their officers, directors, shareholders, employees,
consultants and/or representatives. In no event shall Company
be liable hereunder for any loss, damages, suits, penalties,
costs, liabilities or expenses arising from any act of
negligence of Agent or any Bank or their agents or employees.
It is expressly understood and agreed that (A) the
indemnifications granted herein are intended to protect Agent
and the Banks and their past, present and future officers,
directors, shareholders, employees, consultants and
representatives from any claims that may arise by reason of the
security interest, liens and/or mortgages granted to Agent or
any Bank, or under any other document or agreement given to
secure repayment of any indebtedness from Company, whether or
not such claims arise before or after Banks have foreclosed upon
and/or otherwise become the owner of any such property; and (B)
the provisions hereof shall be continuing and shall survive the
repayment of any indebtedness from Company to Banks.
8.7 Permits. Company shall maintain, and cause Guarantors
to maintain, all permits, licenses and approvals required under
applicable Environmental Laws.
9. DEFAULTS
9.1 Defaults. Any of the following events is an "Event of
Default":
(a) Non-payment of Fees or of the principal or interest due
under the terms of this Agreement or on the Notes or
other instrument or evidence of indebtedness
outstanding under this Agreement when due in accordance
with the terms thereof and (except in the case of non-
payment of principal) continuance for 10 calendar days;
(b) default in the observance or performance of any of the
conditions, covenants or agreements of Company set
forth in Section 6.1, 6.3, 6.4, 6.5, 6.11 through 6.13
or 7 hereof;
(c) default in the observance or performance of any of the
other conditions, covenants or agreements of Company
herein set forth and continuance thereof for thirty
(30) days after notice to Company by Agent;
(d) any representation or warranty made by Company or any
Guarantor herein or in any Loan Document or other
instrument submitted pursuant hereto proves to have
been untrue in any material respect when made;
(e) default in the observance or performance of any of the
conditions, covenants or agreements of Company or any
of the Guarantors set forth in any of the other Loan
Documents, and continuance thereof beyond any period of
grace or cure specified in any such document;
(f) default in the payment of any other obligation of
Company or any Guarantor for borrowed money in excess
of $5,000,000 or in the observance or performance of
any conditions, covenants or agreements related or
given with respect thereto beyond any applicable grace
period, the result of which would have a material and
adverse impact on the financial condition of the
Company and Guarantors, taken as a whole, or their
ability to carry on their business (taken as a whole);
(g) judgments for the payment of money in excess of the sum
of $500,000 over applicable insurance coverage (not
including deductibles) in the aggregate shall be
rendered against Company or any Guarantor, and such
judgments shall remain unpaid, unvacated, unbonded or
unstayed by appeal or otherwise for a period of 30
consecutive days from the date of its entry;
(h) the revocation of the Guaranty by any Guarantor;
(i) any Person or group of Persons acting on concert shall
acquire or control, directly or indirectly, whether by
ownership, voting trust or otherwise, more than 50% of
the issued and outstanding voting securities of
Company;
(j) the occurrence of any "reportable event", as defined in
the Employee Retirement Income Security Act of 1974 and
any amendments thereto, which is determined to
constitute grounds for termination by the Pension
Benefit Guaranty Corporation of any employee pension
benefit plan maintained by or on behalf of Company or
any Guarantor for the benefit of any of its employees
or is determined to constitute grounds for the
appointment by the appropriate United States District
Court of a trustee to administer such plan, and such
reportable event is not corrected and such
determination is not revoked within 30 days after
notice thereof has been given to the plan
administrator; or the institution of proceedings by the
Pension Benefit Guaranty Corporation to terminate any
such employee benefit pension plan or to appoint a
trustee to administer such plan; or the appointment of
a trustee by the appropriate United States District
Court to administer any such employee benefit pension
plan; or
(k) If a creditors' committee shall have been appointed for
the business of Company or any Guarantor; or if Company
or any Guarantor shall have made a general assignment
for the benefit of creditors or shall have been
adjudicated bankrupt, or shall have filed a voluntary
petition in bankruptcy or for reorganization or to
effect a plan or arrangement with creditors; or shall
file an answer to a creditor's petition or other
petition filed against it, admitting the material
allegations thereof for an adjudication in bankruptcy
or for reorganization; or shall have applied for or
permitted the appointment of a receiver or trustee or
custodian for any of its property or assets; or such
receiver, trustee or custodian shall have been
appointed for any of its property or assets and such
receiver, trustee or custodian so appointed shall not
have been discharged within 45 days after the date of
appointment; or if an order shall be entered, and shall
not be dismissed or stayed within 45 days, approving
any petition for reorganization of Company or any
Guarantor.
9.2 Exercise of Remedies. If an Event of Default has
occurred and is continuing hereunder: (v) the Agent may, and
upon being directed to do so by the Majority Banks, shall,
declare the commitment of the Banks to make Advances and to
issue Letters of Credit terminated; (w) the Agent may, and upon
being directed to do so by the Majority Banks, shall, declare
the entire unpaid principal Indebtedness, including the Notes,
immediately due and payable, without presentment, notice or
demand, all of which are hereby expressly waived by Company; (x)
upon the occurrence of any Event of Default specified in
subsection 9.1(k), above, and notwithstanding the lack of any
declaration by Agent under preceding clause (w), the entire
unpaid principal Indebtedness, including the Notes, shall become
automatically and immediately due and payable, and the
commitment of the Banks to make Advances and to issue Letters of
Credit shall be automatically and immediately terminated; (y)
the Agent may, and upon being directed to do so by the Majority
Banks, shall, demand immediate delivery of Letter of Credit Cash
Collateral, and (z) the Agent shall, if directed to do so by the
Majority Banks or the Banks, as applicable (subject to the terms
hereof), exercise any remedy permitted by this Agreement, the
Loan Documents or law.
9.3 Rights Cumulative. No delay or failure of Agent and/or
Banks in exercising any right, power or privilege hereunder
shall affect such right, power or privilege, nor shall any
single or partial exercise thereof preclude any further exercise
thereof, or the exercise of any other power, right or privilege.
The rights of Banks under this Agreement are cumulative and not
exclusive of any right or remedies which Banks would otherwise
have.
9.4 Waiver by Company of Certain Laws. To the extent
permitted by applicable law, Company hereby agrees to waive, and
does hereby absolutely and irrevocably waive and relinquish the
benefit and advantage of any valuation, stay, appraisement,
extension or redemption laws now existing or which may hereafter
exist, which, but for this provision, might be applicable to any
sale made under the judgment, order or decree of any court, on
any claim for interest on the Notes.
9.5 Waiver of Defaults. No Event of Default shall be waived
by the Banks except in a writing signed by an officer of the
Agent in accordance with Section 12.11 hereof. No single or
partial exercise of any right, power or privilege hereunder, nor
any delay in the exercise thereof, shall preclude other or
further exercise of their rights by Agent or the Banks. No
waiver of any Event of Default shall extend to any other or
further Event of Default. No forbearance on the part of the
Agent or the Banks in enforcing any of their rights shall
constitute a waiver of any of their rights. Company expressly
agrees that this Section may not be waived or modified by the
Banks or Agent by course of performance, estoppel or otherwise.
9.6 Interest on Default. Notwithstanding anything to the
contrary set forth in this Agreement, in the event and so long
as any Event of Default shall exist under this Agreement, upon
notice to Company by Agent (except in the case of an Event of
Default under Section 9.1(k), as to which no notice shall be
required), interest shall accrue on the principal amount of all
Advances from time to time outstanding at a per annum rate equal
to the Applicable Interest Rate (calculated on the basis of the
maximum Applicable Margin amount) in respect of each such
Advance plus three percent (3%) per annum for the remainder of
the then existing Interest Period, if any, and at all other such
times, at a per annum rate equal to the Prime-based Rate plus
three percent (3%)
10. PAYMENTS, RECOVERIES AND COLLECTIONS.
10.1 Payment Procedure.
(a) All payments by Company of principal of, or
interest on, the Notes, or of Fees, shall be made without
setoff or counterclaim on the date specified for payment
under this Agreement not later than 11:00 a.m. (Detroit
time) in immediately available funds to Agent, for the
ratable account of the Banks, at Agent's office located at
500 Woodward Avenue, Detroit, Michigan 48226, (care of
Agent's Eurodollar Lending Office, for Eurodollar-based
Advance). Upon receipt by the Agent of each such payment,
the Agent shall make prompt payment in like funds received
to each Bank, or, in respect of Eurodollar-based Advances,
to such Bank's Eurodollar Lending Office.
(b) Unless the Agent shall have been notified by
Company prior to the date on which any payment to be made by
Company is due that Company does not intend to remit such
payment, the Agent may, in its sole discretion and without
obligation to do so, assume that the Company has remitted
such payment when so due and the Agent may, in reliance upon
such assumption, make available to each Bank on such payment
date an amount equal to such Bank's share of such assumed
payment. If Company has not in fact remitted such payment to
the Agent each Bank shall forthwith on demand repay to the
Agent the amount of such assumed payment made available or
transferred to such Bank, together with the interest
thereon, in respect of each day from and including the date
such amount was made available by the Agent to such Bank to
the date such amount is repaid to the Agent at a rate per
annum equal to (i) for Prime-based Advances, the Federal
Funds Effective Rate (daily average), as the same may vary
from time to time, and (ii) with respect to Eurodollar-based
Advances, Agent's aggregate marginal cost (including the
cost of maintaining any required reserves or deposit
insurance and of any fees, penalties, overdraft charges or
other costs or expenses incurred by Agent) of carrying such
amount.
(c) Subject to the definition of Eurodollar-Interest
Period, whenever any payment to be made hereunder shall
otherwise be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day
and such extension of time shall be included in computing
interest, if any, in connection with such payment.
10.2 Pro-rata Recovery. If any Revolving Credit Bank shall
obtain any payment or other recovery (whether voluntary,
involuntary, by application of offset or otherwise) on account
of principal of, or interest on, any of the Revolving Credit
Notes in excess of its pro rata share of payments then or
thereafter obtained by all Revolving Credit Banks upon principal
of and interest on all Revolving Credit Notes, such Bank shall
purchase from the other Revolving Credit Banks such
participations in the Revolving Credit Notes held by them as
shall be necessary to cause such purchasing Revolving Credit
Bank to share the excess payment or other recovery ratably in
accordance with the Percentage with each of them; provided,
however, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing
holder, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.
10.3 Application of Proceeds. Notwithstanding anything to
the contrary in this Agreement, after an Event of Default, the
proceeds of any offsets or voluntary payments by Company or any
Guarantor or others and any other sums received or collected in
respect of the Indebtedness, shall be applied, first, to the
Notes on a pro rata basis (or in such order and manner as
determined by the Majority Banks; subject, however, to the
applicable Percentages of the loans held by each of the Banks),
next, to any other Indebtedness on a pro rata basis, and then,
if there is any excess, to Company. The application of such
proceeds and other sums to the Revolving Credit Notes shall be
based on each Bank's Percentage of the aggregate of the loans.
11. Agent
11.1 Appointment of Agent. Each Bank and the holder of each
Note irrevocably appoints and authorizes the Agent to act on
behalf of such Bank or holder under this Agreement and the Loan
Documents and to exercise such powers hereunder and thereunder
as are specifically delegated to Agent by the terms hereof and
thereof, together with such powers as may be reasonably
incidental thereto, including without limitation the power to
execute or authorize the execution of financing or similar
statements or notices, and other documents. In performing its
functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not
be deemed to have assumed any obligation towards or relationship
of agency or trust with or for Company. Without limiting in any
way the obligations of the Company under this Agreement, each
Bank agrees (which agreement shall survive any termination of
this Agreement) to reimburse Agent for all reasonable out-of-
pocket expenses (including house and outside attorneys' fees and
disbursements) incurred by Agent hereunder or in connection
herewith or with an Event of Default or in enforcing the
obligations of Company under this Agreement or the Loan
Documents or any other instrument executed pursuant hereto, and
for which Agent is not reimbursed by Company, pro rata according
to such Bank's Percentage. Agent shall not be required to take
any action under the Loan Documents, or to prosecute or defend
any suit in respect of the Loan Documents, unless indemnified to
its satisfaction by the Banks against loss, costs, liability and
expense. If any indemnity furnished to Agent shall become
impaired, it may call for additional indemnity and cease to do
the acts indemnified against until such additional indemnity is
given.
11.2 Deposit Account with Agent. Company hereby authorizes
Agent, in Agent's sole discretion, to charge its general deposit
account(s), if any, maintained with Agent for the amount of any
principal, interest, or other amounts or costs due under this
Agreement when the same becomes due and payable under the terms
of this Agreement or the Notes.
11.3 Scope of Agent's Duties. The Agent shall have no duties
or responsibilities except those expressly set forth herein, and
shall not, by reason of this Agreement or otherwise, have a
fiduciary relationship with any Bank (and no implied covenants
or other obligations shall be read into this Agreement against
the Agent). Neither Agent nor any of its directors, officers,
employees or agents shall be liable to any Bank for any action
taken or omitted to be taken by it under this Agreement or any
document executed pursuant hereto, or in connection herewith or
therewith with the consent or at the request of the Majority
Banks or in the absence of their own gross negligence or wilful
misconduct, nor be responsible for or have any duties to
ascertain, inquire into or verify (a) any recitals or warranties
herein or therein, (b) the effectiveness, enforceability,
validity or due execution of this Agreement or any document
executed pursuant hereto or any security thereunder, (c) the
performance by Company of its obligations hereunder or
thereunder, or (d) the satisfaction of any condition hereunder
or thereunder, including without limitation the making of any
Advance or the issuance of any Letter of Credit, except the
receipt of closing documents. Agent shall be entitled to rely
upon any certificate, notice, document or other communication
(including any cable, telegraph, telex, facsimile transmission
or oral communication) believed by it to be genuine and correct
and to have been sent or given by or on behalf of a proper
person. Agent may treat the payee of any Note as the holder
thereof. Agent may employ agents and may consult with legal
counsel (who may be counsel for Company), independent public
accountants and other experts selected by it and shall not be
liable to the Banks (except as to money or property received by
them or their authorized agents), for the negligence or
misconduct of any such agent selected by it with reasonable care
or for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accounts or
experts.
11.4 Successor Agent. Agent may resign as such at any time
upon at least 30 days prior notice to Company and all Banks.
Agent may be removed at any time by the Majority Banks upon the
gross negligence or willful misconduct of Agent, or upon the
failure by Agent to comply with the terms and conditions of this
Agreement. If Agent at any time shall resign or if the office of
Agent shall become vacant for any other reason, Majority Banks
shall, by written instrument, appoint successor agent(s)
(satisfactory to such Majority Banks and with the consent of
Company, which shall not be unreasonably withheld) which shall
thereupon become the Agent hereunder, as applicable, and shall
be entitled to receive from the prior Agent such documents of
transfer and assignment as such successor Agent may reasonably
request. Any such successor Agent shall be a commercial bank
organized under the laws of the United States or any state
thereof and shall have a combined capital and surplus of at
least $500,000,000. If a successor is not so appointed or does
not accept such appointment before the resigning Agent's
resignation becomes effective, the resigning Agent may appoint a
temporary successor to act until such appointment by the
Majority Banks is made and accepted or if no such temporary
successor is appointed as provided above by the resigning Agent,
the Majority Banks shall thereafter perform all of the duties of
the resigning Agent hereunder until such appointment by the
Majority Banks is made and accepted. Such successor Agent shall
succeed to all of the rights and obligations of the resigning
Agent as if originally named. The resigning Agent shall duly
assign, transfer and deliver to such successor Agent all moneys
at the time held by the resigning Agent hereunder after
deducting therefrom its expenses for which it is entitled to be
reimbursed. Upon such succession of any such successor Agent,
the provisions of this Section 11 shall continue in effect for
the benefit of the resigning Agent in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
11.5 Loans by Agent. Comerica Bank and its successors and
assigns, in its capacity as a Bank hereunder, shall have the
same rights and powers hereunder as any other Bank and may
exercise or refrain from exercising the same as though it were
not the Agent. Comerica Bank and its affiliates may (without
having to account therefor to any Bank) accept deposits from,
lend money to, and generally engage in any kind of banking,
trust, financial advisory or other business with Company (or the
shareholders of such party) as if it were not acting as Agent
hereunder, and may accept fees and other consideration therefor
without having to account for the same to the Banks.
11.6 Credit Decisions. Each Bank acknowledges that it has,
independently of Agent and each other Bank and based on the
financial statements of Company and such other documents,
information and investigations as it has deemed appropriate,
made its own credit decision to extend credit hereunder from
time to time. Each Bank also acknowledges that it will,
independently of Agent and each other Bank and based on such
other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time
any rights and privileges available to it under this Agreement
or any document executed pursuant hereto.
11.7 Agent's Fees. Commencing on the date hereof, and on
each succeeding anniversary date thereof until all indebtedness
outstanding under this Agreement has been repaid and no
commitment to fund any loan hereunder is outstanding, Company
shall pay to Agent an annual agency fee and such other fees and
charges as set forth (or to be set forth from time to time) in a
letter agreement among Company and Agent. The Agent's Fees
described in this Section 11.7 shall not be refundable under any
circumstances.
11.8 Authority of Agent to Enforce Notes and This Agreement.
Each Bank, subject to the terms and conditions of this
Agreement, authorizes the Agent with full power and authority as
attorney-in-fact to institute and maintain actions, suits or
proceedings for the collection and enforcement of the Notes and
to file such proofs of debt or other documents as may be
necessary to have the claims of the Banks allowed in any
proceeding relative to Company or its creditors or affecting its
properties, and to take such other actions which Agent consider
to be necessary or desirable for the protection, collection and
enforcement of the Notes, this Agreement or the Loan Documents.
11.9 Indemnification. The Banks agree to indemnify the Agent
(to the extent not reimbursed by Company, but without limiting
any obligation of Company to make such reimbursement), ratably
according to their respective Percentages, from and against any
and all claims, damages, losses, liabilities, costs or expenses
of any kind or nature whatsoever (including, without limitation,
fees and disbursements of counsel) which may be imposed on,
incurred by, or asserted against the Agent in any way relating
to or arising out of this Agreement, any of the Loan Documents
or the transactions contemplated hereby or any action taken or
omitted by the Agent under this Agreement or any of the Loan
Documents, provided, however, that no Bank shall be liable for
any portion of such claims, damages, losses, liabilities, costs
or expenses resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each
Bank agrees to reimburse the Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including, without
limitation, fees and expenses of counsel) incurred by the Agent
in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under,
this Agreement or any of the Loan Documents, to the extent that
the Agent are not reimbursed for such expenses by Company, but
without limiting the obligation of Company to make such
reimbursement. Each Bank agrees to reimburse the Agent promptly
upon demand for its ratable share of any amounts owing to the
Agent by the Banks pursuant to this Section. If the indemnity
furnished to the Agent under this Section shall, in the judgment
of the Agent, be insufficient or become impaired, the Agent may
call for additional indemnity from the Banks and cease, or not
commence, to take any action until such additional indemnity if
furnished.
11.10 Knowledge of Default. It is expressly understood
and agreed that the Agent shall be entitled to assume that no
Event of Default has occurred and is continuing, unless the
officers of the Agent immediately responsible for matters
concerning this Agreement shall have been notified in a writing
specifying such Event of Default and stating that such notice is
a "notice of default" by a Bank or by Company. Upon receiving
such a notice, the Agent shall promptly notify each Bank of such
Event of Default.
11.11 Agent's Authorization; Action by Banks. Except as
otherwise expressly provided herein, whenever the Agent is
authorized and empowered hereunder on behalf of the Banks to
give any approval or consent, or to make any request, or to take
any other action on behalf of the Banks (including without
limitation the exercise of any right or remedy hereunder or
under the other Loan Documents), the Agent shall be required to
give such approval or consent, or to make such request or to
take such other action only when so requested in writing by the
Majority Banks or the Banks, as applicable hereunder. Action
that may be taken by Majority Banks or all of the Banks, as the
case may be (as provided for hereunder) may be taken (i)
pursuant to a vote at a meeting (which may be held by telephone
conference call) as to which all of the Banks have been given
reasonable advance notice, or (ii) pursuant to the written
consent of the requisite Percentages of the Banks as required
hereunder, provided that all of the Banks are given reasonable
advance notice of the requests for such consent.
