<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HOME PRODUCTS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3089 36-4147027
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632
(773) 890-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SELFIX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3089 36-2490451
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632
(773) 890-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SHUTTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
ILLINOIS 3089 36-3572036
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632
(773) 890-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
TAMOR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MASSACHUSETTS 3089 04-2073885
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632
(773) 890-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SEYMOUR HOUSEWARES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3089 35-1873567
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632
(773) 890-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES R. TENNANT
CHIEF EXECUTIVE OFFICER
4501 WEST 47TH STREET, CHICAGO, ILLINOIS 60632
(773) 890-1010
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
<PAGE> 2
------------------------
WITH A COPY TO:
KENNETH G. KOLMIN, ESQ.
SONNENSCHEIN NATH & ROSENTHAL
8000 SEARS TOWER, CHICAGO, ILLINOIS 60606
(312) 876-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _________
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 5/8% Senior Subordinated Notes
due 2008........................ $125,000,000 100% $125,000,000 $36,875
- ------------------------------------------------------------------------------------------------------------------------------
Guarantees of the 9 5/8% Senior
Subordinated Notes.............. (1) (1) $125,000,000 (1)
==============================================================================================================================
</TABLE>
(1) This Registration Statement covers the Guarantees to be issued by certain
subsidiaries of Home Products International, Inc. of its obligations under
the 9 5/8% Senior Subordinated Notes. Such Guarantees are to be issued for
no additional consideration, and therefore no registration fee is required.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 3
HOME PRODUCTS INTERNATIONAL, INC.
SELFIX, INC.
SHUTTERS, INC.
TAMOR CORPORATION
SEYMOUR HOUSEWARES CORPORATION
------------------------
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B),
SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
-------------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page of Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages of
Prospectus; Available Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Prospectus Summary; Risk Factors; Selected Historical
Financial Data
4. Terms of the Transaction................... Prospectus Summary; The Exchange Offer; Description
of the Exchange Notes
5. Pro Forma Financial Information............ Unaudited Pro Forma Combined Financial Data
6. Material Contracts with the Company Being
Acquired................................... *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ The Exchange Offer; Plan of Distribution
8. Interests of Named Experts and Counsel..... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ *
10. Information With Respect to S-3
Registrants................................ Selected Historical Financial Data; Unaudited Pro
Forma Combined Financial Data; Management's
Discussion and Analysis of Financial Condition and
Results of Operations; Business
11. Incorporation of Certain Information by
Reference.................................. Incorporation of Certain Documents by Reference
12. Information With Respect to S-2 or S-3
Registrants................................ *
13. Incorporation of Certain Information by
Reference.................................. *
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants.......... *
15. Information With Respect to S-3
Companies.................................. *
16. Information With Respect to S-2 or S-3
Companies.................................. *
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies.................. *
18. Information if Proxies, Consents or
Authorization Are to be Solicited.......... *
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited, or
in an Exchange Offer....................... Management; Principal Stockholders; Certain
Transactions
</TABLE>
- ---------------
* Not applicable or answer is in the negative.
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
SUBJECT TO COMPLETION, DATED JUNE 10, 1998
PROSPECTUS
HOME PRODUCTS INTERNATIONAL, INC.
OFFER TO EXCHANGE UP TO $125,000,000 OF ITS
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED
------------------------
Home Products International, Inc. ("HPI" and, together with its
subsidiaries, the "Company") hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer") to exchange $1,000
principal amount of 9 5/8% Senior Subordinated Notes due 2008 (the "Exchange
Notes") of HPI for each $1,000 principal amount of the issued and outstanding
9 5/8% Senior Subordinated Notes due 2008 (the "Original Notes," and the
Original Notes and the Exchange Notes, collectively, the "Notes") of HPI from
the Holders (as defined herein) thereof. As of the date of this Prospectus,
there is $125,000,000 aggregate principal amount of the Original Notes
outstanding. The terms of the Exchange Notes are identical in all material
respects to the Original Notes, except that the Exchange Notes have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and therefore will not bear legends restricting their transfer and will not
contain certain provisions providing for the payment of liquidated damages to
the holders of the Original Notes under certain circumstances relating to the
Exchange and Registration Rights Agreement (as defined herein), which provisions
will terminate as to all of the Notes upon the consummation of the Exchange
Offer.
The Company will accept for exchange any and all Original Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on
, 1998, unless extended by the Company in its sole discretion
(the "Expiration Date"). Tenders of Original Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange
Offer is subject to certain customary conditions. See "The Exchange Offer."
The Exchange Notes will be general unsecured obligations of the Company,
and will be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company. The Exchange Notes will rank pari
passu in right of payment with any other Senior Subordinated Indebtedness (as
defined) of the Company and will rank senior in right of payment to all other
Subordinated Obligations (as defined) of the Company. The Company's payment
obligations under the Exchange Notes will be unconditionally guaranteed, jointly
and severally (the "Guarantees"), on a senior subordinated basis by each
Restricted Subsidiary (as defined) of the Company and any future Restricted
Subsidiary of the Company other than any Foreign Subsidiary, as defined (the
"Subsidiary Guarantors"). The Guarantees will be general unsecured obligations
of the Subsidiary Guarantors that will be subordinated to all existing and
future Guarantor Senior Indebtedness (as defined) of the Subsidiary Guarantors.
As of March 28, 1998, after giving effect to the Refinancing (as defined), (i)
the outstanding Senior Indebtedness of the Company, including the Subsidiary
Guarantors, would have been $9.2 million, all of which would have been Secured
Indebtedness (as defined), (ii) the Company, including the Subsidiary
Guarantors, would have had no Subordinated Obligation outstanding and no Senior
Subordinated Indebtedness outstanding other than the Notes, (iii) the
outstanding Guarantor Senior Indebtedness of the Subsidiary Guarantors would
have been $6.7 million, all of which would have been Secured Indebtedness, and
(iv) the Subsidiary Guarantors would have had no Guarantor Senior Subordinated
Indebtedness (as defined) and no Guarantor Subordinated Obligation (as defined).
See "Description of the Exchange Notes."
(continued on following page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING ORIGINAL NOTES IN THE
EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JUNE 10, 1998.
<PAGE> 5
The Original Notes were sold by the Company on May 14, 1998, to Chase
Securities Inc. ("CSI") and NationsBanc Montgomery Securities LLC (the "Initial
Purchasers") in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act (the "Initial Offering").
The Initial Purchasers subsequently placed the Original Notes with qualified
institutional buyers in reliance upon Rule 144A under the Securities Act ("Rule
144A"). Accordingly, the Original Notes may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder to satisfy the obligations of the Company under that certain
Exchange and Registration Rights Agreement, dated as of May 14, 1998, by and
among the Company and the Initial Purchasers (the "Exchange and Registration
Rights Agreement"), entered into in connection with the Initial Offering. See
"The Exchange Offer -- Purpose and Effect of the Exchange Offer."
The Original Notes were not registered under the Securities Act in reliance
upon an exemption from the registration requirements thereof. In general, the
Original Notes may not be offered or sold unless registered under the Securities
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act. The Exchange Notes are being offered hereby in order to
satisfy certain obligations of the Company contained in the Exchange and
Registration Rights Agreement. Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission") set forth in no-action
letters issued to third parties, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Original Notes may be
offered for resale, resold or otherwise transferred by any holder thereof (other
than any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business, such holder has no arrangement with any person to participate in the
distribution of such Exchange Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such Exchange
Notes. Notwithstanding the foregoing, each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with any resale of Exchange Notes received in
exchange for such Original Notes where such Original Notes were acquired by such
broker-dealer as a result of market making activities or other trading
activities (other than Original Notes acquired directly from the Issuers). The
Company has agreed that, for a period of 180 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE
OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. Tenders of
Original Notes pursuant to the Exchange Offer may be withdrawn as provided
herein at any time prior to the Expiration Date (as defined herein). The
Exchange Offer is subject to certain customary conditions.
This Prospectus has been prepared for use in connection with the Exchange
Offer and may be used by CSI in connection with offers and sales related to
market making transactions in the Notes. CSI may act as principal or agent in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale. See "Plan of Distribution."
i
<PAGE> 6
The Company's Common Stock is listed on the Nasdaq Stock Market under the
symbol "HPII." There has not previously been any public market for the Original
Notes or the Exchange Notes. The Company does not intend to list the Exchange
Notes on any securities exchange, but the Original Notes are eligible for
trading in the Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") market. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Absence of Public Market."
Moreover, to the extent that the Original Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Original Notes could be adversely affected.
Interest on the Exchange Notes will accrue from the last interest payment
date on which interest was paid on the Original Notes surrendered in exchange
therefor or, if no interest has been paid on the Original Notes, from the Issue
Date (as defined), and will be payable semi-annually on May 15 and November 15
of each year, commencing on November 15, 1998. The Notes will mature on May 15,
2008. Except as described below, the Company may not redeem the Notes prior to
May 15, 2003. On or after such date, the Company may redeem the Notes, in whole
or in part, at any time at the redemption prices set forth herein, plus accrued
and unpaid interest thereon, if any, to the date of redemption. In addition, at
any time and from time to time prior to May 15, 2001, the Company may, subject
to certain requirements, redeem up to 35% of the aggregate principal amount of
the Notes at a price of 109.625% of the principal amount thereof, plus accrued
and unpaid interest thereon to the redemption date, with the net cash proceeds
of one or more public offerings of common stock of the Company, providing that
at least 65% of the original aggregate principal amount of the Notes remains
outstanding immediately after the occurrence of such redemption. The Notes will
not be subject to any sinking fund requirement. Upon a Change of Control (as
defined), each holder of Notes will have the right to require the Company to
repurchase all or any part of such holder's Notes at a price equal to 101% of
the principal amount of the Notes together with accrued and unpaid interest
thereon, if any, to the date of purchase. See "Description of the Exchange
Notes."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF ORIGINAL NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
The Exchange Notes will be available initially only in book-entry form.
Except as may be described under "Book-Entry; Delivery and Form," the Company
expects that the Exchange Notes issued pursuant to the Exchange Offer will be
represented by one or more duly registered Global Notes (as defined), that will
be deposited with, or on behalf of, the Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Note representing the Exchange Notes will be shown on,
and transfers thereof will be effected only through, records maintained by DTC
and its participants. After the initial issuance of the Global Note, Exchange
Notes in certificated form will be issued in exchange for the Global Note only
in accordance with the terms and conditions set forth in the Indenture. See
"Book-Entry; Delivery and Form."
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
James E. Winslow, Executive Vice President, Chief Financial Officer and
Secretary, Home Products International, Inc., 4501 West 47th Street, Chicago,
ii
<PAGE> 7
Illinois 60632, (773) 890-1010. In order to ensure timely delivery of the
documents, any request should be made by , 1998 (five days before
the Expiration Date).
THE CONTENTS OF THIS PROSPECTUS ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS
OR TAX ADVICE. EACH PROSPECTIVE PARTICIPANT IN THE EXCHANGE OFFER SHOULD CONSULT
ITS OWN ATTORNEY, BUSINESS ADVISOR OR TAX ADVISOR AS TO LEGAL, BUSINESS OR TAX
ADVICE. PROSPECTIVE INVESTORS MAY OBTAIN ADDITIONAL INFORMATION UPON REQUEST
FROM THE INITIAL PURCHASERS OR THE COMPANY WHICH THEY MAY REASONABLY REQUIRE IN
CONNECTION WITH THE DECISION TO PARTICIPATE IN THE EXCHANGE OFFER.
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY,
INCLUDING STATEMENTS UNDER THE CAPTIONS "SUMMARY," "UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL OF THESE FORWARD LOOKING
STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY MANAGEMENT OF THE
COMPANY WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE INHERENTLY UNCERTAIN.
THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES AND
STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES WILL BE
REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH
DIFFERENCES INCLUDE: (1) INCREASED COMPETITION; (2) INCREASED COSTS; (3) LOSS OR
RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (4) INCREASES IN THE COMPANY'S COST OF
BORROWING OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL; (5) ADVERSE
STATE OR FEDERAL LEGISLATION OR REGULATION OR ADVERSE DETERMINATIONS BY
REGULATIONS; AND (6) CHANGES IN GENERAL ECONOMIC CONDITIONS AND/OR IN THE
MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME, COMPETE. MANY OF SUCH
FACTORS ARE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT. FOR FURTHER
INFORMATION OR OTHER FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF THE
COMPANY AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK FACTORS."
iii
<PAGE> 8
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Consolidated Financial
Statements (including the related notes) appearing elsewhere in this Prospectus.
As used herein and except as the context may otherwise require, (i) the
"Company" or "HPI" means, collectively, Home Products International, Inc., a
Delaware corporation, which is a holding company not engaged in any business
other than holding the capital stock of its consolidated subsidiaries, Selfix,
Inc., a Delaware corporation ("Selfix"), Seymour Housewares Corporation, a
Delaware corporation ("Seymour"), Tamor Corporation, a Massachusetts corporation
("Tamor"), and Shutters, Inc., an Illinois corporation ("Shutters"), (ii)
"Selfix" includes both Selfix and, unless the context otherwise requires,
Shutters (which was previously a wholly-owned subsidiary of Selfix), (iii)
"Tamor" includes both Tamor and Housewares Sales, Inc., a Massachusetts
corporation and Tamor's wholly-owned distribution subsidiary, (iv) the "Tamor
Acquisition" refers to the acquisition by the Company of the business of Tamor,
effective as of January 1, 1997 and (v) the "Seymour Acquisition" refers to the
acquisition by the Company of the business of Seymour, which was acquired after
the close of fiscal 1997 on December 30, 1997. The pro forma financial data for
(i) fiscal 1996 give effect to the Tamor Acquisition as though it had occurred
on the first day of fiscal 1996, (ii) the first quarter of fiscal 1997 and the
fiscal year 1997 give effect to the Seymour Acquisition, the New Credit Facility
(as hereinafter defined) and the Initial Offering (as hereinafter defined) as
though they had occurred on the first day of fiscal 1997 and (iii) the first
quarter of fiscal 1998 give effect to the New Credit Facility and the Initial
Offering as if they had occurred on the first day of fiscal 1998.
THE COMPANY
OVERVIEW
The Company, based in Chicago, Illinois, is a leading designer,
manufacturer and marketer of a broad range of value-priced, quality consumer
houseware products in the United States. The Company's significant product lines
include (i) ironing boards, covers and pads, (ii) home/closet organization
products, (iii) plastic storage containers and totes, (iv) laundry accessories,
(v) bath and shower organization products, (vi) juvenile products and (vii) home
improvement products. HPI's ability to provide a substantial array of
up-to-date, quality products on a timely basis, combined with its commitment to
provide additional support services to its customers (such as just-in-time
delivery, product planograms and point-of-purchase advertising) has enabled the
Company to become a preferred supplier to the large, national retailers carrying
its products and to establish a leading market position in several product
lines. The Company's strong relationships with its base of retailers (including
Wal-Mart, Target and Kmart) provide a large and efficient distribution channel
for its products. These relationships enable the Company to work with retailers
to develop products that are well received by both the retailer and the
end-user. On a pro forma basis, the Company's combined net sales and EBITDA for
the twelve month period ended March 28, 1998, would have been $219.4 million and
$32.3 million, respectively.
The Company has actively pursued a growth strategy of selectively acquiring
and integrating complementary houseware manufacturers. This has enabled the
Company to become one of the leading suppliers and cost-effective manufacturers
of houseware products in the United States. The Company believes it has
demonstrated its ability to identify, purchase and integrate companies which
offer complementary product lines and to derive significant manufacturing and
operating efficiencies from such acquisitions. For example, the acquisitions of
Tamor in January 1997 and Seymour in December 1997 strengthened the Company's
ability to offer "one-stop shopping" for a wide range of houseware products to
its retail customers. These acquisitions, combined with internal growth, have
increased the Company's net sales from approximately $35.2 million in fiscal
year 1992 to approximately $222.3 million in fiscal year 1997 (on a pro forma
basis), while EBITDA margins have increased from 7.4% to 14.5% (on a pro forma
basis) during the same period. The additional product offerings resulting from
both strategic acquisitions and an active product development program have
strengthened the Company's relationships with its existing customer base of
national retailers, enabling the Company to obtain increased dedicated retail
shelf space for its expanding product lines. Management believes that the
Company has established a platform to continue this consolidation and product
1
<PAGE> 9
development strategy within the highly fragmented houseware products industry
and that such strategy will further position the Company for continued growth in
the retail distribution channel. The Company continues to look for opportunities
to acquire companies that fit within its acquisition strategy. To that end, the
Company has had, and continues to have, numerous discussions with potential
acquisition candidates. As of the date of this Prospectus, the Company has made
a number of oral and written acquisitions proposals to certain of such
candidates, but has not entered into any binding agreements. While the Company
believes that it is likely to enter into one or more agreements in the near
future with respect to such potential acquisitions, no assurance can be given
that such agreements will be reached or that any of such potential acquisitions
will be consummated.
Industry sources estimate that the total housewares industry in the United
States is approximately $54 billion in size. Within the housewares industry, HPI
currently offers products in the home organization, laundry management and home
improvement segments. Management estimates that the current market size in the
United States for these segments is between $5 billion and $8 billion. This
market is served by a highly fragmented manufacturer base. The Company currently
operates in several categories including (i) ironing boards, covers and pads,
(ii) home/closet organization products, (iii) plastic storage containers and
totes, (iv) laundry accessories, (v) bath and shower organization products, (vi)
juvenile products and (vii) home improvement products. In the opinion of
management, the housewares industry is driven by (i) retailers committing an
increasing amount of shelf space to storage products, (ii) retailers
consolidating the number of their suppliers, (iii) new household and home office
formations, (iv) a movement away from generic products towards items designed to
perform specific functions and (v) overall retailer consolidation.
COMPETITIVE STRENGTHS
Management believes that the following competitive strengths contribute to
the Company's position as a leading manufacturer and marketer of popular
houseware products and serve as a foundation for the Company's business
strategy.
- LEADING MARKET POSITION. Management believes that the Company has a
leading market position in each of the product categories in which its products
compete. In particular, management believes that the Company is the leading
ironing board, cover and pad manufacturer in the United States and is the
nation's leading supplier of plastic clothes hangers. The Company's home
organization products, including plastic clothes hangers, are marketed under the
Selfix and Tamor brand names, which are widely recognized in the industry.
Management believes the Company's broad product offerings in the home
organization products category provide it with a competitive advantage over
other manufacturers. In the bath and shower products segment, management
believes the Company is a leading producer of plastic bath and shower
accessories commanding the second largest market share in the United States. In
the storage container market, management believes the Company ranks third in
market share in the United States. Through both acquisitions and internal
product development, the Company seeks to enhance its position as a leading
supplier of housewares in a highly fragmented industry.
- ESTABLISHED DISTRIBUTION NETWORK. The Company has established a broad
distribution network serving both domestic and international markets. The
Company's houseware products are sold through national and regional retailers,
hardware and homecenter stores, food and drug stores, juvenile stores, specialty
stores, and to hotels. Management believes that its distribution network allows
it to successfully launch new products and broaden existing product lines with
greater consumer acceptance. The Company's distribution network also provides
marketing and distribution synergies for its acquired businesses, which
generally are suppliers of houseware products marketed through many of the same
retail distribution channels.
- STRONG, COLLABORATIVE RELATIONSHIPS WITH RETAILERS. The Company
maintains close and interactive relationships with a diverse customer base of
retailers by focusing on new product development and creative marketing and
packaging ideas. The Company has also strengthened its relationships with major
customers through acquisitions which have enabled it to supply its customers
with a broader selection of houseware product lines, resulting in increased
retail shelf space devoted to the Company's products. HPI offers
customer-specific merchandising programs which management believes enable
retailers and distributors to achieve a higher gross margin on the Company's
products than with the products of a number of its nationally
2
<PAGE> 10
known competitors. For instance, the Company provides its customers with a
variety of retail support services, including customized merchandise
planogramming, small shipping packs, point-of-purchase displays, electronic data
interchange ("EDI") and just-in-time product delivery. The Company also utilizes
its customers' point of sale ("POS") information to allow the Company to better
monitor product sales. Management believes that its prompt and reliable product
delivery of value-priced, high-volume products enables its customers to maintain
minimal inventories.
- INNOVATIVE, CONSUMER-DRIVEN PRODUCT LINE EXTENSIONS. The Company
develops and introduces innovative products with features and benefits that are
designed to meet the needs and demands of consumers. New products or product
line extensions are frequently developed or acquired after consultation with the
Company's major retail customers. This enables the Company to leverage its
existing customer base, to expand its product offerings and to assess the
potential viability of products prior to development. Typically, the Company's
new product introductions are developed by making incremental modifications to
its market-proven products. During 1997, approximately 60 new products and
product improvements were launched by the Company, with each of the Company's
business units introducing at least one new product line.
- FLEXIBLE, LOW-COST MANUFACTURER. The Company operates a network of
efficient manufacturing facilities that result in favorable per unit product
costs. Recent acquisitions have enabled the Company to broaden its product base,
expand its sales and distribution capabilities and increase manufacturing and
distribution synergies, while achieving significant scale in manufacturing. For
instance, management estimates that the Company is the largest United States
manufacturer of full-size ironing boards, building approximately 14,200 units
per day. This volume enables the Company to purchase rolled steel in bulk and
achieve economies of scale. Similarly, it is a large processor of various grades
of plastic resin, utilizing approximately 85 injection molding machines to
process approximately 85 million pounds of plastic resin per year. The Company
is able to achieve cost advantages through the use of off-prime grades of resin
that are typically bought through brokers in the secondary market. The Company
also processes approximately seven million yards of fabric annually, utilizing
its domestic operations, as well as its Reynosa, Mexico facility for those
aspects of production that are more labor intensive. The Company seeks to
maximize its operating efficiency by ensuring that each plant has flexible
manufacturing capabilities as well as utilizing its Mexico operation and Asian
outsourcing opportunities to lower production costs. In addition, the Company is
able to utilize excess capacity in its plants to meet peak demand and optimize
production planning.
- EXPERIENCED MANAGEMENT TEAM. The Company's senior management team has a
wide range of experience in the production, development and marketing of
housewares and related products. Leading the Company's senior management team is
Mr. James R. Tennant, the Company's Chairman and Chief Executive Officer, who
has 20 years of corporate management experience in marketing-oriented
capacities. Mr. Tennant has been with HPI since 1994. Mr. Stephen R. Brian, the
President and Chief Operating Officer of the Company, has 29 years experience in
management and production capacities with major consumer product companies,
including General Electric Corporation and Sunbeam. Mr. James E. Winslow,
Executive Vice President and Chief Financial Officer of the Company, has 16
years of financial management experience in the consumer products industry,
including 11 years with Wilson Sporting Goods. Mr. Winslow has been with HPI
since 1994. Furthermore, the Company's operations are managed by experienced
consumer product and manufacturing professionals.
BUSINESS STRATEGY
The Company intends to continue to take advantage of consolidation
opportunities in the housewares industry and to continue to grow by expanding
its product offerings through strategic acquisitions and by capitalizing on
established distribution channels to increase sales. The Company's strategy for
achieving that objective includes the following key elements:
- LEVERAGE MARKET SHARE POSITION. The Company intends to maintain a
leading market position in the United States in each of the product segments in
which it operates and intends to leverage its market strength to introduce new
products in all of its product categories. Through acquisitions of companies
with complementary product lines and through an internal product development
program, the Company expects to
3
<PAGE> 11
continue to increase sales and to become a leading supplier of new product
categories as well as additional products in its existing product categories.
Management believes that such growth will enable the Company to expand its
merchandising relationships with its existing key customers, and to increase its
presence in these customers' stores, which in turn would give the Company
additional leverage to support further growth.
- CONTINUE BUILDING STRATEGIC SUPPLIER RELATIONSHIPS. Management believes
that national retailers are increasingly interested in establishing "one-stop
shopping" supplier relationships for their store chains to enhance their margins
and operating efficiencies. In addition, these mass merchandisers have come to
expect value-added services (such as merchandise planogramming and EDI) that are
primarily offered by large suppliers. Management believes that the breadth of
the Company's product offerings, combined with the value-added services it
provides, will enable the Company to continue to build close and interactive
relationships with its retailers, capture larger market share and garner
incremental shelf space for its products.
- LAUNCH PRODUCT LINE IMPROVEMENTS AND NEW PRODUCTS. The Company has
successfully launched product line improvements and new products and intends to
continue to do so by capitalizing on its strong relationships with its
retailers. In 1997, the Company introduced approximately 60 new products and
product improvements, which accounted for approximately 13% of the Company's
1997 revenues (excluding sales generated from laundry management products).
Through these product introductions, the Company's products are kept up-to-date
and appealing for both the retailer and end-user. The Company is also able to
manage its research and development expenditures at levels below those of its
competitors as most of these product innovations and improvements require only
minimal feature enhancements and relatively limited technological input.
Management believes that innovative product introductions will further enhance
revenue growth, profitability and market share.
- INCREASE MARKET PENETRATION. The Company expects that strategic
acquisitions, as well as internally developed new product lines, will result in
increased penetration of its existing markets and enable it to develop and
extend its customer base both in the United States and internationally. The
Company also plans to expand its export sales team and leverage established
contacts with key distributors to continue to increase its sales
internationally.
- PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. Management anticipates that
the fragmented nature of the housewares industry will continue to provide
significant opportunities for growth through strategic acquisitions of
complementary businesses. Management intends to continue to acquire businesses
at attractive multiples of cash flow and achieve operational and distribution
efficiencies through integration of complementary businesses. The Company's
acquisition strategy focuses on businesses with product offerings which (i)
offer product expansion into related categories, (ii) focus on products which
can be marketed through the Company's existing distribution channels and (iii)
enhance manufacturing efficiencies by increasing throughput and lowering per
unit production costs, thereby increasing the Company's marketing and
distribution efficiencies. Management will also consider strategic joint
ventures which would provide access to new products, technologies or markets.
The Company continues to look for opportunities to acquire companies that fit
within its acquisition strategy. To that end, the Company has had, and continues
to have, numerous discussions with potential acquisition candidates. As of the
date of this Prospectus, the Company has made a number of oral and written
acquisitions proposals to certain of such candidates, but has not entered into
any binding agreements. While the Company believes that it is likely to enter
into one or more agreements in the near future with respect to such potential
acquisitions, no assurance can be given that such agreements will be reached or
that any of such potential acquisitions will be consummated.
4
<PAGE> 12
THE INITIAL OFFERING
Original Notes................ The Original Notes were sold by the Company on
May 14, 1998 (the "Initial Offering"), to Chase
Securities Inc. and NationsBanc Montgomery
Securities LLC (the "Initial Purchasers")
pursuant to a Purchase Agreement, dated as of
May 7, 1998, by and among the Company, certain
of its subsidiaries and the Initial Purchasers
(the "Purchase Agreement"). The Initial
Purchasers subsequently resold the Original
Notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act
("Rule 144A").
Exchange and Registration
Rights Agreement.............. Pursuant to the Purchase Agreement, the Company
and the Initial Purchasers entered into an
Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement"),
dated as of May 14, 1998 (the "Issue Date"),
which grants the holders of the Original Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such
exchange and registration rights, which rights
shall terminate upon consummation of the
Exchange Offer. See "The Exchange Offer --
Purpose and Effect of the Exchange Offer."
THE EXCHANGE OFFER
Securities Offered............ $125,000,000 aggregate principal amount of
9 5/8% Senior Subordinated Notes due 2008, of
the Company (the "Exchange Notes").
The Exchange Offer............ $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Original Notes. As of the date hereof,
$125,000,000 aggregate principal amount of
Original Notes are outstanding. The Company
will issue the Exchange Notes to holders as
promptly as practicable after the Expiration
Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Original Notes
may be offered for resale, resold and otherwise
transferred by any holder thereof (other than
any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under
the Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such holder's business and that such
holder does not intend to participate and has
no arrangement or understanding with any person
to participate in the distribution of such
Exchange Notes.
Any participating broker-dealer (an "Exchanging
Dealer") that acquired Original Notes for its
own account as a result of market making
activities or other trading activities may be a
statutory underwriter. Each Exchanging Dealer
that receives Exchange Notes for its own
account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a
prospectus, an
5
<PAGE> 13
Exchanging Dealer will not be deemed to admit
that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to
time, may be used by an Exchanging Dealer in
connection with resales of Exchange Notes
received in exchange for Original Notes where
such Original Notes were acquired by such
Exchanging Dealer as a result of market making
activities or other trading activities. the
Company has agreed that, for a period of 180
days after the Expiration Date, it will make
this Prospectus available to any Exchanging
Dealer for use in connection with any such
resale. See "Plan of Distribution." Any holder
who tenders in the Exchange Offer with the
intention to participate, or for the purpose of
participating, in a distribution of the
Exchange Notes could not rely on the position
of the staff of the Commission enunciated in
no-action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Company.
Expiration Date............... 5:00 p.m., New York City time, on
, 1998, unless the Exchange
Offer is extended, in which case the term
"Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
Accrued Interest on the
Exchange Notes and the
Original Notes.............. Interest on the Exchange Notes issued pursuant
to the Exchange Offer will accrue from the last
interest payment date on which interest was
paid on the Original Notes surrendered in
exchange therefor or, if no interest has been
paid on the Original Notes, from the Issue
Date. Holders whose Original Notes are accepted
for exchange will be deemed to have waived the
right to receive any interest accrued on the
Original Notes.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange
Offer -- Conditions."
Procedures for Tendering
Original Notes................ Each holder of Original Notes wishing to accept
the Exchange Offer must complete, sign and date
the accompanying Letter of Transmittal, or a
facsimile thereof (or, in the case of a
book-entry transfer, transmit an Agent's
Message (as defined) in lieu thereof), in
accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile (or Agent's Message), together with
the Original Notes and any other required
documentation to the Exchange Agent (as
defined) at the address set forth herein. By
executing the Letter of Transmittal (or
transmitting an Agent's Message), each holder
will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, that neither the
holder nor any such other person has any
arrangement
6
<PAGE> 14
or understanding with any person to participate
in the distribution of such Exchange Notes and
that neither the holder nor any such other
person is an "affiliate," as defined under Rule
405 of the Securities Act, of the Company. See
"The Exchange Offer -- Purpose and Effect of
the Exchange Offer" and "-- Procedures for
Tendering."
Untendered Original Notes..... Following the consummation of the Exchange
Offer, holders of Original Notes eligible to
participate but who do not tender their
Original Notes will not have any further
exchange or registration rights and such
Original Notes will continue to be subject to
certain restrictions on transfer. Accordingly,
the liquidity of the market for such Original
Notes could be adversely affected. See "Risk
Factors -- Absence of Public Market."
Consequences of Failure to
Exchange...................... Original Notes that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Original Notes
may be resold only (i) to the Company, (ii)
pursuant to Rule 144A or Rule 144 under the
Securities Act or pursuant to some other
exemption under the Securities Act, (iii)
outside the United States to a foreign person
pursuant to the requirements of Rule 904 under
the Securities Act, or (iv) pursuant to an
effective registration statement under the
Securities Act. See "The Exchange
Offer -- Consequences of Failure to Exchange."
Shelf Registration
Statement..................... If any holder of Original Notes (other than any
such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under
the Securities Act) is not eligible under
applicable securities laws to participate in
the Exchange Offer and such holder has
satisfied certain conditions relating to the
provision of information to the Company for use
therein, and under certain other circumstances,
the Company has agreed to use its reasonable
best efforts to file with the Commission a
shelf registration statement (the "Shelf
Registration Statement"), and to use its
reasonable best efforts to have such Shelf
Registration Statement declared effective. the
Company has agreed to maintain the
effectiveness of the Shelf Registration
Statement for, under certain circumstances, a
maximum of two years, to cover resales of the
Original Notes held by any such holders.
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal and delivering its
Original Notes, either make appropriate
arrangements to register ownership of the
Original Notes in such owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time.
7
<PAGE> 15
Guaranteed Delivery
Procedures.................... Holders of Original Notes who wish to tender
their Original Notes and whose Original Notes
are not immediately available or who cannot
deliver their Original Notes (or comply with
the procedures for book-entry transfer), the
Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or transmit an Agent's Message
in lieu thereof) prior to the Expiration Date
must tender their Original Notes according to
the guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Original Notes
and Delivery of Exchange
Notes....................... The Company will accept for exchange any and
all Original Notes that are properly tendered
in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered as promptly as
practicable following the Expiration Date. See
"The Exchange Offer -- Terms of the Exchange
Offer."
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Exchange Agent................ LaSalle National Bank.
THE EXCHANGE NOTES
General....................... The form and terms of the Exchange Notes are
the same as the form and terms of the Original
Notes (which they replace) except that (i) the
issuance of the Exchange Notes will have been
registered under the Securities Act and,
therefore, will not bear legends restricting
the transfer thereof, and (ii) the holders of
Exchange Notes will not be entitled to certain
rights under the Exchange and Registration
Rights Agreement, including the provisions
providing for an increase in the interest rate
on the Original Notes in certain circumstances
relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange
Offer is consummated. See "The Exchange
Offer -- Purpose and Effect of the Exchange
Offer." The Exchange Notes will evidence the
same debt as the Original Notes and will be
entitled to the benefits of the Indenture. See
"Description of the Exchange Notes." The
Original Notes and the Exchange Notes are
referred to herein collectively as the "Notes."
Issuer........................ Home Products International, Inc.
Securities Offered............ $125,000,000 aggregate principal amount of
9 5/8% Senior Subordinated Notes due 2008 of
the Company.
Maturity Date................. May 15, 2008.
Interest Payment Dates........ May 15 and November 15 of each year, commencing
on November 15, 1998.
Guarantees.................... The Company's payment obligations under the
Notes will be jointly and severally guaranteed
on a senior subordinated basis by
8
<PAGE> 16
each of the Company's Restricted Subsidiaries
(as defined) other than any Foreign Subsidiary
(as defined). The Guarantees will be
subordinated in right of payment to all
existing and future Senior Indebtedness of the
Subsidiary Guarantors, including the guarantees
of Senior Indebtedness issued by the Subsidiary
Guarantors under the New Credit Facility. See
"Description of the Exchange
Notes -- Subsidiary Guarantees."
Optional Redemption........... Except as described below, the Notes will not
be redeemable at the Company's option prior to
May 15, 2003. Thereafter, the Notes will be
subject to redemption at any time at the option
of the Company, in whole or in part, upon not
less than 30 nor more than 60 days' advance
notice, at the redemption prices set forth
herein, plus accrued and unpaid interest
thereon, if any, to the applicable redemption
date. In addition, at any time and from time to
time, prior to May 15, 2001, the Company may
redeem up to 35% of the original aggregate
principal amount of the Notes at a redemption
price of 109.625% of the principal amount
thereof, plus accrued and unpaid interest
thereon, if any, to the redemption date, with
the net cash proceeds of one or more public
offerings of common stock of the Company;
provided that at least 65% of the original
aggregate principal amount of Notes remains
outstanding immediately after the occurrence of
such redemption. See "Description of the
Exchange Notes -- Optional Redemption."
Change of Control............. Upon the occurrence of a Change of Control each
holder of Notes will have the right to require
the Company to repurchase all or any part of
such holder's Notes at a price equal to 101% of
the principal amount thereof plus accrued and
unpaid interest, to the date of purchase. See
"Description of the Exchange Notes -- Change of
Control."
Ranking....................... The Notes will be general unsecured obligations
of the Company that will be subordinated to all
existing and future Senior Indebtedness of the
Company. The Notes will rank pari passu in
right of payment with any other Senior
Subordinated Indebtedness of the Company and
will rank senior in right of payment to all
other Subordinated Obligation of the Company.
The Guarantees will be general unsecured
obligations of the Subsidiary Guarantors that
will be subordinated to all existing and future
Guarantor Senior Indebtedness of the Subsidiary
Guarantors. At March 28, 1998, after giving pro
forma effect to the Refinancing, (i) the
outstanding Senior Indebtedness of the Company,
including the Subsidiary Guarantors, would have
been $9.2 million, all of which would have been
Secured Indebtedness, (ii) the Company,
including the Subsidiary Guarantors, would have
had no Subordinated Obligation outstanding and
no Senior Subordinated Indebtedness outstanding
other than the Notes, (iii) the outstanding
Guarantor Senior Indebtedness of the Subsidiary
Guarantors would have been $6.7 million, all of
which would have been Secured Indebtedness, and
(iv) the Subsidiary Guarantors would have had
no Guarantor Senior Subordinated Indebtedness
and no Guarantor Subordinated Obligation. See
"Description of the Exchange Notes -- Ranking
and Subordination."
9
<PAGE> 17
Restrictive Covenants......... The Indenture will contain certain covenants
that, among other things, will limit the
ability of the Company and/or its Restricted
Subsidiaries to (i) incur additional
indebtedness, (ii) pay dividends or make
certain other restricted payments, (iii) make
investments, (iv) enter into transactions with
affiliates, (v) make certain asset dispositions
and (vi) merge or consolidate with, or transfer
substantially all of its assets to, another
person. The Indenture also will limit the
ability of the Company to create restrictions
on the ability of Restricted Subsidiaries to
pay dividends or make any other distributions.
In addition, the Company will be obligated,
under certain circumstances, to offer to
repurchase the Notes with the net cash proceeds
of certain sales or other dispositions of
assets. However, all of these limitations and
prohibitions are subject to a number of
important qualifications. See "Description of
the Exchange Notes -- Certain Covenants."
Use of Proceeds............... The Company will not receive any proceeds from
the Exchange Offer. The Company used the net
proceeds from the Initial Offering, together
with borrowings under a new $100 million senior
secured revolving credit facility (the "New
Credit Facility" and, together with the Initial
Offering, the "Refinancing") which the Company
concurrently entered into with The Chase
Manhattan Bank: (i) to repay approximately $122
million of outstanding indebtedness under the
Company's prior credit facility and to pay
certain fees, prepayment penalties and expenses
related to such repayment; (ii) to pay certain
other fees and expenses incurred in connection
with the Refinancing; and (iii) for working
capital and general corporate purposes. See
"Use of Proceeds."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering Original Notes in exchange for Exchange Notes. These
risk factors are generally applicable to the Original Notes as well as the
Exchange Notes.
------------------------
The principal executive offices of the Company are located at 4501 West
47th Street, Chicago, Illinois 60632, and the Company's telephone number is
(773) 890-1010.
