<PAGE> 1
As filed with Securities and Exchange Commission on February 21, 1997.
- ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 8-B
FOR REGISTRATION OF SECURITIES OF CERTAIN SUCCESSOR ISSUERS
FILED PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
_______________
HOME PRODUCTS INTERNATIONAL, INC.(1)
(Exact name of Registrant as specified in its charter)
Delaware Applied For
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4501 West 47th Street 60632
Chicago, Illinois (Zip Code)
(Address of principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12 (g) of the Act:
Common Stock $0.01 par value per share
--------------------------------------
(Title of Class)
- -------------------------------
(1) Home Products International, Inc., a Delaware corporation (the
"REGISTRANT"), is the successor registrant to Selfix, Inc. (the "PREDECESSOR").
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
(a) Home Products International, Inc. (the "REGISTRANT") was organized as
a corporation under the laws of the State of Delaware on February 7, 1997.
(b) The Registrant's fiscal year ends on the last Saturday in December
and, as a result, a fifty-third week is added every five or six years.
ITEM 2. TRANSACTION OF SUCCESSION.
(a) Selfix, Inc., a Delaware corporation, the only predecessor of the
Registrant (the "PREDECESSOR" or "SELFIX"), had securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and listed on the Nasdaq National Market ("NASDAQ") at the
time of succession.
(b) Effective as of 12:01 a.m. on February 18, 1997, pursuant to
Section 251(g) of the Delaware General Corporation Law and the Agreement
and Plan of Merger, dated February 13, 1997, by and among the
Predecessor, the Registrant and HPI Merger, Inc., a wholly owned
Delaware subsidiary of the Registrant ("MERGER SUB"), the Merger Sub
merged (the "MERGER") with and into the Predecessor, with the
Predecessor as the surviving corporation. As a result of the Merger,
Merger Sub ceased to exist, the Predecessor became a wholly owned
subsidiary of the Registrant and (i) each issued and outstanding share
of common stock of the Predecessor ("PREDECESSOR COMMON STOCK") was
converted into and exchanged for one share of common stock, par value
$0.01 per share, of the Registrant ("REGISTRANT COMMON STOCK"); (ii)
each share of Predecessor Common Stock then held by Registrant in its
treasury immediately prior to the Merger was converted into one share of
Registrant Common Stock held by Registrant in its treasury immediately
after the Merger; (iii) each issued and outstanding share of common
stock of the Merger Sub was converted into one share of Predecessor
Common Stock, and (iv) each share of Registrant Common Stock issued and
outstanding immediately prior to the Merger was canceled without any
consideration being paid therefor.
ITEM 3. SECURITIES TO BE REGISTERED.
The Registrant is authorized by its Certificate of Incorporation to issue
up to 7,500,000 shares of common stock. As of February 28, 1997, there were
3,891,714 shares of common stock issued and outstanding.
2
<PAGE> 3
ITEM 4. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED.
The description of the common stock set forth in Item 1 of the
Registration Statement on Form 8-A (No. 0-17237) of the Predecessor filed with
the Securities and Exchange Commission on October 4, 1988, including any
amendment or reports filed for the purpose of updating such description, is
incorporated herein by reference. Copies of the Form 8-A and the Certificate
of Incorporation of the Registrant have been filed with Nasdaq.
ITEM 5. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements. As provided in Instruction (a) of the
Instructions as to Financial Statements for Form 8-B, no financial statements
are being filed with this Registration Statement since the capital structure
and balance sheet of the Registrant immediately after succession will be
substantially the same as those of the Predecessor.
(b) Exhibits.
*2.1 Agreement and Plan of Merger, dated as of February 13, 1997, by and among
Selfix, Inc., HPI Merger, Inc. and Home Products International, Inc.
*2.2 Agreement and Plan of Merger dated as of October 24, 1995, by and among
Selfix, Inc., Mericon Corporation, Claw, L.L.C. and Dennis Buckshaw.
*3.1 Certificate of Incorporation of the Registrant filed with the Delaware
Secretary of State on February 7, 1997.
*3.2 By-laws of the Registrant.
10.1 Predecessor's 1994 Stock Option Plan. Incorporated by reference from
Exhibit A of Predecessor's Proxy Statement for its 1994 Annual Meeting.
10.2 Predecessor's 1991 Stock Option Plan. Incorporated by reference from
Exhibit A of Predecessor's Proxy Statement for its 1991 Annual Meeting.
3
<PAGE> 4
10.3 Predecessor's 1987 Stock Option Plan. Incorporated by reference from
Exhibit 10.8 to Predecessor's Form S-1 Registration Statement No.
33-23881.
10.4 Lease, dated July 24, 1980, among Selfix as Tenant and NLR Gift Trust and
MJR Gift Trust as Landlord concerning Selfix's facility in Chicago,
Illinois. Incorporated by reference from Exhibit 10.9 to Predecessor's
Form S-1 Registration Statement Registration Statement No. 33-23881.
10.5 Patent licensing agreement, dated as of November 2, 1971, between Selfix
and Meyer J. Ragir concerning M.J. Molding Process. Incorporated by
reference from Exhibit 10.13 to Predecessor's Form S-1 Registration
Statement No. 33-23881.
10.6 Patent licensing agreement, dated as of November 15, 1971, between Selfix
and Meyer J. Ragir concerning Suction Lock Products. Incorporated by
reference from Exhibit 10.14 to Predecessor's Form S-1 Registration
Statement No. 33-23881.
10.7 Patent licensing agreement, dated as of June 1, 1981, between Selfix and
Meyer J. Ragir concerning Shower Organizer Products. Incorporated by
reference from Exhibit 10.15 to Predecessor's Form S-1 Registration
Statement No. 33-23881.
10.8 Loan Agreement dated December, 1989 between Selfix and Illinois
Development Finance Authority in connection with Selfix's Industrial
Revenue Bond. Incorporated by reference from Predecessor's Form 10-K for
the year ended May 31, 1990.
4
<PAGE> 5
10.9 Loan Agreement dated September, 1990 between Selfix and Illinois
Development Finance Authority in connection with Selfix's Industrial
Revenue Bond (the "SERIES 1990 BONDS"). Incorporated by reference from
Predecessor's Form 10-K for the fifty-two weeks ended December 28, 1991.
*10.10 Employment Agreement dated January 1, 1997 between Selfix and James R.
Tennant, Chairman of the Board and Chief Executive Officer.
*10.11 Reimbursement Agreement by and among Selfix, Shutters, Inc. and LaSalle
National Bank dated as of April 12, 1996 relating to letter of credit
issued in connection with the Series 1990 Bonds.
11.1 Statement Regarding Computation of Earnings Per Share is included in the
Notes to the Consolidated Financial Statements and is incorporated by
reference from Exhibit 11.0 to Predecessor's Form 10-K for the fifty-two
weeks ended December 30, 1995.
16.1 Letter re: Change in Certifying Accountant. Incorporated by reference
from Exhibit 16.1 to Form 8-K filed by Predecessor on April 22, 1996.
*21.1 List of Subsidiaries.
27.1 Financial Data Schedule. Incorporated by reference from Exhibit 27.0 to
Predecessor's Form 10-K for the fifty-two weeks ended December 30, 1995.
* Filed herewith, exhibits not marked with an asterisk are incorporated
by reference.
5
<PAGE> 6
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
HOME PRODUCTS INTERNATIONAL, INC.
Dated: February 18, 1997 By: /s/ James R. Tennant
---------------------
James R. Tennant
Chairman of the Board
6
<PAGE> 7
FORM 8-B
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
*2.1 Agreement and Plan of Merger, dated as of February 13, 1997, by and
among Selfix, Inc., HPI Merger, Inc. and Home Products International,
Inc.
*2.2 Agreement and Plan of Merger dated as of October 24, 1995, by and
among Selfix, Mericon Corporation, Claw, L.L.C. and Dennis Buckshaw.
*3.1 Certificate of Incorporation of the Registrant filed with the Delaware
Secretary of State on February 7, 1997.
*3.2 By-laws of the Registrant.
10.1 Predecessor's 1994 Stock Option Plan. Incorporated by
reference from Exhibit A of Predecessor's Proxy Statement for its 1994
Annual Meeting.
10.2 Predecessor's 1991 Stock Option Plan. Incorporated by reference from
Exhibit A of Predecessor's Proxy Statement for its 1991 Annual Meeting.
10.3 Predecessor's 1987 Stock Option Plan. Incorporated by reference from
Exhibit 10.8 to Predecessor's Form S-1 Registration Statement No.
33-23881.
10.4 Lease, dated July 24, 1980, among Selfix as Tenant and NLR Gift Trust
and MJR Gift Trust as Landlord concerning Selfix's facility in Chicago,
Illinois. Incorporated by reference from Exhibit 10.9 to Predecessor's
Form S-1 Registration Statement Registration Statement No. 33-23881.
10.5 Patent licensing agreement, dated as of November 2, 1971,
between Selfix and Meyer J. Ragir concerning M.J. Molding Process.
Incorporated by reference from Exhibit 10.13 to Predecessor's Form S-1
Registration Statement No. 33-23881.
10.6 Patent licensing agreement, dated as of November 15, 1971,
between Selfix and Meyer J. Ragir concerning Suction Lock Products.
Incorporated by reference from Exhibit 10.14 to Predecessor's Form S-1
Registration Statement No. 33-23881.
10.7 Patent licensing agreement, dated as of June 1, 1981, between Selfix
and Meyer J. Ragir concerning Shower Organizer Products. Incorporated
by reference from Exhibit 10.15 to Predecessor's Form S-1 Registration
Statement No. 33-23881.
10.8 Loan Agreement dated December, 1989 between Selfix and Illinois
Development Finance Authority in connection with
<PAGE> 8
FORM 8-B
Selfix's Industrial Revenue Bond. Incorporated by reference from
Predecessor's Form 10-K for the year ended May 31, 1990.
10.9 Loan Agreement dated September, 1990 between Selfix and Illinois
Development Finance Authority in connection with Selfix's Industrial
Revenue Bond (the "Series 1990 Bonds"). Incorporated by reference
from Predecessor's Form 10-K for the fifty-two weeks ended December
28, 1991.
*10.10 Employment Agreement dated January 1, 1997 between Selfix and James R.
Tennant, Chairman of the Board and Chief Executive Officer.
*10.11 Reimbursement Agreement by and among Selfix, Shutters, Inc. and LaSalle
National Bank dated as of April 12, 1996 relating to letter of credit
issued in connection with the Series 1990 Bonds.
11.1 Statement Regarding Computation of Earnings Per Share is
included in the Notes to the Consolidated Financial Statements and is
incorporated by reference from Exhibit 11.0 to Predecessor's Form 10-K
for the fifty-two weeks ended December 30, 1995.
16.1 Letter re: Change in Certifying Accountant. Incorporated by reference
from Exhibit 16.1 to Form 8-K filed by Predecessor on April 22, 1996.
*21.1 List of Subsidiaries.
27.1 Financial Data Schedule. Incorporated by reference from Exhibit 27.0
to Predecessor's Form 10-K for the fifty-two weeks ended December 30,
1995.
* Filed herewith, exhibits not marked with an asterisk are incorporated
by reference.
<PAGE> 1
Exhibit 2.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AGREEMENT OF MERGER OF "SELFIX, INC.", FILED IN THIS OFFICE ON THE THIRTEENTH
DAY OF FEBRUARY, A.D. 1997, AT 9 O'CLOCK A.M.
[GREAT SEAL OF THE STATE OF DELAWARE]
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SECRETARY'S OFFICE SEAL]
AUTHENTICATION: 8331354
DATE: 02-13-97
<PAGE> 2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/13/1997
971048754 - 2126625
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("AGREEMENT"), dated as of February
13, 1997, is by and among SELFIX, INC., a Delaware corporation ("SELFIX"), HPI
MERGER, INC., a Delaware corporation ("MERGER SUB"), and HOME PRODUCTS
INTERNATIONAL, INC., a Delaware corporation ("HOME PRODUCTS").
PRELIMINARY STATEMENTS
Selfix has an authorized capitalization consisting of (i) 7,500,000 shares
of Common Stock, $0.01 par value per share ("SELFIX COMMON STOCK") of which
3,891,714 shares are issued and outstanding, and (ii) 500,000 shares of
Preferred Stock, $0.01 par value per share, of which no shares are issued and
outstanding.
Home Products has an authorized capitalization consisting of (i) 7,500,000
shares of Common Stock, $0.01 par value per share ("HOME PRODUCTS COMMON
STOCK") of which 1,000 shares are issued and outstanding and owned by Selfix,
and (ii) 500,000 shares of Preferred Stock, $0.01 par value per share, of which
no shares are issued and outstanding.
Merger Sub has an authorized capitalization consisting of 1,000 shares of
Common Stock, $0.01 par value per share ("MERGER SUB COMMON STOCK"), all of
which are issued and outstanding and are owned by Home Products.
The Board of Directors of each of Selfix, Home Products and Merger Sub has
heretofore approved the Merger ("MERGER") of Merger Sub with and into Selfix in
accordance with the General Corporation Law of the State of Delaware ("DGCL")
and upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Selfix, Home Products and Merger Sub hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the DGCL, Merger Sub shall
be merged with and into Selfix at the Effective Time (as hereinafter defined).
Following the Effective Time, the separate corporate existence of Merger Sub
shall cease and Selfix shall continue as the surviving corporation (in such
capacity, the "SURVIVING CORPORATION") and shall succeed to and assume all the
rights and obligations of Merger Sub in accordance with the DGCL.
SECTION 1.02. EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on or after the date hereof, Selfix shall
file a copy of this Agreement with the Secretary of State of the State of
Delaware and the Merger shall become effective at the later to occur of (i) the
time of such filing and (ii) 12:01 a.m. on February 18, 1997 ("EFFECTIVE
TIME").
SECTION 1.03. EFFECTS OF THE MERGER. The Merger shall have the effects
as set forth in Section 259 of the DGCL.
SECTION 1.04. CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of Selfix, as
amended and in
1
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effect immediately prior to the Effective Time, shall be amended as set forth
below and as so amended shall thereafter continue in full force and effect as
the certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein and by the DGCL.
Article FOURTH shall be amended to read in its entirety as follows:
FOURTH. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is One Thousand
(1,000) shares of Common Stock, $0.01 par value per share.
Any and all such shares issued, and for which the full
consideration has been paid or delivered, shall be deemed fully
paid stock and the holder of such shares shall not be liable for
any further call or assessment or any other payment thereon.
Article ELEVENTH shall be added and will read as follows:
Any act or transaction by or involving the Corporation that
requires for its adoption under the Delaware General Corporation
Law ("DGCL") or the Corporation's Certificate of Incorporation the
approval of the stockholders of the Corporation shall, in
accordance with Section 251(g) of the DGCL, require, in addition,
the approval of the stockholders of Home Products International,
Inc. ("HOME PRODUCTS") (or any successor by merger), by the same
vote as is required by the DCGL and/or by the Corporation's
Certificate of Incorporation.
(b) At the Effective Time, the By-laws of Merger Sub in effect on the date
thereof, shall be the By-laws of the Surviving Corporation after the Effective
Time until thereafter changed or amended as provided therein or by the DGCL.
SECTION 1.05. DIRECTORS. The directors of Selfix immediately prior to
the Effective Time shall be the directors of the Surviving Corporation and
shall serve until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.06. OFFICERS. The officers of Selfix immediately prior to the
Effective Time shall be the officers of the Surviving Corporation and shall
serve until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.07 TREASURY STOCK. Selfix will, immediately prior to the
Effective Time of the Merger, contribute to the capital of Home Products all of
the shares of Selfix Common Stock then held by Selfix in its treasury.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS AND
ASSUMPTION OF CERTAIN OBLIGATIONS
SECTION 2.01. EFFECT ON CAPITAL STOCK.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of Selfix, Merger Sub or
2
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Home Products or any holder of capital stock of Selfix, Merger Sub or Home
Products, the following events shall occur:
(i) each issued and outstanding share of Selfix Common Stock
shall, without further act or deed by Selfix or its stockholders,
be converted into one share of Home Products Common Stock, and
shall have the same designations, rights and powers and
preferences, and the qualifications, limitations and restrictions
thereof, as the Selfix Common Stock being converted. Each
certificate representing shares of Selfix Common Stock immediately
prior to the Effective Time shall be deemed without the need for
any exchange or transfer to represent the same number of shares of
Home Products Common Stock;
(ii) each share of Selfix Common Stock then held by Home Products
in its treasury immediately prior to the Effective Time shall be
converted into and thereafter represent one duly issued, fully
paid and nonassessable share of Home Products Common Stock held by
Home Products in its treasury immediately after the Effective Time
of the Merger;
(iii) each issued and outstanding share of Merger Sub Common Stock
shall be converted into one share of the common stock, $0.01 par
value per share, of the Surviving Corporation; and
(iv) each issued and outstanding share of Home Products Common
Stock shall be canceled without any consideration being paid
therefor.
(b) From and after the Effective Time, holders of certificates formerly
evidencing Selfix Common Stock shall cease to have any rights as stockholders
of Selfix, except as provided by law; provided, however, that such holders
shall have the rights set forth in Section 2.03 herein.
SECTION 2.02. ASSUMPTION OF SELFIX' OBLIGATIONS TO ISSUE CAPITAL STOCK.
Immediately prior to the Effective Time, Selfix was a party to or subject to
certain agreements and arrangements, including stock options, and compensation
plans and agreements, pursuant to which parties thereto or beneficiaries
thereof acquired, or acquired certain rights to acquire, shares of Selfix
Common Stock, including but not limited to: (i) Selfix, Inc. 1988 Stock Option
Plan, (ii) Selfix, Inc. 1991 Stock Option Plan, (iii) Selfix, Inc. 1994 Stock
Option Plan, and (iv) Selfix, Inc. 1995 Employee Stock Purchase Plan (all such
stock options, and compensation plans and agreements being referred to herein
individually as a "PLAN"). At the Effective Time, Home Products shall adopt,
assume, and agree to be bound by each and every Plan, and any right to acquire
a share of capital stock of Selfix under any such Plan shall, without further
act or deed by Selfix or its stockholders, be converted into a right to acquire
a share of capital stock of Home Products pursuant to such Plan.
SECTION 2.03. OPTION TO EXCHANGE SELFIX CERTIFICATE. Each holder of a
certificate formerly representing shares of Selfix Common Stock (a "SELFIX
CERTIFICATE"), shall have the option, upon surrender of such Selfix Certificate
to Home Product's transfer agent ("TRANSFER AGENT"), to receive a certificate
or certificates of Home Products representing the number of shares of Home
Products Common Stock into which the shares of Selfix Common Stock previously
represented by such Selfix Certificate have been converted pursuant to this
Agreement. The Transfer Agent shall accept such Selfix Certificates upon
compliance with such reasonable terms and conditions as the Transfer Agent may
impose to effect an orderly exchange thereof in accordance with normal exchange
practices. Until surrendered and exchanged in accordance with this Section
2.03 or in the ordinary course, each Selfix Certificate shall be deemed and
treated for all corporate purposes at any time after the Effective Time to
evidence the ownership of the number of shares of Home Products Common Stock
into which such shares of Selfix Common Stock were converted pursuant to
Section 2.01(a).
3
<PAGE> 5
SECTION 2.04. SUCCESSOR ISSUER. It is the intent of the parties hereto
that Home Products, as of the Effective Time, be deemed a "SUCCESSOR ISSUER"
for all purposes under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended.
ARTICLE III
AMENDMENT AND TERMINATION
SECTION 3.01. AMENDMENTS AND WAIVER. No amendment, modification,
restatement or supplement of this Agreement shall be valid unless the same is
in writing and signed by the parties hereto. No waiver of any provision of this
Agreement shall be valid unless in writing and signed by the party against whom
that waiver is sought to be enforced. No failure or delay on the part of any
party hereto in exercising any right, power or privilege hereunder and no
course of dealing between or among any of the parties shall operate as a waiver
of any right, power or privilege hereunder. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. No notice to or demand on any party hereto in any case shall
entitle such party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of any party hereto to any
other or further action in any circumstances without notice or demand.
SECTION 3.02. TERMINATION. At any time prior to the Effective Time, this
Agreement may be terminated and abandoned by the parties. In the event of any
termination of this Agreement, this Agreement shall forthwith become void and
there shall be no liability on the part of any of the parties hereto or their
respective officers or directors.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. TAX FREE REORGANIZATION. The Merger is intended to
constitute a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended, and this Agreement is intended
to constitute a plan of reorganization.
SECTION 4.02. BENEFIT AND BURDEN. This Agreement shall inure to the
benefit of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns.
SECTION 4.03. NO THIRD PARTY RIGHTS. Nothing in this Agreement shall be
deemed to create any right in any creditor or other person or entity, and this
Agreement shall not be construed in any respect to be a contract in whole or in
part for the benefit of any third party.
SECTION 4.04. ASSIGNMENTS. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any of the parties hereto
and any attempt to do so shall be null and void.
SECTION 4.05. COUNTERPARTS. This Agreement may be executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed an original and all of which taken
together shall constitute one and the same agreement. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one counterpart signed by the party to be charged thereby.
4
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SECTION 4.06. SEVERABILITY. Should any clause, sentence, paragraph
subsection, Section or Article of this Agreement be judicially declared to be
invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Agreement, and the part or parts
of this Agreement so held to be invalid, unenforceable or void will be deemed
to have been stricken herefrom by the parties hereto, and the remainder will
have the same force and effectiveness as if such stricken part or parts had
never been included herein.
SECTION 4.07. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 4.08. ENTIRE AGREEMENT. This Agreement sets forth all of the
promises, agreements, conditions, understandings, warranties and
representations among the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements, arrangements and
understandings among the parties hereto, whether written, oral or otherwise.
There are no promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, among the parties hereto
concerning the subject matter hereof except as set forth herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be executed by their respective officers thereunto duly authorized
on this 13 day of February, 1997.
ATTEST: SELFIX, INC.
[SIG] By: James R. Tennant
- --------- -----------------------------------------
Secretary James R. Tennant, Chairman of the Board
ATTEST: HPI MERGER SUB, INC.
[SIG] By: James R. Tennant
- --------- -----------------------------------------
Secretary James R. Tennant, Chairman of the Board
ATTEST: HOME PRODUCTS INTERNATIONAL, INC.
[SIG] By: James R. Tennant
- --------- -----------------------------------------
Secretary James R. Tennant, Chairman of the Board
5
<PAGE> 7
CERTIFICATE OF THE SECRETARY
OF
SELFIX, INC.
I, James E. Winslow, the Secretary of Selfix, Inc., hereby certify that
the Agreement and Plan of Merger to which this certificate is attached was duly
adopted pursuant to Section 251(g) of the DGCL and that the conditions
specified in the first sentence of Section 251(g) of the DGCL have been
satisfied.
WITNESS my hand this 13th day of February, 1997.
[SIGNATURE]
-------------------------
Secretary
6
<PAGE> 8
CERTIFICATE OF THE SECRETARY
OF
HPI MERGER, INC.
I, James E. Winslow, the Secretary of HPI Merger, Inc., hereby certify
that the Agreement and Plan of Merger to which this certificate is attached was
duly adopted pursuant to Section 251(g) of the DGCL and that the conditions
specified in the first sentence of Section 251(g) of the DGCL have been
satisfied.
WITNESS my hand this 13th day of February, 1997.
[SIGNATURE]
-------------------------
Secretary
7
<PAGE> 9
CERTIFICATE OF THE SECRETARY
OF
HOME PRODUCTS INTERNATIONAL, INC.
I, James E. Winslow, the Secretary of Home Products International, Inc.,
hereby certify that the Agreement and Plan of Merger to which this certificate
is attached was duly adopted pursuant to Section 251(g) of the DGCL and that
the conditions specified in the first sentence of Section 251(g) of the DGCL
have been satisfied.
WITNESS my hand this 13th day of February, 1997.
[SIGNATURE]
-------------------------
Secretary
8
<PAGE> 1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of October 24,
1995, is by and among SELFIX, INC., a Delaware corporation ("Selfix"); MERICON
CORPORATION, a Michigan corporation ("MERICON"), CLAW, L.L.C., a Delaware
limited liability company ("Claw"), and DENNIS BUCKSHAW ("BUCKSHAW") (Mericon,
Claw and Buckshaw are collectively referred to as the "SELLERS").
WHEREAS, Mericon, located at 12408 Stark Road, Livonia, Michigan (the
"FACILITY"), is engaged in the business of developing, manufacturing and
distributing child safety and protection products (the "MERICON BUSINESS").
WHEREAS, Mericon wishes to merge into Selfix and Selfix wishes to have
Mericon merge and form a Mericon Division (the "MERICON DIVISION") following
the "Closing" (as defined herein);
WHEREAS, Buckshaw and/or Claw currently own the exclusive title to and
currently posses patents or applications for patents which are pending with the
United States Patent and Trademark Office for various items related to the
Mericon Business (the "PATENTS") these Patents are listed on attached and
incorporated Schedule A;
WHEREAS, Claw and Buckshaw wish to grant and Selfix wishes to obtain an
exclusive license to use the Patents owned by Claw and Buckshaw related to the
Mericon Business ("EXISTING LICENSE PRODUCTS") and the right of first refusal
for all future products, ideas, and patents created by Claw and/or Buckshaw
which relate to child safety products, including but not limited to those in
process and completed products, ideas and patents ("NEW LICENSE PRODUCTS")
(collectively, the Existing License Products and the New License Products are
referred to as the "EXCLUSIVE LICENSE PRODUCTS"); and
WHEREAS, following the Closing, Buckshaw is willing to provide consulting
services to Selfix, on an as needed basis, pursuant to the terms of a
Consulting Agreement to be entered into on the date of Closing.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions hereinafter set forth in this
Merger Agreement, the parties hereto, agree as follows:
ARTICLE I
THE PLAN OF MERGER
1.1 THE MERGER. SURVIVING CORPORATION. Upon the performance of all
covenants and obligations of the parties contained herein and upon the
fulfillment of all conditions to the obligations of the parties contained
herein (other than such covenants, obligations and conditions as shall have
been waived in accordance with the terms hereof), and in accordance with the
Delaware Business Corporation Law ("DBCL"), on the Closing Date, Mericon shall
be merged with and into Selfix or a wholly owned corporate subsidiary of Selfix
designated by Selfix and Selfix or the corporate subsidiary designated by it
shall be the surviving corporation and shall continue its corporate
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existence under the laws of the State of Delaware ("MERGER"). At the Closing of
the Merger, the separate existence of Mericon shall cease and all previously
issued shares of Mericon stock shall be cancelled. In the event that Selfix
designates a wholly owned corporate subsidiary to be merged with Mericon,
Selfix shall remain fully liable for all the liabilities and obligations as
provided in this Agreement.
ARTICLE II
ADDITIONAL TRANSACTIONS
2.1 THE TRANSACTION. At the Closing, Selfix shall sell, transfer, assign
and deliver to the Mericon shareholders, and the Mericon shareholders shall
accept, assume and receive from Selfix, all rights, title and interest in and
to the "MERGER SHARES," as defined herein ("TRANSFER"), in the amounts and to
the specific persons and/or entities as set forth on Schedule 2.1.
2.2 CONSULTING AGREEMENT. On the date of Closing, Buckshaw shall enter
into a Consulting Agreement with Selfix in the form as attached hereto as
Exhibit 2.2 ("CONSULTING AGREEMENT") which consulting Agreement shall be
supported by separate consideration.
2.3 COVENANT NOT TO COMPETE. On the date of Closing, Mericon shall cause
Claw and James Clark ("JAMES") to enter into a Covenant Not To Compete with
Selfix in the Mericon Business in North America for a period of five (5) years
following the date of Closing, in the form as attached hereto as Exhibit 2.3
("COVENANT NOT TO COMPETE").
2.4 AFFIRMATION TO EXISTING LICENSE PRODUCTS. On the date of Closing, Claw
and Buckshaw shall grant Selfix an affirmation of Mericon's transferable rights
to the Existing License Products as set forth in Exhibit 2.4 ("AFFIRMATION").
2.5 LICENSE AGREEMENT. On the date of Closing, Claw and Buckshaw shall
enter into a License Agreement with Selfix for the Existing License Products,
in the form attached hereto as Exhibit 2.5.
2.6 RESEARCH & DEVELOPMENT AGREEMENT. On the Closing date, Buckshaw and
Selfix shall enter into a Research & Development Agreement in the form attached
hereto as Exhibit 2.6.
ARTICLE III
CONSIDERATION
3.1 CONSIDERATION. In consideration for entering into the Merger,
executing the Covenant Not to Compete and granting the Affirmation, Selfix
shall make distributions as follows:
(a) Selfix shall issue two hundred fifty thousand (250,000) shares
of Selfix stock (the "MERGER SHARES") duly issued and authorized,
fully paid and non-
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assessable with other rights to be defined herein, to the Mericon Shareholders
as set forth on attached and incorporated Schedule 2.1 and as follows:
(i) A certificate or certificates representing the
number of whole Merger Shares into which
Mericon Stock has been converted, shall be issued
by Selfix.
(ii) The existence of dissenting shareholders
shall not terminate or postpone the Merger. Mericon
shall diligently pursue such negotiations and
Selfix shall be solely responsible for any payment
required in connection therewith the amount of
which shall be deducted from the amount due to
Sellers.
(iii) On the Effective Date, all shares of
Mericon stock shall be cancelled.
(b) Upon Closing Selfix shall pay Buckshaw a fee for the exclusive
rights to the New License Products in the amount of One Hundred Ninety-Five
Thousand Dollars ($195,000.00). Thereafter, royalty payments shall accrue and
be payable quarterly by Selfix to Claw ("ROYALTY") as set forth in the License
Agreement.