11.12 Enforcement Actions by the Agent. Except as
otherwise expressly provided under this Agreement or in any of
the other Loan Documents and subject to the terms hereof, Agent
will take such action, assert such rights and pursue such
remedies under this Agreement and the other Loan Documents as
the Majority Banks or all of the Banks, as the case may be (as
provided for hereunder), shall direct, provided, however, that
the Agent shall not be required to act or omit to act if, in the
judgment of the Agent, such action or omission may expose the
Agent to personal liability or is contrary to this Agreement,
any of the Loan Documents or applicable law. Except as expressly
provided above or elsewhere in this Agreement or the other Loan
Documents, no Bank (other than the Agent, acting in its capacity
as agent) shall be entitled to take any enforcement action of
any kind under any of the Loan Documents. In the event Agent
fails, within a commercially reasonable time, to take such
action, assert such rights, or pursue such remedies as the
Majority Banks or all of the Banks, as the case may be (as
provided for hereunder), shall direct in conformity with this
Agreement, the Majority Banks or all of the Banks, as the case
may be, shall have the right to take such action, to assert such
rights, or pursue such remedies on behalf of all of the Banks
unless the terms hereof otherwise require the consent of all the
Banks to the taking of such actions (in which event all of the
Banks must join in such action).
12. MISCELLANEOUS
12.1 Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required
to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this
Agreement, it shall be done, unless otherwise specified herein,
in accordance with GAAP.
12.2 Consent to Jurisdiction. Company and Banks hereby
irrevocably submit to the non-exclusive jurisdiction of any
United States Federal or Michigan state court sitting in Detroit
in any action or proceeding arising out of or relating to this
Agreement or any of the Loan Documents and Company and Banks
hereby irrevocably agree that all claims in respect of such
action or proceeding may be heard and determined in any such
United States Federal or Michigan state court.
12.3 Law of Michigan. This Agreement and the Notes have been
delivered at Detroit, Michigan, and shall be governed by and
construed and enforced in accordance with the laws of the State
of Michigan. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
12.4 Interest. In the event the obligation of Company to pay
interest on the principal balance of the Notes is or becomes in
excess of the maximum interest rate which Company is permitted
by law to contract or agree to pay, giving due consideration to
the execution date of this Agreement, then, in that event, the
rate of interest applicable with respect to such Bank's
Percentage shall be deemed to be immediately reduced to such
maximum rate and all previous payments in excess of the maximum
rate shall be deemed to have been payments in reduction of
principal and not of interest.
12.5 Closing Costs and Other Costs. Company agrees to pay,
or reimburse the Agent for payment of, on demand (a) all
reasonable closing costs and expenses, including, by way of
description and not limitation, house and outside attorney fees
and advances, appraisal and accounting fees, and lien search
fees incurred by Agent in connection with the commitment,
consummation and closing of the loans contemplated hereby or in
connection with any amendment, refinancing or restructuring of
the credit arrangements provided under this Agreement; (b) all
stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing or
recording of this Agreement and the Loan Documents and the
consummation of the transactions contemplated hereby, and any
and all liabilities with respect to or resulting from any delay
in paying or omitting to pay such taxes or fees, and (c) all
reasonable costs and expenses of the Agent or any of the Banks
(including reasonable fees and expenses of counsel and whether
incurred through negotiations, legal proceedings or otherwise)
in connection with any Event of Default or the enforcement of
this Agreement, or the Loan Documents or in connection with any
refinancing or restructuring of the credit arrangements provided
under this Agreement and (d) all reasonable costs and expenses
of the Agent or any of the Banks (including reasonable fees and
expenses of counsel) in connection with any action or proceeding
relating to a court order, injunction or other process or decree
restraining or seeking to restrain the Agent or any of the Banks
from paying any amount under, or otherwise relating in any way
to, any Letter of Credit and any and all costs and expenses
which any of them may incur relative to any payment under any
Letter of Credit. All of said amounts required to be paid by
Company, may, at Agent's option, be charged by Agent as a Prime-
based Advance against the Indebtedness.
12.6 Notices. Except as expressly provided otherwise in this
Agreement, all notices and other communications provided to any
party hereto under this Agreement or any other Loan Document
shall be in writing and shall be given by personal delivery, by
mail, by reputable overnight courier, by telex or by facsimile
and addressed or delivered to it at its address set forth on the
signature pages hereof or at such other address as may be
designated by such party in a notice to the other parties that
complies as to delivery with the terms of this Section 12.6. Any
notice, if personally delivered or if mailed and properly
addressed with postage prepaid and sent by registered or
certified mail, shall be deemed given when received; any notice,
if given to a reputable overnight courier and properly
addressed, shall be deemed given 2 Business Days after the date
on which it was sent, unless it is actually received sooner by
the named addressee; and any notice, if transmitted by telex or
facsimile, shall be deemed given when received (answerback
confirmed in the case of telexes and receipt confirmed in the
case of telecopies). Agent may, but shall not be required to,
take any action on the basis of any notice given to it by
telephone, but the giver of any such notice shall promptly
confirm such notice in writing or by telex or facsimile, and
such notice will not be deemed to have been received until such
confirmation is deemed received in accordance with the
provisions of this Section set forth above. If such telephonic
notice conflicts with any such confirmation, the terms of such
telephonic notice shall control.
12.7 Further Action. Company, from time to time, upon
written request of Agent will make, execute, acknowledge and
deliver or cause to be made, executed, acknowledged and
delivered, all such further and additional instruments, and take
all such further action as may reasonably be required to carry
out the intent and purpose of this Agreement or the Loan
Documents, and to provide for Advances under and payment of the
Notes, according to the intent and purpose herein and therein
expressed.
12.8 Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and shall
inure to the benefit of Company, the Agent and the Banks, and
their respective successors and assigns.
(b) The foregoing shall not authorize any assignment
by Company of its rights or duties hereunder, and no such
assignment shall be made (or effective) without the prior
written approval of the Banks.
(c) Each of the Banks may at any time and from time to
time, subject to the terms and conditions hereof, grant
participations (but not assignments, except as expressly
permitted hereunder) in such Bank's rights and obligations
hereunder and under the other Loan Documents to any commercial
bank, savings and loan association, or other similar financial
institution, which institution is approved in advance in writing
by Agent and Company, such approval not to be unreasonably
withheld or delayed; provided, however, that the approval of
Agent shall not be required for the grant of a participation by
a Bank to its Affiliate, to any other Bank or to any Federal
Reserve Bank. The Company authorizes each Bank to disclose to
any prospective participant, once approved by Company and Agent
(if such approval is required), any and all financial
information in such Bank's possession concerning the Company
which has been delivered to such Bank pursuant to this
Agreement. A Bank shall not be permitted to assign or otherwise
transfer (except by participation according to the terms hereof)
its rights and obligations hereunder, except (x) to any Bank or
(y) with the prior written consent of the Company (except that
no such consent shall be required upon the occurrence and during
the continuance of an Event of Default) and the Agent, to any
other financial institution; provided that if any such
assignment is of less than all of a Bank's rights and obligation
hereunder, it shall be in an amount not less than $5,000,000;
(d) Each assignment by a Bank of any portion of its
rights and obligations hereunder and under the other Loan
Documents shall be made pursuant to an Assignment Agreement
substantially (as determined by Agent) in the form attached
hereto as Exhibit "L" (with appropriate insertions acceptable to
Agent) and shall be subject to the terms and conditions hereof,
and to the following restrictions:
(i) each assignment shall cover all of the Notes
issued by Company hereunder, and shall be for
a fixed and not varying percentage thereof,
with the same percentage applicable to each
such Note;
(ii) each assignment shall be of all of a Bank's
rights and obligations hereunder or in a
minimum amount of Five Million Dollars
($5,000,000); and
(iii) no assignment shall be effective unless Agent
has received from the assignee (or from the
assigning Bank) an assignment fee of $3,000
for each such assignment.
In connection with any assignment, Company and Agent shall be
entitled to continue to deal solely and directly with the
assigning Bank in connection with the interest so assigned until
(x) the Agent shall have received a notice of assignment duly
executed by the assigning Bank and an Assignment Agreement (with
respect thereto) duly executed by the assigning Bank and each
assignee; and (y) the assigning Bank shall have delivered to the
Agent the original of each Note held by the assigning Bank. From
and after the date on which the Agent shall notify Company and
the assigning Bank that the foregoing conditions shall have been
satisfied and all consents (if any) required shall have been
given, the assignee thereunder shall be deemed to be a party to
this Agreement. To the extent that rights and obligations
hereunder shall have been assigned to such assignee as provided
in such notice of assignment (and Assignment Agreement), such
assignee shall have the rights and obligations of a Bank under
this Agreement (including without limitation the right to
receive Fees payable hereunder in respect of the period
following such assignment). In addition, the assigning Bank, to
the extent that rights and obligations hereunder shall have been
assigned by it as provided in such notice of assignment (and
Assignment Agreement), but not otherwise, shall relinquish its
rights and be released from its obligations under this
Agreement.
Within five (5) Business Days following Company's receipt of
notice from the Agent that Agent has accepted and executed a
notice of assignment and the duly executed Assignment Agreement,
Company shall, to the extent applicable, execute and deliver to
the Agent in exchange for any surrendered Note, new Note(s)
payable to the order of the assignee in an amount equal to the
amount assigned to it pursuant to such notice of assignment (and
Assignment Agreement), and with respect to the portion of the
Indebtedness retained by the assigning Bank, to the extent
applicable, a new Note payable to the order of the assigning
Bank in an amount equal to the amount retained by such Bank
hereunder shall be executed and delivered by the Company.
Agent, the Banks and the Company acknowledge and agree that any
such new Note(s) shall be given in renewal and replacement of
the surrendered Notes and shall not effect or constitute a
novation or discharge of the Indebtedness evidenced by any
surrendered Note, and each such new Note shall contain a
provision confirming such agreement.
(e) Each Bank agrees that any participation agreement
permitted hereunder shall comply with all applicable laws and
shall be subject to the following restrictions (which shall be
set forth in the applicable Participation Agreement):
(i) such Bank shall remain the holder of its
Notes hereunder, notwithstanding any such
participation;
(ii) except as expressly set forth in this Section
12.8(e) with respect to rights of setoff and
the benefits of Article 3 hereof, a
participant shall have no direct rights or
remedies hereunder;
(iii) a participant shall not reassign or transfer,
or grant any sub-participations in its
participation interest hereunder or any part
thereof to any Bank other than the Bank which
transferred such interest to such
participant; and
(iv) such Bank shall retain the sole right and
responsibility to enforce the obligations of
the Company relating to the Notes and Loan
Documents, including, without limitation, the
right to proceed against any Guarantors, or
cause Agent to do so (subject to the terms
and conditions hereof), and the right to
approve any amendment, modification or waiver
of any provision of this Agreement without
the consent of the participant, except for
those matters covered by Section 12.11(a)
through (g) hereof (provided that a
participant may exercise approval rights over
such matters only on an indirect basis,
acting through such Bank, and Company, Agent
and the other Banks may continue to deal
directly with such Bank in connection with
such Bank's rights and duties hereunder), and
shall otherwise be in form satisfactory to
Agent.
Company agrees that each participant shall be deemed to have all
rights of setoff under this Agreement in respect of its
participation interest in amounts owing under this Agreement and
the Loan Documents to the same extent as if the Indebtedness
were owing directly to it as a Bank under this Agreement, shall
be subject to the pro rata recovery provisions of Section 10.2
hereof, and that each participant shall be entitled to the
benefits of Article 3 hereof. No such participation shall
relieve any Bank of any of its obligations under this Agreement
or any of the other Loan Documents, and all actions hereunder
shall be conducted as if no such participation had been granted.
12.9 Reserved.
12.10 Counterparts. This Agreement may be executed in
several counterparts, and each executed copy shall constitute an
original instrument, but such counterparts shall together
constitute but one and the same instrument.
12.11 Amendment and Waiver. No amendment or waiver of any
provision of this Agreement or any Loan Document, nor consent to
any departure by Company therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Majority Banks (and, with respect to any amendments to this
Agreement or the other Loan Documents, by Company, if a
signatory thereto), and then such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given; provided, however, that no amendment,
waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) subject the Banks to any
additional obligations, (b) reduce the principal of, or interest
on, the Revolving Credit Notes or any Fees or other amounts
payable hereunder, (c) postpone any date fixed for any payment
of principal of, or interest on, the Revolving Credit Notes or
any fees or other amounts payable hereunder, (d) waive any Event
of Default specified in Section 9.1(a), (e) take any action
which requires the signing of all Banks pursuant to the terms of
this Agreement or any Loan Document, (f) change the aggregate
unpaid principal amount of the Notes which shall be required for
the Banks or any of them to take any action under this Agreement
or any Loan Document, or (g) change the definition of "Majority
Banks" or this Section 12.11; provided further, that no
amendment, wavier or consent shall, unless in writing signed by
the Swing Line Bank do any of the following: (x) reduce the
principal of or interest on, the Swing Line Note, or (y)
postpone any date fixed for any payment of principal of or
interest on, the Swing Line Note; and provided further, however,
that no amendment, waiver, or consent shall, unless in writing
and signed by the Agent in addition to all the Banks, affect the
rights or duties of the Agent under this Agreement or any Loan
Document. All references in this Agreement to "Banks" or "the
Banks" shall refer to all Banks, unless expressly stated to
refer to Majority Banks.
12.12 Taxes and Fees. Should any documentary, stamp or
similar tax (other than a tax based upon the net income of any
Bank or Agent imposed by the jurisdiction in which such Bank or
Agent have their respective principal executive offices), or
recording or filing fee become payable in respect of this
Agreement or any of the Loan Documents (or the execution, filing
or recording thereof) or any amendment, modification or
supplement hereof or thereof, Company agrees to pay the same
together with any interest or penalties thereon and agrees to
hold the Agent and the Banks harmless with respect thereto.
12.13 Confidentiality. Each Bank agrees that it will not
disclose without the prior consent of Company, as applicable,
(other than to its employees, to another Bank or to its auditors
or counsel) any information with respect to Company which is
furnished pursuant to this Agreement or any of the Loan
Documents and specifically designated in writing by Company
confidential information; provided that any Bank may disclose
any such information (a) as has become generally available to
the public or has been lawfully obtained by such Bank from any
third party under no duty of confidentiality to Company, (b) as
may be required or appropriate in any report, statement or
testimony submitted to, or in respect to any inquiry, by, any
municipal, state or federal regulatory body having or claiming
to have jurisdiction over such Bank, including the Board of
Governors of the Federal Reserve System of the United States,
the Office of the Comptroller of the Currency or the Federal
Deposit Insurance Corporation or similar organizations (whether
in the United States or elsewhere) or their successors, (c) as
may be required or appropriate in respect to any summons or
subpoena or in connection with any litigation, (d) in order to
comply with any law, order, regulation or ruling applicable to
such Bank, and (e) to any prospective permitted transferee or
assignee or to any approved participant of, or with respect to,
the Notes, as aforesaid, who shall agree in writing to be bound
by the terms of this Section 12.13.
12.14 Withholding Taxes. If any Bank is not incorporated
under the laws of the United States or a state thereof, such
Bank shall promptly deliver to the Agent two executed copies of
(i) Internal Revenue Service Form 1001 specifying the applicable
tax treaty between the United States and the jurisdiction of
such Bank's domicile which provides for the exemption from
withholding on interest payments to such Bank, (ii) Internal
Revenue Service Form 4224 evidencing that the income to be
received by such Bank hereunder is effectively connected with
the conduct of a trade or business in the United States or (iii)
other evidence satisfactory to the Agent that such Bank is
exempt from United States income tax withholding with respect to
such income. Such Bank shall amend or supplement any such form
or evidence as required to insure that it is accurate, complete
and non-misleading at all times. Promptly upon notice from the
Agent of any determination by the Internal Revenue Service that
any payments previously made to such Bank hereunder were subject
to United States income tax withholding when made, such Bank
shall pay to the Agent the excess of the aggregate amount
required to be withheld from such payments over the aggregate
amount actually withheld by the Agent.
12.15 Reserved.
12.16 Effective Upon Execution. This Agreement shall
become effective upon the execution hereof by Banks, Agent and
Company and the issuance by Company of the Notes hereunder, and
shall remain effective until the Indebtedness has been repaid
and discharged in full and no commitment to extend any credit
hereunder or under any of the other Loan Documents, whether
optional or obligatory, remains outstanding.
12.17 Waiver of Jury Trial. The Banks, the Agent and
Company after consulting or having had the opportunity to
consult with counsel, knowingly, voluntarily and intentionally
waive any right any of them may have to a trial by jury in any
litigation based upon or arising out of this Agreement or any
related instrument or agreement or any of the transactions
contemplated by this Agreement or any course of conduct,
dealing, statements (whether oral or written) or action of any
of them. Neither the Banks, the Agent nor Company shall seek to
consolidate, by counterclaim or otherwise, any such action in
which a jury trial has been waived with any other action in
which a jury trial cannot be or has not been waived. These
provisions shall not be deemed to have been modified in any
respect or relinquished by the Banks and the Agent or Company
except by a written instrument executed by all of them.
12.18 Complete Agreement; Conflicts. This Agreement, the
Notes, any Requests for Advance hereunder, and the Loan
Documents contain the entire agreement of the parties hereto,
superseding all prior agreements, discussions and understandings
relating to the subject matter hereof, and none of the parties
shall be bound by anything not expressed in writing. In the
event of any conflict between the terms of this Agreement and
the other Loan Documents, this Agreement shall govern.
12.19 Severability. In case any one or more of the
obligations of Company or any Guarantor under this Agreement,
the Notes or any of the other Loan Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining obligations of
Company shall not in any way be affected or impaired thereby,
and such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or
enforceability of the obligations of Company under this
Agreement, the Notes or any of the other Loan Documents in any
other jurisdiction.
12.20 Table of Contents and Headings. The table of
contents and the headings of the various subdivisions hereof are
for convenience of reference only and shall in no way modify or
affect any of the terms or provisions hereof.
12.21 Construction of Certain Provisions. If any provision
of this Agreement or any of the Loan Documents refers to any
action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such
Person, whether or not expressly specified in such provision.
12.22 Independence of Covenants. Each covenant hereunder
shall be given independent effect (subject to any exceptions
stated in such covenant) so that if a particular action or
condition is not permitted by any such covenant (taking into
account any such stated exception), the fact that it would be
permitted by an exception to, or would be otherwise within the
limitations of, another covenant shall not avoid the occurrence
of an Event of Default or any event or condition which with
notice or lapse of time, or both, could become such an Event of
Default if such action is taken or such condition exists.
12.23 Reliance on and Survival of Various Provisions. All
terms, covenants, agreements, representations and warranties of
Company or any party to any of the Loan Documents made herein or
in any of the Loan Documents or in any certificate, report,
financial statement or other document furnished by or on behalf
of Company in connection with this Agreement or any of the Loan
Documents shall be deemed to have been relied upon by the Banks,
notwithstanding any investigation heretofore or hereafter made
by any Bank or on such Bank's behalf, and those covenants and
agreements of Company set forth in Sections 3.1, 3.5, 3.6 and
12.5 hereof (together with any other indemnities of Company
contained elsewhere in this Agreement or in any of the Loan
Documents) and of Banks set forth in Section 12.13 hereof shall
survive the repayment in full of the Indebtedness and the
termination of the commitment of the Banks.
WITNESS the due execution hereof as of the day and year
first above written.