10
<PAGE> 18
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
THE COMPANY
The following table sets forth certain unaudited summary pro forma combined
financial data of the Company for the periods ended and as of the dates
indicated. The unaudited pro forma statement of operations data give effect to
the Seymour Acquisition and related financing and the Refinancing as if they had
occurred at the beginning of the periods indicated. An effective tax rate of 40%
has been assumed for all periods; however, the year ended December 27, 1997 and
the fifty-two weeks ended March 28, 1998, include a $3.1 million benefit due to
the reduction of an income tax valuation allowance. The unaudited pro forma
balance sheet data reflect the Refinancing as if it had occurred on March 28,
1998. The "Other Data" below, not directly derived from the Unaudited Pro Forma
Combined Financial Data, or the HPI or Seymour historical consolidated financial
statements, have been presented to provide additional analysis. The Summary Pro
Forma Combined Financial Data do not purport to represent what the Company's
financial position or results of operations would actually have been had the
Seymour Acquisition or the Refinancing in fact occurred on the assumed dates or
to project the Company's financial position or results of operations for any
future date or period. The Summary Pro Forma Combined Financial Data have been
derived from, and should be read in conjunction with, the Unaudited Pro Forma
Combined Financial Data and the notes thereto, the respective historical
consolidated financial statements of HPI and Seymour and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN FIFTY-TWO
WEEKS WEEKS WEEKS
YEAR ENDED ENDED ENDED ENDED
DEC. 27, MARCH 29, MARCH 28, MARCH 28,
1997 1997 1998 1998
---------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................................... $222,287 $55,282 $52,408 $219,413
Gross profit(a)............................... 64,499 15,680 15,953 64,772
Operating profit.............................. 15,349 4,022 5,094 16,421
Interest (expense)(b)......................... (15,537) (4,043) (3,482) (14,976)
Earnings (loss) before income taxes and
extraordinary item......................... (920) 122 1,625 583
Income tax (expense) benefit.................. 3,511 (49) (650) 2,910
Earnings before extraordinary item............ 2,591 73 975 3,493
Earnings before extraordinary item per
share -- basic............................. $ 0.38 $ 0.01 $ 0.12 $ 0.48
Earnings before extraordinary item per
share -- diluted........................... $ 0.37 $ 0.01 $ 0.12 $ 0.46
OTHER DATA:
Gross profit margin(a)........................ 29.0% 28.4% 30.4% 29.5%
EBITDA(c)..................................... $ 32,335 $ 8,099 $ 8,036 $ 32,272
EBITDA margin(c).............................. 14.5% 14.7% 15.3% 14.7%
Cash interest expense(b)(d)................... $ 14,922 $ 3,890 $ 3,320 $ 14,352
Capital expenditures.......................... 11,031 1,038 4,092 14,085
Ratio of total debt to EBITDA................. -- -- -- 4.2x
Ratio of EBITDA to cash interest expense(d)... 2.2x 2.1x 2.4x 2.2x
</TABLE>
11
<PAGE> 19
<TABLE>
<CAPTION>
AS ADJUSTED
AS OF
MARCH 28,
1998
-----------
(DOLLARS IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA (END OF PERIOD):
Working capital(e).......................................... $ 24,285
Total assets................................................ 227,268
Total debt, including capital lease obligations............. 134,166
Total stockholders' equity.................................. 52,765
</TABLE>
- ---------------
(a) Gross profit is defined as net sales less cost of goods sold. Gross profit
margin is computed as gross profit as a percentage of net sales.
(b) Had the Company's equity offering, which was completed in July 1997,
occurred on the first day of fiscal 1997, interest expense would have been
reduced by $0.9 million for the year ended December 27, 1997, $0.5 million
for the thirteen weeks ended March 29, 1997, and $0.4 million for the
fifty-two weeks ended March 28, 1998.
(c) EBITDA is defined as the sum of (i) earnings before income taxes and
extraordinary item, (ii) interest expense, (iii) interest income, (iv)
depreciation and amortization, (v) one-time charges in the third and fourth
quarter of 1997 of $2.6 million relating to the consolidation and
disposition of certain Seymour manufacturing operations, (vi) a $0.6 million
one-time write-off in the third quarter of 1997 of an asset eliminated in
connection with the termination of Seymour's defined benefit pension plan
and (vii) certain other one-time items totaling $0.3 million during the
third and fourth quarters of 1997. Management believes that the
consolidation of the Seymour manufacturing operations should enable it to
generate an additional $1.8 million in annual cost savings following the
completion of the consolidation. However, no assurance can be given that
such savings will be realized. Management believes that EBITDA is a measure
commonly used by analysts and investors to determine a company's ability to
service and incur debt. Accordingly, this information has been presented to
permit a more complete analysis. EBITDA should not be considered a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity. EBITDA margin is computed as EBITDA as a percentage of net sales.
(d) Ratio of EBITDA to cash interest expense represents EBITDA divided by total
interest expense, net of deferred financing cost amortization.
(e) Working capital is computed as current assets less current liabilities.
12
<PAGE> 20
RISK FACTORS
Prospective investors should carefully consider the following risk factors
in addition to the other information included in this Prospectus before
tendering Original Notes in exchange for Exchange Notes. The risk factors set
forth below are generally applicable to the Original Notes as well as the
Exchange Notes. This Prospectus contains, in addition to historical information,
certain forward-looking statements that are subject to risks and other
uncertainties. The Company's actual results may differ materially from those
anticipated in these forward-looking statements. Factors that might cause such a
difference include those discussed below, as well as general economic and
business conditions, competition and other factors discussed elsewhere in this
Prospectus. All forward-looking statements attributed to the Company or persons
acting on its behalf are expressly qualified in their entirety by the cautionary
statements set forth herein.
SUBSTANTIAL LEVERAGE; DEBT SERVICE OBLIGATIONS; LIQUIDITY
In connection with the Refinancing, the Company has incurred a significant
amount of indebtedness. As of March 28, 1998, after giving pro forma effect to
the Refinancing, the Company would have had $134.2 million of consolidated
indebtedness, of which $9.2 million would have been Senior Indebtedness.
The Company's ability to make scheduled payments of principal of, or to pay
the interest, if any, on, or to refinance its indebtedness (including the
Notes), or to fund planned capital expenditures or finance acquisitions will
depend on its future financial and operating performance, which to a certain
extent is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond its control. Based on the current
and anticipated level of operations, management believes that cash flows from
operations and available cash, together with available borrowings under the New
Credit Facility, will be adequate to meet the Company's anticipated future
requirements for working capital, budgeted capital expenditures, acquisition
financing and scheduled payments of principal and interest on its indebtedness,
including the Notes, for the foreseeable future. The Company, however, may need
to refinance all or a portion of the principal of the Notes on or prior to
maturity. There can be no assurance that the Company's business will generate
sufficient cash flows from operations or that future borrowings will be
available under the New Credit Facility in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or make anticipated
capital expenditures and to fund future acquisitions. In addition, there can be
no assurance that the Company will be able to effect any refinancing on
commercially reasonable terms, or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Capital Resources
and Liquidity."
The degree to which the Company will be leveraged could have important
consequences to holders of the Notes, including the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations will be required
to be dedicated to the payment of interest on the Notes and the Company's other
existing indebtedness, thereby reducing the funds available to the Company for
other purposes; (iii) the agreements governing the Company's long-term
indebtedness will contain certain restrictive financial and operating covenants;
(iv) certain indebtedness under the New Credit Facility will be at variable
rates of interest, which will cause the Company to be vulnerable to increases in
interest rates; (v) all of the indebtedness outstanding under the New Credit
Facility will be secured by substantially all of the assets of the Company and
will become due prior to the time the principal on the Notes will become due;
(vi) the Company will be substantially more leveraged than certain of its
competitors, which might place the Company at a competitive disadvantage; and
(vii) the Company's substantial degree of leverage could make it more vulnerable
in the event of a downturn in general economic conditions or in its business. In
addition, the degree to which the Company is leveraged could prevent it from
repurchasing all of the Notes tendered to it upon the occurrence of a Change of
Control. See "Description of the Exchange Notes -- Change of Control" and
"Description of Other Indebtedness -- New Credit Facility."
SUBORDINATION; ASSET ENCUMBRANCE
The Notes will be general unsecured obligations of the Company that will be
subordinated to all Senior Indebtedness of the Company. The Guarantees will be
general unsecured obligations of the Subsidiary
13
<PAGE> 21
Guarantors that will be subordinated to all Guarantor Senior Indebtedness of the
Subsidiary Guarantors. At March 28, 1998, after giving pro forma effect to the
Refinancing, (i) the outstanding Senior Indebtedness of the Company, including
the Subsidiary Guarantors, would have been $9.2 million, all of which would have
been Secured Indebtedness, (ii) the Company, including the Subsidiary
Guarantors, would have had no Subordinated Obligation outstanding and no Senior
Subordinated Indebtedness other than the Notes, (iii) the outstanding Guarantor
Senior Indebtedness of the Subsidiary Guarantors would have been $6.7 million,
all of which would have been Secured Indebtedness, and (iv) the Subsidiary
Guarantors would have had no Guarantor Senior Subordinated Indebtedness and no
Guarantor Subordinated Obligation. Although the Indenture contains limitations
on the amount of additional indebtedness which the Company and the Subsidiary
Guarantors may incur under certain circumstances, the amount of such
Indebtedness could be substantial and such Indebtedness may be Senior
Indebtedness. See "Description of the Exchange Notes." The Indenture will
provide that the Company and the Restricted Subsidiaries may not incur or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Indebtedness and senior in any respect in right
of payment to the Notes.
The Company may not pay principal of, or premium or interest on, the Notes,
make any deposit pursuant to defeasance provisions or repurchase or redeem or
otherwise retire any Notes (i) if any Designated Senior Indebtedness (as
defined) is not paid when due or any other default on Designated Senior
Indebtedness occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms or (ii) if any other default on
Designated Senior Indebtedness occurs that permits the holders of such
Designated Senior Indebtedness to accelerate the maturity of such Senior
Indebtedness in accordance with its terms and the Trustee received notice of
such default, unless, in either case, the default has been cured or waived, any
such acceleration has been rescinded or such Senior Indebtedness has been paid
in full or, in the case of any non-payment default, 179 days have passed since
the default notice was given. Upon any payment or distribution to creditors of
the Company in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, the holders of Senior
Indebtedness will be entitled to receive payment in full in cash or Cash
Equivalents (as defined) before the holders of the Notes will be entitled to
receive any payment (other than in the form of Permitted Junior Securities (as
defined)). See "Description of the Exchange Notes -- Ranking and Subordination."
Substantially similar provisions are applicable to the Guarantees. The Notes and
the Guarantees are also unsecured and thus, in effect, will rank junior to any
Secured Debt of the Company or the Subsidiary Guarantors. The indebtedness
outstanding under the New Credit Facility will be secured by liens on
substantially all of the assets of the Company.
In addition, under certain circumstances, the Guarantee provided by any
Subsidiary Guarantor could be set aside under fraudulent conveyance or other
laws and rules affecting creditors' rights. See "-- Fraudulent Conveyance;
Preferential Transfer." In any such case, the Notes would be effectively
subordinated to all liabilities of such Subsidiary Guarantor, including trade
debt.
RESTRICTIVE COVENANTS
The New Credit Facility and the Indenture include certain covenants that,
among other things, restrict: (i) the making of investments, loans and advances
and the paying of dividends and other restricted payments; (ii) the incurrence
of additional indebtedness; (iii) the granting of liens, other than liens
created pursuant to the New Credit Facility and certain permitted liens; (iv)
mergers, consolidations and sales of all or a substantial part of the Company's
business or property; (v) the sale of assets; and (vi) the making of capital
expenditures. The New Credit Facility will also require the Company to maintain
certain financial ratios, including interest coverage and leverage ratios. All
of these restrictive covenants may restrict the Company's ability to expand or
to pursue its business strategies. The ability of the Company to comply with
these and other provisions of the New Credit Facility may be affected by changes
in economic or business conditions, results of operations or other events beyond
the Company's control. The breach of any of these covenants could result in a
default under the New Credit Facility, in which case, depending on the actions
taken by the lenders thereunder or their successors or assignees, such lenders
could elect to declare all amounts borrowed under the New Credit Facility,
together with accrued interest, to be due and payable, and the Company could be
prohibited from making payments with respect to the Notes until the default is
cured or all Senior
14
<PAGE> 22
Indebtedness is paid or satisfied in full. If the Company were unable to repay
such borrowings, such lenders could proceed against their collateral. If the
indebtedness under the New Credit Facility were to be accelerated, there can be
no assurance that the assets of the Company would be sufficient to repay in full
such indebtedness and the other indebtedness of the Company, including the
Notes. See "Description of Other Indebtedness -- New Credit Facility" and
"Description of the Exchange Notes -- Ranking and Subordination."
OPERATION THROUGH SUBSIDIARIES
The Company is a holding company and conducts substantially all of its
operations through its subsidiaries. As a result, the Company is required to
rely upon repayment from its subsidiaries for the funds necessary to meet its
obligations, including the payment of interest on and principal of the Notes.
The ability of the subsidiaries to make such payments will be subject to, among
other things, applicable state laws. Claims of creditors of the Company's
subsidiaries will generally have priority as to the assets of such subsidiaries
over claims of the Company.
Although the Guarantees provide the holders of the Notes with a direct
claim against the assets of the Subsidiary Guarantors, enforcement of the
Guarantees against any Subsidiary Guarantor may be subject to legal challenge in
a bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
such Subsidiary Guarantor and would be subject to certain defenses available to
guarantors generally. See "-- Fraudulent Conveyance; Preferential Transfer."
Although the Indenture contains waivers of most guarantor defenses, certain of
those waivers may not be enforced by a court in a particular case. To the extent
that the Guarantees are not enforceable, the Notes would be effectively
subordinated to all liabilities of the Subsidiary Guarantors, including trade
payables of such Subsidiary Guarantors, whether or not such liabilities
constitute Senior Indebtedness under the Indenture. In addition, the payment of
dividends to the Company by its subsidiaries is contingent upon the earnings of
those subsidiaries and subject to various business considerations and, for
certain subsidiaries, the Indenture will permit restrictive loan covenants to be
contained in the instruments governing the indebtedness of such subsidiaries,
including the covenants which restrict in certain circumstances the payment of
dividends and distributions and the transfer of assets to the Company. See
"Description of Other Indebtedness -- New Credit Facility" and "Description of
the Exchange Notes -- Certain Covenants -- Limitation on Restricted Payments."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company continues to look for opportunities to acquire companies that
fit within its acquisition strategy. To that end, the Company has had, and
continues to have, numerous discussions with potential acquisition candidates.
As of the date of this Prospectus, the Company has made a number of oral and
written acquisitions proposals to certain of such candidates, but has not
entered into any binding agreements. While the Company believes that it is
likely to enter into one or more agreements in the near future with respect to
such potential acquisitions, no assurance can be given that such agreements will
be reached or that any of such potential acquisitions will be consummated. The
Company's ability to accomplish its strategy will depend upon a number of
factors including, among other things, the Company's ability to identify
acceptable acquisition candidates, to consummate such acquisitions on terms
favorable to the Company and to promptly and profitably integrate the acquired
operations into the Company's operations. See "Business -- Business Strategy."
Acquiring additional businesses may require additional capital and the
consent of the Company's lenders and may have a significant impact on the
Company's financial position and results of operations. Any such acquisitions
may involve the issuance of additional debt or the issuance of one or more
classes or series of the Company's equity securities, which could have a
dilutive effect on the then outstanding Common Stock of the Company.
Acquisitions could result in substantial amortization charges to the Company
from the accumulation of goodwill and other intangible assets which could reduce
reported earnings. There can be no assurance that the Company will be successful
in accomplishing its acquisition strategy or that any acquired operations will
be profitable or will be successfully integrated into the Company or that any
such future acquisitions will not materially and adversely affect the Company's
financial condition or results of operations. Opportunities
15
<PAGE> 23
for growth through acquisitions, future operating results and the success of
acquisitions may be subject to the effects of, and changes in, United States and
foreign trade and monetary policies, laws and regulations, political and
economic developments, inflation rates, and the effect of taxes and operating
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Resources and Liquidity."
As a result of the Tamor and Seymour acquisitions, the Company has
experienced significant growth and will seek to continue to expand its
operations through acquisitions. The management of the Company's growth, if any,
will require continued expansion and refinement of the Company's control systems
and a significant increase in the Company's development, manufacturing, quality
control, marketing, logistics and service capabilities, all of which could place
a significant strain on the Company's resources. There is no assurance that the
Company will adequately anticipate all of the demands that its growth, if any,
will impose on such control systems. If the Company's management is unable to
manage growth effectively, then the quality of the Company's products, its
ability to retain and hire key personnel and its financial condition and results
of operations could be materially and adversely affected. Failure to integrate
new personnel on a timely basis could also have an adverse effect on the
Company.
CUSTOMER CONCENTRATION; CONSOLIDATING CUSTOMER BASE
During fiscal 1997, on a pro forma basis, Wal-Mart, Kmart and Target
accounted for approximately 17.5%, 12.5% and 5.9%, respectively, of the
Company's gross sales. During fiscal 1997, no other customer represented 5% or
more of the net sales (approximately $222.3 million on a pro forma basis) of the
Company. Although the Company believes that its relationships with Wal-Mart,
Kmart, Target and its other large customers are good, it does not have long-term
purchase agreements or other contractual assurances as to future sales to these
customers. If any significant customer substantially reduces its level of
purchases from the Company, the Company's financial position and results of
operations would be adversely affected. Moreover, continued consolidation within
the retail industry may result in an increasingly concentrated customer base. To
the extent such consolidation continues to occur, the Company's revenues and
profitability may be increasingly sensitive to a significant deterioration in
the financial condition of, or other adverse developments in its relationships
with, one or more customers. From time to time, the Company has experienced
credit losses due to customers seeking protection under bankruptcy or similar
laws. Although such credit losses have not had a material adverse effect on the
Company to date, there can be no assurance that future credit losses will not
have a material adverse effect on the Company. See "Business -- Marketing and
Sales" and "-- Customers and Distribution."
COMPETITION
The market for the Company's products is highly competitive. The Company
competes with a significant number of companies, some of which have greater
name-brand recognition, larger customer bases and/or significantly greater
financial resources than the Company, such as Rubbermaid Inc. There are no
substantial regulatory or other barriers to entry of new competitors into the
Company's industries. There can be no assurance that the Company will be able to
compete successfully against current and future sources of competition or that
the current and future competitive pressures faced by the Company will not
adversely affect its profitability or financial performance. See
"Business -- Competition."
A number of the Company's products are similar in design and/or function to
competitors' products. There can be no assurance that third parties will not
assert infringement or misappropriation claims against the Company in the future
with respect to current or future products. Any such claims or litigation,
whether with or without merit, could be costly and could have a material adverse
effect on the Company's financial position and results of operations. See
"Business -- Patents, Trademarks and Licenses" and "Business -- Legal
Proceedings."
16
<PAGE> 24
AVAILABILITY AND PRICING OF RAW MATERIALS
The primary raw materials used in plastic injection molding are various
plastic resins -- primarily polypropylene and its derivatives. The plastic
resins used by the Company are produced from petrochemical intermediates which,
in turn, are derived from natural gas liquids. Plastic resin prices may
fluctuate as a result of changes in natural gas and crude oil prices and
capacity and changes in supply and demand for resin and petrochemical
intermediates from which they are produced. The automotive and housing
industries are significant users of plastic resin. As a result, significant
changes in the demand for automobiles or housing construction may cause
significant fluctuations in the price of plastic resin. See
"Business -- Manufacturing, Raw Materials and Suppliers."
The Company purchases plastic resin from various suppliers. The Company has
no long-term supply contracts for the purchase of resin, although the Company
generally maintains a 60-day supply of resin. For fiscal 1997, the cost of resin
on a pro forma basis accounted for approximately 18% of the Company's total cost
of goods sold and 13% of the Company's net sales. In the past, the Company has
had limited ability to increase product pricing in response to plastic resin
price increases. Any future increases in the price of plastic resins could have
a material adverse effect on the Company's financial position and results of
operations. The Company generally attempts to reduce its resin costs by
purchasing off-prime grades of material primarily through brokers in secondary
markets thereby enabling the Company to buy resin at a discount. There is no
assurance that the Company will continue to have available necessary quantities
of resin at reasonable prices. See "Business -- Manufacturing, Raw Materials and
Suppliers."
The Company also purchases steel and greige fabric used in the
manufacturing and production of ironing boards and covers and pads from various
suppliers. Any price increases because of the unavailability of steel could have
a material adverse effect.
RETAIL INDUSTRY; ECONOMIC CONDITIONS
The Company sells its products through retailers, including mass
merchandisers, supermarkets, hardware stores, specialty stores and other retail
channels. See "Business -- Customers and Distribution." Retail sales depend, in
part, on general economic conditions. A significant decline in such conditions
could have a negative impact on sales by retailers of products sold by the
Company and consequently could have an adverse effect on the Company's sales,
profitability and cash flows. Retail environments which are poor or perceived to
be poor, whether due to economic or other conditions, may lead houseware
manufacturers and marketers, including the Company, to increase their
discounting and promotional activities. Such activities could have an adverse
effect on the Company's profit margins and, consequently, its results of
operations. The Company may also not be able to fully offset the impact of
inflation through price increases due to an unfavorable retail environment.
RECENT LOSSES; SELFIX RESTRUCTURING
The Company has incurred operating losses in two of the last five fiscal
years. The Company's operating losses were $4.5 million in 1994 and $4.1 million
in 1995. Beginning in 1994, management of the Company restructured the Company's
operations to improve its profitability by, among other things, eliminating
unprofitable product lines, reducing overhead, upgrading financial controls and
increasing international distribution capabilities. See "Business -- Company
History." After implementing the restructuring, the Company had operating
profits of $1.4 million in fiscal 1996 and $12.7 million in fiscal 1997.
Although the Company has restructured its operations and returned to
profitability, there is no assurance that the Company will be able to maintain
profitability.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends, in large part, upon the efforts and
abilities of its senior management team, particularly James R. Tennant, the
Company's Chief Executive Officer. The loss of the services of Mr. Tennant or
one or more of the Company's other key employees could have a material adverse
effect on the Company's business. Certain of the Company's senior management,
including Mr. Tennant, have entered into employment agreements with the Company,
containing certain non-competition provisions. The Com-
17
<PAGE> 25
pany does not carry key man life insurance on Mr. Tennant or any of its senior
management team. See "Management -- Employment Agreements."
LABOR RELATIONS
As of December 30, 1997, the Company employed 1,240 persons in the United
States. Approximately 90 are hourly employees at its Leominster, Massachusetts
facility, covered by a collective bargaining agreement which expires in March,
1999; and approximately 150 are hourly employees at its Chicago, Illinois
facilities, covered by a collective bargaining agreement which expires in
January 2001. The Company also employs approximately 200 hourly employees at its
Reynosa, Mexico facility, who are covered by a collective bargaining agreement
which expires in December 1999. The Company utilizes the services of
approximately 350 temporary workers in its injection molding operations, for
assembly and in certain warehouses. Although the Company believes its
relationship with its employees is good, there can be no assurance that the
Company will successfully renegotiate the labor contracts when they expire
without work stoppages. However, the Company does not anticipate having problems
renegotiating any contracts that would materially affect its results of
operations. See "Business -- Employees."
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code in
existing computer and software systems as the millennium ("Year 2000")
approaches. The Year 2000 problem is pervasive and complex, as virtually every
computer operator could be affected in some way by the rollover of the two-digit
year value to "00." The issue is whether systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause
complete system failures. The costs to date have not been material; however, no
assurance can be given that additional amounts will not be required to be
expended or that the Company's computer system will be totally Year 2000
compliant. The inability to be totally Year 2000 compliant may have an adverse
effect on the Company. The Company also plans to communicate with customers,
vendors and others to ensure that their systems are Year 2000 compliant.
However, there can be no assurance that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material effect on the Company.
RISKS ASSOCIATED WITH DEVELOPING NEW PRODUCTS
In order to remain competitive, the Company is developing and introducing
new products and product modifications and intends to continue to develop and
introduce other new products in the future. The development, production and
marketing of new products could require significant investment of financial
resources. Although management intends to introduce and develop new products
which are complementary to the Company's existing products, the Company may
encounter production and marketing obstacles which would have a material adverse
effect on the sales of these new products and the Company's results of
operations. See "Business -- Business Strategy."
LEGAL PROCEEDINGS
Due to the nature of the Company's products, the Company is subject to
product liability claims involving personal injuries allegedly related to the
Company's products. The Company believes that such legal proceedings and claims,
individually and in the aggregate, are either without merit or that the
Company's insurance is generally adequate to cover such claims. Nevertheless,
currently pending claims and any future claims are subject to the uncertainties
related to litigation and the ultimate outcome of any such proceedings or claims
cannot be predicted. There is also no assurance that the product liability
insurance of the Company is or will be adequate to cover such claims.
Furthermore, there can be no assurance that insurance will remain available or,
if available, that it will not be prohibitively expensive. The loss of insurance
coverage could have a material adverse effect on the Company's results of
operations and financial condition. See "Business -- Legal Proceedings."
18
<PAGE> 26
ENVIRONMENTAL REGULATION
The Company's operations are subject to a wide variety of federal, state
and local laws and regulations governing, among other things, emissions to air,
discharge to waters, the generation, handling, storage, transportation,
treatment and disposal of hazardous substances and other materials, and employee
health and safety matters. Also, as an owner and/or operator of real property or
a generator of hazardous substances, the Company may be subject to environmental
cleanup liability, regardless of fault, pursuant to the Comprehensive
Environmental Response Compensation and Liability Act or analogous state laws.
An environmental report obtained in connection with the acquisition of Tamor
indicated that certain remedial work relating to ground contamination of Tamor's
Leominster, Massachusetts facility was required. The former shareholders of
Tamor escrowed $1.1 million to pay for, among other things, any required
remediation at the Leominster, Massachusetts facility. The Company has completed
certain remediation projects at the Leominster, Massachusetts facility. The
Company believes that the cost of the remediation already completed, plus the
cost of any additional remediation that may be required in the future, will be
less than the amount of the escrow.
Except as described above, the Company believes that its properties and
facilities are in compliance, in all material respects, with applicable federal,
state and local laws, ordinances and regulations concerning the presence of
hazardous substances and that continued compliance with such laws, ordinances
and regulations will not have a material effect on the Company's capital
expenditures, earnings or competitive position. However, no assurances can be
given that (i) future laws, ordinances or regulations will not require or impose
any material expenditures or liabilities in connection with any environmental
conditions on the Company's facilities, (ii) the current environmental condition
of the Company's properties will not be affected by the condition of properties
in the vicinity of the Company's facilities or by third parties unrelated to the
Company and (iii) prior owners of any of the Company's properties and facilities
did not create environmental problems of which the Company is not aware. See
"Business -- Environmental Matters."
LIMITATION ON ABILITY TO REPURCHASE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control each holder of Notes would have
the right to require the Company to repurchase all or a portion of such holder's
Notes at a price equal to 101% of the aggregate principal amount of the Notes,
together with accrued and unpaid interest to the date of repurchase. However,
the New Credit Facility will prohibit the purchase of the Notes by the Company
in the event of a Change of Control, unless and until such time as the
indebtedness under the New Credit Facility is repaid in full. The Company's
failure to purchase the Notes would result in a default under the Indenture and
the New Credit Facility, which, in turn, could result in amounts outstanding
under the New Credit Facility being declared due and payable. Any such
declaration could have adverse consequences to the Company and the holders of
the Notes. In the event of a Change of Control, there can be no assurance that
the Company would have sufficient assets to satisfy all of its obligations under
the New Credit Facility and the Notes. See "Description of Other
Indebtedness -- New Credit Facility" and "Description of the Exchange
Notes -- Change of Control."
FRAUDULENT CONVEYANCE; PREFERENTIAL TRANSFER
If the court in a lawsuit brought by an unpaid creditor or representative
of creditors, such as a trustee in bankruptcy, were to find under relevant
federal and state fraudulent conveyance statutes that the Company or any
Subsidiary Guarantor did not receive fair consideration or reasonably equivalent
value for incurring the indebtedness represented by the Notes or the Guarantees,
and that, at the time of such incurrence, the Company or such Subsidiary
Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of such
incurrence, (iii) was engaged in a business or transaction for which the assets
remaining with the Company or such Subsidiary Guarantor constituted unreasonably
small capital or (iv) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they matured, or to find that the
Company acted with actual intent to defraud, such court, subject to applicable
statutes of limitation, could (i) void the Company's obligations under the Notes
or the Subsidiary Guarantor's obligations under the Guarantees, (ii) subordinate
the Notes or the Guarantees to other indebtedness of the Company or the
Subsidiary Guarantors or (iii) take other action detrimental to the holders of
the Notes.
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The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction being applied. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than all of that company's assets at a fair valuation, or if the present
fair salable value of that company's assets is less than the amount that will be
required to pay its probable liability on its existing debts as they become
absolute and matured or if it is unable to pay its debts as they become due.
Moreover, regardless of solvency, a court could avoid an incurrence of
indebtedness, including the Notes, if it determined that such transaction was
made with intent to hinder, delay or defraud creditors, or a court could
subordinate the indebtedness, including the Notes, to the claims of all existing
and future creditors on similar grounds. Based upon financial and other
information currently available to it, management believes the Company is
solvent and will continue to be solvent after the consummation of the
Refinancing. However, there can be no assurance as to what standard a court
would apply in order to determine whether the Company or the Subsidiary
Guarantors were "insolvent" upon consummation of the sale of the Notes and the
Guarantees.
Additionally, under federal bankruptcy or applicable state insolvency law,
if certain bankruptcy or insolvency proceedings were initiated by or against the
Company or any Subsidiary Guarantor within at least 90 days after any payment by
the Company or any Subsidiary Guarantor with respect to the Notes or the
Guarantees or the incurrence of any future Guarantee, all or a portion of such
payment or such future Guarantee could be voided as a preferential transfer and
the recipient of such payment could be required to return such payment if
certain other factors necessary to establish a valid preference action are
present.
ABSENCE OF PUBLIC MARKET
The Original Notes were issued to, and the Company believes are currently
owned by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Original Notes. The Original
Notes have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
Exchange Notes by holders who are entitled to participate in the Exchange Offer.
The market for Original Notes not tendered for exchange in the Exchange Offer is
likely to be more limited than the existing market for Original Notes. The
holders of Original Notes (other than any such holder that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) who are not
eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Company is required to file a Shelf Registration
Statement with respect to such Original Notes. See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer."
The Exchange Notes are new securities for which there currently is no
market. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the Exchange Notes, they are not obligated
to do so and any such market making may be discontinued at any time without
notice. In addition, such market making activity may be limited during the
effectiveness of the Shelf Registration Statement (if filed). Accordingly, there
can be no assurance as to the development or liquidity of any market for the
Exchange Notes. The Original Notes have been designated for trading in the
PORTAL market. The Company does not intend to apply for listing of the Exchange
Notes on any securities exchange or for their quotation through an automated
dealer quotation system.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
FAILURE TO EXCHANGE ORIGINAL NOTES FOR EXCHANGE NOTES
Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. See "The Exchange Offer -- Procedures for Tendering." Therefore,
holders of Original Notes desiring to tender such Original Notes in exchange for
Exchange Notes should allow sufficient time to ensure timely delivery. Neither
the Exchange Agent nor the Company is under any duty to give notification of
defects or irregularities with respect to tenders of Original Notes for
exchange. Original Notes
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<PAGE> 28
that are not tendered or are tendered but not accepted will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, upon consummation of the Exchange Offer,
certain registration rights under the Exchange and Registration Rights Agreement
will terminate. In addition, any holder of Original Notes who tenders in the
Exchange Offer for the purpose of participating in the distribution of the
Exchange Notes may be deemed to have received restricted securities and, if so,
will be required to comply with the registration and prospectus delivery
requirement of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in exchange
for Original Notes, where such Original Notes were acquired by such activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes. To the extent that Original Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Original Notes could be adversely affected due to the limited
amount, or "float," of the Original Notes that are expected to remain
outstanding following the Exchange Offer. Generally, a lower "float" of a
security could result in less demand to purchase such security and could,
therefore, result in lower prices for such security. For the same reason, to the
extent that a large amount of Original Notes are not tendered or are tendered
and not accepted in the Exchange Offer, the trading market for the Exchange
Notes could be adversely affected. See "Plan of Distribution" and "The Exchange
Offer."
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<PAGE> 29
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on May 14, 1998, to the Initial
Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Original Notes to qualified institutional buyers (as
defined in Rule 144A) ("QIBs") in reliance on Rule 144A. As a condition to the
Purchase Agreement, the Company and the Initial Purchasers entered into the
Exchange and Registration Rights Agreement on the date of the Initial Offering
(the "Issue Date").
The following description of the Exchange and Registration Rights Agreement
is a summary only, does not purport to be complete and is qualified in its
entirety by reference to all provisions of the Exchange and Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Exchange Offer
Registration Statement (as defined below). See "Available Information."
Pursuant to the Exchange and Registration Rights Agreement, the Company
agreed to (i) file with the Commission on or prior to 60 days after the Issue
Date a registration statement (the "Exchange Offer Registration Statement")
relating to the Exchange Offer and (ii) use its reasonable best efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act within 150 days after the Issue Date. As soon as practicable
after the effectiveness of the Exchange Offer Registration Statement, the
Company will offer to the holders of Transfer Restricted Securities (as defined)
who are not prohibited by any law or policy of the Commission from participating
in the Exchange Offer the opportunity to exchange their Transfer Restricted
Securities for the Exchange Notes. The Company will keep the Exchange Offer open
for not less than 30 days (or longer, if required by applicable law) after the
date notice of the Exchange Offer is mailed to the holders of the Original
Notes. If a change in law or applicable interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer or do not
permit any holder of the Original Notes (including the Initial Purchaser) to
participate in the Exchange Offer, the Company will use its reasonable best
efforts to file with the Commission a shelf registration statement (the "Shelf
Registration Statement") to cover resales of Transfer Restricted Securities by
such holders who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. For purposes of
the foregoing, "Transfer Restricted Securities" means each Original Note until
(i) the date on which such Original Note has been exchanged for a freely
transferable Exchange Note in the Exchange Offer; (ii) the date on which such
Original Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement; or (iii) the
date on which such Original Note is distributed to the public in accordance with
Rule 144 under the Securities Act or is salable pursuant to Rule 144(k) under
the Securities Act.
The Company will use its reasonable best efforts to have the Exchange Offer
Registration Statement or, if applicable, the Shelf Registration Statement
(each, a "Registration Statement") declared effective by the Commission as
promptly as practicable after the filing thereof. Unless the Exchange Offer
would not be permitted by a policy of the Commission, the Company will commence
the Exchange Offer and will use its reasonable best efforts to consummate the
Exchange Offer as promptly as practicable, but in any event prior to 180 days
after the Issue Date. If applicable, the Company will use its best efforts to
keep the Shelf Registration Statement effective for a period of two years after
the Issue Date, or such shorter period as may be required to permit holders to
sell the Original Notes in accordance with Rule 144 under the Securities Act. If
(i) either an Exchange Offer Registration Statement or Shelf Registration
Statement is not filed with the Commission on or prior to 60 days after the
Issue Date; (ii) either an Exchange Offer Registration Statement or a Shelf
Registration Statement is not declared effective within 150 days after the Issue
Date; or (iii) the Exchange Offer is not consummated on or prior to 180 days
after the Issue Date in respect of tendered Original Notes and a Shelf
Registration Statement has not been declared effective or a Shelf Registration
Statement is filed and declared effective within 150 days after the Issue Date
but shall thereafter cease to be effective (at any time that the Company is
obligated to maintain the effectiveness thereof) without being succeeded within
60 days by an additional Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iii), a "Registration
Default"), the Company will pay liquidated damages ("Liquidated Damages") to
each holder of Transfer Restricted Securities, during the period of one
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<PAGE> 30
or more such Registration Defaults, in an amount equal to $0.192 per week per
$1,000 principal amount of the Original Notes constituting Transfer Restricted
Securities held by such holder until a Registration Statement is filed, an
Exchange Offer Registration Statement or Shelf Registration Statement is
declared effective or the Exchange Offer is consummated or the Shelf
Registration Statement is declared effective or again becomes effective, as the
case may be. All accrued Liquidated Damages shall be paid to holders in the same
manner as interest payments on the Original Notes on semi-annual payment dates
which correspond to interest payment dates for the Original Notes. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will cease.
The Exchange and Registration Rights Agreement also provides that the
Company (i) shall make available for a period of 180 days after the consummation
of the Exchange Offer a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such
Exchange Notes and (ii) shall pay all expenses incident to the Exchange Offer
(including the expense of one counsel to the holders of the Original Notes) and
will indemnify certain holders of the Original Notes (including any
broker-dealer) against certain liabilities, including liabilities under the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Original Notes where such Original Notes were
acquired by such broker-dealer as a result of market making activities or other
trading activities (other than Original Notes acquired directly from the
Company). A broker-dealer which delivers such a prospectus to purchasers in
connection with such resales will be subject to certain of the civil liability
provisions under the Securities Act and will be bound by the provisions of the
Exchange and Registration Rights Agreement (including certain indemnification
rights and obligations).
Each holder of Original Notes who wishes to exchange such Original Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business; (ii) it
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes; and (iii) it is not an affiliate of the
Company or an Exchanging Dealer (as defined) not complying with the requirements
of the next paragraph, or if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Original Notes, where such Original Notes were acquired
by such broker-dealer as a result of market making activities or other trading
activities (an "Exchanging Dealer"), must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
Holders of the Original Notes will be required to make certain
representations to the Company (as described above) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have their Original
Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth in the preceding paragraphs. A
holder who sells Original Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Exchange and
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations).
Following the consummation of the Exchange Offer, holders of the Original
Notes who were eligible to participate in the Exchange Offer but who did not
tender their Original Notes will not have any further registration rights and
such Original Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Original Notes could
be adversely affected. See "Risk Factors -- Absence of Public Market."
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<PAGE> 31
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Original
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding
Original Notes accepted in the Exchange Offer. Holders may tender some or all of
their Original Notes pursuant to the Exchange Offer. However, Original Notes may
be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the issuance of the Exchange Notes will
have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, and (ii) the holders of the Exchange
Notes will not be entitled to certain rights under the Exchange and Registration
Rights Agreement, including the provisions providing for an increase in the
interest rate on the Original Notes in certain circumstances relating to the
timing of the Exchange Offer, all of which rights terminate upon consummation of
the Exchange Offer. The Exchange Notes will evidence the same debt as the
Original Notes and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $125,000,000 aggregate principal amount
of Original Notes are outstanding. The Company has fixed the close of business
on , 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Original Notes do not have any appraisal or dissenters' rights
under the General Corporation Law of Delaware or the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the Exchange Notes from the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Original Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Original Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by written notice and will mail to the registered holders
of Original Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, or (ii) to amend the terms of
the Exchange Offer in any manner. Any
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<PAGE> 32
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof to the registered
holders.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes issued pursuant to the Exchange Offer will
accrue from the last interest payment date on which interest was paid on the
Original Notes surrendered in exchange therefor or, if no interest has been paid
on the Original Notes, from the Issue Date. Holders whose Original Notes are
accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Original Notes.
Interest on the Exchange Notes is payable semi-annually in arrears on each
May 15 and November 15, commencing on November 15, 1998.
PROCEDURES FOR TENDERING
Only a holder of Original Notes may tender such Original Notes in the
Exchange Offer. For a holder to validly tender Original Notes pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal,
and any other required documents must be received by the Exchange Agent at the
address set forth under "Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date. In addition, prior to 5:00 p.m., New York City time, on
the Expiration Date, either (a) certificates for tendered Original Notes must be
received by the Exchange Agent at such address or (b) such Original Notes must
be transferred pursuant to the procedures for book-entry transfer described
below (and a confirmation of such tender received by the Exchange Agent,
including an Agent's Message if the tendering holder has not delivered a Letter
of Transmittal). The term "Agent's Message" means a message transmitted by the
book-entry transfer facility, The Depository Trust Company (the "Book-Entry
Transfer Facility"), to and received by the Exchange Agent and forming a part of
a book-entry confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the tendering participant that such
participant has received and agrees to be bound by the Letter of Transmittal and
that the Company may enforce such Letter of Transmittal against such
participant.
By executing the Letter of Transmittal (or transmitting an Agent's Message
in lieu thereof), each holder will make to the Company the representations set
forth above under the heading "-- Purpose and Effect of the Exchange Offer."