(c) Upon Closing, Selfix shall pay each of Buckshaw and James for the
Covenant Not To Compete Twenty-Eight Thousand Dollars ($28,000.00) and Two
Thousand Dollars ($2,000.00) respectively; and
(d) So long as Sellers are not in material breach of this Agreement,
Selfix shall extend Claw a line of credit prior to April 10, 1996 in the amount
of Seventy Thousand Dollars ($70,000.00) with interest accruing quarterly at
the rate of eight percent (8%) per annum. Such line of credit if used by Claw
shall be prepayable by the deduction of twenty percent (20%) of each quarterly
Royalties payment from Selfix to Claw, which amount shall be applied first to
interest and then to principal. Claw shall pay Selfix all accrued and unpaid
interest and principal which shall be payable in full five (5) years from the
date of granting the line of credit. Claw may borrow funds against such line of
credit by delivering written notice ("Notice") to Selfix. Upon receipt of
Notice from Claw (provided Sellers are not in material breach of this
Agreement) and execution by Claw of an unsecured promissory note evidencing the
amount borrowed and other related documents which are necessary to establish
that the loan is a bona fide obligation of Claw, Selfix shall deliver the funds
requested, up to Seventy Thousand Dollars ($70,000.00), by wire transfer to an
account designated by Claw, within five (5) days from the date that Selfix
receives the Notice ("DUE DATE"). In the event that Selfix does not deliver the
funds requested by the Due Date, Selfix shall be obligated to pay Claw Five
Hundred Dollars ($500.00) for each day past the Due Date until the funds are
delivered. In the event that the funds are not delivered by the Due Date, Claw
shall be entitled to immediate injunctive relief to compel Selfix to deliver
the requested funds as set forth in the Notice. For purposes of this paragraph,
Selfix irrevocably agrees and consents that any action to enforce the terms of
this paragraph may be brought in any state or Federal court that has competent
jurisdiction and is located in or whose district includes, Wayne County,
Michigan and that any such court shall have personal jurisdiction over Selfix
for purposes of this action.
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ARTICLE IV
CLOSING
4.1 EFFECTIVE DATE. The Merger shall be effected by: (i) Board of
Director resolutions authorizing the plan of merger; (ii) Shareholder approval
of the plan of merger if required by law; and (iii) filing of articles of
merger and certificate of merger as applicable, to which this Agreement shall
be annexed, with both the Secretary of State of Delaware in accordance with the
provisions of the DBCL and the Michigan Department of Commerce in accordance
with the provisions of the Michigan Business Corporation Act ("ARTICLES OF
MERGER"). The Merger shall be deemed effective at the time of filing of the
Articles of Merger by the Secretary of State of Delaware and the Certificate of
Merger with the Michigan Department of Commerce, which Articles and Certificate
of Merger shall be so filed contemporaneously on or about the Closing date,
which date shall be on or about October 24, 1995 (the "CLOSING"). The date and
time when the Merger shall be deemed effective is herein referred to as the
"EFFECTIVE DATE."
4.2 COOPERATION; CONSENTS. Each of the parties hereto will use its
best efforts to obtain all consents, authorizations, orders and
approvals of, and make all filings and registrations with, any governmental
commission, board or other regulatory body or any other person required for or
in connection with the consummation by it of the transactions contemplated on
its part hereby and will cooperate fully with the other party in assisting it
to obtain such consents, authorizations, orders and approvals and to make such
filings and registrations. No party hereto will take or omit to take any action
for the purpose of delaying, impairing or impeding the receipt of any required
consent, authorization, order or approval or the making of any required filing
or registration.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby make the following representations and warranties to
Selfix, each of which they warrant to be true and correct on the date hereof
and, except as affected by the transactions expressly contemplated by this
Agreement, on the date of Closing.
5.1 AUTHORITY. Sellers have full legal right, power and authority,
without the consent of any other party, to execute and deliver this Agreement
and to carry out the transactions contemplated hereby. All corporate and other
actions required to be taken by Sellers to complete performance of this
Agreement and all transactions contemplated hereby have or will be duly and
properly taken prior to the date of Closing.
5.2 VALIDITY. This Agreement has been, and the documents to be
delivered at the Closing will be, duly executed and delivered and are, or at
the Closing will be, the lawful, valid and legally binding obligations of
Sellers, enforceable in accordance with their respective terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, rearrangement,
reorganization or similar debtor relief legislation affecting the rights of
creditors generally and subject to the application of general principles of
equity. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby are not or will not:
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(a) be prohibited by, do not violate or conflict with
any provision of, and do not result in a default under or a
breach of (i) Mericon's Articles of Incorporation or by-laws,
(ii) any contract, agreement or other instrument to which any
of the Sellers are a party or by which any of the Sellers or
Mericon may be bound, (iii) any regulation, order, writ,
decree or judgment of any court or governmental agency, or
(iv) any law applicable to any of the Sellers; or
(b) accelerate or modify, terminate or give any party the
right to accelerate, terminate, modify, abandon or refuse
to perform any contract, agreement or other instrument with
respect to which Mericon or the Mericon Business is a party.
5.3 DUE ORGANIZATION. Mericon is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan, and is
in good standing as a foreign corporation under the laws of any other state in
which failure to so qualify would have a material adverse affect on Mericon and
with full power and authority to own or lease its properties and to carry on
the Mericon Business as heretofore conducted.
5.4 TITLE TO ASSETS. Mericon is the sole and exclusive legal and
equitable owner of all right, title and interest in and has good, marketable
and indefeasible title to all of the assets of Mericon (including, but not
limited to), as set forth in the Financial Statements as described in Section
5.13 below, subject to such purchases, sales and retirements as occur in the
ordinary course of business ("MERICON ASSETS"). The Mericon Assets are free and
clear of all liens, claims, securities interests, pleadings, encumbrances of
any kind except those of First of America Bank and Lanier as listed in Schedule
5.4. Prior to the date of Closing, Mericon shall have the right (subject to the
conditions set forth in Section 5.13) to transfer all or any portion of its
office equipment and furniture to an entity of its choice for nominal
consideration.
5.5 CAPITALIZATION. As of the date of this Agreement, the authorized
capital stock of Mericon consists only of fifty thousand (50,000) shares of One
($1.00) Dollar par value common stock and twenty thousand (20,000) shares of
preferred, Ten Dollars ($10.00) par value stock. As of the date of this
Agreement, fifty thousand (50,000) shares of common stock and ten thousand
(10,000) shares of preferred stock were issued and outstanding to the persons
and/or entities and in the amounts as set forth in Schedule 5.5, and there are
no other shares of capital stock issued and outstanding. All issued and
outstanding shares of Mericon Stock are validly issued, fully paid and
nonassessable. There are not, and at the Effective Date there will not be, any
outstanding options, warrants, convertible debentures, calls, subscriptions or
rights to purchase or acquire any capital stock of Mericon, and there are not,
and at the Closing there will not be, except as set forth above, any contracts,
commitments, understandings, arrangements or restrictions by which Mericon is
bound to issue any additional shares of its capital stock.
5.6 CONTRACTS. Attached and incorporated Schedule 5.6 lists all
material contracts, leases, agreements, plans and arrangements, whether written
or oral, express or implied, or having any other legally binding basis to which
Mericon is a party or by which Mericon or any of its properties are bound and
which require the payment of more than Ten Thousand Dollars ($10,000.00)
(collectively the "MERICON AGREEMENTS"),
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including but not limited to those which involve the following: (i) capital
expenditures; (ii) financing, loan and other agreements which involve borrowed
funds or the extension of credit; (iii) security agreements; (iv) guaranties;
(v) equipment leases; (vi) chattel or real property mortgages; (vii) real
property leases; (viii) confidentiality agreements; (ix) union or collective
bargaining agreements; (x) employment, consulting or other agreements involving
personnel or services which are not terminable at will; (xi) employee benefit,
stock option and pension plans; (xii) licenses (where Mericon is licensee or
licensor; and (xiii) sales representative and/or independent contractor
agreements. Schedule 5.6 also identifies the following information concerning
each of the Mericon Agreements: the parties to such contracts; the date of
their execution and termination; whether or not such contracts are terminable on
thirty (30) days notice; whether there is any dispute concerning such
contracts; the substantive area of each such contract; and the amounts
involved. Schedule 5.6(i) identifies all Mericon Agreements that require the
consents of third parties, which consents the Sellers shall obtain on or prior
to the Closing. Except as set forth on Schedule 5.6(i), the Agreements will not
require the consent, approval or act of or the filing of notice with any other
party in order for them to be effective with respect to Selfix.
5.7 INTANGIBLE PROPERTY. In the conduct of the Mericon Business,
Mericon has not infringed upon or otherwise acted adversely to the rights of
any person under or with respect of any patent, copyright, trademark or trade
name or other proprietary or intellectual property rights of any other person
or received any notice of claim of such infringement or act which pertains to
the Mericon Business. Except as set forth on Schedule 5.7 and the Claw License
Agreement, Mericon is not obligated or under any liability whatsoever to make
any royalty or other payments to any owner or licensee of or other claimant to
any patent, copyright, trademark, trade name or other proprietary or
intellectual property right with respect to the use thereof or in connection
with the conduct of the Mericon Business.
5.8 LITIGATION. Sellers are not, with respect to the Mericon Business,
engaged in or a party to or, to Sellers' knowledge, threatened with any suit,
claim, action or proceeding relating to the Mericon Business before or by any
federal, state, municipal or other governmental court, department, commission,
board, agency or instrumentality, domestic or foreign, and no notice has been
received by Sellers and to Sellers' knowledge no other circumstances exist to
provide any basis for any such action against Sellers with respect to the
Mericon Business. Sellers are not, with respect to the Mericon Business,
subject to any order, writ, injunction or decree, related to or affecting the
Mericon Business, of any court, domestic or foreign, or any federal agency or
instrumentality.
5.9 TAXES. Mericon has filed on a timely basis all federal, state,
county and local income, excise, withholding, property, sales, use, franchise
or other tax returns, declarations or reports which any state, local, municipal
or federal authority ("GOVERNMENTAL AUTHORITY") required Mericon to file on or
before the Closing Date. All such tax returns, declarations and reports which
Mericon filed were true and correct, and accurately reflected all taxable
income and tax liabilities of Mericon for the periods such reports covered.
Mericon has paid all taxes, interest and penalties (if any), which became due
pursuant to such returns or pursuant to any assessment which has become
payable. If reasonably necessary to Selfix, Mericon shall provide Selfix with
copies of all income and other tax returns they filed for the previous five (5)
tax years, with any Governmental Authority. Mericon has filed or will file on a
timely basis all required
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federal, state, county and local income, excise, withholding, social security
and other payroll, property, sales, use, franchise and other tax returns which
any Governmental Authority required them to file on or before the date of
Closing. The Sellers will cause all such returns, declarations and reports
concerning taxes which they file to be, to the best of their knowledge, true
and correct and to reflect accurately all taxable income and all tax
liabilities of Mericon for the period such reports cover. The Sellers have not
received notice that an examination of or proceeding concerning any tax return
or report of Mericon is currently in progress or threatened of any kind.
Mericon does not have any outstanding agreements or waivers extending the
statutory period of limitations established by any Governmental Authority that
are applicable to any of their tax returns.
5.10 BROKERS. Sellers have not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions or
finders' fees with respect to this Agreement or the transactions contemplated
hereby.
5.11 LEGAL COMPLIANCE.
(a) Mericon has, in all material respects, complied with all
laws, statutes, ordinances, rules, regulations and orders of all governmental
entities applicable to the Mericon Business. Any immaterial violations in the
aggregate would not adversely affect Mericon.
(b) No notice has been issued which has not been cured and no
investigation, litigation, administrative proceeding, judgment, order or review
is pending or, to the best knowledge of the Sellers, is threatened by any
governmental entity with respect to: (i) any alleged violation by Mericon of
any law, ordinance, rule, regulation, order, policy or guideline of any
governmental entity, or (ii) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the Mericon Business.
5.12 REAFFIRMATION. All of Sellers' representations, warranties and
information contained in this Agreement and in the documents furnished to
Selfix by Sellers pursuant to this Agreement are, and shall be at the date of
Closing, true, correct and complete. Mericon represents and warrants that since
May 26, 1995, there have been no material adverse changes in the business which
would affect the representations and warranties provided herein. Selfix
acknowledges that since May 26, 1995, it has discussed and is familiar with the
operations of Mericon's business with Sellers and that it has been apprised of
certain transactions entered into by Mericon.
5.13 FINANCIAL STATEMENTS. Mericon has heretofore delivered to Selfix:
(i) balance sheet of Mericon as at December 31, 1994 as reviewed by Follmer,
Rudzewicz & Co., P.C. ("BALANCE SHEET"), and (ii) statements of income,
shareholders' equity and cash flow for the partial year ended August 31, 1995,
as prepared by Mericon management (the Balance Sheet statement of cash flow and
statement of income are hereby collectively called the "FINANCIAL STATEMENTS").
The Financial Statements fairly and accurately present the financial position
of Mericon as of the respective dates thereof and fairly and accurately present
the results of operations and cash flow of Mericon for the period then ended,
subject to normal year-end audit adjustments. As of August 31, 1995, the net
worth of Mericon (as disclosed on a Balance Sheet compiled by Follmer,
Rudzewicz & Co., P.C.) will not be less than a negative Eighty Thousand Dollars
($80,000.00). If the August 31, 1995 Balance Sheet shows a net worth better
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than negative Eighty Thousand Dollars ($80,000.00), such difference shall
increase the amount of Sellers' basket for representations and warranties
described in Paragraph 11.6; if such net worth amount is worse than negative
Eighty Thousand Dollars ($80,000.00), such difference shall decrease the amount
of Mericon's basket for representations and warranties described in Paragraph
11.6
5.14 LABOR RELATIONS. Mericon is not a party to or bound by any oral or
written employee collective bargaining or other union agreement, employment
agreement which is not terminable at will, employee leasing agreements,
consultant, advisory or service agreements, deferred compensation agreements,
confidentiality agreements or covenants not to compete, except as set forth in
Exhibit 5.14(a). Schedule 5.14(b) identifies all employee pension, profit
sharing, cash or deferred benefit, stock option, bonus, incentive, stock
purchase, welfare, life insurance, hospital or medical benefit plans, severance
pay, vacation or holiday pay policies and any other employee benefit agreements
or plans of Mericon. Sellers shall indemnify and hold Selfix harmless from all
claims, obligations, and liability with respect to Mericon's: (i) employee
pension, profit sharing, cash or deferred benefit, stock option, bonus,
incentive, stock purchase, welfare, life insurance, disability insurance,
hospital or medical benefit plans, severance pay, vacation or holiday pay
policies and any other employee benefit agreements or plans of Mericon; and
(ii) all fringe benefits which Mericon provides to all classes of their
employees, independent contractors or directors.
5.15 COBRA. Mericon has or will provide each of Mericon's present and
former employees with the right to continue his or her respective insurance
program with Mericon, in compliance with and if required by all relevant
provisions of the Internal Revenue Code, as modified by the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") and Title I of ERISA,
including all amendments to COBRA as contained in the Tax Reform Act of 1986,
or any subsequent legislation.
5.16 CONDITION OF EQUIPMENT. All of the equipment, molds, and fixed
assets of Mericon are in good operating condition (ordinary wear and tear
excepted).
5.17 UNDISCLOSED LIABILITIES. Mericon has no debts or liabilities of
any nature or type, whether accrued, absolute or contingent, determined or
undetermined, whether due or to become due (including, without limitation,
unassorted claims whether known or unknown, liabilities for taxes of any type,
penalties, fees or interests) other than-those reflected in the August 31, 1995
Balance Sheet described in Section 5.13 herein, those liabilities otherwise
disclosed in this Agreement, and those liabilities incurred in the ordinary
course of business since the date of the August 31, 1995 Balance Sheet
("ORDINARY COURSE LIABILITIES"); the net change of the ordinary course
liabilities is not material and adverse to the financial condition of Mericon
or the Mericon Business since the date of the August 31, 1995 Balance Sheet.
5.18 BUSINESS RELATIONS. The Sellers have and will in the future take
all actions to maintain good relations with Mericon's employees,
representatives, suppliers, agents and customers. Sellers have not taken and
will not in the future commit any actions which were or are calculated to
dissuade or had or will have the effect of dissuading any present employees,
representatives, suppliers, agents or customers of Mericon who are or were
associated with the Mericon Business, from becoming associated with Selfix. To
the best knowledge of the Sellers, no supplier, customer or agent of Mericon
currently contemplates discontinuing or recently has discontinued its
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business relationship with Mericon. Selfix acknowledges that it is aware of
Mericon's participation in the "MADE IN AMERICA PROGRAM" of Walmart Corporation
and the "MINORITY SUPPLIER" program at K-Mart Corporation. Furthermore, Selfix
acknowledges Mericon's concern that participation in these programs might
affect the business relationships with the regular channel of buyers for these
customers. Mericon asserts that as of the Effective Date it has no knowledge
that participation in these programs has affected the business relationship
between it and Walmart or K-Mart.
5.19 ABSENCE OF CERTAIN CHANGES. Since May 26, 1995 Mericon has not
experienced any material adverse change in the Mericon Business, operations,
assets, liabilities, profits, prospects or other conditions (whether financial
or otherwise). No fact or condition exists, is contemplated or is threatened
which might reasonably be expected to cause such a change in the future.
Mericon has not experienced any theft, damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other taking adversely
affecting in any material respect prospects for the Mericon Business.
5.20 PERMITS. Mericon owns, holds or possesses all governmental
licenses, franchises, permits, privileges, immunities, approvals and other
authorizations (collectively the "PERMITS") which are necessary to entitle
Mericon to own, lease, operate and use its assets and to conduct the Mericon
Business as currently conducted, a list of the Permits is disclosed on attached
and incorporated Schedule 5.20. The Sellers have delivered true, complete and
correct copies of all the Permits to Selfix. Mericon has fulfilled and
performed all its obligations under each Permit. Mericon has not received
notice of cancellation, of default or of any material dispute concerning any
Permits. Each Permit is valid, subsisting and in full force and effect and will
continue in full force and effect after the Closing.
5.21 PERSONAL PROPERTY. To the Sellers' best knowledge, Mericon uses
all of the Mericon Assets in conformity with all applicable laws, regulations,
rules, ordinances, codes, licenses, franchises and permits (including without
limitation electrical, building, environmental and occupational safety and
health requirements). Mericon has not received notice of any violation of any
of such matters relating to its assets or their use.
5.22 ACCOUNTS RECEIVABLE. All Mericon's accounts receivable have
arisen from bona fide transactions in the ordinary course of Mericon's
business. The accounts receivable, net of allowances for doubtful accounts, as
shown on the closing balance sheet dated October 24, 1995 or such other date
as the closing shall occur (as compiled by Follmer, Rudzewicz & Co., P.C.) will
be good and collectible not later than one hundred twenty (120) days from the
date of Closing. Attached and incorporated Schedule 5.22 contains a true and
materially correct list of accounts receivable as of the Closing.
5.23 EMPLOYEE RELATIONS. Mericon is in compliance with all laws, rules
and regulations concerning prices, wages, hours, discrimination in employment,
collective bargaining and the general operation of the Mericon Business.
Mericon is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the aforesaid laws. The Sellers believe that
Mericon has satisfactory relations with its employees. Mericon is not a party
to, affected by or to the Seller's best knowledge threatened with any dispute
or controversy with a union or with respect to unionization or collective
bargaining which involves either Mericon's employees, or any supplier or
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customer of Mericon. There has not been within the past twelve (12) months any
strike, slowdown, work stoppage or labor dispute concerning Mericon, whether or
not such dispute affects unionized employees of Mericon.
5.24 LEASES. Attached and incorporated Schedule 5.24 sets forth a list
and description of each lease or similar agreement (showing the annual rental,
expiration date, renewal and purchase options if any, improvements located on
the leased premises, uses made of the leased premises and location of the real
property subject to such lease) under which Mericon is lessor or lessee or
holds or operates any real property owned by any third party, the Seller or any
affiliate of the Seller. Mericon has not violated any terms or conditions under
any such lease, and all the covenants which any other party must perform under
any such lease have been fully performed. All the property which Mericon leases
is in a state of good maintenance and repair and is adequate and suitable for
the purposes for which it is presently being used.
5.25 INSURANCE. Attached and incorporated Schedule 5.25 contains a
list and a brief description of all property, casualty and general liability
insurance policies which Mericon owns, maintains or holds as of the date of
this Agreement. To the Sellers' best knowledge, Mericon has procured and
continues to maintain in full force and effect all insurance coverage which any
law, order or agreement requires Mericon to maintain, and to the Sellers' best
knowledge, Mericon has complied materially with all such insurance
requirements. The Sellers shall cause Mericon to keep such insurance or
comparable insurance in full force and effect through the Closing. Mericon has
complied with all material requisites of each of its insurance policies, and
has not failed to give any notice or present any claim under such policies in a
due and timely fashion, where failure to do so would have a material, adverse
effect on Mericon or the Mericon Business.
5.26 ENVIRONMENTAL. To the actual knowledge of Sellers: (i) with
respect to any contaminant, there are not material actions, proceedings, or
investigations pending or threatened before any federal or state environmental
regulatory body, or before any federal or state court, alleging non-compliance
with or liability in connection with, or by Mericon, CERCLA or any other
Environmental Laws; (ii) there is no reasonable basis for the institution of
any material action, proceeding or investigation against Mericon under any
Environmental Law; (iii) Mericon is not responsible in any material respect
under any Environmental Law for any release; (iv) Mericon is not responsible
for any material costs of any response action required by virtue of any release
of any contaminant into the environment including, without limitation, costs
arising from investigation, removal or remediation of contaminants, security
fencing, alternative water supplies, temporary evacuation and housing and other
emergency assistance undertaken by any environmental regulatory body or any
other person; (v) Mericon is, in all material respects, in compliance with all
applicable Environmental Law; and (vi) no real property owned or used by
Mericon contains any contaminant including, without limitation, any asbestos,
PCBs or petroleum products or byproducts in any form, the presence, location or
condition of which (a) could require remediation or other corrective action
pursuant to any Environmental Law in any material respect, or (b) otherwise
would pose any significant health or safety risk unless remedial measures were
taken.
5.27 DISCLOSURES. None of the representations or warranties which the
Sellers make either in this Agreement, the exhibits, the schedules or in
connection therewith contain or will contain any untrue statement of fact, or
omit or will omit to state a fact
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necessary to make the statements contained in such representations or
warranties not misleading. The foregoing includes any and all statements which
the Sellers or Mericon have provided to Selfix in any schedule, financial
statement, exhibit, list or document associated with this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELFIX
6.1 GENERAL. To induce the Sellers to cause the Merger, Selfix
covenants that the warranties and representations set forth in this Article 6
are true and correct and will be true and correct as of the Closing.
6.2 AUTHORIZATION OF AGREEMENT. Selfix has the full power and
authority to enter into this Agreement, to consummate the Agreement and to
comply with the material terms, conditions and provisions of this Agreement and
the related agreements. This Agreement and related agreements constitute the
valid and binding obligation of Selfix, enforceable against Selfix in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general.
6.3 CORPORATE ORGANIZATION. Selfix (and, if applicable, any wholly
owned corporate subsidiary into which Mericon is merged) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
6.4 NO BREACH. Selfix's execution, delivery and performance under this
Agreement will not conflict with, nor result in the breach or termination of,
nor constitute a default under any lease, agreement, contract, commitment or
other instrument or any order, judgment or decree to which Selfix is party or
by which Selfix is bound.
6.5 LITIGATION OF AGREEMENT. There are no judicial or administrative
actions, proceedings or investigations pending or to Selfix's best knowledge
threatened that question the validity of this Agreement or any action which
Selfix has taken in connection with this Agreement.
6.6 FINANCING. Selfix has all funds necessary to pay the Purchase
Price and has the financial capacity to perform all its obligations under this
Agreement.
6.7 DISCLOSURES. None of the representations or warranties of Selfix
made either in this Agreement, the exhibits, the schedules or in connection
therewith contain or will contain any untrue statement of fact, or omit or will
omit to state a fact necessary to make the statements contained in such
representations or warranties not misleading. The foregoing includes any and
all statements which Selfix has provided to the Sellers in any schedule,
financial statement, exhibit, list or document associated with this Agreement.
6.8 FINANCIAL STATEMENTS. Selfix has delivered to Mericon: (i) balance
sheet of Selfix as of December 31, 1994 ("SELFIX BALANCE SHEET"), and (ii)
statements of income, shareholders' equity and cash flow for the year ended
December 31, 1994, audited by Grant Thorton, LLP, Certified Public Accountants,
whose reports thereon are included therewith; Selfix has also delivered its
interim financial statements for the
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quarters ended March 31, 1995 and June 30, 1995 (all of such statements being
referred to as the "SELFIX FINANCIAL STATEMENTS"). The Selfix Financial
Statements fairly and accurately present the results of operations, cash flow
and the financial position of Selfix for the period then ended, subject to
normal year-end audit adjustments.
6.9 MERGER SHARES. The Merger Shares will be validly issued,
non-assessable and freely transferable as of the Closing Date, subject to all
applicable securities laws and regulations.
ARTICLE VII
COVENANTS OF SELLERS
Sellers hereby agree to keep, perform and duly discharge the following
covenants and agreements:
7.1 INTERIM CONDUCT OF MERICON BUSINESS. From the date hereof to the
date of the Closing, Mericon shall preserve, protect and maintain the Mericon
Business and protect, repair, maintain and keep in good operating condition
Mericon Assets and leased property. Mericon shall operate the Mericon Business
as a for profit going concern consistent with prior practice and in the
ordinary course that Mericon has previously operated the Mericon Business.
7.2 CONFIDENTIAL INFORMATION. Sellers, its officers, directors, and
affiliates shall not communicate, divulge, or use for the benefit of any
person, firm, partnership or corporation any of the trade secrets, business
methods, business records and files, customer lists, supplier lists, product
specifications, drawings and prototypes, price lists, instruction manuals,
reports, or any other confidential or proprietary information of any type or
description being acquired by Selfix pursuant to this Agreement, provided that
Sellers may disclose such information to the extent necessary to comply with
any reporting requirement or any audit or investigation by its lenders, any
federal, state or local authorities or under court order or subpoena. This
Section shall not apply to any information which is generally available to the
public (other than by reason of any disclosure by Sellers). In the event this
transaction is not consummated for any reason, each party shall forthwith
deliver to the other (without retaining copies thereof) any and all documents or
other written information obtained from the other party.
7.3 NO THIRD PARTY NEGOTIATIONS. Prior to the date of Closing,
Sellers, and their respective affiliates, shareholders, directors, officers and
employees shall not enter into or engage in any negotiations or discussions
with other parties relating to the potential acquisition of Mericon (other than
product sales within the ordinary course of business), nor disclose the
existence or substance of this Agreement, except to persons within Mericon's or
Sellers' organization who must be so informed or to Sellers' professional
advisors.
7.4 CUMULATIVE SALES. Sellers warrant to Selfix that in the five (5)
years following the Closing, the cumulative sales by the Mericon division of
Selfix of products primarily derived from the Exclusive Licensed Products and
improvements thereto and all other presently existing Mericon products which
are not included in such term shall exceed Five Million Dollars ($5,000,000.00)
("CUMULATIVE SALES"). In the event the Cumulative Sales are less than Five
Million Dollars ($5,000,000.00), Sellers shall pay
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to Selfix twenty percent (20%) of the difference between the Cumulative Sales
and Five Million Dollars ($5,000,000.00), plus interest from Closing on such
amount at the prime rate from time to time (the "SALES SHORTFALL AMOUNT").
Notwithstanding anything to the contrary contained herein, the Sales Shortfall
Amount due and owing Selfix shall not exceed Three Hundred Twelve Thousand
Dollars ($312,000.00) plus interest from Closing at the prime rate from time to
time. Payment of the Sales Shortfall Amount to Selfix shall be secured by the
Exclusive License Products and the Royalty.
7.5 INVESTMENT INTENT. Sellers acknowledge that they know that Selfix
has not registered the Merger Shares pursuant to the Securities Act of 1933 (as
amended), and as a result the Mericon shareholders of record as of the Closing
Date (collectively "MERICON SHAREHOLDERS") may be required to hold the Shares
pursuant to the Securities Act of 1933. Sellers warrant that the Mericon
Shareholders are acquiring the Shares solely for investment purposes and not
with the intention to resell or otherwise redistribute the Shares.
7.6 LIMITATION OF WARRANTIES AND REPRESENTATIONS. Sellers make no
warranties or representations, whether express or implied, with respect to any
matter which relates to the transaction contemplated by this Agreement other
than those expressly set forth in the Agreement.
ARTICLE VIII
COVENANTS OF SELFIX AND SELLERS
Selfix and Sellers hereby agree to keep, perform and duly discharge the
following covenants and agreements:
8.1 EMPLOYMENT OF EMPLOYEES. Sellers and Selfix agree that Selfix
shall not be obligated in any way to offer employment to any employee
or independent contractor of Mericon and that Selfix will not be responsible or
liable in connection with any employment arrangements (whether written or oral)
made by Sellers or Mericon with employees or independent contractors of
Mericon, or for any salaries, severance pay, vacation accruals other than all
accrued salary or hourly wage liabilities for current services in connection
with employment and independent contractors as reflected in the Closing Balance
Sheet or other benefits owed or payable by Sellers to any employees or
independent contractors of Mericon. However, if Selfix shall employ any of
Mericon's employees or independent contractors, Selfix agrees to be liable for
all salaries and other benefits to such persons after the date of Closing.
Selfix may approach any Mericon employees regarding their employment by Selfix
following the date of Closing. Mericon will terminate all employees at closing.
8.2 TRANSFER OF MERICON BUSINESS ASSETS. All Mericon Assets shall be
removed, at Selfix's expense, from the premises of Mericon. Selfix shall
reimburse Denshaw for any and all reasonable employee or independent contractor
costs for work performed for Selfix by such employees or independent
contractors during the transition and transfer of the Mericon Business from
Detroit, Michigan to Chicago, Illinois.
8.3 POST CLOSING ACCESS. For a period of five (5) years following the
Closing, Selfix shall provide reasonable access to the Sellers, upon reasonable
prior written notice, to inspect and photocopy during normal business hours, at
Sellers' expense, such
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business records pertaining to the Mericon Business,in written, magnetic or
electronic form, as are reasonably necessary for the Sellers to prosecute,
defend, answer or respond to, state, local or federal governmental proceedings
of any type, or litigation or manifest threats thereof and shall maintain such
business records for not less than six (6) years.
8.4 REGISTRATION RIGHTS. If Selfix proposes to file a registration
statement under the Securities Act of 1933, as amended on a form on which any
common shares of Selfix can be registered in any transaction in which Selfix is
registering securities ("PROPOSED OFFERED SECURITIES"), then Selfix shall give
written notice of such proposed filing to the holders of the Merger Shares at
least thirty (30) days before the anticipated filing date, and such notice
shall offer such holders the opportunity to elect within ten (10) days of
receipt thereof to register such amount of Selfix Shares as each holder may
request. Selfix shall use its best efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering ("OFFERING") to permit holders
of the Merger Shares to be included in any demand registration or any Piggyback
registration of Selfix on the same terms and conditions as are offered to the
other security holders involved in the Offering. If any Proposed Offered
Securities are to be sold in one or more underwritten offerings, and the
managing underwriters deliver a written opinion to Selfix and such holders of
the Merger Shares that the total amount and/or class of Selfix Capital Shares
and Proposed Offered Securities to be included in such offering is such as to
materially and adversely affect the success of such offering, then the amount
of securities to be offered for the account of the holders of the Merger Shares
shall be reduced pro rata with all other persons or entities seeking to
register other Proposed Offered Securities to the extent necessary to reduce
the total amount of securities to be included in such offering to the amount
recommended by such managing underwriter.