COMERICA BANK, CHAMPION ENTERPRISES, INC.
as Agent
By: By:
Its: Its:
P.O. Box 75000 2701 University Drive
Detroit, Michigan 48275-3268 Suite 320
Attn: Robert M. Porterfield Auburn Hills, Michigan 48326
Attention: President
REVOLVING CREDIT BANKS: COMERICA BANK
By:
Its:
Eurodollar Lending Office: P.O. Box 75000
Comerica Bank Detroit, Michigan 48275-3268
One Detroit Center Attn: Robert M. Porterfield
500 Woodward Avenue Telex No. 235808
9th Floor, MC 3289 Facsimile No. (313) 222-9514
Detroit, Michigan 48243
Attention: Sandra Fields
Facsimile No. (313) 222-5272
<PAGE>
THE FIRST NATIONAL BANK OF
CHICAGO
Eurodollar Lending Office:
By:
One First National Plaza
Suite 0088
Chicago, Illinois 60670 Its:
Attn: Susan L. Comstock
Telex No. 4330253
Facsimile No. (312) 732-5161
One First National Plaza
Suite 0088
Chicago, Illinois 60670
Attn: Susan L. Comstock
Telex No. 4330253
Facsimile No. (312) 732-5161
SWING LINE BANK: COMERICA BANK
By:
Its:
P.O. Box 75000
Detroit, Michigan 48275-3268
Attn: Robert M. Porterfield
Telex No. 235808
Facsimile No. (313) 222-9514<PAGE>
EXHIBIT "A"
REQUEST FOR REVOLVING CREDIT ADVANCE
No. Dated: , 199
TO: Comerica Bank ("Agent")
RE: Credit Agreement dated as of September 29, 1995 by and
among Company, the Bank signatories thereto and Comerica
Bank, as Agent ("Credit Agreement")
The Company pursuant to the Credit Agreement requests a
Revolving Credit Advance from Banks as follows:
A. Date of Advance: , 199
B. / / (check if applicable)
This Advance is or includes a whole or partial
refund/conversion of:
Advance No(s).
C. Type of Advance (check only one);
/ / Prime-based Advance
/ / Eurodollar-based Advance
D. Amount of Advance:
E. Interest Period (not applicable to Prime-based Advances)
months (insert 1, 2, 3 or 6)
F. Disbursement Instructions
/ / Comerica Bank Account No.
/ / Other:
The Company certifies to the matters specified in Section
2.7(e) of the Credit Agreement.
<PAGE>
Capitalized terms used herein, except as defined to the
contrary, have the meanings given them in the Credit Agreement.
CHAMPION ENTERPRISES, INC.
By:
Its:
Agent Approval:
<PAGE>
EXHIBIT "B"
REVOLVING CREDIT NOTE
$ September 29, 1995
On or before the Revolving Credit Maturity Date, FOR VALUE
RECEIVED, Champion Enterprises, Inc., a Michigan corporation
("Company"), promises to pay to the order of [insert Bank]
("Bank") at Detroit, Michigan, care of Agent, for the account of
Bank, in lawful money of the United States of America, the
indebtedness or so much of the sum of [Insert Amount derived
from Percentages] Dollars ($ ), as may from time to time
have been advanced to Borrower and then be outstanding hereunder
pursuant to Section 2 of the Champion Enterprises, Inc. Credit
Agreement dated as of September 29, 1995, made by and among the
Company, certain banks, including the Bank, and Comerica Bank as
Agent for such banks, as the same may be amended from time to
time (the "Agreement"), together with interest thereon as
hereinafter set forth.
Each of the Advances made hereunder shall bear interest at
the Applicable Interest Rate from time to time applicable
thereto under the Agreement or as otherwise determined
thereunder, and interest shall be computed, assessed and payable
as set forth in the Agreement.
This Note is a note under which advances (including
refundings and conversions), repayments and readvances may be
made from time to time, but only in accordance with the terms
and conditions of the Agreement. This Note evidences borrowings
under, is subject to, is secured in accordance with, and may be
accelerated or matured under, the terms of the Agreement, to
which reference is hereby made. Definitions and terms of the
Agreement are hereby incorporated by reference herein.
This Note shall be interpreted and the rights of the
parties hereunder shall be determined under the laws of, and
enforceable in, the State of Michigan.
Company hereby waives presentment for payment, demand,
protest and notice of dishonor and nonpayment of this Note and
agrees that no obligation hereunder shall be discharged by
reason of any extension, indulgence, release, or forbearance
granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any
property, real or personal, which is now or hereafter security
for this Note.
Nothing herein shall limit any right granted Bank by any
other instrument or by law.
CHAMPION ENTERPRISES, INC.
By:
Its:
<PAGE>
EXHIBIT "C"
PERMITTED ENCUMBRANCES
<PAGE>
EXHIBIT "D"
STATES OF INCORPORATION AND
QUALIFICATION/LIST OF SUBSIDIARIES
NAME OF SUBSIDIARY STATE OF QUALIFIED TO
INCORPORATION DO BUSINESS
Champion Home Builders Co. Michigan Alabama
California
Colorado
Florida
Idaho
Indiana
Nebraska
New Mexico
New York
North Carolina
Pennsylvania
Tennessee
Texas
Champion Financial
Corporation Michigan -----
Builders Credit
Corporation Michigan -----
CAC Funding
Corporation Michigan -----
Service Contract
Corporation Michigan -----
Champion Home Communities,
Inc. Michigan North Carolina
Champion Motor Coach, Inc. Michigan Indiana
Moduline International,
Inc. Washington -----
Moduline Industries
(Oregon), Inc. Oregon -----
Moduline Industries
(Canada), Ltd. British Columbia -----
Lamplighter Homes,
Inc. Washington -----
Lamplighter Homes
(Oregon), Inc. Oregon -----
Dutch Housing, Inc. Michigan Indiana
Crest Ridge Homes, Inc. Michigan Texas
Chandeleur Homes, Inc. Michigan Alabama
<PAGE>
EXHIBIT "E"
PENSION PLANS
NONE
<PAGE>
EXHIBIT "F"
FLOOR PLAN FINANCING AND REPURCHASE ARRANGEMENTS
I. Repurchase Agreements
It is customary practice for companies in the manufactured
housing and commercial bus industries to enter into repurchase
agreements with lending institutions who have provided wholesale
inventory floor plan financing to dealers. A majority of
wholesale sales for Champion Enterprises, Inc. and its
subsidiaries ("Champion") are made pursuant to these agreements.
Such repurchase agreements generally provide for the
repurchase of new inventory from the lender in the event of a
dealer's default with the lender. Our liability is generally
limited to 12-15 months from original date of sale to a dealer
and is reduced for curtailments by various amounts as the
reduction programs vary from lender to lender.
While Champion is contingently liable for substantial
amounts under these agreements, any expenses or losses are
minimal due to the resale value of the products which we are
required to repurchase.
A sample copy of Champion's standard form of repurchase
agreements for manufactured housing and recreational vehicles is
attached as this exhibit.
II. Recourse Liabilities
In addition to the above, Champion and its subsidiary,
Builders Credit Corp. ("BCC") and General Electric Capital Corp.
("GECC") entered into an Agreement for Purchase of Accounts,
dated February 22, 1989 (the "Purchase Agreement"), whereby GECC
provides and administers floor plan financing for Champion
dealers on Champion products exclusively. Transamerica
Commercial Financial Corporation has assumed GECC's obligations
in the above Purchase Agreement.
Pursuant to the Purchase Agreement, Champion and its
subsidiaries, BCC, Champion Home Builders Co., Champion Motor
Coach, Inc., and Moduline International, Inc. (Champion and its
subsidiaries collectively referred to herein as the "Parties"),
have a full recourse obligation in the case of a dealer default
for sales out of trust, missing or damaged equipment and billed
unpaid interest charges.
Champion, based on past experience, provides currently for
estimated future losses under this program with accruals based
on monthly volumes financed with GECC.
Amounts outstanding under recourse obligation at January 1,
1994 totaled $46 million.
III. Retail Repurchase Obligations
Prior to the sale of Champion's retail subsidiary, Global
Homes, Inc. ("Global"), a significant portion of Champion's
retail sales were made pursuant to installment sales contracts
which were then customarily placed with various lending
institutions. As part of these arrangements, the Company,
through its subsidiary Champion Marketing Corporation, is
obligated to repurchase the product upon customer default for
the amount due the lending institution. The Company provides
for estimated future expenses for such repurchase.<PAGE>
EXHIBIT "G"
PERMITTED INDEBTEDNESS (*)
*TO BE UPDATED BY BORROWER
1. Champion
Lender Amount Interest Rate Year Due
Receivable Backed Notes $3,142,408 10.4% 1994-2003
IBM (LT Lease) 78,848 13.2% 1995
Clarklift (LT Lease) 7,429 11.2% 1995
2. DHI
1. Capital lease with Midwest Commerce Leasing for new
Ingersoll-Rand tractor lift commencing May, 1992 for
60 months at $616.00 per month; option to purchase at
end of lease for $10,800.
2. Capital lease with Midwest Commerce Leasing for one
new Ingersoll-Rand tractor lift commencing October,
1992 for 60 months at $616.00 per month; option to
purchase at end of lease for $10,800.
3. Lease with Hull Life Truck, Inc. for 2 lift trucks
commencing September 10, 1992 for 60 months at
$1,020.00 per month.
4. Lease with Hull Life Truck, Inc. for new Ingersoll-
Rand tow tractor commencing May 30, 1993 for 60 months
at $616.00 per month.
5. Lease with Hull Life Truck, Inc. for new Mitsubishi
lift truck commencing October 23, 1991 for 60 months
at $488.00 per month.
6. Lease with Hull Life Truck, Inc. for one Mitsubishi
lift truck commencing February 25, 1992 for 60 months
at $510.00 per month.
7. Lease with Hull Life Truck, Inc. for one Mitsubishi
lift truck commencing __________________ for ______
months at $___________ per month.
8. Lease with Hull Life Truck, Inc. for one new
Mitsubishi lift truck commencing April 30, 1993 for 60
months at $510.00 per month.
9. Lease with Hull Life Truck, Inc. for one new
Mitsubishi lift truck commencing May 30, 1993 for 60
months at $510.00 per month.
10. Lease with Hull Life Truck, Inc. for one new
Mitsubishi lift truck commencing May 30, 1993 for 60
months at $510.00 per month.
11. Lease with Hull Life Truck, Inc. for one new
Mitsubishi lift truck commencing May 30, 1993 for 60
months at $510.00 per month.
12. Lease with Hull Life Truck, Inc. for one new
Mitsubishi lift truck commencing September 10, 1992
for 60 months at $510.00 per month.<PAGE>
EXHIBIT "H"
REQUEST FOR SWING LINE ADVANCE
No. Dated: , 199
To: Comerica Bank, Swing Line Bank
Re: Credit Agreement by and among Comerica Bank (individually
and as Agent), the lenders from time to time parties
thereto (collectively, "Banks"), and Champion Enterprises,
Inc. ("Company") dated as of September 29, 1995 (as amended
from time to time, the "Agreement").
Pursuant to the Agreement, the Company requests a Swing
Line Advance from the Swing Line Bank as follows:
A. Date of Advance:
B. Amount of Advance:
$
/ / Comerica Bank Account No. ______________
/ / Other: _________________________________
_________________________________
C. Interest Rate:
1. Prime-based Rate / /
2. Quoted Rate / /
D. Interest Period:
1. days*
*INSERT UP TO 30 DAYS
The Company certifies to the matters specified in Section
2B.3(e) of the Agreement.
CHAMPION ENTERPRISES, INC.
By:
Its:
Swing Line Bank Approval:
<PAGE>
EXHIBIT "J"
SWING LINE NOTE
$5,000,000 September 29, 1995
On or before the Revolving Credit Maturity Date, FOR VALUE
RECEIVED, Champion Enterprises, Inc., a Michigan corporation
("Company"), promises to pay to the order of Comerica Bank
("Bank") at 500 Woodward Avenue, Detroit, Michigan in lawful
money of the United States of America, the sum of Five Million
Dollars ($5,000,000), or so much of said sum as may from time to
time have been advanced and then be outstanding hereunder
pursuant to Article 2B of the Credit Agreement dated as of
September 29, 1995, by and among the Company, certain banks,
including the Bank, and Comerica Bank as Agent for such banks,
as the same may be amended from time to time (the "Agreement"),
together with interest thereon as hereinafter set forth.
The unpaid principal indebtedness from time to time
outstanding under this Note shall be due and payable on the last
day of the Interest Period applicable thereto or as otherwise
set forth in the Agreement, provided that no Swing Line Advance
may mature or be payable on a day later than the Revolving
Credit Maturity Date.
Each of the Swing Line Advances made hereunder shall bear
interest at the Prime-based Rate or the Quoted Rate from time to
time applicable thereto under the Agreement or as otherwise
determined thereunder, and interest shall be computed, assessed
and payable as set forth in the Agreement.
This Note is a note under which advances, repayments and
readvances may be made from time to time, but only in accordance
with the terms and conditions of the Agreement. This Note
evidences borrowings under, is subject to, is secured in
accordance with, and may be accelerated or matured under, the
terms of the Agreement, to which reference is hereby made.
Definitions and terms of the Agreement are hereby incorporated
by reference herein.
This Note shall be interpreted and the rights of the
parties hereunder shall be determined under the laws of, and
enforceable in, the State of Michigan.
Company hereby waives presentment for payment, demand,
protest and notice of dishonor and nonpayment of this Note and
agrees that no obligation hereunder shall be discharged by
reason of any extension, indulgence, release, or forbearance
granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any
property, real or personal, which is now or hereafter security
for this Note.
Nothing herein shall limit any right granted Bank by any
other instrument or by law.
CHAMPION ENTERPRISES INC.
By:
Its:
<PAGE>
EXHIBIT "K"
FORM OF
SWING LINE LOAN PARTICIPATION CERTIFICATE
________________, 199
[Name of Bank]
_________________________
_________________________
Ladies and Gentlemen:
Pursuant to subsection 2B.5(b) of the Credit Agreement
dated as of September 29, 1995, among Champion Enterprises Inc.,
the Banks named therein and Comerica Bank, as Agent, the
undersigned hereby acknowledges receipt from you of $
as payment for a participating interest in the following Swing
Line Loan:
Date of Swing Line Loan:________________________________
Principal Amount of Swing Line Loan:____________________
The participation evidenced by this certificate shall be subject
to the terms and conditions of the Credit Agreement including
without limitation Section 2B.5(b) thereof.
Very truly yours,
COMERICA BANK, as Agent
By:____________________________
Its:___________________________
<PAGE>
EXHIBIT "L"
FORM OF
ASSIGNMENT AGREEMENT
Date:
To: CHAMPION ENTERPRISES, INC.
and
COMERICA BANK ("Agent")
Re: Credit Agreement dated as of September 29, 1995 (the
"Agreement"), among Champion Enterprises, Inc. ("Company"),
Agent and certain Banks
Gentlemen and Ladies:
Reference is made to Section 12.8 of the Agreement. Unless
otherwise defined herein or the context otherwise requires, all
initially capitalized terms used herein without definition shall
have the meanings specified in the Agreement.
This Agreement constitutes notice to each of you of the
proposed assignment and delegation by [insert assignor Bank]
(the "Assignor") to [insert proposed assignee] (the
"Assignee") of a _____% undivided interest in Assignor's
Revolving Credit Note under the Agreement (the "Note"), such
that after giving effect to the assignment and assumption
hereafter provided the Assignee's interest in the Note shall
equal $ * and its Percentage shall equal % under
the Loan Documents.
*SUCH AMOUNT SHALL NOT BE LESS THAN $5,000,000.
The Assignor hereby instructs the Agent to make all
payments from and including the "Effective Date" (as hereafter
defined) hereof in respect of the interest assigned hereby,
directly to the Assignee. The Assignor and the Assignee agree
that all interest and fees accrued up to, but not including, the
Effective Date of the assignment and delegation being made
hereby are the property of the Assignor, and not the Assignee.
The Assignee agrees that, upon receipt of any such interest or
fees accrued up to the Effective Date, the Assignee will
promptly remit the same to the Assignor.
The Assignee hereby confirms that it has received a copy of
the Agreement and the exhibits and schedules referred to
therein, and all other Loan Documents which it considers
necessary, together with copies of the other documents which
were required to be delivered under the Agreement as a condition
to the making of the loans thereunder. The Assignee
acknowledges and agrees that it: (a) has made and will continue
to make such inquiries and has taken and will take such care on
its own behalf as would have been the case had its Percentage
been granted and its loans been made directly by such Assignee
to the Company without the intervention of the Agent, the
Assignor or any other Bank; and (b) has made and will continue
to make, independently and without reliance upon the Agent, the
Assignor or any other Bank, and based on such documents and
information as it has deemed appropriate, its own credit
analysis and decisions relating to the Agreement. The Assignee
further acknowledges and agrees that neither the Agent, nor the
Assignor has made any representations or warranties about the
creditworthiness of the Company, or any other party to the
Agreement or any other of the Loan Documents, or with respect to
the legality, validity, sufficiency or enforceability of the
Agreement, or any other of the Loan Documents. This assignment
shall be made without recourse to or warranty by the Assignor,
except as set forth herein.
Except as otherwise provided in the Agreement, effective as
of the Effective Date:
(a) the Assignee: (i) shall be deemed automatically to
have become a party to the Agreement, to have assumed
all of the Assignor's obligations thereunder to the
extent of the Assignee's percentage referred to in the
second paragraph of this Assignment Agreement, and to
have all the rights and obligations of a party to the
Agreement, as if it were an original signatory thereto
to the extent specified in the second paragraph
hereof; and (ii) agrees to be bound by the terms and
conditions set forth in the Agreement as if it were an
original signatory thereto; and
(b) the Assignor's obligations under the Agreement shall
be reduced by the percentage referred to in the second
paragraph of this Assignment Agreement.
As used herein, the term "Effective Date" means the date on
which all of the following have occurred or have been completed,
as reasonably determined by the Agent:
(1) the delivery to the Agent of an original of this
Assignment Agreement executed by the Assignor and the
Assignee;
(2) the payment to the Agent, of all accrued fees,
expenses and other items for which reimbursement is
then owing under the Agreement;
(3) the payment to the Agent of the $3,000 processing fee
referred to in Section 12.8(d) (iii) of the Agreement;
and
(4) all other restrictions and items noted in Sections
12.8(c), (d) and (e) of the Agreement have been
satisfied.
The Agent shall notify the Assignor and the Assignee of the
Effective Date.
The Assignee hereby advises each of you of the following
administrative details with respect to the assigned loans:
(A) Address for Notices:
Institution Name:
Address:
Attention:
Telephone:
Facsimile:
(B) Payment Instructions:
(C) Proposed effective date of assignment.
Please evidence your consent to and acceptance of the
proposed assignment and delegation set forth herein by signing
and returning counterparts hereof to the Assignor and the
Assignee.
[ASSIGNOR]
By:
Its:
[ASSIGNEE]
By:
Its:
<PAGE>
ACCEPTED AND CONSENTED TO
this day of ,
COMERICA BANK, Agent
By:
Its:
CHAMPION ENTERPRISES, INC.*
By:
Its:
[This form of Assignment Agreement (including footnotes) is
subject in all respects to the terms and conditions of the
Agreement which shall govern in the event of any inconsistencies
or omissions.]
*ONLY IF CONSENT REQUIRED UNDER AGREEMENT<PAGE>
SCHEDULE 1.1
EXISTING LETTERS OF CREDIT
LETTER OF CREDIT NO. FACE AMOUNT BENEFICIARY
510929 $595,000 United Pacific Insurance Co.