The tender of Original Notes by a holder and the acceptance thereof by the
Company will constitute agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the
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<PAGE> 33
Original Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States, or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange
Act, which is a member of one of the recognized signature guarantee programs
identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Original Notes listed therein, such Original Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Company or their authority to so act must be submitted with
the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Original Notes at the Book-Entry Transfer Facility for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Original Notes by causing such
Book-Entry Transfer Facility to transfer such Original Notes into the Exchange
Agent's account with respect to the Original Notes in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of the Original Notes may be effected through book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate
Letter of Transmittal properly completed and duly executed with any required
signature guarantee (or, in the case of book-entry transfer, an Agent's Message
in lieu thereof) and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole discretion
to waive any defects, irregularities or conditions of tender as to particular
Original Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Original Notes must be cured prior to the
Expiration Date. Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Original Notes, nor shall any of them incur any liability for failure
to give any such notice. Tenders of Original Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Original Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available, (ii) who cannot deliver their Original
Notes, the Letter of Transmittal (or, in the case of book-entry
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<PAGE> 34
transfer, an Agent's Message) or any other required documents to the Exchange
Agent, or (iii) who cannot complete the procedures for book-entry transfer
(including delivery of an Agent's Message), prior to the Expiration Date, may
effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution (i) an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, or (ii) a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Original Notes and the principal amount
of Original Notes tendered, stating that the tender is being made thereby
and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Original Notes (or a
confirmation of book-entry transfer of such Original Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof (or, in the case of book-entry transfer, an Agent's
Message), as well as the certificate(s) representing all tendered Original
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Original Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility), and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Original Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received by
the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Original Notes to be
withdrawn (the "Depositor"), (ii) identify the Original Notes to be withdrawn
(including the certificate number(s) and principal amount of such Original
Notes, or, in the case of Original Notes transferred by book-entry transfer, the
name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Original Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Original Notes register the transfer of such Original Notes into the name of the
person withdrawing the tender, and (iv) specify the name in which any such
Original Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Original Notes so withdrawn will
be deemed not to have been validly tendered for purposes of the Exchange Offer
and no Exchange Notes will be issued with respect thereto unless the Original
Notes so withdrawn are validly retendered. Any Original Notes which have been
tendered but which are not accepted for exchange will be retendered to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Original Notes may be retendered by following one of the procedures
described above under "-- Procedures for Tendering" at any time prior to the
Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Original
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Original Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer, or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Original Notes and
return all tendered Original Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Original Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw such
Original Notes (see "-- Withdrawal of Tenders"), or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Original Notes which have not been withdrawn. The Company is not aware of any
federal or state consents that must be obtained, other than obtaining the
effectiveness of the Exchange Offer Registration Statement, prior to
consummation of the Exchange Offer.
EXCHANGE AGENT
LaSalle National Bank has been appointed as Exchange Agent (the "Exchange
Agent") for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<CAPTION>
BY OVERNIGHT DELIVERY: BY MAIL: BY HAND:
- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C>
LaSalle National Bank LaSalle National Bank LaSalle National Bank
135 South LaSalle Street 135 South LaSalle Street 135 South LaSalle Street
Room 1825 Room 1825 Room 1825
Chicago, Illinois 60603 Chicago, Illinois 60603 Chicago, Illinois 60603
Attn: Sarah Webb Attn: Sarah Webb Attn: Sarah Webb
</TABLE>
FACSIMILE TRANSMISSION NUMBER:
(312) 904-2236
CONFIRM BY TELEPHONE:
(312) 904-2444
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company,
28
<PAGE> 36
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, which is face value, less the original issue discount (net of
amortization) as reflected in the Company's accounting records on the date of
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. Certain expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Original
Notes may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) so long as the Original Notes are eligible for resale pursuant
to Rule 144A, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A, in accordance with Rule 144
under the Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably acceptable to the Company), (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Original Notes in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquired Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Exchanging Dealer that receives Exchange
Notes for its own account in exchange for Original Notes, where such Original
Notes were acquired by such Exchanging Dealer as a result of market making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
As contemplated by these no-action letters and the Exchange and
Registration Rights Agreement, each holder accepting the Exchange Offer is
required to represent to the Company in the Letter of Transmittal that (i) the
Exchange Notes are to be acquired by the holder or the person receiving such
Exchange Notes, whether or not such person is the holder, in the ordinary course
of business, (ii) the holder or any such other person (other than a
broker-dealer referred to in the next sentence) is not engaging, and does not
intend to engage, in the distribution of the Exchange Notes, (iii) the holder or
any such other person has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iv) neither the holder
nor any such other person is an "affiliate" of the Company within the meaning of
29
<PAGE> 37
Rule 405 under the Securities Act, and (v) the holder or any such other person
acknowledges that if such holder or other person participates in the Exchange
Offer for the purpose of distributing the Exchange Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on those
no-action letters. As indicated above, each Exchanging Dealer that receives an
Exchange Note for its own account in exchange for Original Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. For a description of the procedures for such resales by
Exchanging Dealers, see "Plan of Distribution."
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Exchange and Registration
Rights Agreement. The Company will not receive any proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes contemplated in this Prospectus, the Company will receive Original Notes
in like principal amount, the form and terms of which are the same as the form
and terms of the Exchange Notes (which replace the Original Notes), except as
otherwise described herein. The Original Notes surrendered in exchange for
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any increase or decrease in
the indebtedness of the Company. As such, no effect has been given to the
Exchange Offer in the pro forma statements or capitalization tables.
The $125 million of gross proceeds from the Initial Offering (before
deductions of underwriting discounts and other expenses of the Initial
Offering), together with borrowings under the New Credit Facility of
approximately $2.8 million, were used to pay (i) all amounts outstanding under
the Company's previously outstanding credit facility with General Electric
Capital Corporation, together with certain fees, prepayment penalties and
expenses related to such repayment, in an aggregate amount of approximately $122
million, (ii) other fees and expenses of approximately $1.3 million incurred in
connection with the Refinancing and (iii) for working capital and general
corporate purposes. See "Description of Other Indebtedness -- New Credit
Facility."
30
<PAGE> 38
CAPITALIZATION
The following table sets forth the pro forma capitalization of the Company
after giving effect to the Seymour Acquisition and the Refinancing. See "Use of
Proceeds." This table should be read in conjunction with the Consolidated
Financial Statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 28, 1998
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 4,163 $ 4,163
======== ========
Short-term debt:
Current maturities of Existing Credit Facility............ $ 5,600 $ --
Current maturities of industrial development revenue bonds
and capital lease obligations.......................... 991 991
-------- --------
Total short-term debt............................. 6,591 991
-------- --------
Long-term debt:
Existing Credit Facility.................................. 114,400 --
New Credit Facility....................................... -- 2,500
Industrial development revenue bonds and capital lease
obligations............................................ 5,675 5,675
Notes offered hereby...................................... -- 125,000
-------- --------
120,075 133,175
-------- --------
Stockholders' equity:
Common stock and other equity............................. 47,939 47,939
Retained earnings......................................... 8,125 4,826
-------- --------
Total stockholders' equity........................ 56,064 52,765
-------- --------
Total capitalization.............................. $182,730 $186,931
======== ========
</TABLE>
31
<PAGE> 39
SELECTED HISTORICAL FINANCIAL DATA
HOME PRODUCTS INTERNATIONAL, INC.
The following table sets forth selected historical financial data of HPI as
of and for each of the five fiscal years in the period ended December 27, 1997
and for the thirteen week periods ended March 29, 1997 and March 28, 1998. The
statement of operations data for the five fiscal years in the period ended
December 27, 1997 were derived from HPI's audited historical financial
statements included elsewhere in this Prospectus. The unaudited statement of
operations data for the thirteen week periods ended March 29, 1997 and March 28,
1998 were derived from the unaudited financial statements of HPI. "Other Data"
below, not directly derived from the HPI historical financial statements, have
been presented to provide additional analysis. In the opinion of management, the
unaudited data includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the data for such periods. Interim
results for the thirteen week period ended March 28, 1998, are not necessarily
indicative of results that can be expected in future periods. The summary
historical financial data below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THIRTEEN WEEKS
YEAR ENDED ENDED
---------------------------------------------------- ---------------------
DEC. 25, DEC. 31, DEC. 30, DEC. 28, DEC. 27, MARCH 29, MARCH 28,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $39,711 $40,985 $41,039 $38,200 $129,324 $31,738 $52,408
Gross profit(a)........................ 17,207 15,398 15,361 15,208 40,436 9,128 15,953
Operating profit (loss)................ 2,993 (4,488) (4,075) 1,365 12,748 2,526 5,092
Interest expense....................... (1,066) (999) (896) (707) (5,152) (1,532) (3,006)
Extraordinary item, net of tax......... -- -- -- -- -- -- (1,737)
Net earnings (loss).................... 1,515 (6,003) (4,010) 806 7,320 1,032 (491)
OTHER DATA:
Gross profit margin(a)................. 43.3% 37.6% 37.4% 39.8% 31.3% 28.8% 30.4%
Capital expenditures................... $ 3,131 $ 2,326 $ 1,334 $ 1,734 $ 8,568 $ 597 $ 4,092
Ratio of earnings to fixed
charges(b)........................... 2.8x -- -- 2.0x 2.4x 1.7x 1.7x
</TABLE>
- ---------------
(a) Gross profit is defined as net sales less cost of goods sold. Gross profit
margin is computed as gross profit as a percentage of net sales.
(b) For the purposes of computing this ratio, earnings consist of earnings
(loss) before income taxes, extraordinary item and fixed charges. Fixed
charges consist of interest expense, amortization of debt financing costs,
and the estimated interest factor in rental expense. The 1994 and 1995
coverage deficiencies were $5.8 million and $4.3 million, respectively.
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
The following table sets forth selected financial data of Seymour as of and
for each of the three fiscal years in the period ended June 30, 1997 and for the
six month periods ended December 28, 1996 and December 27, 1997. The statement
of operations and balance sheet data for the three years in the period ended
June 30, 1997 have been derived from Seymour's audited historical consolidated
financial statements. The unaudited statement of operations data for the six
month periods ended December 28, 1996 and December 27, 1997 have been derived
from the unaudited financial statements of Seymour. The historical Seymour
statements of operations reflect certain reclassifications to conform with HPI
presentation. "Other Data" below, not directly derived from the Seymour
historical financial statements, have been presented to provide additional
analysis. The Selected Historical Financial Data below should be read in
conjunction with
32
<PAGE> 40
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, --------------------
-------------------------------- DEC. 28, DEC. 27,
1995 1996 1997 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 92,554 $105,532 $ 98,274 $45,248 $43,096
Gross profit(a)..................... 25,266 25,687 29,518 12,583 10,233
Operating profit (loss)............. 3,737 (684) 6,220 1,188 (3,171)
Interest expense, net............... (7,394) (8,384) (7,923) (4,047) (3,708)
Net loss............................ (2,410) (11,888) (2,019) (2,883) (7,487)
OTHER DATA:
Gross profit margin(a).............. 27.3% 24.3% 30.0% 27.8% 23.7%
Capital expenditures................ $ 1,124 $ 2,595 $ 1,161 $ 321 $ 1,376
BALANCE SHEET DATA:
Working capital(b).................. $ 26,453 $ 21,604 $ 16,070 $16,360 $ 9,627
Total assets........................ 124,580 111,323 103,188 99,906 93,810
Total debt, including capital lease
obligations...................... 83,779 83,772 76,301 76,884 70,003
Total stockholders' equity.......... 22,829 10,850 8,765 7,923 1,238
</TABLE>
- ---------------
(a) Gross profit is defined as net sales less cost of goods sold. Gross profit
margin is computed as gross profit as a percentage of net sales.
(b) Working capital is computed as current assets less current liabilities.
33
<PAGE> 41
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following Unaudited Pro Forma Combined Financial Data of the Company
are based on, and should be read in conjunction with, the Consolidated Financial
Statements of HPI and Seymour and the notes thereto included elsewhere in this
Prospectus, and have been adjusted to give pro forma effect to the Seymour
Acquisition and related financing and the Refinancing. An effective tax rate of
40% has been assumed for all periods; however, the year ended December 27, 1997
includes a $3.1 million income tax benefit due to the reduction of a valuation
allowance. The historical Seymour statements of operations reflect certain
reclassifications to conform with HPI presentation.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 27, 1997 has been prepared by combining the Consolidated Statement of
Operations of HPI for the year ended December 27, 1997 with the Unaudited
Consolidated Statement of Operations of Seymour for the year ended December 27,
1997, as if the Seymour Acquisition and related financing and the Refinancing
had occurred on December 29, 1996.
The Unaudited Pro Forma Combined Statement of Operations of the Company for
the thirteen week period ended March 28, 1998 gives pro forma effect to the
Refinancing as if it had occurred on December 28, 1997. The Unaudited Pro Forma
Combined Statement of Operations for the thirteen week period ended March 29,
1997 gives pro forma effect to the Seymour Acquisition and related financing and
the Refinancing as if each of the transactions had occurred on December 29,
1996. The Unaudited Pro Forma Combined Statement of Operations for the thirteen
week period ended March 29, 1997 has been prepared by combining the Unaudited
Consolidated Statement of Operations of HPI for the thirteen week period ended
March 29, 1997 with the Unaudited Consolidated Statement of Operations of
Seymour for the thirteen week period ended March 29, 1997.
The pro forma adjustments are based upon available information and certain
assumptions that HPI believes are reasonable. Other data included on the pro
forma statements of operations have been presented to provide additional
analysis. The Seymour Acquisition has been accounted for using the purchase
method of accounting. Allocations of the purchase price have been determined
based upon preliminary information and estimates of fair value and are subject
to change. Differences between the amounts included herein and the final
allocations are not expected to have a material effect on the Unaudited Pro
Forma Combined Financial Data. The Unaudited Pro Forma Combined Financial Data
do not purport to represent what the Company's results of operations would have
been if such events had occurred at the dates indicated, nor do such statements
purport to project the results of the Company's operations for any future
period.
34
<PAGE> 42
HOME PRODUCTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 27, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------
SEYMOUR PRO FORMA
HPI SEYMOUR ACQUISITION REFINANCING COMBINED
--------- ------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales.................... $ 129,324 $92,963 $ -- $ -- $ 222,287
Cost of goods sold........... 88,888 69,121 (221)(b) -- 157,788
--------- ------- --------- ----- ---------
Gross profit............... 40,436 23,842 221 -- 64,499
Operating expenses........... 27,688 21,916 (a) (1,300)(c) (17)(g) 49,150
875 (d)
(12)(b)
--------- ------- --------- -----
Operating profit........... 12,748 1,926 658 17 15,349
Interest (expense)........... (5,152) (7,701) (1,871)(e) (813)(f) (15,537)
Other income (expense)....... 70 (635)(a) -- (167)(l) (732)
--------- ------- --------- ----- ---------
Earnings (loss) before
income taxes and
extraordinary item...... 7,666 (6,410) (1,213) (963) (920)
Income tax (expense) benefit
before change in valuation
allowance.................. (3,489) (260) 3,732 (h) 385 (h) 368
Change in income tax
valuation allowance........ 3,143(i) -- -- -- 3,143
--------- ------- --------- ----- ---------
Total income tax (expense)
benefit.................... (346) (260) 3,732 385 3,511
--------- ------- --------- ----- ---------
Earnings (loss) before
extraordinary item...... $ 7,320 $(6,670) $ 2,519 $(578) $ 2,591
========= ======= ========= ===== =========
Earnings before extraordinary
item per share -- basic.... $ 0.38
=========
Earnings before extraordinary
item per share --diluted... $ 0.37
=========
Weighted average common
shares
outstanding -- basic....... 5,436,002 1,320,700(j) 6,756,702
Weighted average common
shares
outstanding -- diluted..... 5,682,415 1,320,700(j) 7,003,115
OTHER DATA:
EBITDA(k).................. $ 32,335
EBITDA margin(k)........... 14.5%
Capital expenditures....... $ 11,031
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Data
35
<PAGE> 43
HOME PRODUCTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 29, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------
SEYMOUR PRO FORMA
HPI SEYMOUR ACQUISITION REFINANCING COMBINED
--------- ------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 31,738 $23,544 $ -- $ -- $ 55,282
Cost of goods sold................. 22,610 16,992 -- -- 39,602
--------- ------- --------- ----- ---------
Gross profit..................... 9,128 6,552 -- -- 15,680
Operating expenses................. 6,602 5,076 218 (d) (2)(g) 11,658
(236)(c)
Operating profit................. 2,526 1,476 18 2 4,022
Interest (expense)................. (1,532) (1,951) (468)(e) (92)(f) (4,043)
Other income (expense)............. 155 19 -- (31)(l) 143
--------- ------- --------- ----- ---------
Earnings (loss) before income tax
and extraordinary item........ 1,149 (456) (450) (121) 122
Income tax (expense) benefit....... (117) (119) 139 (h) 48 (h) (49)
--------- ------- --------- ----- ---------
Earnings (loss) before
extraordinary item............ $ 1,032 $ (575) $ (311) $ (73) $ 73
========= ======= ========= ===== =========
Earnings (loss) before
extraordinary item per
share -- basic................... $ 0.01
=========
Earnings (loss) before
extraordinary item per
share -- diluted................. $ 0.01
=========
Weighted average common shares
outstanding -- basic............. 4,298,779 1,320,700 (j) 5,619,479
Weighted average common shares
outstanding -- diluted........... 4,513,683 1,320,700 (j) 5,834,383
OTHER DATA:
EBITDA(k)........................ $ 8,099
EBITDA margin(k)................. 14.7%
Capital expenditures............. $ 1,038
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Data
36
<PAGE> 44
HOME PRODUCTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THIRTEEN WEEKS ENDED MARCH 28, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO
REFINANCING FORMA
HPI ADJUSTMENTS COMBINED
-------- ------------ ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales................................................. $52,408 $ -- $52,408
Cost of goods sold........................................ 36,455 -- 36,455
------- ------ -------
Gross profit............................................ 15,953 -- 15,953
Operating expenses........................................ 10,861 (2)(g) 10,859
------- ------ -------
Operating profit........................................ 5,092 2 5,094
Interest (expense)........................................ (3,006) (476)(f) (3,482)
Other income (expense).................................... 58 (45)(l) 13
------- ------ -------
Earnings (loss) before income taxes and extraordinary
item................................................. 2,144 (519) 1,625
Income tax (expense) benefit.............................. (898) 248 (h) (650)
------- ------ -------
Earnings (loss) before extraordinary item............... $ 1,246 $ (271) $ 975
======= ====== =======
Earnings before extraordinary item per share -- basic..... $0.12
=======
Earnings before extraordinary item per share -- diluted... $0.12
=======
Weighted average common shares outstanding -- basic....... 7,928,668 7,928,668
Weighted average common shares outstanding -- diluted..... 8,316,182 8,316,182
OTHER DATA:
EBITDA(k)............................................... $ 8,036
EBITDA margin(k)........................................ 15.3%
Capital expenditures.................................... $ 4,092
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Data
37
<PAGE> 45
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) Other income (expense) includes a $550 write-off of a prepaid asset that was
eliminated in connection with the termination of Seymour's defined benefit
pension plan. Operating expenses includes $2,600 of expense estimated to be
incurred in connection with the consolidation and disposition of certain
Seymour manufacturing operations.
(b) Reflects an adjustment of Seymour depreciation expense to conform with HPI's
half-year convention depreciation policy. Cost of goods sold is reduced by
$221 and operating expenses is reduced by $12.
(c) Reflects cost savings relating to the consolidation of Seymour's sales,
marketing and R&D functions with those of existing HPI companies. The
estimated cost savings primarily represents wages and benefits associated
with redundant Seymour personnel.
(d) Reflects the additional amortization expense resulting from the recording of
goodwill associated with the Seymour Acquisition. Goodwill is amortized over
40 years.
(e) Reflects the interest expense on additional debt of $21,043 for the Seymour
Acquisition at the 1997 effective Existing Credit Facility at an assumed
weighted average interest rate of 8.89%.
(f) Reflects the estimated net change in interest expense as if the Refinancing
had occurred as of the beginning of the applicable years. An interest rate
of 9.625% has been used for the Refinancing. The pro forma adjustment to
interest expense is comprised of the following:
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
YEAR WEEKS WEEKS
ENDED ENDED ENDED
DEC. 27, MARCH 27, MARCH 28,
1997 1997 1998
-------- --------- ---------
<S> <C> <C> <C>
Elimination of debt discount created from issuance of
Warrants to General Electric Capital Corporation.......... $ 400 $171 $ --
Increased effective interest rate resulting from the Initial
Offering as compared to historical rates.................. (166) (53) (194)
Interest expense on $5,000 of additional debt resulting from
the Initial Offering as compared to historical debt
levels.................................................... (481) (120) (120)
Interest expense on assumed borrowings under the New Credit
Facility.................................................. (241) (60) (60)
Unused revolver fees on the New Credit Facility............. (453) (113) (110)
Incremental change in amortization of deferred financing
fees...................................................... 123 80 (55)
Other....................................................... 5 3 63
----- ---- -----
Total............................................. $(813) $(92) $(476)
===== ==== =====
</TABLE>
(g) Reflects the elimination of the annual fees associated with the Existing
Credit Facility.
(h) Reflects an adjustment to income tax (expense) benefit by applying an
effective tax rate of 40% to the historical results of HPI and Seymour, as
well as to the Seymour Acquisition and Refinancing pro forma adjustments.
(i) The change in the income tax valuation allowance of $3,143 results from
management's determination that it is more likely than not that the Company
will realize its deferred tax assets.
(j) Reflects the increase in weighted average common shares outstanding as a
result of the Seymour Acquisition.
(k) EBITDA is defined as the sum of (i) earnings before income taxes and
extraordinary items, (ii) interest expense, (iii) interest income, (iv)
depreciation and amortization, (v) one-time charges in the third and fourth
quarter of 1997 of $2,600 relating to the consolidation and disposition of
certain Seymour manufacturing operations, (vi) a $550 one-time write off in
the third quarter of 1997 of an asset eliminated in connection with the
termination of Seymour's defined benefit pension plan and (vii) certain
other one-time items totaling $293 during the third and fourth quarters of
1997. Management believes
38
<PAGE> 46
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA -- (CONTINUED)
that the consolidation of the Seymour manufacturing operations should enable
it to generate an additional $1,800 in annual cost savings following the
completion of the consolidation. However, no assurance can be given that
such savings will be realized. Management believes that EBITDA is a measure
commonly used by analysts and investors to determine a company's ability to
service and incur debt. Accordingly, this information has been presented to
permit a more complete analysis. EBITDA should not be considered a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity. EBITDA margin is computed as EBITDA as a percentage of net sales.
(l) Reflects the estimated change in interest income as if the Initial Offering
had occurred as of the beginning of the applicable years.
39
<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Historical Financial Data," "Unaudited Pro Forma Combined Financial Data" and
the Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this Prospectus. This Prospectus contains, in addition to
historical information, forward-looking statements that are subject to risks and
other uncertainties. The Company's actual results may differ materially from
those anticipated in these forward-looking statements.
The Company reports on a 52-53 week year ending on the last Saturday of
December. References to the fiscal years 1997, 1996 and 1995 are for the
fifty-two weeks ended December 27, 1997, December 28, 1996, and December 30,
1995, respectively.
THIRTEEN WEEKS ENDED MARCH 28, 1998 ("FIRST QUARTER 1998") COMPARED TO
THIRTEEN WEEKS ENDED MARCH 27, 1997 ("FIRST QUARTER 1997") (PRO FORMA TO INCLUDE
SEYMOUR)
The following discussion and analysis compares the pro forma results for
the first quarter 1998 to the pro forma results for the first quarter 1997.
Management believes that such comparison is necessary to meaningfully analyze
the changes occurring in such periods. The pro forma financial results give
effect to the Seymour Acquisition and related financing and the Refinancing as
if they had occurred on December 29, 1996. The pro forma operating expenses
reflect additional amortization expense resulting from the recording of goodwill
associated with the Seymour Acquisition. The pro forma interest expense reflects
the estimated net increase in interest expense as if the Seymour Acquisition and
the Refinancing had occurred on December 29, 1996. Income tax expense assumes a
pro forma rate of 40% for the period presented. The pro forma number of weighted
shares assumes the 1,320,700 shares issued as a result of the Seymour
Acquisition were outstanding as of December 29, 1996.
As such, in the discussion that follows, all comparisons are made on a pro
forma basis with reference to the following:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------------------------
MARCH 28, 1998 MARCH 27, 1997
-------------------- --------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales....................................... $52,408 100.0% $55,282 100.0%
Cost of goods sold.............................. 36,455 69.6 39,602 71.6
------- ----- ------- -----
Gross profit.................................. 15,953 30.4 15,680 28.4
Operating expenses.............................. 10,859 20.7 11,658 21.1
------- ----- ------- -----
Operating profit.............................. 5,094 9.7 4,022 7.3
Interest (expense).............................. (3,482) (6.6) (4,043) (7.3)
Other income.................................... 13 -- 143 0.2
------- ----- ------- -----
Earnings before income taxes.................. 1,625 3.1 122 0.2
Income tax (expense)............................ (650) (1.2) (49) (0.1)
------- ----- ------- -----
Earnings before extraordinary item.............. $ 975 1.9% $ 73 0.1%
======= ===== ======= =====
Earnings before extraordinary item per
share -- basic................................ $ 0.12 $ 0.01
======= =======
Earnings before extraordinary item per
share -- diluted.............................. $ 0.12 $ 0.01
======= =======
</TABLE>
Net sales. Net sales of $52.4 million in the first quarter of 1998
decreased $2.9 million, or 5.2%, from net sales of $55.3 million in the first
quarter of 1997. Net sales were down as a result of the Company's continuing
effort to cutback or eliminate the sales of certain underperforming products. In
addition, sales as compared to the prior period were negatively impacted by the
bankruptcy of several retailers during the fourth quarter of 1997 and first
quarter of 1998. Sales to such customers for the first quarter of 1997 totaled
$2.1 million as compared to $0.4 million in the first quarter of 1998.
40
<PAGE> 48
Gross profit. Gross profit increased from $15.7 million in the first
quarter of 1997 to $16.0 million in the first quarter of 1998 in spite of a
sales decline of $2.9 million. Gross profit margins increased from 28.4% in 1997
to 30.4% in 1998 due to a decrease in the cost of plastic resin. The Company
experienced a price decrease resulting in margin savings of 2.8% as compared to
a year ago. The discontinuance of certain underperforming products also helped
to improve margins. Partially offsetting the margin improvements were product
mix shifts, manufacturing inefficiencies related to new product start ups and
unabsorbed overhead on reduced manufacturing production.
Operating expenses. Operating expenses of $10.9 million in the first
quarter of 1998 were down $0.8 million as compared to the first quarter of 1997.
As a percent of net sales, operating expenses were 20.7% in 1998 as compared to
21.1% in 1997. Selling expenses declined $0.4 million in 1998 but remained at
12.3% of sales for both years. Commissions and freight decreased $0.4 million as
a result of the decline in sales. Administrative expenses increased from 6.0% of
net sales in 1997 to 6.7% of net sales in 1998 as a result of the decrease in
net sales.
Amortization of intangibles decreased $0.6 million from the first quarter
of 1997 to the first quarter of 1998. This is a result of certain intangibles
that were fully amortized in 1997 as well as a write-down of a non-compete
agreement in the fourth quarter of 1997.
Interest expense. Interest expense of $3.5 million in the first quarter of
1998 was down $0.5 million from $4.0 million in 1997. Both periods reflect
interest and financing fees related to the Refinancing. The decrease is due to a
public stock offering of 3,780,000 shares in the third quarter of 1997, of which
1,500,000 shares were sold by selling stockholders. Proceeds from the stock
offering to the Company, $20.9 million, were used to repay a subordinated note
of $7.0 million, term notes of $13.6 million, and accrued interest of $0.3
million.
Income taxes. Income taxes increased to $0.7 million in the first quarter
of 1998 from $0.1 million in the first quarter of 1997 as a result of higher
earnings.
Earnings before extraordinary item. Earnings before extraordinary item
increased to $1.0 million in the first quarter of 1998 from first quarter
earnings in 1997 of $0.1 million. Diluted earnings per share increased to $0.12
in the first quarter of 1998 from $0.01 in the first quarter of 1997 based on
8,316,182 and 5,834,383 weighted shares outstanding for 1998 and 1997,
respectively.
FISCAL YEAR 1997 (ACTUAL) COMPARED TO FISCAL YEAR 1996 (PRO FORMA TO INCLUDE
TAMOR)
The following discussion and analysis compares the actual results of 1997
to the pro forma results for 1996. Management believes that such a comparison
(pro forma 1996 results for Tamor) is necessary to meaningfully analyze the
changes occurring in such years. The pro forma financial results give effect to
the Tamor Acquisition, and related financing, as if each of the transactions had
occurred on January 1, 1996. The pro forma operating expenses reflect (i)
additional amortization expense resulting from the recording of goodwill
associated with the Tamor Acquisition, (ii) net estimated cost savings as a
result of the Tamor Acquisition, including a net reduction in discretionary
distributions paid to and on behalf of related parties of Tamor and (iii)
additional costs associated with the Company's 401(k) and profit sharing plans
and certain other fees. The pro forma interest expense reflects the estimated
net increase in interest expense as if the Tamor Acquisition and related
financing had occurred on January 1, 1996. The pro forma number of weighted
average shares assumes the 480,000 shares issued as a result of the Tamor
Acquisition and a warrant issued in connection with the acquisition financing
were outstanding as of January 1, 1996.
41
<PAGE> 49
As such, in the discussion that follows, all comparisons are made on a pro
forma basis with reference to the following:
<TABLE>
<CAPTION>
FIFTY-TWO WEEKS ENDED
--------------------------------------------------
PRO FORMA
DECEMBER 27, 1997 DECEMBER 28, 1996
----------------------- -----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................................. $129,324 100.0% $113,914 100.0%
Cost of goods sold.................................... 88,888 68.7 80,810 70.9
-------- ----- -------- -----
Gross profit........................................ 40,436 31.3 33,104 29.1
Operating expenses.................................... 27,688 21.5 24,864 21.8
-------- ----- -------- -----
Operating profit.................................... 12,748 9.8 8,240 7.3
Interest (expense).................................... (5,152) (4.0) (6,328) (5.6)
Other income.......................................... 70 0.1 847 0.7
-------- ----- -------- -----
Earnings before income taxes........................ 7,666 5.9 2,759 2.4
Income tax (expense).................................. (346) (0.2) (160) (0.1)
-------- ----- -------- -----
Net earnings.......................................... $ 7,320 5.7% $ 2,599 2.3%
======== ===== ======== =====
Net earnings per share -- basic....................... $ 1.35 $ 0.60
======== ========
Net earnings per share -- diluted..................... $ 1.29 $ 0.59
======== ========
</TABLE>
Net sales. Net sales of $129.3 million were up $15.4 million from the
prior year. The sales increase was primarily driven by new product introductions
within Tamor's storage container line. The introduction of the flat lid 20, 30,
and 48 gallon storage totes contributed $12.2 million of new product sales.
Growth in the storage category was driven by continuing consumer trends toward
larger, more durable products for storage of seasonal and other items. Sales of
plastic hangers increased $3.5 million from 1996 as a result of aggressive
pricing action taken in response to competitive pressures. 1997 also saw an
increase in the bath and shower category with the introduction of Selfix's
Suction Lock bath line. This increase offset declines in less profitable
juvenile and home organization products. Home improvement products experienced a
decrease of $0.9 million due to postponed remodeling projects by end users.
Gross profit. Gross profit margins in 1997 were 31.3% of net sales, up
significantly from 1996 margins of 29.1%. The margin improvement was a direct
result of a decline in the cost of plastic resin. The average cost of plastic
resin dropped from $0.37 per pound in 1996 to $0.33 in 1997. The decrease in the
cost of plastic resin resulted in savings of approximately $2.6 million as
compared to 1996. This savings represents 2% of 1997 net sales. Declines in
resin costs were a reflection of plastic resin market factors and not as a
result of any change in the Company's buying practices. In addition to the
decrease in cost of plastic resin, margins also benefited from improved usage of
existing capacity. Tamor was able to shift some of its excess molding capacity
($2.1 million) to Selfix and Shutters, allowing all three entities to run nearly
at full capacity. Fixed costs were absorbed over an expanded manufacturing
volume thus reducing unit costs as a percent of net sales.
Operating expenses. Operating expenses, including selling, administrative,
and amortization of intangibles, decreased slightly as a percentage of sales
from 1996 to 1997. Selling expenses decreased from 14.9% in 1996 to 14.2% in
1997. The slight decrease as a percentage of net sales is attributable to the
Company's continuous efforts to effectively manage costs. Administrative
expenses increased from 6.2% of net sales in 1996 to 6.5% in 1997. The minor
increase is due to the 1997 implementation of two separate incentive bonus
plans, as well as an increase in the reserve for bad debts. Amortization of
intangibles increased slightly, but as a percentage of net sales remained
constant at 0.7%.
Interest expense. Interest expense of $5.2 million in 1997 decreased $1.1
million from $6.3 million in 1996 due to a public stock offering of 3,780,000
shares in the third quarter, of which 1,500,000 were sold by selling
stockholders. Proceeds from the offering to the Company, $20.9 million, were
used to repay a subordinated note of $7.0 million, term notes of $13.6 million
and accrued interest of $0.3 million.
42
<PAGE> 50
Other income. Other income of $0.1 million in 1997 decreased from $0.8
million in 1996. In 1996, the Company realized interest income on excess cash
flow as well as the proceeds of a life insurance policy.
Income taxes. The Company was able to use federal net operating loss
carryforwards and use the elimination of its valuation allowance to reduce the
1997 federal tax liability to zero. The valuation allowance was eliminated as a
result of the Company's determination that it was more likely than not that the
benefit of the deferred tax assets recorded would be realized. The Company
recorded a provision for state income taxes in the amount of $0.3 million, as a
result of the inability to use tax loss carryforwards in Massachusetts, Tamor's
primary state of business. The pro forma 1996 results also reflect zero federal
tax expense, and the state provision recorded reflects the actual state taxes
paid by Tamor.
Net earnings. Net earnings in 1997 were $7.3 million, or $1.29 per common
share -- diluted, based on 5.7 million weighted average common shares
outstanding. This compares to net earnings of $2.6 million in 1996, or $0.59 per
common share -- diluted, based on 4.4 million weighted average common shares
outstanding. The $4.7 million increase in profitability is due to a 13.5%
increase in net sales combined with a 2.2% increase in gross margin. The
increase in weighted average common shares outstanding is the result of the
secondary public stock offering in July, 1997, the exercise of stock options
throughout 1997, and stock issued in connection with the Company's Employee
Stock Purchase Plan.
FISCAL 1996 COMPARED TO FISCAL 1995
The following discussion and analysis compares the actual historical
results of 1996 and 1995 without consideration for the Tamor Acquisition, which
would affect, among other items, raw materials prices:
<TABLE>
<CAPTION>
FIFTY-TWO WEEKS ENDED
------------------------------------------------
DECEMBER 28, 1996 DECEMBER 30, 1995
-------------------- --------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales....................................... $38,200 100.0% $41,039 100.0%
Cost of goods sold.............................. 22,992 60.2 25,678 62.6
------- ----- ------- -----
Gross profit.................................. 15,208 39.8 15,361 37.4
Operating expenses.............................. 13,843 36.2 17,385 42.3
Restructuring charge............................ -- -- 2,051 5.0
------- ----- ------- -----
Operating profit (loss)....................... 1,365 3.6 (4,075) (9.9)
Interest expense................................ (707) (1.9) (896) (2.2)
Other income (expense).......................... 148 0.4 688 1.7
------- ----- ------- -----
Earnings (loss) before income taxes........... 806 2.1 (4,283) (10.4)
Income tax benefit.............................. -- -- 273 0.6
------- ----- ------- -----
Net earnings (loss)............................. $ 806 2.1% $(4,010) (9.8)%
======= ===== ======= =====
Net earnings (loss) per share -- basic.......... $ 0.21 $ (1.11)
======= =======
Net earnings (loss) per share -- diluted........ $ 0.21 $ (1.11)
======= =======
</TABLE>
General. Fiscal 1996 results began to reflect the positive benefits of the
restructuring actions taken during fiscal years 1994 and 1995. The Company's net
earnings in fiscal 1996 of $0.8 million reflect reduced operating expenses,
improved manufacturing efficiencies and increased gross profit margins.
Overhead reductions and operating initiatives which were implemented in
1994 and 1995 directly benefited 1996 results as follows: (i) a 24% reduction in
the workforce; (ii) the elimination of unprofitable product lines; (iii) the
closing of three facilities; (iv) a reduction in outside warehousing costs; (v)
a 29% reduction of gross inventory; and (vi) the reduction of operating expenses
below amounts spent in fiscal 1993.
Net sales. Net sales of $38.2 million in 1996 decreased $2.8 million, or
6.9%, from net sales in 1995 of $41.0 million. The reduction in sales was a
direct result of decisions made in 1995 to discontinue the sale of certain
underperforming housewares products. Discontinued products, accounting for $3.3
million of 1995 net
43
<PAGE> 51
sales, were across all of the housewares product lines but were greatest in the
hooks and home helpers and home organization product lines. Home bathwares sales
increased 3.0% from 1995 as a result of an expanded line of shower organizers.
Juvenile products sales increased 10.0% as the Company had a full year in which
to sell the child safety product line acquired in October 1995. Home improvement
products increased 5.0% as a result of increased placement with remodeling
distributors.
Gross profit. Gross profit margins in 1996 were 39.8% of net sales, an
increase from margins in 1995 of 37.4% of net sales. Increased gross profit
margins were attributable to a slight decrease in the cost of plastic resin but
more significantly to the impact of decisions made in 1995 and the selling of
fewer lower margin products. Plastic resin costs declined about 9.0% during 1996
to an average cost of $0.48 per pound from an average cost of $0.53 per pound
for plastic resin during 1995. Selfix used approximately seven million pounds of
plastic resin resulting in a cost savings of $0.3 million as compared to 1995
cost levels. The declines in resin costs were a reflection of plastic resin
market factors and not as a result of any change in the Company's buying
practices.
Operating expenses. Selling expenses decreased from 25.5% of net sales in
1995 to 23.7% of net sales in 1996. Warehousing and customer service costs were
reduced by the first quarter closing of the Company's Canadian facility. All
Canadian business is now serviced from the Company's manufacturing and
distribution facilities in Chicago. The closing resulted in personnel reductions
and reduced warehousing costs. In addition, management decided that the Company
was better served by outsourcing certain product design services. This resulted
in further personnel related savings.
Administrative expenses also decreased as a percent of net sales.
Administrative expenses were 12.0% of net sales in 1996 as compared to 15.7% in
1995. Management efforts to evaluate and reduce spending successfully reduced
personnel costs, professional fees and nearly all other administrative items.
Costs related to the search and evaluation of acquisition targets were
significantly decreased in 1996. Management devoted the majority of its
attention to cost reduction efforts, manufacturing efficiencies, and managing
the impact of selling a reduced number of product lines. Fourth quarter costs in
1996 of approximately $0.2 million related to the Tamor Acquisition were
capitalized. In addition, 1995 included an increase in the allowance for
doubtful accounts of $0.4 million to address the uncertain financial condition
of several retailers. Further, management decided in 1995 to outsource its
management information department and incurred $0.4 million of charges for
related severance payments and equipment write-offs.
Amortization of intangibles decreased from 1.2% of net sales in 1995 to
0.5% in 1996. The decrease in amortization is the result of 1995 write-offs of
previously capitalized patents and trademarks related to discontinued product
lines.