Selfix shall be obligated to afford the holders of the Merger Shares the
aforesaid opportunity in each and every such registration taking place until
the earlier of: (a) the time all Merger Shares have been included in a
registration statement; (b) the time at which legal counsel for Selfix
determines that the Merger Shares can be sold free of registration under the
Securities Act of 1933, as amended; or (c) the Merger Shares otherwise become
free of such restrictions.
The inclusion of the Merger Shares in any such registration or
underwritten offering shall be upon the condition that the holders thereof have
their registered Merger Shares sold through the underwriters on the same terms
and conditions as are applicable to Selfix or, if there be any such other
selling holders, to such other selling holders of proposed offered securities.
8.5 CONFIDENTIAL INFORMATION. In the event this transaction is not
consummated for any reason, Selfix, its officers, directors, and affiliates
shall not communicate, divulge, or use for the benefit of any person, firm,
partnership or corporation any of the trade secrets, business methods, business
records and files, customer lists, supplier lists, product specifications,
drawings and prototypes, price lists, instruction manuals, reports, or any
other confidential or proprietary information of any type or description which
was to be acquired by Selfix pursuant to the Agreement, provided that Selfix may
disclose such information to the extent necessary to comply with any reporting
requirement or any audit or investigation by its lenders, any federal, state or
local authorities or under court order or subpoena. This Section shall not
apply to any information which is generally available to the public (other than
by reason of any
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disclosure by Sellers). In the event this transaction is not consummated for
any reason, each party shall forthwith deliver to the other (without retaining
copies thereof) any and all documents or other written information obtained
from the other party.
8.6 ASSUMPTION OF LIABILITIES. Except as otherwise provided in this
Agreement, Selfix shall succeed to and assume all liabilities of Mericon,
without setoff, as disclosed on the August 31, 1995 balance sheet, including
the ordinary course liabilities referenced in Paragraph 5.17, and other
liabilities assumed by Selfix as set forth in this Agreement.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELFIX
Each and all of the obligations of Selfix to consummate the
transactions contemplated by this Agreement are subject to fulfillment, prior
to or as of the date of Closing, of the following conditions precedent (any of
which may be waived in writing by Selfix):
9.1 ACCURACY OF WARRANTIES, PERFORMANCE OF COVENANTS. The
representations and warranties of Sellers and Mericon contained herein shall be
accurate in all material respects as if made on and as of the date of Closing.
Sellers and Mericon shall have performed each and all of the obligations and
complied with each and all of the covenants, agreements and conditions
specified herein to be performed or complied with on or prior to the date of
Closing.
9.2 NO PENDING ACTION. No action or proceeding (nor investigation
preliminary thereto) shall be instituted at any time prior to or as of the date
of Closing before any court or other governmental body or by any person or
public authority seeking to restrain or prohibit, or seeking damages or other
relief in connection with, the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
9.3 DELIVERIES BY SELLERS. At the Closing, Sellers shall deliver to
Selfix the following:
(a) Assignments. Written instruments or stock powers,
assigning all of the beneficial interest in and to the Shares
from the Sellers, which assignments or stock powers shall be
executed in blank by the Sellers.
(b) Certificates. The certificates representing all of the Shares;
(c) Certificate of Good Standing. A Mericon Certificate of Good
Standing issued by the Michigan Department of Commerce no more
than two (2) weeks prior to the Closing;
(d) Corporate Records. The current Articles of Incorporation, as
amended or restated (certified by the Michigan Department of
Commerce within two (2) weeks prior to the Closing and by the
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Secretary of Mericon as of the Closing), original minute book
seals, stock transfer books and all other books and records of
Mericon which the Mericon Secretary has certified as the
complete true and accurate records of Mericon (the Sellers may
deliver certain of Mericon's books and records to Selfix at
Mericon's place of business);
(e) UCC Searches. Satisfactory UCC searches, lien, tax and
judgment searches in accordance with this Agreement;,
(f) Consents. All original executed consents and estoppel
certificates in accordance with this Agreement;
(g) Closing Certificates of Accuracy. A certificate of the
President of Mericon and Sellers certifying as to the continued
accuracy of the representations and warranties, the performance
and observance of the covenants and the compliance with the
conditions precedent contained in Articles V, VII, VIII, and IX,
respectively, of this Agreement;
(h) Corporate Documents. Corporate documents including: (i)
resolutions of the Board of Directors and the Shareholders of
Mericon authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
which have been adopted and a certificate of Mericon's Secretary
or Assistant Secretary certifying that such resolutions have not
been amended or rescinded and remain in full force and effect as
of the date of Closing, and (ii) a Certificate of Incumbency of
officers who will be executing the Closing documents;
(i) Consulting Agreement. The Consulting Agreement in the form
attached hereto as Exhibit 2.2;
(j) Covenant Not to Compete. The Covenant Not to Compete in the
form attached hereto as Exhibit 2.3;
(k) Other Documents. All other documents either necessary or
appropriate to consummate the transactions set forth in this
Agreement.
(l) License Agreement. The License Agreement attached hereto as
Exhibit 2.5.
9.4 REGULATORY CONSENTS, AUTHORIZATION, ETC. All consents,
authorizations, orders and approvals of any governmental commission, board or
other regulatory body or lender (including all Uniform Commercial Code
termination statements) which are required in connection with the execution and
delivery of this Agreement and the consummation by each party hereto of the
transactions contemplated on its part hereby, shall have been obtained or made,
other than consents, authorization, orders, or approvals, as to which the
failure to obtain or make will not, after the date of Closing, (a) materially
and adversely affect the Mericon Business, or (b) subject Selfix, any of its
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subsidiaries or affiliates or any of its or their respective directors or
officers to liability on the grounds that it or they have breached any law or
regulation or have otherwise acted improperly in relation to the transactions
contemplated by this Agreement.
9.5 CONDITION OF MERICON BUSINESS AND ASSETS. There shall have been no
material adverse changes from the date of this Agreement in the condition of
the assets of Mericon or the condition of, or prospects for, the operation and
business of the Mericon Business.
9.6 OPINION LETTER OF SELLERS' COUNSEL. Sellers shall deliver to
Selfix an opinion letter from legal counsel for the Sellers, with respect to
Sections 5.1, 5.2, 5.3 (except the opinion with respect to 5.3 shall be made to
the best of its actual knowledge for matters concerning any state other than
Michigan), and to the best of its actual knowledge 5.8 in form acceptable to
Selfix's counsel.
9.7 EXECUTION OF AGREEMENTS. Buckshaw and James shall have executed
and delivered to Selfix an Agreement Not To Compete in form to be attached
hereto as Exhibit 2.3.
9.8 OTHER DOCUMENTS. Sellers shall have executed and delivered to
Selfix such documents as counsel for Selfix shall reasonably request to carry
out the purpose of this Agreement.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
Each and all of the obligations of Sellers to consummate the
transactions contemplated by this Agreement are subject to fulfillment, prior
to or as of the date of Closing, of the following conditions precedent (any of
which may be waived in writing by Sellers):
10.1 ACCURACY OF WARRANTIES, PERFORMANCE OF COVENANTS. The
representations and warranties of Selfix contained herein shall be accurate in
all material respects as if made on and as of the date of Closing. Selfix shall
have performed each and all of the obligations and complied with each and all
of the covenants, agreements and conditions specified herein to be performed or
complied with on or prior to the date of Closing.
10.2 NO PENDING ACTION. No action or proceeding (nor investigation
preliminary thereto) shall be instituted at any time prior to or as of the date
of Closing before any court or other governmental body or by any person or
public authority seeking to restrain or prohibit, or seeking damages or other
relief in connection with, the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
10.3 DELIVERIES BV SELFIX. At the Closing. Selfix shall deliver to
the Sellers the following:
(a) Certificate of Accuracy. A certificate of the President of
Selfix certifying as to the continued accuracy of the
representations and warranties, the performance and
observance of the covenants and
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compliance with the conditions precedent contained in
Articles VI, VIII, and X, respectively, of this Agreement;
(b) Corporate Documents. Corporate documents including: (i)
resolutions of the Board of Directors of Selfix authorizing
the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby which
have been adopted and a certificate of Selfix's Secretary
or Assistant Secretary certifying that such resolutions
have not been amended or rescinded and remain in full force
and effect as of the date of Closing; and (ii) a
Certificate of Incumbency of Selfix's officers who will be
executing the Closing documents;
(c) Certificate of Good Standing. Selfix Certificate of
Good Standing issued by the Delaware Secretary of State no
more than two (2) weeks prior to the Closing;
(d) Merger Shares. The Merger Shares as set forth on
Schedule 2.1;
(e) Other Documents. All other documents either necessary
or applicable to consummate the transactions set forth
in this Agreement;
(f) Cash. The monetary consideration, in United States
currency, for the Covenant Not to Compete and the License
Agreement, by cashiers check or by wire transfer to an
account or accounts selected by Sellers.
(g) Consulting Agreement. Consulting Agreement in the form
attached hereto as Exhibit 2.2;
(h) License Agreement. License Agreement in the form
attached hereto as Exhibit 2.5; and
(i) Research & Development Agreement. Research & Development
Agreement in the form attached hereto as Exhibit 2.6.
10.4 OPINION LETTER OF SELFIX'S COUNSEL. Selfix shall deliver to
Sellers an opinion letter from legal counsel for Selfix, Much Shelist Freed
Denenberg Ament Bell and Rubenstein, P.C., with respect to Section 6.2, 6.3 and
6.9, and to the best of its actual knowledge 6.5, in form acceptable to
Sellers' counsel.
10.5 OTHER DOCUMENTS. Selfix shall have executed and delivered to
Sellers such documents as counsel for Sellers shall reasonably request to carry
out the purpose of this Agreement.
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1 SURVIVAL. All representations and warranties contained in this
Agreement or in any document delivered pursuant hereto shall survive the
Closing and shall be fully effective and enforceable for a period of eighteen
(18) months following the date of Closing; provided, however, that
notwithstanding the foregoing (i) the Sellers' representations and warranties
set forth in Section 5.4 shall survive the Closing in perpetuity and shall be
fully effective and enforceable, and (ii) Sellers's representations
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and warranties set forth in Sections 5.8 and 5.9 and Selfix's representations
and warranties set forth in Section 6.5 shall survive the Closing and shall be
fully effective and enforceable for a period of the applicable statute of
limitation. All covenants and agreements contained in this Agreement or in any
document delivered pursuant hereto shall survive the Closing until satisfied,
or in perpetuity, as applicable.
11.2 LOSS. For the purposes of this Article 11, "LOSS" shall mean, with
respect to any party, any diminution in value, damage, liability, demand,
claim, action, cause of action, cost, deficiency, tax, penalty, fine or other
loss or expense, (whether or not arising out of a third party claim), including
all interest, penalties, reasonable attorney's fees and expenses and all amounts
paid or incurred in connection with any: (a) action, (b) demand, (c) cause of
action, (d) proceeding, (e) investigation, or (f) claim by any third party
against or affecting such party ((a) through (f) collectively "CLAIM"), and the
investigation, defense or settlement of any Claim, together with interest
thereon from the date incurred through and including the date on which the
total amount of the Loss, including such interest, is recovered or recouped
pursuant to this Article 11.
11.3 INDEMNIFICATION OBLIGATIONS OF SELLERS. Sellers hereby indemnify
Selfix and its stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the "SELFIX
INDEMNITEES") in respect of, and save and hold each Selfix Indemnitee harmless
against and pay on behalf of or reimburse each Selfix Indemnitee as and when
incurred, any Claim or Loss which any Selfix Indemnitee suffers, sustains or
becomes subject to as a result of or by virtue of:
(a) any facts or circumstances which constitute a
misrepresentation or breach of any warranty by Sellers or
Mericon Shareholders as set forth in this Agreement
(including any exhibit or schedule), or any document
delivered by any of the Sellers or Mericon prior to or at
Closing pursuant to this Agreement, provided, however, that
the Sellers are given written notice of such Loss during
the survival period specified in Section 11.1; and
(b) any nonfulfillment or breach of any covenant or
agreement of Mericon or Sellers as set forth in this
Agreement (including any exhibit or schedule).
11.4 INDEMNIFICATION OBLIGATIONS OF SELFIX. Selfix shall indemnify
Sellers and their stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the
"SELLERS INDEMNITEES") in respect of, and save and hold each of Sellers
Indemnitees harmless against and pay on behalf of or reimburse each Sellers
Indemnitee as and when incurred, with respect to any Claim or Loss which such
Sellers Indemnitee suffers, sustains or becomes subject to as a result of or by
virtue of:
(a) any facts or circumstances which constitute a
misrepresentation or breach of any warranty by Selfix as
set forth in this Agreement (including any exhibit or
schedule) or any document delivered by Selfix prior to or
at Closing pursuant to this Agreement, provided, however,
that Selfix is given written notice of such Loss during the
survival period specified in Section 11.1); and
(b) any nonfulfillment or breach or any covenant or
agreement of Selfix as set forth in this Agreement
(including any exhibit or schedule).
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11.5 INDEMNIFICATION PROCEDURES.
(a) Notice of Claim. Any person seeking indemnification pursuant to
Sections 11.3 or 11.4 (an "INDEMNIFYING PARTY") must give the party from whom
indemnification is sought (an "INDEMNIFYING PARTY") written notice of such
claim (an "INDEMNIFICATION CLAIM NOTICE") promptly after the Indemnified party
receives any written notice of any Claim against or involving the Indemnified
Party or otherwise discovers the liability, obligation or facts giving rise to
such Claim for indemnification; provided that the failure to notify or delay in
notifying an Indemnifying Party will not relieve the Indemnifying Party of its
obligations pursuant to Section 11.3 or 11.4, as applicable, except to the
extent that such failure actually harms the Indemnifying Party (it being
understood that any indemnity sought pursuant to Sections 11.3(a) and 11.4(a)
must be made by notice given within the applicable time period specified
therein). Such notice must contain a description of the Claim and the nature
and amount of such Loss (to the extent that the nature and amount of such Loss
is known at such time).
(b) Control of Defense; Conditions. With respect to the defense of any
Claim in which a third party in question seeks only the recovery of a sum of
money for which indemnification is provided in Section 11.3 or 11.4, at its
option an Indemnifying Party may appoint as lead counsel of such defense any
legal counsel selected by the Indemnifying Party; provided that before the
Indemnifying Party assumes control of such defense it must first enter into an
agreement with the Indemnified Party (in form and substance reasonably
satisfactory to the Indemnified Party) pursuant to which the Indemnifying Party
agrees to be fully responsible (with no reservation of any rights other than
the right to be subrogated to the rights of the Indemnified Party) for all
Losses relating to such Claim, unconditionally guarantees the payment and
performance of any liability or obligation which may arise with respect to such
Claim or the facts giving rise to such Claim for indemnification, and secures
such guarantee with collateral which is acceptable to the Indemnified Party, in
its sole discretion.
(c) Control of Defense; Exceptions, etc. Notwithstanding Section
11.5(b): (i) the Indemnified Party will be entitled to participate in the
defense of such Claim and to employ counsel of its choice for such purpose at
its own expense (provided that the Indemnifying Party will bear and pay the
reasonable fees and expenses of such separate counsel incurred prior to the
date upon which the Indemnifying Party effectively assumes control of such
defense); and (ii) the Indemnifying Party will not be entitled to assume
control of the defense of such Claim, and will pay the reasonable fees and
expenses of legal counsel retained by the Indemnified Party, if:
(1) the Indemnified Party reasonably believes that an
adverse determination of such Proceeding could be
detrimental to or injure the Indemnified Party's reputation
or future business prospects,
(2) the Indemnified Party reasonably believes that
there exists or could arise a conflict of interest which,
under applicable principles of legal ethics, could prohibit
a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such
Proceeding, or
(3) a court of competent jurisdiction rules that the
Indemnifying Party has failed or is failing to prosecute or
defend vigorously such Claim.
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(d) Settlement. Either Party must obtain the prior written consent of
the other Party (which consent shall not be unreasonably withheld) prior to
entering into any settlement of any Claim or proceeding or ceasing to defend
such Claim.
11.6 LIMITATION. The respective indemnification obligations of the
Sellers and Selfix identified in Sections 11.3 and 11.4 of this agreement shall
be subject to the following limitations: except for the Sellers Indemnitees
related to Taxes (pursuant to the representations and warranties of
Section 5.9), neither party shall be liable to indemnify the other party if the
aggregate value of the indemnification obligation is less than or equal to
Twenty-Five Thousand Dollars ($25,000.00); but done of the foregoing
limitations shall apply in the event of the fraud or willful dishonesty of the
party with the indemnification obligation. Sellers' floor on claims under this
Article XI is subject to increase under Section 5.13.
11.7 TAXES. Selfix and Sellers shall treat any indemnification payment
made pursuant to Section 11.3 or 11.4 as an adjustment to the Purchase Price.
11.8 PRODUCT LIABILITY. With respect to Claims, demands,
administrative proceedings or suits based on the manufacture or sale of
products, or for alleged breach of an express or implied warranty, Sellers
shall be responsible for demands and liabilities with respect to services
rendered or goods that were manufactured prior to the date of Closing,
regardless of whether such goods may have been sold or shipped subsequent to
the date of Closing.
11.9 LIMITATION OF LIABILITY. Notwithstanding any other provision of
this Agreement, the liability of any individuals shall not exceed the value of
the Selfix stock received by them pursuant to this Agreement.
11.10 RIGHT OF SETOFF. The Parties agree that Royalty Payments may be
setoff to satisfy claims in excess of the warranty basket as set forth in
Paragraph 11.6 above and as provided below. In the event that Selfix has a bona
fide claim in excess of such warranty basket, all Royalty Payments, up to the
amount of such bona fide claim, shall be paid in escrow. As soon as reasonably
possible, such claim shall be resolved by arbitration conducted in Cleveland,
Ohio in accordance with the rules of the American Arbitration Association. The
prevailing party shall be entitled to the escrowed funds as determined by the
Arbitrator in addition to reasonable attorney fees.
ARTICLE XII
GENERAL PROVISIONS
12.1 AMENDMENT AND WAIVER. No amendment or waiver of any provision of
this Agreement shall in any event be effective, unless the same shall be in
writing and signed by Selfix and Sellers, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
12.2 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be sent by registered or certified
mail, postage prepaid, or by facsimile, as follows:
21
<PAGE> 22
(a) If to any Sellers:
(Name of Party)
c/o Dennis Buckshaw
12408 Stark Road
Livonia, Michigan 48150
with a copy to:
R. Peter Prokop
Raymond & Prokop, P.C.
Attorneys and Counselors
2000 Town Center
Suite 2400
Southfield, Michigan 48075
(b) If to Selfix:
Selfix, Inc.
4501 West 47th Street
Chicago, Illinois 60632
Attention: James R. Tennant
With a copy to:
Jeffrey C. Rubenstein
Much Shelist Freed Denenberg Ament
Bell and Rubenstein, P.C.
200 N. LaSalle Street, Suite 2100
Chicago, Illinois 60601-1095
FAX: (312) 621-1750
Any party may change its address for receiving notice by written notice given
to the others named above.
12.3 PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors, assigns
and any personal representatives. Nothing in the Agreement, express or implied,
is intended to confer on any person other than the parties and their respective
successors or permitted assigns, any rights or remedies under or by reason of
this Agreement.
12.4 ENTIRE TRANSACTION. This Agreement including any attachments,
exhibits, and schedules hereto, and the other documents referred to herein and
therein contain the entire understanding between the parties with respect to
the transactions contemplated hereby and supersede all other agreements and
understandings between the parties with respect to the subject matter hereof,
including but not limited to the Memorandum Agreement dated the 26th day of
May, 1995.
12.5 SPECIFIC PERFORMANCE. The breach of any provision of this
Agreement may cause irreparable harm to the non-breaching parties. Accordingly,
each party to this Agreement shall have the remedies which are available to him
or it for the violation of
22
<PAGE> 23
any of the terms of this Agreement, including but not limited to the equitable
remedy of specific performance.
12.6 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Illinois, exclusive of its
principles of conflict of laws.
12.7 SEVERABILITY. Should any provision of this Agreement be declared
invalid, void or unenforceable for any reason, the remaining provisions hereof
shall remain in full force and effect.
12.8 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.9 EXHIBITS. All the exhibits, attachments and schedules attached
hereto are incorporated herein and made a part of this Agreement by reference
thereto.
12.10 ASSIGNMENT. Neither Mericon, Sellers nor Selfix shall have the
authority to assign its rights or obligations under this Agreement without the
prior written consent of the other party, except that, without such consent,
Selfix may assign this Agreement or any interest herein, by operation of law or
otherwise to (i) any wholly-owned subsidiary of Selfix; or (ii) any successor
to all or substantially all of Selfix's capital stock, assets or business, by
dissolution, merger, consolidation, transfer of assets or otherwise.
12.11 EXPENSES. Except as otherwise expressly provided herein, each
party to this agreement shall pay its own costs and expenses in connection with
the transactions contemplate hereby.
12.12 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the day and year first above written.
MERICON CORPORATION SELFIX, INC.
By: /s/ Dennis Buckshaw BY: /s/ James R. Tennant
------------------------------ -------------------------------
Dennis Buckshaw, President James R. Tennant, President
CLAW, L.L.C.
By: /s/ Dennis Buckshaw
------------------------------
Dennis Buckshaw, Manager
/s/ Dennis Buckshaw
---------------------------------
Dennis Buckshaw, Individually
23
<PAGE> 24
With respect to Paragraphs 5.9 and 5.13, Denshaw Corporation, a
Michigan corporation, hereby joins the Sellers with respect to the warranties
and representations made therein.
DENSHAW CORPORATION
By: /s/ Dennis Buckshaw
---------------------------------
Dennis Buckshaw, President
24
<PAGE> 1
Exhibit 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "HOME PRODUCTS INTERNATIONAL, INC.", FILED IN THIS OFFICE ON
THE SEVENTH DAY OF FEBRUARY, A.D., 1997, 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[GREAT SEAL OF DELAWARE]
/s/ Edward J. Freel
[SECRETARY'S OFFICE LOGO] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8322578
DATE: 02-19-97
<PAGE> 2
CERTIFICATE OF INCORPORATION
OF
HOME PRODUCTS INTERNATIONAL, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "DELAWARE GENERAL CORPORATION LAW") hereby certifies that:
FIRST: The name of the Corporation (hereinafter called the "CORPORATION")
is:
Home Products International, Inc.
SECOND: The address, including street, number, city and county of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, Wilmington, DE 19805, New Castle County, and the name of the registered
agent of the Corporation in the State of Delaware at such address is
Corporation Service Company.
THIRD: The nature of the business and of the purposes to be conducted and
promoted by the Corporation shall be to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Eight Million (8,000,000) shares. Of such
authorization, Seven Million Five Hundred Thousand (7,500,000) are designated
as Common Stock, $0.01 par value per share, and Five Hundred Thousand (500,000)
are designated as Preferred Stock, $0.01 par value per share. The Preferred
Stock may be issued from time to time in one or more series. The number of
shares, the stated value and interest rate, if any, of each such series and the
preferences and relative, participating and special rights and the
qualifications, limitations or restrictions shall be fixed in the case of each
series by resolution of the Board of Directors at the time of issuance subject
in all cases to the laws of the State of Delaware applicable thereto, and set
forth in a certificate of designation filed and recorded with respect to each
series in accordance with the laws of the State of Delaware.
Any and all such shares issued, and for which the full consideration has
been paid or delivered, shall be deemed fully paid stock and the holder of such
shares shall not be liable for any further call or assessment or any other
payment thereon.
FIFTH: The name and the mailing address of the sole Incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
Karen A. Cohen c/o Much Shelist Freed Denenberg
Ament Bell & Rubenstein, P.C.
200 North LaSalle Street
Suite 2100
Chicago, Illinois 60601
1
<PAGE> 3
SIXTH: The books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of Directors or in
the By-Laws of the Corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation as the case may be,
and also on this Corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the Corporation and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, it is
further provided:
1. The number of directors of the Corporation shall be as specified in
the By-Laws of the Corporation but such number may from time to time be
increased or decreased in such manner as prescribed by the By-Laws. In no
event shall the number of directors be less than the minimum prescribed by law.
The election of directors need not be by ballot. Directors need not be
stockholders.
2. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized
and empowered to make, alter, amend and repeal By-Laws, subject to the power of
the stockholders to alter or repeal By-Laws made by the Board of Directors.
3. Any director or any officer elected or appointed by the stockholders
or by the Board of Directors may be removed at any time in such manner as shall
be provided in the By-Laws of the Corporation.
4. Stockholders of the Corporation shall have no preemptive right to
subscribe to any capital stock to be hereafter issued, whether now authorized
and unissued or hereafter authorized.
2
<PAGE> 4
5. In the absence of fraud, no contract or other transaction between the
Corporation and any other corporation and no act of the Corporation, shall in
any way be affected or invalidated by the fact that any of the directors of the
Corporation are pecuniarily or otherwise interested in, or are directors or
officers of, such other corporation; and in the absence of fraud, any director,
individually, or any firm of which any director may be a member, may be a party
to, or may be pecuniarily or otherwise interested in, any contract or
transaction of the Corporation; provided, in any case, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors or the majority thereof; and any director of the
Corporation, who is also a director or officer of any such other corporation,
or who is also interested, may be counted in determining the existence of a
quorum at any meeting of the Board of Directors of the Corporation which shall
authorize any such contract, act or transaction, and may vote thereat to
authorize any such contract, act or transaction, with like force and effect as
if he were not such director or officer of such other corporation, or not so
interested.
6. To the fullest extent permitted by the Delaware General Corporation
Law as it now exists or may be hereafter amended, no director of this
Corporation shall be liable to this Corporation or any of its stockholders for
monetary damages for breach of fiduciary duty as a director.
NINTH:
(A) Any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"PROCEEDING"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee
or agent, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by and in the manner set forth in the Delaware
General Corporation Law, as the same exists, or hereafter may be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
paragraph (b) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The Corporation may advance to the
person seeking indemnification the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person
3
<PAGE> 5
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified under this Section or otherwise.
(B) If a claim under paragraph (a) of this Article is not paid in full by
the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
(C) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of stockholders or disinterested
directors or otherwise.
(D) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability
or loss under the Delaware General Corporation Law.
(E) For the purposes of this Article, references to "the Corporation"
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Article with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
For the purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fine" shall include any excise
taxes assessed on
4
<PAGE> 6
a person with respect to any employee benefit plan; and reference to
"serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties
on, or involves services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article.
TENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the Corporation by
this Certificate are granted subject to the provisions of this Article TENTH.
Executed at Chicago, Illinois on the 5th day of February, 1997.
/s/ Karen A. Cohen
-------------------------
Karen A. Cohen
Incorporator
5
<PAGE> 1
EXHIBIT 3.2
================================================================================
By-Laws
of
HOME PRODUCTS INTERNATIONAL, INC.
(a Delaware Corporation)
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page Number
ARTICLE 1 OFFICES..................................................... 1
ARTICLE 2 STOCKHOLDERS................................................ 1
SECTION 2.1. ANNUAL MEETING...................................... 1
SECTION 2.2. SPECIAL MEETINGS.................................... 1
SECTION 2.3. PLACE OF MEETING.................................... 1
SECTION 2.4. NOTICE OF MEETING................................... 1
SECTION 2.5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.. 2
SECTION 2.6. VOTING LISTS........................................ 2
SECTION 2.7. QUORUM.............................................. 2
SECTION 2.8. PROXIES............................................. 3
SECTION 2.9. VOTING OF SHARES.................................... 3
SECTION 2.10. INSPECTORS.......................................... 3
SECTION 2.11. VOTING OF SHARES BY CERTAIN HOLDERS................. 3
SECTION 2.12. VOTING BY BALLOT.................................... 3
ARTICLE 3 DIRECTORS................................................... 4
SECTION 3.1. GENERAL POWERS...................................... 4
SECTION 3.2. NUMBER, TENURE AND QUALIFICATION.................... 4
SECTION 3.3. REGULAR MEETINGS.................................... 4
SECTION 3.4. SPECIAL MEETINGS.................................... 4
SECTION 3.5. NOTICE.............................................. 4
SECTION 3.6. QUORUM.............................................. 4
SECTION 3.7. MANNER OF ACTING.................................... 4
SECTION 3.8. VACANCIES........................................... 4
SECTION 3.9. COMPENSATION........................................ 4
SECTION 3.10. INFORMAL ACTION BY BOARD OF DIRECTORS............... 5
SECTION 3.11. PARTICIPATION BY CONFERENCE TELEPHONE............... 5
SECTION 3.12 COMMITTEES.......................................... 5
ARTICLE 4 OFFICERS.................................................... 5
SECTION 4.1. NUMBER.............................................. 5
SECTION 4.2. ELECTION AND TERMS OF OFFICE........................ 6
SECTION 4.3. REMOVAL............................................. 6
SECTION 4.4. VACANCIES........................................... 6
SECTION 4.5. THE CHAIRMAN OF THE BOARD........................... 6
SECTION 4.6. THE PRESIDENT....................................... 6
SECTION 4.7. THE VICE PRESIDENTS................................. 6
SECTION 4.8. THE TREASURER....................................... 6
SECTION 4.9. THE CONTROLLER...................................... 7
SECTION 4.10. THE SECRETARY....................................... 7
SECTION 4.11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES...... 7
SECTION 4.12. SALARIES............................................ 7
ARTICLE 5 INDEMNIFICATION AND INSURANCE............................... 7
i
<PAGE> 3
SECTION 5.1. RIGHT TO INDEMNIFICATION............................ 7
SECTION 5.2. RIGHT OF CLAIMANT TO BRING SUIT..................... 8
SECTION 5.3. NON-EXCLUSIVITY OF RIGHTS........................... 8
SECTION 5.4. INSURANCE........................................... 8
SECTION 5.5. CONSOLIDATION....................................... 9
ARTICLE 6 CONTRACTS, LOANS, CHECKS AND DEPOSITS...................... 9
SECTION 6.1. CONTRACTS........................................... 9
SECTION 6.2. LOANS............................................... 9
SECTION 6.3. CHECKS, DRAFTS, ETC................................. 9
SECTION 6.4. DEPOSITS............................................ 9
ARTICLE 7 CERTIFICATES FOR SHARES AND THEIR TRANSFER................. 10
SECTION 7.1. CERTIFICATES FOR SHARES............................. 10
SECTION 7.2. TRANSFER OF SHARES.................................. 10
SECTION 7.3. REGULATIONS......................................... 10
SECTION 7.4. FACSIMILE SIGNATURES................................ 10
ARTICLE 8 FISCAL YEAR................................................ 11
ARTICLE 9 DIVIDENDS.................................................. 11
ARTICLE 10 SEAL....................................................... 11
ARTICLE 11 WAIVER OF NOTICE........................................... 11
ARTICLE 12 AMENDMENTS TO THE BY-LAWS.................................. 11
ii
<PAGE> 4
HOME PRODUCTS INTERNATIONAL, INC. BY-LAWS
ARTICLE 1
OFFICES
The principal office of the Corporation and the registered office of the
Corporation required by the General Corporation Law of Delaware to be
maintained in the State of Delaware shall be 1013 Centre Road, City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation in Delaware shall be the Corporation Service Company. The
Corporation may have such other offices, either within or without the State of
Delaware, as the business of the Corporation may require from time to time.