526542 $4,251,526 Aetna Casualty
526541 $414,580 Aetna Casualty
526613 $463,219 Aetna Casualty
525935 $172,881 Aetna Casualty
<PAGE>
SCHEDULE 5.12
ENVIRONMENTAL MATTERS
In December 1990, Champion Home Builders Co. ("CHB")
received a Section 104 notification letter from the United
States Environmental Protection Agency ("EPA") advising CHB that
it is a potentially responsible party ("PRP") for remediation of
the Metamora Landfill in Metamora, Michigan (the "Site"). In
August 1994, CHB received a Section 107 demand for restitution
of past response costs incurred by the EPA. CHB conducted a
thorough investigation of its waste generation practices at the
Site and, as a result of that investigation, believes that its
liability as a PRP is de minimis. However, to avoid the
uncertainty of the result of protracted litigation, CHB has
agreed to settle the EPA's claims for all past and future costs
for the sum of $3 million. The EPA is preparing a consent order
agreeable to all concerned and is in the process of obtaining
settlement approval from the Justice Department and the District
Court in Flint. Execution of the consent order and payment of
the $3 million is expected in early 1996.
On January 4, 1995, CHB received a demand from the Michigan
Department of Natural Resources ("MDNR") for payment of past
costs incurred pursuant to Section 104 and future costs incurred
by the State of Michigan for responding to the release or
threatened release of hazardous substances ar the Site. The
demand letter alleges that CHB is jointly and severally
responsible with other PRP's for payment of $3.4 million in
costs. On July 31, 1995 CHB voluntarily entered into an
Administrative Order by Consent with the MDNR and subsequently
paid the State $65,000 in full and total settlement of CHB's
liability for all past, present and future response costs
incurred by the State and costs that may continue to accrue in
undertaking response activities at the Site. The order provides
CHB with full contribution protection.
CHB is voluntarily remediating a leaking underground
storage tank site at its former Dryden manufactured home
production facility. Soil remediation was completed in
February, 1994. Ground water remediation, if necessary, is
expected to begin in the spring of 1996. The cost of such
remediation is not considered by management to be material.
In August 1995, CHB received a Section 107 demand for
restitution of past and anticipated future EPA response costs at
the Tri-Cities Barrel Co., Inc. Superfund Site in Fenton, New
York. The EPA determined that CHB was entitled to de minimis
status under Section 122(g)(1)(A) of CERCLA and offered to
settle for the sum of $66,400 provided that CHB enter into and
execute an Administrative order on Consent. on September 13,
1995, CHB executed the order which provides for the full and
total release of liability for all past, present and future
response costs incurred by the EPA and for contribution
protection.
FIRST AMENDMENT TO THE
CHAMPION ENTERPRISES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
Pursuant to resolutions adopted by the Board of Directors of
Champion Enterprises, Inc. ("Company") on August 11, 1995, and
subject to shareholder approval at the Company's next annual
meeting, the 1995 Stock Option and Incentive Plan ("Plan") is
hereby amended effective August 31, 1995 as follows:
1. An additional 725,000 shares of the Company's Common
Stock shall be reserved for issuance under the Plan, and the
first sentence of Section 1.6 "Stock," shall be amended and
restated in its entirety to read as follows:
The Corporation has reserved 1,375,000 shares of the
Corporation's Common Stock for issuance under the Plan.
2. The annual cap on option shares that may be granted
under the Plan shall be increased to 750,000 shares, and the
second sentence in Section 2.1 "Grant of Options" shall be
amended and restated in its entirety to read as follows:
Provided, however, that no Employee may be granted Options
and Stock Appreciation Rights during any one fiscal year to
purchase more than 750,000 shares of Common Stock.
3. Article V, "Performance Share Awards is amended by
the addition of Section 5.3 "Performance Share Awards Granted
Under Code Section 162(m)" to read as follows:
5.3 Performance Share Awards Granted Under Code Section
162(m).
5.3 Performance Share Awards Granted Under Code
Section 162(m). The Committee, at its discretion, may
designate certain Performance Share Awards as granted
pursuant to Code Section 162(m). Such Performance Share
Awards must comply with the following additional
requirements, which override any other provision set forth
in this Article V:
5.3 Grant of Performance Share Awards.
(a) The Committee, at its discretion, may grant
Code Section 162(m) Performance Share Awards based upon
pre-established, objective performance goals that are
intended to satisfy the performance-based compensation
requirements of Code Section 162(m) and the regulations
promulgated thereunder. Further, at the discretion of the
Committee, a Performance Share Award also may be subject to
goals and restrictions in addition to the performance
requirements.
(b) Each Code Section 162(m) Performance Share
Award shall be based upon the attainment of specified levels
of Corporation or Subsidiary performance during a specified
performance period, as measured by any or all of the
following: earnings (as measured by net income, net income
per share, operating income or operating income per share),
sales growth and market capitalization.
(c) For each designated performance period, the
Committee shall (i) select those Employees who shall be
eligible to receive a Code Section 162(m) Performance Share
Award, (ii) determine the performance period, which may be a
three, four, or five fiscal year period, (iii) determine the
target levels of Corporation or Subsidiary performance, and
(iv) determine the Performance Award to be paid to each
selected Employee. The Committee shall make the foregoing
determinations prior to the commencement of services to
which a Performance Share Award relates (or within the
permissible time-period established under Code Section
162(m)) and while the outcome of the performance goals and
targets is uncertain.
(d) For each performance period, the Committee shall
certify, in writing: (i) if the Corporation has attained
the performance targets, and (ii) the cash or number of
shares (or combination thereof) pursuant to the Performance
Share Award that shall be paid to each selected Employee (or
the number of shares that are to become freely transferable,
if a Performance Share Award is granted subject to
attainment of the designated performance goals). The
Committee, may not waive all or part of the conditions,
goals and restrictions applicable to the receipt of full or
partial payment of a Performance Share Award.
(e) Code Section 162(m) Performance Share Awards may
be granted in two different forms, at the discretion of the
Committee. Under one form, the Employee shall receive a
Performance Share Award that consists of a legended
certificate of Common Stock, restricted from transfer prior
to the satisfaction of the designated performance goals and
restrictions, as determined by the Committee and specified
in the Employee's Agreement. Prior to satisfaction of the
performance goals and restrictions, the Employee shall be
entitled to vote the Performance Shares. Further, any
dividends paid on such shares during the
performance/restriction period automatically shall be
reinvested on behalf of the Employee in additional
performance shares under the Plan, and such additional
shares shall be subject to the same performance goals and
restrictions as the other shares under the Performance Share
Award. No shares under a Performance Share Award shall
become transferable until the Committee certifies in writing
that the performance goals and restrictions have been
satisfied.
(f) Under the second form, the Employee shall receive
an Agreement from the Committee that specifies the
performance goals and restrictions that must be satisfied
before the Company shall issue the payment, which may be
cash, a designated number of shares of Common Stock or a
combination of the two. Any certificate for shares under
such form of Performance Share Award shall be issued only
after the Committee certifies in writing that the
performance goals and restrictions have been satisfied.
(g) No Employee, in any one fiscal year of the
Company, shall be granted a Performance Share Award to
receive more than 50,000 shares of Common Stock.
(h) Except as provided in this Article V of the Plan,
the shares pursuant to a Performance Share Award granted
hereunder may not be transferred, pledged, assigned, or
otherwise alienated or hypothecated until the applicable
performance targets and other restrictions are satisfied, as
shall be certified in writing by the Committee. All rights
with respect to a Performance Share Award granted hereunder
shall apply only to such Employee or the Employee's legal
representative.
(i) In addition to any legends placed on certificates
pursuant to paragraph (h), each certificate representing
shares under a Performance Share Award shall bear the
following legend:
The sale or other transfer of the shares of
stock represented by this certificate,
whether voluntary, involuntary or by
operation of law, is subject to certain
restrictions on transfer set forth in the
Champion Enterprises, Inc. 1995 Stock Option
and Incentive Plan ("Plan"), rules and
administrative guidelines adopted pursuant to
such Plan and a Performance Share Agreement
dated , . A copy of the
Plan, such rules and such Performance Share
Agreement may be obtained from the General
Counsel of Champion Enterprises, Inc.
(j) Except as otherwise provided in this Article V of
the Plan, and subject to applicable federal and state
securities laws, shares covered by each Performance Share
Award made under the Plan shall become freely transferable
by the Employee after the Compensation Committee has
certified that the applicable performance targets and
restrictions have been satisfied. Once the shares are
released from the restrictions, the Employee shall be
entitled to have the legend required by paragraph (i)
removed from the applicable Common Stock certificate.
4. Article IV, "Restricted Stock" is amended by the
addition of Section 4.10 "Restricted Stock Awards granted Under
Code Section 162(m)" to read as follows:
4.10 Restricted Stock Awards Granted Under Code Section
162(m). The Committee, at its discretion, may designate
certain Restricted Stock Awards as granted pursuant to Code
Section 162(m). Such Restricted Stock Awards must comply
with the following additional requirements, which override
any other provision set forth in this Article IV:
(a) Each Code Section 162(m) Restricted Stock Award
shall be based upon pre-established, objective performance
goals that are intended to satisfy the performance-based
compensation requirements of Code Section 162(m) and the
regulations promulgated thereunder. Further, at the
discretion of the Committee, a Restricted Stock Award also
may be subject to goals and restrictions in addition to the
performance requirements.
(b) Each Code Section 162(m) Restricted Stock Award
shall be based upon the attainment of specified levels of
Corporation or Subsidiary performance during a specified
performance period, as measured by any or all of the
following: earnings (as measured by net income, net income
per share, operating income or operating income per share),
sales growth and market capitalization.
(c) For each designated performance period, the
Committee shall (i) select those Employees who shall be
eligible to receive a Restricted Stock Award, (ii) determine
the performance period, which may be a three, four, or five
fiscal year period, (iii) determine the target levels of
Corporation or Subsidiary performance, and (iv) determine
the number of shares subject to a Restricted Stock Award to
be paid to each selected Employee. The Committee shall make
the foregoing determinations prior to the commencement of
services to which a Restricted Stock Award relates (or
within the permissible time-period established under Code
Section 162(m)) and while the outcome of the performance
goals and targets is uncertain.
(d) For each performance period, the Committee shall
certify, in writing: (i) if the Corporation has attained
the performance targets, and (ii) the number of shares
pursuant to the Restricted Stock Award that are to become
freely transferable. The Committee shall have no discretion
to waive all or part of the conditions, goals and
restrictions applicable to the receipt of full or partial
payment of a Restricted Stock Award.
(e) Any dividends paid during the Restriction Period
automatically shall be reinvested on behalf of the Employee
in additional shares of Restricted Stock under the Plan, and
such additional shares shall be subject to the same
performance goals and restrictions as the other shares under
the Restricted Stock Award. No shares under a Code Section
162(m) Restricted Stock Award shall become transferable
until the Committee certifies in writing that the
performance goals and restrictions have been satisfied.
(f) No Employee, in any one fiscal year of the
Company, shall be granted a Code Section 162(m) Restricted
Stock Award for more than 50,000 shares of Common Stock.
(g) Except as provided in this Article IV of the Plan,
the shares pursuant to a Restricted Stock Award granted
hereunder may not be transferred, pledged, assigned, or
otherwise alienated or hypothecated until the applicable
performance targets and other restrictions are satisfied, as
shall be certified in writing by the Committee. All rights
with respect to a Performance Share Award granted hereunder
shall apply only to such Employee or the Employee's legal
representative.
(h) Except as otherwise provided in this Article IV of
the Plan, and subject to applicable federal and state
securities laws, shares covered by each Restricted Stock
Award made under the Plan shall become freely transferable
by the Employee after the Compensation Committee has
certified that the applicable performance targets and
restrictions have been satisfied. Once the shares are
released from the restrictions, the Employee shall be
entitled to have the legend required by Section 4.5 of the
Plan removed from the applicable Common Stock certificate.
5. Section 7.2 of the Plan, entitled "Restricted Stock,"
shall be amended with the addition of the following provision at
the end of Section 7.2:
Notwithstanding the foregoing, the Committee shall not waive
any restrictions on a Code Section 162(m) Restricted Stock
Grant, but the Committee may include a provision in an
Employee's Code Section 162(m) Restricted Stock Agreement
stating that upon the Employee's termination of employment
due to (i) death, (ii) Disability, or (iii) involuntary
termination by the Company without Cause prior to the
attainment of the associated performance goals and the
termination of the Restriction Period, that the performance
goals and restrictions shall be deemed to have been
satisfied on a pro rata basis, so that the number of shares
that become freely transferable shall be based on the
Employee's full number of months of employment during the
Restriction Period, and the Employee shall forfeit the
remaining shares and his rights to such forefited shares
shall terminate in full.
6. Section 7.3 of the Plan shall be amended by the
addition of the following language at the end of Section 7.3:
Notwithstanding the foregoing, the Committee shall not waive
any restrictions on a Code Section 162(m) Performance Share
Award, but the Committee may include a provision in an
Employee's Code Section 162(m) Performance Share Award
Agreement stating that upon the Employee's termination of
employment due to (i) death, (ii) Disability, or (iii)
involuntary termination by the Company without Cause prior
to the attainment of the associated performance goals and
restrictions, that the performance goals and restrictions
shall be deemed to have been satisfied on a pro rata basis,
so that the number of shares that become freely transferable
shall be based on the Employee's full number of months of
employment during the employment period, and the Employee
shall forfeit the remaining shares and his rights to such
forfeited shares shall terminate in full.
7. Section 7.5 of the Plan shall be amended and restated
in its entirety to read as follows:
7.5 Other Provisions. The transfer of an Employee from one
corporation to another among the Corporation and any of its
Subsidiaries, or a leave of absence under the leave policy
of the Corporation or any of its Subsidiaries shall not be a
termination of employment for purposes of the Plan, unless a
provision to the contrary is expressly stated by the
Committee in a Participant's Agreement issued under the
Plan.
FIRST AMENDMENT TO THE CHAMPION ENTERPRISES, INC.
1993 MIDDLE MANAGEMENT STOCK OPTION PLAN
Pursuant to resolutions adopted by the Board of Directors of
Champion Enterprises, Inc. on September , 1995, and effective
September 15, 1995, Section 6(b) of the 1993 Middle Management
Stock Option Plan is hereby amended and restated in its entirety
to read as follows:
(b) Grants under the Plan consist of a right to
purchase a designated number of shares of the Company's
Common Stock at a purchase price of not less than 40% of the
fair market value per share, to be exercised on or before
120 days after the date of grant. Subject to the exercise
of his full rights under the Plan, a participant shall be
granted a nonqualified stock option to purchase additional
shares of the Company's Common stock at fair market value.
Fair market value for purposes of rights and options granted
hereunder is deemed to constitute the closing price of the
Company's Common Stock on the New York Stock Exchange on the
last business day preceding the date of grant, as reported
in The Wall Street Journal.
THIS FIRST AMENDMENT to the 1993 Middle Management Stock
Option Plan is hereby executed on this the day of September,
1995.
CHAMPION ENTERPRISES, INC.
By:
Walter R. Young, Jr.
Chairman, President and
Chief Executive Officer
As Amended Through
Second Amendment
Adopted October 24, 1994
CHAMPION ENTERPRISES, INC.
1990 NONQUALIFIED STOCK OPTION PROGRAM
1. Purpose. The purpose of the Champion Enterprises, Inc.
1990 Nonqualified Stock Option Program (the "Program") is to
promote the best interests of Champion Enterprises, Inc. (the
"Company") and its shareholders by encouraging participants to
acquire a proprietary interest in the Company, thus identifying
their interests with those of its shareholders and encouraging
the participants to make greater efforts on behalf of the
Company.
2. Certain Definitions. As used in this Program, the term
"parent" of the Company means any "parent corporation" as
defined in Section 425(e) of the Internal Revenue Code of 1986,
as amended (the "Code"), the term "subsidiary" of the Company
means any "subsidiary corporation" as defined in Section 425(f)
of the Code, the term "employee" means an individual with an
"employment relationship" with the Company, parent or any
subsidiary as defined in Regulation 1.421-7(h) of the Income Tax
Regulations, and the term "employment" means employment with the
Company, or any parent or subsidiary of the Company.
3. Administration. The Program shall be administered by
the Board of Directors of the Company (the "Board"). The Board
shall interpret the Program, prescribe, amend, and rescind rules
and regulations relating to the Program, and make all other
determinations necessary or advisable for its administration.
The decision of the Board on any question concerning the
interpretation of the Program or any right or option granted
under the Program shall be final and binding upon all
participants.
4. Participants. Participants in the Program shall
include one designated non-employee director of the Company and
such officers and key employees (including employees who are
directors) of the Company or of Champion Motor Coach, Inc. or
Moduline International, Inc. as the Chief Executive Officer may
select from time to time upon the instruction of the Board.
5. Stock. The stock subject to rights and options under
the Program shall be the Common Stock of the Company, par value
$1.00 per share ("Common Stock"), and may be either authorized
and unissued shares or shares reacquired by the Company. The
total amount of Common Stock on which rights and options may be
granted under the Program shall not exceed 300,000 shares,
subject to adjustment in accordance with Section 11. Shares
subject to any unexercised portion of a terminated, cancelled or
expired right or option granted under the Program may again be
subjected to options under the Program.
6. Grant of Rights and Options. (a) The Chief Executive
Officer, at any time and from time to time, upon instructions
from the Board and subject to Section 16, may grant rights and
options to such participants and for such number of shares of
Common Stock as he shall designate. Options granted under the
Program are nonqualified options that are not intended to
constitute incentive stock options under Section 422A of the
Code. Each right and option granted under the Program shall
meet all of the terms and conditions of the Program. Any
participant may hold more than one right and option under the
Program and any other stock option plan of the Company. The
date on which a right and option are granted shall be the date
of the Board's authorization of the right and option or such
later date as shall be determined by the Board at the time the
right and option are authorized. Each right and option shall be
evidenced by a stock option agreement (the "Agreement") in such
form and containing such provisions not inconsistent with the
Program as the Board shall direct.
(b) Grants under the Program consist of a right to purchase
a designated number of shares of the Company's Common Stock at a
purchase price of not less than $1.00 per share, to be exercised
on or before 67 days after the date of grant. Subject to the
full exercise of his full rights under the Program, a
participant shall be granted a nonqualified stock option to
purchase additional shares of the Company's Common Stock at fair
market value. Fair market value for purposes of the Program is
deemed to constitute the closing price of the Company's Common
Stock on the American Stock Exchange on the last business day
preceding the date of grant, as reported in The Wall Street
Journal. At the discretion of the Chief Executive Officer, a
participant may receive a stand-alone option under the Program
that is not granted in connection with, or predicated upon the
exercise of, an initial right, granted hereunder.
7. Exercise of Stock Options. The Board, at its
discretion, shall determine the general terms and conditions
regarding the exercise of options granted hereunder, which shall
be set forth in a participant's Agreement. Provided, however,
that the terms and conditions of exercise shall be within the
limitations of the Program and, unless designated otherwise in a
Participant's Agreement, one third of each option grant shall
become exercisable on each anniversary of the date of grant. No
stock option shall be exercisable after the tenth anniversary of
the date of grant.
8. Payment for Right and Option Shares. The purchase
price for shares of Common Stock to be acquired upon exercise of
a right or option granted hereunder shall be paid in full in
cash or by personal check, bank draft or money order at the time
of exercise.
9. Partial Exercise/Fractional Shares. The Board may
permit, and shall establish procedures for, the partial exercise
of rights and options granted under the Program. Provided,
however, that a participant's initial right granted hereunder to
purchase shares for not less than $1.00 per share must be
exercised in full within 67 days after the date of grant for the
tandem stock option to become exercisable.
10. Effect of Termination of Services or Death. (a) If a
participant dies or becomes disabled (within the meaning of
Section 22(e) of the Code), the right and option to the extent
it was exercisable as of the date of the participant's death or
disability, may be exercised by the participant (or the executor
or administrator of the participant's estate or the person to
whom the right and option shall have been transferred by will or
by the laws of descent and distribution) at any time prior to
the expiration date of the right and option or within one year
after the participant's date of death or disability, whichever
period is shorter.