Restructuring charge. Restructuring charges totaling $2.1 million were
recorded in 1995 related to discontinuing certain unprofitable product lines,
closing the Company's Canadian facility and moving the Canadian operations to
Chicago. Such charges included severance benefits, the write-off of Canadian
fixed assets, early lease termination charges on the Canadian building lease and
the write-off of inventory and intangibles related to discontinued product
lines. The charges for the closing and relocation of the Canadian operation
totaled $1.0 million, including severance benefits of $0.2 million covering all
of the Canadian employees. The relocation of the Canadian operation was
completed in the first half of 1996. The remaining $1.1 million of restructuring
charges related to product lines the Company decided to discontinue and the
write-off of related product molds, inventory and patents. The after tax and per
share impact of the write-off of depreciable assets in connection with the 1995
restructuring charge was $1.0 million and $0.27, respectively.
Interest expense. In December 1995, the Company used excess cash to pay
down a $1.5 million note payable to a bank. In addition, $0.8 million of
installment payments on variable rate demand bonds were made. As a result of
these payments, Selfix's 1996 interest expense was reduced $0.2 million as
compared to 1995. Changes in interest rates had no significant impact on
interest expense between years.
Other income. In 1996, other income of $0.1 million was significantly less
than the $0.7 million of other income in 1995. Other income in 1995 was
positively impacted by the favorable settlement of a non-compete
44
<PAGE> 52
and consulting agreement. The favorable settlement allowed $0.3 million of
related accruals to be reversed into 1995 earnings. In addition, 1995 other
income included gains on sales of fixed assets and a franchise tax refund.
Income taxes. The Company was able to use tax losses from prior years to
reduce current year tax provisions to zero. In 1995 and 1994, however, the
Company was unable to record a significant tax benefit on pre-tax losses because
of the unavailability of tax loss carrybacks. An income tax benefit of $0.3
million was recorded in 1995 through the utilization of alternative minimum tax
carrybacks. The Company has about $6.5 million of book tax losses to shelter
future reported pre-tax earnings.
Net earnings (loss). Net earnings in 1996 were $0.8 million or $0.21 per
common share--diluted, based on 3.9 million weighted average common shares
outstanding. This compares to a net loss of $4.0 million in 1995 or $1.11 loss
per common share--diluted, based on 3.6 million weighted average common shares
outstanding. The $4.8 million turnaround in profitability was due to the
operating improvements achieved over the prior few years and the $2.1 million
decrease in restructuring charges. The increase in common shares and common
share equivalents was the result of stock issued in connection with the
Company's Stock Purchase Plan and the dilutive impact of stock options. The
increase in the Company's year end stock price from $5.625 to $8.625 caused
several previously issued stock option grants to be treated as dilutive for
purposes of the common share equivalent determination.
OPERATING RESULTS BY INDUSTRY SEGMENT
The Company operates in two industry segments: (i) houseware products and
(ii) home improvement products.
Houseware Products
The housewares segment significantly improved its profitability in 1997.
Operating profits of $12.3 million were achieved compared to pro forma (for the
Tamor Acquisition) operating profits in 1996 of $7.7 million. The improvement
resulted primarily from a 13.5% increase in net sales and a drop in the cost of
plastic resin of $0.03 per pound or $2.4 million as compared to 1996. Other
factors adding to the improvement were better utilization of existing capacity,
allowing for the reduction in outside molding, and holding selling and marketing
expenses steady in spite of the increase in sales.
Historical operating profits of $0.9 million in 1996 were up $5.8 million
as compared to a loss in 1995, of $4.9 million. The improvement resulted from
higher gross profit margins and reduced operating expenses. The majority of the
operating initiatives and cost cutting measures of the prior two years benefited
the housewares segment. The Selfix line of products was significantly
streamlined from nearly 2,000 SKUs in 1994 to under 700 SKUs as of the end of
1996. The reduction in SKUs has allowed management to concentrate on selling
more profitable products, allocate capital resources accordingly and cutback
personnel. Additionally, 1995 results included a $2.1 million restructuring
charge, whereas 1996 did not.
Home Improvement Products
Operating profits of the home improvement segment remained flat from 1996
to 1997 at $0.5 million. Sales for 1997 decreased $1.1 million as a result of
postponed remodeling projects by end users. Offsetting the effects of a decline
in sales were higher gross profit margins. The cost of plastic resin decreased
$0.06 per pound in 1997 or $0.2 million as compared to 1996. Shutters was able
to operate at nearly full capacity in 1997 by molding for the housewares
segment, allowing them to absorb their fixed costs over an expanded
manufacturing volume, thus reducing unit costs as a percentage of net sales. In
response to the sales shortfall, operating expenses were significantly reduced
in 1997.
Operating profits in 1996 of $0.5 million declined from $0.8 million in
1995. The decline in profitability occurred primarily in the first quarter when
sales were significantly constrained by weather conditions in the midwest and
northeast. Late winter storms deferred the start of the building season. This
resulted in missed sales and significant unabsorbed fixed manufacturing costs.
Although sales caught up later in the year, the unabsorbed manufacturing costs
could not be recovered. In addition, operating expenses increased 8.0% to
45
<PAGE> 53
support new product introductions and to pursue new trade channel opportunities.
During the fourth quarter, management initiated a series of changes to
permanently reduce manufacturing costs and operating expenses. This resulted in
a fourth quarter profit as compared to historical fourth quarter losses.
Further, these changes positioned the home improvement segment for improved
profitability in 1997.
SEYMOUR ACQUISITION
Effective December 30, 1997 (within the Company's 1998 fiscal year), the
Company acquired Seymour, a privately held company founded in 1942. Seymour is a
leading designer, manufacturer and marketer of consumer laundry care products.
Seymour manufactures and markets a full line of ironing boards, covers and pads
and numerous laundry related accessories.
Seymour was acquired for a total purchase price of $100.7 million,
consisting of $16.4 million in cash, $14.3 million in common stock (1,320,700
shares) and the assumption of $70.0 million of debt. The necessary funds to
complete the acquisition were obtained from the Existing Credit Facility.
The Existing Credit Facility consists of a $20.0 million revolving credit
facility, two term loans totaling $110.0 million and a $10.0 million senior
subordinated term loan. The revolving credit facility, the term loans and the
senior subordinated term loan provided a total of $140.0 million of available
financing. The Existing Credit Facility is secured by a pledge of all of the
assets of the subsidiaries of the Company and all of the shares of capital stock
of such subsidiaries. Interest on the revolving credit facility and term notes
is initially charged at floating rates of 100-150 basis points over the lender's
prime rate or 250-300 basis points over LIBOR, at the option of the Company. The
senior subordinated term loan of $10.0 million bears interest at a floating rate
of 300 basis points over the lender's prime rate, but in no event less than 11%.
If the Seymour Acquisition had occurred on January 1, 1997, the Company's
1997 net sales of $129.3 million would have increased by $93.0 million to $222.3
million and operating profits of $12.7 million would have increased by $2.6
million to $15.3 million. The pro forma operating profit of $15.3 million
includes a charge of $2.6 million related to management's plans to consolidate
and dispose of certain manufacturing operations of Seymour.
SEYMOUR FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------------------
1997 1996
------------------- --------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.............................................. $98,274 100.0% $105,532 100.0%
Cost of goods sold..................................... 68,756 70.0 79,845 75.7
------- ----- -------- -----
Gross profit......................................... 29,518 30.0 25,687 24.3
Operating expenses..................................... 23,298 23.7 26,371 25.0
------- ----- -------- -----
Operating profit (loss).............................. 6,220 6.3 (684) (0.7)
Interest (expense)..................................... (7,923) (8.0) (8,384) (7.9)
Other expense.......................................... (57) -- (223) (0.2)
------- ----- -------- -----
Loss before income taxes............................. (1,760) (1.8) (9,291) (8.8)
Income tax (expense)................................... (259) (0.3) (2,597) (2.5)
------- ----- -------- -----
Net loss............................................... $(2,019) (2.1)% $(11,888) (11.3)%
======= ===== ======== =====
</TABLE>
Net sales. Net sales of $98.3 million for 1997 decreased $7.3 million, or
6.9%, from net sales of $105.5 million for 1996. The sales decline was primarily
concentrated at one particular customer where sales were down $7.1 million. At
the beginning of fiscal year 1997, this customer was significantly overstocked
on boards, covers and pads, with an excess of four to five months of supply on
hand, and throughout the year lowered its inventory to a more appropriate level.
For all other customers, sales of covers and pads were up while sales of ironing
boards and indoor dryers were down slightly.
46
<PAGE> 54
Gross profit. Gross profit margins for 1997 were 30.0% of net sales, up
significantly from margins of 24.3% for 1996. The improvements were due to
reductions in inventory obsolescence, inventory shrinkage and costs of direct
labor, material and overhead. In late 1996 Seymour implemented various material
planning processes and inventory control measures that resulted in improved
plant efficiencies, reductions in material and overtime costs and reductions in
slow-moving and obsolete inventory.
Operating expenses. Operating expenses for 1997 decreased $3.1 million, or
11.7%, from 1996. As a percentage of sales, operating costs decreased from 25.0%
of net sales in 1996 to 23.7% of net sales in 1997. The decline in operating
expenses was primarily due to a reduction in bad debt expense for 1997. There
were a number of bankruptcy filings in 1996 that negatively impacted Seymour's
reserves. Headcount reductions and management's continued efforts to control
operating costs further led to reduced operating expenses in 1997.
Interest expense. Interest expense decreased $0.5 million from $8.4
million in 1996 to $7.9 million in 1997. The decrease in interest was
attributable to improved earnings and subsequent additional cash flows that
enabled Seymour to reduce borrowings under its revolving line of credit
agreement from $13.4 million in 1996 to $6.4 million in 1997.
Income taxes. Income taxes decreased from $2.6 million in 1996 to $0.3
million in 1997. This decrease was attributable to the recognition in 1996 of a
full reserve against deferred tax assets, which resulted in a deferred tax
provision of $2.4 million.
SEYMOUR FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------------
1996 1995
----------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.............................................. $105,532 100.0% $92,554 100.0%
Cost of goods sold..................................... 79,845 75.7 67,288 72.7
-------- ----- ------- -----
Gross profit......................................... 25,687 24.3 25,266 27.3
Operating expenses..................................... 26,371 25.0 21,529 23.3
-------- ----- ------- -----
Operating income (loss).............................. (684) (0.7) 3,737 4.0
Interest (expense)..................................... (8,384) (7.9) (7,394) (7.9)
Other income (expense)................................. (223) (0.2) 125 0.1
-------- ----- ------- -----
Loss before income taxes............................. (9,291) (8.8) (3,532) (3.8)
Income tax (expense) benefit........................... (2,597) (2.5) 1,122 1.2
-------- ----- ------- -----
Net loss............................................... $(11,888) (11.3)% $(2,410) (2.6)%
======== ===== ======= =====
</TABLE>
Net sales. Net sales of $105.5 million for fiscal 1996 increased $13.0
million, or 14.0%, from net sales of $92.6 million for fiscal 1995. This
increase was due to the inclusion of net sales derived from the business of
Magla Products which was acquired in December 1994.
Gross profit. Gross profit margins in 1996 were 24.3% of net sales as
compared to 27.3% of net sales in 1995. The decline was primarily due to
one-time manufacturing inefficiencies resulting from the initial integration of
Magla Products, the closing of Seymour's Arkansas facility and the relocation of
these operations to other existing Seymour facilities.
Operating expenses. Operating expenses of $26.4 million, or 25.0%, of 1996
net sales increased $4.9 million from $21.5 million or 23.3% of 1995 net sales.
The primary contributors to the increase as a percentage of net sales were
allowances for bad debts as a result of several customers filing for bankruptcy
in 1996, coupled with an increase in employee procurement costs associated with
several key management changes. Further contributing to the 1996 increase in
operating expenses was additional amortization related to the acquisition of
Magla Products.
Interest expense. Interest expense of $8.4 million for fiscal 1996
represented an increase of $1.0 million from 1995 interest expense of $7.4
million. The increase resulted from interest expense incurred to finance the
47
<PAGE> 55
acquisition of Magla Products and an increase in the outstanding borrowings on
Seymour's revolving line of credit.
Income taxes. The provision for income taxes increased to $2.6 million in
1996 from a tax benefit of $1.1 million in 1995. This increase was attributable
to the recognition of a full reserve against deferred tax assets, which resulted
in a deferred tax provision of $2.4 million.
SEYMOUR SIX MONTH PERIOD ENDED DECEMBER 27, 1997 COMPARED TO SIX MONTH PERIOD
ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
6 MONTHS ENDED 6 MONTHS ENDED
DECEMBER 27, 1997 DECEMBER 31, 1996
------------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales............................................. $43,096 100.0% $45,248 100.0%
Cost of goods sold.................................... 32,863 76.3 32,665 72.2
------- ----- ------- -----
-- -- -- --
Gross profit........................................ 10,233 23.7 12,583 27.8
Operating expense..................................... 13,404 31.1 11,395 25.2
------- ----- ------- -----
Operating profit (loss)............................. (3,171) (7.4) 1,188 2.6
Interest expense...................................... (3,708) (8.6) (4,047) (9.0)
Other income (expense)................................ (550) (1.3) 32 0.1
------- ----- ------- -----
Loss before income taxes............................ (7,429) (17.3) (2,827) (6.3)
Income tax (expense).................................. (58) (0.1) (56) (0.1)
------- ----- ------- -----
Net loss.............................................. $(7,487) (17.4)% $(2,883) (6.4)%
======= ===== ======= =====
</TABLE>
Net sales. Net sales for the six month 1997 period of $43.1 million
decreased $2.1 million, or 4.6%, from net sales of $45.2 million for 1996. The
sales decrease is primarily due to a decline in the sales of safety gates.
Safety gate sales declined due to decisions by some of the Company's customers
to reduce the number of suppliers within the juvenile products category. All
other product categories were essentially unchanged between the periods.
Gross profit. Gross profit margin for the six month 1997 period was 23.7%
of net sales, down from 27.8% for 1996. The primary reason for the decline in
gross margin was a reduction in pricing in response to competitive pressures. In
addition, margins were impacted by lower production volume in an effort to keep
inventories in line. The reduction in production volume resulted in unabsorbed
overhead costs.
Operating expenses. Operating expenses increased from $11.4 million, or
25.2% of net sales for the six month 1996 period to $13.4 million, or 31.1% of
net sales for 1997. Included in operating expenses for the period are one-time
costs of $2.6 million associated with the consolidation and disposition of
certain manufacturing operations. If the costs associated with plant
consolidations were excluded, operating expenses for the period would have been
25.2% of net sales and down $0.6 million as compared to the prior period.
Interest expense. Interest expense decreased $0.3 million to $3.7 million
for the six month 1997 period from $4.0 million for 1996. This decrease was
attributable to improved cash flow which enabled Seymour to reduce its average
borrowings under its revolving line of credit from $11.9 million for the six
month period ended December 31, 1996 to $1.7 million for the six month period
ended December 27, 1997.
Other income (expense). Other expense for the six month 1997 period
includes a $0.6 million write-off of a prepaid asset that was eliminated in
connection with the termination of Seymour's defined benefit pension plan.
Income taxes. The provision for income taxes in both periods relate to
state taxes payable in states where net operating loss carryforwards were
unavailable.
48
<PAGE> 56
CAPITAL RESOURCES AND LIQUIDITY
Cash and cash equivalents at December 27, 1997 were $0.6 million as
compared to $2.9 million at December 28, 1996. The decrease in cash is the
result of daily sweeps against the Company's revolving line of credit that was
established in February 1997 in connection with the Tamor Acquisition. Capital
spending of $8.6 million was used to acquire molds to support new product
introductions, additional injection molding machines and to fund an expansion of
the Company's Missouri warehouse facility. Since the Tamor Acquisition, working
capital has increased $4.3 million.
In July 1997, the Company completed a stock offering of 3,780,000 shares of
Common Stock, of which 1,500,000 shares were sold by selling stockholders. Net
proceeds to the Company of $20.9 million were used to repay a subordinated note
of $7.0 million, term notes of $13.6 million and accrued interest of $0.3
million.
The Company's capital spending needs in 1998 are expected to be between
$10.0 million and $12.0 million. Most of the spending relates to new injection
molding presses to expand existing capacity and to replace old, inefficient
machines. The replacement machines are expected to reduce manufacturing cycle
times and ongoing maintenance costs. In addition, the Company exercised an
option in the first quarter of 1998 to purchase the leased manufacturing and
warehouse facility in Missouri at an approximate cost of $1.4 million. Where
possible, management will pursue alternative means of financing such as capital
leases and other purchase money transactions. In addition, operating leases will
be pursued to the extent they represent attractive economic alternatives.
Management intends to continue to pursue its consolidation strategy within
the housewares industry. The ability to successfully fund future acquisitions
will depend on the financial situation of the target company, possible
renegotiation or refinancing of existing credit terms or the possibility of
obtaining an alternative credit facility, and the ability to use stock in lieu
of cash.
Upon consummation of the Refinancing, interest payments on the Notes and
interest payments under the New Credit Facility will represent significant cash
requirements for the Company. After the consummation of the Refinancing, the
Company will have outstanding approximately $134.2 million of consolidated
indebtedness, consisting of $125.0 million principal amount of the Notes,
approximately $2.5 million drawn under the New Credit Facility, $4.4 million of
industrial development revenue bonds (see "Description of Other Indebtedness")
and $2.3 million of capital lease obligations. The Company will have $89.0
million of availability under the New Credit Facility after giving effect to the
$2.5 million drawn upon the consummation of the Refinancing and approximately
$8.5 million reserved for letters of credit. See "Description of Other
Indebtedness -- New Credit Facility."
As a result of the Refinancing the Company expects to incur extraordinary
charges in the second quarter of 1998 totaling $3.3 million, net of tax, related
to the write-off of deferred financing fees and prepayment penalties.
The Company believes its financing facilities together with its cash flow
from operations will provide sufficient capital to fund operations, make the
required debt repayments and meet the anticipated capital spending needs.
YEAR 2000
The Company is aware of the issues associated with the programming code in
existing computer and software systems as the Year 2000 approaches. The Year
2000 problem is pervasive and complex, as virtually every computer operator
could be affected in some way by the rollover of the two-digit year value to
"00." The issue is whether systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause complete
system failures. The Company believes that its costs associated with the
rollover of the two-digit value to "00" will not be material. The Company also
plans to communicate with customers, vendors and others to ensure that their
systems are Year 2000 compliant. See "Risk Factors -- Year 2000 Compliance."
49
<PAGE> 57
BUSINESS
OVERVIEW
The Company, based in Chicago, Illinois, is a leading designer,
manufacturer and marketer of a broad range of value-priced, quality consumer
houseware products in the United States. The Company's significant product lines
include (i) ironing boards, covers and pads, (ii) home/closet organization
products, (iii) plastic storage containers and totes, (iv) laundry accessories,
(v) bath and shower organization products, (vi) juvenile products and (vii) home
improvement products. HPI's ability to provide a substantial array of
up-to-date, quality products on a timely basis, combined with its commitment to
provide additional support services to its customers (such as just-in-time
delivery, product planograms and point-of-purchase advertising) has enabled the
Company to become a preferred supplier to the large, national retailers carrying
its products and to establish a leading market position in several product
lines. The Company's strong relationships with its base of retailers (including
Wal-Mart, Target and Kmart) provide a large and efficient distribution channel
for its products. These relationships enable the Company to work with retailers
to develop products that are well-received by both the retailer and the
end-user. On a pro forma basis, the Company's combined net sales and EBITDA for
the twelve month period ended March 28, 1998, would have been $219.4 million and
$32.3 million, respectively.
The Company has actively pursued a strategy of selectively acquiring and
integrating complementary houseware manufacturers. This has enabled the Company
to become one of the leading suppliers and cost-effective manufacturers of
houseware products in the United States. The Company believes it has
demonstrated its ability to identify, purchase and integrate companies which
offer complementary product lines and to derive significant manufacturing and
operating efficiencies from such acquisitions. For example, the acquisitions of
Tamor in January, 1997 and Seymour in December, 1997 strengthened the Company's
ability to offer "one-stop shopping" for a wide range of houseware products to
its retail customers. These acquisitions, combined with internal growth, have
increased the Company's net sales from approximately $35.2 million in fiscal
year 1992 to approximately $222.3 million in fiscal year 1997 (on a pro forma
basis), while EBITDA margins have increased from 7.4% to 14.5% (on a pro forma
basis) during the same period. The additional product offerings resulting from
both strategic acquisitions and an active product development program have
strengthened the Company's relationships with its existing customer base of
national retailers, enabling the Company to obtain increased dedicated retail
shelf space for its expanding product lines. Management believes that the
Company has established a platform to continue this consolidation and product
development strategy within the highly fragmented houseware products industry
and that such strategy will further position the Company for continued growth in
the retail distribution channel. The Company continues to look for opportunities
to acquire companies that fit within its acquisition strategy. To that end, the
Company has had, and continues to have, numerous discussions with potential
acquisition candidates. As of the date of this Prospectus, the Company has made
a number of oral and written acquisitions proposals to certain of such
candidates, but has not entered into any binding agreements. While the Company
believes that it is likely to enter into one or more agreements in the near
future with respect to such potential acquisitions, no assurance can be given
that such agreements will be reached or that any of such potential acquisitions
will be consummated.
Industry sources estimate that the total housewares industry in the United
States is approximately $54 billion in size. Within the housewares industry, HPI
currently offers products in the home organization, laundry management and home
improvement segments. Management estimates that the current market size in the
United States for these segments is between $5 billion and $8 billion. This
market is served by a highly fragmented manufacturer base. The Company currently
operates in several categories including (i) ironing boards, covers and pads,
(ii) home/closet organization products, (iii) plastic storage containers and
totes, (iv) laundry accessories, (v) bath and shower organization products, (vi)
juvenile products and (vii) home improvement products. In the opinion of
management, the housewares industry is driven by (i) retailers committing an
increasing amount of shelf space to storage products, (ii) retailers
consolidating the number of their suppliers, (iii) new household and home office
formations, (iv) a movement away from generic products towards items designed to
perform specific functions and (v) overall retailer consolidation.
50
<PAGE> 58
COMPANY HISTORY
The Company was founded in 1952 under the name Selfix, Inc. and became a
public company in 1988. In 1994, the Company began a restructuring program which
included replacing the senior management team, implementing a focused sales and
marketing program, expanding distribution, decreasing the number of product
SKUs, reducing overhead and upgrading financial and systems controls. Effective
January 1, 1997, the Company acquired Tamor, which designs, manufactures and
markets storage totes, hangers and juvenile organization products and its
affiliated product distribution company, Houseware Sales, Inc. In February 1997,
a holding company was established with HPI as the holding company entity. The
Company completed a common stock offering in June 1997 of 3,780,000 shares, of
which 1,500,000 shares were sold by selling stockholders at $9.75 per share.
With a view to expanding into new related product categories, the Company
acquired Seymour in December 1997.
The principal executive offices of the Company are located at 4501 West
47th Street, Chicago, Illinois 60632, and the Company's telephone number is
(773) 890-1010.
COMPETITIVE STRENGTHS
Management believes that the following competitive strengths contribute to
the Company's position as a leading manufacturer and marketer of popular
houseware products and serve as a foundation for the Company's business
strategy.
- LEADING MARKET POSITION. Management believes that the Company has a
leading market position in each of the product categories in which its
products compete. In particular, management believes that the Company is
the leading ironing board, cover and pad manufacturer in the United
States and is the nation's leading supplier of plastic clothes hangers.
The Company's home organization products, including plastic clothes
hangers, are marketed under the Selfix and Tamor brand names, which are
widely recognized in the industry. Management believes the Company's
broad product offerings in the home organization products category
provides it with a competitive advantage over other manufacturers. In the
bath and shower products segment, management believes the Company is a
leading producer of plastic bath and shower accessories commanding the
second largest market share in the United States. In the storage
container market, management believes the Company ranks third in market
share in the United States. Through both acquisitions and internal
product development, the Company seeks to enhance its position as a
leading supplier of housewares in a highly fragmented industry.
- ESTABLISHED DISTRIBUTION NETWORK. The Company has established a broad
distribution network serving both domestic and international markets. The
Company's houseware products are sold through national and regional
retailers, hardware and homecenter stores, food and drug stores, juvenile
stores, specialty stores, and to hotels. Management believes that its
distribution network allows it to successfully launch new products and
broaden existing product lines with greater consumer acceptance. The
Company's distribution network also provides marketing and distribution
synergies for its acquired businesses, which generally are suppliers of
houseware products marketed through many of the same retail distribution
channels.
- STRONG, COLLABORATIVE RELATIONSHIPS WITH RETAILERS. The Company
maintains close and interactive relationships with a diverse customer
base of retailers by focusing on new product development and creative
marketing and packaging ideas. The Company has also strengthened its
relationships with major customers through acquisitions which have
enabled it to supply its customers with a broader selection of houseware
product lines, resulting in increased retail shelf space devoted to the
Company's products. HPI offers customer-specific merchandising programs
which management believes enable retailers and distributors to achieve a
higher gross margin on the Company's products than with the products of a
number of its nationally known competitors. For instance, the Company
provides its customers with a variety of retail support services,
including customized merchandise planogramming, small shipping packs,
point-of-purchase displays, EDI, and just-in-time product delivery. The
Company also utilizes its customers' POS information to allow the Company
to better monitor product sales.
51
<PAGE> 59
Management believes that its prompt and reliable product delivery of
value-priced, high-volume products enables its customers to maintain
minimal inventories.
- INNOVATIVE, CONSUMER-DRIVEN PRODUCT LINE EXTENSIONS. The Company
develops and introduces innovative products with features and benefits
that are designed to meet the needs and demands of consumers. New
products or product line extensions are frequently developed or acquired
after consultation with the Company's major retail customers. This
enables the Company to leverage its existing customer base to expand its
product offerings and to assess the potential viability of products prior
to development. Typically, the Company's new product introductions are
developed by making incremental modifications to its market-proven
products. During 1997, approximately 60 new products and product
improvements were launched by the Company, with each of the Company's
business units introducing at least one new product line.
- FLEXIBLE, LOW-COST MANUFACTURER. The Company operates a network of
efficient manufacturing facilities that result in favorable per unit
product costs. Recent acquisitions have enabled the Company to broaden
its product base, expand its sales and distribution capabilities and
increase manufacturing and distribution synergies, while achieving
significant scale in manufacturing. For instance, management estimates
that the Company is the largest United States manufacturer of full-size
ironing boards, building approximately 14,200 units per day. This volume
enables the Company to purchase rolled steel in bulk and achieve
economies of scale. Similarly, it is a large processor of various grades
of plastic resin, utilizing approximately 85 injection molding machines
to process approximately 85 million pounds of plastic resin per year. The
Company is able to achieve cost advantages through the use of off-prime
grades of resin that are typically bought through brokers in the
secondary market. The Company also processes approximately seven million
yards of fabric annually, utilizing its domestic operations, as well as
its Reynosa, Mexico facility for those aspects of production that are
more labor intensive. The Company seeks to maximize its operating
efficiency by ensuring that each plant has flexible manufacturing
capabilities as well as utilizing its Mexico operation and Asian
outsourcing opportunities to lower production costs. In addition, the
Company is able to utilize excess capacity in its plants to meet peak
demand and optimize production planning.
- EXPERIENCED MANAGEMENT TEAM. The Company's senior management team has a
wide range of experience in the production, development and marketing of
housewares and related products. Leading the Company's senior management
team is Mr. James R. Tennant, the Company's Chairman and Chief Executive
Officer, who has 20 years of corporate management experience in
marketing-oriented capacities. Mr. Tennant has been with HPI since 1994.
Mr. Stephen R. Brian, the President and Chief Operating Officer of the
Company, has 29 years experience in management and production capacities
with major consumer product companies, including General Electric
Corporation and Sunbeam. Mr. James E. Winslow, Executive Vice President
and Chief Financial Officer of the Company, has 16 years of financial
management experience in the consumer products industry, including 11
years with Wilson Sporting Goods. Mr. Winslow has been with HPI since
1994. Furthermore, the Company's operations are managed by experienced
consumer product and manufacturing professionals.
BUSINESS STRATEGY
The Company intends to continue to take advantage of consolidation
opportunities in the housewares industry and to continue to grow by expanding
its product offerings through strategic acquisitions and by capitalizing on
established distribution channels to increase sales. The Company's strategy for
achieving that objective includes the following key elements:
- LEVERAGE MARKET SHARE POSITION. The Company intends to maintain a
leading market position in the United States in each of the product
segments in which it operates and intends to leverage its market strength
to introduce new products in all of its product categories. Through
acquisitions of companies with complementary product lines and through an
internal product development program, the Company expects to continue to
increase sales and to become a leading supplier of new product categories
as well as additional products in its existing product categories.
Management believes that such growth will
52
<PAGE> 60
enable the Company to expand its merchandising relationships with its
existing key customers, and to increase its presence in these customers'
stores, which in turn would give the Company additional leverage to
support further growth.
- CONTINUE BUILDING STRATEGIC SUPPLIER RELATIONSHIPS. Management believes
that national retailers are increasingly interested in establishing
"one-stop shopping" supplier relationships for their store chains to
enhance their margins and operating efficiencies. In addition, these mass
merchandisers have come to expect value-added services (such as
merchandise planogramming and EDI) that are primarily offered by large
suppliers. Management believes that the breadth of the Company's product
offerings, combined with the value-added services it provides, will
enable the Company to continue to build close and interactive
relationships with its retailers, capture larger market share and garner
incremental shelf space for its products.
- LAUNCH PRODUCT LINE IMPROVEMENTS AND NEW PRODUCTS. The Company has
successfully launched product line improvements and new products and
intends to continue to do so by capitalizing on its strong relationships
with its retailers. In 1997, the Company introduced approximately 60 new
products and product improvements, which accounted for approximately 13%
of the Company's 1997 revenues (excluding sales generated from laundry
management products). Through these product introductions, the Company's
products are kept up-to-date and appealing for both the retailer and
end-user. The Company is also able to manage its research and development
expenditures at levels below those of its competitors as most of these
product innovations and improvements require only minimal feature
enhancements and relatively limited technological input. Management
believes that continued product introductions will further enhance
revenue growth, profitability and market share.
- INCREASE MARKET PENETRATION. The Company expects that strategic
acquisitions, as well as internally developed new product lines, will
result in increased penetration of its existing markets and enable it to
develop and extend its customer base both in the United States and
internationally. The Company also plans to expand its export sales team
and leverage established contacts with key distributors to continue to
increase its sales internationally.
- PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. Management anticipates that
the fragmented nature of the housewares industry will continue to provide
significant opportunities for growth through strategic acquisitions of
complementary businesses. Management intends to continue to acquire
businesses at attractive multiples of cash flow and achieve operational
and distribution efficiencies through integration of complementary
businesses. The Company's acquisition strategy focuses on businesses with
product offerings which (i) offer product expansion into related
categories, (ii) focus on products which can be marketed through the
Company's existing distribution channels and (iii) enhance manufacturing
efficiencies by increasing throughput and lowering per unit production
costs, thereby increasing the Company's marketing and distribution
efficiencies. Management will also consider strategic joint ventures
which would provide access to new products, technologies or markets. The
Company continues to look for opportunities to acquire companies that fit
within its acquisition strategy. To that end, the Company has had, and
continues to have, numerous discussions with potential acquisition
candidates. As of the date of this Prospectus, the Company has made a
number of oral and written acquisitions proposals to certain of such
candidates, but has not entered into any binding agreements. While the
Company believes that it is likely to enter into one or more agreements
in the near future with respect to such potential acquisitions, no
assurance can be given that such agreements will be reached or that any
of such potential acquisitions will be consummated.
PRODUCTS
The Company's significant product lines include (i) ironing boards, covers
and pads, (ii) home/closet organization products, (iii) plastic storage
containers and totes, (iv) laundry accessories, (v) bath and shower organization
products, (vi) juvenile products and (vii) home improvement products.
53
<PAGE> 61
PRO FORMA GROSS SALES BY PRODUCT CATEGORY
FISCAL YEAR ENDED DECEMBER 27, 1997
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PLASTIC BATH AND
IRONING BOARDS, HOME/CLOSET STORAGE SHOWER HOME
COVERS ORGANIZATION CONTAINERS LAUNDRY ORGANIZATION JUVENILE IMPROVEMENT
AND PADS PRODUCTS AND TOTES ACCESSORIES PRODUCTS PRODUCTS PRODUCTS
--------------- ------------ ---------- ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross sales.......... $75.4 $55.9 $47.3 $17.6 $16.6 $16.6 $8.4
% Sales.............. 32% 23% 20% 7% 7% 7% 4%
</TABLE>
Ironing Boards, Covers and Pads. The Company offers a significant variety
of ironing boards under the Seymour brand name (approximately 185 individual
SKU's). Key products in this category include the EasyBoard (perforated board),
SureFoot (vented, four leg board), ReadyPress (over-the-door) and WorkWizard
(vented, four-leg with hanger rack). Management believes the Company is also the
leading manufacturer of ironing board covers and pads. The Company offers eight
different types of covers and pads in over 85 different designs that fit not
only its own ironing boards, but all regular size boards. The Company is the
only company that sells ironing board covers with 3M Scotchguard protection.
Home/Closet Organization Products. The Company offers a variety of
products for general home organization, under both the Selfix and Tamor brand
names. This category is primarily comprised of plastic clothes hangers, which
represented 33% of this category's gross dollar sales in 1997. Due to the
commodity nature of the hanger segment, margins in this category are inherently
lower, while unit volumes are substantially higher. Management believes that HPI
has a leading market share in the sale of plastic clothes hangers in the United
States, and that its broad product offering gives it a competitive advantage
over other hanger manufacturers. In addition to plastic hangers, the Company
markets a complete line of over 150 hooks, primarily made of plastic, under the
brand name Selfix. The original product marketed by the Company was a plastic
hook, unique in that it employed a proprietary no-tools mounting system. The
Company has expanded its offering of these patented, self-adhesive hooks, and
now believes it offers a complete line in the opening price-point segment.
Also included in this category are other plastic organizers, closet and
clothing care products, recycling containers, plastic kitchen organizers
(including vinyl coated wire kitchen organizers) and miscellaneous housewares
products.
Plastic Storage Containers and Totes. The Company offers a variety of
plastic home storage containers under the Tamor brand name. The Company's home
storage containers range in size from shoe boxes to jumbo (48 gallon) totes, and
include specialty containers sold during holiday seasons. These products range
in retail price from $2 to $20 and contain a variety of product attributes,
including removable wheels and domed-top lids, which increase storage capacity.
Management believes these features are key to obtaining shelf space and
competing in the market.
Laundry Accessories. Management believes the Company is the leading
producer of laundry accessories in the United States. Key products within this
category include drying racks, laundry bags, hampers and sorters, clotheslines,
and clothes pins.
Bath and Shower Organization Products. The Company markets a broad line of
value-priced plastic bath accessories and organizers, primarily under the brand
name Selfix. These products include shower organizers, towel bars, soap dishes,
shelves, portable shower sprays, and fog-free shower mirrors. In January 1997,
the Company launched a major line extension in the bath and shower organization
category, Suction-LockT Organizers. The Company believes it is a leading
producer of opening price-point plastic bath accessories in the United States.
Juvenile Products. The Company markets a line of quality children's
organization products, under the brand names Tidy KidsT, KidtivityT, and Lil'
HelpersE. These products include closet extenders, hook racks, storage cubes,
clothes hangers, under-the-bed storage trolleys, and safety gates and are sold
in the juvenile or housewares departments of its core customers, and also
through specialty juvenile retailers like Toys 'R Us and
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<PAGE> 62
Babies 'R Us. Management believes the Company created a market niche of
children's organization products in the development and successful sales of its
Tidy KidsT and Lil' HelpersEproducts, and that it offers the premier children's
organization program in the industry.
Home Improvement Products. Through the Shutters brand name, the Company
markets a unique line of plastic exterior shutters to the construction trades
and to consumers through retailers and home improvement catalogs. Because of a
patented design, the shutters are assembled from components, rather than formed
in a single piece, which allows the shutters to be configured in a variety of
sizes and colors. The Company markets the shutters in component form to
remodeling distributors and in finished form to home center retailers. In both
cases, the key competitive advantage is customization of size and color, and
quick turnaround service.
MARKETING AND SALES
The Company's primary marketing strategy is to design innovative products
with consumer features and benefits, and focus on marketing these products to
its retail customers. Management believes that one of its competitive advantages
is prompt and reliable product delivery of value-priced, high-volume products,
allowing customers to maintain minimal inventories. The Company believes that
the customer-specific merchandising programs it offers enable retailers to
achieve a higher margin on the Company's products than the products of some of
its competitors. To that end, the Company provides its customers a variety of
retail support services, including customized merchandise planogramming, small
shipping packs, point-of-purchase displays, EDI, and just-in-time product
delivery designed to continue their growth with volume retailers.
The Company's marketing efforts also include advertising, promotional and
differentiated packaging programs. Promotions include cooperative advertising,
customer rebates targeted at the Company's value-added feature products and
point-of-purchase displays.
CUSTOMERS AND DISTRIBUTION
The Company's houseware products are sold through national and regional
discounters, hardware/home center, food/drug stores, juvenile stores, specialty
stores, and to hotels. The Company sells directly to major retail customers
through the Company's internal sales management team. The Company also sells to
approximately 3,000 other customers through a network of approximately 50
independent manufacturers' representatives. The Company's key distribution
channels include the following: (i) Wal-Mart, which accounted for approximately
17.5% of the Company's fiscal 1997 pro forma gross sales; (ii) Kmart, which
accounted for approximately 12.5% of the Company's fiscal 1997 pro forma gross
sales; and (iii) Target, which accounted for approximately 5.9% of the Company's
fiscal 1997 pro forma gross sales.
Management believes that one of its greatest opportunities is to fully
leverage the Company's long-standing relationships with these customers in order
to gain additional market share in its core products lines and to successfully
introduce new and enhanced products lines.
COMPETITION
The houseware products industry is highly fragmented and management
believes that no single supplier accounts for more than 5% of total market
sales. The Company competes with a significant number of companies, some of
which have greater name-brand recognition, larger customer bases and/or
significantly greater financial resources than the Company. The Company's key
competitors include Rubbermaid and Sterilite. There are no substantial
regulatory or other barriers to entry of new competitors into the Company's
markets. To provide complete product lines, suppliers of houseware products have
begun to consolidate. Accordingly, the Company believes that it is
well-positioned to pursue its strategy of growth through acquisitions.
The Company believes that large national retailers are continuing to reduce
the number of suppliers of storage and other housewares products with which they
do business in order to improve margins and operating efficiencies. These
retailers are forming key relationships with suppliers that can provide complete
product
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<PAGE> 63
lines within product categories, profitable fast-turning products, timely
delivery and merchandising support. With its numerous product lines and strong
relationships with these retailers, the Company believes it is well-positioned
to continue to meet their needs.
MANUFACTURING, RAW MATERIALS AND SUPPLIERS
The Company manufactures the majority of its plastic resin products at its
five manufacturing facilities using injection molding and extrusion processes.
The primary raw material used in the Company's injection molding operations is
plastic resin, primarily polypropylene. Plastic resin is a spot commodity with
pricing parameters tied to supply and demand characteristics beyond the
Company's control. In total, the Company used 84.8 million pounds of plastic
resin in 1997 representing approximately 32% of the Company's total cost of
goods sold and 22% of the Company's net sales. Because of the large amount of
plastic resin used and the relative inability to pass cost increases along to
its retail customers, the Company is highly susceptible to changes in plastic
resin pricing. After giving effect to the Seymour Acquisition, the Company's
usage of plastic resin in 1997 dropped to 13% of net sales and 18% of total cost
of goods sold.