ARTICLE 2
STOCKHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the stockholders shall
be held on the third Wednesday of May, or such other date designated by the
Board of Directors, at such hour as shall be designated in the notice of the
meeting for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein for any annual meeting, or at any adjournment thereof,
the Board of Directors shall cause the election to be held at a meeting of the
stockholders as soon thereafter as conveniently may be.
SECTION 2.2. SPECIAL MEETINGS. Special meetings of the stockholders may be
called by the President, or by the Board of Directors, and shall be called by
the President at the written request of the stockholders of record holding not
less than one-third of all the outstanding voting shares of the Corporation
entitled to vote at such meeting specifying the purposes for which such meeting
shall be called.
SECTION 2.3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual or special meeting. If no designation is made, the place of
meeting shall be the registered office of the Corporation in the State of
Delaware.
SECTION 2.4. NOTICE OF MEETING. Written or printed notice stating the
place, day and hour of the meeting, and in the case of a special meeting, the
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the case of a
merger or consolidation not less than twenty nor more than sixty days before
the meeting, either personally or by mail, by or at the direction of the
President or the Secretary to each stockholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the stockholder at his
address as it appears on the records of the Corporation, with postage thereon
prepaid.
Whenever notice is required to be given under any provision of these
By-Laws or of the Certificate of Incorporation, to any person with whom
communication is unlawful, the giving of
<PAGE> 5
such notice to such person shall not be required. Any action or meeting
which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such
notice had been duly given. Whenever notice is required to be given under these
By-Laws or the Certificate of Incorporation to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of
the taking of action by written consent without a meeting to such person during
the period between such two consecutive annual meetings, or (ii) all, and at
least two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any meeting which shall be taken or held without notice to such
person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the Corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated.
SECTION 2.5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining stockholders entitled to notice of or to vote at any
meeting of stockholders, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors of the Corporation may provide that the
stock transfer books shall be closed for a stated period but not to exceed, in
any case, sixty days. If the stock transfer books shall be closed for the
purpose of determining stockholders entitled to notice of or to vote at a
meeting of stockholders, such books shall be closed for at least ten days, or
in the case of a merger or consolidation, at least twenty days, immediately
preceding such meeting. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than sixty
days and, for a meeting of stockholders, not less than ten days, or in the case
of a merger or consolidation, not less than twenty days, immediately preceding
such meeting. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, as the case may be, the record date for such determination of
stockholders shall be: (a) the day next preceding the date on which notice of
the meeting is mailed, or (b) the date on which the resolution of the Board of
Directors declaring such dividend is adopted.
SECTION 2.6. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the Corporation shall make at least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the registered office
of the Corporation and shall be subject to inspection by any stockholder for
any purpose germane to the meeting at any time during usual hours. Such list
shall also be produced and kept open at the time and place of the meeting and
during the whole time of the meeting shall be subject to the inspection of any
stockholder who is present. The original share ledger or transfer book, or a
duplicate thereof kept in this State, shall be prima facie evidence as to the
identity of the stockholders entitled to examine such list or share ledger or
transfer book or to vote at any meetings of stockholders.
SECTION 2.7. QUORUM. One-third of the outstanding shares of the
Corporation, represented in person or by proxy, shall constitute a quorum at
any meeting of stockholders, unless the representation of a larger number be
required by law, and, in that case, the representation of the number so
requested shall constitute a quorum; provided, that if less than a quorum is
represented at said meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice other than
announcement at the meeting. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting in person or by proxy
shall be the act of the stockholders, unless the vote of a
2
<PAGE> 6
greater number or voting by classes is required by the Delaware General
Corporation Law or the Certificate of Incorporation.
SECTION 2.8. PROXIES. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact and delivered to inspectors at the meeting. Such proxy shall
be filed with the Secretary of the Corporation before or at the time of the
meetings. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 2.9. VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote upon each matter submitted to vote at a
meeting of stockholders.
SECTION 2.10. INSPECTORS. At each meeting of the stockholders, the polls
shall be opened and closed, the proxies and ballots shall be received and taken
in charge, and all questions touching the qualification of voters and the
validity of proxies and the acceptance or rejection of votes, shall be decided
by two inspectors. Such inspectors shall be appointed by the Board of Directors
before or at the meeting, or, if no such appointment shall have been made, then
by the presiding officer at the meeting. If for any reason either of the
inspectors previously appointed shall fail to attend or refuse or be unable to
serve, inspectors shall be appointed in like manner in their place.
SECTION 2.11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, conservator or trustee may be voted by such fiduciary,
either in person or by proxy, but no guardian, conservator or trustee shall be
entitled, as such fiduciary, to vote shares held by him without a transfer of
such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares unless and until in the transfer by the pledgor on the books of the
Corporation the pledgor has expressly empowered the pledgee to vote thereon, in
which case only the pledgee or his proxy may represent such stock and be
entitled to vote thereon.
Shares of its own stock belonging to the Corporation shall neither
directly nor indirectly be voted or counted for quorum purposes at any meeting.
SECTION 2.12. VOTING BY BALLOT. The votes for directors, and, upon demand
of any stockholder or where required by law the votes on any question before
the meeting, shall be by ballot. On all other questions the voting need not be
by written ballot.
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ARTICLE 3
DIRECTORS
SECTION 3.1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors.
SECTION 3.2. NUMBER, TENURE AND QUALIFICATION. The number of directors of
the Corporation shall be six. The number of directors may be increased or
decreased from time to time by resolution of the Board of Directors. Each
director of the Corporation shall be elected by ballot annually by the
stockholders and shall hold office until the next annual meeting of
stockholders or until his successor shall have been duly elected and qualified.
Directors need not be residents of Delaware or stockholders of the Corporation.
SECTION 3.3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this By-Law, immediately after, and at
the same place as, the annual meeting of stockholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Delaware, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 3.4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or one-third of the
Directors then in office. The person or persons authorized to call special
meetings of the Board of Directors may fix any place, either within or without
the State of Delaware, as the place for holding any special meeting of the
Board of Directors called by them.
SECTION 3.5. NOTICE. Notice of any special meeting shall be given at least
two days previous thereto by written notice delivered personally or mailed to
each director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at any meeting shall constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
SECTION 3.6. QUORUM. One-third of the number of directors fixed by these
By-Laws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, provided, that if less than a quorum is
present at said meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
SECTION 3.7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 3.8. VACANCIES. Any vacancy occurring in the Board of Directors
and any directorship to be filled by reason of an increase in the number of
directors may be filled by the directors at a special meeting called for such
purpose. Any director elected to such vacancy shall hold office until the next
annual meeting of stockholders.
SECTION 3.9. COMPENSATION. The Board of Directors, by the affirmative vote
of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for
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services to the Corporation as directors, officers or otherwise. By resolution
of the Board of Directors, the directors may be paid their expenses, if any, of
attendance at each meeting of the Board. In the event the Internal Revenue
Service shall deem any compensation (including any fringe benefit) paid to a
director to be unreasonable or excessive, such director must repay to the
Corporation the excess over what is determined by the Internal Revenue Service
to be reasonable compensation, with interest on such excess at the rate of nine
percent (9%) per annum, within ninety days after notice from the Corporation.
SECTION 3.10. INFORMAL ACTION BY BOARD OF DIRECTORS. Any action required
or permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board
or committee consent thereto in writing and all such writings are filed with
the minutes of proceedings of the Board or committee.
SECTION 3.11. PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board
of Directors or of any committee designated by the Board of Directors may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such meeting
shall constitute attendance and presence in person at the meeting of the person
or-persons so participating.
SECTION 3.12 COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate an executive committee and one or
more other committees, and may determine the quorum thereof, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors, or in these By-Laws, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to
amending the Certificate of Incorporation by the Board of Directors, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the By-Laws of the
Corporation; and, unless the Board of Directors, By-Laws or Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to
adopt a Certificate of Ownership and Merger.
ARTICLE 4
OFFICERS
SECTION 4.1. NUMBER. The principal officers of the Corporation shall be a
Chairman of the Board of Directors and a President, both of whom shall be
directors, and a Treasurer, a Comptroller and a Secretary, and such Vice
Presidents (the number thereof to be determined by the Board of Directors),
Assistant Treasurers, Assistant Secretaries or other officers as may be elected
or appointed by the Board of Directors. Any two or more offices may be held by
the same person, except that the office of President and Secretary may not be
held by the same person.
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SECTION 4.2. ELECTION AND TERMS OF OFFICE. The Chairman of the Board, the
Vice Chairman and the President of the Corporation shall be elected by the
Board of Directors at the first meeting of the Board of Directors; the other
officers may be appointed by the Board of Directors. If the election or
appointment of officers shall not be held at such meeting, such election or
appointment shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until his successor shall have been duly elected or
appointed and shall have qualified or until his death or until he shall resign
or shall have been removed in the manner hereinafter provided. Election or
appointment of an officer or agent shall not of itself create contract rights.
In its discretion, the Board of Directors may leave unfilled any office except
those of President, Treasurer and Secretary.
SECTION 4.3. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed.
SECTION 4.4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, or because of the creation
of an office, may be filled by the Board of Directors for the unexpired portion
of the term at any time.
SECTION 4.5. THE CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors ("Chairman") shall be the chief executive officer of the Corporation
and, subject to the Board of Directors and the executive committee, shall be in
general charge of the affairs of the Corporation. The Chairman of the Board
shall preside at all meetings of the stockholders and of the Board of
Directors.
SECTION 4.6. THE PRESIDENT. The President shall be the chief operating
officer of the Corporation and shall, subject to the Chairman of the Board of
Directors and the Board itself, have general charge of the business and affairs
of the Corporation. He shall keep the Board of Directors and the executive
committee and the chairman of each fully informed and shall freely consult them
concerning the business of the Corporation in his charge. He may sign, with the
Secretary or any other officer of the Corporation thereunto authorized by the
Board of Directors, certificates for shares of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the chairman of the Board of Directors or the Board itself from
time to time.
SECTION 4.7. THE VICE PRESIDENTS. In the absence of the President or in
the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any Vice President may sign, with the Secretary or an Assistant
Secretary, certificates for shares of the Corporation, and shall perform such
other duties as from time to time may be assigned to him by the President or by
the Board of Directors.
SECTION 4.8. THE TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors shall determine.
He shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation, receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositaries
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as shall be selected in accordance with the provisions of Article 6 of these
By-Laws; (b) in general perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
SECTION 4.9. THE CONTROLLER. The controller shall be the chief accounting
officer of the Corporation. He shall keep or cause to be kept all books of
accounts and accounting records of the Corporation, and shall prepare or have
prepared appropriate financial statements for submission to the Board of
Directors, executive committee, and stockholders. He shall perform all other
duties incident to his office.
SECTION 4.10. THE SECRETARY. The Secretary shall: (a) keep the minutes of
the stockholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all certificates for shares
prior to the issue thereof and to all documents, the execution of which on
behalf of the Corporation under its seal is duly authorized in accordance with
the provisions of these By-Laws; (d) keep a register of the post office address
of each stockholder which shall be furnished to the Secretary by such
stockholder; (e) sign with the President, or a Vice President, certificates for
shares of the Corporation, the issue of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the Corporation; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors.
SECTION 4.11. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
Assistant Treasurers shall respectively, if required by the Board of Directors,
give bonds for the faithful discharge of their duties in such sums and with
such sureties as the Board of Directors shall determine. The Assistant
Secretaries as thereunto authorized by the Board of Directors may sign with the
President or a Vice President certificates for shares of the Corporation, the
issue of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers and Assistant Secretaries, in general,
shall perform such duties as shall be assigned to them by the Treasurer or the
Secretary, respectively, or by the President or the Board of Directors.
SECTION 4.12. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation. In the event that the Internal Revenue Service shall deem
any compensation (including any fringe benefit) paid to an officer to be
unreasonable or excessive, such officer must repay to the Corporation the
excess over what is determined by the Internal Revenue Service to be reasonable
compensation, with interest on such excess at the rate of nine percent (9%) per
annum, within 90 days after notice from the Corporation.
ARTICLE 5
INDEMNIFICATION AND INSURANCE
SECTION 5.1. RIGHT TO INDEMNIFICATION. Any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to
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employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by and in the manner set forth in the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 5.2
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors
of the Corporation. The right to indemnification conferred in this Section
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance
of its final disposition; provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise.
SECTION 5.2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section 5.1
of this Article is not paid in full by the Corporation within thirty days after
a written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant has not met such applicable
standard or conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
SECTION 5.3. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
SECTION 5.4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense,
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liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
SECTION 5.5. CONSOLIDATION. For the purposes of this Article, references
to "the Corporation" include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers and
employees or agents, so that any person who is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
For the purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
ARTICLE 6
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 6.1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 6.2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 6.3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 6.4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositaries as the Board of Directors may
select.
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ARTICLE 7
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 7.1. CERTIFICATES FOR SHARES. Certificates representing shares of
the Corporation shall be in such form not inconsistent with the Certificate of
Incorporation as may be determined by the Board of Directors. No certificate
shall be valid unless signed by the Chairman, President or a Vice President and
by the Secretary or an Assistant Secretary, but where such certificate is
signed by a registrar other than the Corporation or its employee, the
signatures of any such Chairman, President, Vice President, Secretary or
Assistant Secretary and, where authorized by resolution of the Board of
Directors, any transfer agent may be facsimiles. In case any such Chairman,
President, Vice President, secretary or Assistant Secretary or transfer agent
of the Corporation who shall have signed, or whose facsimile signature or
signatures shall have been placed upon any certificate shall cease to serve in
such capacity before such certificate shall have been issued, such certificate
may be issued by the corporation with the same effect as though the person or
persons who signed such certificate, or whose facsimile signature or signatures
shall have been placed thereon, were continuing to serve in such capacities at
the date of issue. All certificates for shares shall be consecutively numbered
or otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
SECTION 7.2. TRANSFER OF SHARES. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
SECTION 7.3. REGULATIONS. The Board of Directors, and the executive
committee also, shall have power and authority to make all such rules and
regulations as respectively they may deem expedient, concerning the issue,
transfer and registration of certificates for shares of the capital stock of
the Corporation.
The Board of Directors or the executive committee may appoint one or more
transfer agents or assistant transfer agents and one or more registrars of
transfers, and may require all stock certificates to bear the signature of a
transfer agent or assistant transfer agent and a registrar of transfers. The
Board of Directors or the executive committee may at any time terminate the
appointment of any transfer agent or any assistant transfer agent or any
registrar of transfers.
SECTION 7.4. FACSIMILE SIGNATURES. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these By-Laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or the executive
committee.
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ARTICLE 8
FISCAL YEAR
The fiscal year of the Corporation consists of either the fifty-two or
fifty-three weeks ending on the last Saturday in December.
ARTICLE 9
DIVIDENDS
The Board of Directors may from time to time, declare, and the Corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Certificate of Incorporation.
ARTICLE 10
SEAL
The Board of Directors shall provide a suitable seal which shall have
inscribed thereon the name of the Corporation, which seal shall be in charge of
the Secretary. If and when so directed by the Board of Directors or by the
executive committee, if any, duplicates of the seal may be kept and be used by
the Treasurer or by any Assistant Secretary or Assistant Treasurer.
ARTICLE 11
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions
of these By-Laws or under the provisions of the Certificate of Incorporation or
under the provisions of the Delaware General Corporation law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice.
ARTICLE 12
AMENDMENTS TO THE BY-LAWS
These By-Laws may be altered, amended or repealed and new By-Laws may be
adopted at any meeting of the Board of Directors of the Corporation by a
majority of the directors present at the meeting, subject to the power of the
stockholders to alter or repeal By-Laws made by the Board of Directors.
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Exhibit 10.10
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of January, 1997 (the "EFFECTIVE
DATE"), between Selfix, Inc., an Illinois corporation (the "COMPANY") and James
R. Tennant ("EMPLOYEE").
RECITALS
A. Pursuant to that certain Employment Agreement dated May 1, 1994 (the
"AGREEMENT"), Selfix hired the Employee to serve as its chief executive
officer.
B. During the time the Employee has served as the Company's chief executive
officer, certain changes have occurred in both the economy as a whole and the
performance of the Company.
C. The Company and the Employee previously amended certain provisions of the
Agreement to account for certain changes desired by both parties and said
changes are reflected in accordance with the terms and provisions of that
certain First Amendment to Employment Agreement dated May 1, 1995 ("FIRST
AMENDMENT").
D. Since the execution of the First Amendment, certain changes have occurred in
both the economy as a whole and the performance of the Company. The Company and
the Employee therefore desire to amend certain provisions of the Agreement and
the First Amendment to account for such changes, and to amend and restate those
terms in a single document in accordance with the terms and provisions hereof.
CLAUSES
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth below, the parties agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions contained in this
Agreement, the Company employs Employee as its Chairman and Chief Executive
Officer and Employee accepts such employment with the Company.
2. TERM. Unless earlier terminated in accordance herewith, Employee's
employment with the Company under this Agreement shall begin as of January 1,
1997 and continue until December 31, 1999 ("INITIAL TERM"). Employee's term of
employment with the Company will thereafter be subject to automatic one-year
extensions
<PAGE> 2
commencing January 1, 2000 ("RENEWAL TERM") unless one party notifies the other
in writing of an intention not to renew no less than 60 days prior to October
15, 1999. The Employee's actual term of employment with the Company under the
Agreement, inclusive of the Initial Term and the Renewal Term or any shorter
period will be collectively referred to as the "TERM".
3. DUTIES. Employee agrees to devote his exclusive and full-time attention
to the performance of his duties as Chairman and Chief Executive Officer of the
Company, which shall include such senior executive duties for the Company as
the Company's Board of Directors (the "BOARD") may from time to time assign to
Employee. Employee shall at all times discharge his duties in consultation with
and subject to the general direction and control of the Board.
4. BOARD OF DIRECTORS. During the Term and each Renewal Term, Employee
shall continue to serve on the Board and, if consistent with the Board's
fiduciary duties, shall be maintained as a management nominee for retention on
the Board.
5. COMPENSATION. In consideration of the services Employee will perform
for the Company under this Agreement, the Company shall compensate Employee
during the Term at an annual base salary of Two Hundred Seventy-Five Thousand
Dollars ($275,000). The Company shall pay the Employee such base salary in
equal monthly installments, reduced solely by all applicable payroll and
withholding taxes, and other legal garnishments. The Company shall compensate
Employee during the Term in an amount no less than the foregoing annual base
salary amount, subject to upward adjustments as the Board, in its sole
discretion, may determine.
In addition to base salary, in each fiscal year in which the Board
determines that the successful operation of the Company merits the Employee
earning a bonus, the Board shall declare and pay such bonus to the Employee.
The Board shall have broad discretion to determine what factors to consider in
reviewing whether or not the Company's operation was successful enough to merit
such bonus payment to the Employee. The Company shall pay any such bonus to the
Employee as the Board determines, reduced solely by all applicable payroll and
withholding taxes and other legal garnishments.
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6. EXPENSES. The Company shall reimburse Employee for all reasonable and
necessary expenses incurred by him in executing his duties on behalf of the
Company; provided, however, that such reimbursement shall be conditioned upon
Employee's compliance with all policies adopted by the Company regarding
expense reimbursement, including without limitation, policies regarding the
documentation and timely submission of such expenses.
7. BENEFITS PLANS. During the Term, Employee shall be entitled to
participate in those of the Company's employee benefit plans including any
profit sharing plan, stock purchase plan and life, medical and other insurance
plans in accordance with the terms of such plans for which he qualifies. In
addition, during the Term, the Company shall pay the annual premiums on
Employee's existing One Million Dollar ($1,000,000) universal life insurance
policy, issued by Pacific Mutual Insurance Company and known as Policy Number
VP60003670, provided that such annual premiums do not exceed Seven Thousand
Five Hundred Dollars ($7,500.00) in any year.
8. COMPANY CAR. During the Term, Employee will be provided a Company car
which shall be a BMW-740i(L) or an equivalent make and model at Employee's
option.
9. VACATION. Employee shall be entitled to vacation in accordance with the
Company's vacation policy for senior executives.
10. RESIDENCE. Employee shall not be required to move his residence from
the Chicago metropolitan area in connection with this Agreement.
11. ILLNESS, DISABILITY OR DEATH. If during the Term, Employee shall be
unable to perform his material duties hereunder by reason of illness, physical
or mental disability, or other incapacity for a period of one hundred eighty
(180) consecutive days, or any shorter periods aggregating one hundred eighty
(180) days in any twelve (12) month period, the Company may, at its sole
option, terminate this Agreement by giving written notice to the Employee,
effective as of the date set forth in such notice, which shall in no event be
less than one (1) year after the giving of such notice. During this time,
Employee shall be entitled to all compensation, benefits, rights and
entitlement under this Agreement. Compensation shall, however, be reduced by
any amount
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<PAGE> 4
paid to Employee by any long-term disability insurance policy or coverage
provided by the Company or for which the Company paid the premiums. If Employee
dies during the Term, this Agreement shall thereupon immediately and
automatically terminate in its entirety, provided however, that all payments
which accrued to Employee prior to the date of his death in accordance with the
terms and conditions of the Company's employment manual that in effect, shall
be paid to the Employee's estate or beneficiaries in accordance with the
Company's standard payroll practices, or the terms of this Agreement if the
terms of this Agreement differ from said payroll practices.
12. SEVERANCE PAY. If the Company provides notice of intention not to
extend the Agreement for an additional year pursuant to paragraph 2 hereof,
then and in such event the Company shall pay Employee a one (1) time severance
payment of Two Hundred Fifty Thousand Dollars ($250,000), payable in twelve
(12) equal monthly installments following the termination of the Term. In
addition, Employee shall have the right to exercise solely those Stock Options
granted to him under Section 14 below which have vested in their entirety on or
prior to the date of the termination of the Employee. For example, if the
Employee's employment terminates in April of 1996, he shall be entitled to
exercise solely those Stock Options which vest on or before May 1, 1996, and
shall not have any other Stock Options under this Agreement.
13. CHANGE OF CORPORATE CONTROL.
(a) DEFINITIONS. For purposes of this Agreement, a "CHANGE OF CONTROL"
shall have occurred if an "Unrelated Third Party" (as defined in this Section)
becomes the beneficial owner of shares of stock in the Company representing
fifty percent (50%) or more of the total number of voting shares that may be
cast for the election of directors of the Company. For purposes of this
Agreement, an "UNRELATED THIRD PARTY" shall mean any individual or entity which
is not: (i) directly or indirectly related by birth or marriage to a member of
the Ragir family; (ii) a trust, estate, corporation or partnership owned by,
controlled by, or held for the benefit of a member of the Ragir family; or
(iii) an ESOP, or other qualified or non-qualified employee benefit plan
established, adopted or maintained by the Company or a beneficiary of any such
plan, or one of its affiliates.
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(b) TERMINATION FOLLOWING CHANGE OF CONTROL. If Employee's active
full-time employment with the Company terminates within one hundred eighty
(180) days after a Change of Control, either voluntary or involuntary, whether
by the Company or Employee:
(i) The Company shall pay Employee on the date of such termination an
amount equal to Five Hundred Thousand Dollars ($500,000); and
(ii) All stock options granted by the Company to Employee under Section 14
below shall become immediately vested and exercisable in accordance with their
terms.
(c) NO DUPLICATION. Notwithstanding anything to the contrary, if the
Employee first becomes entitled to payment pursuant to Section 13(b) above, he
shall not be entitled to severance payments under Section 12 above; conversely,
if the Employee first becomes entitled to severance payments under Section 12
above, he shall not be entitled to payments or acceleration of stock options
under this Section 13.
(d) SPECIAL COMPENSATION IF COMPANY SOLD FOR MINIMUM PRICE DURING
EMPLOYEE'S EMPLOYMENT. The Employee shall have the option to receive special
compensation under this Section (the "SPECIAL COMPENSATION OPTION"), if both of
the following occur: (i) the Company is sold for a price equal to or greater
than Five Dollars and Fifty Cents ($5.50) per share, irrespective of whether
such sale was a sale of stock or assets (if a sale of assets, then the purchase
price the Company receives for such assets shall be divided by the number of
shares of the Company outstanding on the closing date of such asset sale to
determine the per share price for purposes of this provision); and (ii) the
Employee is still employed by the Company on the closing of such sale. Under
the Special Compensation Option, the Employee shall have the option to receive
either: (i) a One Million Dollar ($1,000,000) payment from the Company; or (ii)
the Employee may exercise all "Stock Options," as defined in and as granted
under Section 14 of this Agreement, as if all such Stock Options were then
available and vested. The Employee shall provide the Company with written
notice of his election under the Special Compensation Option within fifteen
(15) days following the closing of the applicable sale of the Company (the
"NOTICE PERIOD"). If the Employee elects to receive payment
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<PAGE> 6
of One Million Dollars ($1,000,000), the Company shall make such payment,
reduced solely by all applicable payroll and withholding taxes and other
garnishments, within ten (10) days of the expiration of the Notice Period. If
on the other hand the Employee elects to exercise all his Stock Options under
Section 14 of this Agreement, the Employee shall pay for all such Stock Options
in full to the Company and upon receipt of such payment in the form of readily
available cash, the Company shall issue the stock subject to such Stock Options
to the Employee, within ten (10) days of the expiration of the Notice Period.
Notwithstanding anything to the contrary in the Agreement, if the Employee
exercises his Special Compensation Option under this Section 13(d), then 13(b)
above shall contemporaneously terminate in its entirety, and be of no further
force or effect, and the Employee shall have no rights to receive any payments
thereunder. Conversely, if the Employee exercises his right to receive
compensation under 13(b) above, then this Section 13(d) shall contemporaneously
terminate in its entirety, and be of no further force or effect.
14. STOCK OPTIONS.
(a) PRIOR GRANTS. Subject to the conditions identified in Section 14(c)
below and the vesting period identified in this Section, the Company has
granted the Employee the following options to purchase common stock of the
Company, at the following prices (collectively, the "STOCK OPTIONS"): (i) One
Hundred Thousand (100,000) shares of the Company's common stock for the price
of Six Dollars ($6.00) per share; (ii) an additional One Hundred Seventy-Five
Thousand (175,000) shares of the Company's common stock for a price of Seven
Dollars ($7.00) per share; and (iii) an additional Seventy-Five Thousand
(75,000) shares of the Company's common stock for a price of Eight Dollars
($8.00) per share. The Stock Options shall vest on a pro rata basis, with the
Employee becoming entitled to exercise one-third (1/3) of each of the Stock
Options identified in subparts (i), (ii) and (iii) of the first sentence of
this Section 14(a) on January 1 of each of 1997, 1998 and 1999. The Employee
may exercise the then vested portion(s) of the Stock Options at any time during
the three (3) year period commencing on January 1, 1997 and continuing until
and including December 31, 1999 (the "OPTION PERIOD"). The Employee may extend
the Option Period until and including April 30, 2005 if the daily closing price
for the Company's common stock for the entire month of December 1999 is equal
to or greater than Ten Dollars
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<PAGE> 7
($10.00) per share. Any such extension of the Option Period shall modify
the definition of "Option Period" as defined in this Agreement.
(b) NEW GRANT. Subject to the conditions identified in Section 14(c) below
and the vesting period identified in this subsection, the Company grants the
employee the following additional options to purchase common stock of the
Company, at the following prices (collectively, the "New Stock Options"): Two
Hundred Thousand (200,000) shares of the Company's common stock for a price of
Five Dollars ($5.00) per share. The New Stock Options shall vest on a pro rata
basis, with the Employee becoming entitled to exercise one-third (1/3) of each
of the New Stock Options on January 1 of each of 1997, 1998 and 1999. The
Employee may exercise the then vested portion(s) of the New Stock Options any
time during the three (3) year period commencing on January 1, 1997 and
continuing until and including December 31, 1999 (the "OPTION PERIOD"). The
Employee may extend the Option Period until and including April 30, 2005 if and
only if the average daily closing price for the Company's common stock for the
entire month of December, 1999 is equal to or greater than Ten Dollars ($10.00)
per share. Any such extension of the Option Period shall modify the definition
of "Option Period" as defined in this Agreement.
(c) FORFEITURE. The Stock Options and related rights set forth in this
Agreement are personal to the Employee. The Employee therefore may not assign,
pledge, alienate, devise or in any other manner transfer (voluntarily or
involuntarily) all or any part of the Stock Options. The Employee's attempt to
do so shall be void ab initio, and shall be without legal, beneficial or other
effect and shall result in the complete termination of all Stock Options of the
Employee as well as the Employee's rights to exercise the same under this
Agreement. Upon the Employee's death, the Stock Options granted in this
Agreement shall terminate in their entirety and be of no further force or
effect. The Employee therefore acknowledges and agrees that neither his estate
nor any of his successors, legatees, devisees or heirs shall have any rights
whatsoever to exercise any of the Stock Options. Finally, except for those
Stock Options which are exercisable on an accelerated basis following the
occurrence of a Change of Control or are exercisable under Section 12 above,
the Employee shall not have any right to exercise any of the Stock Options
under this Agreement if
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<PAGE> 8
he is no longer an Employee of the Company at the time he attempts to exercise
such Stock Option, or if the Employee materially breaches the provisions of
Sections 15 or 16 of this Agreement prior to such exercise, except that, if the
Company terminates the Employee without cause, then and solely in such event,
any Stock Options which would have vested in the calendar year of such
termination, shall vest and be exercisable by the Employee in accordance with
the applicable terms of this Agreement, as if such termination had occurred on
the final day of such calendar year.