(b) If a participant's employment by the Company is
terminated for any reason other than death or disability, the
right and option shall terminate simultaneously with the
participant's termination of employment; provided, however, that
in the event the participant's employment is terminated by the
Company in connection with a "sale or merger" of the Company
within 60 days of the termination, the participant may elect to
surrender to the Company all or part of his outstanding option
(but not right), whether or not then exercisable by its terms,
and, upon such surrender, the Company shall pay the optionee
cash for each share subject to such option, in an amount equal
to the difference between the per share exercise price of the
shares subject to such option and the then per share market
price of the Company's outstanding shares or, if higher, the
average price per share paid in cash in connection with a sale
or merger or, if applicable, the per share market value of any
other consideration, including stock of the purchaser or
surviving corporation, given in exchange for a share of the
Company's stock in such transaction.
(c) A "sale or merger" means the occurrence of any of the
following events: (i) the acquisition of ownership by a person,
firm or corporation, or a group acting in concert, of fifty-one
percent, or more, of the outstanding common stock of the Company
in a single transaction or a series of related transactions
within a one-year period; (ii) a sale of all or substantially
all of the assets of the Company to any person, firm or
corporation; or (iii) a merger or similar transaction between
the Company and another entity if shareholders of the Company do
not own a majority of the voting stock of the corporation
surviving the transaction and a majority in value of the total
outstanding stock of such surviving corporation after the
transaction.
(d) The transfer of an employee from one corporation to
another among the Company, parent and any of its subsidiaries,
or a leave of absence with the written consent of the Company,
parent or subsidiary shall not be a termination of services for
purposes of the Program.
11. Stock Dividend, Reclassification, Etc. The total
amount of Common Stock for which rights and options may be
granted under the Program, and the number of shares subject to
any right or option granted to a participant (both as to the
number of shares of Common Stock and the option price), shall be
appropriately adjusted by the Board for any increase or decrease
in the number of outstanding shares of Common Stock resulting
from payment of a stock dividend on Common Stock, a subdivision
or combination of shares of Common Stock, or a reclassification
of Common Stock, or similar transaction affecting the shares
covered by a right and option.
The foregoing adjustments, and their application to
particular circumstances, shall be determined by the Board in
its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become
subject to an option.
12. Rights Prior to Issuance of Shares. No participant
shall have any rights as a shareholder with respect to any
shares covered by a right or option until the issuance of a
stock certificate to the participant for such shares. No
adjustment shall be made for dividends or other rights with
respect to such shares for which the record date is prior to the
date such certificate is issued.
13. Non-Assignability. No right or option shall be
transferable by a participant except by will or the laws of
descent and distribution. Further, no shares of Company Common
Stock acquired under the Program shall be sold or otherwise
transferred until the expiration of six months after the date of
purchase. During the lifetime of a participant, a right or
option shall be exercised only by the participant. No transfer
of a right or option by will or by the laws of descent and
distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof
and a copy of the will or such evidence as the Company may deem
necessary to establish the validity of the transfer and the
acceptance by the transferee of the terms and conditions of the
right or option.
14. Securities Laws. (a) Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver
stock pursuant to the exercise of a stock option or stock
appreciation right is subject to such compliance with federal
and state laws, rules and regulations applying to the
authorization, issuance or sale of securities, and applicable
stock exchange requirements, as the Company deems necessary or
advisable. The Company shall not be required to sell and
deliver stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares will not
violate any of the provisions of the Securities Act of 1933 or
the Securities Exchange Act of 1934 or the rules and regulations
of the Securities Exchange Commission promulgated thereunder, or
those of any stock exchange on which the stock may be listed,
the provisions of any state law governing the sale of
securities, or that there has been compliance with the
provisions of such acts, rules, regulations and state laws.
(b) The Board may impose such restrictions on any shares of
Common Stock acquired pursuant to the exercise of a right and
option under the Program as it may deem advisable, including,
without limitation, restrictions (i) under applicable federal
securities law, (ii) under the requirements of any stock
exchange upon which such shares of Common Stock are then listed
and (iii) under any blue sky or state securities laws applicable
to such shares.
15. Withholding Taxes. The Company shall have the right to
withhold from a participant's compensation or require a
participant to remit sufficient funds to the Company to satisfy
applicable withholding for income and employment taxes due to
the exercise of a right or option granted hereunder.
16. Termination and Amendment. (a) The Board may
terminate the Program, or the granting of rights and options
under the Program, at any time. No right or option shall be
granted under the Program 10 years after July 25, 1990.
Termination of the Program shall not affect the rights of the
holders of any rights and options previously granted and then
outstanding.
(b) No amendment or modification of the Program shall in
any manner affect any right or option granted under the Program
without the consent of the participant holding the right or
option.
17. Effect on Employment. Neither the adoption of the
Program nor the granting of any right or option pursuant to it
shall be deemed to create any right in any individual to be
retained or continued in the employment of the Company, parent
or any of its subsidiaries.
18. Use of Proceeds. The proceeds received from the sale
of Common Stock pursuant to the Program shall be used for
general corporate purposes of the Company.
IN WITNESS WHEREOF, the Champion Enterprises, Inc. 1990
Stock Option Program is hereby executed as of April 27, 1990,
the date on which the Program was approved by the Board of
Directors of the Company.
CHAMPION ENTERPRISES, INC.
By:
Walter R. Young, Jr.
President and Chief
Executive Officer
MAH/2209
[CHAMPION ENTERPRISES, INC. LETTERHEAD]
August 31, 1995
Mr. Walter R. Young, Jr.
6372 Muirfield Court
Bloomfield Hills, MI 48301
Re: Employment Agreement Amendment
Dear Walter:
Effective today, this letter amends the employment agreement
between Champion Enterprises, Inc. ("Corporation") and you,
dated April 27, 1990 and as previously amended by letters from
Stanley R. Day and Brian Sullivan, dated April 27, 1990 and May
7, 1990 respectively (in the aggregate, the "Agreement").
1. Base Salary Increase. Effective January 1, 1997 and on
the first day of every other calendar year thereafter, your
annual base compensation in Section 3(a) of the Agreement shall
be increased by $50,000.
2. Stock Option Rights Upon Employment Termination.
Section 9 of the Agreement, which accelerates the exercise terms
of outstanding stock options and provides cash out rights if
your employment terminates under certain circumstances, shall
not apply to any stock options granted to you on August 31,
1995. Such option grants shall be governed by the employment
termination provisions set forth in the stock option agreements
evidencing the grants.
3. Non-Competition Provision. A new Section 14 shall be
added to the Agreement to read as follows:
14. Noncompetition Provision.
In recognition of the highly competitive nature of the
Corporation's business, you agree that (i) as long as you
are an employee or officer of the Corporation and (ii) for
two years after your termination of employment with the
Corporation (unless your employment is terminated by the
Corporation without cause, in which case this Section 14
shall not apply to competitive action occurring after the
termination of your employment);
(a) You will not, directly or indirectly (other than
on behalf of the Corporation), as owner, partner, joint
venturer, employee, broker, agent, principal, trustee,
corporate officer, licensor, consultant or in any capacity
whatsoever, engage in, become financially interested in, or
have any connection with, any business located in the United
States engaged in the production and marketing of
manufactured homes and buses (other than on behalf of the
Corporation). You agree not to supply competing products or
provide competing services to any customer with whom the
Corporation has done any business during your employment
with the Corporation, whether as an officer, director,
proprietor, employee, partner, or investor (other than as a
holder of less than 1% of the outstanding capital stock of a
publicly traded corporation), consultant, advisor, agent or
sales representative.
(b) You agree not to directly or indirectly induce
employees of the Corporation to engage in any activity
hereby prohibited to you or to terminate their employment
with the Corporation.
(c) If any one or more of the terms contained in this
Section 14 shall for any reason be held invalid, illegal or
unenforceable, such invalidity, illegality and
unenforceability shall not affect any other term therein,
but such term shall be deemed deleted, and such deletion
shall not affect the validity of the other terms of this
Section 14 or any other Section of this Agreement, or your
obligations under any other agreements with the Corporation.
Alternatively, if any one or more of the terms contained in
this Section 14 shall for any reason be held to be
excessively broad with regard to time, duration, geographic
scope or activity, that term shall be construed in a manner
to enable it to be enforced to the extent compatible with
applicable law.
(d) You acknowledge that the Corporation's and its
subsidiaries' trade secrets, private or secret processes as
they exist form time to time and information concerning
products, research and development data, market studies and
forecasts, editorial redesign information, editorial source
identification and compensation information, technical
information, procurement and sales activities and
procedures, promotion and pricing techniques, marketing
arrangements and plans, business plans, the substance of
agreements with customers or others, service and training
programs and arrangements, customer lists and credit and
financial data concerning customers (the "Proprietary
Information") are valuable, special and unique assets of the
Corporation and its subsidiaries, access to and knowledge of
which will have been gained by virtue of your position and
involvement with the Corporation. In light of the highly
competitive nature of the industry in which the Corporation
has conducted its business, you further agree that all
Proprietary Information obtained by you as a result of such
position or involvement shall be considered confidential.
In recognition of this fact, you agree that you will not
disclose any of such Proprietary Information to any person
or other entity for any reason or purpose whatsoever, and
you will not make use of any Proprietary Information for
your own purposes or for the benefit of any person or other
entity (except the Corporation) under any circumstances.
(e) Upon your termination of employment with the
Corporation, you will deliver to the Corporation all
records, data and memoranda of every kind and character of
the Corporation and all copies thereof which are in your
possession or control, and which relate to your employment
or to the activities of the Corporation or its subsidiaries
or to any Proprietary Information, including but not limited
to customer lists, editorial sources, drawings, prints,
manuals, notebooks, reports and correspondence, other than
employment related records and documents which you are
entitled to keep.
(f) Notwithstanding the provisions in the third
paragraph of Section 2 of this Agreement to the contrary,
you acknowledge and agree that the Corporation's remedy at
law or through arbitration for a breach of any of the
provisions of Section 14 would be inadequate and, in
recognition of this fact, in the event of a breach or
threatened breach by you of any provision of Section 14 of
this Agreement, it is agreed that, in addition to any other
remedies it may have, the Corporation shall be entitled to
equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be
available. Further, you acknowledge that the granting of a
temporary injunction, or temporary restraining order would
not be an adequate remedy upon breach or threatened breach
of Section 14 hereof and consequently agree upon any such
breach or threatened breach that the Corporation shall be
entitled to the granting of injunctive relief prohibiting
the sale of products and providing of services of the kind
sold or provided by the Corporation. Nothing herein
contained shall be construed as prohibiting the Corporation
from pursuing any other remedies available to it for such
breach. This provision shall override the third paragraph
of Section 2 of the Agreement for purposes of enforcing the
Covenant not to Compete and Proprietary Information
requirements set forth in this Section 14.
4. Except as amended herein, your Agreement remains in
full force and effect and has not been modified or rescinded.
If this letter conforms to your understanding and approval,
please sign below, and this letter will constitute a contractual
amendment to the Agreement between you and the Corporation.
ACCEPTED AND AGREED: CHAMPION ENTERPRISES, INC.
Walter R. Young, Jr. George R. Mrkonic
Chairman of the Compensation
Committee
MAH/5877
NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE CHAMPION ENTERPRISES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
THIS STOCK OPTION AGREEMENT made this 31st day of August,
1995, by and between Champion Enterprises, Inc., a Michigan
corporation ("the Company"), and Walter R. Young, Jr. (the
"Optionee").
WITNESSETH:
WHEREAS, the Optionee is now employed by the Company as
President and Chief Executive Officer, and the Company desires
to provide additional incentive to the Optionee, to encourage
stock ownership by the Optionee, and to encourage the Optionee
to remain in the employ of the Company, and as an inducement
thereto, the Company has determined to grant to the Optionee a
nonqualified stock option pursuant to the Company's 1995 Stock
Option and Incentive Plan, a copy of which is attached hereto as
Exhibit A;
NOW, THEREFORE, it is agreed between the parties as follows:
1. Definitions in Agreement. For purposes of this
Agreement, certain words and phrases have the following
definitions:
(a) "Cause" means "cause" as defined in the Optionee's
employment agreement with the Company, dated April 27, 1990, as
may be amended from time to time; provided, however, that any
notice by the Company not to renew such employment agreement
shall not be deemed to constitute termination for "cause" unless
specifically stated in the notice;
(b) "Change in Control" means a "change in control of
the Company," as defined in Section 8.2 of the Plan;
(c) "Code" means the Internal Revenue Code of 1986, as
amended;
(d) "Committee" means the Compensation Committee of
the Company;
(e) "Common Stock" means the common stock of the
Company;
(f) "Company" means Champion Enterprises, Inc.;
(g) "Disability" means "disability" as defined under
Section 22(e) of the Code;
(h) "Employment" (whether or not capitalized) means
employment with the Company or any Parent or Subsidiary of the
Company;
(i) "Optionee" means Walter R. Young, Jr;
(j) "Parent" means any "parent corporation" as defined
in Section 424(e) of the Code;
(k) "Plan" means the Company's 1995 Stock Option and
Incentive Plan; and
(l) "Subsidiary" means any "subsidiary corporation" as
defined in Section 424(f) of the Code.
(m) "Vest," "Vested" or "Vesting" (whether or not
capitalized) means the date on which all or a portion of the
option is first exercisable.
2. Grant of Option. Subject to the terms and conditions
hereof, the Company hereby grants to the Optionee the right and
option to purchase from the Company up to, but not exceeding in
the aggregate, 200,000 shares of the Company's Common Stock at a
price of $17.00 per share, the fair market value of the
Company's Common Stock on the date of grant. This option is not
intended to meet the requirements under Section 422 of the Code.
3. Optionee's Deposit of Shares. As partial consideration
for this option grant and the total stock incentive program of
800,000 shares of Company Common Stock granted to Optionee on
the grant date, Optionee shall deposit with the Company 62,500
of his personally-owned, unencumbered shares of the Company's
Common Stock within 60 days after the date of this option grant.
Optionee shall be entitled to vote and receive dividends on such
shares while they are on deposit with the Company. The option
granted hereunder shall terminate in full if the Optionee does
not deposit the aforementioned 62,500 unencumbered shares on or
before 60 days after the grant date, or, if the Optionee
otherwise retakes possession of said shares prior to full
vesting of this option (unless the Committee, at its sole
discretion, has unilaterally decided to return the deposited
shares to the Optionee prior to such date). The Optionee's
shares on deposit shall be returned to the Optionee upon the
vesting, expiration or termination of the option, whichever
occurs first. If the option vests in installments, then a pro
rata number of shares shall be returned as the vesting occurs.
4. Right to Exercise Option. The Optionee may purchase
from the Company, in whole or in part, on and after the fifth
anniversary of the date of grant, 100% of the shares covered by
this option, provided that on the date of exercise, the Optionee
has continuously complied with the Common Stock deposit
requirements of Section 3 To the extent that the option is
outstanding upon the occurrence of a Change in Control, the
option, whether or not then exercisable, shall become
exercisable in full; provided the Optionee has continuously
complied with the Common Stock deposit requirements of Section
3. Any provision of this Agreement notwithstanding, no portion
of this option shall be exercisable on or after the earlier of
the eighth anniversary of the date of grant, or three years
after that portion of the option has become exercisable under
the acceleration provisions.
5. Acceleration Due to Performance. The Optionee may
purchase from the Company up to and including one-half of the
option shares (100,000 shares) on or after the third anniversary
of the grant date if (a) the Company's Common Stock has attained
a price of $29.375 per share (20% compound annual growth), and
(b) the Optionee has continuously complied with the Common Stock
deposit requirements of Section 3. If the Company's Common
Stock has not attained the aforementioned price by the third
anniversary of the grant date, the Optionee may then purchase
from the Company up to and including one-half of the option
shares on or after the fourth anniversary of the date of grant
if the Company's Common Stock has attained a price of $35.25 per
share (20% compound annual growth) as of such date. For
purposes of this Section 5, the Company's Common Stock price
shall equal the average closing price for the 10 highest
consecutive trading days during the 60 trading days immediately
preceding the related anniversary date.
6. Termination of Employment.
(a) If, prior to the date that this option shall first
become exercisable, the Optionee's employment with the Company
shall be terminated for any reason except (i) a Change in
Control, (ii) death, (iii) Disability or (iv) the Optionee's
involuntary termination by the Company without Cause, the
Optionee's right to exercise this option shall terminate and all
exercise rights hereunder shall cease.
(b) If the Optionee's employment is terminated due to
a Change in Control, the Option shall become fully exercisable
and may be exercised pursuant to paragraph (d) below.
(c) If the Optionee's employment is terminated due to
(i) death, (ii) Disability, or (iii) the Optionee is
involuntarily terminated by the Company without Cause, the
Committee shall then deem a prorated number of shares under this
Option to have vested, based on the Optionee's number of
completed months in the five-year vesting period.
(d) If, on or after the date that this option shall
first become exercisable (or deemed partially exercisable), the
Optionee's employment shall be terminated for any reason other
than death or Disability, the Optionee shall have the right,
within three months after such termination of employment, to
exercise this option to the extent that it is exercisable and
unexercised on the date of such termination of employment,
subject to any other limitation on the exercise of the option in
effect at the date of exercise. The three-month period may be
extended at the discretion of the Committee, but not beyond the
expiration date stated in the original grant.
(e) If, on or after the date that this option shall
first become exercisable (or deemed partially exercisable), the
Optionee shall die or become Disabled, the Optionee or the
executor or administrator of the estate of the Optionee (as the
case may be) or the person or persons to whom the option shall
have been transferred by will or by the laws of descent and
distribution, or the legal guardian of the Optionee or the
individual designated in the Optionee's durable power of
attorney in the event of Disability, shall have the right,
within one year from the date of the Optionee's death or
Disability, to exercise this option to the extent that it is
exercisable and unexercised on the date of the Optionee's death
or Disability, subject to any other limitation on exercise in
effect at the date of exercise. The one-year period may be
extended at the discretion of the Committee, but not beyond the
expiration date stated in the original grant.
(f) A leave of absence with the written consent of the
Company, shall not be a termination of services for purposes of
this option. However, the transfer of the Optionee from one
corporation to another among the Company, its Parent and any of
its Subsidiaries shall be deemed to constitute the Optionee's
involuntary termination of employment by the Company without
Cause if the Optionee, without his consent, does not retain his
position as Chief Executive Officer of the Company.
7. Exercise of Option. The Optionee, from time to time
during the period when the option hereby granted may by its
terms be exercised, may exercise the option in whole or in part
as at the time permitted, by delivery to the Company of: (a) a
written notice signed by the Optionee (i) stating the number of
shares that the Optionee has elected to purchase at that time
from the Company, and (ii) upon the request of the Company,
representing that the Optionee is acquiring the shares being
purchased for investment and not for resale; and (b) cash,
personal check, bank draft, or money order for an amount equal
to the purchase price of the shares then to be purchased;
provided, however, that the Optionee may pay all or part of the
purchase price by tendering to the Company previously-acquired
shares of Company Common Stock, valued at the closing price of
the Company's Common Stock on the preceding business day, as
reported in The Wall Street Journal. In lieu of the foregoing,
the Optionee may exercise all or part of the exercisable Option
pursuant to the cashless exercise procedure described in Section
2.4(b) of the Plan. After receipt of the foregoing and subject
to Section 8 below, the Company shall issue the shares in the
name of the Optionee and deliver the certificates therefor to
the Optionee.