Due to the nature of its products, the Company is able to use off-prime
grades of resin which allows the Company to buy plastic resin through brokers in
a secondary market at a discount. Buying off-prime material at a discount gives
the Company a cost advantage but does not alleviate the pricing risks inherent
in buying a commodity raw material. Plastic resin is utilized by a number of
different industries, many of which have quite different demand cycles than the
Company's primary housewares business. For example, the automobile and housing
industries are very large users of plastic resin. Demand changes in the
automobile industry or the number of new housing starts can impact plastic resin
pricing.
Plastic resin prices can vary widely from year to year and are very
difficult to predict beyond a few months. Tamor's plastic resin cost history is
illustrative of the swings that can occur in resin pricing. Tamor, which uses
about 90% of the Company's resin requirements, experienced a 26% average price
increase from 1993 to 1994, another 25% increase from 1994 to 1995, a 16% price
decrease from 1995 to 1996 and a further 10% price decrease from 1996 to 1997.
There is no futures market for plastic resin and, as a result, the Company
cannot lock in its costs without purchasing significant quantities beyond its
immediate manufacturing needs. The Company has no long-term supply contracts for
the purchase of plastic resin. However, the Company generally maintains a 60-day
supply of resin. See "Risk Factors -- Availability and Pricing of Raw
Materials."
The Company manufactures the majority of its rolled steel products at its
facilities in Seymour, Indiana. Approximately 14,200 full size ironing boards
are manufactured daily with three shifts. The Company's total capacity is
approximately 3.6 million units per year (24 hour day/250 days). The Company
diversifies its purchases for rolled steel primarily from three different rolled
steel companies. The Company makes it a practice to purchase steel from the
lowest cost reliable supplier. The Company purchases approximately seven million
yards of fabric annually for the manufacture of ironing board covers and pads.
In addition, the Company outsources the manufacturing of wire caddies to general
Asian suppliers.
MANAGEMENT SYSTEMS
The Company's network information system allows it to communicate online
with any customer or internal or external salesperson. The Company's largest
customers, Kmart, Wal-Mart, Target and Toys R Us, are on electronic mail and
transmit all orders via EDI. With Kmart and Wal-Mart, the Company's POS
information systems allow it to access daily sales activity directly from retail
cash registers at the customers' points of sale.
Internally, the manufacturing process is guided by a manufacturing resource
planning system. This computerized planning infrastructure allows the Company to
plan its manufacturing, purchasing and labor resources and make revisions on a
daily basis in reaction to ever-changing sales activity.
By the end of fiscal 1998, the Company expects that most of its systems
will be Year 2000 compliant and that all of its systems will be compliant by the
end of fiscal 1999; although there can be no assurance that the
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<PAGE> 64
Company will not experience difficulties in the integration of its systems which
could have a material adverse effect on the Company. See "Risk Factors--Year
2000 Compliance."
PROPERTIES
At March 28, 1998, the Company maintained facilities with an aggregate of
1,924,000 square feet of space. The Company considers all of its facilities to
be in good operating condition. Currently, all of the Company's manufacturing
facilities are operating at or near full capacity. The following table
summarizes the principal physical properties, both owned and leased, used by the
Company in its operations:
<TABLE>
<CAPTION>
SIZE OWNED/
FACILITY USE (SQUARE FEET) LEASED
- -------- ---------------------------------- ------------- ------
<S> <C> <C> <C>
SELFIX
Chicago, IL Manufacturing/Distribution 186,000 Leased
Chicago, IL Storage/Distribution 83,500 Leased
SEYMOUR
Mooresville, NC Manufacturing/Distribution 270,000 Owned
McAllen, Texas Administration/Distribution 5,000 Leased
Reynosa, Mexico Manufacturing 30,000 Owned
Seymour, IN
Corporate Corporate administration 10,000 Owned
East Plant Manufacturing 70,000 Owned
South Plant Manufacturing/Distribution 105,000 Owned
Skaggs Facility Storage 40,000 Leased
West Plant Manufacturing/Storage/Distribution 132,000 Owned
Logistics Center Storage/Distribution 100,000 Leased
SHUTTERS
Hebron, IL Manufacturing/Distribution 62,500 Owned
TAMOR
Fitchburg, MA Distribution 220,000 Leased
Leominster, MA Manufacturing 100,000 Owned
Leominster, MA Sales Office 5,000 Leased
Leominster, MA Storage 120,000 Leased
Louisiana, MO Manufacturing/Distribution 340,000 Owned
Thomasville, GA Manufacturing Distribution 45,000 Owned
</TABLE>
PATENTS, TRADEMARKS AND LICENSES
Selfix, Tamor, Shutters, and Seymour collectively own a number of
trademarks and approximately 150 mechanical and design patents in the United
States relating to various products and manufacturing processes. The Company
believes that, in the aggregate, its patents enhance its business by
discouraging competitors from adopting patented features of its products;
however, no single patent, trademark or license is material to the business of
the Company.
EMPLOYEES
As of December 30, 1997, the Company employed 1,240 persons in the United
States. Approximately 90 are hourly employees at its Leominster, Massachusetts
facility, covered by a collective bargaining agreement which expires in March
1999; and approximately 150 are hourly employees at its Chicago, Illinois
facilities, covered by a collective bargaining agreement which expires in
January 2001. The Company also employs approximately 200 hourly employees at its
Reynosa, Mexico facility, who are covered by a collective bargaining agreement
which expires in December 1999. The Company utilizes the services of
approximately
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<PAGE> 65
350 temporary workers in its injection molding operations, for assembly and in
certain warehouses. Management believes that employee relations are good. See
"Risk Factors -- Labor Relations."
ENVIRONMENTAL MATTERS
An environmental report obtained in connection with the Tamor Acquisition
indicated that certain remedial work relating to ground contamination of Tamor's
Leominster, Massachusetts facility was required. The former shareholders of
Tamor placed $1.1 million in escrow to pay for, among other things, any required
remediation at the Leominster, Massachusetts facility. The Company has completed
certain remediation projects at the Leominster, Massachusetts facility. The
Company believes that the cost of remediation already completed, plus the cost
of any additional remediation that may be required in the future, can be
completed for an amount which will not exceed the amount in escrow.
Except as described above, the Company believes that its properties and
facilities are in compliance, in all material respects, with applicable federal,
state and local laws, ordinances and regulations concerning the presence of
hazardous substances, and that continued compliance with such laws, ordinances
and regulations will not have a material effect on the Company's capital
expenditures, earnings or competitive position. See "Risk
Factors -- Environmental Regulation."
LEGAL PROCEEDINGS
A subsidiary of the Company was notified in early 1997, that it has been
named co-defendants, along with an unrelated third party, in a product
liability/personal injury suit. The suit seeks $7.0 million in total damages,
one-half from each defendant. The Company and its subsidiary have adequate
levels of insurance coverage, and its defense is being handled by its insurance
carrier's attorneys. Although management of the Company cannot predict the
ultimate outcome of this matter with certainty, it believes that the ultimate
resolution to this matter will not have a material effect on the Company's
financial condition taken as a whole. See "Risk Factors -- Legal Proceedings".
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<PAGE> 66
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and principal positions, as of March 28, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James R. Tennant................................... 45 Chairman of the Board and Chief Executive
Officer
Stephen R. Brian................................... 49 President and Chief Operating Officer
James E. Winslow................................... 43 Executive Vice President, Chief Financial
Officer and Secretary
Charles R. Campbell................................ 58 Director
Joseph Gantz....................................... 50 Director
Stephen P. Murray.................................. 35 Director
Marshall Ragir..................................... 53 Director
Jeffrey C. Rubenstein.............................. 56 Director
Daniel B. Shure.................................... 40 Director
Joel D. Spungin.................................... 60 Director
</TABLE>
James R. Tennant, Chairman of the Board and Chief Executive Officer joined
the Company as Chairman of the Board and Chief Executive Officer in April 1994.
Mr. Tennant was elected a Director of the Company in December 1992, and was a
member of the Company's Compensation Committee until April 1994. From 1982 to
1994, Mr. Tennant was Division President of True North Communications, an
international marketing services company. Mr. Tennant is a member of the
Nominating Committee.
Stephen R. Brian, President and Chief Operating Officer joined the Company
as President and Chief Operating Officer in January 1998. From June 1996 to
January 1998, Mr. Brian was President and Chief Executive Officer of Seymour
Housewares Corporation. From April 1994 to June 1996, Mr. Brian was Executive
Vice President Manufacturing and Technology for Sunbeam. Prior to April 1994,
Mr. Brian was employed by Hamilton Beach/Proctor Silex with his final position
being Executive Vice President of Operations.
James E. Winslow, Executive Vice President, Chief Financial Officer and
Secretary was named Executive Vice President in October 1996. Mr. Winslow joined
the Company as Chief Financial Officer and Senior Vice President in November
1994. From 1983 to 1994, Mr. Winslow was employed by Wilson Sporting Goods Co.
in various capacities, his final position being Vice President and Chief
Financial Officer.
Charles R. Campbell has been a Director of the Company since September
1994. Since 1996, Mr. Campbell has been a principal with the Everest Group, a
management consulting firm. From 1995 to 1996, Mr. Campbell was President of
C.R. Campbell & Associates, a management consulting firm. From 1985 to 1995, Mr.
Campbell was Senior Vice President, Chief Financial and Administrative Officer
of Federal Signal Corporation, a diversified manufacturer of capital goods. From
1982 to 1985, he was Vice President and Chief Financial Officer of the Masonite
Corporation, a manufacturer of building products. Mr. Campbell is a member of
the Audit Committee.
Joseph Gantz was appointed to the Board of Directors in January 1998 in
connection with the Company's acquisition of Seymour on December 30, 1997. Mr.
Gantz joined Seymour Housewares, Inc., as Chairman of the Board in 1996. From
1994 to 1996, Mr. Gantz was President and General Manager of Rubbermaid Cleaning
& Maintenance Products ("RCMP"), a manufacturer and marketer of brooms, brushes
and mops. RCMP, formerly, Empire Brushes, Inc., was a $1 billion division of
Rubbermaid. From 1974 to 1994, Mr. Gantz held various positions at Empire
Brushes, Inc., a manufacturer and marketer of brooms, brushes and mops, with his
final position being President. Mr. Gantz is a member of the Nominating
Committee.
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<PAGE> 67
Stephen P. Murray was appointed to the Board of Directors in January 1998
in connection with the Company's acquisition of Seymour on December 30, 1997.
Mr. Murray is a general partner of Chase Capital Partners, an affiliate of Chase
Manhattan Bank and Chase Securities Inc. Prior to joining Chase Capital
Partners, Mr. Murray was a Vice President with the Middle Market Lending
Division of Manufacturers Hanover. Mr. Murray is a member of the Audit
Committee. Mr. Murray is a director of several privately held companies.
Marshall Ragir has been a Director of the Company since July 1995. Since
1991, Mr. Ragir has been President and Chief Executive Officer of Know Business
Inc., a venture capital and investment company. Mr. Ragir is a member of the
Compensation Committee. Mr. Ragir is a director of several charitable
foundations and non-profit agencies.
Jeffrey C. Rubenstein has been a Director of the Company since September
1986. Since 1991, Mr. Rubenstein has been a principal with the law firm of Much
Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., an Illinois professional
corporation, which is counsel to the Company. From January 1989 until June 1991,
Mr. Rubenstein was of counsel to the law firm of Sachnoff & Weaver, Ltd., an
Illinois professional corporation, of which he had been a principal prior to
July 1988. From March 1988 until January 1989, Mr. Rubenstein was President of
Medical Management of America, Inc., ("MMA"), a management services company for
health care providers. Mr. Rubenstein is a member of the Audit and Compensation
Committees. Mr. Rubenstein is a director of Miller Building Systems, Inc., Vita
Food Products, Inc. and a number of privately held companies.
Daniel B. Shure has been a Director of the Company since December 1994.
Since 1988, Mr. Shure has been President and Chief Executive Officer of
Strombecker Corporation, an international toy manufacturer and distributor. From
1987 to 1988, he was Vice President of Giftco, Inc., a wholesaler and
distributor of non-durable products. From 1986 to 1987, Mr. Shure was Executive
Vice President of North American Bear Company, a toy manufacturer. Mr. Shure is
a member of the Nominating Committee. He is also a director of a number of
privately held companies.
Joel D. Spungin has been a Director of the Company since September 1996.
Mr. Spungin is managing Partner of DMS Enterprises, L.P., a consulting and
management advisory partnership. Mr. Spungin was formerly Chairman and Chief
Executive Officer of United Stationers and since 1994, he has been Chairman
Emeritus of United Stationers, Inc. From 1981 to 1995, Mr. Spungin was employed
by United Stationers, Inc. in various capacities with his final position being
Chairman of the Board and Chief Executive Officer. Mr. Spungin is a member of
the Compensation Committee. Mr. Spungin is also a director of AAR Corporation
and a number of privately held companies.
EMPLOYMENT AGREEMENTS
Messrs. James R. Tennant, Chairman of the Board and Chief Executive
Officer, and Stephen R. Brian, President and Chief Operating Officer, have
entered into employment agreements with the Company as of January 1, 1997 and
January 5, 1998, respectively. The terms of these agreements are for a period of
three years subject to automatic one year renewals unless earlier terminated.
Mr. Tennant's employment agreement provides for an annual base salary of
$275,000 and Mr. Brian's employment agreement provides for an annual base salary
of $250,000. In October 1997, the Board of Directors increased Mr. Tennant's
base salary to $350,000. In January 1998, the Board of Directors increased Mr.
Brian's salary to $265,000. Mr. Tennant is entitled to receive a discretionary
bonus, based on the Company's financial performance, as well as incentive
bonuses subject to the terms of the Executive Incentive Plan and the Management
Incentive Plan. Mr. Brian is eligible to participate in the Company's senior
management bonus program, as such bonus program may be amended by the Board of
Directors from time to time. If the Company does not renew Mr. Tennant's
employment agreement for any renewal year after December 31, 1999, Mr. Tennant
will be entitled to receive a severance payment of $250,000, payable in twelve
monthly installments, and may exercise options which have vested prior to such
date. If Mr. Tennant's employment is terminated after a Change In Control (as
defined therein) of the Company, Mr. Tennant is entitled to receive a $500,000
severance payment and all of his stock options will immediately vest. In the
event the Company is sold for a price of $5.50 per share or more
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<PAGE> 68
in a stock sale or asset sale and Mr. Tennant is employed by the Company on the
closing of any such event, Mr. Tennant will be entitled, at his option, to (i)
receive a $1,000,000 payment from the Company or (ii) exercise all stock options
he holds as if they were then available and vested. In the event the Company
terminates Mr. Brian's employment Without Cause (as defined therein), Mr. Brian
is entitled to receive a severance payment equal to 100% of his yearly base
salary then in effect, plus all compensation that he would otherwise be entitled
to through the initial three-year term. In addition, Mr. Brian will have the
right to exercise stock options which have vested prior to the date of
termination. Upon a Change of Control (as defined therein) if (i) Mr. Brian
voluntarily terminates his employment within 180 days thereafter, Mr. Brian is
entitled to receive an amount equal to 100% of his base salary then in effect or
(ii) the Company causes Mr. Brian's termination within 180 days of a Change of
Control, Mr. Brian shall be entitled to receive 100% of his base salary then in
effect plus all compensation that he otherwise would be entitled to through the
initial three-year term. In addition, upon a Change In Control, Mr. Brian's
stock options become immediately vested and exercisable. All amounts payable to
Mr. Brian upon a Change of Control shall be payable in 12 monthly installments.
Mr. Tennant's employment agreement provides for the granting of 350,000 options
to purchase Common Stock, (100,000 options at $6.00 per share; 175,000 options
at $7.00 per share; and 75,000 at $8.00 per share). The 350,000 options vest
one-third each year beginning on January 1, 1997, and expire on December 31,
1999. The expiration of these options can be extended for a period of five years
if the trading price of the Common Stock exceeds $10.00 per share for the entire
month of December 1999. Mr. Tennant was granted additional stock options for
200,000 shares at a price of $5.00 per share, which vest in equal increments
over a three year period. These options may be extended until April 30, 2005,
under the same conditions as the other options. The principal terms of Mr.
Tennant's employment agreement, including the grant of additional stock options
at an exercise price of $5.00 per share, were included in an agreement between
the Company and Mr. Tennant dated September 19, 1996. Mr. Brian was granted
100,000 options to purchase the Company's Common Stock at a price per share
equal to $11.375. Mr. Brian is also eligible for additional options each year as
are approved by the Board of Directors.
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<PAGE> 69
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of March 25, 1998 (as
of the dates indicated in the table below with respect to Warburg Pincus Asset
Management, Inc.; SAFECO Asset Management Co.; Putnam Investments, Inc.,; Putnam
Investment Management, Inc.; The Putnam Advisory Company, Inc.; Marsh & McLennan
Companies, Inc.; T. Rowe Price Associates, Inc.; and T. Rowe Price Small Cap
Value Fund, Inc.) with respect to the beneficial ownership of the Company's
issued and outstanding Common Stock by (i) each stockholder known by the Company
to be the beneficial owner of more than 5% of its Common Stock, (ii) each
director, (iii) each executive officer named in the Directors and Executive
Officers Table and (iv) all of the directors and executive officers of the
Company as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities. Unless otherwise
indicated, the persons or entities identified in the table have sole voting and
investment power with respect to the shares shown as beneficially owned by them.
Percentage ownership calculations are based upon 7,943,680 shares of Common
Stock outstanding.
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) CLASS(2)
- ------------------------------------ ------------ --------
<S> <C> <C>
Chase Venture Capital Associates, L.P.(3)................... 1,289,760 16.2%
Warburg Pincus Asset Management, Inc.(4).................... 868,500 10.9
SAFECO Asset Management Company(5).......................... 489,200 6.2
Putnam Investments, Inc.; Putnam Investment Management,
Inc.; The Putnam Advisory Company, Inc.; and Marsh &
McLennan Companies, Inc.(6)............................... 438,000 5.5
T. Rowe Price Associates, Inc., and T. Rowe Price Small Cap
Value Fund, Inc.(7)....................................... 427,500 5.4
Jeffrey C. Rubenstein(8).................................... 568,858 7.2
James R. Tennant(9)......................................... 389,300 4.9
Charles R. Campbell......................................... 6,000 *
Daniel B. Shure............................................. 6,400 *
Marshall Ragir(10).......................................... 231,093 2.9
Joel D. Spungin............................................. 7,500 *
Stephen P. Murray(11)....................................... 1,289,760 16.2
Joseph Gantz................................................ 8,000 *
Stephen R. Brian............................................ 7,200 *
James E. Winslow(12)........................................ 31,397 *
All directors and executive officers as a group (10
persons)(13).............................................. 2,314,515 29.1%
</TABLE>
- ---------------
(1) Unless otherwise indicated, the persons or entities have sole voting and
investment power with respect to the shares beneficially owned by them.
(2) Asterisks indicate less than 1%.
(3) According to information provided by Chase Venture Capital Associates, L.P.
("CVCA"), CVCA is a California limited partnership and its general partner
is Chase Capital Partners ("CCP"), a New York general partnership. The
shares being reported include 319,599 shares of Common Stock which, as of
March 25, 1998, were held in escrow pursuant to an escrow agreement entered
into in connection with the Company's December 30, 1997 acquisition of
Seymour (CVCA was the majority shareholder of Seymour prior to acquisition
by the Company). The escrow was created to provide the Company with a means
to secure certain indemnification obligations pursuant to the Seymour
acquisition agreement. The shares may be transferred by the escrow agent to
the Company to satisfy certain indemnification claims. The escrow will
terminate on December 30, 1998, and based upon the number of shares of the
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<PAGE> 70
Company's Common Stock remaining in the escrow, CVCA may receive no shares,
a currently undeterminable number of the 319,599 shares, or all of the
319,599 shares. CCP and CVCA expressly disclaim that they are, in fact, the
beneficial owners of such shares. The address for CVCA and CCP is 380
Madison Avenue, New York, New York 10017.
(4) According to information contained in a report on Schedule 13G/A dated
January 21, 1998, filed by Warburg Pincus Asset Management, Inc.
("Warburg"), Warburg serves as investment adviser to numerous accounts. The
shares being reported on Schedule 13G/A are owned by Warburg's accounts.
Warburg and the various accounts to which they are advisers have sole power
to vote 361,100 shares of Common Stock (which represent 4.5% of the shares
outstanding); have shared power to vote 463,400 shares of Common Stock
(which represent 5.8% of the shares outstanding); and have sole power to
dispose of 868,500 shares of Common Stock (which represent 10.9% of the
shares outstanding). For purposes of the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), Warburg
is deemed to be a beneficial owner of such shares; however, Warburg
expressly disclaims that it is, in fact, the beneficial owner of such
shares. Warburg's address is 466 Lexington Avenue, New York, New York
10017.
(5) According to information contained in a report on Schedule 13G/A dated
February 10, 1998, filed by SAFECO Asset Management Company ("SAMC"), a
wholly owned subsidiary of SAFECO Corporation ("SAFECO"), SAMC beneficially
owns 489,200 shares of Common Stock (which represent 6.2% of the shares
outstanding) as a result of acting as an investment adviser for registered
investment companies. SAFECO and the various accounts to which they are
advisers have shared power to vote and sole power to dispose of 489,200
shares of Common Stock (which represent 6.2% of the shares outstanding).
Such shares include 293,200 shares beneficially owned by SAFECO Common
Stock Trust (which represents 3.7% of the shares outstanding). For purposes
of the Exchange Act, SAMC and SAFECO are deemed to be beneficial owners of
such shares; however, SAMC and SAFECO expressly disclaim that, they are, in
fact, the beneficial owners of such shares. SAMC's address is 601 Union
Street, Suite 2500, Seattle, Washington 98101 and SAFECO's address is
SAFECO Plaza, Seattle, Washington 98185.
(6) According to information contained in a report on Schedule 13G dated
January 20, 1998, filed by Putnam Investment, Inc. ("PI"), the shares being
reported are beneficially owned by Putnam Investment Management, Inc.
("PIM") and the Putnam Advisory Company, Inc. ("PAC"), each a registered
investment adviser subsidiary of PI. PI is a wholly owned subsidiary of
Marsh & McLennan Companies, Inc. ("M&M"). PI and PAC share voting power
with respect to 286,600 shares of Common Stock (which represent 3.6% of the
shares outstanding) and PIM and PI share investment power with respect to
133,100 shares of Common Stock (which represent 1.7% of the shares
outstanding) and PI and PAC share investment power with respect to 304,900
shares (which represent 3.8% of the shares outstanding). For purposes of
the Exchange Act, PI, PIM, PAC and M&M are deemed to be beneficial owners
of such shares; however, PI, PIM, PAC and M&M expressly disclaim that they
are, in fact, the beneficial owners of such shares. The address for PI,
PIM, and PAC is One Post Office Square, Boston, Massachusetts 02109 and the
address for M&M is 116 Avenue of the Americas, New York, New York 10036.
(7) According to information contained in a report on Schedule 13G/A dated
February 9, 1998, and correspondence to the Company from T. Rowe Price
Associates, Inc. ("Price Associates"), the shares of Common Stock being
reported are owned by various individual and institutional investors,
including T. Rowe Price Small Cap Value Fund, Inc. ("Price Fund") (which
owned 402,500 shares and represents 5.1% of the shares outstanding), which
Price Associates serves as an investment adviser. Price Associates has sole
voting power with respect to 25,000 shares and sole investment power with
respect to 427,500 shares (which represent 5.4% of the shares outstanding).
Price Fund has sole voting power with respect to 402,500 shares and does
not have investment power with respect to any shares. For purposes of the
reporting requirements of the Exchange Act, Price Associates is deemed to
be a beneficial owner of such shares; however, Price Associates and Price
Fund expressly disclaim that they are, in fact, the beneficial owners of
such shares. The address for Price Associates and Price Fund is 100 East
Pratt Street, Baltimore, Maryland 21202.
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<PAGE> 71
(8) Jeffrey C. Rubenstein is the executor of the Norma L. Ragir Estate and in
such capacity exercises voting and investment power with respect to the
shares of Common Stock beneficially owned by the Norma L. Ragir Estate
(248,251 shares). Mr. Rubenstein is a director of the Meyer and Norma Ragir
Foundation (the "Ragir Foundation") and in such capacity exercises shared
voting and investment power with respect to the shares of Common Stock
beneficially owned by the Ragir Foundation (164,000 shares). Mr. Rubenstein
is co-trustee of five separate trusts and, in such capacities exercises
shared voting and investment power with respect to the shares of Common
Stock beneficially owned by the five separate Ragir trusts. The five Ragir
trusts, and the respective number of shares held by each is as follows:
MJR/NLR Gift Trust -- Judith Ragir Separate Trust (15,189 shares); MJR/NLR
Gift Trust -- Robert Ragir Separate Trust (13,985 shares); MJR/NLR Gift
Trust -- Marshall Ragir Separate Trust (15,190 shares) (collectively, the
"Ragir Gift Trusts"); Meyer J. Ragir Family Irrevocable Trust -- Judith
Ragir (24,750 shares); and the Meyer J. Ragir Family Irrevocable Trust --
Marshall Ragir Separate Trust (66,993 shares) (collectively, the "Ragir
Family Trusts"). All five Ragir trusts are collectively referred to herein
as the "Ragir Trusts". None of the Ragir Trusts individually owns more than
1% of the Common Stock of the Company. The shares of Common Stock
beneficially owned by the Norma L. Ragir Estate, the Ragir Foundation and
the Ragir Trusts are deemed to be beneficially owned by Mr. Rubenstein
pursuant to the Exchange Act. Mr. Rubenstein, as executor of the Norma L.
Ragir Estate and a director of the Ragir Foundation and co-trustee of the
Ragir Trusts, exercises either sole or shared voting and investment power
with respect to 548,358 shares of Common Stock (which represent 6.9% of the
outstanding shares). Mr. Rubenstein expressly disclaims that he is, in
fact, the beneficial owner of such shares. The address for Mr. Rubenstein
is 200 North LaSalle Street, Suite 2100, Chicago, Illinois 60601.
(9) Includes 371,668 shares of Common Stock subject to stock options
exercisable within 60 days of March 25, 1998.
(10) Includes 164,000 shares of Common Stock beneficially owned by the Ragir
Foundation with respect to which Mr. Ragir, in his capacity as a director,
exercises shared voting and investment power. These shares are deemed to be
beneficially owned by Mr. Ragir pursuant to the Exchange Act. Mr. Ragir
expressly disclaims that he is, in fact, the beneficial owner of such
shares. The number of shares reported in the table also includes 66,993
shares of Common Stock beneficially owned by the Meyer J. Ragir Family
Irrevocable Trust -- Marshall Ragir Separate Trust with respect to which
Mr. Ragir, in his capacity as a co-trustee, exercises shared voting and
investment power. Does not include 15,190 shares of Common Stock
beneficially owned by the MJR/NLR Gift Trust -- Marshall Ragir Separate
Trust with respect to which Mr. Ragir does not exercise sole or shared
voting or investment power.
(11) Mr. Murray is a general partner of Chase Capital Partners, which is the
general partner of CVCA, and in such capacity exercises shared voting and
investment power with respect to the shares beneficially owned by CVCA
(1,289,760 shares which represent 16.2% of the shares outstanding). These
shares are deemed to be beneficially owned by Mr. Murray pursuant to the
Exchange Act. Mr. Murray expressly disclaims that he is, in fact, the
beneficial owner of such shares.
(12) Includes 20,035 shares of Common Stock subject to stock options exercisable
within 60 days of March 25, 1998.
(13) Includes 391,703 shares of Common Stock subject to stock options
exercisable within 60 days of March 25, 1998.
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CERTAIN TRANSACTIONS
The Company leases its principal office and the Selfix manufacturing and
distribution facility in Chicago, Illinois from the Ragir Gift Trusts. Marshall
Ragir is a director of the Company and is the brother of Judith Ragir and Robert
Ragir. The Company made aggregate payments to the Ragir Gift Trusts under the
lease of $519,687 during fiscal 1997 and $467,139 during fiscal 1996. Rent
payments are subject to adjustment every three years to reflect increases in the
Consumer Price Index. The lease expires in July 2010. The Company believes that
the rent paid to the Ragir Gift Trusts under the lease represents fair market
value and that the other terms and conditions are commercially reasonable.
The Company entered into three exclusive patent licensing agreements with
Meyer J. Ragir, two in 1971 and one in 1981, relating to patented manufacturing
processes used to produce wood insert molded products and the patented design of
certain suction lock and shower organizer products, which in each case were
developed by Mr. Ragir. The licensing agreements also cover any improvements
which Mr. Ragir developed with respect to such patents. The licensing agreements
provide for payment of royalties based upon unit sales of licensed products
subject to annual minimum royalties in the aggregate amount of $8,500. Pursuant
to the licensing agreements, the Company accrued approximately $28,500 for
fiscal 1997 payable to Mr. Ragir's estate (the "Meyer J. Ragir Estate") and paid
$25,909 to the Meyer J. Ragir Estate for fiscal 1996. Jeffrey C. Rubenstein, a
director of the Company, is executor of the Meyer J. Ragir Estate.
Jeffrey C. Rubenstein, a director of the Company is a principal with the
law firm Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., which
serves as general counsel to the Company. The Company made aggregate payments to
Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C. during fiscal 1997 in
the amount of $730,000. Mr. Rubenstein, as executor of the Meyer J. Ragir
Estate, executor of the Norma L. Ragir Estate, a director of the Ragir
Foundation, and co-trustee of the Ragir Trusts, exercises either sole or shared
voting and investment power with respect to 548,358 shares of the Company's
Common Stock, or 6.9% of the outstanding shares of Common Stock as of March 25,
1998. The Company's principal office and the Selfix manufacturing facility in
Chicago, Illinois is owned by the Ragir Gift Trust, of which Mr. Rubenstein
serves as co-trustee.
In fiscal 1997, the Company engaged the services of the Everest Group, a
management consulting firm to assist it with the preparation of a long-term
strategic plan. Charles R. Campbell, a director of the Company and member of the
Compensation Committee, was a principal with the Everest Group. The Company made
aggregate payments to the Everest Group during fiscal 1997 in the amount of
$99,400. Management believes this transaction was conducted on an arm's length
basis at competitive prices.
Chase Securities Inc. ("CSI"), one of the Initial Purchasers, is an
affiliate of The Chase Manhattan Bank ("Chase") which will be agent bank and a
lender to the Company under the New Credit Facility. Chase Venture Capital
Associates, L.P. ("CVCA"), an affiliate of CSI and Chase, owns approximately
16.2% of the Company's outstanding Common Stock, including shares of Common
Stock that are held in escrow pursuant to an escrow agreement entered into in
connection with the Company's December 30, 1997 acquisition of Seymour. See
"Principal Stockholders." Stephen P. Murray, a director of the Company, is a
General Partner of Chase Capital Partners which is an affiliate of CSI, Chase
and CVCA. In addition, CSI, Chase and their affiliates perform various
investment banking and commercial banking services on a regular basis for
affiliates of the Company.
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DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
General. On May 14, 1998, the Company entered into the New Credit Facility
with The Chase Manhattan Bank, as administrative agent, and the several lenders
parties thereto. The New Credit Facility consists of a senior secured revolving
facility in a the maximum aggregate principal amount of $100.0 million. The
following is a summary description of the principal terms of the New Credit
Facility and is subject to, and qualified in its entirety by, reference to the
definitive agreement.
All obligations of the Company under the New Credit Facility are
unconditionally and irrevocably guaranteed jointly and severally by each of the
Company's Subsidiary Guarantors. Indebtedness under the New Credit Facility is
secured by a first priority security interest in (i) all of the capital stock of
each of the Company's domestic subsidiaries and certain foreign subsidiaries
provided that the granting of such security interest will not create an adverse
tax consequence and (ii) all tangible and intangible assets of the Company and
the Subsidiary Guarantors, with exceptions to be negotiated.
Revolving Loans. The Company is entitled to draw amounts under the New
Credit Facility for general corporate purposes and working capital requirements
for it and its subsidiaries and for financing permitted acquisitions. The
Revolving Facility includes sub-limits of up to $15 million for letters of
credit and up to $5 million for swing line loans available on same-day notice.
The New Credit Facility will mature on the fifth anniversary of the Closing
Date.
Availability. The availability of the New Credit Facility is subject to
various conditions precedent typical of bank facilities of this type including,
among other things, the absence of any material adverse change in the business,
property, assets, condition (financial or otherwise/or prospect) of the Company
and its subsidiaries taken as a whole and the consummation of the Refinancing.
The New Credit Facility may be borrowed, repaid and reborrowed during the term
thereof.
Interest Rates. Borrowings under the New Credit Facility bear interest at
a rate per annum (at the Company's option) equal to: (i) the alternate base rate
plus the applicable margin; or (ii) LIBOR plus the applicable margin.
Mandatory Commitment Reductions. Mandatory commitment reductions must be
made from the net proceeds of an issuance or incurrence of certain indebtedness
and from the proceeds of certain sales or dispositions of certain assets,
subject in each case to certain exceptions.
Optional Prepayments. Loans may be prepaid and commitments may be reduced
at the Company's option in minimum amounts to be agreed upon.
Fees. The Company is required to pay a commitment fee, on a quarterly
basis, ranging from 0.375% to 0.5%, based on the average daily unused portion of
the revolving commitments and certain fees in respect of letters of credit
issued under the New Credit Facility.
Covenants. The New Credit Facility contains certain covenants applicable
to, and other requirements of, the Company and its subsidiaries. The affirmative
covenants provide for, among other things, mandatory reporting by the Company of
financial and other information and notice by the Company upon the occurrence of
certain events. The New Credit Facility also contains certain negative covenants
and restrictions on actions by the Company including, without limitation,
restrictions on indebtedness, liens, guaranteed obligations, mergers, asset
dispositions, investments, loans, advances, acquisitions, dividends and other
restricted payments, transactions with affiliates, change in business and
prepayment of subordinated indebtedness. The New Credit Facility requires the
Company to meet certain financial covenants including interest coverage and
maximum leverage ratios.
Events of Default. The New Credit Facility contains certain customary
events of default including, without limitation, non-payment of principal,
interest or fees, violation of covenants, material inaccuracy of representations
and warranties, cross default to certain other indebtedness, bankruptcy and
insolvency events, material undischarged judgments, ERISA violations and change
of control.
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INDUSTRIAL DEVELOPMENT REVENUE BONDS
The Company, through two of its subsidiaries, Shutters (the "Shutters
Project") and Selfix (the "Selfix Project") has two variable rate demand
Industrial Development Revenue Bonds outstanding. The Shutters Project bond has
a principal balance of $2.0 million, was issued in December 1989 and matures on
November 1, 2002. The Selfix Project bond has a principal balance of $2.4
million, was issued in September 1990 and matures on September 1, 2005. Interest
on both bonds is based on a variable rate payable monthly and principal payments
are due annually on December 1.
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DESCRIPTION OF THE EXCHANGE NOTES
The Original Notes were, and the Exchange Notes will be, issued under an
Indenture (the "Indenture"), dated as of May 14, 1998, among the Company, the
Subsidiary Guarantors and LaSalle National Bank, as trustee (the "Trustee"). The
form and terms of the Exchange Notes are the same as the form and terms of the
Original Notes (which they replace) except that (i) the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof, and (ii) the holders of Exchange Notes will
not be entitled to certain rights under the Exchange and Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Original Notes in certain circumstances relating to the timing of
the Exchange Offer, which rights will terminate when the Exchange Offer is
consummated. The Original Notes issued in the Initial Offering and the Exchange
Notes offered hereby are referred to collectively as the "Notes."
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and to all of the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the Trust Indenture Act, as in effect on the date of the Indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "Certain Definitions." References in this "Description of
the Exchange Notes" section and the "Registration Rights," "Book-Entry; Delivery
and Form" and "Plan of Distribution" sections to "the Company" mean only Home
Products International, Inc. and not any of its subsidiaries.
GENERAL
The Notes are unsecured senior subordinated obligations of the Company,
limited to $125 million aggregate principal amount, and will mature on May 15,
2008. The Original Notes were and the Exchange Notes will be, issued only in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. Pursuant to the Indenture, the Trustee, initially, will
serve as registrar and paying agent. No service charge will be made for any
registration of transfer or exchange of the Notes, except for any tax or other
governmental charge that may be imposed in connection therewith. Each Note will
bear interest at the rate of 9 5/8% per annum from the date of issuance, or from
the most recent date to which interest has been paid or provided for, payable
semi-annually on May 15 and November 15 of each year commencing on November 15,
1998 to holders of record at the close of business on the May 1 or November 1
immediately preceding the interest payment date.
Interest will be computed on the basis of a 360 day year comprised of
twelve 30 day months. Principal of, premium, if any, and interest on the Notes
will be payable, and the Notes may be exchanged or transferred, at the office or
agency of the Company in the Borough of Manhattan, The City of New York (which
initially will be the corporate trust office of the Trustee in New York, New
York), except that, at the option of the Company, payment of interest may be
made by check mailed to the address of the holders as such address appears in
the Note Register. No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
The Notes will be issued in fully registered form without interest coupons,
in denominations of $1,000 and any integral multiple of $1,000. The Notes will
be represented by one or more registered notes in global form and in certain
circumstances may be represented by Notes in definitive form. See "Book-Entry;
Delivery and Form."
The Notes have been designated for trading in the PORTAL market.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option
of the Company prior to May 15, 2003. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days prior notice mailed by first-class mail to
each
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holder's registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date) if
redeemed during the 12-month period commencing on May 15 of the years set forth
below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------ ----------------
<S> <C>
2003................................................. 104.813%
2004................................................. 103.208%
2005................................................. 101.604%
2006 and thereafter.................................. 100.000%
</TABLE>
In addition, at any time and from time to time prior to May 15, 2001, the
Company may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the proceeds of one or more Equity Offerings received by, or
invested in, the Company so long as there is a Public Market at the time of such
redemption, at a redemption price (expressed as a percentage of principal
amount) of 109.625% plus accrued and unpaid interest, if any, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
that at least 65% of the original aggregate principal amount of the Notes must
remain outstanding after each such redemption, provided, further, that each such
redemption occurs within 90 days after the closing of each Equity Offering.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion will deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note will state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note.
RANKING AND SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
and other obligations with respect to the Notes is subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full in cash or
Cash Equivalents when due of all Senior Indebtedness of the Company. However,
payment from the money or the proceeds of U.S. Government Obligations held in
any defeasance trust described under "Defeasance" below is not subordinate to
any Senior Indebtedness or subject to the restrictions described herein. As of
March 28, 1998, on a pro forma basis after giving effect to the Refinancing, the
outstanding Senior Indebtedness of the Company, including the Subsidiary
Guarantors, would have been $9.2 million (exclusive of unused commitments).
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Company may incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be Senior Indebtedness. See "Certain Covenants -- Limitation on
Indebtedness."
"Senior Indebtedness" is defined, whether outstanding on the Issue Date or
thereafter issued, created, incurred or assumed, as the Bank Indebtedness and
all other Indebtedness of the Company, including accrued and unpaid interest
thereon (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company at the rate specified
in the documentation with respect thereto whether or not a claim for post filing
interest is allowed in such proceeding) and fees relating thereto, unless, in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that the obligations in respect of such Indebtedness
are not superior in right of, or are subordinate to, payment to the Notes;
provided, however, that Senior Indebtedness will not include (i) any obligation
of the Company to any Subsidiary, (ii) any liability for Federal, state,
foreign, local or other taxes owed or owing by the Company, (iii) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including Guarantees thereof or instruments evidencing such
liabilities), (iv) any Indebtedness, Guarantee or obligation of the Company that
is expressly subordinate or junior in right of payment to any other
Indebtedness, Guarantee or obligation of the Company, including any Senior
Subordinated Indebtedness and any Subordinated Obligations or (v) any
obligations in respect of Capital Stock.