15. CONFIDENTIALITY. Employee acknowledges that: (i) during the course of
his association and employment with the Company, he will be in contact with
suppliers and customers of the Company and will have access to the Company's,
its affiliates' and their respective confidential and proprietary information
including without limitation, their properties, research and development,
accounts, books and records, sales, know-how, software, technology, inventions,
techniques, profits, products, customers lists, requirements, suppliers, cost
data, memoranda, devices, processes, methods, procedures, formulas, contract
prices, pricing and other corporate activities, whether or not in written form
or marked "Confidential", whether developed by Employee or others, which relate
to the business operations, research development, engineering, products or
activities of the Company and/or its affiliates (collectively "CONFIDENTIAL
INFORMATION:); (ii) the Confidential Information constitutes "Trade Secrets" of
the Company, within the meaning of the Illinois Trade Secrets Act; (iii) all
documents, electronic, magnetic or other media and information which concern
the Confidential Information are highly confidential and also constitute "trade
secrets" as identified above; (iv) the Company has invested and will continue
to invest considerable sums of money to obtain and maintain its Confidential
Information; (v) the Company derives substantial economic benefit due to the
confidentiality of its Confidential Information and inventions; (vi) the
Company's competitors would obtain unfair economic and competitive advantages
if its Confidential Information or inventions were divulged; (vii) the useful
life of the Confidential Information based on general industry standards is
unlimited; (viii) the Company has instituted procedures to maintain the
confidentiality of its Confidential Information; (ix) the Company operates its
business throughout the World (the "RESTRICTED TERRITORY"); and (x) the
Confidential Information constitutes a
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<PAGE> 9
highly significant factor in the Company's ability to conduct its business
profitably.
Recognizing that the disclosure or improper use of Confidential
Information will cause serious and irreparable injury to the company, Employee
agrees that he will not at any time, directly or indirectly: (i) disclose,
assign or sell Confidential information to any third party or otherwise use
Confidential Information for his own benefit or the benefit of others unless
previously authorized, in writing, by the Company to do so; (ii) attack,
compromise, take any action or fail to take any action which could vitiate any
of the Company's rights, titles or interests in any of its trade secrets,
Confidential Information, inventions or "Assigned Intellectual Property" (as
defined in Section 17 below); or (iii) disassemble or reverse engineer any of
the Confidential Information, inventions or "Assigned Intellectual Property"
for himself or others. The Employee's obligations under this Section shall
remain in effect henceforth, notwithstanding termination of Employee's
employment with the Company for any reason.
16. NON-COMPETITION, NON-SOLICITATION. Employee agrees that, during the
Term, and if Employee is terminated for Cause (as defined below) is entitled to
severance pay as provided in Sections 12 or 13 above, or voluntarily resigns,
then for a period of twelve (12) months following such termination of
Employee's employment with the Company, he will not, directly or indirectly,
alone or in association with others, either as a principal, agent, owner,
shareholder, officer, director, partner, employee, lender, investor,
consultant, manager or in any other capacity engage in, have a financial
interest in or be in any way connected or affiliated with, or render advice or
services to any business which competes with the Company or its affiliates,
including any entity engaged in the manufacture or distribution of any products
which are manufactured, assembled or sold by the Company or its affiliates;
provided, however, that Employee may own less than five percent (5%) of the
outstanding securities of public companies which are engaged in the same
business as the Company or its affiliates. Employee further agrees that, during
the Term, and in the event that Employee is either terminated for Cause (as
defined below), is entitled to severance pay as provided in Section 12 above or
voluntarily resigns, then for a period of twelve (12) months following the
termination of Employee's employment with the
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Company, he will not, directly or indirectly, divert, take away, solicit or
interfere with any of the customers, accounts or employees of the Company or
its affiliates existing as of the Effective Date or subsequently acquired by
the Company or its affiliates during the Term. Employee expressly acknowledges
that his severance pay hereunder is adequate to support the employee's
livelihood for the period of the covenants set forth in Section 16, that he has
experience and expertise in areas which are unrelated to the business conducted
by the Company, that he shall be able to earn a livelihood without violating
the covenants set forth in Sections 15 and 16 of this agreement and that the
Company has relied upon Employee's representations concerning the adequacy of
his severance pay and that he has the ability to earn a livelihood in unrelated
occupations as a specific condition precedent to the Company agreeing to enter
into this Agreement and engage Employee. The parties have attempted to limit
Employee's rights to compete only to the extent necessary to protect the
Company from unfair competition. If, however, the restrictive covenants
contained in this Agreement are held to be unenforceable at any time, the
parties specifically direct the court, arbitrator or other trier of fact to
modify and enforce said covenants to the extent that it believes is reasonable
under the circumstances existing at that time, rather than deleting or
rendering unenforceable such restriction(s).
17. PROPERTY: INVENTIONS. Employee agrees that all discoveries,
inventions, ideas, concepts, research and other information, processes,
products, methods and improvements (collectively "INVENTIONS") which are
conceived, developed or otherwise made by him alone or jointly with others
during the Term, shall be the sole property of the Company. Employee therefore
grants, conveys, transfers, alienates and assigns exclusively to the Company,
for and throughout the world, in and for all languages (including but not
limited to computer languages and human languages, whether now existing or
subsequently developed) all rights, titles and interests (legal, equitable, use
or otherwise) which Employee has, may have in the future or may have the right
to claim now or in the future, in all Inventions, copyrights, patents,
trademarks, trade names and service marks (whether or not registered, including
all associated applications therefor and the right to file and register the
same in the Company's or any other name), modifications, improvements,
derivative works and/or other work which Employee conceives solely or jointly
with others
10
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(collectively THE "ASSIGNED INTELLECTUAL PROPERTY") which: (i) are related to
any trade secrets, Confidential Information or other proprietary materials of
the Company; (ii) are predicated upon or relate to work Employee performs for
the Company (whether or not done during normal working hours); (iii) Employee
develops based on materials, equipment, facilities or information of the
Company; or (iv) Employee develops during the one (1) year period immediately
following the termination of his employment with the Company for any reason, if
related to or competitive with the business or products of the Company. The
foregoing assignment by Employee is under any and all foreign or domestic,
federal, state or local copyright, trade secret, intellectual property, patent
or other laws, is intended to be all inclusive, and specifically includes the
right to sue for and collect and retain all damages associated with past,
present or future infringements of any or all of the Assigned Intellectual
Property. Employee acknowledges that the Company has provided him with a copy
of the Illinois Employee Patent Act (as set forth on attached SCHEDULE "17"),
that Employee has read said Act in its entirety prior to executing this
Agreement, and that he understands the Act's substantive provisions.
Employee's assignment of the Assigned Intellectual Property to the Company
under this Agreement constitutes a complete, absolute and exclusive transfer of
all rights (legal, equitable, use and otherwise) in the Assigned Intellectual
Property, whether such rights are currently existing or arise in the future.
The Employee does not reserve or retain any right, title or interest in any
Assigned Intellectual Property or any trade secrets, Confidential Information
or related information which concerns any Assigned intellectual Property.
Employee acknowledges and agrees that the Assigned Intellectual Property
constitutes the sole, exclusive and confidential property of the Company.
Employee shall disclose to the Company, in full, accurate detail and in
writing, all Inventions, derivative works, improvements and/or developments
(whether or not patentable, copyrightable or otherwise protectable under law)
which Employee makes or assists in making either during the course of his
employment with the Company or that in any way concern, relate to or are based
upon the Confidential Information, Assigned Intellectual Property or any other
trade secrets of the Company, and acknowledges that the same constitutes the
Company's sole property.
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If at any time the Company deems it necessary or appropriate, the Employee
shall execute any and all documents and shall provide such assistance
(including testifying in court or other judicial or administrative proceeding)
which the Company believes are necessary either to evidence or register the
assignment of rights made by the Employee in this Agreement, or to evidence or
register the rights so assigned.
If Employee ceases to be employed by the Company, or at any other time
upon request of the Company, he shall promptly return any records, agreements,
books of account, corporate memoranda, customer lists or other property
belonging to the Company or its customers.
18. REMEDIES. Employee understands the Company would not have any adequate
remedy at law for the material breach or threatened breach by Employee of any
one or more of the covenants set forth in this Agreement and agrees that, in
the event of any such material breach of threatened breach, the Company may, in
addition to the other remedies which may be available to it: (a) declare
forfeited any moneys representing accrued salary, bonus or other fringe
benefits due and payable to Employee; and/or (b) file a suit in equity, without
the necessity of posting bond, to enjoin Employee from the breach or threatened
breach of such covenants, including but not limited to the right to obtain an
immediate temporary restraining order. The foregoing stipulated damages of the
Company are in addition to, and not to the exclusion of, any other damages the
Company may be able to prove.
19. TERMINATION. The Company shall have the option to terminate the
employment of Employee immediately for "Cause" at any time. "CAUSE" as used in
this Agreement shall mean dishonesty, fraud, conviction of a felony or of any
crime involving moral turpitude, willful refusal to perform the material duties
hereunder, gross dereliction or gross neglect of duty, or material breach of
Sections 15, 16 or 17 of this Agreement, subject to Employee's right to
Arbitration as provided in Section 24 below. The Board shall make the
determination as to whether Cause exists as aforesaid to terminate the
Employee, and shall provide the Employee with written notice thereof, as
provided in the following sentence. Notwithstanding the foregoing, and although
Employee may have been relieved of his responsibilities, he shall not be deemed
to have been terminated for Cause unless and until he has received
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(i) written notice of the specific charges against Employee, (ii) an
opportunity for Employee, together with counsel, to be heard before the Board
within ten (10) business days of Employee's receipt of such notice (if Employee
fails or refuses to appear before the Board during such ten (10) day period, he
shall be deemed to have consented to his termination for Cause as outlined in
the Board's notice), and (iii) thereafter receive a second written notice from
the Board stating that in the good faith opinion of the Board Cause as defined
above exists for the Employee's termination. The obligations of Employee under
Sections 15, 16 and 17 of this Agreement shall survive the termination of his
employment for any reason.
20. MODIFICATION. With respect to the terms of Employee's employment, this
Agreement constitutes the full and complete understanding and agreement of the
parties, supersedes any prior understanding and agreement, and cannot be
changed or terminated except in writing signed by the parties to be bound
thereby.
21. ASSIGNMENT. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. The rights and obligation of Employee
hereunder may not be assigned or delegated.
22. SEVERABILITY. Each provision of this Agreement shall be severable. If,
for any reason, any provision herein is finally determined to be invalid and
contrary to, or in conflict with, any existing or future law or regulation of a
court or agency having valid jurisdiction, such determination shall not impair
the operation or affect the remaining provisions of this Agreement, and such
remaining provisions will continue to be given full force and effect and bind
the Company and Employee.
23. WAIVER. The waiver by either party of any breach of this Agreement by
the other will not operate or be construed as a waiver of any other breach by
the other which is not specifically waived in writing.
24. ARBITRATION. If this Agreement shall be terminated for
Cause and Employee disputes the existence of appropriate Cause,
Employee may, upon notice to the Company within ten (10) days after
Employee has been advised of such termination, or, if there should
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be any other dispute between the parties with reference to this Agreement,
either party may with the written consent of the other party, elect to refer
such dispute to an arbitrator of the Chicago panel of the American Arbitration
Association under the rules effective in Chicago, and the award of the
arbitrator shall be binding and conclusive upon all parties and may be made the
subject of a judgment in any court of jurisdiction. The arbitrator shall have
discretion in awarding reasonable attorneys' fees to either party, but shall
have no authority to change or modify any provision of this Agreement.
25. NOTICE. Any notice or other communication required or permitted to be
given to a party pursuant to this Agreement shall be in writing and shall be
determined to have been duly given when delivered personally or deposited in
United States certified or registered mail, return receipt requested, postage
prepaid, as follows:
If to Employee: James R. Tennant
2771 Sheridan Road
Evanston, Illinois 60201
If to the Company: Selfix, Inc.
Attention: James E. Winslow
4501 West 47th Street
Chicago, Illinois 60632
Either party may change his or its address for the purpose of this section by
written notice given in the manner provided above.
26. ILLINOIS LAW. This Agreement shall be interpreted and construed in
accordance with Illinois Law.
The parties have executed this Agreement as of the Effective
Date.
EMPLOYEE: COMPANY:
Selfix, Inc.
/s/ James R. Tennant, By: [Signature]
- ------------------------------ ------------------------
James R. Tennant, individually Its: Executive VP & CFO
------------------------
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<PAGE> 1
EXHIBIT 10.11
REIMBURSEMENT AGREEMENT
dated as of April 12, 1996
by and among
SELFIX, INC.,
SHUTTERS, INC.
and
LASALLE NATIONAL BANK
______________________
$4,000,000
Illinois Development Finance Authority
Variable Rate Demand Industrial Development Revenue Bonds
(Selfix,Inc. Project)
Series 1990
______________________
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.........................................................1
Section 1.1. Definition.................................................1
Section 1.2. Accountings Terms and Definitions.........................10
ARTICLE 2. LETTER OF CREDIT...................................................10
Section 2.1. Issuance, Reissuance, Extensions and Termination of Letter
of Credit................................................10
Section 2.2. Agreement to Reimburse Bank ..............................11
Section 2.3. Letter of Credit .........................................12
Section 2.4. No Deductions; Increased Costs............................13
Section 2.5. Interest on Overdue Amounts...............................14
Section 2.6. Payments..................................................14
Section 2.7. Pledged Bonds.............................................15
Section 2.8. Collateral Account........................................15
Section 2.9. Security Documents........................................16
ARTICLE 3. GUARANTY...........................................................16
Section 3.1. Guaranty of Obligations...................................16
Section 3.2. Terms of Guaranty ........................................16
ARTICLE 4. REPRESENTATIONS....................................................16
Section 4.1. Organization..............................................16
Section 4.2. Authorization; No Conflict................................17
Section 4.3. Validity and Binding Nature...............................17
Section 4.4. Financial Statements .....................................17
Section 4.5. True and Complete Disclosure .............................17
Section 4.6. Litigation................................................18
Section 4.7. Investment Company Act ...................................18
Section 4.8. Public Utility Holding Company Act........................18
Section 4.9. Regulation U..............................................18
Section 4.10. Compliance with Laws ......................................18
Section 4.11. Tax Returns and Tax Liability..............................18
Section 4.12. Employee Benefit Plans ....................................19
Section 4.13. Liens......................................................19
ARTICLE 5. COVENANTS..........................................................19
Section 5.1. Payment and Performance...................................19
Section 5.2. Financial Statements and Other Reports....................20
Section 5.3. Notices...................................................21
Section 5.4. Records, Books and Inspections............................21
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Section 5.5. Other Agreements .........................................22
Section 5.6. Maintenance of Employee Benefit Plans.....................22
Section 5.7. Compliance with Regulation U..............................22
Section 5.8. Amortization..............................................22
Section 5.9. Fiscal Year...............................................22
Section 5.10. Consolidated Tangible Net Worth...........................22
Section 5.11. Ratio of Annualized Income Available for Debt Service to
Annualized Debt Service Requirements......................23
Section 5.12. Current Ratio .......................................... 23
Section 5.13. Consolidation, Merger, Sale of Assets; etc................23
Section 5.14. Indebtedness..............................................23
Section 5.15. Liens.....................................................23
Section 5.16. Issuance of Stock ........................................24
Section 5.17. Guaranties ...............................................24
Section 5.18. Redemptions ..............................................24
Section 5.19. Dividends and Distributions ..............................24
Section 5.20. Transactions with Affiliates..............................24
Section 5.21. Investments...............................................24
Section 5.22. Further Assurances........................................24
ARTICLE 6. CONDITIONS TO ISSUANCE OF LETTER OF CREDIT.........................25
Section 6.1. Documents ................................................25
ARTICLE 7. EVENTS OF DEFAULT; REMEDIES.......................................26
Section 7.1. Events of Default........................................26
Section 7.2. Remedies..................................................28
Section 7.3. Set-Off...................................................28
Section 7.4. No Remedy Exclusive ......................................29
Section 7.5. No Additional Waiver Implied by One Waiver................29
ARTICLE 8. GENERAL ...........................................................29
Section 8.1. Amendments................................................29
Section 8.2. Notices...................................................29
Section 8.3. Costs, Expenses and Taxes ................................29
Section 8.4. Liability of the Bank ....................................30
Section 8.5. Captions and References ..................................30
Section 8.6. Governing Law ............................................31
Section 8.7. Successors and Assigns ...................................31
Section 8.8. Severability of Provisions................................31
Section 8.9. Execution in Counterparts.................................31
ii
<PAGE> 4
REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT, dated as of April 12, 1996, is entered into
by and between SELFIX, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware (the "Account Party"), SHUTTERS, INC.,
a corporation duly organized and validly existing under the laws of the State
of Illinois (the "Guarantor") and LASALLE NATIONAL BANK, a national banking
association (the "Bank").
WHEREAS, the Illinois Development Finance Authority (the "Issuer"),
pursuant to authority granted by The Illinois Development Finance Authority
Act, Ch. 48, Paragraph 850.01 et seq. of the Illinois Revised Statutes, as
supplemented and amended from time to time, has issued its $4,000,000 Variable
Rate Demand Industrial Development Revenue Bonds (Selfix, Inc. Project) Series
1990 (the "Bonds") and loaned the proceeds received from the sale thereof to
the Account Party to finance the costs of certain land and equipment and the
construction of a manufacturing facility;
WHEREAS, the Bonds are secured by the Indenture of Trust, Series 1990,
dated as of September 1, 1990 (as amended, restated, supplemented or otherwise
modified from time to time with the written consent of the Bank, hereinafter
called the "Indenture"), between the Issuer and Manufacturers and Traders
Trust Company, as Trustee (the "Trustee");
WHEREAS, the Account Party has requested the Bank to issue an irrevocable
direct-pay letter of credit in an amount not exceeding $3,476,165 of which (a)
$3,200,000 shall be in respect of principal of the Bonds, and (b) $276,165
shall be in respect of 210 days' accrued interest (calculated at the maximum
assumed interest rate of 15% per annum and a year of 365 days) on the Bonds;
WHEREAS, to induce the Bank to issue the letter of credit described
above, the Guarantor, a wholly-owned subsidiary of the Account Party, has
agreed to guaranty the Obligations (as hereinafter defined) pursuant to the
terms of this Agreement; and
NOW, THEREFORE, in consideration of the premises and to induce the Bank
to issue such letter of credit, and intending to be legally bound hereby, the
Account Party and the Bank hereby agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. Definitions. When used herein, the following terms shall
have the following respective meanings, which meanings shall be applicable to
both the singular and plural forms of such terms:
"Account Party" shall have the meaning set forth in the preamble hereto.
"Account Party Agreements" shall mean the Loan Agreement, the Note, the
Arbitrage Regulation Agreement and the Remarketing Agreement.
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<PAGE> 5
"Advances" shall have the meaning assigned thereto in the Credit
Agreement.
"Affiliate" shall include, with respect to any Person, any Person which
directly or indirectly controls, is controlled by, or is under common control
with such Person and each officer and director of such Person. For purposes of
this definition, a Person shall be deemed to control another Person if the
controlling Person owns directly or indirectly five percent (5%) or more of
the shares of stock (or in the case of a Person which is not a corporation, 5%
or more of the equity interest) of the controlled person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the controlled Person, whether through ownership of
stock, by contract or otherwise.
"Agreement" shall mean this Reimbursement Agreement, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"Annualized Debt Service Requirements" shall mean, as of any date of
determination thereof, the Debt Service Requirements during the immediately
preceding consecutive twelve-month period that ended on such determination
date; provided, however, that for any date of determination occurring during
the Borrower's fiscal year ending December 29, 1996, "Annualized Debt Service
Requirements" shall mean the Debt Service Requirements during the immediately
preceding consecutive twelve-month period that ended on such determination
date multiplied by a fraction the numerator of which is the number of months
from December 31, 1995 to such determination date and the denominator of which
is twelve.
"Annualized Income Available for Debt Service" shall mean, as of any date
of determination thereof, the Income Available for Debt Service during the
immediately preceding consecutive twelve-month period that ended on such
determination date; provided, however, that for any date of determination
occurring during the Borrowers' fiscal year ending December 29, 1996,
"Annualized Income Available for Debt Service" shall mean Income Available for
Debt Service for the period from the beginning of such fiscal year to such
date of determination.
"Arbitrage Regulation Agreement" means the Arbitrage Regulation Agreement
dated as of September 1, 1990 among the Account Party, the Issuer and the
Trustee.
"Bank" shall have the meaning set forth in the preamble hereto.
"Bonds" shall have the meaning set forth in the first recital hereto.
"Business Day" shall mean a day on which banks located in Chicago,
Illinois are not required or authorized to remain closed.
"Capital Expenditures" shall mean, for any fiscal period, the aggregate
of all expenditures during such period for any assets, or for improvements,
replacements, substitutions or additions therefor or thereto, which are
capitalized on the Consolidated balance sheet of the Account Party and its
Subsidiaries and which, in conformity with GAAP, are required to be included
in or reflected by the property, plant or equipment or similar fixed asset
account reflected in such
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<PAGE> 6
balance sheet, but shall exclude the balance sheet amount of Capitalized Lease
Obligations and Purchase Money Indebtedness incurred or assumed during such
period.
"Capital Lease" shall mean a lease of (or other agreement conveying the
right to use) real and/or personal property, which obligation is, or in
accordance with GAAP is required to be, classified and accounted for as a
capital lease on a balance sheet of such Person at the time incurred.
"Capitalized Lease Obligations" shall mean, with respect to any Person,
any obligation of such Person to pay rent or other amounts under a Capital
Lease and for purposes of this Agreement the amount of each Capitalized Lease
Obligation shall be the capitalized amount thereof determined in accordance
with GAAP.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than 90 days from the date of acquisition, (ii) time deposits and certificates
of deposit of any domestic commercial bank of recognized standing having
capital and surplus in excess of $100,000,000 with maturities of not more than
90 days from the date of acquisition, (iii) fully secured repurchase
obligations with a term of not more than 7 days for underlying securities of
the types described in clause (i) entered into with any bank meeting the
qualifications specified in clause (ii) above, and (iv) commercial paper
issued by the parent corporation of any domestic commercial bank of recognized
standing having capital and surplus in excess of $200,000,000 and commercial
paper rated at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by Moody's Investor
Services, Inc. and in each case maturing within 90 days after the date of
acquisition.
"Closing Date" shall mean September 27, 1990, being the date of issuance
and original delivery of the Bonds.
"Collateral Account" shall mean the collateral account established
pursuant to Section 2.8.
"Consolidated" shall mean, 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) the Account Party and its
Subsidiaries, the accounts of the Account Party and its Subsidiaries,
determined on a consolidated basis, all determined as to principles of
consolidation and, except as otherwise specifically required by the definition
of such term or by such statement as to such accounts, in accordance with
GAAP.
"Consolidated Interest Expense" shall mean, for any fiscal period, the
aggregate payments of interest expense (excluding capitalized interest accrued
during such period) made or required to be made by the Account Party and its
Consolidated Subsidiaries during such period including, without limitation,
the portion of any rent paid or required to be paid on a Capitalized Lease
Obligation which is allocable to interest expense in accordance with GAAP.
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<PAGE> 7
"Consolidated Net Income" shall mean, for any fiscal period, the net
income of the Account Party and its Subsidiaries for such period, as
determined on a consolidated basis in accordance with GAAP, provided that
there shall be excluded therefrom, to the extent included in the calculation
thereof, (a) the income (or loss) of any Person arising prior to the date it
becomes a Subsidiary or is merged into or consolidated with the Account Party
or a Subsidiary, (b) the income (or loss) of any Person (other than a
Subsidiary) in which the Account Party or any Subsidiary has an ownership
interest, except to the extent that any such income has been actually received
by the Account Party or such Subsidiary in the form of cash dividends or
similar cash distributions, (c) any restoration to income of any contingency
reserve (other than routine adjustments to reserves made in the ordinary
course of business), (d) any aggregate net gain and any aggregate net loss
during such period arising from the sale, exchange or other disposition of
assets other than in the ordinary course of business, (e) any net gain from
the collection of the proceeds of life insurance policies, (f) any
extraordinary items of gain or loss (as determined in accordance with GAAP),
and (g) any portion of the net earnings of any Subsidiary which for any reason
is unavailable for payment of dividends to the Account Party.
"Consolidated Operating Cash Flow" shall mean, for any fiscal period, an
amount equal to the sum of: (a) Consolidated Net Income for such period, plus
(b) the sum of depreciation, amortization, tax and interest to the extent
deducted in arriving at such Consolidated Net Income.
"Consolidated Tangible Net Worth" shall mean, as of the date of
determination thereof, the total of all assets appearing on a Consolidated
balance sheet of the Account Party and its Subsidiaries, after deducting all
proper reserves (including reserves for depreciation, obsolescence and
amortization), less the sum of (a) all Consolidated Total Liabilities of the
Account Party and its Subsidiaries and (b) all other assets of the Account
Party or any of its Subsidiaries which would be treated as intangibles under
GAAP including, in any event and without limitation, such items as
prepayments, deferred charges (including, without limitation, unamortized debt
discount and expense, organization costs and development expense), goodwill,
trademarks, trade names, service marks, copyrights, patents, licenses,
agreements not to compete and rights with respect to any of the foregoing.
"Consolidated Total Debt" shall mean, as of the date of determination
thereof, the aggregate outstanding principal balance of the Indebtedness of
the Account Party and its Subsidiaries (on a consolidated basis) on such date.
"Consolidated Total Liabilities" shall mean, as of the date of
determination thereof, the total of all assets appearing on a Consolidated
balance sheet of the Account Party and its Subsidiaries, after deducting all
proper reserves (including reserves for depreciation, obsolescence and
amortization), less the shareholders' equity and the Subordinated Debt appearing
on such balance sheet.
"Credit Agreement" shall mean that certain agreement dated as of April
12, 1996 (together with all amendments and modifications thereto) between the
Guarantor, the Account Party, and the Bank.
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<PAGE> 8
"Current Assets" shall mean all assets of the Account Party and its
Subsidiaries which, in accordance with GAAP, are or should be classified as
current assets on a Consolidated balance sheet of the Account Party and its
Subsidiaries.
"Current Liabilities" shall mean all liabilities of the Account Party and
its Subsidiaries which, in accordance with GAAP, are or should be classified
as current liabilities on a Consolidated balance sheet of the Account Party
and its Subsidiaries; provided, however, that the Advances outstanding under
the Credit Agreement shall constitute "Current Liabilities" for purposes of
this Agreement.
"Current Ratio" shall mean, as of the date of determination thereof, the
ratio of Current Assets as of such date to Current Liabilities as of such
date.
"Debt Service Requirements" shall mean for any fiscal period, the sum of
(i) Consolidated Interest Expense for such fiscal period and (ii) the
aggregate amount of principal required to be paid or prepaid during such
fiscal period on Consolidated Total Debt of the Account Party and its
Subsidiaries, excluding however the Advances outstanding and Indebtedness
maturing less than one year from its date of issue.
"Effective Date" shall mean April 12, 1996, being the date of original
issuance and delivery of the Letter of Credit.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations issued thereunder.
"Event of Default" shall mean any of the events described in Section 7. 1.
"GAAP" shall mean generally accepted accounting principles (i)
consistently applied and maintained throughout the term of this Agreement
except for such changes as are in accordance with the generally accepted
accounting principles in effect at the time of such change and (ii) consistent
with the audited Consolidated financial statements of the Account Party and
its Subsidiaries delivered to the Banks pursuant to Section 5.4. Whenever any
accounting term is used herein which is not otherwise defined, it shall be
interpreted in accordance with GAAP.
"Guarantor" shall have the meaning set forth in the preamble hereto.
"Guaranty" shall mean any agreement, undertaking or arrangement by which
the respective obligor guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the debt,
obligation or other liability of any Person (other than guaranties or
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any Person
except for endorsements of negotiable instruments for deposit or collection in
the regular course of business. The amount of any Guaranty shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty is made or, if not stated or
determinable, the maximum
5
<PAGE> 9
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Income Available for Debt Service" shall mean, for any fiscal period,
Consolidated Operating Cash Flow for such fiscal period, less Capital
Expenditures made during such period.
"Indebtedness" of any Person at any time shall mean: (a) indebtedness
for borrowed money or for the unpaid purchase price of property or services,
except for Current Liabilities consisting of accounts payable arising in the
ordinary course of business and payable in accordance with customary trade
terms; (b) Capitalized Lease Obligations; (c) obligations under direct or
indirect Guaranties of indebtedness or obligations of others; (d) any
indebtedness secured by any Lien on the property of such Person, whether or not
such Person has assumed or become liable for the payment of such indebtedness;
(e) obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of such property; (f) the face amount of all letters of credit issued
for the account of such Person and all unreimbursed amounts thereunder; and (g)
all payment obligations of such Person under any interest rate protection
agreement (including, without limitation, any interest rate swaps, caps,
floors, collars and similar agreements) and currency swaps and similar
agreements.
"Indemnified Liabilities" shall have the meaning set forth in Section
8.3.
"Indemnitees" shall have the meaning set forth in Section 8.3.
"Indenture" shall have the meaning set forth in the second recital
hereto.
"Investment" shall mean: (a) any share of capital stock, debt security
or other security issued by any other Person, (b) any loan, advance, or
extension of credit to, or contribution to the capital of, any other Person,
(other than (i) loans to employees in the ordinary course of business not to
exceed $50,000 in the aggregate and (ii) a loan to Dennis Buckshaw in an amount
not in excess of $70,000) and (c) any purchase of the securities or business or
integral part of the business of any other Person, or commitment or option to
make such purchase; provided, however, that the term "Investment" shall not
include: (x) trade and customer accounts for goods sold or for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms or (y) advances to employees and directors for travel
expenses and similar expenditures in the ordinary course of business.
"Issuer" shall have the meaning set forth in the first recital hereto.
"Letter of Credit" shall have the meaning set forth in Section 2.1.1.
"Lien" shall mean (i) any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, whether arising under a security
instrument or as a matter of law, judicial process or otherwise or any
agreement to grant any of the foregoing, any Capitalized Lease, any conditional
sale or other title retention agreement or the filing of or agreement to file
any financing statement
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<PAGE> 10
under the Uniform Commercial Code of any jurisdiction in connection with any
of the foregoing, and (ii) any exception to or defect in the title to or
ownership interest in property, including, without limitation, reservations,
rights of entry, possibilities of reverter, encroachments, easements, rights
of way, restrictive covenants, leases and licenses. For purposes of this
Agreement, a Person shall be deemed to be the owner of any property which it
has acquired or holds subject to a conditional sale agreement, Capitalized
Lease or other arrangement pursuant to which title to the property has been
retained by or vested in some other Person for security purposes.