8. Compliance With Securities Laws. Anything to the
contrary herein notwithstanding, the Company's obligation to
sell and deliver stock under this option is subject to such
compliance with federal and state laws, rules and regulations
applying to the authorization, issuance or sale of securities,
and applicable stock exchange requirements, as the Company deems
necessary or advisable. The Company shall not be required to
sell and deliver stock pursuant hereto unless and until it
receives satisfactory proof that the issuance or transfer of
such shares will not violate any of the provisions of the
Securities Act of 1933 or the Securities Exchange Act of 1934 or
the rules and regulations of the Securities Exchange Commission
promulgated thereunder, or the rules and regulations of any
stock exchange on which the Company's securities are traded, or
state law governing the sale of securities, or that there has
been compliance with the provisions of such acts, rules,
regulations and state laws. If the Optionee fails to accept
delivery and pay for all or any part of the number of shares
specified by such notice upon tender of delivery thereof the
Optionee's right to exercise this option with respect to such
undelivered shares may be terminated by the Company.
9. Non-Assignability. The option hereby granted shall not
be transferable by the Optionee other than by will or the laws
of descent and distribution, and the option may be exercised
during the Optionee's lifetime only by the Optionee except in
the event of the Optionee's Disability, in which case the
Optionee's legal guardian or the individual designated in the
Optionee's durable power of attorney may exercise the option.
Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the
option shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and a copy
of the will and/or such other evidence as the Company may deem
necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and
conditions of this Agreement. No assignment or transfer of this
option, or of the rights represented thereby, whether voluntary
or involuntary, by operation of law or otherwise, except a
transfer by the Optionee by will or by the laws of descent and
distribution, shall vest in the purported assignee or transferee
any interest or right herein whatsoever.
10. Withholding. The Optionee hereby authorizes the
Company to withhold from his compensation or agrees to tender
the applicable amount to the Company to satisfy any requirements
for withholding of income and employment taxes in connection
with the exercise of the option granted hereby.
11. Disputes. As a condition to the granting of the option
granted hereby, the Optionee and the Optionee's successors and
assigns agree that any dispute or disagreement which shall arise
under or as a result of this Agreement shall be determined by
the Committee in its sole discretion and judgment and that any
such determination and any interpretation by the Committee of
the terms of this Agreement shall be final and shall be binding
and conclusive for all purposes.
12. Adjustments. In the event of any stock dividend, stock
split, reclassification, merger, consolidation, or similar
transaction affecting the shares covered by this option, the
rights of the Optionee shall be as provided in Section 8.1 of
the Plan and any adjustment therein provided shall be made in
accordance with Section 8.1 of the Plan.
13. Rights as Shareholder. The Optionee shall have no
rights as a shareholder of the Company with respect to any of
the shares covered by this option until the issuance of a stock
certificate or certificates upon the exercise of the option in
full or in part, and then only with respect to the shares
represented by such certificate or certificates.
14. Notices. Every notice relating to this Agreement shall
be in writing and if given by mail shall be given by registered
or certified mail with return receipt requested. All notices to
the Company shall be delivered to the Secretary of the Company
at the Company's headquarters in Auburn Hills, Michigan, or
addressed to the Secretary of the Company at 2701 University
Drive, Auburn Hills, MI 48326-9090. All notices by the Company
to the Optionee shall be delivered to the Optionee personally or
addressed to the Optionee at the Optionee's last residence
address as then contained in the records of the Company or such
other address as the Optionee may designate. Either party by
notice to the other may designate a different address to which
notices shall addressed. Any notice given by the Company to the
Optionee at the Optionee's last designated address shall be
effective to bind any other person who shall acquire rights
hereunder.
15. "Optionee" to Include Certain Transferees. Whenever
the word "Optionee" is used in any provision of this Agreement
under circumstances where the provision should logically apply
to any other person or persons to whom the option, in accordance
with the provisions of Section 7 hereof, may be transferred, the
word "Optionee" shall be deemed to include such person or
persons.
16. Governing Law. This Agreement has been made in and
shall be construed in accordance with the laws of the State of
Michigan.
17. Provisions of Plan Controlling. The provisions hereof
are subject to the terms and provisions of the Plan attached
hereto as Exhibit A. In the event of any conflict between the
provisions of this option and the provisions of the Plan, the
provisions of the Plan shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CHAMPION ENTERPRISES, INC.
By:
George R. Mrkonic
Chairman of the
Compensation Committee
Walter R. Young, Jr., Optionee
MAH/5866
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
GRANTED UNDER THE CHAMPION ENTERPRISES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
Secretary
Champion Enterprises, Inc.
2701 University Drive
Suite 320
Auburn Hills, Michigan 48326
Dear Sir:
A nonqualified stock option was granted to me on August 31,
1995 to purchase up to 200,000 shares of Champion Enterprises,
Inc. Common Stock at a price of $17.00 per share.
I hereby elect to exercise my nonqualified stock option with
respect to shares. A personal check [or cash, bank draft
or money order] for the purchase price is enclosed herewith.
I authorize the Company to withhold from my compensation or
agree to tender the applicable amount to the Company to satisfy
any requirements for withholding of income and employment taxes
due to my exercise of this option.
[I further represent that the shares of stock that I am
purchasing upon this exercise of my option are being purchased
for investment purposes and not with a view to resale. This
representation shall not be binding upon me if the shares of
Common Stock that I am purchasing are subject to an effective
Registration Statement under the Securities Act of 1933.]
Walter R. Young, Jr., Optionee
Dated , 19
NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE CHAMPION ENTERPRISES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
THIS STOCK OPTION AGREEMENT made this 31st day of August,
1995, by and between Champion Enterprises, Inc., a Michigan
corporation ("the Company"), and Walter R. Young, Jr. (the
"Optionee").
WITNESSETH:
WHEREAS, the Optionee is now employed by the Company as
President and Chief Executive Officer, and the Company desires
to provide additional incentive to the Optionee, to encourage
stock ownership by the Optionee, and to encourage the Optionee
to remain in the employ of the Company, and as an inducement
thereto, the Company has determined to grant to the Optionee a
nonqualified stock option pursuant to the Company's 1995 Stock
Option and Incentive Plan, a copy of which is attached hereto as
Exhibit A;
NOW, THEREFORE, it is agreed between the parties as follows:
1. Definitions in Agreement. For purposes of this
Agreement, certain words and phrases have the following
definitions:
(a) "Cause" means "cause" as defined in the Optionee's
employment agreement with the Company, dated April 27, 1990, as
may be amended from time to time; provided, however, that any
notice by the Company not to renew such employment agreement
shall not be deemed to constitute termination for "cause" unless
specifically stated in the notice.
(b) "Change in Control" means a "change in control of
the Company," as defined in Section 8.2 of the Plan;
(c) "Code" means the Internal Revenue Code of 1986, as
amended;
(d) "Committee" means the Compensation Committee of
the Company;
(e) "Common Stock" means the common stock of the
Company;
(f) "Company" means Champion Enterprises, Inc.;
(g) "Disability" means "disability" as defined under
Section 22(e) of the Code;
(h) "Employment" (whether or not capitalized) means
employment with the Company or any Parent or Subsidiary of the
Company;
(i) "Optionee" means Walter R. Young, Jr;
(j) "Parent" means any "parent corporation" as defined
in Section 424(e) of the Code;
(k) "Plan" means the Company's 1995 Stock Option and
Incentive Plan; and
(l) "Subsidiary" means any "subsidiary corporation" as
defined in Section 424(f) of the Code.
(m) "Vest," "Vested" or "Vesting" (whether or not
capitalized) means the date on which all or a portion of the
option is first exercisable.
2. Grant of Option. Subject to the terms and conditions
hereof, the Company hereby grants to the Optionee the right and
option to purchase from the Company up to, but not exceeding in
the aggregate, 550,000 shares of the Company's Common Stock at a
price of $17.00 per share, the fair market value of the
Company's Common Stock on the date of grant. Provided, however,
that notwithstanding any other provision in this Agreement to
the contrary (including Sections 4 and 6(a)), this option is
conditioned upon, and cannot be exercised unless, shareholders
of the Company at the next annual meeting, vote to approve
amendments to the Plan that increase the number of shares
available for issuance under the Plan and increase the cap on
the number of annual option shares available for grants to any
one Plan participant. If either of such approvals is not
obtained, this option grant shall be null and void, and the
Optionee's rights hereunder shall terminate in full. This
option is not intended to meet the requirements under Section
422 of the Code.
3. Optionee's Deposit of Shares. As partial consideration
for this option grant and the total stock incentive program of
800,000 shares of Company Common Stock granted to Optionee on
the grant date, Optionee shall deposit with the Company 171,875
of his personally-owned, unencumbered shares of the Company's
Common Stock within 60 days after the date of this option grant.
Optionee shall be entitled to vote and receive dividends on such
shares while they are on deposit with the Company. The option
granted hereunder shall terminate in full if the Optionee does
not deposit the aforementioned 171,875 unencumbered shares on or
before 60 days after the grant date, or, if the Optionee
otherwise retakes possession of said shares prior to full
vesting of this option (unless the Committee, at its sole
discretion, has unilaterally decided to return the deposited
shares to the Optionee prior to such date). If shareholder
approval is not obtained for the Plan amendments described in
Section 2, above, the 171,875 shares of the Optionee's Common
Stock on deposit with the Company shall be immediately returned
to the Optionee. If shareholder approval is obtained for the
Plan amendments described in Section 2, above, his shares on
deposit shall be returned to the Optionee upon the vesting,
expiration or termination of the option, whichever occurs first.
If the option vests in installments, then a pro rata number of
shares shall be returned as the vesting occurs.
4. Right to Exercise Option. The Optionee may purchase
from the Company, in whole or in part, on and after the fifth
anniversary of the date of grant, 100% of the shares covered by
this option, provided that on the date of exercise, the Optionee
has continuously complied with the Common Stock deposit
requirements of Section 3. To the extent that the option is
outstanding upon the occurrence of a Change in Control, the
option, whether or not then exercisable, shall become
exercisable in full; provided that the Optionee has continuously
complied with the Common Stock deposit requirements of Section
3. Any provision of this Agreement notwithstanding, no portion
of this option shall be exercisable on or after the earlier of
the eighth anniversary of the date of grant, or three years
after that portion of the option has become exercisable under
the acceleration provisions.
5. Acceleration Due to Performance. The Optionee may
purchase from the Company up to and including one-half of the
option shares (275,000 shares) on or after the third anniversary
of the grant date if (a) the Company's Common Stock has attained
a price of $29.375 per share (20% compound annual growth), and
(b) the Optionee has continuously complied with the Common Stock
deposit requirements of Section 3. If the Company's Common
Stock has not attained the aforementioned price by the third
anniversary of the grant date, the Optionee may then purchase
from the Company up to and including one-half of the option
shares on or after the fourth anniversary of the date of grant
if the Company's Common Stock has attained a price of $35.25 per
share (20% compound annual growth) as of such date. For
purposes of this Section 5, the Company's Common Stock price
shall equal the average closing price for the 10 highest
consecutive trading days during the 60 trading days immediately
preceding the related anniversary date.
6. Termination of Employment.
(a) If, prior to the date that this option shall first
become exercisable, the Optionee's employment with the Company
shall be terminated for any reason except (i) a Change in
Control, (ii) death, (iii) Disability or (iv) the Optionee's
involuntary termination by the Company without Cause, the
Optionee's right to exercise this option shall terminate and all
exercise rights hereunder shall cease.
(b) If the Optionee's employment is terminated due to
a Change in Control, the Option shall become fully exercisable
and may be exercised pursuant to paragraph (d) below.
(c) If the Optionee's employment is terminated due to
(i) death, (ii) Disability, or (iii) the Optionee is
involuntarily terminated by the Company without Cause, the
Committee shall then deem a pro-rated number of shares under
this Option to have vested, based on the Optionee's number of
completed months in the five-year vesting period.
(d) If, on or after the date that this option shall
first become exercisable (or deemed partially exercisable), the
Optionee's employment shall be terminated for any reason other
than death or Disability, the Optionee shall have the right,
within three months after such termination of employment, to
exercise this option to the extent that it is exercisable and
unexercised on the date of such termination of employment,
subject to any other limitation on the exercise of the option in
effect at the date of exercise. The three-month period may be
extended at the discretion of the Committee, but not beyond the
expiration date stated in the original grant.
(e) If, on or after the date that this option shall
first become exercisable (or deemed partially exercisable), the
Optionee shall die or become Disabled, the Optionee or the
executor or administrator of the estate of the Optionee (as the
case may be) or the person or persons to whom the option shall
have been transferred by will or by the laws of descent and
distribution, or the legal guardian of the Optionee or the
individual designated in the Optionee's durable power of
attorney in the event of Disability, shall have the right,
within one year from the date of the Optionee's death or
Disability, to exercise this option to the extent that it is
exercisable and unexercised on the date of the Optionee's death
or Disability, subject to any other limitation on exercise in
effect at the date of exercise. The one-year period may be
extended at the discretion of the Committee, but not beyond the
expiration date stated in the original grant.
(f) A leave of absence with the written consent of the
Company, shall not be a termination of services for purposes of
this option. However, the transfer of the Optionee from one
corporation to another among the Company, its Parent and any of
its Subsidiaries shall be deemed to constitute the Optionee's
involuntary termination of employment by the Company without
Cause if the Optionee, without his consent, does not retain his
position as Chief Executive Officer of the Company.
7. Exercise of Option. The Optionee, from time to time
during the period when the option hereby granted may by its
terms be exercised, may exercise the option in whole or in part
as at the time permitted, by delivery to the Company of: (a) a
written notice signed by the Optionee (i) stating the number of
shares that the Optionee has elected to purchase at that time
from the Company, and (ii) upon the request of the Company,
representing that the Optionee is acquiring the shares being
purchased for investment and not for resale; and (b) cash,
personal check, bank draft, or money order for an amount equal
to the purchase price of the shares then to be purchased;
provided, however, that the Optionee may pay all or part of the
purchase price by tendering to the Company previously-acquired
shares of Company Common Stock, valued at the closing price of
the Company's Common Stock on the preceding business day, as
reported in The Wall Street Journal. In lieu of the foregoing,
the Optionee may exercise all or part of the exercisable Option
pursuant to the cashless exercise procedure described in Section
2.4(b) of the Plan. After receipt of the foregoing and subject
to Section 8 below, the Company shall issue the shares in the
name of the Optionee and deliver the certificates therefor to
the Optionee.
8. Compliance With Securities Laws. Anything to the
contrary herein notwithstanding, the Company's obligation to
sell and deliver stock under this option is subject to such
compliance with federal and state laws, rules and regulations
applying to the authorization, issuance or sale of securities,
and applicable stock exchange requirements, as the Company deems
necessary or advisable. The Company shall not be required to
sell and deliver stock pursuant hereto unless and until it
receives satisfactory proof that the issuance or transfer of
such shares will not violate any of the provisions of the
Securities Act of 1933 or the Securities Exchange Act of 1934 or
the rules and regulations of the Securities Exchange Commission
promulgated thereunder, or the rules and regulations of any
stock exchange on which the Company's securities are traded, or
state law governing the sale of securities, or that there has
been compliance with the provisions of such acts, rules,
regulations and state laws. If the Optionee fails to accept
delivery and pay for all or any part of the number of shares
specified by such notice upon tender of delivery thereof the
Optionee's right to exercise this option with respect to such
undelivered shares may be terminated by the Company.
9. Non-Assignability. The option hereby granted shall not
be transferable by the Optionee other than by will or the laws
of descent and distribution, and the option may be exercised
during the Optionee's lifetime only by the Optionee, except in
the event of the Optionee's Disability, in which case the
Optionee's legal guardian or the individual designated in the
Optionee's durable power of attorney may exercise the option.
Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the
option shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and a copy
of the will and/or such other evidence as the Company may deem
necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and
conditions of this Agreement. No assignment or transfer of this
option, or of the rights represented thereby, whether voluntary
or involuntary, by operation of law or otherwise, except a
transfer by the Optionee by will or by the laws of descent and
distribution, shall vest in the purported assignee or transferee
any interest or right herein whatsoever.
10. Withholding. The Optionee hereby authorizes the
Company to withhold from his compensation or agrees to tender
the applicable amount to the Company to satisfy any requirements
for withholding of income and employment taxes in connection
with the exercise of the option granted hereby.
11. Disputes. As a condition to the granting of the option
granted hereby, the Optionee and the Optionee's successors and
assigns agree that any dispute or disagreement which shall arise
under or as a result of this Agreement shall be determined by
the Committee in its sole discretion and judgment and that any
such determination and any interpretation by the Committee of
the terms of this Agreement shall be final and shall be binding
and conclusive for all purposes.
12. Adjustments. In the event of any stock dividend, stock
split, reclassification, merger, consolidation, or similar
transaction affecting the shares covered by this option, the
rights of the Optionee shall be as provided in Section 8.1 of
the Plan and any adjustment therein provided shall be made in
accordance with Section 8.1 of the Plan.
13. Rights as Shareholder. The Optionee shall have no
rights as a shareholder of the Company with respect to any of
the shares covered by this option until the issuance of a stock
certificate or certificates upon the exercise of the option in
full or in part, and then only with respect to the shares
represented by such certificate or certificates.
14. Notices. Every notice relating to this Agreement shall
be in writing and if given by mail shall be given by registered
or certified mail with return receipt requested. All notices to
the Company shall be delivered to the Secretary of the Company
at the Company's headquarters in Auburn Hills, Michigan, or
addressed to the Secretary of the Company at 2701 University
Drive, Auburn Hills, MI 48326-9090. All notices by the Company
to the Optionee shall be delivered to the Optionee personally or
addressed to the Optionee at the Optionee's last residence
address as then contained in the records of the Company or such
other address as the Optionee may designate. Either party by
notice to the other may designate a different address to which
notices shall addressed. Any notice given by the Company to the
Optionee at the Optionee's last designated address shall be
effective to bind any other person who shall acquire rights
hereunder.
15. "Optionee" to Include Certain Transferees. Whenever
the word "Optionee" is used in any provision of this Agreement
under circumstances where the provision should logically apply
to any other person or persons to whom the option, in accordance
with the provisions of Section 7 hereof, may be transferred, the
word "Optionee" shall be deemed to include such person or
persons.
16. Governing Law. This Agreement has been made in and
shall be construed in accordance with the laws of the State of
Michigan.
17. Provisions of Plan Controlling. The provisions hereof
are subject to the terms and provisions of the Plan attached
hereto as Exhibit A. In the event of any conflict between the
provisions of this option and the provisions of the Plan, the
provisions of the Plan shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CHAMPION ENTERPRISES, INC.
By:
George R. Mrkonic
Chairman of the
Compensation Committee
Walter R. Young, Jr., Optionee
MAH/5872
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
GRANTED UNDER THE CHAMPION ENTERPRISES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
Secretary
Champion Enterprises, Inc.
2701 University Drive
Suite 320
Auburn Hills, Michigan 48326
Dear Sir:
A nonqualified stock option was granted to me on August 31,
1995 to purchase up to 550,000 shares of Champion Enterprises,
Inc. Common Stock at a price of $17.00 per share.
I hereby elect to exercise my nonqualified stock option with
respect to shares. A personal check [or cash, bank draft
or money order] for the purchase price is enclosed herewith.
I authorize the Company to withhold from my compensation or
agree to tender the applicable amount to the Company to satisfy
any requirements for withholding of income and employment taxes
due to my exercise of this option.
[I further represent that the shares of stock that I am
purchasing upon this exercise of my option are being purchased
for investment purposes and not with a view to resale. This
representation shall not be binding upon me if the shares of
Common Stock that I am purchasing are subject to an effective
Registration Statement under the Securities Act of 1933.]
Walter R. Young, Jr., Optionee
Dated , 19
PERFORMANCE SHARE AWARD AGREEMENT
UNDER THE CHAMPION ENTERPRISES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
THIS PERFORMANCE SHARE AWARD AGREEMENT made this 31st day of
August, 1995, by and between Champion Enterprises, Inc., a
Michigan corporation ("the Company"), and Walter R. Young, Jr.
(the "Grantee").