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Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not incur, directly or indirectly, any Indebtedness that is subordinate or
junior in ranking in any respect to Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to Secured Indebtedness merely because it is
unsecured.
The Company may not pay principal of, premium, if any, or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase, redeem or retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when
due in cash or Cash Equivalents or (ii) any other default on Senior Indebtedness
occurs and the maturity of such Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, the default has been cured or waived and
any such acceleration has been rescinded or such Senior Indebtedness has been
paid in full in cash or Cash Equivalents. However, the Company may pay the Notes
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the Senior Indebtedness
with respect to which either of the events set forth in clause (i) or (ii) of
the immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the second preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of such Designated Senior Indebtedness or the Representative
of such holders have accelerated the maturity of such Designated Senior
Indebtedness, the Company may resume payments on the Notes after the end of such
Payment Blockage Period. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness during such period.
Upon any payment or distribution of the assets or securities of the Company
upon a total or partial liquidation, dissolution, reorganization or bankruptcy
of or similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full in cash or Cash
Equivalents of the Senior Indebtedness (including interest accruing after, or
which would accrue but for, the commencement of any proceeding at the rate
specified in the applicable Senior Indebtedness, whether or not a claim for such
interest would be allowed) before the holders of the Notes are entitled to
receive any payment or distribution, and until the Senior Indebtedness is paid
in full in cash or Cash Equivalents, any payment or distribution to which
holders of the Notes would be entitled but for the subordination provisions of
the Indenture will be made to holders of the Senior Indebtedness as their
interests may appear. If a payment or distribution is made to holders of the
Notes that, due to the subordination provisions, should not have been made to
them, such holders are required to hold it in trust for the holders of Senior
Indebtedness and pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee will promptly notify the holders of the Designated Senior
Indebtedness or the Representative of such holders of the acceleration. The
Company may not pay the Notes until five Business Days after such holders or the
Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
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By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders.
SUBSIDIARY GUARANTEES
Each Subsidiary Guarantor will unconditionally guarantee, jointly and
severally, to each holder and the Trustee, on a senior subordinated basis, the
full and prompt payment of principal of, premium, if any, and interest on the
Notes, and of all other obligations of the Company under the Indenture.
The Indebtedness evidenced by each Subsidiary Guarantee (including the
payment of principal of, premium, if any, and interest on the Notes and other
obligations with respect to the Notes) will be subordinated to all Guarantor
Senior Indebtedness of such Subsidiary Guarantor on the same basis as the Notes
are subordinated to Senior Indebtedness of the Company. Each Subsidiary
Guarantee will in all respects rank pari passu with all other Senior
Subordinated Indebtedness of such Subsidiary Guarantor. In addition, a
Subsidiary Guarantor may not incur any Indebtedness if such Indebtedness is
subordinate or junior in ranking in any respect to any Guarantor Senior
Indebtedness of such Subsidiary Guarantor unless such Indebtedness is Guarantor
Senior Subordinated Indebtedness of such Subsidiary Guarantor or is expressly
subordinated in right of payment to Guarantor Senior Subordinated Indebtedness
of such Subsidiary Guarantor. As of March 28, 1998, on a pro forma basis after
giving effect to the Refinancing, there would have been approximately $6.7
million of Guarantor Senior Indebtedness of Subsidiary Guarantors. See
"Description of Other Indebtedness." Although the Indenture contains limitations
on the amount of additional Indebtedness that the Company's Restricted
Subsidiaries may incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Guarantor Senior Indebtedness. See "Certain Covenants -- Limitation on
Indebtedness" and "-- Ranking and Subordination".
The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, without limitation, any
guarantees in respect of Indebtedness under the Senior Credit Agreement) and
after giving effect to any collections from or payments made by or on behalf of
any other Subsidiary Guarantor in respect of the obligations of such other
Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its
contribution obligations under the Indenture, result in the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation. Each
Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a corporation, partnership or trust other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor) except that if the surviving corporation of any such
merger or consolidation is a Subsidiary of the Company, such Subsidiary may not
be a Foreign Subsidiary. Upon the sale or disposition of a Subsidiary Guarantor
(by merger, consolidation, the sale of its Capital Stock or the sale of all or
substantially all of its assets) to a Person (whether or not an Affiliate of the
Subsidiary Guarantor) which is not a Subsidiary of the Company, which sale or
disposition is otherwise in compliance with the Indenture (including the
covenant described under "Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock"), such Subsidiary Guarantor will be deemed released from all
its obligations under the Indenture and its Subsidiary Guarantee and such
Subsidiary Guarantee will terminate; provided, however, that any such
termination will occur only to the extent that all obligations in respect of
Indebtedness of such Subsidiary Guarantor under the Senior Credit Agreement and
all of its guarantees of, and under all of its pledges of assets or other
security interests which secure, any other Indebtedness of the Company will also
terminate upon such release, sale or transfer.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), unless the Company shall have exercised its right to redeem the Notes
as described under "-- Optional Redemption", each holder will have the right to
require the Company to repurchase all or any part of such holder's Notes at a
purchase
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price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date):
(i) (A) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 40% of the total voting power
of the Voting Stock of the Company (or its successor by merger,
consolidation or purchase of all or substantially all of its assets); and
(B) the Permitted Holders "beneficially own" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the Voting Stock of the
Company (or its successor by merger, consolidation or purchase of all or
substantially all of its assets) than such other person and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of the Company
or such successor; or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of at least a majority of the directors of
the Company then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved or is a designee of the Permitted Holders or was nominated or
elected by such Permitted Holders or any of their designees) cease for any
reason to constitute a majority of the Board of Directors of the Company
then in office; or
(iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole to any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
other than a Permitted Holder; or
(iv) the adoption by the stockholders of a plan for the liquidation or
dissolution of the Company.
Within 30 days following any Change of Control, unless the Company has
previously mailed a redemption notice with respect to all the outstanding Notes
as described under "-- Optional Redemption", the Company will mail a notice to
each holder with a copy to the Trustee stating: (i) that a Change of Control has
occurred and that such holder has the right to require the Company to purchase
such holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of holders of record on a record date to receive interest
on the relevant interest payment date); (ii) the repurchase date (which shall be
no earlier than 30 days nor later than 60 days from the date such notice is
mailed); and (iii) the procedures determined by the Company, consistent with the
Indenture, that a holder must follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Senior Credit Agreement. Future
Senior Indebtedness of the Company and its Subsidiaries may also contain
prohibitions of certain events that would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
holders upon a repurchase may be limited by
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the Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases. Even if sufficient funds were otherwise available, the terms of the
Senior Credit Agreement will (and other Senior Indebtedness may) prohibit the
Company's prepayment of Notes prior to their scheduled maturity. Consequently,
if the Company is not able to prepay the Bank Indebtedness and any other Senior
Indebtedness containing similar restrictions or obtain requisite consents, as
described above, the Company will be unable to fulfill its repurchase
obligations if holders of Notes exercise their repurchase rights following a
Change of Control, thereby resulting in a default under the Indenture.
The Change of Control provisions described above may deter certain mergers,
tender offers and other takeover attempts involving the Company by increasing
the capital required to effectuate such transactions. The definition of "Change
of Control" includes a disposition of all or substantially all of the property
and assets of the Company and its Restricted Subsidiaries. With respect to the
disposition of property or assets, the phrase "all or substantially all" as used
in the Indenture varies according to the facts and circumstances of the subject
transaction, has no clearly established meaning under New York law (which is the
choice of law under the Indenture) and is subject to judicial interpretation.
Accordingly, in certain circumstances there may be a degree of uncertainty in
ascertaining whether a particular transaction would involve a disposition of
"all or substantially all" of the property or assets of a Person, and therefore
it may be unclear as to whether a Change of Control has occurred and whether the
Company is required to make an offer to repurchase the Notes as described above.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any of its Restricted Subsidiaries to, Incur any Indebtedness; provided,
however, that the Company may Incur Indebtedness if on the date thereof the
Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries is
at least (i) 2.00 to 1.00, if such Indebtedness is Incurred on or prior to the
second anniversary of the Issue Date and (ii) 2.25 to 1.00, if such Indebtedness
is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (i)(A)
Indebtedness Incurred pursuant to the Senior Credit Agreement in an aggregate
principal amount not to exceed the greater of (1) $100 million less the amount
of all mandatory reductions of the revolving credit commitments thereunder and
(2) the Borrowing Base and (B) Indebtedness Incurred under any other senior
credit facility or facilities, providing for revolving loans; provided, that the
aggregate principal amount of all such additional revolving Indebtedness under
such other senior credit facility or facilities after giving effect to such
Incurrence, does not exceed (1) the Borrowing Base, less (2) the maximum
aggregate commitments under the Senior Credit Agreement; (ii) the Subsidiary
Guarantees and Guarantees of, or Liens in respect of, Indebtedness Incurred
pursuant to paragraph (a) above or clause (i) of this paragraph (b); (iii)
Indebtedness of the Company owing to and held by any Wholly-Owned Subsidiary or
Indebtedness of a Restricted Subsidiary owing to and held by the Company or any
Wholly-Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any such
Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any
subsequent transfer of any such Indebtedness (except to the Company or another
Wholly-Owned Subsidiary) will be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof; (iv) Indebtedness
represented by (A) the Notes, (B) any Indebtedness (other than the Indebtedness
described in clauses (i), (ii) and (iii)) outstanding on the Issue Date and (C)
any Refinancing Indebtedness Incurred in respect of any Indebtedness described
in this clause (iv), clause (v) or clause (vii) or Incurred pursuant to
paragraph (a) above; (v) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was acquired by the
Company (other than Indebtedness Incurred (A) to provide all or any portion of
the funds utilized to consummate the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Subsidiary or
was otherwise acquired by the Company or (B) otherwise in connection with, or in
contemplation of, such acquisition); provided, however, that at the time such
Restricted Subsidiary is acquired by the Company, the Company would have
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been able to Incur $1.00 of additional Indebtedness pursuant to paragraph (a)
above after giving effect to the Incurrence of such Indebtedness pursuant to
this clause (v); (vi) Indebtedness under Currency Agreements and Interest Rate
Agreements and certain raw material hedging transactions; provided, however,
that in the case of Currency Agreements and Interest Rate Agreements, such
Currency Agreements and Interest Rate Agreements are entered into for bona fide
hedging purposes of the Company or its Restricted Subsidiaries (as determined in
good faith by the Board of Directors or senior management of the Company) and
correspond in terms of notional amount, duration, currencies and interest rates,
as applicable, to Indebtedness of the Company or its Restricted Subsidiaries
Incurred without violation of the Indenture or to business transactions of the
Company or its Restricted Subsidiaries on customary terms entered into in the
ordinary course of business and in the case of raw material hedging
transactions, such are entered into with respect to the purchase of raw
materials and are entered in the ordinary course of business for bona fide
hedging purposes; (vii) Purchase Money Indebtedness and Capitalized Lease
Obligations Incurred on or after the Issue Date; provided, however, that the
aggregate principal amount of such Indebtedness Incurred on or after the Issue
Date and outstanding at any time pursuant to this clause (vii) shall not exceed
$15 million, and such Indebtedness as originally Incurred shall not constitute
more than 100% of the cost (determined in accordance with GAAP) of the property
so purchased or leased; and (viii) Indebtedness (other than Indebtedness
described in clauses (i)-(vii)) in a principal amount which, when taken together
with the principal amount of all other Indebtedness Incurred pursuant to this
clause (viii) and then outstanding, will not exceed $10 million.
(c) Neither the Company nor any Restricted Subsidiary will Incur any
Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations of the Company
unless such Indebtedness will be subordinated to the Notes to at least the same
extent as such Subordinated Obligations. No Subsidiary Guarantor will incur any
Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly to refinance any Guarantor Subordinated Obligations of
such Subsidiary Guarantor unless such Indebtedness will be subordinated to the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee to at
least the same extent as such Guarantor Subordinated Obligations.
(d) In addition, the Company will not Incur any Secured Indebtedness which
is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien. No
Subsidiary Guarantor will Incur any Secured Indebtedness which is not Guarantor
Senior Indebtedness of such Subsidiary Guarantor unless contemporaneously
therewith effective provision is made to secure such Subsidiary Guarantor's
obligations under its Subsidiary Guarantee equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
(e) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness incurred pursuant to and in
compliance with, this covenant, (i) in the event that Indebtedness meets the
criteria of more than one of the types of Indebtedness described in paragraph
(b) above, the Company, in its sole discretion, will classify, or later
reclassify, such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of such clauses; and (ii) the amount of
Indebtedness issued at a price that is less than the principal amount thereof
will be equal to the amount of the liability in respect thereof determined in
accordance with GAAP.
Limitation on Layering. The Company will not Incur any Indebtedness if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness
or is contractually subordinated in right of payment to Senior Subordinated
Indebtedness. No Subsidiary Guarantor will Incur any Indebtedness if such
Indebtedness is contractually subordinate or junior in ranking in any respect to
any Guarantor Senior Indebtedness of such Subsidiary Guarantor unless such
Indebtedness is Guarantor Senior Subordinated Indebtedness of such Subsidiary
Guarantor or is contractually subordinated in right of payment to Guarantor
Senior Subordinated Indebtedness of such Subsidiary Guarantor.
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Limitation on Restricted Payments. (a) The Company will not, and will not
permit any of its Restricted Subsidiaries, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock and (B) dividends or distributions payable to the Company or a
Restricted Subsidiary of the Company (and if such Restricted Subsidiary is not a
Wholly-Owned Subsidiary, to its other holders of Capital Stock or other equity
interests, as applicable, on a pro rata basis), (ii) purchase, redeem, retire or
otherwise acquire for value any Capital Stock of the Company held by Persons
other than a Restricted Subsidiary of the Company or any Capital Stock of a
Restricted Subsidiary of the Company held by any Affiliate of the Company, other
than another Restricted Subsidiary (in either case, other than in exchange for
its Capital Stock (other than Disqualified Stock)), (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of purchase, repurchase or acquisition) or (iv)
make any Investment (other than a Permitted Investment) in any Unrestricted
Subsidiary or any other Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
being herein referred to in clauses (i) through (iv) as a "Restricted Payment"),
if at the time the Company or such Restricted Subsidiary makes such Restricted
Payment: (A) a Default shall have occurred and be continuing (or would result
therefrom); or (B) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) under "Limitation on Indebtedness"; or
(C) the aggregate amount of such Restricted Payment and all other Restricted
Payments declared or made (without double counting) subsequent to the Issue Date
would exceed the sum of: (1) 50% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from the Issue Date to the end of
the most recent fiscal quarter ending prior to the date of such Restricted
Payment as to which financial results are available (or, in case such
Consolidated Net Income is a deficit, minus 100% of such deficit); (2) the
aggregate Net Cash Proceeds received by the Company from the issue or sale of
its Capital Stock (other than Disqualified Stock) or other capital contributions
subsequent to the Issue Date (other than net proceeds received from an issuance
or sale of such Capital Stock to a Subsidiary of the Company or an employee
stock ownership plan or similar trust to the extent such sale to an employee
stock ownership plan or similar trust is financed by loans from or guaranteed by
the Company or any Restricted Subsidiary unless such loans have been repaid with
cash on or prior to the date of determination); (3) the amount by which
Indebtedness of the Company is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the Company) subsequent to
the Issue Date of any Indebtedness of the Company convertible or exchangeable
for Capital Stock of the Company (less the amount of any cash, or other
property, distributed by the Company upon such conversion or exchange); and (4)
the amount equal to the net reduction in Investments made by the Company or any
of its Restricted Subsidiaries in any Person resulting from (x) repurchases or
redemptions of such Investments by such Person, proceeds realized upon the sale
of such Investment to an unaffiliated purchaser, repayments of loans or advances
or other transfers of assets (including by way of dividend or distribution) by
such Person to the Company or any Restricted Subsidiary of the Company or (y)
the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investment") not to
exceed, in the case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was included in the calculation of the amount of
Restricted Payments; provided, however, that no amount will be included under
this clause (4) to the extent it is already included in Consolidated Net Income.
(b) The provisions of paragraph (a) will not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock of the Company issued or sold to a Subsidiary or an employee stock
ownership plan or similar trust to the extent such sale to an employee stock
ownership plan or similar trust is financed by loans from or guaranteed by the
Company or any Restricted Subsidiary unless such loans have been repaid with
cash on or prior to the date of determination); provided, however, that (A) such
purchase or redemption will be excluded in
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subsequent calculations of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale will be excluded from clause (C) (2) of paragraph
(a); (ii) any purchase or redemption of Subordinated Obligations of the Company
made by exchange for, or out of the proceeds of the substantially concurrent
sale of, Subordinated Obligations of the Company; provided, however, that such
purchase or redemption will be excluded in subsequent calculations of the amount
of Restricted Payments; (iii) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted under "Limitation on
Sales of Assets and Subsidiary Stock" below; provided, however, that such
purchase or redemption will be excluded in subsequent calculations of the amount
of Restricted Payments; (iv) dividends paid within 60 days after the date of
declaration if at such date of declaration such dividend would have complied
with this provision; provided, however, that such dividends will be included in
subsequent calculations of the amount of Restricted Payments; (v) repurchases of
Capital Stock deemed to occur upon the exercise of stock options if such Capital
Stock represents a portion of the exercise price hereof; provided, however, that
such repurchases will be excluded from the calculation of the amount of
Restricted Payments; and (vi) any repurchase, retirement or other acquisition or
retirement for value of Capital Stock of the Company held by any future, present
or former employee of the Company or any Subsidiary pursuant to any management
equity plan or stock option plan or any other management or employee benefit
plan or agreement; provided, however, that the aggregate Restricted Payment made
under this clause (vi) does not exceed in any calendar year $2 million; provided
further that such amount in any calendar year may be increased by any unused
amounts from any of the three years prior to such calendar year.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligations owed to the
Company, (ii) make any loans or advances to the Company or (iii) transfer any of
its property or assets to the Company, except (A) any encumbrance or restriction
pursuant to an agreement in effect at or entered into on the date of the
Indenture (including, without limitation, the Senior Credit Agreement); (B) any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
an agreement relating to any Indebtedness Incurred by a Restricted Subsidiary on
or prior to the date on which such Restricted Subsidiary was acquired by the
Company (other than Indebtedness Incurred as consideration in, or to provide all
or any portion of the funds utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on such
date; (C) any encumbrance or restriction with respect to a Restricted Subsidiary
pursuant to an agreement effecting a refinancing of Indebtedness Incurred
pursuant to an agreement referred to in clause (A) or (B) of this covenant or
this clause (C) or contained in any amendment to an agreement referred to in
clause (A) or (B) of this covenant or this clause (C); provided, however, that
the encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such agreement or amendment are no less favorable to the
Holders of the Notes than encumbrances and restrictions contained in such
agreements; (D) in the case of clause (iii) above, any encumbrance or
restriction (1) that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is subject to a lease, license or
similar contract, or the assignment or transfer of any such lease, license or
other contract, (2) by virtue of any transfer of, agreement to transfer, option
or right with respect to, or Lien on, any property or assets of the Company or
any Restricted Subsidiary not otherwise prohibited by the Indenture, (3)
contained in mortgages, pledges or other security agreements securing
Indebtedness of a Restricted Subsidiary to the extent such encumbrance or
restrictions restrict the transfer of the property subject to such mortgages,
pledges or other security agreements or (4) pursuant to customary provisions
restricting dispositions of real property interests set forth in any reciprocal
easement agreements of the Company or any Restricted Subsidiary; (E) any
restriction with respect to a Restricted Subsidiary (or any of its property or
assets) imposed pursuant to an agreement entered into for the direct or indirect
sale or disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary (or the property or assets that are subject to such
restriction) pending the closing of such sale or disposition; and (F)
encumbrances or restrictions arising or existing by reason of applicable law.
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Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value, as determined
in good faith by the Board of Directors (including as to the value of all
non-cash consideration), of the shares and assets subject to such Asset
Disposition, (ii) at least 80% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents
and (iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as the
case may be) (A) first, to the extent the Company or any Restricted Subsidiary,
as the case may be, elects (or is required by the terms of any Senior
Indebtedness or Indebtedness (other than Preferred Stock) of a Wholly-Owned
Subsidiary), to prepay, repay or purchase Senior Indebtedness or Indebtedness
(other than any Preferred Stock) of a Wholly-Owned Subsidiary (in each case
other than Indebtedness owed to the Company or an Affiliate of the Company)
within 180 days from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (B) second, to the extent of the balance of
such Net Available Cash after application in accordance with clause (A), at the
Company's election to invest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary) within one year
from the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (C) third, to the extent of the balance of such Net Available
Cash after application and in accordance with clauses (A) and (B) (the "Excess
Proceeds"), to make an offer to purchase the Notes and other Senior Subordinated
Indebtedness outstanding with similar provisions requiring the Company to make
an offer to purchase such Indebtedness with the proceeds from any Asset
Disposition ("Pari Passu Notes") at 100% of the principal amount thereof (or
100% of the accreted value of such Pari Passu Notes so tendered if such Pari
Passu Notes were issued at a discount) plus accrued and unpaid interest, if any,
to the date of purchase; and (D) fourth, to the extent of the balance of the
Excess Proceeds, after application in accordance with clause (C), to fund other
corporate purposes not prohibited by the Indenture; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A) above, the Company or such Restricted Subsidiary will retire such
Indebtedness and will cause the related loan commitment, if any, to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions, (i) the Company
and its Restricted Subsidiaries will not be required to apply any Net Available
Cash in accordance herewith except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this covenant exceed $5 million and (ii) in addition, the Company and its
Restricted Subsidiaries may make in the aggregate $1 million in Asset
Dispositions each year which are not subject to the provisions of this covenant.
For the purposes of this covenant, the following will be deemed to be cash:
(i) the assumption by the transferee of Senior Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary of the Company and the release of the
Company or such Restricted Subsidiary from all liability on such Senior
Indebtedness or Indebtedness in connection with such Asset Disposition (in which
case the Company will, without further action, be deemed to have applied such
assumed Indebtedness in accordance with clause (iii) (A) of the preceding
paragraph) and (ii) securities received by the Company or any Restricted
Subsidiary of the Company from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (iii)(C) of paragraph (a), the Company will be required
to apply such Excess Proceeds to the repayment of the Notes and any Pari Passu
Notes as follows: (i) the Company will make an offer to purchase (an "Offer")
within ten days of such time from all holders of the Notes in accordance with
the procedures set forth in the Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out of an
amount (the "Note Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Notes and the denominator of which is the sum of the outstanding
principal amount of the Notes and the outstanding principal amount (or accreted
value, as the case may be) of the Pari Passu Notes at a purchase price of 100%
of the principal amount thereof plus
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accrued and unpaid interest, if any, to the date of purchase and (ii) the
Company will make an offer to purchase any Pari Passu Notes (a "Pari Passu
Offer") in an amount equal to the excess of the Excess Proceeds over the Note
Amount at a purchase price of 100% of the principal amount (or accreted value,
as the case may be) thereof plus accrued and unpaid interest, if any, to the
date of purchase in accordance with the procedures (including prorating in the
event of oversubscription) set forth in the documentation governing such Pari
Passu Notes with respect to the Pari Passu Offer. If the aggregate purchase
price of the Notes and Pari Passu Notes tendered pursuant to the Offer and the
Pari Passu Offer is less than the Excess Proceeds, the remaining Excess Proceeds
will be available to the Company for use in accordance with clause (iii)(D) of
paragraph (a) above. The Company will not be required to make an Offer for Notes
pursuant to this covenant if the Excess Proceeds available therefor are less
than $10 million (which lesser amounts will be carried forward for purposes of
determining whether an Offer is required with respect to the Excess Proceeds
from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or conduct any transaction (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate of the
Company (an "Affiliate Transaction") unless: (i) the terms of such Affiliate
Transaction are no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an Affiliate;
(ii) in the event such Affiliate Transaction involves an aggregate amount in
excess of $5 million, the terms of such transaction have been approved by a
majority of the members of the Board of Directors of the Company having no
personal stake in such transaction, if any (and such majority determines that
such Affiliate Transaction satisfies the criteria in (i) above); and (iii) in
the event such Affiliate Transaction involves an aggregate amount in excess of
$10 million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is not materially less favorable than those that might reasonably
have been obtained in a comparable transaction at such time on an arm's-length
basis from a Person that is not an Affiliate.
(b) The foregoing paragraph (a) will not apply to (i) any Restricted
Payment permitted to be made pursuant to the covenant described under
"Limitation on Restricted Payments," (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements or bonuses (whether or not pursuant to an
employment agreement), stock options and stock ownership plans approved by the
Board of Directors of the Company, (iii) loans or advances to employees in the
ordinary course of business of the Company or any of its Restricted
Subsidiaries, (iv) the payment of reasonable fees to directors of the Company
and its Restricted Subsidiaries who are not employees of the Issuer or its
Restricted Subsidiaries, (v) any payments to the Company by the Restricted
Subsidiaries pursuant to a tax sharing agreement, (vi) transactions in the
ordinary course of business between the Company or any Restricted Subsidiary
with Selfix Europe L.L.C. or its successors and (vii) any transaction between
the Company and a Wholly-Owned Subsidiary or between Wholly-Owned Subsidiaries.
Limitation on Capital Stock of Restricted Subsidiaries. The Company will
not sell any shares of Capital Stock of a Restricted Subsidiary, and will not
permit any Restricted Subsidiary, directly or indirectly, to issue or sell any
shares of its Capital Stock except: (i) to the Company or a Wholly-Owned
Subsidiary; or (ii) (A) in compliance with the covenant described under
"-- Limitation on Sales of Assets and Subsidiary Stock" if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary would
continue to be a Restricted Subsidiary or (B) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer be a
Restricted Subsidiary, and, in each case, the Investment of the Company in such
Person after giving effect to such issuance or sale would have been permitted to
be made under the "Limitation on Restricted Payments" covenant as if made on the
date of such issuance or sale.
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Notwithstanding the foregoing, the Company may sell all the Capital Stock of a
Subsidiary as long as the Company is in compliance with the terms of the
covenant described under "-- Limitation on Sales of Assets and Subsidiary
Stock".
Limitation on the Sale or Issuance of Preferred Stock of Restricted
Subsidiaries. The Company will not sell any shares of Preferred Stock of a
Restricted Subsidiary and will not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell any shares of its Preferred Stock to any Person
(other than to the Company or a Wholly-Owned Subsidiary).
SEC Reports. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, to the extent
permitted by the Exchange Act, the Company will file with the Commission, and
provide, within 15 days after the Company is required to file the same with the
Commission, the Trustee and the holders of the Notes with the annual reports and
the information, documents and other reports (or copies of such portions of any
of the foregoing as the Commission may by rules and regulations prescribe) that
are specified in Sections 13 and 15(d) of the Exchange Act. In the event that
the Company is not permitted to file such reports, documents and information
with the Commission pursuant to the Exchange Act, the Company will nevertheless
provide such Exchange Act information to the Trustee and the holders of the
Notes as if the Company were subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act.
Merger and Consolidation. The Company will not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") will be a corporation, partnership, trust or limited
liability company organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and the Successor Company
(if not the Company) will expressly assume, by supplemental indenture, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction (and treating any Indebtedness that
becomes an obligation of the Successor Company or any Restricted Subsidiary of
the Successor Company as a result of such transaction as having been incurred by
the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur at least an additional $1.00 of
Indebtedness pursuant to paragraph (a) of "Limitation on Indebtedness"; and (iv)
the Company has delivered to the Trustee an Officers' Certificate and an Opinion
of Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture, if any, comply with the Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), (i) any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and (ii) the Company may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Company in another jurisdiction to realize tax or other benefits.
Future Subsidiary Guarantors. After the Issue Date, the Company will cause
each Restricted Subsidiary other than a Foreign Subsidiary created or acquired
by the Company which Guarantees the Bank Indebtedness or Incurs Indebtedness
under paragraph (a) of "Limitation on Indebtedness" to execute and deliver to
the Trustee a Subsidiary Guarantee pursuant to which such Subsidiary Guarantor
will unconditionally Guarantee, on a joint and several basis, the full and
prompt payment of the principal of, premium, if any and interest on the Notes on
a senior subordinated basis.
The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, without limitation, any
guarantees under the Senior Credit Agreement) and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other
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Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its
contribution obligations under the Indenture, result in the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law.
Each Subsidiary Guarantor will be permitted to consolidate with or merge
into or sell its assets to the Company or another Subsidiary Guarantor without
limitation. Each Subsidiary Guarantor will be permitted to consolidate with or
merge into or sell all or substantially all its assets to a corporation,
partnership or trust other than the Company or another Subsidiary Guarantor
except that if the surviving corporation of any such merger or consolidation is
a Subsidiary of the Company, such Subsidiary may not be a Foreign Subsidiary.
Upon the sale or disposition of a Subsidiary Guarantor (by merger,
consolidation, the sale of its Capital Stock or the sale of all or substantially
all of its assets) to a Person (whether or not an Affiliate of the Subsidiary
Guarantor) which is not a Subsidiary of the Company, which sale or disposition
is otherwise in compliance with the Indenture (including the covenant described
under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary
Stock"), such Subsidiary Guarantor will be deemed released from all its
obligations under the Indenture and its Subsidiary Guarantee and such Subsidiary
Guarantee will terminate; provided, however, that any such termination will
occur only to the extent that all obligations of such Subsidiary Guarantor under
the Senior Credit Agreement and all of its guarantees of, and under all of its
pledges of assets or other security interests which secure, any other
Indebtedness of the Company will also terminate upon such release, sale or
transfer.
Limitation on Lines of Business. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any business other than a Related
Business. Notwithstanding the foregoing, the Company may acquire and operate any
business which is primarily engaged in a Related Business at the time of
acquisition.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture:
(i) a default in any payment of interest on any Note when due, continued for 30
days, whether or not such payment is prohibited by the provisions described
under "-- Ranking and Subordination" above, (ii) a default in the payment of
principal of any Note when due at its Stated Maturity, upon optional redemption,
upon required repurchase, upon declaration or otherwise, whether or not such
payment is prohibited by the provisions described under "-- Ranking and
Subordination" above, (iii) the failure by the Company to comply with its
obligations under "-- Certain Covenants -- Merger and Consolidation" above, (iv)
the failure by the Company to comply for 30 days after notice with any of its
obligations under the covenants described under "-- Change of Control" above or
under the covenants described under "-- Certain Covenants" above (in each case,
other than a failure to purchase Notes which will constitute an Event of Default
under clause (ii) above), (v) the failure by the Company to comply for 60 days
after notice with its other agreements contained in the Indenture, (vi)
Indebtedness of the Company or any Restricted Subsidiary is not paid within any
applicable grace period after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $5 million (the "cross acceleration provision"), (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (viii) any judgment or
decree for the payment of money in excess of $5 million is rendered against the
Company or a Significant Subsidiary and such judgment or decree remains
undischarged or unstayed for a period of 60 days after such judgment becomes
final and non-appealable (the "judgment default provision") or (ix) any
Subsidiary Guarantee ceases to be in full force and effect (except as
contemplated by the terms of the Indenture) or any Subsidiary Guarantor denies
or disaffirms its obligations under the Indenture or its Subsidiary Guarantee.
However, a default under clauses (iv) and (v) will not constitute an Event of
Default until the Trustee or the holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company and the Trustee may declare the principal of and accrued and unpaid
interest, if any, on all the Notes to be due and payable. Upon such a
declaration, such principal and accrued and unpaid interest will be due and
payable immediately. If an Event of Default relating
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to certain events of bankruptcy, insolvency or reorganization of the Company
occurs and is continuing, the principal of and accrued and unpaid interest on
all the Notes will become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium, if any, or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder or that would
involve the Trustee in personal liability. Prior to taking any action under the
Indenture, the Trustee will be entitled to indemnification satisfactory to it in
its sole discretion against all losses and expenses caused by taking or not
taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium, if any, or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its trust officers in good
faith determines that withholding notice is in the interests of the Noteholders.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any events which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes) and any past default or compliance with any
provisions may be waived with the consent of the holders of a majority in
principal amount of the Notes then outstanding. However, without the consent of
each holder of an outstanding Note affected, no amendment may, among other
things, (i) reduce the amount of Notes whose holders must consent to an
amendment, (ii) reduce the stated rate of or extend the stated time for payment
of interest on any Note, (iii) reduce the principal of or extend the Stated
Maturity of any Note, (iv) reduce the premium payable upon the redemption or
repurchase of any Note or change the time at which any Note may be redeemed as
described under "-- Optional Redemption" above, (v) make any Note payable in
money other than that stated in the Note, (vi) impair the right of any holder to
receive payment of principal of and interest on such holder's Notes on or after
the due dates therefor or to institute suit for the enforcement of any payment
on or with respect to such holder's Notes or (vii) make any change in the
amendment provisions which require each holder's consent or in the waiver
provisions.
Without the consent of any holder, the Company and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Company under the Indenture,
to
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provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
further Guarantees with respect to the Notes, to secure the Notes, to add to the
covenants of the Company for the benefit of the holders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any holder or to comply with any requirement of
the Commission in connection with the qualification of the Indenture under the
Trust Indenture Act. However, no amendment may be made to the subordination
provisions of the Indenture that adversely affects the rights of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment. After an amendment under the
Indenture becomes effective, the Company is required to mail to the holders a
notice briefly describing such amendment. However, the failure to give such
notice to all the holders, or any defect therein, will not impair or affect the
validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. If the Company exercises its legal defeasance option, the Subsidiary
Guarantees in effect at such time will terminate. The Company at any time may
terminate its obligations under covenants described under "-- Certain Covenants"
(other than "-- Merger and Consolidation"), the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Significant
Subsidiaries, the judgment default provision and the Subsidiary Guarantee
provision described under "Events of Default" above and the limitations
contained in clauses (iii) and (iv) under "Certain Covenants -- Merger and
Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries), (viii) or (ix) under "-- Events of Default" above or
because of the failure of the Company to comply with clause (iii) or (iv) under
"-- Certain Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium, if any, and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
LaSalle National Bank is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
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GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or a Restricted Subsidiary of the Company; or (iii) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary of the Company; provided, however, that, in the case of
clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Restricted Subsidiaries (including
any disposition by means of a merger, consolidation or similar transaction)
other than (i) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly-Owned Subsidiary, (ii) the sale
of Cash Equivalents in the ordinary course of business, (iii) a disposition of
inventory in the ordinary course of business, (iv) a disposition of obsolete or
worn out equipment or equipment that is no longer useful in the conduct of the
business of the Company and its Restricted Subsidiaries and that is disposed of
in each case in the ordinary course of business, (v) the sale, discount or
factoring (with or without recourse on commercially reasonable terms) of
accounts receivable arising in the ordinary course of business, (vi)
transactions permitted under "-- Certain Covenants -- Merger and Consolidation"
above and (vii) for purposes of the covenant described in "-- Certain
Covenants Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the covenant
described under "-- Certain Covenants -- Limitation on Restricted Payments".
"Attributable Indebtedness" in respect of a sale/leaseback transaction
means, as of the time of determination, the present value (discounted at the
interest rate assumed in making calculations in accordance with GAAP) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such sale/leaseback transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Indebtedness or Preferred
Stock multiplied by the amount of such payment by (ii) the sum of all such
payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable by the Company or any Subsidiary
under or in respect of the Senior Credit Agreement and any related notes,
collateral documents, letters of credit and guarantees or any Interest Rate
Agreement entered into with a Lender (as defined in the Senior Credit Agreement)
in connection with the Senior Credit Agreement, including principal, premium, if
any, interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company at the rate
specified therein whether
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or not a claim for post filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
40% of the aggregate book value of inventory and (ii) 75% of the aggregate book
value of all accounts receivable of the Company and its Restricted Subsidiaries
on a consolidated basis, as determined in accordance with GAAP consistently
applied. To the extent that information is not available as to the amount of
inventory or accounts receivable as of a specific date, the Company shall use
the most recent available information for purposes of calculating the Borrowing
Base.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation will be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof will be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition; (ii) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (iii) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof issued
by any commercial bank the long-term debt of which is rated at the time of
acquisition thereof at least "A" or the equivalent thereof by Standard & Poor's
Rating Group, or "A" or the equivalent thereof by Moody's Investors Service,
Inc., and having capital and surplus in excess of $250 million (or foreign
currency equivalent thereof); (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(i), (ii) and (iii) entered into with any bank meeting the qualifications
specified in clause (iii) above; (v) commercial paper rated at the time of
acquisition thereof at least "A-2" or the equivalent thereof by Standard &
Poor's Rating Group or "P-2" or the equivalent thereof by Moody's Investors
Service, Inc., or carrying an equivalent rating by a nationally recognized
rating agency, if both of the two named rating agencies cease publishing ratings
of investments, and in either case maturing within 270 days after the date of
acquisition thereof; and (vi) interests in any investment company which invests
solely in instruments of the type specified in clauses (i) through (v) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means, with
respect to any Person, the ratio of (i) the aggregate amount of Consolidated
EBITDA of such Person for the period of the most recent four consecutive fiscal
quarters for which financial statements are available ending prior to the date
of such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (A) If the Company or any Restricted
Subsidiary (1) has Incurred any Indebtedness since the beginning of such period
that remains outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is an
Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Interest
Expense for such period will be calculated after giving effect on a pro forma
basis to such Indebtedness as if such Indebtedness had been Incurred on the
first day of such period (except that in making such computation, the amount of
Indebtedness under any revolving credit facility outstanding on the date of such
calculation will be computed based on (a) the average daily balance of such
Indebtedness during
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such four fiscal quarters or such shorter period for which such facility was
outstanding or (b) if such facility was created after the end of such four
fiscal quarters, the average daily balance of such Indebtedness during the
period from the date of creation of such facility to the date of such
calculation) and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, or (2) has
repaid, repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves a discharge of Indebtedness (in each case
other than Indebtedness incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid), Consolidated EBITDA and Consolidated
Interest Expense for such period will be calculated after giving effect on a pro
forma basis to such discharge of such Indebtedness, including with the proceeds
of such new Indebtedness, as if such discharge had occurred on the first day of
such period, (B) if since the beginning of such period the Company or any
Restricted Subsidiary will have made any Asset Disposition or if the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, the Consolidated EBITDA for such period will be reduced by an
amount equal to the Consolidated EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated EBITDA (if negative) directly
attributable thereto for such period and Consolidated Interest Expense for such
period will be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in connection with such
Asset Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (C) if since the beginning of such period the
Company or any Restricted Subsidiary (by merger or otherwise) will have made an
Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition of
assets occurrin g in connection with a transaction causing a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, Consolidated EBITDA and Consolidated Interest Expense for such
period will be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred on
the first day of such period and (D) if since the beginning of such period any
Person (that subsequently became a Restricted Subsidiary or was merged with or
into the Company or any Restricted Subsidiary since the beginning of such
period) will have made any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (B) or (C)
above if made by the Company or a Restricted Subsidiary during such period,
Consolidated EBITDA and Consolidated Interest Expense for such period will be
calculated after giving pro forma effect thereto as if such Asset Disposition or
Investment or acquisition occurred on the first day of such period. For purposes
of this definition, whenever pro forma effect is to be given to an acquisition
of assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations will be determined in good
faith by a responsible financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the Consolidated Interest Expense on such Indebtedness will be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (any Interest Rate Agreement applicable to
such Indebtedness for a period (not in excess of 12 months) corresponding to the
remaining term of such Interest Rate Agreement as of the date of determination).