"Loan Agreement" shall mean the Loan Agreement, dated as of September 1,
1990, between the Issuer and the Account Party, as the same may be amended,
restated, supplemented or otherwise modified from time to time with the
written consent of the Bank.
"Mortgage" shall mean, individually or collectively, as the case may be,
each of the mortgages (including any leasehold mortgage) or deeds of trust
required by the Bank to be made by the Account Party and/or the Guarantor in
favor of the Bank, as each such mortgage or deed of trust is originally
executed and as it may be amended, modified or supplemented from time to time.
"Note" shall mean the nonnegotiable promissory note of the Account Party,
dated as of September 29, 1990 and in the original principal amount of
$4,000,000, evidencing the obligation of the Account Party to make loan
payments under the Loan Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time with the written consent
of the Bank.
"Obligations" shall mean all obligations of the Account Party to the
Bank, howsoever created, absolute or contingent, or now or hereafter existing,
or due or to become due, which arise out of or in connection with this
Agreement, including, without limitation, the reimbursement obligation of the
Account Party set forth in Section 2.2, the obligation of the Account Party to
pay the Letter of Credit fees set forth in Section 2.3, the obligation of the
Account Party to pay the additional amounts in the circumstances specified in
Section 2.4, the obligation of the Account Party to pay interest on overdue
amounts under this Agreement set forth in Section 2.5 and the indemnification
obligations of the Account Party set forth in Section 8.3.
"Patent Security Agreement" shall mean the Patent Security Agreement
dated as of April 12, 1996 entered into by each of the Account Party and the
Guarantor in favor of the Bank, as such Patent Security Agreement is
originally executed and as it may be amended, modified or supplemented from
time to time.
"Payment Account" shall mean any account of the Account Party at the Bank.
"Permitted Investments" shall mean the Cash Equivalents as defined in the
Credit Agreement.
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<PAGE> 11
"Permitted Liens" shall mean: (a) Liens for taxes, assessments or
governmental charges or levies not yet due and payable; (b) Liens, charges and
encumbrances incidental to the conduct of its business or the ownership of its
property and assets incurred in the ordinary course of business which were not
incurred in connection with the borrowing of money or the obtaining of an
advance or credit, which do not in the aggregate materially detract from the
value of its property or assets or materially impair the use thereof in the
operation of its business and which relate to sums not more than thirty (30)
days delinquent or which are being contested in good faith; provided that a
reserve or other appropriate provision shall have been made therefor in
accordance with GAAP; (c) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure public or
statutory obligations of the Account Party or any of its Subsidiaries; (d)
Liens arising pursuant to any Loan Document; (e) Liens arising out of
judgments or awards in an aggregate amount of not to exceed $100,000 with
respect to which it shall concurrently therewith be prosecuting an appeal or
proceeding for review and with respect to which it shall have secured a stay
of execution pending such appeal or proceeding for review and in respect of
which adequate reserves shall be maintained in accordance with GAAP; (f) Liens
existing on the date hereof and disclosed on Exhibit III hereto; (g) Liens
granted by any Subsidiary of the Account Party in favor of the Account Party
but only so long as the Indebtedness secured by such Lien has been assigned as
Collateral to the Bank for the benefit of the Bank; (b) Liens placed upon or
existing on tangible personal property (and not extending to any other
property) at the time such property is acquired by the Account Party or any of
its Subsidiaries, securing Capitalized Lease Obligations or Purchase Money
Indebtedness permitted to be incurred pursuant to the provisions of Section
7.2 hereof; and (i) subject to the terms and conditions contained in any
Mortgage, municipal and zoning restrictions, easements, licenses, restrictions
on the use of real property or minor irregularities in title thereto, which do
not materially impair the use of such property in the operation of its
business or the value of such property for the purpose of such business;
provided, however, that none of the Liens listed in clauses (a), (b), (c),
(e), (f) or (h) above shall, in any event, constitute a "Permitted Lien" on
and after the commencement in respect thereof of any enforcement, collection,
execution, levy or foreclosure or forfeiture proceeding.
"Person" shall mean any corporation, trust, partnership, limited
liability company, joint venture, association, joint stock association or
other unincorporated entity, or any government or governmental agency, body or
instrumentality, or a natural person.
"Pledged Bonds" shall mean Bonds tendered for purchase by the registered
owners thereof pursuant to Sections 401, 402, 403, 404, and 406 of the
Indenture that are purchased from moneys received by the Trustee from a demand
for payment under the Letter of Credit.
"Prime Rate" shall mean the rate of interest then most recently announced
by the Bank to its customers from time to time as its "prime rate" for
calculating interest on certain loans (which may not be the lowest rate
charged by the Bank at that time); the "Prime Rate" hereunder to change
simultaneously with any change in the Bank's "prime rate".
"Purchase Money Indebtedness" shall mean Indebtedness incurred to finance
the cost of any assets, or for improvements, replacements, substitutions or
additions therefor or thereto, which are capitalized on the Consolidated
balance sheet of the Account Party and its Subsidiaries
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<PAGE> 12
and which, in conformity with GAAP, are required to be included in or
reflected by the property, plant or equipment or similar fixed asset account
reflected in such balance sheet; provided that the principal amount of
Purchase Money Indebtedness incurred to acquire any asset shall not exceed the
amount capitalized on the Consolidated balance sheet of the Account Party and
its Subsidiaries in respect of such asset.
"Remarketing Agent" shall mean LaSalle National Bank, as Remarketing Agent
under the Remarketing Agreement.
"Remarketing Agreement" shall mean the Placement and Remarketing
Agreement, dated as of September 1, 1990, by and among the Account Party, the
Remarketing Agent and the Issuer, as the same may be amended, restated,
supplemented or otherwise modified from time to time with the written consent
of the Bank.
"Security Agreement" shall mean the Pledge and Security Agreement, dated
as of April 12, 1996, by and between the Account Party, the Guarantor, and the
Bank, as the same may be amended, restated, supplemented or otherwise modified
from time to time with the written consent of the Bank.
"Security Documents" shall mean, individually or collectively, as the
case may be, the Security Agreement, the Trademark Security Agreement, the
Patent Security Agreement, the Mortgage, the Subsidiary Guaranty, the
Subsidiary Security Agreement, the UCC Financing Statements and each other
pledge agreement, security agreement, mortgage, deed of trust, assignment,
guaranty or other agreement or instrument at any time delivered by a Guarantor
or an Account Party in favor of the Bank as security for the Obligations, each
as originally executed and as amended, modified or supplemented from time to
time.
"Selfix Guaranty" shall have the meaning set forth in Section 3.1.
"Stated Amount" shall have the meaning set forth in the Letter of Credit.
"Stated Expiration Date" shall have the meaning set forth in the Letter of
Credit.
"Subordinated Debt" shall mean any unsecured Indebtedness of the Account
Party, which by its terms is expressly subordinate in right of payment to the
payment of the Loan pursuant to a subordination agreement approved by the
Bank.
"Subsidiary" of any Person shall mean (i) any corporation of which more
than 50% of the outstanding shares of capital stock of any class or classes
having ordinary voting power for the election of directors (irrespective of
whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is now or hereafter owned directly or indirectly by such Person,
by such Person and one or more of its Subsidiaries, or by one or more of such
Person's other Subsidiaries, and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person,
directly or indirectly through Subsidiaries, is either a general partner or
has a 50% or more equity interest at the time.
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<PAGE> 13
"Trademark Security Agreement" shall mean the Trademark Security
Agreement dated as of April 12, 1996 entered into by each of the Account Party
and the Guarantor in favor of the Bank, as such Trademark Security Agreement
is originally executed and as it may be amended, modified or supplemented from
time to time.
"Trustee" shall have the meaning set forth in the second recital hereto.
"UCC Financing Statements" shall mean the Uniform Commercial Code
financing statements evidencing the security interests granted by the Account
Party to the Bank under the Security Documents.
"Unmatured Default" shall mean, at any time, any event or occurrence
described in Section 7.1 that, with lapse of time or notice or with lapse of
time and notice, would constitute an Event of Default.
"Wholly Owned Subsidiary" shall mean a Subsidiary in which all voting
shares (except for directors' qualifying shares, if any) are owned by the
Account Party and/or one or more Wholly Owned Subsidiaries of the Account
Party.
Section 1.2. Accounting Terms and Definitions. Unless otherwise specified
herein, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made and all financial
statements required to be delivered under this Agreement shall be prepared in
accordance with generally accepted accounting principles as in effect from
time to time.
ARTICLE 2.
LETTER OF CREDIT
Section 2.1. Issuance, Reissuance, Extensions and Termination of Letter
of Credit.
2.1.1. Issuance of Letter of Credit. Subject to the terms and
conditions of this Agreement, the Bank agrees to issue to the Trustee
and for the account of the Account Party, on the Effective Date, an
irrevocable direct-pay letter of credit (herein, together with any
substitute letter of credit issued pursuant to Section 2.1.2, called the
"Letter of Credit") in the form of Exhibit I, with appropriate insertions.
2.1.2. Reissuance of Letter of Credit. If at any time, or from
time to time, during the term of the Letter of Credit, a portion of the
Bonds shall be retired or redeemed in accordance with the Indenture, then
the Bank shall deliver to the Trustee an amendment to the Letter of Credit
or, upon surrender of the Letter of Credit, a substitute letter of credit
in an amount calculated in the same manner as the Stated Amount of the
Letter of Credit but with respect to the aggregate outstanding principal
amount of the Bonds (and with respect to any proportionate reduced amount
for the payment of interest, determined in accordance with the Letter of
Credit) after giving effect to such retirement or redemption and otherwise
having terms identical to the Letter of Credit.
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2.1.3. Extensions of Letter of Credit. The Bank shall notify the
Account Party in writing at least 60 calendar days prior to the Stated
Expiration Date as to whether the Bank is willing to extend the Stated
Expiration Date for eighteen months. If the Bank offers to so extend the
Stated Expiration Date and the Account Party requests such an extension in
writing, the Bank shall notify the Trustee of the extension of the Stated
Expiration Date, and shall specify the new Stated Expiration Date. Each
such extension shall, except as otherwise expressly provided in an
amendment to this Agreement, be on the same terms and conditions as those
set forth in this Agreement.
2.1.4. Termination of Letter of Credit Arrangement by Account
Party. The Bank acknowledges that the Indenture permits the Account
Party, upon compliance with the conditions therein set forth, to terminate
and replace the Letter of Credit and the Bank with an Alternate Credit
Facility as defined in the Indenture). The Bank agrees that the Account
Party shall have the right, exercisable at any time upon 30 days' prior
written notice to the Bank and the payment and satisfaction (or the making
of arrangements satisfactory to the Bank for the payment and satisfaction)
of all of the Obligations owed and to be owing on or before the proposed
Letter of Credit termination date, to so replace the Letter of Credit and
the Bank; provided that no such termination shall entitle the Account
Party to a refund of the fee paid pursuant to Section 2.3.1 hereof.
Section 2.2. Agreement to Reimburse Bank. The Account Party agrees:
2.2.1. Letter of Credit Drawings for Principal, Premium and
Interest Payments. On the date each payment is made by the Bank under
the Letter of Credit honoring any demand for payment made by the Trustee
thereunder, to provide for the payment of principal of, premium, if any,
and interest on the Bonds, to reimburse the Bank in an amount equal to
such payment.
2.2.2. Letter of Credit Drawings for Purchase Price Payments. On or
before the earlier of (i) the Stated Expiration Date in effect at the
time of the hereinafter described payment under the Letter of Credit or
(ii) the sixtieth day next following the date a payment is made by the
Bank under the Letter of Credit honoring a demand for payment made by the
Trustee thereunder to provide for the payment of the purchase price (i.e.,
principal portion and interest portion) of Bonds tendered for purchase by
the registered owners thereof pursuant to Sections 401, 402, 403, 404 or
406 of the Indenture, to reimburse the Bank in an amount equal to such
payment. If and to the extent that the Bank is not reimbursed for any
payment under the Letter of Credit for the purchase price (i.e., principal
portion and interest portion) of Bonds on the date that the Bank honored
such demand for payment, then the unreimbursed portion of such payment
shall bear interest, for the period from and including the date that the
Bank honored such demand for payment to but not including the date on
which payment is made, at a rate per annum equal to the Prime Rate, plus
two and one-half percent (2.5%). Interest on unreimbursed amounts under
this subsection shall be payable on the first day of each month
(commencing with the month next following the month during which the Bank
honored the demand for a purchase price payment under the Letter of
Credit) and on the date specified in the first sentence of this subsection
and shall be computed on the basis of a
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360-day year, for the actual number of days elapsed. If and to the
extent that the Account Party fails to fully reimburse the Bank for
honoring a purchase price demand for payment by the date set forth in
the first sentence of this subsection, then such unreimbursed amount
shall, from and after the date set forth in the first sentence of this
subsection, bear interest at the interest rate applicable to overdue
amounts as provided in Section 2.5.
2.2.3. Other Bank Payments and Disbursements. To reimburse the
Bank, on demand, for any and all disbursements made or expenses incurred
by the Bank in enforcing any rights under this Agreement, the Indenture,
any Account Party Agreement or any Security Document, including, without
limitation, reasonable attorneys' fees and any amounts advanced by the
Bank hereunder or under the Indenture, any Account Party Agreement or
any Security Document.
The Account Party's obligation to reimburse the Bank when due for
payments, disbursements and expenses made or incurred by the Bank as
described in this Section shall be absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or
defense to payment that the Account Party or the Guarantor may have or
have had against the Bank, including, without limitation, any set-off,
counterclaim or defense that is based upon (v) the failure of such
demand for payment to conform to the terms of the Letter of Credit,
(w)any failure of the Issuer or the Account Party to receive all or any
part of the proceeds of the sale of the Bonds, (x) any nonapplication or
misapplication by the Issuer, the Trustee or any paying agent under the
Indenture of the proceeds of such demand for payment, (y) the failure or
refusal of the Bank to extend the Stated Expiration Date or to issue
another letter of credit upon the expiration of the Letter of Credit or
(z)the illegality, invalidity, irregularity or unenforceability of the
Bonds, the Indenture, any of the Account Party Agreements, any of the
Security Documents or the Letter of Credit; provided, however, that the
Account Party shall not be obligated to reimburse the Bank for any
wrongful payment or disbursement made by the Bank under the Letter of
Credit as a result of acts or omissions constituting gross negligence or
willful misconduct on the part of the Bank or any of its officers,
employees or agents.
Section 2 3. Letter of Credit. The Account Party agrees to pay to the Bank:
2.3.1. Annual Fee. An annual fee with respect to the Letter of
Credit in an amount equal to an annual rate of one percent (1%) of the
Stated Amount in effect on the first day of each annual period from the
Effective Date until the Termination Date (as defined in the Letter of
Credit). The foregoing annual fee shall be payable in advance on the
Effective Date for the period through June 30, 1996 and thereafter
quarterly in advance on each July 1, October 1, January 1 and April 1.
The fee shall be calculated on the basis of a 360-day year, for the
actual number of days elapsed; provided, however, for purposes of
computing the final quarterly payment of the fee (assuming the Letter of
Credit terminates on the Stated Expiration Date), the last day of the
quarterly period shall be the Stated Expiration Date. The fee is
non-refundable.
2.3.2. Drawing Fee. A drawing fee in the amount of $200, which
drawing fee shall be paid on any date that the Bank honors a demand for
payment upon the Letter of Credit.
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2.3.3. Transfer Fee. A transfer fee in the amount of $1,500, which
transfer fee shall be paid on any date that the Letter of Credit is
transferred by the Trustee or any subsequent named beneficiary of the
Letter of Credit to another beneficiary.
2.3.4. Reissuance Fee. A reissuance fee in the amount of $500, which
reissuance fee shall be paid on the date that the Letter of Credit is
reissued pursuant to Section 2.1.2.
Section 2.4. No Deductions; Increased Costs. (a) Except as otherwise
required by law, each payment by the Account Party and the Guarantor to the
Bank under this Agreement or any other Account Party Agreement shall be made
without setoff or counterclaim and without withholding for or on account of
any present or future taxes (other than overall net income taxes on the Bank
imposed by any jurisdiction having control of the Bank) imposed by or within
the jurisdiction in which the Account Party or the Guarantor is domiciled, any
jurisdiction from which the Account Party or the Guarantor makes any payment
hereunder, or (in each case) any political subdivision or taxing authority
thereof or therein. If any such withholding is so required, the Account Party
or the Guarantor, as the case may be, shall make the withholding, pay the
amount withheld to the appropriate governmental authority before penalties
attach thereto or interest accrues thereon and forthwith pay such additional
amount as may be necessary to ensure that the net amount actually received by
the Bank free and clear of such taxes (including such taxes on such additional
amount) is equal to the amount which the Bank would have received had such
withholding not been made. If the Bank pays any amount in respect of any such
taxes, penalties or interest, the Account Party and the Guarantor shall
reimburse the Bank for that payment on demand in the currency in which such
payment was made. If the Account Party or the Guarantor pays any such taxes,
penalties or interest, it shall deliver official tax receipts evidencing that
payment or certified copies thereof to the Bank on or before the thirtieth day
after payment.
(b) If any change in or adoption of any law, treaty, regulation,
guideline or directive, or any new or modified interpretation of any of the
foregoing by any authority or agency charged with the administration or
interpretation thereof or any central bank or other fiscal, monetary or other
authority having jurisdiction over the Bank or the transactions contemplated
by this Agreement (whether or not having the force of law) shall:
(i) limit the deductibility of interest on funds obtained by the Bank
to pay any of its liabilities or subject the Bank to any tax, duty,
charge, deduction or withholding on or with respect to payments relating
to the Bonds, the Letter of Credit or this Agreement, or any amount paid
or to be paid by the Bank as the issuer of the Letter of Credit (other
than any tax measured by or based upon the overall net income of the Bank
imposed by any jurisdiction having control over the Bank);
(ii) impose, modify, require, make or deem applicable to the
Bank any reserve requirement, capital requirement, special deposit
requirement, insurance assessment or similar requirement against any
assets held by, deposits with or for the account of, or loans, letters of
credit or commitments by, an office of the Bank;
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(iii) change the basis of taxation of payments due the Bank
under this Agreement or the Bonds (other than by a change in taxation
of the overall net income of the Bank);
(iv) cause or deem letters of credit to be assets held by the
Bank and/or as deposits on its books; or
(v) impose upon the Bank any other condition with respect to
any amount paid or payable to or by the Bank or with respect to this
Agreement or any of the other Account Party Agreements;
and the result of any of the foregoing is to increase the cost to the Bank of
making any payment or maintaining the Letter of Credit, or to reduce the
amount of any payment (whether of principal, interest or otherwise) receivable
by the Bank, or to reduce the rate of return on the capital of the Bank or to
require the Bank to make any payment on or calculated by reference to the
gross amount of any sum received by it, in each case by an amount which the
Bank in its reasonable judgment deems material, then the Account Party shall
pay to the Bank, from time to time as specified by the Bank, such an amount or
amounts as will compensate the Bank for such additional cost, reduction or
payment.
The protection of this Section 2.4(b) shall be available to the Bank
regardless of any possible contention of invalidity or inapplicability of the
law, regulation or condition which has been imposed; provided, however, that
if it shall be later determined by the Bank that any amount so paid by the
Account Party pursuant to this Section 2.4(b) is in excess of the amount
payable under the provisions hereof, the Bank shall refund such excess amount
to the Account Party. The obligations of the Account Party under this Section
shall survive the termination of this Agreement and the discharge of the other
Obligations of the Account Party hereunder.
Section 2.5. Interest on Overdue Amounts. The Account Party agrees to
pay, on demand, interest on any Obligation which is not paid when due, for the
period from and including the date on which payment is due to but not
including the date on which payment is made, at a rate per annum equal to the
Prime Rate, plus two percent (2%). Interest on overdue amounts shall be
computed on the basis of a year consisting of 360 days, for the actual number
of days elapsed.
Section 2.6. Payments. The Account Party agrees that the Bank shall debit
from the Payment Account an amount equal to each payment to be made by the
Account Party to the Bank hereunder, whether on account of reimbursements of
demands for payment made under the Letter of Credit or other disbursements and
expenses made or incurred by the Bank pursuant to Section 2.2, any fee payable
under Section 2.3, payment to the Bank of the increased amounts or other
amounts under Section 2.4 or any other amounts at any time owing hereunder or
under any of the Security Documents or interest due on any of the foregoing.
All such debits shall be made by the Bank not later than 3:00 p.m., Chicago
time, on the date due and any debits made or payments received after that time
on such date shall be deemed received on the next Business Day. Whenever any
payment to be made under this Agreement shall be due on a day which is not a
Business Day, such payment shall be due on the next succeeding Business Day,
with interest continuing to accrue thereon until such payment is made.
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Section 2.7. Pledged Bonds. The Account Party pledges, assigns,
hypothecates, transfers, and delivers to the Bank or to the Trustee as the
agent of the Bank (a) all its right, title and interest to the Pledged Bonds
and (b) the Account Party's right to receive such Pledged Bonds as the same
may from time to time be delivered to the Trustee by the registered owners
thereof. The Account Party further grants to the Bank a first lien on, and a
first priority security interest in, the Account Party's right, title and
interest in and to the Pledged Bonds and the Account Party's right to receive
such Pledged Bonds, the interest thereon and all proceeds thereof as
collateral security for the prompt and complete payment when due of all
amounts due or to become due in respect of the Obligations. If the Bank, in
its sole discretion, deems it necessary, then the Account Party shall execute
and deliver, and, if requested by the Bank, shall use its best efforts to
cause the Trustee to execute and deliver, such pledge agreements and financing
statements (in form and substance satisfactory to the Bank) as the Bank may
require in order to accomplish the purposes of this Section. Prior to or
simultaneously with the remarketing of Pledged Bonds, the Account Party shall
pay, or cause the Trustee or the Remarketing Agent on behalf of the Account
Party to pay, the amounts then outstanding hereunder with respect to all
drawings honored by the Bank under the Letter of Credit to pay the purchase
price of the Pledged Bonds (in the order in which such drawings were made) by
paying to the Bank an amount equal to the sum of (y) the aggregate principal
amount of the Pledged Bonds being resold, plus (z) any interest due and owing
to the Bank pursuant to Section 2.2.2 and Section 2.5. Upon payment to the
Bank of the amount to be paid pursuant to the preceding sentence of this
Section, the Bank shall release or cause the Trustee to release, as the case
may be, from the pledge and security interest created by this Agreement a
principal amount of Pledged Bonds corresponding to the amount of such payment.
Section 2.8. Collateral Account. The Bank shall establish a collateral
account (the "Collateral Account") to hold funds delivered to the Bank by the
Account Party pursuant to Section 5.8 hereof. The Account Party shall have no
right in, dominion over, or control of the Collateral Account. If no Event of
Default or Unmatured Default shall have occurred, the amounts on deposit
therein shall be transferred to the Trustee as provided in Section 5 8. If an
Event of Default or Default shall have occurred, the Bank may apply the
amounts on deposit in the Collateral Account to the payment of the
Obligations, in such order as the Bank may in its sole discretion determine.
The Bank shall have no obligation to invest the amounts on deposit in the
Collateral Account, provided that if no Event of Default or Unmatured Default
shall have occurred, the Bank shall, upon the written request of the Account
Party, invest the amounts on deposit in the Collateral Account in Permitted
Investments which mature no later than the next succeeding December 1. Any
such investment shall be made in the name of the Bank and shall be collateral
for the Obligations. Any interest accruing or profit realized on any such
investments shall be credited to the Collateral Account; any loss resulting
from any such investment, or disposition thereof, shall be charged to the
Collateral Account; provided that upon the realization of any such loss the
Account Party shall promptly pay to the Bank for deposit to the Collateral
Account the amount of such loss. The Account Party hereby assigns, pledges and
grants a security interest to the Bank in the Collateral Account, all funds,
instruments, securities, investments and other securities entitlements at any
time held therein, as security for the Obligations.
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Section 2.9. Security Documents. The Account Party agrees that the
payment of the Obligations is, and at all times shall remain, secured by the
Security Documents.
ARTICLE 3.
GUARANTY
Section 3.1. Guaranty of Obligations. As consideration for the Bank's
agreeing to issue the Letter of Credit, the Guarantor unconditionally
guaranties the due and punctual payment of all Obligations outstanding
hereunder when due (whether by required reimbursement or payment, declaration
or otherwise). The obligations of the Guarantor under this Section are
referred to as the "Selfix Guaranty".
Section 3.2. Terms of Guaranty. The Guarantor agrees that the Obligations
and any obligations of the Account Party under the Security Documents may be
extended or renewed, in whole or in part, without notice or further assent
from the Guarantor, and that the Guarantor will remain bound upon its Selfix
Guaranty notwithstanding any extension or renewal of any of the Obligations or
any obligations of the Account Party under the Security Documents.
The Guarantor waives notice of protest for nonpayment. The obligations of
the Guarantor under the Selfix Guaranty shall not be affected by (a) the
failure of the Bank to assert any claim or demand or to enforce any right or
remedy against the Account Party under the provisions of this Agreement, the
Indenture, any Account Party Agreement, any Security Document or any other
agreement or instrument, (b) any extension or renewal of any such agreement or
instrument, (c) any rescission, waiver, amendment or modification of any of
the terms or provisions of this Agreement, the Bonds, the Indenture, any
Account Party Agreement, any Security Document or of any other agreement or
instrument, (d) the release of any of the security held by or on behalf of the
Bank under the Security Documents or otherwise for the Obligations or any of
them or (e) the failure of the Bank to exercise any right or remedy against
any other guarantor of the Obligations.
The Guarantor further agrees that the Selfix Guaranty constitutes a
guaranty of payment when due and not of collection and waives any right to
require that any resort be had by the Bank to any of the security held for
payment of the Obligations or to any credit on the books of the Bank in favor
of the Account Party.
ARTICLE 4.
REPRESENTATIONS
To induce the Bank to issue the Letter of Credit, the Guarantor and the
Account Party, jointly and severally, represent to the Bank that:
Section 4.1. Organization. The Guarantor and the Account Party are
corporations for profit duly organized, validly existing and in good standing
under the laws of the States of Illinois and Delaware, respectively. The
Guarantor and the Account Party are duly qualified to do business, and in good
standing, in each other jurisdiction where, because of the operations or
properties of the Guarantor or the Account Party such qualification is
required, unless the failure to be so qualified does not and will not have a
material adverse effect on the consolidated
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financial condition or the operations of the Account Party and its
subsidiaries taken as a whole. The Account Party owns all of the common stock
of the Guarantor.
Section 4.2. Authorization; No Conflict. (a) The execution and delivery by
the Guarantor of this Agreement and the performance by the Guarantor of its
obligations hereunder and (b) the execution and delivery by the Account Party
of this Agreement, the Account Party Agreements and the Security Documents,
the obtaining of the issuance of the Letter of Credit, the approval of the
Indenture and the performance by the Account Party of its obligations under
this Agreement, the Account Party Agreements and the Security Documents, are
within the Guarantor's and the Account Party's respective corporate powers,
have been duly authorized by all necessary corporate action, have received all
necessary governmental approvals, if any shall be required, and do not and
will not (x) contravene or conflict with any existing provision of law, with
any judicial or administrative order, writ, judgment, decree, determination or
award applicable to the Account Party or the Guarantor, with any provision of
the Guarantor's or the Account Party's charter or by-laws or with any
resolution of the Guarantor's or the Account Party's Board of Directors or any
committee thereof, (y) result in a breach of any indenture, loan agreement,
mortgage, deed of trust or other agreement binding upon the Guarantor or the
Account Party or affecting the properties of the Guarantor or the Account
Party or (z) result in, or require the creation of, any lien of any nature
(except as otherwise provided herein and in the Security Documents) upon any
of the properties now owned or hereafter acquired by the Account Party or the
Guarantor.
Section 4.3. Validity and Binding Nature. This Agreement, each of the
Account Party Agreements and each of the Security Documents are the respective
valid and binding obligations of the Account Party, enforceable against the
Account Party in accordance with their respective terms, except as enforcement
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and subject to general principles
of equity regardless of whether such enforcement is considered in a proceeding
in equity or at law. This Agreement is a valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and subject to
general principles of equity regardless of whether such enforcement is
considered in a proceeding in equity or at law.
Section 4.4. Financial Statements. The Account Party's audited annual
consolidated financial statements as at December 30, 1995, copies of which
have been furnished to the Bank, have been prepared in conformity with GAAP
and fairly present the consolidated financial condition of the Account Party
and its Subsidiaries taken as a whole as at such date, and since such date
there has been no material adverse change in their consolidated financial
condition or operations taken as a whole. The Account Party and its
Subsidiaries taken as a whole have no material contingent liabilities not
provided for or disclosed in the foregoing financial statements.
Section 4.5. True and Complete Disclosure. (a) All factual information
relating to the Account Party and the Guarantor furnished to the Bank
heretofore or contemporaneously herewith by or on behalf of the Account Party
or the Guarantor for purposes of or in connection with this Agreement is true
and complete in every material respect on the date as of which such
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information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading at such time
for the purposes for which such information was furnished, and (b) there is no
fact known to the Account Party or the Guarantor on the date hereof that
materially adversely affects the business or financial prospects of the
Account Party and its Subsidiaries that has not been disclosed in writing to
the Bank.
Section 4.6. Litigation. Except as disclosed in the Account Party's annual
consolidated financial statements as at December 30, 1995, no litigation
(including, without limitation, any derivative action), arbitration proceeding
or governmental proceeding is pending or, to the knowledge of the Account
Party or the Guarantor, threatened that, if adversely determined, would (a)
have a material adverse effect on the present or future consolidated financial
condition, business, prospects or operations of the Account Party and its
Subsidiaries taken as a whole, (b) materially impair the Account Party's or
the Guarantor's ability to perform its obligations under or in connection with
this Agreement, any of the Account Party Agreements or any of the Security
Documents, (c) impair the validity or enforceability of this Agreement, any of
the Account Party Agreements or any of the Security Documents or (d) adversely
affect the federal tax-exempt status of the interest on the Bonds.
Section 4.7. Investment Company Act. Neither the Account Party nor any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
Section 4.8. Public Utility Holding Company Act. Neither the Account
Party nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
Section 4.9. Regulation U. Neither the Account Party nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System).