WITNESSETH:
WHEREAS, the Grantee is now employed by the Company as
President and Chief Executive Officer, and the Company desires
to provide additional incentive to the Grantee, to encourage
stock ownership by the Grantee, and to encourage the Grantee to
remain in the employ of the Company, and as an inducement
thereto, the Company has determined to award to the Grantee a
Performance Share Award pursuant to the Company's 1995 Stock
Option and Incentive Plan, a copy of which is attached hereto as
Exhibit A;
NOW, THEREFORE, it is agreed between the parties as follows:
1. Definitions in Agreement. For purposes of this
Agreement, certain words and phrases have the following
definitions:
(a) "Cause" means "cause" as defined in the Grantee's
employment agreement with the Company, dated April 27, 1990, as
may be amended from time to time; provided, however, that any
notice by the Company not to renew such employment agreement
shall not be deemed to constitute termination for "cause" unless
specifically stated in the notice;
(b) "Change in Control" means a "change in control of
the Company," as defined in Section 8.2 of the Plan.
(c) "Code" means the Internal Revenue Code of 1986, as
amended;
(d) "Committee" means the Compensation Committee of
the Company;
(e) "Common Stock" means the common stock of the
Company;
(f) "Company" means Champion Enterprises, Inc.;
(g) "Disability" means "disability" as defined under
Section 22(e) of the Code;
(h) "Employment" (whether or not capitalized) means
employment with the Company or any Parent or Subsidiary of the
Company;
(i) "Grantee" means Walter R. Young, Jr;
(j) "Parent" means any "parent corporation" as defined
in Section 424(e) of the Code;
(k) "Performance Share Award means the award granted
hereunder;
(l) "Plan" means the Company's 1995 Stock Option and
Incentive Plan; and
(m) "Subsidiary" means any "subsidiary corporation" as
defined in Section 424(f) of the Code.
(n) "Vest," "Vested" or "Vesting" (whether or not
capitalized) means the date on which all or a portion of the
restrictions under the Performance Share Award lapse.
2. Grant of Performance Share Award. Subject to the terms
and conditions hereof, the Company hereby awards to the Grantee
a Performance Share Award for 50,000 shares of the Company's
Common Stock. Provided, however, that notwithstanding any other
provision in this Agreement to the contrary (including Section
5(a)), this Performance Share Award is conditioned upon
shareholder approval of a Plan amendment at the next annual
meeting of the Company that establishes performance share goals
in accordance with the requirements of Code Section 162(m). If
such Plan amendment is not approved, this Performance Share
Award shall be null and void, the shares under the award shall
be forfeited, and the Grantee's rights to the performance shares
granted hereunder shall terminate in full.
3. Performance Goals - Restrictions on Transfer.
The following requirements must be satisfied before the
shares pursuant to this award shall be freely transferable:
(a) The Grantee has continuously complied with the Common
Stock deposit requirements of Section 4 until the performance
goals established herein have been satisfied or deemed
satisfied; and
(b) The Company's earnings per share for the 1996 through
1999 fiscal years have grown at a rate at least equal to the
median of the following peer group of eight publicly-held
manufactured home companies and one publicly-held bus company:
Clayton Homes, Inc., Fleetwood Enterprises, Inc., Oakwood Home
Corporation, Skyline Corporation, Cavalier Homes, Inc., Schult
Homes Corporation, Liberty Homes, Inc. and Supreme Industries,
Inc. (formerly "ESI Industries, Inc."), as applied in accordance
with the August 11, 1995 Committee minutes.
(c) If any of the foregoing conditions is not satisfied,
the Grantee shall forfeit the shares under the award, and his
rights under the award shall be null and void. The certificate
evidencing the shares under the award shall carry a restrictive
legend that prohibits any transfer including the assignment,
hypothecation or pledge of the shares under the award prior to
the attainment of the performance goals and lapse of the
foregoing restrictions.
(d) Any Common Stock issued pursuant to this award shall
not be transferable until the Committee certifies in writing
that the performance goals and restrictions have been satisfied.
4. Grantee's Deposit of Shares.
(a) As partial consideration for this Performance
Share Award and the total stock incentive program of 800,000
shares of Company Common Stock awarded to Grantee on the award
date, Grantee shall deposit with the Company 15,625 of his
personally-owned, unencumbered shares of the Company's Common
Stock within 60 days after the date of this award. Grantee
shall be entitled to vote and receive dividends on such shares
while they are on deposit with the Company. The Performance
Share Award granted hereunder shall terminate in full if the
Grantee does not deposit the aforementioned 15,625 unencumbered
shares on or before 60 days after the award date, or, subject to
paragraph (b) below, if the Grantee otherwise retakes possession
of said shares prior to the expiration, termination or full
attainment of the vesting and performance goals under this award
(unless the Committee, at its sole discretion, has unilaterally
decided to return the deposited shares to the Grantee prior to
such date). If shareholder approval is not obtained for the
Plan amendment described in Section 2, above, the 15,625 shares
of the Grantee's Common Stock on deposit with the Company for
this award shall be immediately returned to the Grantee.
(b) Upon the attainment of the performance goals under
this Performance Share Award, the 15,625 shares on deposit shall
be returned to Grantee. If shareholder approval is obtained for
the Plan amendment described in Section 2, above, and the
restrictions and/or performance goals set forth in Section 3,
above, are not satisfied, the Grantee's shares on deposit
immediately shall be returned to the Grantee.
5. Termination of Employment and Change in Control.
(a) If, prior to the satisfaction of all performance
goals and restrictions under this award, the Grantee's
employment with the Company shall be terminated for any reason
except (i) a Change in Control, (ii) death, (iii) Disability, or
(iv) the Grantee's involuntary termination by the Company
without Cause, the Grantee shall forfeit all shares under the
award and his rights to the performance shares under this award
shall terminate in full.
(b) In the event of a Change in Control, all
performance goals and restrictions under the Performance Share
Award shall be deemed to have been satisfied, and all
restrictions shall lapse, making the shares under the award
freely transferable, subject to any applicable federal or state
securities laws.
(c) Upon the Grantee's termination due to (i) death,
(ii) Disability or (iii) involuntary termination by the Company
without Cause prior to the satisfaction of all performance goals
and restrictions under this award, such performance goals and
restrictions shall be deemed to have been satisfied on a
prorated basis, so that the number of shares that become freely
transferable shall be based on the Grantee's number of full
months of employment during the performance period, and the
Grantee shall forfeit the remaining shares and his rights to
such forfeited shares shall terminate in full.
(d) A leave of absence with the written consent of the
Company, shall not be a termination of services for purposes of
this award. However, the transfer of the Grantee from one
corporation to another among the Company, its Parent and any of
its Subsidiaries shall be deemed to constitute the Grantee's
involuntary termination of employment by the Company without
Cause if the Grantee, without his consent, does not retain his
position as Chief Executive Officer of the Company.
6. Compliance With Securities Laws. Anything to the
contrary herein notwithstanding, the Company's obligation to
deliver stock under this award is subject to such compliance
with federal and state laws, rules and regulations applying to
the authorization, issuance or sale of securities, and
applicable stock exchange requirements, as the Company deems
necessary or advisable. The Company shall not be required to
deliver stock pursuant hereto unless and until it receives
satisfactory proof that the issuance or transfer of such shares
shall not violate any of the provisions of the Securities Act of
1933 or the Securities Exchange Act of 1934 or the rules and
regulations of the Securities Exchange Commission promulgated
thereunder, or the rules and regulations of any stock exchange
on which the Company's securities are traded, or state law
governing the sale of securities, or that there has been
compliance with the provisions of such acts, rules, regulations
and state laws.
7. Non-Assignability. The Performance Share Award hereby
granted and shares of Common Stock pursuant to such award shall
not be transferable by the Grantee other than by will or the
laws of descent and distribution. Any transferee of the award
shall take the same subject to the terms and conditions of this
Agreement. No such transfer of the award shall be effective to
bind the Company unless the Company shall have been furnished
with written notice thereof and a copy of the will and/or such
other evidence as the Company may deem necessary to establish
the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions of this
Agreement. No assignment or transfer of this award, or of the
rights represented thereby, whether voluntary or involuntary, by
operation of law or otherwise, except a transfer by the Grantee
by will or by the laws of descent and distribution, shall vest
in the purported assignee or transferee any interest or right
herein whatsoever.
8. Withholding. The Grantee hereby authorizes the Company
to withhold from his compensation or agrees to tender the
applicable amount to the Company to satisfy any requirements for
withholding of income and employment taxes in connection with
the satisfaction of the restrictions and the performance goals
under the award granted hereby.
9. Disputes. As a condition to the granting of this
award, the Grantee and the Grantee's successors and assigns
agree that any dispute or disagreement which shall arise under
or as a result of this Agreement shall be determined by the
Committee in its sole discretion and judgment and that any such
determination and any interpretation by the Committee of the
terms of this Agreement shall be final and shall be binding and
conclusive for all purposes.
10. Adjustments. In the event of any stock dividend, stock
split, reclassification, merger, consolidation, or similar
transaction affecting the shares covered by this award, the
rights of the Grantee shall be as provided in Section 8.1 of the
Plan and any adjustment therein provided shall be made in
accordance with Section 8.1 of the Plan.
11. Rights as Shareholder. The Grantee shall have no
rights as a shareholder of the Company with respect to any of
the shares covered by this award until the issuance of a stock
certificate or certificates representing the shares under the
award. Provided, further, that during the period when the
shares are nontransferable and subject to the restrictions and
performance goals set forth in Section 3, the Grantee may vote
the shares under the award, and any dividends issued on such
shares during the restricted period shall be reinvested on
behalf of the Grantee in additional shares under the Plan, and
such additional shares shall become a part of this award and
subject to the terms, conditions and restrictions herein. The
shares awarded herein shall not be transferable until all terms,
conditions and restrictions set forth herein have lapsed.
12. Notices. Every notice relating to this Agreement shall
be in writing and if given by mail shall be given by registered
or certified mail with return receipt requested. All notices to
the Company shall be delivered to the Secretary of the Company
at the Company's headquarters in Auburn Hills, Michigan, or
addressed to the Secretary of the Company at 2701 University
Drive, Auburn Hills, MI 48326-9090. All notices by the Company
to the Grantee shall be delivered to the Grantee personally or
addressed to the Grantee at the Grantee's last residence address
as then contained in the records of the Company or such other
address as the Optionee may designate. Either party by notice
to the other may designate a different address to which notices
shall addressed. Any notice given by the Company to the Grantee
at the Grantee's last designated address shall be effective to
bind any other person who shall acquire rights hereunder.
13. "Grantee" to Include Certain Transferees. Whenever the
word "Grantee" is used in any provision of this Agreement under
circumstances where the provision should logically apply to any
other person or persons to whom the award, in accordance with
the provisions of Section 7 hereof, may be transferred, the word
"Grantee" shall be deemed to include such person or persons.
14. Governing Law. This Agreement has been made in and
shall be construed in accordance with the laws of the State of
Michigan.
15. Provisions of Plan Controlling. The provisions hereof
are subject to the terms and provisions of the Plan attached
hereto as Exhibit A. In the event of any conflict between the
provisions of this option and the provisions of the Plan, the
provisions of the Plan shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CHAMPION ENTERPRISES, INC.
By:
George R. Mrkonic
Chairman of the
Compensation Committee
Walter R. Young, Jr., Grantee
MAH/5875
RESIGNATION AND CONSULTING AGREEMENT
This Resignation and Consulting Agreement (the "Agreement")
is made and entered into by and between Champion Enterprises,
Inc., a Michigan corporation with its principal place of
business at 2701 University Drive, Suite 320, Auburn Hills,
Michigan 48326 (the "Corporation") and James W. Gurch, an
individual residing at 5859 Murfield Drive, Rochester Hills,
Michigan 48306 ("Gurch").
WITNESSETH:
WHEREAS, Gurch has been employed since July 6, 1992 as Vice
President of the Corporation and as President of Champion Home
Builders Co., a wholly owned subsidiary of the Corporation;
WHEREAS, for health related reasons Gurch is desirous of
resigning his offices with the Corporation effective this date
and his employment with the Corporation effective July 15, 1995;
WHEREAS, it is in the best interests of the Corporation and
Gurch for his employment to be continued until July 15, 1995;
and
WHEREAS, the Corporation is desirous of retaining Gurch's
services as a consultant after July 15, 1995.
NOW, THEREFORE, the Corporation and Gurch agree as follows:
1. SERVICES. Gurch shall continue his employment with the
Corporation and shall serve as an administrative assistant to
the President and Chief Executive Officer of the Corporation
until July 15, 1995, on which date he shall resign his
employment with the Corporation; afterwhich, Gurch shall become
and shall serve as an outside consultant to the Corporation
until December 31, 1996.
In his capacity as consultant, Gurch shall perform
consulting services on behalf of the Corporation, as such
services shall be mutually agreed upon in writing by Gurch and
the President of the Corporation from time to time during the
term of this Agreement. Gurch hereby agrees to devote
sufficient time and attention to and use his best efforts to
provide such services, but shall not be precluded from pursuing
other business activities outside the manufactured housing
industry.
2. RELATIONSHIP BETWEEN THE PARTIES WHILE GURCH IS ACTING
AS A CONSULTANT. During the consulting term, this Agreement
does not in any way create the relationship of joint venture,
partnership, legal representative, franchisor and franchisee,
employer and employee or principal and agent between the
Corporation and Gurch. Gurch shall not have any right to bind,
transact any business in the Corporation's name or in its behalf
in any manner or form, or to make any promises, representations
or warranties on behalf of the Corporation. Gurch shall not act
or attempt to act or represent himself directly or by
implication as an employee or agent for the Corporation or in
any manner assume or create or attempt to assume or create any
obligation on behalf of or in the name of the Corporation.
Gurch shall represent himself only as an independent contractor.
The Corporation by this Agreement does not appoint Gurch to act
in any capacity other than that described herein nor does this
Agreement define or control the rights and obligations of the
parties when Gurch acts in any capacity other than that
described herein.
3. COMPENSATION.
(a) BONUS. Gurch shall receive a 1995 bonus incentive
payment amounting to the product of the Champion Home Builders
Co. Fiscal 1995 profit multiplied by a factor of .00834 of which
amount $150,000, if earned, shall be paid on October 1, 1995 and
the remainder, if earned, shall be paid after the final close in
February, 1996, but no later than March 15, 1996.
(b) SALARY. From this date and until July 15, 1995, Gurch
shall be paid a pro rata share of his prior base salary of
$200,000 per year on a monthly basis.
(c) CONSULTING FEE. After July 15, 1995 and until December
31, 1996, Gurch shall be compensated as a consultant at the rate
of $500.00 per day for any consulting services which may be
mutually agreed upon pursuant to Paragraph 1.
(d) INSURANCE COVERAGE. Gurch's medical, dental and life
insurance shall be continued by the Corporation until July 31,
1995, afterwhich Gurch may elect to exercise his COBRA
continuation rights as to medical and dental insurance (per the
attached letter).
(e) OPTIONS. This Agreement shall not affect Gurch's
rights under certain option agreements, including the right to
exercise nonqualified stock options during the period of July 6,
1995 to August 15, 1995 for 25,000 shares of the Corporation's
common stock. The Corporation agrees to effect a registration of
such shares with the Securities and Exchange Commission pursuant
to a Form S-8 Registration Statement prior to July 6, 1995.
4. EXPENSES. Champion shall reimburse Gurch his
reasonable, ordinary and necessary business expenses incurred
while performing services contemplated by this Agreement. Such
expenses must receive the prior approval of the President to
qualify for reimbursement.
5. TERM. Subject to the provisions of Paragraph 6 hereof,
this Agreement shall continue in full force and effect for the
term ending on December 31, 1996.
6. TERMINATION. This Agreement may be cancelled and
terminated as provided below:
a) This Agreement may be cancelled and terminated upon the
written consent of the parties hereto.
b) This Agreement may be cancelled or terminated by the
Corporation immediately upon written notice upon the occurrence
of any one or more of the events constituting default hereunder:
(i) any material failure of Gurch to perform or comply with any
term or condition of the Agreement or any other agreement
hereafter entered into between the Corporation and Gurch; (ii)
any act or omission of Gurch tending in the Corporation's
opinion to adversely affect the good name, goodwill or
reputation of the Corporation, its subsidiaries, products or
services; (iii) employment of Gurch by a competitor of
Champion during the term hereof.
7. RECORDS. Any records or documents prepared by or
acquired by Gurch during his employment shall be returned to the
Corporation no later than July 15, 1995. Any records or
documents prepared by or acquired by Gurch while acting as a
consultant to the Corporation shall be returned to the
Corporation upon termination of this Agreement or earlier upon
the request of the President.
8. MODIFICATION. This Agreement may not be modified
unless such modification is made in writing and is executed by
all parties to this Agreement.
9. ASSIGNMENT. This Agreement may not be assigned by
either party hereto.
10.CHOICE OF LAW. This Agreement shall be construed in
accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, this Agreement has been signed and
delivered by the parties hereto as of the 14th day of April,
1995.
By:
James W. Gurch
CHAMPION ENTERPRISES, INC.
By:
Walter R. Young, Jr.
Its: Chairman of the Board of
Directors, President and
Chief Executive Officer
August 25, 1995
Tom Ensch cc: George Mrkonic
Buddy Savary
Carl Valdiserri
Lou Balius
Jackie Dout
Ed Grakamp
Meg Hunter
Ron Liggett
COMPENSATION AND INCENTIVE PACKAGE
In recognition of your past and potential performance as
President of Champion Motor Coach, I am pleased on behalf of the
Board to present the following compensation and incentive
package.
A) Base Salary. Your base salary has been increased to
$180,000 annually, effective April 1, 1995. As in the
past, future base salary increases will be at 24 to 30
month intervals.
B) Annual Cash Incentive Plan. Your 1995 Fiscal Year Plan
stands as issued to you previously. Your 1996 Fiscal
Year Plan is attached at the 6% level. It is
anticipated that your 1997 Fiscal Year Plan will be at
the 5% level.
C) Rolling Three Year Incentive Plan. Attached is the
1995-97 Rolling Three-Year Incentive Plan for payout as
of March 1998 to encourage and reward even higher
profit and return on investment during that period.
D) Change of Control Agreement. Attached is a five year
agreement to provide encouragement and security in the
potential event of various change of control scenarios.
Please review, sign and return a copy to me.
Tom it is a pleasure that we can provide this integrated
incentive package to you based upon your and Champion Motor
Coach's performance. Consistent with this approach you will not
receive the annual premium priced option grants of Champion
Enterprises stock that you have in the past three years.
We look forward to your continued success.
Walter R. Young, Jr.
\bj
attch.
CHANGE IN CONTROL AND COVENANT NOT TO COMPETE AGREEMENT
THIS AGREEMENT, dated as of , 1995, is
between Champion Motor Coach, Inc. ("CMC") and Thomas J. Ensch
(the "Executive"), who is currently employed as President of
CMC.
WITNESSETH:
WHEREAS, CMC recognizes that the Executive has contributed
to the growth and success of CMC due to his industry, dedication
and services; and
WHEREAS, CMC believes that it is in the best interests of
CMC and its Shareholder if the Executive is assured that he will
receive appropriate financial protection in the event of a
Change in Control of CMC (as defined in Section 3 below), thus
ensuring that the Executive will have an incentive to perform
valuable services for CMC and will not be distracted in the
event of an actual or threatened Change in Control; and
WHEREAS, the Executive is willing to provide dedicated
services to CMC on the condition that he receives adequate
assurance that he will receive appropriate financial protection
in the event of a Change in Control;
NOW THEREFORE, in consideration of the premises and mutual
covenants, the parties hereto agree as follows:
AGREEMENT
1. Operation of Agreement. This Agreement sets forth the
consideration that CMC shall give the Executive if CMC incurs a
Change in Control, as defined herein. Payments to the Executive
under this Agreement are in lieu of (a) any severance payments
due to the Executive under any other CMC or Champion
Enterprises, Inc. ("Champion") severance program, and (b) any
unpaid three-year incentive plan payments then outstanding at
the time of a Change in Control.