"Consolidated EBITDA" for any period means the Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense, (iv) amortization of intangibles and (v)
other non-cash charges reducing Consolidated Net Income (excluding any such
non-cash charge to the extent it represents an accrual of or reserve for cash
charges in any future period or amortization of a prepaid cash expense that was
paid in a prior period not included in the calculation). Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
interest, depreciation and amortization of, a
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Restricted Subsidiary of a Person will be added to Consolidated Net Income to
compute Consolidated EBITDA of such Person only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Consolidated Subsidiaries, plus, to the extent
not included in such interest expense, (i) interest expense attributable to
Capitalized Lease Obligations and the interest portion of rent expense
associated with Attributable Indebtedness in respect of the relevant lease
giving rise thereto, determined as if such lease were a capitalized lease in
accordance with GAAP, (ii) amortization of debt discount and debt issuance cost
(other than costs incurred in connection with the Refinancing), (iii)
capitalized interest and accrued interest, (iv) non-cash interest expense, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) interest actually paid by the
Company or any such Subsidiary under any Guarantee of Indebtedness or other
obligation of any other Person, (vii) net costs associated with Hedging
Obligations (including amortization of fees), (viii) dividends in respect of all
Disqualified Stock of the Company and all Preferred Stock of Subsidiaries, in
each case, held by Persons other than the Company or a Wholly-Owned Subsidiary
and (ix) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection with
Indebtedness Incurred by such plan or trust; provided, however, that there will
be excluded therefrom any such interest expense of any Unrestricted Subsidiary
to the extent the related Indebtedness is not Guaranteed or paid by the Company
or any Restricted Subsidiary. For purposes of the foregoing, total interest
expense will be determined after giving effect to any net payments made or
received by the Company and its Subsidiaries with respect to Interest Rate
Agreements. Notwithstanding the foregoing, the Consolidated Interest Expense
with respect to any Restricted Subsidiary of the Company that was not a
Wholly-Owned Subsidiary will be included only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its Consolidated Subsidiaries; provided, however, that there
will not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Restricted Subsidiary, except that (A)
subject to the limitations contained in (iv) below, the Company's equity in the
net income of any such Person for such period will be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(iii) below) and (B) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period will be included in
determining such Consolidated Net Income to the extent such loss has been funded
with cash from the Company or a Restricted Subsidiary; (ii) any net income
(loss) of any Person acquired by the Company or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income (loss) of any Restricted Subsidiary if such Subsidiary is
subject to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that (A) subject to the limitations contained
in (iv) below the Company's equity in the net income of any such Restricted
Subsidiary for such period will be included in such Consolidated Net Income up
to the aggregate amount of cash that could have been distributed by such
Restricted Subsidiary during such period to the Company or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution that could have been made to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the Company's
equity in a net loss of any such Restricted Subsidiary for such period will be
included in determining such Consolidated Net Income; (iv) any gain (loss)
realized upon the sale or other disposition of any property, plant, equipment or
other asset of the Company or its consolidated Subsidiaries which is not sold or
otherwise disposed of in the ordinary course of business and any gain (loss)
realized upon the sale or other disposition of any Capital Stock of any Person;
(v) any extraordinary gain or loss and (vi) the cumulative effect of a change in
accounting principles.
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"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness in the
case of the Company and (ii) any other Senior Indebtedness which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $25 million and is specifically designated in the instrument evidencing
or governing such Senior Indebtedness as "Designated Senior Indebtedness" for
purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock (excluding capital stock which is convertible or exchangeable
solely at the option of the Company or a Restricted Subsidiary) or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the Stated Maturity of the Notes, provided, that only the
portion of Capital Stock which so matures or is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder
thereof prior to such Stated Maturity will be deemed to be Disqualified Stock.
"Equity Offering" means an offering for cash by the Company of its common
stock, or options, warrants or rights with respect to its common stock.
"Fiscal Year" means a 52 or 53 week period ending on the last Saturday in
December.
"Foreign Subsidiary" means any Subsidiary that is not organized under the
laws of the United States of America or any state thereof or the District of
Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture will be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" will not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means, with respect to a Subsidiary
Guarantor, the following obligations, whether outstanding on the date of the
Indenture or thereafter issued, without duplication: (i) any Subsidiary
Guarantee of the Bank Indebtedness by such Subsidiary Guarantor and all other
Subsidiary Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the
Company or Guarantor Senior Indebtedness for any other Subsidiary Guarantor; and
(ii) all obligations consisting of the principal of and premium, if any, and
accrued and unpaid interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization relating to the Subsidiary
Guarantor regardless of whether post filing interest is allowed in such
proceeding) on, and fees and other amounts owing in respect of, all other
Indebtedness of the Subsidiary Guarantor, unless, in the instrument creating or
evidencing the same or
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pursuant to which the same is outstanding, it is expressly provided that the
obligations in respect of such Indebtedness are not senior in right of payment
to the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee;
provided, however, that Guarantor Senior Indebtedness will not include (A) any
obligations of such Subsidiary Guarantor to another Subsidiary Guarantor or any
other Subsidiary of the Subsidiary Guarantor, (B) any liability for Federal,
state, local, foreign or other taxes owed or owing by such Subsidiary Guarantor,
(C) any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities), (D) any Indebtedness of such Subsidiary Guarantor
that is expressly subordinate in right of payment to any of the Indebtedness of
such Subsidiary Guarantor, including any Guarantor Senior Subordinated
Indebtedness and Guarantor Subordinated Obligations of such Subsidiary Guarantor
or (E) any obligation with respect to Capital Stock.
"Guarantor Senior Subordinated Indebtedness" means with respect to a
Subsidiary Guarantor, the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee and any other Indebtedness of such Subsidiary Guarantor
(whether outstanding on the Issue Date or thereafter Incurred) that specifically
provides that such Indebtedness is to rank pari passu in right of payment with
the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee and
is not expressly subordinated by its terms in right of payment to any
Indebtedness of such Subsidiary Guarantor which is not Guarantor Senior
Indebtedness of such Subsidiary Guarantor.
"Guarantor Subordinated Obligation" means, with respect to a Subsidiary
Guarantor, any Indebtedness of such Subsidiary Guarantor (whether outstanding on
the Issue Date or thereafter Incurred) which is expressly subordinate in right
of payment to the obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee pursuant to a written agreement.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) will be deemed to be Incurred
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium, if any,
in respect of indebtedness of such Person for borrowed money; (ii) the principal
of and premium, if any, in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments; (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto); (iv) all obligations
of such Person to pay the deferred and unpaid purchase price of property or
services (except trade payables), which purchase price is due more than six
months after the date of placing such property in service or taking delivery and
title thereto or the completion of such services; (v) all Capitalized Lease
Obligations and all Attributable Indebtedness of such Person; (vi) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary,
any Preferred Stock (but excluding, in each case, any accrued dividends); (vii)
all Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided, however,
that the amount of such Indebtedness will be the lesser of (A) the fair market
value of such asset at such date of determination and (B) the amount of such
Indebtedness of such other Persons; (viii) all Indebtedness of other Persons to
the extent Guaranteed by such Person; and (ix) to the extent not otherwise
included in this definition, net obligations of such Person under Currency
Agreements and Interest Rate Agreements (the amount of any such obligations to
be equal at any time to the net termination value of such agreement or
arrangement giving rise to such obligation that would be payable by such Person
at such time). The amount of Indebtedness of any Person at any date will be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
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"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by, such Person. For purposes
of the "Limitation on Restricted Payments" covenant, (i) "Investment" will
include the portion (proportionate to the Company's equity interest in a
Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the
fair market value of the net assets of such Restricted Subsidiary of the Company
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, the Company will be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (A) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (B) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so re-designated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary will be valued at its fair market value at the time of such transfer,
in each case as determined in good faith by the Board of Directors of the
Company.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, accounting, investment banking, title and recording tax expenses,
commissions and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon, or other
security agreement of any kind with respect to, such assets, or which must by
its terms, or in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the assets disposed of in such Asset Disposition and retained by the
Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
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"Permitted Holders" means (i) directors and officers of the Company on the
Issue Date and (ii) Chase Venture Capital Associates, L.P. and any Affiliate
thereof.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the
making of such Investment, become a Restricted Subsidiary; provided, however,
that the primary business of such Restricted Subsidiary is a Related Business;
(ii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) cash and Cash Equivalents; (iv) receivables owing to the Company or any
Restricted Subsidiary created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) any Investment in an entity conducting a Related Business that is not a
Restricted Subsidiary; provided that the aggregate fair market value of all
Investments made pursuant to this clause (vii) (valued on the date each such
Investment was made and without giving effect to subsequent changes in value)
may not at any one time exceed $5 million; (viii) Investments in Selfix Europe,
L.L.C. or its Successors; provided that the aggregate fair market value of all
Investments made pursuant to this clause (viii) (valued on the date each such
Investment was made and without giving effect to subsequent changes in value)
may not at any one time exceed $3 million; (ix) stock, obligations or securities
received in settlement of debts created in the ordinary course of business and
owing to the Company or any Restricted Subsidiary or in satisfaction of
judgments; (x) any Investment in securities or other assets received in
connection with Asset Dispositions made in accordance with the provisions of the
covenant described under "Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock"; and (xi) Currency Agreements, Interest Rate Agreements and
related Hedging Obligations entered into in compliance with the covenant
described under "Certain Covenants -- Limitation on Indebtedness" and hedging
arrangements with respect to the purchase of raw materials entered into in the
ordinary course of business on customary terms for bona fide hedging purposes.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
A "Public Market" exists at any time with respect to the common stock of
the Company if (i) the common stock of the Company is then registered with the
Commission pursuant to Section 12(b) or 12(g) of the Exchange Act and traded
either on a national securities exchange or in the National Association of
Securities Dealers Automated Quotation System and (ii) at least 15% of the total
issued and outstanding common stock of the Company has been distributed prior to
such time by means of an effective registration statement under the Securities
Act.
"Purchase Money Indebtedness" of any Person means any Indebtedness of such
person to any seller or other person incurred to finance the acquisition or
construction of any asset (or, in each case, any interest therein) acquired or
constructed after the Issue Date which is related to a Related Business of the
Company and which is incurred concurrently with, or within 180 days of, such
acquisition or the completion of such construction and, if secured, is secured
only by the assets so financed.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay, redeem, retire or extend (including pursuant
to any defeasance or discharge mechanism) (collectively, "refinance",
"refinances," and "refinanced" shall have a correlative meaning) any
Indebtedness existing on
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the date of the Indenture or Incurred in compliance with the Indenture
(including Indebtedness of the Company that refinances Indebtedness of any
Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including Indebtedness
that refinances Refinancing Indebtedness, provided, however, that (i) the
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being refinanced, (ii) the Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is Incurred that
is equal to or greater than the Average Life of the Indebtedness being
refinanced, and (iii) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the sum of the aggregate principal amount
(or if issued with original issue discount, the aggregate accreted value) then
outstanding (plus fees and expenses, including any premium and defeasance costs)
of the Indebtedness being refinanced.
"Related Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Company and its
Restricted Subsidiaries on the date of the Indenture.
"Representative" means any trustee, agent or representative (if any) of an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Credit Agreement" means (i) the Senior Secured Credit Agreement
entered into among the Company, The Chase Manhattan Bank, as Administrative
Agent, and the lenders parties thereto from time to time, as the same may be
amended, supplemented or otherwise modified from time to time and any guarantees
issued thereunder and (ii) any renewal, extension, refunding, restructuring,
replacement or refinancing thereof (whether with the original Administrative
Agent and lenders or another administrative agent or agents or other lenders and
whether provided under the original Senior Credit Agreement or any other credit
or other agreement or indenture).
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary will
refer to a Subsidiary of the Company.
"Subsidiary Guarantee" means, individually, any Guarantee of payment of the
Notes by a Subsidiary Guarantor pursuant to the terms of the Indenture, and,
collectively, all such Guarantees. Each such Subsidiary Guarantee will be in the
form prescribed in the Indenture.
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"Subsidiary Guarantor" means each Subsidiary of the Company in existence on
the Issue Date and any Restricted Subsidiary created or acquired by the Company
after the Issue Date (other than a Foreign Subsidiary) which Guarantees the Bank
Indebtedness or Incurs Indebtedness under paragraph (a) of the covenant
described under "Certain Covenants--Limitation on Indebtedness".
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that either (A) the Subsidiary to be so designated has total
consolidated assets of $10,000 or less or (B) if such Subsidiary has
consolidated assets greater than $10,000, then such designation would be
permitted under "--Certain Covenants--Limitation on Restricted Payments." The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (i) the Company could Incur $1.00 of additional Indebtedness
pursuant to paragraph (a) under "--Certain Covenants--Limitation on
Indebtedness" and (ii) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, all
of the Capital Stock of which (other than directors' qualifying shares) is owned
by the Company or one or more Wholly-Owned Subsidiaries.
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BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Notes initially will be
represented by one or more permanent global certificates in definitive, duly
registered form (the "Global Notes"). The Global Notes will be deposited on the
Issue Date with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"), and registered in the name of a nominee of DTC.
THE GLOBAL NOTES
The Company expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Notes, DTC or its custodian will credit, on its
internal system, an interest in such Global Notes to the respective accounts of
persons who have accounts with DTC and (ii) ownership of beneficial interests in
the Global Notes will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the Initial Purchasers and ownership of beneficial
interests in the Global Notes will be limited to persons who have accounts with
DTC ("participants") or persons who hold interests through participants. QIBs
and institutional Accredited Investors who are not QIBs may hold their interests
in the Global Notes directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium, if any, and interest on the Global
Notes will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global Notes
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states that require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in a Global Note in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the
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<PAGE> 101
meaning of the Uniform Commercial Code and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participants and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Note and a successor depositary is not appointed by the Issuer within
90 days, Certificated Securities will be issued in exchange for the Global
Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Original Notes where such Original Notes were acquired as a result
of market making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until [ ], 1998, all dealers
effecting transactions in the Exchange Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Original Notes), other than commissions or concessions of any
broker-dealers and will indemnify the holders of the Original Notes (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act. The Company will be indemnified by the holders of Original
Notes, severally, against certain liabilities, including liabilities under the
Securities Act.
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<PAGE> 102
This Prospectus has been prepared for use in connection with the Exchange
Offer and may be used by CSI in connection with offers and sales related to
market making transactions in the Notes. CSI may act as principal or agent in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale. The Company will not receive any of the
proceeds of such sales. CSI has no obligation to make a market in the Notes and
may discontinue its market making activities at any time without notice, at its
sole discretion. The Company has agreed to indemnify CSI against certain
liabilities, including liabilities under the Securities Act of 1933, and to
contribute to payments which CSI might be required to make in respect thereof.
For a description of certain relationships between the Company and CSI and
its affiliates, see "Certain Transactions."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a general description of certain of the material
anticipated federal income tax consequences of the ownership, exchange and
disposition of the Exchange Notes to Holders that receive the Exchange Notes in
exchange for Original Notes pursuant to the Exchange Offer. This discussion does
not purport to deal with all aspects of federal income taxation that may be
relevant to Holders in light of their personal investment circumstances, nor to
certain types of Holders subject to special treatment under the federal income
tax laws, such as dealers in securities or currencies, financial institutions,
tax-exempt entities, life insurance companies, persons holding Notes as a part
of a hedging, conversion or constructive sale transaction or a straddle or
holders of Notes whose "functional currency" is not the U.S. dollar, and is
generally limited to investors who will hold the Notes as capital assets within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). In addition, this description does not consider the effect of any
applicable foreign, state or local tax laws. Prospective investors are urged to
consult their own tax advisors as to the precise federal, state, local, foreign
and other tax consequences of the purchase, ownership and disposition of the
Notes.
This discussion is based on current provisions of the Code, existing and
proposed Treasury Regulations promulgated thereunder, rulings of the Internal
Revenue Service (the "Service") and judicial decisions now in effect, all of
which are subject to change, possibly retroactively. No ruling will be sought
from the Service with respect to the transactions contemplated hereby, and there
can be no assurance that the Service will not assert positions contrary to the
views expressed herein, or that any such contrary position would not be
sustained.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MIGHT BE RELEVANT TO AN INVESTOR'S DECISION TO ACQUIRE THE NOTES.
EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF
THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS PARTICULAR SITUATION
BEFORE DETERMINING WHETHER TO ACQUIRE THE NOTES.
TAX CONSIDERATIONS FOR U.S. HOLDERS
For purposes of this summary, a "U.S. Holder" is any person who is (i) a
citizen or resident of the United States; (ii) a corporation or partnership
created under the laws of the United States or any political subdivision
thereof; (iii) an estate, the income of which is subject to United States
federal income taxation without regard to the source of income; or (iv) a trust
if a U.S. court is able to exercise primary supervision over the administration
of such trust and one or more U.S. persons have the authority to control all
substantial decisions of such trust. A "Non-U.S. Holder" is any holder who is
not a U.S. Holder.
Exchange Pursuant to Exercise of Registration Rights
Neither an exchange of Original Notes for Exchange Notes nor the filing of
a registration statement with respect to the resale of the Notes should be a
taxable event to Holders of Notes, and Holders should not
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<PAGE> 103
recognize any taxable gain or loss or any interest income as a result of such an
exchange or such a filing. Further, the holding period of the Exchange Notes
will include the holding period of the Original Notes, and the basis of the
Exchange Notes will be the same as the basis of the Original Notes immediately
before the exchange.
Taxation of Stated Interest
The Original Notes were issued at their stated principal amount and
accordingly were not issued with "original issue discount" within the meaning of
Section 1273 of the Code. Thus, stated interest on a Note will be includible in
the gross income of a U.S. Holder as ordinary income when received or accrued by
such U.S. Holder in accordance with its method of tax accounting.
Gain or Loss on Disposition of the Notes
If a Note is sold, exchanged or otherwise disposed of, the U.S. Holder
generally will recognize gain or loss in an amount equal to the difference
between the amount realized on the sale, exchange or other disposition and such
U.S. Holder's adjusted basis in the Note. The adjusted basis of the Note
generally will equal the U.S. Holder's cost. Any such gain or loss will
generally be capital gain or loss. Recently enacted legislation provides that
for individual U.S. Holders, the maximum rate of United States federal income
taxation generally is 28% if the Note disposed of was held for more than one
year but not more than eighteen months, and that the maximum rate generally is
20% if the Note disposed of was held for more than eighteen months.
Backup Withholding and Information Reporting
A U.S. Holder may be subject to backup withholding at the rate of 31%, with
respect to interest paid on a Note, unless such U.S. Holder (a) is a corporation
or comes within certain other exempt categories and, when required, demonstrates
this fact, or (b) provides a correct taxpayer identification number, certifies
as to the U.S. Holder's exemption from backup withholding and otherwise complies
with applicable requirements of the backup withholding rules. A U.S. Holder who
does not provide the Company or the U.S. Holder's broker with such U.S. Holder's
correct taxpayer identification number may be subject to penalties imposed by
the Service. Any amount paid as backup withholding will be credited against the
U.S. Holder's income tax liability. The Company will report to the U.S. Holders
and the Service the amount of any "reportable payments" for each calendar year
and the amount of tax withheld, if any, with respect to payments made with
respect to the Notes.
TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
Under present United States federal income and estate tax law and subject
to the discussion of backup withholding below:
(a) payments of interest on the Notes to a Non-U.S. Holder will not be
subject to federal withholding tax, provided that (1) the Non-U.S. Holder
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (2)
the Non-U.S. Holder is not (i) a bank receiving interest pursuant to a loan
agreement entered into in the ordinary course of its trade or business or
(ii) a controlled foreign corporation that is related to the Company
through stock ownership and (3) either (i) the Non-U.S. Holder certifies to
the Company or its agent, under penalties of perjury, that it is not a
United States person and provides its name and address or (ii) a securities
clearing organization, bank or other financial institution which holds the
Notes and customers' Notes in the ordinary course of its trade or business
(a "financial institution") certifies to the Company or its agent under
penalties of perjury that such statement has been received by it from the
Non-U.S. Holder (or by a financial institution between it and the Non-U.S.
Holder) and furnishes the payor with a copy thereof;
(b) a Non-U.S. Holder will not be subject to federal income tax on
gain realized on the sale, redemption or other disposition of a Note,
unless (1) such Non-U.S. Holder is an individual who is present in the
United States for 183 days or more during the taxable year and certain
requirements are
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<PAGE> 104
met or (2) the gain is effectively connected with a United States trade or
business of the Non-U.S. Holder; and
(c) a Note held by an individual Non-U.S. Holder who at the time of
death is not a citizen or resident of the United States for federal estate
tax purposes will not be subject to federal estate tax as a result of such
individual's death unless (1) the income from the Note is effectively
connected with a United States trade or business of the Non-U.S. Holder or
(2) the individual actually or constructively owns 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote.
If a Non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of premium, if any, and
interest made to such Non-U.S. Holder will be subject to a 30% withholding tax
unless the beneficial owner of the Note provides the Company or its paying
agent, as the case may be, with a properly executed (1) IRS Form 1001 (or
successor form) claiming an exemption from withholding under the benefit of a
tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and premium, if any, or interest on the Note is effectively connected with the
conduct of such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed above, will be subject to United States federal income
tax on such interest on a net income basis in the same manner as if it were a
U.S. Holder. In addition, if such holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to adjustments. For this
purpose, such premium, if any, and interest on a Note will be included in such
foreign corporation's earnings and profits.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-U.S. Holders
if a statement described in (a)(3) above has been received and the payor does
not have actual knowledge that the beneficial owner is a U.S. person. Payment of
the proceeds from the sale, redemption or other disposition of a Note to or
through a United States office of a broker, received by a Non-U.S. Holder will
not be subject to information reporting and backup withholding if the payor has
received the appropriate certification statement. Appropriate certification
procedures require that the Non-U.S. Holder certify as to its status as a
Non-U.S. Holder and provide its name and address. In addition, payments of the
proceeds from the sale, redemption or other disposition of a Note to or through
a foreign office of a broker or the foreign office of a custodian, nominee or
other agent acting on behalf of the beneficial owner of a Note will not be
subject to information reporting or backup withholding; however, if the broker,
custodian, nominee or other agent is a U.S. person, a controlled foreign
corporation for federal income tax purposes, or a foreign person 50% or more of
whose gross income over a specified three-year period is from a United States
trade or business, information reporting may be required with respect to such
payments. Any amounts withheld under the backup withholding rules from a payment
to a Non-U.S. Holder would be allowed as a refund or a credit against such
Non-U.S. Holder's federal income tax liability, provided that the required
information is furnished to the IRS. Recently finalized Treasury Regulations
would modify the application of information reporting requirements and the
backup withholding tax to Non-U.S. Holders effective January 1, 1999.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Sonnenschein Nath & Rosenthal, Chicago, Illinois.
EXPERTS
The consolidated financial statements of Home Products International, Inc.
and subsidiaries as of December 27, 1997 and December 28, 1996 and for the
fifty-two week periods then ended, included in this Prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as stated in their
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report appearing herein. The consolidated statements of operations,
stockholders' equity and cash flows for the 52-week period ended December 30,
1995, of Home Products International, Inc. and subsidiaries included in this
Prospectus have been audited by Grant Thornton LLP, independent certified public
accountants, as stated in their report appearing herein. The consolidated
balance sheets of Seymour Sales Corporation and subsidiaries as of June 30, 1997
and 1996, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years then ended, have been audited
by Ernst & Young LLP, independent auditors, as stated in their report appearing
herein.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, covering the Exchange Notes offered hereby. This Prospectus does not
contain all the information set forth in the Exchange Offer Registration
Statement. For further information with respect to the Company and the Exchange
Offer, reference is made to the Exchange Offer Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to such
contract, agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
While any Original Notes remain outstanding the Company will make
available, upon request, to any holder and any prospective purchaser of Notes
the information required pursuant to Rule 144A(d)(4) under the Securities Act
during any period in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act. Any such request should be directed to James E. Winslow,
Executive Vice President, Chief Financial Officer and Secretary, Home Products
International, Inc., 4501 West 47th Street, Chicago, Illinois 60632, (773)
890-1010.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Seven World Trade
Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material can be obtained by
mail from the Public Reference Section of the Commission at 450 West Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The reports, proxy
statements and other information may also be obtained from the Web site that the
Commission maintains at http://www.sec.gov. The Company's Common Stock is listed
on The Nasdaq Stock Market under the symbol "HPII," and such material may be
inspected at the offices of Nasdaq, National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20549.
The Indenture provides that the Company will furnish copies of the periodic
reports required to be filed with the Commission under the Exchange Act to the
holders of the Notes. If the Company is not subject to the periodic reporting
and informational requirements of the Exchange Act, it will, to the extent such
filings are accepted by the Commission, and whether or not the Company has a
class of securities registered under the Exchange Act, file with the Commission,
and provide the Trustee and the holders of the Notes within 15 days after such
filings with, annual reports containing the information required to be contained
in Form 10-K promulgated under the Exchange Act, quarterly reports containing
the information required to be contained in Form 10-Q promulgated under the
Exchange Act, and from time to time such other information as is required to be
contained in Form 8-K promulgated under the Exchange Act. If filing such reports
with the Commission is not accepted by the Commission or prohibited by the
Exchange Act, the Company will also provide copies of such reports, at its cost,
to prospective purchasers of the Notes and participants in the Exchange Offer
promptly upon written request.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 27,
1997.
2. Quarterly Report on Form 10-Q for the fiscal quarter ended March
28, 1998.
3. Reports on Form 8-K, dated December 30, 1997 (including the
amendment thereto on Form 8-K/A-1) and April 7, 1998.
4. Definitive Proxy Statement with respect to the Company's Annual
Meeting of Stockholders held on May 20, 1998.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of (i) the Exchange Offer and (ii) any resales by
CSI of Exchange Notes acquired pursuant to the Registration Statement of which
this Prospectus is a part, including resales of Exchange Notes acquired by it
pursuant to market making activities, hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents not
specifically described above. Requests for such documents should be directed to
James E. Winslow, Executive Vice President, Chief Financial Officer and
Secretary, 4501 West 47th Street, Chicago, Illinois 60632, (773) 890-1010.
99
<PAGE> 107
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HOME PRODUCTS INTERNATIONAL, INC.
Report of Arthur Andersen LLP............................... F-2
Report of Grant Thornton LLP................................ F-3
Consolidated Balance Sheets at December 27, 1997 and
December 28, 1996......................................... F-4
Consolidated Statements of Operations for the fiscal years
1997, 1996 and 1995....................................... F-5
Consolidated Statements of Stockholders' Equity for the
fiscal years 1997, 1996 and 1995.......................... F-6
Consolidated Statements of Cash Flows for the fiscal years
1997, 1996 and 1995....................................... F-7
Notes to Consolidated Financial Statements.................. F-8
Unaudited Quarterly Financial Information................... F-23
Report of Arthur Andersen LLP on Schedule II................ F-24
Report of Grant Thornton LLP on Schedule II................. F-25
Schedule of Valuation and Qualifying Accounts............... F-26
Condensed Consolidated Balance Sheets at March 28, 1998
(unaudited) and December 27, 1997......................... F-27
Condensed Consolidated Statements of Operations and Retained
Earnings for the thirteen week periods ended March 28,
1998 (unaudited) and March 29, 1997 (unaudited)........... F-28
Condensed Consolidated Statements of Cash Flows for the
thirteen week periods ended March 28, 1998 (unaudited) and
March 29, 1997 (unaudited)................................ F-29
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... F-30
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
Report of Ernst & Young LLP................................. F-32
Consolidated Balance Sheets as of June 30, 1997 and 1996.... F-33
Consolidated Statements of Operations for the fiscal years
1997, 1996 and 1995....................................... F-34
Consolidated Statements of Changes in Stockholders' Equity
for the fiscal years 1997, 1996 and 1995.................. F-35
Consolidated Statements of Cash Flows for the fiscal years
1997, 1996 and 1995....................................... F-36
Notes to Consolidated Financial Statements.................. F-37
Condensed Consolidated Balance Sheet at December 27, 1997
(unaudited)............................................... F-47
Condensed Consolidated Statement of Operations for the Six
Months Ended December 27, 1997 and December 28, 1996
(unaudited)............................................... F-48
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended December 27, 1997 and December 28, 1996
(unaudited)............................................... F-49
Notes to Unaudited Interim Financial Statements............. F-50
</TABLE>
F-1
<PAGE> 108
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Home Products International, Inc.
We have audited the accompanying consolidated balance sheets of Home
Products International, Inc. (formerly Selfix, Inc.) (a Delaware corporation)
and subsidiaries as of December 27, 1997 and December 28, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the fifty-two week periods then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Home Products International,
Inc. and subsidiaries as of December 27, 1997 and December 28, 1996, and the
results of its operations and its cash flows for the fifty-two week periods then
ended in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
February 6, 1998
F-2
<PAGE> 109
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Home Products International, Inc. (formerly Selfix, Inc.)
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows for the 52-week period ended December 30,
1995 of Home Products International, Inc., (formerly Selfix, Inc.). These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of their operations and their
consolidated cash flows for the 52-week period ended December 30, 1995 of Home
Products International, Inc. and Subsidiaries, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
February 9, 1996
F-3
<PAGE> 110
HOME PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF FISCAL YEAR END
---------------------
1997 1996
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 583 $ 2,878
Accounts receivable, net of allowance for doubtful
accounts of $1,716 at December 27, 1997 and $901 at
December 28, 1996...................................... 20,802 6,476
Notes and other receivables............................... 80 119
Inventories, net.......................................... 12,797 4,391
Prepaid expenses and other current assets................. 428 100
-------- --------
Total current assets.............................. 34,690 13,964
-------- --------
Property, plant and equipment -- at cost.................... 47,634 22,515
Less accumulated depreciation and amortization.............. (19,254) (14,581)
-------- --------
Property, plant and equipment, net.......................... 28,380 7,934
-------- --------
Deferred income taxes....................................... 3,466 --
Intangible and other assets................................. 32,807 2,807
-------- --------
Total assets................................................ $ 99,343 $ 24,705
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations............... $ 3,850 $ 838
Accounts payable.......................................... 9,664 1,956
Accrued liabilities....................................... 12,913 4,018
-------- --------
Total current liabilities......................... 26,427 6,812
-------- --------
Long-term obligations -- net of current maturities.......... 30,700 6,184
Stockholders' equity:
Preferred stock -- authorized, 500,000 shares, $.01 par
value; none issued..................................... -- --
Common stock -- authorized 15,000,000 shares, $.01 par
value; 6,674,271 shares issued at December 27, 1997 and
3,881,423 shares issued at December 28, 1996........... 67 39
Additional paid-in capital................................ 33,956 10,839
Retained earnings......................................... 8,616 1,296
Common stock held in treasury -- at cost (58,762
shares)................................................ (264) (264)
Currency translation adjustments.......................... (159) (201)
-------- --------
Total stockholders' equity........................ 42,216 11,709
-------- --------
Total liabilities and stockholders' equity.................. $ 99,343 $ 24,705
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 111
HOME PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------------
1997 1996 1995
----------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales.................................................. $129,324 $38,200 $41,039
Cost of goods sold......................................... 88,888 22,992 25,678
-------- ------- -------
Gross profit............................................. 40,436 15,208 15,361
Operating expenses
Selling.................................................. 18,332 9,042 10,474
Administrative........................................... 8,474 4,600 6,433
Amortization of intangible assets........................ 882 201 478
Restructuring charge..................................... -- -- 2,051
-------- ------- -------
27,688 13,843 19,436
-------- ------- -------
Operating profit (loss).................................. 12,748 1,365 (4,075)
-------- ------- -------
Other income (expense)
Interest income.......................................... 50 80 230
Interest (expense)....................................... (5,152) (707) (896)
Other income............................................. 20 68 458
-------- ------- -------
(5,082) (559) (208)
-------- ------- -------
Earnings (loss) before income taxes........................ 7,666 806 (4,283)
Income tax (expense) benefit............................... (346) -- 273
-------- ------- -------
Net earnings (loss)........................................ $ 7,320 $ 806 $(4,010)
======== ======= =======
Net earnings (loss) per common share -- Basic.............. $ 1.35 $ 0.21 $ (1.11)
======== ======= =======
Net earnings (loss) per common share -- Diluted............ $ 1.29 $ 0.21 $ (1.11)
======== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 112
HOME PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON
ADDITIONAL CURRENCY STOCK HELD
PREFERRED COMMON PAID-IN RETAINED TRANSLATION OTHER, IN TREASURY
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS NET AT COST TOTAL
--------- ------ ---------- -------- ----------- ------ ----------- -------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994....... $ -- $36 $ 9,360 $ 4,500 $(222) $(51) $ -- $13,623
Net loss........................... -- -- -- (4,010) -- -- -- (4,010)
Issuance of 250,000 shares of
common stock in connection with
the acquisition of Mericon Child
Safety Products.................. -- 3 1,372 -- -- -- -- 1,375
Issuance of 8,147 shares of common
stock in connection with exercise
of stock options................. -- -- 33 -- -- -- -- 33
Purchase of 58,762 common share
held in treasury at cost......... -- -- -- -- -- -- (264) (264)
Other.............................. -- -- -- -- -- 60 -- 60
Translation adjustments............ -- -- -- -- 30 -- -- 30
------ --- ------- ------- ----- ---- ----- -------
BALANCE AT DECEMBER 30, 1995....... -- 39 10,765 490 (192) 9 (264) 10,847
Net earnings....................... -- -- -- 806 -- -- -- 806
Issuance of 19,639 shares of common
stock in connection with employee
stock purchase plan.............. -- -- 74 -- -- -- -- 74
Other.............................. -- -- -- -- -- (9) -- (9)
Translation adjustments............ -- -- -- -- (9) -- -- (9)
------ --- ------- ------- ----- ---- ----- -------
BALANCE AT DECEMBER 28, 1996....... -- 39 10,839 1,296 (201) -- (264) 11,709
Net earnings....................... -- -- -- 7,320 -- -- -- 7,320
Issuance of 19,560 shares in
connection with employee stock
purchase plan.................... -- -- 107 -- -- -- -- 107
Issuance or 480,000 shares of
common stock in connection with
Tamor Acquisition................ -- 5 2,395 -- -- -- -- 2,400
Issuance of 2,280,000 shares of
common stock in connection with
secondary public offering........ -- 23 20,148 -- -- -- -- 20,171
Issuance of warrant................ -- -- 400 -- -- -- -- 400
Issuance of 13,288 shares of common
stock in connection with the
exercise of stock options........ -- -- 67 -- -- -- -- 67
Translation adjustments............ -- -- -- -- 42 -- -- 42
------ --- ------- ------- ----- ---- ----- -------
BALANCE AT DECEMBER 27, 1997....... $ -- $67 $33,956 $ 8,616 $(159) $ -- $(264) $42,216
====== === ======= ======= ===== ==== ===== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 113
HOME PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------
1997 1996 1995
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................................... $ 7,320 $ 806 $(4,010)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 5,687 2,214 3,337
Provision for restructuring charge..................... -- -- 2,051
Changes in assets and liabilities:
(Increase) decrease in accounts receivable............. (5,428) (1,786) 494
(Increase) decrease in inventories..................... (2,280) 760 105
Decrease in refundable income taxes.................... -- 222 159
Increase in net deferred tax asset..................... (3,466) -- --
(Increase) decrease in notes and other receivables..... -- (35) 1,691
Increase (decrease) in accounts payable................ (4,695) 622 (681)
Increase (decrease) in accrued liabilities............. 5,060 (793) (603)
Other operating activities, net........................ (1,320) (187) 32
-------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 878 1,823 2,575
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Tamor Acquisition, net of cash acquired................... (27,876) -- --
Proceeds from sale or maturity of marketable securities... -- 515 408
Capital expenditures, net................................. (8,382) (1,624) (1,215)
Restricted cash -- Industrial Revenue Bond................ -- -- 5
Mericon Child Safety Products Acquisition, net of cash
acquired............................................... -- -- (921)
-------- ------- -------
NET CASH USED FOR INVESTING ACTIVITIES...................... (36,258) (1,109) (1,723)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings.................................... (34,609) (860) (2,471)
Proceeds from borrowings and warrants..................... 44,158 -- --
Net proceeds from borrowings under revolving line of
credit................................................. 3,355 -- --
Net proceeds from secondary stock offering................ 20,171 -- --
Payment of capital lease obligation....................... (164) (32) (27)
Purchase of treasury stock................................ -- -- (264)
Exercise of common stock options and issuance of common
stock under stock purchase plan........................ 174 74 33
-------- ------- -------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES........ 33,085 (818) (2,729)
-------- ------- -------
Net decrease in cash and cash equivalents................. (2,295) (104) (1,877)
Cash and cash equivalents at beginning of year............ 2,878 2,982 4,859
-------- ------- -------
Cash and cash equivalents at end of year.................. $ 583 $ 2,878 $ 2,982
======== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest.................................................. $ 3,568 $ 599 $ 822
-------- ------- -------
Income taxes, net......................................... 1,255 (314) (457)
-------- ------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 114
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1997, DECEMBER 28, 1996, AND DECEMBER 30, 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Home Products International, Inc. (the "Company") and its subsidiary
companies design, manufacture and market products in two industry segments:
housewares products and home improvement products. Housewares products are
marketed principally through mass market trade channels throughout the United
States and internationally. Home improvement products are sold principally
through wholesalers that service the residential construction, repair, and
remodeling industry throughout the United States.
Principles of Consolidation.
The consolidated financial statements include the accounts of the Company
and its subsidiary companies. All significant intercompany transactions and
balances have been eliminated. The accompanying statements do not include the
accounts of Seymour Sales Corporation or its wholly owned subsidiary, Seymour
Housewares Corporation, (collectively, "Seymour"), as the Company did not
complete the acquisition until after the end of fiscal 1997. See Note 16 for
more information regarding the acquisition of Seymour.
Use of Estimates.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments and Credit Risk.
The carrying value of cash, cash equivalents, investments and long-term
obligations approximate their fair values based upon quoted market rates. As of
December 27, 1997, and December 28, 1996, the Company had no significant
concentrations of credit risk related to cash equivalents.
Inventories.
Inventories are stated at the lower of cost or net realizable value with
cost determined on a first in, first out (FIFO) basis.
Property, Plant and Equipment.
Property, plant and equipment are stated at cost. Depreciation is charged
against results of operations over the estimated service lives of the related
assets.
Improvements to leased property are amortized over the life of the lease or
the life of the improvement, whichever is shorter. For financial reporting
purposes, the Company uses the straight-line method of depreciation. For tax
purposes, the Company uses accelerated methods where permitted.
F-8
<PAGE> 115
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated service lives of the fixed assets are as follows:
<TABLE>
<S> <C>
Buildings................................................... 30 years
Land and building under capital lease....................... lease term
Machinery, equipment and vehicles........................... 3-8 years
Tools, dies and molds....................................... 5 years
Furniture, fixtures and office equipment.................... 2-8 years
Leasehold improvements...................................... lease term
</TABLE>
Revenue Recognition.
The Company recognizes revenue as products are shipped to customers.
Intangible Assets.
Goodwill, which represents the excess of the purchase price over the fair
value of net assets acquired, is amortized over forty years. Covenants not to
compete are amortized on a straight-line basis over the terms of the respective
agreements. Patents, royalty rights, trademarks acquired and licensing
agreements are amortized over their estimated useful lives ranging from five to
ten years.
Long-Lived Assets.
In fiscal 1996, the Company adopted Statement of Financial Accounting
Standard No. 121, ("SFAS 121"), "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of". The statement requires entities
to review long-lived assets and certain intangible assets in certain
circumstances, and if the value of the asset is impaired, an impairment loss
shall be recognized. The adoption of this policy had no material effect on the
Company's financial position or results of operations.