Section 4.10. Compliance with Laws. To the best of their knowledge
after due inquiry, neither the Account Party nor any of its Subsidiaries is in
violation of any provision of law, or of any judicial or administrative order,
writ, judgment, decree, determination or award which violation involves a
reasonable possibility of materially and adversely affecting the consolidated
financial condition or operations of the Account Party.
Section 4.11. Tax Returns and Tax Liability. The Account Party has
filed all tax returns that are required to be filed by it and has paid or
provided adequate reserves for the payment of all taxes and assessments
payable by it that have become due, other than those that are not
yet delinquent or not substantial in aggregate amount, or that are being
contested in good faith. The Account Party has paid, or has provided adequate
reserves for the payment of, all taxes and assessments applicable for all prior
fiscal years and for the current fiscal year to the date of its most recent
financial statements.
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Section 4.12. Employee Benefit Plans. Each employee benefit plan as to
which the Account Party or the Guarantor may have any liability complies in all
material respects with all applicable requirements of law and regulations and
(a) no Reportable Event (as defined in ERISA) has occurred with respect to any
such plan, (b) the Account Party has not, nor has any of its Subsidiaries,
withdrawn from any such plan or initiated steps to do so and (c) no steps have
been taken to terminate any such plan.
Section 4.13. Liens. None of the assets of the Account Party or
any Subsidiary is subject to any Lien, except:
(a) Liens for current taxes not delinquent or taxes being
contested in good faith and by appropriate proceedings and as to which
such reserves or other appropriate provisions as may be required by
GAAP are being maintained;
(b) carriers', warehousemen's, mechanics', materialmen's and
other like statutory Liens arising in the ordinary course of business
securing obligations which are not overdue for a period of more than
30 days or which are being contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, and other obligations of a
like nature incurred in the ordinary course of business; and
(e) Liens listed on Exhibit III.
ARTICLE 5.
COVENANTS
Until (a) the obligation of the Bank to issue the Letter of Credit
subject to the terms and conditions of this Agreement is terminated, (b) the
Letter of Credit is surrendered and (c) the Obligations are paid in full, each
of the Account Party and the Guarantor agrees that, unless the Bank shall
otherwise expressly consent in writing:
Section 5.1. Payment and Performance. The Account Party and the Guarantor
shall pay and perform, or cause to be paid and performed, as the case may be,
each of the Account Party's and the Guarantor's covenants and obligations
hereunder, each of the Account Party Agreements and each of the Security
Documents in accordance with the terms and conditions hereof and thereof. To
effectuate the purposes of this Section, (a) each of the Account Party and the
Guarantor agrees that the representations, warranties and covenants set forth
in each of the Account Party Agreements and each of the Security Documents are
incorporated by reference in this Agreement and that the Bank shall have the
right to rely upon and enforce said representations, warranties and covenants
as if the same were fully set forth in this Agreement.
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Section 5.2. Financial Statements and Other Reports. The Account Party
shall furnish to the Bank:
(a) Annual Audit Report. Within 90 days after each fiscal year of the
Account Party, a copy of the annual audit report of the Account Party
and its Subsidiaries prepared on a consolidated basis in conformity with
generally accepted accounting principles and certified by Grant Thornton
or another independent certified public accountant who shall be
satisfactory to the Bank, together with a certificate from such accountant
containing a computation of, and showing compliance with, each of the
FINANCIAL RATIOS AND RESTRICTIONS contained in this Article 5 and to the
effect that, in making the examination necessary for the signing of such
annual audit report, such accountant has not become aware of any Event of
Default or Unmatured Default that has occurred and is continuing, or, if
such accountant has become aware of any such event, describing it and the
steps, if any, being taken to cure it;
(b) Monthly Financial Statement. Within 30 days after each month
(except the last month) of each fiscal year of the Account Party, a
copy of the unaudited financial statements of (i) the Account Party and
its Subsidiaries prepared on a consolidated basis in conformity with
generally accepted accounting principles (subject to year-end adjustments
in the absence of footnotes), signed by the Account Party's chief
financial officer and consisting of at least a balance sheet as at the
close of such month and statements of earnings for such month and for the
period from the beginning of such fiscal year to the close of such month
and (ii) the Guarantor prepared in conformity with generally accepted
accounting principles (subject to year-end adjustments in the absence of
footnotes), signed by the Guarantor's chief financial officer and
consisting of at least a balance sheet as at the close of such month and
statements of earnings for such month and for the period from the
beginning of such fiscal year to the close of such month;
(c) Quarterly Financial Statement. Within 45 days after each quarter
(except the last quarter) of each fiscal year of the Account Party, a
copy of the unaudited financial statement of the Account Party and its
Subsidiaries prepared in the same manner as the financial statements
referred to in the preceding clause (b) (subject to year-end adjustments
in the absence of footnotes), signed by the Account Party's chief
financial officer and consisting of at least a balance sheet as at the
close of such quarter and statements of earnings for such quarter and for
the period from the beginning of such fiscal year to the close of such
quarter;
(d) Officer's Certificate. Together with the financial statements
furnished by the Account Party under preceding clauses (a), (b), and (c), a
certificate of the Account Party's chief financial officer, dated the date
of such annual audit report or such quarterly financial statement, as the
case may be, to the effect that no Event of Default or Unmatured Default
has occurred and is continuing, or, if there is any such event, describing
it and the steps, if any, being taken to cure it, and containing a
computation of, and showing compliance with, each of the financial ratios
and restrictions contained in this Article 4;
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(e) Report of Change in Subsidiaries or Partnerships. Promptly from
time to time, a written report of any change in the Account Party's
Subsidiaries, partnerships and joint ventures since the Closing Date; and
(f) Requested Information. Promptly from time to time, such other
reports or information as the Bank may reasonably request.
Section 5.3. Notices. The Account Party and the Guarantor shall notify
the Bank in writing of any of the following immediately upon learning of the
occurrence thereof, describing the same and, if applicable, the steps being
taken by the Person(s) affected with respect thereto:
(a) Default. The occurrence of an Event of Default or an Unmatured
Default;
(b) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding which is material to the Account
Party and its Subsidiaries taken as a whole;
(c) Judgment. The entry of any judgment or decree against the Account
Party or any Subsidiary if the aggregate amount of all judgments and
decrees then outstanding against the Account Party and all Subsidiaries
exceeds $250,000 after deducting (i) the amount with respect to which the
Account Party or any Subsidiary is insured and with respect to which the
insurer has assumed responsibility in writing, and (ii) the amount for
which the Account Party or any Subsidiary is otherwise indemnified if the
terms of such indemnification are satisfactory to the Bank;
(d) Pension and Welfare Plans. The occurrence of a Reportable Event
with respect to any Plan; the institution of any steps by the Account
Party, any ERISA Affiliate, the PBGC or any other Person to terminate any
Plan; the institution of any steps by the Account Party or any ERISA
Affiliate to withdraw from any Plan; or the incurrence of any material
increase in the contingent liability of the Account Party or any
Subsidiary with respect to any post-retirement welfare benefits; or
(e) Material Adverse Change. The occurrence of a material adverse
change in the business, operations or financial condition of the
Account Party and its Subsidiaries taken as a whole.
Section 5.4. Records, Books and Inspections. The Account Party shall, and
shall cause each of its Subsidiaries to, maintain complete and accurate
records and books of account, in which complete entries are made reflecting
the business and financial transactions of the Account Party and such
Subsidiary, such entries to be made in accordance with GAAP consistently
applied (in the case of financial transactions) or as otherwise required by
applicable rules and regulations of any governmental agency or regulatory
authority (federal, state or local) having jurisdiction over the Account Party
and such Subsidiary or the transactions contemplated by this Agreement, any of
the Account Party Agreements or any of the Security Documents; permit
reasonable access by the Bank to, and permit the Bank to make copies of and to
take abstracts from, the books and records of the Account Party and its
Subsidiaries; and permit the Bank to inspect the other properties and
operations of the Account Party and its Subsidiaries.
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Section 5.5. Other Agreements. The Account Party shall not, and shall not
permit any of its Subsidiaries to, enter into any agreement containing any
provision that would be violated or breached by the performance of its
obligations hereunder, (in the case of the Account Party) any of the Account
Party Agreements or any of the Security Documents or under any other
instrument or document delivered or to be delivered by it hereunder or
thereunder or in connection herewith or therewith.
Section 5.6. Maintenance of Employee Benefit Plans. The Account Party
shall, and shall cause each of its Subsidiaries to, maintain each employee
benefit plan as to which it may have any liability, in compliance with all
applicable requirements of law and regulations. The foregoing shall in no way
limit or impair the right of the Account Party or its Subsidiaries to
terminate or withdraw from participation in any of said plans provided said
termination or withdrawal is in compliance with all applicable provisions of
law and regulations.
Section 5.7. Compliance with Regulation U. The Account Party shall not
use or permit any proceeds of the Letter of Credit to be used, either directly
or indirectly, for the purpose, whether immediate, incidental or ultimate, of
"buying or carrying margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, as amended from time to
time.
Section 5.8. Amortization. The Account Party shall pay, or cause to be
paid, as the case may be, on or before December 1 of each year, beginning
December 1, 1996, $400,000 of the outstanding principal of the Bonds. In
furtherance of the foregoing the Account Party agrees to pay to the Bank for
deposit into the Collateral Account on the Effective Date $100,000 in cash and
on each February 1, May 1, August 1 and November 1 thereafter the amount of
$100,000 in cash, to be applied to the redemption of the Bonds. The Account
Party shall take all action necessary to cause the redemption of Bonds in an
aggregate principal amount equal to $400,000 on or before December 1 of each
year. The Bank shall transfer the funds in the Collateral Account to the
Trustee upon the later to occur of December 1 of each year and certification
to the Bank by the chief financial officer of the Account Party that the
Account Party has given all notices and taken all other action required by the
Indenture to cause the redemption of the Bonds to be effected.
Section 5.9. Fiscal Year. The Account Party shall, and shall cause each of
its Subsidiaries, to maintain for all purposes, including, without limitation,
accounting purposes, a 52/53 week fiscal year ending with the week ending on
the last Saturday of December; provided, however, that the Account Party may
change the fiscal year if it shall have given the Bank not less than 30 days'
prior written notice of any such change. In the event of any change to the
Account Party's fiscal year, the Bank shall adjust the financial covenants of
this Agreement to reflect the effect of such change.
Section 5.10. Consolidated Tangible Net Worth. The Account Party shall
maintain at all times Consolidated Tangible Net Worth at not less than
$6,000,000, plus for each fiscal quarter of the Account Party, commencing with
the end of the fiscal quarter ending March 31,1996, 50% of the Consolidated
Net Income for such fiscal quarter with no deductions for losses.
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Section 5.11. Ratio of Annualized Income Available for Debt Service to
Annualized Debt Service Requirements. The Account Party shall maintain the
ratio of Annualized Income Available for Debt Service to Annualized Debt
Service Requirements at not less than 1.25:1.00 as of the end of each fiscal
month ending on or after August 3, 1996.
Section 5.12. Current Ratio. The Account Party shall maintain as of the
last day of each calendar month a Current Ratio at not less than 1.60:1.00.
Section 5.13. Consolidation, Merger, Sale of Assets; etc. The Account
Party shall not, and shall not permit any of its Subsidiaries to:
(a) consolidate with or merge into or with any other Person except that
any Subsidiary of the Account Party may merge into or consolidate with the
Account Party or a Wholly-Owned Subsidiary of the Account Party; or
(b) sell, transfer, lease or otherwise dispose of, in one or a series of
transactions, all or a substantial part of its assets, other than in the
ordinary course of business; or
(c) sell, transfer, lease or otherwise dispose of any of its assets,
except for (i) sales of Inventory in the ordinary course of business as
provided in Section 5.20; (ii) dispositions of equipment which have become
obsolete, worn out, unsuitable or unnecessary and the disposition thereof will
not impair the efficiency or economic value of the remaining assets; and (iii)
sales, leases, transfers or dispositions to the Account Party or a
Wholly-Owned Subsidiary of the Account Party.
Section 5.14. Indebtedness. The Account Party will not, and will not
permit any of its Subsidiaries to, issue, incur, assume, create or have
outstanding any Indebtedness, except:
(a) Indebtedness owing to the Bank;
(b) Capitalized Lease Obligations and Purchase Money Indebtedness;
provided that the aggregate principal amount of Capitalized Lease Obligations
(other than Capitalized Lease Obligations disclosed in Schedule 4.9 of the
Credit Agreement), and Purchase Money Indebtedness outstanding at any time does
not exceed $250,000; and provided further that the amount of any such
Capitalized Lease Obligation or Purchase Money Indebtedness shall not exceed an
amount equal to 100% of the lesser of the purchase price or fair market value
of the property subject to such Capital Lease or acquired with the proceeds of
such Purchase Money Indebtedness; and
(c) Indebtedness existing on the date hereof, as described on Schedule
4.9 of the Credit Agreement, and disclosed to the Bank in writing.
Section 5.15. Liens. The Account Party will not, and will not permit
any of its Subsidiaries to pledge, mortgage, or otherwise encumber or subject
to or permit to exist upon or be subjected to any Lien, any assets or property
of any kind or character at any time owned by the Account Party or any of its
Subsidiaries other than Permitted Liens.
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Section 5.16. Issuance of Stock. The Account Party will not, and will not
permit any of its Subsidiaries to, sell or issue shares of any class of the
stock of any Subsidiary of the Account Party or any other ownership interests
therein to any Person other than (i) to the Account Party, or (ii) any
employees of the Account Party pursuant to any employment or incentive
agreement in effect from time to time.
Section 5.17. Guaranties. The Account Party shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist
any Guaranty except for endorsements of negotiable instruments for deposit or
collection in the regular course of business.
Section 5.18. Redemptions. The Account Party shall not, and shall not
permit any of its Subsidiaries to, redeem, purchase or otherwise acquire,
directly or indirectly, any shares of any class of its stock or otherwise
acquire or retire for value, prior to scheduled maturity, any Indebtedness
(other than Indebtedness owing to the Bank and any Capitalized Lease
Obligations and Purchase Money Indebtedness incurred in accordance with the
provision of Section 5.14(b) hereof) which is pari passu or subordinate in
right of payment to the Indebtedness owing to the Bank or which is or shall be
scheduled to mature after the Stated Expiration Date.
Section 5.19. Dividends and Distributions. The Account Party shall not,
and shall not permit any of its Subsidiaries to, (i) pay or declare at any
time any dividend on any shares of any class of its stock (except for
dividends payable solely in capital stock of the Account Party), (ii) make at
any time any other distributions on account of any shares of any class of its
stock, except for payments of dividends to the Account Party by a Subsidiary
of the Account Party or (iii) make any payment of principal of or interest on
any Indebtedness subordinated in right of payment to the Indebtedness owing to
the Bank.
Section 5.20. Transactions with Affiliates. The Account Party shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, enter
into or permit to exist any transaction (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Account Party other than on terms that are
at least as favorable to the Account Party or such Subsidiary, as the case may
be, as those which might be obtained at the time from persons who are not an
Affiliate and which, in the reasonable judgment of the Board of Directors of
the Account Party, are fair and reasonable to the Account Party or such
Subsidiary, provided that the foregoing restriction shall not apply to any
transaction entered into in the ordinary course of business between the
Account Party and any Wholly-Owned Subsidiary of the Account Party.
Section 5.21. Investments. The Account Party shall not, and shall not
permit any of its Subsidiaries to, acquire or have outstanding or commit
itself to acquire or hold any Investment except Investments in: (a) Cash
Equivalents, (b) Investments, including Investments in Wholly Owned
Subsidiaries, in existence on the date of this Agreement and disclosed to the
Bank in Schedule 4.18 of the Credit Agreement, (c) Investments in an aggregate
amount not to exceed $300,000 in Implex and (d) Investments in addition to the
foregoing with an aggregate value at no time exceeding $100,000.
Section 5.22. Further Assurances. The Account Party and the Guarantor
shall execute and deliver at any time and from time to time, upon the written
request of the Bank, such further
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documents including, but not limited to, a complete copy of the bond documents
which shall be certified by an officer of the Account Party as true, complete
and correct and do such further acts and things as the Bank may reasonably
request in order to effect the purposes of this Agreement.
ARTICLE 6.
CONDITIONS TO ISSUANCE OF LETTER OF CREDIT
The obligation of the Bank to issue the Letter of Credit pursuant to
Section 2.1.1 is subject to the following conditions precedent:
Section 6.1. Documents. The Bank shall have received all of the
following, each duly executed and dated the Effective Date (or such other date
prior to the Effective Date as shall be satisfactory to the Bank), in form and
substance satisfactory to the Bank:
6.1.1. Account Party and Other Agreements. Duly executed or certified
copies of the Bonds, the Indenture, the Account Party Agreements and the
Security Documents and a duly certified transcript of proceedings of the Issuer
for the original issuance of the Bonds.
6.1.2. Corporate Action and Consents. Copies certified by the
Secretary or Assistant Secretary of the Account Party, of all documents
evidencing (i) any necessary corporate action of the Account Party, including,
without limitation, certified copies of the resolutions of the Board of
Directors of the Account Party authorizing or ratifying the execution,
delivery and performance by the Account Party of each of this Agreement, the
Account Party Agreements and the Security Documents and (ii) any consents and
governmental approvals with respect to this Agreement, the Account Party
Agreements and the Security Documents.
6.1.3. Incumbency and Signatures. A certificate of the Secretary or
an Assistant Secretary of the Account Party certifying the names of the
officer(s) or other Person(s) authorized to sign this Agreement and any other
documents provided for in this Agreement for or on behalf of the Account Party
together with a sample of the true signature of each such officer(s) or
Person(s). (The Account Party hereby agrees that the Bank may conclusively rely
on such certificates until formally advised by a like certificate of any
changes therein.)
6.1.4. Corporate Documents. Copies duly certified by the
Secretary or Assistant Secretary of the Account Party of the Account Party's
charter and by-laws, as in effect on the Effective Date.
6.1.5. Corporate Action and Consents. Copies certified by the
Secretary or Assistant Secretary of the Guarantor, of all documents
evidencing (i) any necessary corporate action of the Guarantor, including,
without limitation, certified copies of the resolutions of the Board of
Directors of the Guarantor authorizing or ratifying the execution, delivery and
performance of this Agreement by the Guarantor and (ii) any consents and
governmental approvals with respect to this Agreement.
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6.1.6. Incumbency and Signatures. A certificate of the Secretary or
an Assistant Secretary of the Guarantor certifying the names of the
officer(s) or other Person(s) authorized to sign this Agreement and any
other documents provided for in this Agreement for or on behalf of the
Guarantor together with a sample of the true signature of each such
officer(s) or Person(s). (The Guarantor hereby agrees that the Bank may
conclusively rely on such certificates until formally advised by a like
certificate of any changes therein.)
6.1.7. Corporate Documents. Copies duly certified by the Secretary or
Assistant Secretary of the Guarantor of the Guarantor's charter and
by-laws, as in effect on the Effective Date.
6.1.8. Opinion of Counsel for the Account Party. The opinion of Much,
Shelist, Freed, Denenberg & Ament, P.C., counsel to the Account Party
and the Guarantor, in the form attached hereto as Exhibit II.
6.1.9. Opinion of Bond Counsel. The opinion (which may take the
form of a reliance opinion) of Carlson and Hug, addressed to the Bank,
to the effect that the Bonds, the Indenture and the Loan Agreement are the
legal, valid and binding obligations of the Issuer and that the interest
on the Bonds is not generally includible in the gross income of the
registered owners thereof for federal income tax purposes.
6.1.10. Bring-Down Certificate. A certificate, dated the Effective
Date and signed by the chief financial or accounting officer of each of
the Account Party and the Guarantor, to the effect that (i) each of the
Account Party and the Guarantor has performed all actions to be performed
on its part in order to enter into this Agreement, the Account Party
Agreements and the Security Documents, (ii) the representations set forth
in Article 4 are true, correct and complete on the Effective Date and
(iii) on the Effective Date, after giving effect to the execution and
delivery of this Agreement and the issuance of the Letter of Credit, no
Event of Default or Unmatured Default has occurred and is continuing.
6.1.11. Title Insurance. A duly executed original policy of title
insurance on the real property described in the Mortgage (the "Policy")
insuring the Mortgage, in form and substance acceptable to the Bank.
6.1.12. Other Documents. Such other documents as the Bank shall have
requested.
ARTICLE 7.
EVENTS OF DEFAULT; REMEDIES
Section 7.1. Events of Default. Each of the following shall constitute
an Event of Default under this Agreement:
7.1.1. Violation of Law. The issuance of the Bonds or the execution,
delivery or performance of the Indenture, any Account Party Agreement
or any Security Document
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shall result in a violation of any law, rule or regulation, or any order of
any court, governmental agency or regulatory body, or any indenture or loan or
credit agreement (including, without limitation, this Agreement), or any other
agreement or instrument, applicable to the Account Party or the Guarantor.
7.1.2. Nonpayment of Obligations. Default in the payment when due of any
Obligation owing under this Agreement or any obligation under any of the
Security Documents and the continuation thereof after five (5) Business Days
notice thereof from the Bank to the Account Party.
7.1.3. Nonpayment of Other Indebtedness for Borrowed Money. Default in
the payment when due (subject to any applicable grace period), whether by
acceleration, redemption or otherwise, of any indebtedness (other than
indebtedness under this Agreement, the Account Party Agreements or the
Security Documents) for borrowed money of the Guarantor, the Account Party or
any of their respective Subsidiaries in excess of $100,000.
7.1.4. Bankruptcy and Insolvency. The Account Party or the Guarantor
becomes insolvent or generally fails to pay, or admits in writing its
inability to pay, debts as they become due; or the Account Party or the
Guarantor applies for, consents to, or acquiesces in the appointment of, a
trustee, receiver or other custodian for it or for any of its property, or
makes a general assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for the Account Party or the Guarantor or for a
substantial part of its property and is not discharged within ninety (90)
days; or any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of the Account Party or the
Guarantor and if such case or proceeding is not commenced by the Account Party
or the Guarantor, it is consented to or acquiesced in by the Account Party or
the Guarantor, as applicable, or remains for ninety (90) days undismissed; or
the Account Party or the Guarantor takes any corporate action to authorize, or
in furtherance of, any of the foregoing.
7.1.5. Noncompliance with this Agreement. (i) Failure by the Account
Party to comply with or to perform any provision of Article 6 and continuance
of such failure under this clause (i) for thirty (30) days after notice
thereof to the Account Party or the Guarantor from the Bank, or (ii) failure
by the Account Party or the Guarantor to comply with or to perform any
provision of this Agreement (if such failure does not constitute an Event of
Default under any of the preceding provisions of this Section 7.1, including,
without limitation, Section 7.1.2 and the provisions of clause (i) of this
Section 7. 1.5) and continuance of such failure under this clause (ii) for
thirty (30) days after notice thereof to the Account Party or the Guarantor
from the Bank.
7. 1.6. Representations and Warranties. Any representation or warranty,
or reaffirmation thereof, made by the Account Party or the Guarantor herein or
in any of the Account Party Agreements or in connection herewith or therewith
is breached or is false or misleading in any material respect, or any
schedule, certificate, financial statement,
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report, notice or other writing furnished by the Account Party or the
Guarantor to the Bank, the Issuer, the Trustee or any other Person in
connection with the issuance, sale and delivery, or the remarketing in the
secondary market, of the Bonds is false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified.
7.1.7. Default Relating to Employee Benefit Plans. With respect to any
employee benefit plan as to which the Account Party or the Guarantor
may have any liability, there shall exist for thirty (30) or more
consecutive days a deficiency in excess of minimum funding standards as
contained in the Internal Revenue Code in plan assets available to satisfy
the benefits guaranteeable under ERISA with respect to such plan, or any
Reportable Event (as defined in ERISA) with respect to such plan shall
occur and be subsisting for thirty (30) or more consecutive days.
7.1.8. Default under Other Documents. A default or an event of default,
as described under the Indenture, any of the Account Party Agreements
or any of the Security Documents, occurs and is continuing beyond any
applicable grace or cure periods.
7.1.9. Amendment, Termination or Waiver of Other Documents. The
Indenture, any of the Account Party Agreements or any of the Security
Documents, is amended, modified, supplemented or terminated, or any
provision thereof waived, without the prior written consent of the Bank.
7.1.10. Certain Judgments and Orders. A judgment or order shall be
rendered against the Account Party or any of its Subsidiaries for the
payment of money in excess of $100,000 and such judgment or order shall
continue unsatisfied or unstayed for a period of in thirty (30) consecutive
days.
Section 7.2. Remedies. If any Event of Default occurs and is continuing,
then, and in any such event, the Bank, in its sole discretion, may either at
the same time or at different times (i) by notice to the Account Party,
declare all Obligations to be, and such amounts shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Account Party and
the Guarantor, provided that upon the occurrence of an Event of Default under
Section 7.1.4 hereof such acceleration shall automatically occur (unless such
automatic acceleration is waived by the Bank in writing), (ii) invoke the
right of set-off in accordance with Section 7.3, (iii) give written notice to
the Trustee that an Event of Default has occurred and is continuing and direct
the Trustee to declare the Bonds to be immediately due and payable and (iv)
exercise any remedies available hereunder, under the Indenture, any Account
Party Agreements or any of the Security Documents, or otherwise available at
law or in equity.
Section 7.3. Set-Off. In addition to and not in limitation of all rights
of set-off that the Bank may have under applicable law, the Bank shall, upon
the occurrence of any Event of Default, have the right to appropriate and
apply to the payment of any and all Obligations any and all balances, credits,
deposits, accounts or moneys of the Account Party and the Guarantor then or
thereafter with the Bank.
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Section 7.4. No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Bank is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given to the Bank hereunder or otherwise
available. No delay or omission in exercising any right or power accruing upon
any Event of Default shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle the Bank
to exercise any remedy reserved to it by this Article, the Bank need not give
any notice, other than such notices as may be herein expressly required.
Section 7.5. No Additional Waiver Implied by One Waiver. In the event any
agreement contained in this Agreement is breached by the Account Party or the
Guarantor and thereafter waived by the Bank, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
ARTICLE 8.
GENERAL
Section 8.1. Amendments. No amendment, modification, supplement,
termination or waiver of, or consent with respect to, any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed by the Bank and the Account Party.
Section 8.2. Notices. Any notice hereunder to any party hereto shall be
in writing and, if by telegram, telecopy or telex, shall be deemed to have
been given when sent and, if mailed, shall be deemed to have been given when
sent by registered or certified mail, postage prepaid, and addressed to such
party at its address shown below its signature hereto, or at such other
address as it may, by written notice received by the other party hereto, have
designated as its address for such purpose. No notice to or demand on the
Account Party or the Guarantor in any specific case shall entitle the Account
Party or the Guarantor to any other or further notice or demand in similar or
other circumstances where such further notice or demand is not expressly
required by this Agreement to be given to the Account Party or the Guarantor.
Section 8.3. Costs, Expenses and Taxes. The Account Party and the
Guarantor agree (a) to pay to the Bank, on demand, all reasonable
out-of-pocket costs and expenses of the Bank (including the fees and
out-of-pocket expenses of counsel for the Bank) in connection with the
preparation, execution and delivery of this Agreement, the Letter of Credit,
the Security Documents, any amendments or modifications of (or supplements
to) any of the foregoing and any and all other instruments or documents
furnished pursuant hereto or in connection herewith, and all reasonable
out-of-pocket costs and expenses (including attorneys' fees and legal
expenses) incurred by the Bank in connection with the enforcement of this
Agreement, the Indenture, any Account Party Agreement, any Security Document,
any such other instruments or documents or any collateral security, (b) to
pay, and to save the Bank harmless from all liability for, any stamp or
similar taxes that may be payable in connection with the execution or
delivery of this Agreement, the Letter of Credit, the Security Documents or
any other instrument or document provided for herein or delivered or to be
delivered hereunder or in connection herewith and to save the Bank harmless
from and against any and all liabilities with respect to or resulting from
any delay in paying, or any failure to pay, such taxes and (c) to indemnify,
pay and hold the
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Bank and the directors, officers, employees and agents of the Bank
(collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits and costs, including without limitation reasonable attorneys' fees,
expenses and disbursements of any kind or nature whatsoever, that are not
caused by the Indemnitees' gross negligence or willful misconduct and that are
incurred by the Indemnitees in connection with the issuance, sale and
delivery, or the remarketing in the secondary market, of the Bonds, or the
transfer of, payment of, or (pursuant to any judicial order) failure to pay or
delay in paying under, the Letter of Credit (collectively, the "Indemnified
Liabilities").
To the extent that the undertaking to indemnify, pay and hold harmless
set forth in the preceding paragraph may be unenforceable because it violates
any law or public policy, the Account Party and the Guarantor shall contribute
the maximum portion that each is permitted to pay and satisfy under applicable
law to the payment and satisfaction of all Indemnified Liabilities incurred by
the Indemnitees or any of them. The obligations of the Account Party and the
Guarantor under this Section shall survive the termination of this Agreement
and the discharge of the Account Party's and the Guarantor's other
Obligations.
Section 8.4. Liability of the Bank. Neither the Bank nor any of its
directors, officers, employees or agents shall be liable or responsible for
(a) the use that may be made of the Letter of Credit or for any acts or
omissions of the Trustee and any transferee in connection therewith, (b) the
validity, sufficiency or genuineness of documents other than the Letter of
Credit, or of any endorsement(s) thereon, even if such documents should in
fact prove to be in any or all respects invalid, insufficient, fraudulent or
forged, (c) payment by the Bank against presentation of documents that do not
comply with the terms of the Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of Credit,
or (d) any other circumstances whatsoever in making or failing to make payment
under the Letter of Credit, except only that the Account Party shall have a
claim against the Bank, and the Bank shall be liable to the Account Party, to
the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Account Party that the Account Party
proves were caused by the Bank's willful misconduct or gross negligence in
determining whether documents presented under the Letter of Credit comply with
the terms of the Letter of Credit and there shall have been a wrongful payment
as a result thereof or the Bank's wrongful and willful failure to pay under
the Letter of Credit after the presentation to it by the Trustee (or a
successor trustee under the Indenture to whom the Letter of Credit has been
transferred in accordance with its terms) of a certificate strictly complying
with the terms and conditions of the Letter of Credit. In furtherance and not
in limitation of the foregoing and unless the Bank has actual knowledge to the
contrary, the Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary.