2. Term of the Agreement. This Agreement shall be
effective upon its execution by both parties and shall terminate
upon the first to occur of the following: (a) five years from
the date hereof if a Change in Control has not occurred within
such five-year period, or (b) the involuntary termination of the
Executive's employment with CMC. Notwithstanding the foregoing,
Sections 5 and 6 regarding Proprietary Information and the
Executive's Covenant not to Compete shall survive the term of
the Agreement.
3. Change in Control. A Change in Control shall be deemed
to have occurred upon the occurrence of any of the following
events:
(a) Sale of Stock. The acquisition of ownership by a
person, firm or corporation, or a group acting in concert, of
51%, or more, of the outstanding common stock of CMC in a single
transaction or a series of related transactions within a
one-year period;
(b) Sale of Assets. A sale of all or substantially
all of the assets of CMC to any person, firm or corporation;
(c) Merger/Consolidation. A merger, consolidation or
similar transaction between CMC and another entity if Champion
does not own a majority of the voting stock of the corporation
surviving the transaction and a majority in value of the total
outstanding stock of such surviving corporation after the
transaction; or
(d) Public Spin-Off. A public spin-off of all or
substantially all of CMC from Champion.
4. Change in Control Payment.
(a) Amount. In the event of a Change in Control
during the term of this Agreement, the Executive shall be
entitled to an award equal to five percent (5%) of the "total
enterprise value" of CMC, in accordance with the terms set forth
below. Notwithstanding the foregoing, such Change in Control
consideration shall not exceed two million dollars ($2,000,000)
in value. For purposes of this Agreement, "total enterprise
value" shall be defined as the aggregate amount of consideration
received by CMC's shareholders (treating any shares issuable
upon exercise of options, warrants or other rights of conversion
as outstanding) plus the face amount of any debt securities
assumed and/or the redemption value of preferred stock redeemed
or remaining in consideration of the Change in Control.
In the event of the sale of assets or shares or a
merger/consolidation, the determination of "total enterprise
value" will be made only after all potential "post-closing"
adjustments, representations and warranties and/or terms are
resolved or quantified. In the event of a separate public
offering, "total enterprise value" will be determined by the
total initial offering consideration received by CMC and/or its
shareholders.
In the event of a less than 100% transaction (but in excess
of 50%), "total enterprise value" will be 100%.
(b) Sale/Merger/Consolidation. In the event that the
Change in Control is due to a sale of CMC stock or assets, or a
consolidation or merger, then the Executive shall receive a cash
payment (valued as of the consummation of the Change in Control)
upon the earlier to occur of the Executive's involuntary
termination of employment with CMC, or eighteen (18) months
following the consummation of the Change in Control.
(c) Public Spin-Off. In the event that the Change in
Control is due to a public spin-off of CMC and the Executive
continues to be employed by CMC, he shall receive his award in
CMC stock, valued and issued to the Executive at the time of the
spin-off but restricted from transfer, including sale, pledge,
assignment or gift for the 18-month period following the Change
in Control. If there is a spin-off and he is not retained as
President of CMC, the Executive shall receive a cash payment at
the time of his involuntary termination of employment.
Notwithstanding the foregoing, if the Executive receives CMC
stock pursuant to this Section and subsequently is terminated by
CMC, he shall not be entitled to a subsequent cash award.
5. Confidential and Proprietary Information.
(a) The Executive agrees to disclose promptly to
CMC and hereby assigns and agrees to assign to CMC, free from
any obligation to the Executive, all of the Executive's rights,
title and interest in and to any and all ideas, concepts,
processes, improvements and inventions made, conceived,
disclosed, or developed by him, either singly or jointly with
others, during the term of his employment with CMC (during
regular work hours or otherwise), which in any way relate to the
business or activities of CMC or result from or are suggested by
any work the Executive may do for CMC or at its request.
(b) The Executive agrees to deliver to CMC any and all
drawings, notes, specifications, and data relating to such
ideas, concepts, processes, improvements and inventions, and to
cooperate fully during his employment and thereafter in the
securing of patent and copyright protection and similar rights
in the United States and foreign countries, and to give evidence
and testimony, and execute and deliver to CMC all papers
reasonably requested by it in connection with obtaining such
protection.
(c) The Executive acknowledges that CMC's trade
secrets, private or secret processes as they exist form time to
time and information concerning products, research and
development data, market studies and forecasts, editorial
redesign information, editorial source identification and
compensation information, technical information, procurement and
sales activities and procedures, promotion and pricing
techniques, marketing arrangements and plans, business plans,
the substance of agreements with customers or others, service
and training programs and arrangements, customer lists and
credit and financial data concerning customers (the "Proprietary
Information") are valuable, special and unique assets of CMC,
access to and knowledge of which will have been gained by virtue
of the Executive's position and involvement with CMC. In light
of the highly competitive nature of the industry in which CMC
has conducted its business, the Executive further agrees that
all Proprietary Information obtained by him as a result of such
position or involvement shall be considered confidential. In
recognition of this fact, the Executive agrees that he will not
disclose any of such Proprietary Information to any person or
other entity for any reason or purpose whatsoever, and he will
not make use of any Proprietary Information for his own purposes
or for the benefit of any person or other entity (except CMC)
under any circumstances.
(d) Upon termination of the Executive's employment
with CMC, he will deliver to CMC all records, data and memoranda
of every kind and character of CMC and all copies thereof which
are in his possession or control, and which relate to his
employment or to the activities of CMC or to any Proprietary
Information, including but not limited to customer lists,
editorial sources, drawings, prints, manuals, notebooks, reports
and correspondence, other than employment related records and
documents which he is entitled to keep.
6. Non-Competition. In recognition of the highly
competitive nature of CMC's business, the Executive agrees that
(i) so long as he is an employee or officer of CMC and (ii) for
three years after his termination of employment with CMC;
(a) The Executive will not, directly or indirectly
(other than on behalf of CMC), as owner, partner, joint
venturer, employee, broker, agent, principal, trustee, corporate
officer, licensor, consultant or in any capacity whatsoever,
engage in, become financial interested, or have any connection
with, any business located in the United States engaged in the
marketing or manufacturing of buses (other than on behalf of
CMC) by supplying competing products or providing competing
services to any customer with whom CMC has done any business
during the Executive's employment with CMC, whether as an
officer, director, proprietor, employee, partner, or investor
(other than as a holder of less than 1% of the outstanding
capital stock of a publicly traded corporation), consultant,
advisor, agent or sales representative.
(b) The Executive will not directly or indirectly
induce employees of CMC to engage in any activity hereby
prohibited to the Executive or to terminate their employment
with CMC.
(c) If any one or more of the terms contained in this
Section 6 shall for any reason be held invalid, illegal or
unenforceable, such invalidity, illegality and unenforceability
shall not affect any other term therein, but such term shall be
deemed deleted, and such deletion shall not affect the validity
of the other terms of this Section 6 or any other Section of
this Agreement, or the obligations of the Executive under any
other agreements with CMC. Alternatively, if any one or more of
the terms contained in this Section 6 shall for any reason be
held to be excessively broad with regard to time, duration,
geographic scope or activity, that term shall be construed in a
manner to enable it to be enforced to the extent compatible with
applicable law.
7. Tax Withholding. CMC may withhold from any cash
amounts payable to the Executive under this Agreement to satisfy
all applicable Federal, State, local or other income and
employment withholding taxes. In the event that CMC fails to
withhold such sums for any reason, CMC may require the Executive
to promptly remit to CMC sufficient cash to satisfy all
applicable income and employment withholding taxes.
8. Binding Effect.
(a) This Agreement shall be binding upon the
successors and assigns of CMC. CMC shall take whatever actions
are necessary to ensure that any successor to CMC's operations
(whether by purchase, merger, consolidation, sale of
substantially all assets or otherwise) assumes the obligations
under this Agreement and will cause such successor to evidence
the assumption of such obligations in an agreement satisfactory
to the Executive. Notwithstanding any other provisions in this
Agreement, if CMC fails to obtain an agreement evidencing the
assumption of CMC's obligations by any such successor, the
Executive shall be entitled to immediate payment of the
compensation provided under Section 4, irrespective of whether
his employment has then terminated. For purposes of this
Agreement, CMC shall mean CMC or any successor thereto.
(b) This Agreement shall be binding upon the Executive
and shall inure to the benefit of and be enforceable by his
legal representatives and heirs. However, the rights of the
Executive under this Agreement shall not be assigned,
transferred, pledged, hypothecated or otherwise encumbered,
except by operation of law.
9. Amendment of Agreement. This Agreement may not be
modified or amended except by instrument in writing signed by
the parties hereto.
10. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall continue in full force and effect.
11. Limitation on Rights.
(a) This Agreement shall not be deemed to create a
contract of employment between CMC and the Executive and shall
create no right in the Executive to continue in CMC's employment
for any specific period of time, or to create any other rights
in the Executive or obligations on the part of CMC, except as
set forth herein. This Agreement shall not restrict the right
of CMC to terminate the Executive, or restrict the right of the
Executive to terminate his employment.
(b) The rights of the Executive under this Agreement
shall be solely those of an unsecured general creditor of CMC.
12. Disputes.
(a) Disclosure of proprietary information and
non-competition. The Executive acknowledges and agrees that
CMC's remedy at law for a breach of any of the provisions of
Sections 5 or 6 of the Agreement would be inadequate and, in
recognition of this fact, in the event of a breach or threatened
breach by the Executive of the provision of Sections 5 or 6 of
this Agreement, it is agreed that, in addition to any other
remedies it may have, CMC shall be entitled to equitable relief
in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable
remedy which may then be available. Further, the Executive
acknowledges that the granting of a temporary injunction,
temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an
adequate remedy upon breach or threatened breach of Sections 5
or 6 hereof and consequently agrees upon any such breach or
threatened breach that CMC shall be entitled to the granting of
injunctive relief prohibiting the sale of products and providing
of services of the kind sold or provided by CMC. Nothing herein
contained shall be construed as prohibiting CMC from pursuing
any other remedies available to it for such breach.
(b) Except as set forth in (a) above, it is mutually
agreed between the parties that any disputes regarding the
interpretation or enforceability of this Agreement shall be
resolved by binding arbitration before an arbitrator mutually
acceptable to both parties, the arbitration to be held in
Detroit, Michigan, in accordance with the voluntary labor
arbitration rules of the American Arbitration Association, as
then in effect. The arbitrator's sole authority shall be to
interpret and apply the provisions of this Agreement; the
arbitrator shall not change, add to, or subtract from, any of
its provisions. The arbitrator shall have the power to compel
attendance of witnesses at an arbitration hearing. Any court
having jurisdiction may enter a judgment based upon such
arbitration. All decisions of the arbitrator shall be final and
binding on the claimant and CMC without appeal to any court.
Upon execution of this Agreement, the Executive shall be deemed
to have waived his right to commence litigation proceedings
outside of arbitration without the express written consent of
CMC.
13. Legal Fees and Expenses. In the event that litigation
(Sections 5 and 6) or arbitration is brought to enforce any
provision of this Agreement and the Executive prevails, then he
shall be entitled to recover from CMC his reasonable costs and
expenses of such litigation and/or arbitration, including
reasonable fees and disbursements of counsel. If CMC prevails,
then each party shall be responsible for its/his respective
costs, expenses and attorneys fees, and the costs of arbitration
shall be equally divided. For purposes of determining the date
when legal fees and expenses are payable, such amounts are not
due until 30 days after notification to CMC of such amounts.
14. Nonalienation of Benefits. Except in so far as this
provision may be contrary to applicable law, no sale, transfer,
alienation, assignment, pledge, collateralization or attachment
of any benefits under this Agreement shall be valid or
recognized by CMC.
15. Notices. Any notice required or permitted by this
Agreement shall be in writing, sent by registered or certified
mail, return receipt requested, addressed to the Board of CMC
and CMC at CMC's then principal office, or to the Executive at
the Executive's last address on file with CMC, as the case may
be, or to such other address or addresses as any party hereto
may from time to time specify in writing for the purpose of this
Agreement in a notice given to the other parties in compliance
with this Section 15. Notices shall be deemed given when
received.
16. Miscellaneous/Severability. A waiver of the breach of
any term or condition of this Agreement shall not be deemed to
constitute a waiver of any subsequent breach of the same or any
other term or condition. This Agreement is intended to be
performed in accordance with, and only to the extent permitted
by, all applicable laws, ordinances, rules and regulations. To
the extent that any provision or benefit under this Agreement is
not deemed to be in accordance with any applicable law,
ordinance, rule or regulation, the noncomplying provision shall
be construed, or benefit limited, to the extent necessary to
comply with all applicable laws, ordinances and regulations and
any such provision or benefit shall not affect the validity of
any other provision or benefit provided by this Agreement. The
headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect
the meaning of any provision hereof.
17. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Michigan.
18. Entire Agreement. This document represents the entire
agreement and understanding of the parties with respect to the
subject matter of the Agreement and it may not be altered or
amended except by an agreement in writing.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
CHAMPION MOTOR COACH, INC.
By:
Walter R. Young, Jr.
Chairman of the Board
By:
Thomas J. Ensch
Executive
MAH/5755
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of October 27,
1995 (the "First Amendment"), to the Credit Agreement dated as of
September 29, 1995 (the "Credit Agreement"), among Champion Enter-
prises, Inc. (the "Company"), Comerica Bank and The First National
Bank of Chicago (the "Banks"), and Comerica Bank as agent for the
Banks (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Company, the Banks and the Agent are parties to
the Credit Agreement; and
WHEREAS, the Company wishes to amend the Credit Agreement to
clarify the limitation on liens provided in Section 7.7 and to
permit certain guarantees by the Company or any Subsidiary of certain
indebtedness as provided in Section 7.3; and
WHEREAS, the Banks and the Agent have agreed to amend the Credit
Agreement on the terms and subject to the conditions set forth
below;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, it is hereby agreed as follows:
ARTICLE I -- DEFINITIONS AND AMENDMENTS
1.1 Defined Terms. Capitalized terms used herein which are
defined in the Credit Agreement are used herein with such defined
meanings.
1.2 Amendment to Section 7.7. Section 7.7 of the Credit Agreement
is amended by deleting the term "Consolidated Net Tangible Assets"
where it appears in the fifth line and inserting in its place the
term "Consolidated Tangible Net Worth."
1.3 Amendment to Section 7.3. Section 7.3 of the Credit Agree-
ment is amended by (i) deleting the word "and" in the seventeenth line
thereof, and (ii) adding the words ", and (vi) guarantees by Company
or any Subsidiary of obligations of Company or any Subsidiary permitted
by Section 7.4 hereof." after the word "hereto" at the end of said
Section.
ARTICLE II -- REPRESENTATIONS AND WARRANTIES;
EFFECTIVE DATE
2.1 Representations; No Default. On and as of the date hereof and
after giving effect to this First Amendment, the Company hereby (a)
confirms, reaffirms and restates the representations and warranties
set forth in Section 5 of the Credit Agreement, except to the extent
that such representations and warranties relate solely to an earlier
date in which case the Company confirms, reaffirms and restates such
representations and warranties for such early date, provided that the
references to the Credit Agreement therein shall be deemed to be to
the Credit Agreement as amended by this First Amendment, and (b)
represents that no Event of Default has occurred and is continuing.
2.2 Effective Date. This First Amendment shall become
effective on the first date upon which the Agent shall have received
counterparts of this First Amendment executed by the Company, the
Guarantors, the Banks and the Agent.
ARTICLE III - MISCELLANEOUS
3.1 Limited Effect. Except as expressly amended hereby, all
of the provisions, covenants, terms and conditions of the Credit
Agreement shall continue to be, and shall remain, in full force
and effect in accordance with its terms.
3.2 Counterparts. This First Amendment may be executed by one
or more parties hereto on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed and delivered by their proper and duly
authorized officers or other agents as of the date first above written.
CHAMPION ENTERPRISES, INC.
By: A. Jacqueline Dout
Its: Executive VP and CFO
COMERICA BANK, as Agent and as
a Bank
By: Robert M. Porterfield
Its: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: Susan L. Comstock
Its: Vice President
CONSENT AND AGREEMENT
As of the day and year first above written, each of the under-
signed hereby:
(a) fully consents to the terms and provisions of the First
Amendment and the consummation of the transactions contemplated
thereby;
(b) agrees that the Guaranty Agreement dated as of
September 29, 1995 (the "Guaranty") in favor of the Banks, is
ratified and confirmed and shall remain in full force and effect,
and each of the undersigned hereby acknowledges that it has no
defense, offset or counterclaim with respect to the Guaranty or
otherwise in connection with the Credit Agreement as amended by
the First Amendment; and
(c) agrees that all references to the "Credit Agreement"
contained in the Guaranty and all other agreements, instruments
and documents executed pursuant thereto by the undersigned shall
be deemed references to the Credit Agreement, as amended by the
First Amendment.
CHAMPION MOTOR COACH, INC.
By: A. Jacqueline Dout
Its: Vice President
CHAMPION HOME BUILDERS CO.
By: A. Jacqueline Dout
Its: Vice President
MODULINE INTERNATIONAL, INC.
By: A. Jacqueline Dout
Its: Vice President
LAMPLIGHTER HOMES, INC.
By: A. Jacqueline Dout
Its: Vice President
DUTCH HOUSING, INC.
By: A. Jacqueline Dout
Its: Vice President
CHANDELEUR HOMES, INC.
By: A. Jacqueline Dout
Its: Vice President
CREST RIDGE HOMES, INC.
By: A. Jacqueline Dout
Its: Vice President
BUILDERS CREDIT CORPORATION
By: A. Jacqueline Dout
Its: President
CHAMPION FINANCIAL CORPORATION
By: A. Jacqueline Dout
Its: President
STATE OF INCORPORATION NAMES UNDER WHICH
NAME OF SUBSIDIARY(a) OR ORGANIZATION BUSINESS DONE (b)
Champion Home Builders Co. Michigan --
Champion Motor Coach, Inc. Michigan --
Moduline International, Inc. Washington --
Lamplighter Homes, Inc. Washington --
Dutch Housing, Inc. Michigan --
Chandeleur Homes, Inc. Michigan --
Crest Ridge Homes, Inc. Michigan --
(a) Each subsidiary is wholly-owned by the Registrant, or by
the subsidiary of the Registrant which is its immediate parent
and under which it is listed in the above table.
(b) In addition to its own name.
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 2-93052, 2-93052-99,
33-36511, 33-38470, 33-41957, 33-41959, 33-75244 and 33-58973)
and the Prospectus constituting part of the Registration State-
ments on Form S-3 (Nos. 33-54192 and 33-82544) of Champion
Enterprises, Inc. of our report dated February 9, 1996
appearing on page F-2 of this Form 10-K.
/S/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Detroit, Michigan
March 22, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE COMPANY'S
AUDITED FINANCIAL STATEMENTS AS OF AND FOR
THE PERIOD ENDING DECEMBER 30, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<PERIOD-TYPE> YEAR
<CASH> 14,995
<SECURITIES> 0
<RECEIVABLES> 36,179
<ALLOWANCES> 206
<INVENTORY> 45,558
<CURRENT-ASSETS> 108,473
<PP&E> 60,134
<DEPRECIATION> 20,744
<TOTAL-ASSETS> 235,939
<CURRENT-LIABILITIES> 104,487
<BONDS> 0
0
0
<COMMON> 15,302
<OTHER-SE> 97,801
<TOTAL-LIABILITY-AND-EQUITY> 235,939
<SALES> 797,871
<TOTAL-REVENUES> 797,871
<CGS> 679,732
<TOTAL-COSTS> 679,732
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 38
<INTEREST-EXPENSE> 2,313
<INCOME-PRETAX> 53,450
<INCOME-TAX> 21,200
<INCOME-CONTINUING> 32,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,250
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
</TABLE>