Section 8.5. Captions and References. Article and Section captions used
in this Agreement are for convenience only and, together with the Table of
Contents hereto, shall not affect the construction of this Agreement. All
references herein to Articles, Sections and Exhibits shall be deemed to be
references to Articles, Sections and Exhibits of this Agreement, unless the
context indicates otherwise.
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Section 8.6. Governing Law. This Agreement shall be a contract made under,
governed by and construed in accordance with the substantive laws of the State
of Illinois applicable to contracts made, and to be performed, in the State of
Illinois. All obligations of the Account Party and the Guarantor and rights of
the Bank expressed herein shall be in addition to and not in limitation of
those provided by applicable law.
Section 8.7. Successors and Assigns. This Agreement shall be binding upon
the Account Party, the Guarantor and the Bank and their respective successors
and assigns, and shall inure to the benefit of the Account Party, the
Guarantor and the Bank and the successors and assigns of the Bank. Neither the
Account Party nor the Guarantor may assign its rights hereunder or in
connection herewith or any interest herein (voluntarily, by operation of law
or otherwise) without the prior written consent of the Bank. This Agreement
shall not be construed so as to confer any right or benefit upon any person
other than the parties to this Agreement and (subject to the preceding
provisions of this Section) their respective successors and assigns.
Section 8.8. Severability of Provisions. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 8.9. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one
and the same instrument, and any party hereto may execute this Agreement by
signing one or more counterparts.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by its duly authorized officers, all as of the day and the year
first above written.
SELFIX, INC.
By: James E. Winslow
----------------------------------------------
Title: Senior V.P. & CEO
-------------------------------------------
Address: 4501 West 47th Street
Chicago, Illinois 60632
Telecopy: 312-890-0523
With a copy to:
Jeffrey C. Rubenstein
Much, Shelist, Freed, Denenberg & Ament
200 North LaSalle Street, Suite 2100
Chicago, Illinois 60601
Telecopy: 312-621-1750
LASALLE NATIONAL BANK
By: F. Ward Nixon
----------------------------------------------
Title: Senior V.P.
-------------------------------------------
Address: 120 South LaSalle Street
Chicago, Illinois 60603
Attention: F. Ward Nixon
Telecopy: 312-904-4364
SHUTTERS, INC.
By: James E. Winslow
----------------------------------------------
Title: Vice President
-------------------------------------------
Address: 4501 West 47th Street
Chicago, Illinois 60632
Telecopy: 312-890-0523
With a copy to:
Jeffrey C. Rubenstein
Much, Shelist, Freed, Denenberg & Ament
200 North LaSalle Street, Suite 2100
Chicago, Illinois 60601
Telecopy: 312-621-1750
32
<PAGE> 36
EXHIBIT I
FORM OF LETTER OF CREDIT
1
<PAGE> 37
IRREVOCABLE LETTER OF CREDIT
Number: 9200100377
April 12, 1996
Account Party: Selfix, Inc.
4501 West 47th Street
Chicago, Illinois 60632
Manufacturers and Traders Trust Company,
as Trustee
One Manufacturers and Traders Plaza
Buffalo, New York 14240
Attention: Corporate Trust Group
Dear Sirs:
1. Manufacturers and Traders Trust Company, as Trustee (the "Trustee")
under the Indenture of Trust, Series 1990, dated as of September 1, 1990 (the
"Indenture"), between the Illinois Development Finance Authority (the
"Issuer") and the Trustee, pursuant to which $4,000,000 original aggregate
principal amount of the Illinois Development Finance Authority, Variable Rate
Demand Industrial Development Revenue Bonds (Selfix, Inc. Project), Series
1990 (the "Bonds") have been issued, are hereby irrevocably authorized to draw
on LaSalle National Bank (the "Bank") Irrevocable Letter of Credit No.
9200100377, for the account of Selfix, Inc. (the "Account Party"), available
upon the terms and conditions hereinafter set forth, an aggregate amount not
exceeding $3,476,165 (the "Stated Amount") of which (i) an amount not
exceeding $3,200,000 (the "Principal Portion") may be drawn to pay the unpaid
principal amount of Bonds when due upon maturity, acceleration or redemption
or the portion of purchase price of Bonds equal to the principal amount of
Bonds delivered to the Trustee for purchase by the Trustee pursuant to the
Indenture which are not remarketed and (ii) an amount not exceeding $276,165
(which represents 210 days' accrued interest on the Bonds at an assumed rate
of 15% per annum) (the "Interest Portion") may be drawn to pay up to 210 days'
interest accrued on Bonds when due, or the portion of purchase price of Bonds
equal to up to 210 days' interest accrued on Bonds delivered to the Trustee
for purchase by the Trustee pursuant to the Indenture which are not
remarketed, computed in each case at the actual rate from time to time
applicable to the Bonds at the time outstanding (but not in excess of 15% per
annum). The Stated Amount, the Principal Portion and the Interest Portion
shall from time to time be reduced or reinstated as provided herein. This
Letter of Credit is issued pursuant to a Reimbursement Agreement dated as of
April 12, 1996, (the "Reimbursement Agreement") between the Account Party,
Shutters, Inc., and the Bank, is effective immediately and expires on the
Termination Date (as hereinafter defined).
2. Funds under this Letter of Credit are available to the Trustee
against presentation of the following documents:
Page 1 of 14
<PAGE> 38
(A) if the drawing is being made with respect to any payment
of principal of the Bonds upon redemption, acceleration or
maturity (an "A Drawing"), a written certificate signed by the
Trustee in the form of Exhibit A attached hereto appropriately
completed,
(B) if the drawing is being made with respect to payment of
interest on the Bonds on any interest payment date, redemption
date, acceleration date or maturity date for the Bonds (a "B
Drawing"), a written certificate signed by the Trustee in the
form of Exhibit B attached hereto appropriately completed,
(C) if the drawing is being made with respect to payment of
the portion of purchase price including accrued interest of Bonds
equal to the principal amount of Bonds delivered to the Trustee
for purchase in accordance with Section 401, 402, 403, 404 or 406
of the Indenture which are not remarketed (a "C Drawing"), a
written certificate signed by the Trustee in the form of Exhibit
C attached hereto appropriately completed.
Presentation of such certificate(s) shall be made at our office located
at LaSalle National Bank, 200 West Monroe Street, Suite 1100, Chicago, Illinois
60606, Attn: International Banking, or at any other office in the City of
Chicago, Illinois which may be designated by us by written notice delivered to
you, or shall be made in person or by tested Telex or TWX or other writing
transmitted by telecopier facsimile sent to the following number(s), as
applicable: Telex No. 190393(ANSWERBACK: LASBNK UT),Telecopier No.312-904-6303.
Presentation of such certificate(s) may also be made by United States mail,
postage prepaid, addressed as aforesaid, provided that presentation in such
manner shall not constitute a "drawing" hereunder prior to the business day next
succeeding the business day on which such certificate(s) are received by the
Bank. Any drawing by telecopier or telex is deemed to be the operative
instrument without the need of presenting originally signed documents or
certificates.
3. We hereby agree that all certificates presented under and in compliance
with the terms of this Letter of Credit will be duly honored by us upon
delivery of the certificate(s), as specified in paragraph 2 hereof, if
presented at our aforesaid office on or before the Termination Date. If a
drawing is made by you hereunder at or prior to 11:00 A.M., Chicago time, on a
business day, and provided that such drawing and the documents presented in
connection therewith conform to the terms and conditions hereof, payment shall
be made to you or your designee of the amount specified, in immediately
available funds at or before 4:00 p.m. Chicago time, on the same business day.
If a drawing is made by you hereunder after 11:00 A.M., Chicago time, on a
business day, and provided that such drawing and the documents presented in
connection therewith conform to the terms and conditions hereof, payment shall
be made to you or your designee of the amount specified, in immediately
available funds at or before 4:00 p.m. Chicago time, on the next succeeding
business day. Payment under this Letter of Credit shall be made to the Trustee
or to the Trustee's designee as specified in the certificate presented pursuant
to paragraph 2 hereof and shall be made to the account number specified in such
certificate. We will pay all drawings under this Letter of Credit with our own
funds. If a demand for payment made by you hereunder does not, in any instance,
conform to the terms and conditions of this Letter of Credit, the Bank shall
give you prompt notice that the purported demand was not
Page 2 of 14
<PAGE> 39
effected in accordance with the terms and conditions of this Letter of Credit;
provided, however, that any failure to give such notice shall not affect the
Bank's rights and liabilities hereunder. As used in this Letter of Credit
"business day" shall mean any day (a) other than a day on which banks located
in Chicago, Illinois or New York, New York are authorized or required by law
to close or to remain closed and (b) on which The New York Stock Exchange is
open.
4. Multiple drawings may be made hereunder, provided that each drawing
honored by the Bank hereunder for the payment of principal or interest shall
pro tanto reduce the amount available under this Letter of Credit for the
payment of principal or interest, respectively, provided, however, with
respect to any B Drawing by the Trustee to pay interest on the Bonds on any
Interest Payment Date (as defined in the Indenture), if the Trustee shall not
have received from the Bank within ten (10) days from the date the payment of
such drawing a notice by telecopier, by telex or in writing that the Letter of
Credit will not be reinstated to support the payment of 210 days interest at
the assumed rate of 15% per annum for the aggregate principal amount of the
Bonds then outstanding, the Trustee's right to draw under the Letter of Credit
with respect to any payment of interest shall be reinstated on the eleventh
calendar day following the date of the payment of such drawing in an amount
equal to the amount of such drawing for the purpose of paying interest on the
Bonds (other than Bonds subject to redemption, acceleration or maturity on
such date). With respect to any C Drawing by the Trustee, the amount available
under this Letter of Credit for payment of the purchase price of the Bonds
shall be reinstated immediately in an amount equal to such drawing, but only
to the extent that the Bank is reimbursed in accordance with the terms of the
Reimbursement Agreement for the amounts so drawn. Payments made to or for the
account of the Trustee in respect to any drawing (whether or not complying
with terms of this Letter of Credit) shall reduce by the amount of such
payment the amounts which the Trustee may draw hereunder notwithstanding any
acts or omissions, whether authorized or unauthorized, of the Trustee or any
officer, director, employee or agent of the Trustee in connection with this
Letter of Credit. References to the Trustee and to an account held by the
Trustee in this paragraph 4 shall be deemed to include any transferee of the
Trustee specified in a transfer letter provided for in paragraph 10 hereof and
any account specified by such transferee in accordance with paragraph 3
hereof.
5. Upon any partial or full redemption of the outstanding principal
amount of the Bonds during the term of this Letter of Credit, the Stated
Amount shall be reduced to an amount which is equal to the sum of the
aggregate principal amount of the Bonds outstanding (other than Bonds
registered in the name of the Company or in the name of the Trustee for the
account of the Company or pledged to the Bank), immediately following such
partial redemption plus up to 210 days' interest thereon at an assumed rate of
15% per annum upon receipt by the Bank of the Trustee's written certificate in
the form of Exhibit D hereto, stating that such redemption has occurred and
setting forth the aggregate principal amount of Bonds then outstanding, other
than Bonds registered in the name of the Account Party or in the name of the
Trustee for the account of the Account Party or pledged to the Bank, and the
interest thereon calculated as aforesaid.
6. Only the Trustee or its transferee may make a drawing under this
Letter of Credit. Upon the payment as provided in paragraph 3 of the amount
specified in any certificate delivered pursuant hereto, we shall be fully
discharged of our obligation under this Letter of Credit with respect to such
certificate and we shall not thereafter be obligated to make any further
payments
Page 3 of l4
<PAGE> 40
under this Letter of Credit in respect of such certificate to the Trustee or
its transferee or any other person or entity who may have made or makes a
demand for payment of principal or purchase price of, or interest on, any
Bond.
7. This Letter of Credit applies only to the principal or portion of
purchase price payable pursuant to the Indenture equal to the principal of the
Bonds, and up to 210 days' interest accruing, or the portion of purchase price
payable pursuant to the Indenture equal to up to 210 days' interest accruing,
on the Bonds on or prior to the Termination Date at a rate not to exceed 15%
per annum, and does not apply to any interest that may accrue thereon
thereafter.
8. This Letter of Credit shall automatically terminate and be delivered
to the Bank for cancellation at the close of business at the office
designated pursuant to paragraph 2 hereof upon the earliest to occur (the
"Termination Date") of the following dates: (a) April 1, 1998 or, if such date
is not a business day, the first business day following such date, as it may be
extended pursuant to the terms hereof (the "Stated Expiration Date"), (b) any
business day designated as the effective date in a certificate in the form of
Exhibit D hereto appropriately completed and containing the certification
provided for therein received by the Bank, provided such certificate certifies
the reduction to zero of the Stated Amount (both the Principal Portion and the
Interest Portion); (c) the date of our receipt of a certificate signed by a
duly authorized officer of the Trustee stating that: "(i) an Alternate Credit
Facility (as defined in the Indenture) has been obtained by the Account Party
not less than 15 days prior to the date hereof, and (ii) upon receipt by the
Bank of this certificate, its Letter of Credit No. 9200100377 shall terminate";
(d) the date of our receipt of a certificate signed by a duly authorized
officer of the Trustee stating that: "(1) the Conversion Date (as defined in
the Indenture) has occurred not less than 15 days prior to the date hereof and
(ii) upon receipt by the Bank of this certificate its Letter of Credit No.
9200100377 shall terminate"; (e) the date of our receipt of a certificate
signed by a duly authorized officer of the Trustee stating that: "(i) no Bonds
are Outstanding (as defined in the Indenture) and (ii) upon receipt by the Bank
of this certificate its Letter of Credit No. 9200100377 shall terminate"; (f)
the twentieth day following the date of the Trustee's receipt of a notice from
the Bank that an Event of Default as defined in the Reimbursement Agreement has
occurred and is continuing. Upon notice to the Trustee in the form of Exhibit
F, the Stated Expiration Date shall be extended to the date specified in such
notice.
9. This Letter of Credit shall be governed by the Uniform Customs and
Practice for Documentary Credits, 1993 Revision, International Chamber of
Commerce Publication No. 500, and any successor thereto (the "Uniform
Customs"). This Letter of Credit shall be supplemented by the provisions (to
the extent that such provisions are consistent with this Letter of Credit) of
the laws of the State of Illinois including, without limitation, Article 5 of
the Uniform Commercial Code as in effect in said State.
10. This Letter of Credit is transferable in its entirety (but not in
part) to any transferee who has succeeded the Trustee as trustee under the
Indenture and such transferred Letter of Credit may be successively
transferred. Transfer of this Letter of Credit to any such transferee shall be
effected by the Bank upon presentation to us of this Letter of Credit for
endorsement thereon of such transfer accompanied by a transfer form attached
hereto as Exhibit E.
Page 4 of 14
<PAGE> 41
11. This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds), except only the Uniform Customs
and the certificate(s) referred to herein, and such reference shall not be
deemed to incorporate herein by reference any document, instrument or
agreement except for the Uniform Customs and such certificate(s).
Very truly yours,
LaSalle National Bank
By:
----------------------------
Title:
-------------------------
Page 5 of 14
<PAGE> 42
Exhibit A
to
Irrevocable Letter of Credit
No. 9200100377
CERTIFICATE FOR A PRINCIPAL PAYMENT DEMAND
The undersigned hereby certifies to LaSalle National Bank (the "Bank"),
with reference to Irrevocable Letter of Credit No. 9200100377 (the "Letter of
Credit") issued by the Bank in favor of Manufacturers and Traders Trust
Company, as Trustee (the "Trustee") and for the account of Selfix, Inc. (the
"Account Party"), that the undersigned is a duly authorized officer of the
Trustee, that any capitalized term used but not defined herein shall have its
respective meaning set forth in the Letter of Credit and that:
1. The Trustee is the Trustee under the Indenture.
2. The Trustee hereby makes a demand for payment under the Letter of
Credit in the amount of $ . Such demand for payment is made with
respect to a payment of principal on the Bonds that is due and payable
on , 19 , [This demand for payment is made with respect to a partial
payment of the principal amount of Bonds, after which payment the aggregate
principal amount of Bonds outstanding shall be $ .] [This demand for
payment is made with respect to the payment of the entire outstanding principal
amount of the bonds.]
3. The amount hereby demanded does not exceed the Principal Portion
available on the date hereof to be demanded under this Letter of Credit.
4. The amount hereby demanded was computed in accordance with the terms
and conditions of the Bonds and the Indenture.
5. The amount hereby demanded is not, in whole or in part, with respect
to the Pledged Bonds or with respect to any other Bond held of record by or
for the account of the Account Party.
6. The Trustee hereby directs you to make payment of the amount demanded
hereby [by deposit] [by wire transfer] to account No. ____ at _________________.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ___ day of , 19_.
MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee
By:
-------------------------------
Title:
------------------------------
Page 6 of 14
<PAGE> 43
Exhibit B
to
Irrevocable Letter of Credit
No. 9200100377
CERTIFICATE FOR AN INTEREST PAYMENT DEMAND
The undersigned hereby certifies to LaSalle National Bank (the "Bank"),
with reference to Irrevocable Letter of Credit No. 9200100377 issued by the
Bank in favor of Manufacturers and Traders Trust Company, as Trustee (the
"Trustee") and for the account of Selfix, Inc. (the "Account Party"), that the
undersigned is a duly authorized officer of the Trustee, that any capitalized
term used but not defined herein shall have its respective meaning set forth
in the Letter of Credit and that:
1. The Trustee is the Trustee under the Indenture.
2. The Trustee hereby makes a demand for payment under the Letter of
Credit in the amount of $ . Such demand for payment is made
with respect to a payment of interest on the Bonds that is due and
payable on , 19__. Of the amount demanded by this
Certificate, $ of such amount is in respect of the payment of
interest on Bonds which are subject to redemption, acceleration or
maturity on such date.
3. The amount hereby demanded does not exceed the Interest Portion
available on the date hereof to be demanded under the Letter
of Credit.
4. The amount hereby demanded was computed in accordance with the
terms and conditions of the Bonds and the Indenture.
5. The amount hereby demanded is not, in whole or in part, with
respect to Pledged Bonds or with respect to any other Bonds held of
record by or for the account of the Account Party.
6. The Trustee hereby directs you to make payment of the amount demanded
hereby [by deposit] [by wire transfer] to account No. __________
at________________________________.
Page 7 Of l4
<PAGE> 44
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of _________________ , 19_.
MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee
By:
----------------------------------
Title:
----------------------------------
Page 8 of 14
<PAGE> 45
Exhibit C
Irrevocable Letter of Credit
No. 9200100377
CERTIFICATE FOR A PURCHASE PRICE PAYMENT DEMAND
The undersigned hereby certifies to LaSalle National Bank (the "Bank"),
with reference to Irrevocable Letter of Credit No. 9200100377 (the "Letter of
Credit") issued by the Bank in favor of Manufacturers and Traders Trust
Company, as Trustee (the "Trustee") and for the account of Selfix, Inc. (the
"Account Party"), that the undersigned is a duly authorized of the Trustee,
that any capitalized terms used but not defined herein shall have its
respective meaning set forth in the Letter of Credit, and that:
1. The Trustee is the Trustee under the Indenture.
2. The Trustee hereby makes a demand for payment under the Letter of
Credit in the amount of $____ . Such demand for payment is made with
respect to the payment of the Purchase Price of Bonds tendered for
purchase on ______, 19_, pursuant to Section 401, 402, 403, 404 or 406
of the Indenture, and not remarketed.
3. (a) The portion of the Purchase Price corresponding to
the interest accrued on such Bonds equals $_____________.
(b) The portion of the Purchase Price corresponding to principal
of such Bonds equals $ _______________.
4. The demand for payment made hereby under the Letter of Credit
does not exceed (i) in the case of the portion of the drawing
corresponding to the interest on such Bonds, the Interest Portion available to
be drawn under the Letter of Credit and (ii) in the case of the portion of the
drawing corresponding to the principal of such Bonds, the Principal Portion
available to be drawn under the Letter of Credit.
5. The amount hereby demanded was computed in accordance with the terms
and conditions of the Bonds and the Indenture.
6. The amount hereby demanded is not, in whole or in part, with respect
to Pledged Bonds or with respect to any other Bonds held of record by or for
the account of the Account Party.
7. The Trustee hereby directs you to make payments of the amount
demanded hereby [by deposit] [by wire transfer] to account No. ________at
____________________.
Page 9 of 14
<PAGE> 46
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of this ____ day _________ of , 19__.
MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee
By:
-------------------------
Title:
------------------------
Page 10 of 14
<PAGE> 47
Exhibit D
Irrevocable Letter of Credit
No. 9200100377
CERTIFICATE FOR REDUCTION OF STATED AMOUNT
The undersigned hereby certifies to LaSalle National Bank (the "Bank"),
with reference to Irrevocable Letter of Credit No. 9200100377 (the "Letter of
Credit") issued by the Bank in favor of Manufacturers and Traders Trust
Company, as Trustee (the "Trustee") and for the account of Selfix, Inc. (the
"Account Party") that the undersigned is a duly authorized officer of the
Trustee, that any capitalized term used but not defined herein shall have its
respective meaning set forth in the Letter of Credit and that:
1. The Trustee is the Trustee under the Indenture.
2. Effective on __________, l9__ [insert date at least three Business
Days after the date of the certificate], due to a partial or full redemption,
the Stated Amount shall be reduced to $________ of which an amount not exceeding
(a) $_________ shall be the available Principal Portion of the Stated Amount for
Bonds other than Bonds registered in the name of the Account Party or in the
name of the Trustee for the account of the Account Party or pledged to the Bank,
and (b) $ _________ shall be the available Interest Portion of the Stated Amount
which amount equals 210 days' interest thereon at an annual rate of 15% per
annum.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _______ day of __________, 19_.
MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee
By:
--------------------------
Title:
-----------------------
Page 11 of 14
<PAGE> 48
Exhibit E
Irrevocable Letter of Credit
No. 9200100377
FORM OF TRANSFER LETTER
______________, 19__
LaSalle National Bank
200 West Monroe Street
Suite 1100
Chicago, Illinois 60606
Attention: International Banking
Re: LaSalle National Bank
Irrevocable Letter of Credit No. 9200100377
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
(Name of Transferee)
(Address),
all rights of the undersigned beneficiary to make demands for payment
under the above-referenced Letter of Credit (the "Letter of Credit") in its
entirety. Said transferee has succeeded the undersigned Trustee under the
Indenture of Trust, Series 1990, dated as of September 1, 1990, between the
Illinois Development Finance Authority and the undersigned securing the
$4,000,000 Illinois Development Finance Authority Variable Rate Demand
Industrial Development Revenue Bonds (Selfix, Inc. Project) Series 1990.
By this transfer, all rights of the undersigned beneficiary in the
Letter of Credit are transferred to the transferee and the transferee shall
have the sole rights as beneficiary thereof, including sole rights relating to
any amendments of the Letter of Credit and whether now existing or hereafter
made. All amendments of the Letter of Credit are to be advised directly to the
transferee without the necessity of any consent of or notice to the undersigned
beneficiary.
Page 12 of 14
<PAGE> 49
The Letter of Credit is returned herewith. We ask that you endorse the
reverse of the Letter of Credit and forward the Letter of Credit directly to
the transferee with your customary notice of transfer.
Very truly yours,
Signature Authenticated: [Name of Beneficiary]
By:
- --------------------------------- ----------------------------------
(Authorized Signature) Title:
-------------------------------
Signature Authenticated: [Name of Transferee], as Trustee
By:
- --------------------------------- ----------------------------------
(Authorized Signature) Title:
-------------------------------
Page 13 of 14
<PAGE> 50
Exhibit F
Irrevocable Letter of Credit
No. 9200100377
[Address to Trustee]
Re: LaSalle National Bank
Irrevocable Letter of Credit No. 9200100377
Ladies and Gentlemen:
Reference is hereby made to the Irrevocable Letter of Credit No.
9200100377 (the "Letter of Credit") issued by LaSalle National Bank in favor
of Manufacturers and Traders Trust Company, as trustee (the "Trustee"), and
for the account of Selfix, Inc. (the "Account Party"). Capitalized terms used
herein and not defined herein shall have the meanings assigned thereto in the
Letter of Credit.
The undersigned hereby notifies you that the Stated Expiration Date of
the Letter of Credit has been extended to ____ 199_.
LASALLE NATIONAL BANK
By:
----------------------------------
Title:
-------------------------------
Page 14 of 14
<PAGE> 51
EXHIBIT II
FORM OF OPINION OF COUNSEL TO ACCOUNT PARTY
[To be dated the Effective Date]
LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
Re: Reimbursement Agreement, dated as of April 12, 1996 (the
"Reimbursement Agreement"), by and among Selfix, Inc. (the
"Account Party"), Shutters, Inc. (the "Guarantor"), and LaSalle
National Bank (the "Bank")
Ladies and Gentlemen:
We have acted as special counsel for the Account Party and the Guarantor
in connection with the above-referenced Reimbursement Agreement securing the
payment of the principal of and up to 210 days' accrued interest on and the
par purchase price of the $4,000,000 Illinois Development Finance Authority
Variable Rate Demand Industrial Development Revenue Bonds (Selfix, Inc.
Project) Series 1990 (the "Bonds"). Terms used but not otherwise defined
herein are used herein as defined in the Reimbursement Agreement.
We have reviewed the original or an executed counterpart of the
Reimbursement Agreement, the Letter of Credit, and the Security Documents. We
have also made such other examinations and inquiries of fact and law as we
have deemed necessary or appropriate as a basis for the opinions hereinafter
expressed. Based on the foregoing, we are of the opinion on the date hereof
that:
1. Each of the Account Party and the Guarantor is a corporation for
profit duly organized, validly existing and in good standing under the laws of
the States of Delaware and Illinois, respectively, and is duly qualified to do
business in the State of Illinois.
2. The Account Party has full corporate power and authority to execute,
deliver and perform its obligations under the Reimbursement Agreement
and the Security Documents. The Guarantor has full corporate power and
authority to execute and deliver the Reimbursement Agreement. The Reimbursement
Agreement and the Security Documents have been duly authorized by the corporate
action necessary to be taken by the Account Party for the due execution,
delivery and performance of those documents and duly executed and delivered by
duly authorized corporate officers of the Account Party. The Reimbursement
Agreement has been duly authorized by all corporate action necessary to be
taken by the Guarantor for the due execution, delivery and performance of the
Reimbursement Agreement and duly executed and delivered by duly authorized
corporate officers of the Guarantor. Assuming the due authorization, execution
and delivery of each such document by the other parties thereto, said
1
<PAGE> 52
documents constitute the legal, valid and binding obligations of the Account
Party and the Guarantor (with respect to the Reimbursement Agreement)
enforceable against the Account Party and the Guarantor (with respect to the
Reimbursement Agreement) in accordance with their respective terms; subject
to, and except to the extent that the enforcement thereof (but not validity),
may be limited by laws relating to bankruptcy, reorganization, moratorium,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and by applicable principles of equity; and we express no
opinion as to the availability of the remedies of specific performance.
3. No approval, consent or authorization of or other action by, and no
notice to or filing or registration with, any governmental or public agency,
authority or regulatory body not heretofore obtained or effected is required
by either the Account Party or the Guarantor for the due execution, delivery
and performance by the Account Party or the Guarantor of the Reimbursement
Agreement or the Security Documents.
4. The execution, delivery and performance by the Account Party of the
Reimbursement Agreement and the Security Documents and the execution, delivery
and performance by the Guarantor of the Reimbursement Agreement under the
circumstances contemplated thereby, and in accordance with the respective
terms of the Reimbursement Agreement and the Security Documents, will not
violate in any material respect any law, judgment, order or regulation of any
court or of any public or government agency or authority to which the Account
Party, the Guarantor, or any of their respective properties is subject, any
violation of which would have a material adverse effect on the Account Party's
or the Guarantor's performance under the foregoing documents, will not on the
part of the Account Party or the Guarantor conflict with or contravene any of
the provisions of the charter or by-laws of the Account Party or the
Guarantor, and any existing amendments thereto as of the date hereof, or any
resolution adopted by the Board of Directors of the Account Party or the
Guarantor or any committee thereof, will not conflict with or result in a
breach or default under any indenture, mortgage, deed of trust or other
agreement or instrument known to us after due inquiry to which the Account
Party or the Guarantor is a party or by which the Account Party, or the
Guarantor or their respective properties are bound, and will not of themselves
result in or require the creation of any lien, security interest or other
charges or encumbrances (except as provided in or contemplated by the
Reimbursement Agreement and the Security Documents) upon or with respect to
any of the Account Party's or the Guarantor's property.
5. We have no actual knowledge of any litigation, arbitration
proceedings, governmental proceedings or regulatory proceedings pending or
threatened against the Account Party or the Guarantor (nor do we have any
actual knowledge of any basis therefor) that relate to the transactions
contemplated in the Reimbursement Agreement, or the Security Documents; or
that would, if adversely determined, materially and adversely affect (i) the
financial condition or continued operation of the Account Party or the
Guarantor or (ii) the ability of the Account Party to perform its obligations
under the Reimbursement Agreement and the Security Documents or of the
Guarantor to perform its obligations under the Reimbursement Agreement.
2
<PAGE> 53
This opinion is rendered solely for the benefit of the addressees hereto
in connection with the transactions contemplated herein and no other person or
entity shall be entitled to rely on any matter set forth herein, or in any other
context or for any other purpose. This opinion may not be quoted in whole or in
part, or in any way published, nor may copies of this opinion be furnished or
delivered to any other person or entity, without prior written consent of this
firm. This opinion is limited to the matters set forth herein and no opinion is
intended to be implied or may be inferred beyond those expressly stated herein.
Respectfully submitted,
MUCH, SHELIST, FREED, DENENBERG
& AMENT, P.C.
3
<PAGE> 54
EXHIBIT III
SCHEDULE OF LIENS
1. Mortgage and Loan Agreement dated as of October 1, 1984 and recorded
December 18, 1984 as Document No. 897485, made by McHenry State
Bank, as trustee under a trust agreement dated August 30, 1984 and
known as Trust No. 3089, Mortgagor, to County of McHenry, Illinois,
Mortgagee, to secure an indebtedness in the amount of $740,000,
covering real estate commonly known as 12213 Highway 173, Hebron,
Illinois.
2. Liens arising pursuant to any Loan Documents.
3. Capitalized lease obligation under a lease agreement for the premises
at 4501 W. 47th Street, Chicago, Illinois in the amount of $ 1,846,844
as of March 29, 1996.
1
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF HOME PRODUCTS INTERNATIONAL INC.:
Selfix, Inc.
(Delaware corporation)
Chicago, Illinois
Shutters, Inc.
(Illinois corporation)
Hebron, Illinois