Income Taxes.
Deferred tax assets and liabilities are determined at the end of each
period, based on differences between the financial statement bases of assets and
liabilities and the tax bases of those same assets and liabilities, using the
currently enacted statutory tax rates.
Net Earnings (Loss) Per Common Share.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"),
which established new standards for the computation and presentation of earning
per share information. As required, the Company has adopted the provisions of
SFAS 128 for its year end 1997 financial statements, and has restated all prior
year earnings per share information. Net earnings (loss) per common
share -- basic, was calculated by dividing net earnings (loss) applicable to
common shares by the weighted average number of common shares outstanding during
each year. Net earnings (loss) per common share -- diluted, reflects the
potential dilution that could occur assuming exercise of all outstanding
"in-the-money" stock options. A reconciliation of the net earnings
F-9
<PAGE> 116
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(loss) and the number of shares used in computing basic and diluted earnings per
share was as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
Net earnings (loss) per common share -- Basic:
Net earnings (loss) applicable to common shares........... $7,320 $ 806 $(4,010)
====== ====== =======
Weighted average common shares outstanding for the year... 5,436 3,820 3,617
====== ====== =======
Net earnings (loss) per common share -- Basic............. $ 1.35 $ 0.21 $ (1.11)
====== ====== =======
Net earnings (loss) per common share -- Diluted:
Net earnings (loss) applicable to common shares........... $7,320 $ 806 $(4,010)
====== ====== =======
Weighted average common shares outstanding for the year... 5,436 3,820 3,617
Increase in shares which would result from exercise of
"in-the-money" stock options........................... 246 34 --
------ ------ -------
Weighted average common shares assuming conversion of the
above securities....................................... 5,682 3,854 3,617
====== ====== =======
Net earnings (loss) per common share -- Diluted........... $ 1.29 $ 0.21 $ (1.11)
====== ====== =======
</TABLE>
Benefit Plans.
The Company provides a profit sharing and savings plan (including a 401(k)
plan) to which both the Company and eligible employees may contribute. Company
contributions to the profit sharing and savings plan are voluntary and at the
discretion of the Board of Directors. The Company matches the employee 401(k)
plan contributions with certain limitations. The total Company contributions to
both plans are limited to the maximum deductible amount under the Federal income
tax law.
The Company provides retirement plans for its employees covered under
collective bargaining agreements. The amount of the Company contribution is
determined by the respective collective bargaining agreement.
The contributions to all the profit sharing, savings, and retirement plans
for 1997, 1996 and 1995, were $414, $248, and $259, respectively.
Cash and Cash Equivalents.
The Company considers all highly liquid, short-term investments with an
original maturity of three months or less, to be cash equivalents.
Fiscal Year.
The Company's fiscal year ends on the last Saturday in December. References
to the fiscal years 1997, 1996 and 1995 are for the fifty-two weeks ended
December 27, 1997, December 28, 1996 and December 30, 1995.
Related Parties.
A director of the Company is the executor and co-trustee of certain estates
and trusts which lease facilities to the Company as discussed in Note 9. In
addition, the director is a partner in a law firm which is the Company's general
counsel. Total fees paid to this law firm in fiscal 1997 were $730.
F-10
<PAGE> 117
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In fiscal 1997 the Company engaged the services of a management consulting
firm in which a director of the Company is a partner. Total fees paid to this
management consulting firm in 1997 were $99.
In fiscal 1997, Tamor purchased raw materials and packaging from vendors
whose ownership was related to certain officers of Tamor. Such transactions were
as follows: (i) raw materials totaling $9,835, and packaging totaling $1,700.
Management believes the transactions were conducted on an arm's length basis at
competitive prices.
NOTE 2. ACQUISITION OF TAMOR PLASTICS CORPORATION AND HOUSEWARE SALES, INC.
Pursuant to an agreement dated October 29, 1996, the Company, as of January
1, 1997, took operating and financial control of Tamor Plastics Corporation, and
its affiliated product distribution company, Houseware Sales, Inc.,
(collectively, "Tamor"), assumed substantially all of the liabilities of Tamor
and retained substantially all of the earnings from Tamor's operations (the
"Tamor Acquisition"). Actual results are combined since the date of effective
control although the purchase did not close until February 28, 1997. Tamor,
founded in 1947, designs, manufactures, and markets quality plastic houseware
products, including storage totes, hangers, and juvenile organization products.
The Tamor Acquisition was completed by the Company for a total purchase
price of $41,900 consisting of $27,800 in cash, $2,400 of Common Stock (480,000
shares), and the assumption of $11,700 of short and long-term debt. The funds
used for the Tamor Acquisition were obtained from a credit agreement entered
into with General Electric Capital Corporation, ("GECC"), on February 27, 1997,
(the "Credit Agreement"). See Note 9 for additional information on the Credit
Agreement.
The Tamor Acquisition was accounted for as a purchase, and the operating
results of Tamor have been included in the accompanying financial statements
from January 1, 1997, the effective date of the acquisition. The excess of the
purchase price over the fair value of the assets acquired (goodwill)
approximated $27,599 and is being amortized over a period of forty years.
The unaudited pro forma consolidated results of operations as of December
28, 1996 would have been as follows, if the Tamor Acquisition had occurred on
January 1, 1996:
<TABLE>
<S> <C>
Net sales................................................... $113,914
Gross profit................................................ 33,104
Operating Income............................................ 8,240
Net earnings................................................ 2,599
Net earnings per common share -- Basic...................... $ 0.60
Net earnings per common share -- Diluted.................... $ 0.59
</TABLE>
Adjustments made in arriving at the pro forma combined results include
increased interest expense and amortization of debt issuance costs on
acquisition debt, amortization of goodwill, and certain operating expense
reductions. No effect has been given in operating expenses to the fair value of
the assets acquired, depreciable values or lives, or synergistic benefits which
may be realized from the acquisition.
The pro forma consolidated results do not purport to be indicative of
results that would have occurred had the Tamor Acquisition been in effect as of
January 1, 1996 nor do they purport to be indicative of the results that will be
obtained in the future.
NOTE 3. ACQUISITION OF MERICON CHILD SAFETY PRODUCTS
On October 24, 1995, the Company acquired 100% of the common stock of
Mericon Child Safety Products for a total purchase price of $2,421 consisting of
250,000 shares of the Company's common stock. The acquisition was accounted for
as a purchase, and accordingly, the results of operations are included in the
F-11
<PAGE> 118
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consolidated financial results from the date of acquisition. The purchase price
in excess of the fair value of net assets acquired (goodwill) of approximately
$1,796 is being amortized over a period of forty years.
NOTE 4. PUBLIC STOCK OFFERING
On June 30, 1997, the Company completed a secondary public offering of
2,000,000 new shares of its common stock. Net proceeds in the amount of $18,300
were used to repay the subordinated note of $7,000, term notes of $11,100, and
accrued interest of $200. On July 16, 1997, an additional 280,000 shares were
sold pursuant to an underwriter's over-allotment provision. Net proceeds of
$2,600 were used to repay term notes of $2,500 and accrued interest of $100.
See Note 9 for additional information regarding the repayment of debt.
NOTE 5. INVENTORIES
The components of the Company's inventory were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Finished goods........................................... $ 7,335 $ 2,604
Work-in-process.......................................... 2,225 1,003
Raw materials............................................ 3,237 784
------- -------
$12,797 $ 4,391
======= =======
</TABLE>
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Buildings and land..................................... $ 5,588 $ 2,176
Land and building under capital lease.................. 2,535 2,535
Machinery, equipment and vehicles...................... 17,936 7,092
Tools and dies......................................... 16,303 6,704
Furniture, fixtures and office equipment............... 3,339 2,679
Leasehold improvements................................. 1,933 1,329
-------- --------
47,634 22,515
Less accumulated depreciation and amortization......... (19,254) (14,581)
-------- --------
$ 28,380 $ 7,934
======== ========
</TABLE>
F-12
<PAGE> 119
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Goodwill, net of accumulated amortization of $993 on
December 27, 1997, and $223 on December 28, 1996.......... $28,892 $1,978
Covenants not to compete, net of accumulated amortization of
$13 on December 27, 1997, and $7 on December 28, 1996..... 77 23
Industrial Revenue Bond fees, net of accumulated
amortization of $230 on December 27, 1997, and $202 on
December 28, 1996......................................... 173 201
Patents, net of accumulated amortization of $1,384 on
December 27, 1997, and $1,327 on December 28, 1996........ 96 153
Licensing agreement, net of accumulated amortization of $42
on December 27, 1997, and $23 on December 28, 1996........ 153 172
Deferred financing fees, net of accumulated amortization of
$439 on December 27, 1997, and $20 on December 28, 1996... 3,320 77
Other assets................................................ 96 203
------- ------
$32,807 $2,807
======= ======
</TABLE>
NOTE 8. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Compensation and other benefits........................... $ 3,012 $1,540
Sales incentives and commissions.......................... 2,721 814
Income taxes payable...................................... 3,551 92
Other..................................................... 3,629 1,572
------- ------
$12,913 $4,018
======= ======
</TABLE>
NOTE 9. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Revolving credit facility, variable rate, due August 28,
2002...................................................... $ 3,355 $ --
Term Loan A, variable rate, due July 1, 2002................ 11,783 --
Term Loan B, variable rate, due July 1, 2004................ 12,938 --
Illinois Development Finance Authority (IDFA) variable rate
demand Industrial Development Revenue bonds (Shutters
Project) Series 1989, due November 1, 2002................ 2,000 2,400
Illinois Development Finance Authority (IDFA) variable rate
demand Industrial Development Revenue Bonds (Selfix, Inc.
Project) Series 1990, due September 1, 2005............... 2,400 2,800
Capital lease obligations................................... 2,074 1,822
------- ------
34,550 7,022
Less current maturities..................................... (3,850) (838)
------- ------
$30,700 $6,184
======= ======
</TABLE>
F-13
<PAGE> 120
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Tamor Acquisition, (as more fully described in Note
2), the Company entered into a credit agreement dated February 27, 1997 (the
"Credit Agreement"), with GECC which provided (i) a $20,000 revolving credit
facility, (ii) a twenty-two quarter $20,000 term loan, and (iii) a thirty
quarter $20,000 term loan. In addition, the Company obtained a $7,000
subordinated equity bridge note (the "Subordinated Note") through GECC. However,
as more fully described in Note 16, effective December 30, 1997 the Company
terminated the February 27, 1997, Credit Agreement, and entered into a $130,000
credit agreement dated December 30, 1997 (the "12/30/97 Credit Agreement") with
GECC. In addition to the 12/30/97 Credit Agreement, the Company obtained a
$10,000 senior subordinated note, also through GECC.
In connection with the Subordinated Note, the Company issued a warrant (the
"Warrant") to purchase 79,204 shares of common stock, exercisable at 50% of the
Market price ($5.80 per share), as defined in the Warrant. The exercise period
commenced on August 1, 1997, and terminates on February 27, 2007. The Warrant
was recorded by the Company at its estimated fair value of $400. As of December
27, 1997 the Warrant had not been exercised.
As discussed in Note 4, on June 24, 1997, the Company completed a secondary
public offering of 2,000,000 shares of its common stock. Net proceeds in the
amount of $18,300 were used to fully repay the Subordinated Note of $7,000, term
notes of $11,100, and accrued interest of $200. On July 16, 1997, an additional
280,000 shares were sold pursuant to an underwriter's over-allotment provision.
Net proceeds of $2,600 were used to repay term notes of $2,500 and accrued
interest of $100.
The IDFA variable rate demand Industrial Development Bonds (Shutters
Project) Series 1989, were issued in December 1989, and mature on November 1,
2002. Interest is calculated based upon a weekly variable rate, and is paid
monthly. Principal is payable in annual installments, due on December 1. The
variable rate at December 27, 1997, and December 28, 1996, was 4.6%.
The IDFA variable rate demand Industrial Development Bonds (Selfix Project)
Series 1990, were issued in September 1990, and mature on September 1, 2005.
Interest is calculated based upon a weekly variable rate, and is paid monthly.
Principal is payable in annual installments, due on December 1. The variable
rate at December 27, 1997, and December 28, 1996, was 4.6%.
Capital lease obligations include; (i) a lease agreement between Selfix and
two related trusts for Selfix's principal factory and corporate office; and (ii)
starting in fiscal 1997, various equipment lease agreements. Lease payments to
the trusts were $519, $467 and $491, in 1997, 1996 and 1995, respectively, and
lease payments for machinery and equipment in 1997 were $140.
The following schedule shows future minimum lease payments together with
the present value of the payments for capital lease obligations.
<TABLE>
<S> <C>
Years ending:
1998........................................................ $ 430
1999........................................................ 422
2000........................................................ 417
2001........................................................ 404
2002........................................................ 367
Thereafter.................................................. 2,604
-------
4,644
Less amount representing interest........................... (2,570)
-------
Present value of minimum lease payments..................... $ 2,074
=======
Long-term portion........................................... $ 1,974
Current portion............................................. 100
-------
$ 2,074
=======
</TABLE>
F-14
<PAGE> 121
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company leases certain manufacturing, distribution, and office
facilities under noncancellable operating leases, expiring at various dates
through 1999. Future minimum lease payments amount to $1,046, and $1,020 for
fiscal years 1998 and 1999, respectively. Rent expense under operating leases
for 1997, 1996, and 1995, was $1,184, $354, and $381, respectively.
NOTE 11. INCOME TAXES
The components of earnings (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
<S> <C> <C> <C>
Domestic................................................ $7,602 $1,122 $(3,262)
Foreign................................................. 64 (316) (1,021)
------ ------ -------
$7,666 $ 806 $(4,283)
====== ====== =======
</TABLE>
Significant components of the Company's deferred tax items as of December
27, 1997 and December 28, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
DEFERRED TAX ASSETS
Inventory reserves and overhead capitalized for tax
purposes............................................... $1,166 $ 414
Employee benefit expenses and other accruals.............. 341 450
Accounts receivable reserve............................... 423 241
Capitalized lease treated as operating lease for tax
purposes............................................... 378 430
Accrued advertising, volume rebates and reserves for
returns................................................ 890 109
Other accrued liabilities................................. 235 344
Net operating loss carryforward........................... -- 612
Other..................................................... 936 889
------ -------
Gross deferred tax assets................................... 4,369 3,489
------ -------
DEFERRED TAX LIABILITIES
Depreciation.............................................. 628 301
Other..................................................... 275 45
------ -------
Gross deferred tax liabilities.............................. 903 346
------ -------
Deferred tax assets net of deferred liabilities............. 3,466 3,143
Valuation allowance......................................... -- (3,143)
------ -------
Net deferred tax asset...................................... $3,466 $ --
====== =======
</TABLE>
In fiscal 1997, the Company received a refund of approximately $330
relating to federal income taxes paid in prior years. Through the claim for
refund filed, and the level of fiscal 1997 taxable income, the Company utilized
all federal net operating loss carryforwards in fiscal 1997.
The Company has research and development credit carryforwards of
approximately $11, expiring through the year 2010, state investment tax credit
carryforwards of approximately $86 expiring through 2000 and foreign net
operating loss carryforwards of $1,082 expiring in 2002.
The Company eliminated the valuation allowance as of December 27, 1997
based upon the determination that it is more likely than not that the Company
will realize the benefits generated from the deferred tax assets recorded.
F-15
<PAGE> 122
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ----- -----
<S> <C> <C> <C>
Current
U.S. federal.............................................. $ 1,721 $ 0 $(247)
Foreign................................................... -- (10) 22
State..................................................... 346 0 (48)
------- ----- -----
2,067 (10) (273)
------- ----- -----
Deferred
U.S. federal.............................................. 1,422 266 (463)
Increase (decrease) in valuation allowance................ (3,143) (256) 463
------- ----- -----
(1,721) 10 --
------- ----- -----
Total income tax expense (benefit).......................... $ 346 $ -- $(273)
======= ===== =====
</TABLE>
Income tax expense (benefit) differs from amounts computed based on the
U.S. federal statutory tax rate applied to earnings (loss) before tax as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ----- -------
<S> <C> <C> <C>
Computed at statutory U.S. federal income tax rate.......... $ 2,683 $ 282 $(1,456)
State income taxes, net of U.S. federal tax benefit......... 383 (39) (32)
Foreign tax rate difference and foreign loss
carryforwards............................................. -- -- 460
Tax exempt interest......................................... -- (12) (25)
Exercise of Stock Options................................... (34) -- --
Non deductible goodwill..................................... 62 -- --
Other....................................................... 395 25 317
Change in valuation allowance............................... (3,143) (256) 463
------- ----- -------
$ 346 $ -- $ (273)
======= ===== =======
</TABLE>
NOTE 12. STOCK OPTIONS
Under the 1987, 1991 and 1994 stock option plans as amended, (collectively,
the "Stock Option Plan") key employees and certain key nonemployees were granted
options to purchase shares of the Company's common stock. All stock option
grants are authorized by the Compensation Committee of the Board of Directors,
which is comprised of outside directors.
Options granted may or may not be "incentive stock options" as defined by
the Internal Revenue Code of 1986. The exercise price is determined by the
Company's Board of Directors at the time of grant but may not be less than 100%
of the market price at the time of grant for incentive stock options. Options
may not be granted for a term greater than ten years.
All options granted, with the exception of those granted to the Chief
Executive Officer, vest within a five year period. The options granted to the
Chief Executive Officer vest on an accelerated schedule in accordance with his
employment contract.
In 1997, the shareholders of the Company voted to increase the maximum
number of shares of common stock which may be granted under the Stock Option
Plan by 450,000 shares to a maximum available of 1,475,000. A total of 120,820
shares of common stock have been issued as of December 27, 1997 from the Stock
Option Plan, and 1,354,180 shares remain in reserve.
F-16
<PAGE> 123
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company applies APB Opinion 25 "Accounting for Stock Based
Compensation" and related interpretations in accounting for stock option awards
under the Stock Option Plan. Accordingly, no compensation cost has been
recognized in the Company's financial statements. As required by SFAS 123, the
Company has computed, for pro forma disclosure purposes, the value of options
granted during fiscal years 1997 and 1996 using an option pricing model. The
weighted average assumptions used for stock option grants for 1997 and 1996 were
a dividend yield of 0%, expected volatility of the market price of the Company's
common stock of 43% for 1997, and 41% for 1996, a weighted-average expected life
of the options of approximately five years, and weighted average risk free
interest rates of 6.3% for fiscal 1997 and 6.5% for fiscal 1996.
Option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because changes in the subjective
input assumptions can materially affect the fair value estimates, in
management's opinion, the existing model does not necessarily provide a reliable
single measure of the fair value of its employee stock based compensation plan.
Had compensation cost for the Company's 1997 and 1996 grants been
determined using the above fair values and considering the applicable vesting
periods, the Company's reported results would have been impacted as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -------
<S> <C> <C> <C>
Net earnings (loss)
As reported............................................ $7,320 $ 806 $(4,010)
Pro forma.............................................. 6,720 564 (4,092)
Net earnings (loss) per common share -- Basic
As reported............................................ $ 1.35 $0.21 $ (1.11)
Pro forma.............................................. $ 1.24 $0.15 $ (1.13)
Net earnings (loss) per common share -- Diluted
As reported............................................ $ 1.29 $0.21 $ (1.11)
Pro forma.............................................. $ 1.18 $0.15 $ (1.13)
</TABLE>
A summary of the transactions in the option plans is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ----------------- ------------------
SHARES PRICE* SHARES PRICE* SHARES PRICE*
--------- ------ ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year...... 781,987 $ 6.21 598,527 $6.74 557,842 $8.65
Granted.................. 497,900 10.17 248,900 4.95 626,700 7.22
Exercised................ (13,288) 4.58 -- -- (8,147) 4.15
Canceled................. (45,100) 10.38 (65,440) 6.20 (577,868) 9.14
--------- ------- --------
Unexercised options
outstanding at end of
year................... 1,221,499 7.70 781,987 6.21 598,527 6.74
========= ======= ========
Options exercisable at
end of year............ 199,734 6.75 16,754 4.89 15,784 4.69
========= ======= ========
Available for grant...... 132,681 1,934 195,394
========= ======= ========
</TABLE>
- ---------------
* Weighted average
F-17
<PAGE> 124
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
-------------- ------------- --------------
<S> <C> <C> <C>
Price range of options Granted........ $4.38 - $14.00 $4.25 - $6.00 $4.13 - $12.00
Exercised............................. $4.23 - $ 5.00 $ -- - $ -- $4.00 - $ 4.23
Canceled.............................. $4.25 - $10.38 $4.13 - $8.00 $3.13 - $12.00
Outstanding........................... $4.13 - $14.00 $4.13 - $8.00 $4.13 - $ 8.00
</TABLE>
The above stock options have the following characteristics as of December
27, 1997:
<TABLE>
<CAPTION>
REMAINING
SHARES LIFE SHARES
GRANT YEAR OUTSTANDING PRICE* (IN YEARS)* EXERCISABLE
---------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Pre-1995................................... 16,399 $ 5.09 5.5 16,399
1995....................................... 512,200 6.88 7.5 116,668
1996....................................... 238,000 4.96 8.8 66,667
1997....................................... 454,900 10.15 9.8 --
--------- -------
1,221,499 199,734
========= =======
</TABLE>
- ---------------
* Weighted average
NOTE 13. EMPLOYEE STOCK PURCHASE PLAN
The 1995 Employee Stock Purchase Plan allows eligible employees to purchase
up to 200,000 shares of the Company's stock. The purchase price shall be the
lesser of 85% of the fair market value of a common share on the first day of
each purchase period or the fair market value of a common share on the last day
of such purchase period, adjusted to the nearest 1/8 point. As of December 27,
1997, and December 28, 1996, 19,560, and 19,639 shares respectively had been
purchased under the plan.
NOTE 14. STATEMENT OF OPERATIONS AND RESTRUCTURING CHARGES
In the fourth quarter of 1995, the Company announced its intent to
consolidate facilities and exit additional product lines. The 1995 charge is a
result of the Company's decision to exit certain unprofitable product lines,
close the Company's Canadian facility and move the Canadian operations to the
Chicago manufacturing and distribution facilities. The restructuring charges for
these initiatives totaled $2,051. The charges for the closing and relocation of
the Canadian operation totaled $951 including severance benefits of $184
covering all of the Canadian employees. The relocation of the Canadian operation
was completed in the first half of 1996. The remaining $1,100 of restructuring
charges pertains to product lines the Company has decided to exit and the
related write-off of product molds, inventory and patents. Approximately $66 of
inventory reserves, $74 of accrued legal and accrued severance and $140 of
accrued facility closing costs remained on the Company's books at December 28,
1996. As of December 27, 1997, no balances remained in these accounts.
In 1995, the Company received approximately $1,400, net of a contingent
liability, as its share of the net proceeds from a patent suit settlement. The
Company recorded approximately $500 as its share of the proceeds in other income
in 1994.
NOTE 15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in two industry segments, the housewares segment and
the home improvement products segment. The housewares segment provided
approximately 94% of the Company's gross sales in 1997 and the home improvement
products segment provided approximately 6% of the Company's gross sales in 1997.
Sales to customers outside the United States in 1997 accounted for approximately
6% of total net sales
F-18
<PAGE> 125
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
with Canada accounting for approximately 2% of total net sales. Information
about the Company's operations in these segments is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Gross sales:
Housewares......................................... $129,745 $31,375 $34,543
Home improvement products.......................... 8,385 9,457 8,993
-------- ------- -------
Consolidated.................................... $138,130 $40,832 $43,536
======== ======= =======
Operating profit (loss):
Housewares......................................... $ 12,277 $ 904 $(4,892)
Home improvement products.......................... 471 461 817
-------- ------- -------
Consolidated....................................... $ 12,748 $ 1,365 $(4,075)
======== ======= =======
Identifiable assets:
Housewares......................................... $ 93,898 $19,615 $19,676
Home improvement products.......................... 5,445 5,090 5,300
-------- ------- -------
Consolidated.................................... $ 99,343 $24,705 $24,976
======== ======= =======
Depreciation and amortization:
Housewares......................................... $ 5,274 $ 1,532 $ 2,684
Home improvement products.......................... 413 682 653
-------- ------- -------
Consolidated.................................... $ 5,687 $ 2,214 $ 3,337
======== ======= =======
Capital expenditures, net:
Housewares......................................... $ 8,062 $ 982 $ 880
Home improvement products.......................... 320 642 335
-------- ------- -------
Consolidated.................................... $ 8,382 $ 1,624 $ 1,215
======== ======= =======
</TABLE>
Information about the Company's operations by geographic area is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Gross sales:
United States........................................ $136,407 $38,855 $40,283
Foreign.............................................. 1,723 1,977 3,253
-------- ------- -------
Consolidated...................................... $138,130 $40,832 $43,536
======== ======= =======
Operating profit (loss):
United States........................................ $ 12,689 $ 1,386 $(2,975)
Foreign.............................................. 59 (21) (1,100)
-------- ------- -------
Consolidated...................................... $ 12,748 $ 1,365 $(4,075)
======== ======= =======
Identifiable assets:
United States........................................ $ 99,018 $24,170 $23,699
Foreign.............................................. 325 535 1,277
-------- ------- -------
Consolidated...................................... $ 99,343 $24,705 $24,976
======== ======= =======
</TABLE>
As a percentage of gross sales, a single customer represented 23% in 1997,
and 12% in each of 1996 and 1995. A second customer represented 10% of 1997
gross sales, and less than 10% of gross sales in each of 1996 and 1995.
F-19
<PAGE> 126
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. SUBSEQUENT EVENTS
Effective December 30, 1997, (within the Company's fiscal 1998), the
Company completed the acquisition of Seymour Sales Corporation and its wholly
owned subsidiary, Seymour Housewares Corporation, (collectively, "Seymour").
Seymour, headquartered in Seymour, Indiana, is an industry leading manufacturer
and marketer of consumer laundry care products, including a full line of ironing
boards, ironing board covers and pads, and numerous laundry related accessories.
The acquisition will be accounted for as a purchase. As such, the excess of
the purchase price over the estimated fair value of the acquired net assets,
which approximates, $35,000, will be recorded as goodwill and amortized over
forty years. The purchase price allocation will be determined in 1998 when
additional information becomes available. Accordingly, the final allocation may
have a material effect on the pro forma information presented below.
Total consideration for the acquisition was $100,700, consisting of
approximately $16,400 in cash, $14,300 in common stock (1,320,700 shares) and
the assumption of $70,000 of debt.
The following unaudited pro forma information for the fifty-two weeks ended
December 27, 1997 presents the combined results of operations as if the
acquisition had been completed at the beginning of 1997, and may not be
indicative of what would have occurred had the acquisition actually been made as
of such date, or results which may occur in the future.
Had the Seymour Acquisition occurred on January 1, 1997, pro forma net
sales would have been $222,287, and operating profit would have been $15,332.
Pro forma net income before extraordinary item would have been $3,972 or $0.59
per common share -- basic and $0.57 per common share -- diluted. Pro forma net
earnings, after a $1,800 net of tax extraordinary item for the write-off of
deferred financing fees related to a prior credit agreement would have been
$2,172 or $0.32 per common share -- basic and $0.31 per common share -- diluted.
Adjustments made in arriving at the pro forma unaudited combined results
include increased interest expense, amortization of debt issuance costs on
acquisition debt, amortization of goodwill, certain operating expense reductions
and income tax expense recorded at an estimated combined statutory rate of 40%,
prior to adjustment to the valuation allowance. No effect has been given in
operating expenses to the fair value of assets acquired, depreciable values or
lives, transition and restructuring costs or synergistic benefits which may be
realized from the acquisition.
The source of funds for the acquisition included the proceeds of a $130,000
Credit Agreement, dated December 30, 1997, (the "12/30/97 Credit Agreement"),
among the Company, Selfix, Shutters, Tamor, and Seymour, the lenders which are
parties thereto and General Electric Capital Corporation ("GECC") as agent, and
a $10,000 senior subordinated note (the "12/30/97 Senior Subordinated Note"),
dated December 30, 1997. The 12/30/97 Credit Agreement consists of a $20,000
revolving credit facility (the "12/30/97 Revolver") and $110,000 in senior term
loans. All loans under the 12/30/97 Credit Agreement are secured by
substantially all of the assets of the subsidiaries of the Company (including
Seymour) and a pledge by the Company of all the outstanding shares of capital
stock of such subsidiaries.
The provisions of the 12/30/97 Credit Agreement include restrictions on
additional indebtedness, asset sales, acquisitions or mergers, capital
expenditures and dividend payments, among other things. As defined in the
12/30/97 Credit Agreement, the Company is also required to meet certain
financial tests which include, but are not limited to, those relating to a
minimum net worth test and a minimum interest coverage ratio.
The 12/30/97 Revolver provides up to $20,000 (including a letter of credit
facility of up to $15,000) subject to the availability of sufficient qualifying
collateral. Interest is charged, at the Company's option, at either (i) the 1, 2
or 3 month reserve adjusted LIBOR rate plus a margin of 2.5%; or (ii) a floating
rate equal to the prime rate plus a margin of 1.0%. Interest is paid monthly for
borrowings which bear interest based on
F-20
<PAGE> 127
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the prime rate and is paid at the end of the applicable LIBOR period for
borrowings which bear interest based on a LIBOR rate. An unused facility fee of
.5% per annum is charged on the average unused daily balance. As of December 30,
1997, there were no borrowings outstanding on the 12/30/97 Revolver and unused
availability was $13,400. Availability was reduced by several letters of credit
outstanding as of December 30, 1997, which totaled $6,600. The 12/30/97 Revolver
terminates on December 30, 2002.
The 12/30/97 Credit Agreement also includes two senior term loans, (i)
consisting of a $50,000 twenty-four quarter senior term loan ("Senior Term Loan
A") and (ii) a $60,000 thirty-two quarter senior term loan ("Senior Term Loan
B"). Both term loans are immediately due and payable in full if the 12/30/97
Revolver is terminated.
Senior Term Loan A is required to be repaid in quarterly principal
installments commencing in April 1998. Aggregate principal repayments for the
Senior Term Loan A are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
------------
<S> <C>
1998............................................... $ 3,750
1999............................................... 6,500
2000............................................... 7,750
2001............................................... 9,500
2002............................................... 10,000
Thereafter......................................... 12,500
</TABLE>
Interest is charged, at the Company's option at either: (i) the 1, 2 or 3
month reserve adjusted LIBOR plus a margin of 2.5%; or (ii) a floating rate
equal to the prime rate plus a margin of 1.0%. Interest is paid monthly for
borrowings which bear interest based on the prime rate and is paid at the end of
the applicable LIBOR period for borrowings which bear interest based on a LIBOR
rate.
Senior Term Loan B is required to be repaid in quarterly principal
installments commencing in April of 1998. Aggregate principal repayments for the
Senior Term Loan B are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
------------
<S> <C>
1998............................................... $ 450
1999............................................... 600
2000............................................... 600
2001............................................... 600
2002............................................... 600
Thereafter......................................... 57,150
</TABLE>
Interest is charged, at the Company's option, at either: (i) the 1, 2 or 3
month reserve adjusted LIBOR plus a margin of 3.0%; or (ii) a floating rate
equal to the prime rate plus a margin of 1.5%. Interest is paid monthly for
borrowings which bear interest based on the prime rate and is paid at the end of
the applicable LIBOR period for borrowings which bear interest based on a LIBOR
rate.
The interest rates applicable to the obligations outstanding under the
12/30/97 Credit Agreement are subject to adjustment (up or down) based on the
Company's year to date 1998 consolidated financial performance.
The 12/30/97 Senior Subordinated Note matures on December 30, 2006, and is
secured by a second lien on substantially all of the assets of the Company's
subsidiaries. As such, the 12/30/97 Senior Subordinated Note is subordinated in
right of payment from the proceeds of such collateral to the 12/30/97 Revolver
and to the Senior Term Loans A and B. If all outstanding obligations under the
12/30/97 Credit Agreement have been paid and the commitment under the 12/30/97
Revolver has been terminated, the Company must prepay
F-21
<PAGE> 128
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the 12/30/97 Senior Subordinated Note in full. Interest is payable monthly, and
is charged at a rate of prime plus a margin of 3%, but in no event less than 11%
per annum. The 12/30/97 Senior Subordinated Note is due and payable in a single
installment on December 30, 2006.
The 12/30/97 Senior Subordinated Note contains a fee which is due and
payable to GECC upon repayment of the principal. If the 12/30/97 Senior
Subordinated Note is repaid in full on or prior to December 30, 1999, the
required fee is $500; if repaid in full after December 30, 1999, but prior to
December 30, 2000, the fee is $750; if repaid in full after December 30, 2000,
but prior to December 30, 2001, the fee is $1,200; if repaid in full after
December 30, 2001, but prior to December 30, 2002, the fee is $1,600; and if
repaid on or after December 30, 2002, the fee is $2,000.
The 12/30/97 Credit Agreement provides for mandatory prepayments of
obligations under the 12/30/97 Credit Agreement and the 12/30/97 Senior
Subordinated Note from proceeds received in certain transactions outside the
normal scope of the Company's business, such as the sale of fixed assets, or the
receipt of insurance proceeds. Additionally, the Company is subject to an annual
mandatory prepayment out of "excess cash", as defined in the 12/30/97 Credit
Agreement. The Company will be subject to a prepayment premium, as defined in
the 12/30/97 Credit Agreement, until December 30, 1999, if the revolving credit
facility is terminated or the Company prepays all or any portion of the Senior
Term Loans A or B other than as a result of the mandatory prepayments discussed
above.
F-22
<PAGE> 129
HOME PRODUCTS INTERNATIONAL, INC.
UNAUDITED QUARTERLY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN THIRTEEN THIRTEEN
WEEKS WEEKS WEEKS WEEKS
ENDED ENDED ENDED ENDED
MARCH 29 JUNE 28 SEPTEMBER 27 DECEMBER 27
1997 -------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales........................................ $31,738 $33,023 $32,875 $31,688
Gross profit..................................... 9,128 10,124 10,377 10,807
Net earnings..................................... 1,032 1,789 2,421 2,078
Net earnings per common share -- Basic........... $ 0.24 $ 0.41 $ 0.37 $ 0.31
Net earnings per common share -- Diluted......... $ 0.23 $ 0.40 $ 0.36 $ 0.30
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN THIRTEEN THIRTEEN
WEEKS WEEKS WEEKS WEEKS
ENDED ENDED ENDED ENDED
MARCH 30 JUNE 29 SEPTEMBER 28 DECEMBER 28
1996 -------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales........................................ $ 8,625 $10,155 $10,728 $ 8,692
Gross profit..................................... 2,858 4,311 4,388 3,651
Net earnings (loss).............................. (1,116) 709 764 449
Net earnings (loss) per common share -- Basic.... $ (0.29) $ 0.19 $ 0.20 $ 0.11
Net earnings (loss) per common
share -- Diluted............................... $ (0.29) $ 0.19 $ 0.20 $ 0.11
</TABLE>
F-23
<PAGE> 130
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II
Board of Directors
Home Products International Inc.
We have audited in accordance with generally accepted auditing standards
the consolidated financial statements of Home Products International, Inc.
(formerly Selfix, Inc.) as of and for the fifty-two week period ended December
27, 1997 and December 28, 1996 included in this Prospectus, and have issued our
report thereon dated February 6, 1998. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The Valuation and
Qualifying Accounts on Schedule II is the responsibility of the Company's
management. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
February 6, 1998
F-24
<PAGE> 131
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE II
Board of Directors
Home Products International, Inc. (Formerly Selfix, Inc.)
In connection with our audit of the consolidated financial statements of
Home Products International, Inc. (formerly Selfix, Inc.) and Subsidiaries
referred to in our report dated February 9, 1996, we have also audited Schedule
II for the 52-week period ended December 30, 1995. In our opinion, this schedule
presents fairly, in all material respects, the information required to be set
forth therein.
GRANT THORNTON LLP
Chicago, Illinois
February 9, 1996
F-25
<PAGE> 132
SCHEDULE II
HOME PRODUCTS INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 27, 1997,
FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 28, 1996,
FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 30, 1995
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
---------------------- -----------
BALANCE AT CHARGED TO (NET BALANCE
BEGINNING COSTS AND BALANCES WRITE-OFFS/ AT END
OF PERIOD EXPENSES ACQUIRED RECOVERIES) OF PERIOD
---------- ---------- -------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
December 27, 1997...................... $ 901 $ 499 $659 $ (343) $1,716
December 28, 1996...................... $1,395 $ 211 $ -- $ (705) $ 901
December 30, 1995...................... $1,431 $ 524 $ -- $ (560) $1,395
WARRANTY RESERVES
December 27, 1997...................... $ 453 $ -- $ -- $ (181) $ 272
December 28, 1996...................... $ 495 $ -- $ -- $ (42) $ 453
December 30, 1995...................... $ 511 $ -- $ -- $ (16) $ 495
INVENTORY RESERVES
December 27, 1997...................... $ 993 $ 698 $300 $ (624) $1,367
December 28, 1996...................... $2,411 $ 678 $ -- $(2,096) $ 993
December 30, 1995...................... $1,560 $1,648 $ -- $ (797) $2,411
</TABLE>
F-26
<PAGE> 133
HOME PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 28, DECEMBER 27,
1998 1997
--------- ------------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,163 $ 583
Accounts receivable, net.................................. 30,460 20,802
Inventories, net.......................................... 24,756 12,797
Prepaid expenses and other current assets................. 1,974 508
-------- ------------
Total current assets.............................. 61,353 34,690
-------- ------------
Property, plant and equipment -- at cost.................... 62,840 47,634
Less accumulated depreciation and amortization.............. (21,121) (19,254)
-------- ------------
Property, plant and equipment, net.......................... 41,719 28,380
Intangible and other assets................................. 121,947 36,273
-------- ------------
Total assets...................................... $225,019 $ 99,343
======== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations............... $ 6,591 $ 3,850
Accounts payable.......................................... 16,293 9,664
Accrued liabilities....................................... 19,784 12,913
-------- ------------
Total current liabilities......................... 42,668 26,427
-------- ------------
Long-term obligations -- net of current maturities.......... 120,075 30,700
Other liabilities........................................... 6,212 --
Stockholders' equity:
Preferred Stock -- authorized, 500,000 shares, $.01 par
value; none issued..................................... -- --
Common Stock -- authorized 15,000,000 shares, $.01 par
value; 8,003,727 shares issued at March 28, 1998 and
6,674,271 shares issued at December 27, 1997........... 80 67
Additional paid-in capital.................................. 48,282 33,956
Retained earnings........................................... 8,125 8,616
Common stock held in treasury -- at cost (58,762 shares).... (264) (264)
Currency translation adjustments............................ (159) (159)
-------- ------------
Total stockholders' equity........................ 56,064 42,216
-------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $225,019 $ 99,343
======== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE> 134
HOME PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
MARCH 28, MARCH 29,
1998 1997
--------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Net sales................................................... $52,408 $31,738
Cost of goods sold.......................................... 36,455 22,610
Gross profit.............................................. 15,953 9,128
Operating expenses
Selling................................................... 6,429 4,588
Administrative............................................ 3,504 1,809
Amortization of intangible assets......................... 928 205
------- -------
10,861 6,602
------- -------
Operating profit.......................................... 5,092 2,526
------- -------
Other income (expense)
Interest income........................................... 45 31
Interest (expense)........................................ (3,006) (1,532)
Other, net................................................ 13 124
------- -------
(2,948) (1,377)
------- -------
Earnings before income taxes and extraordinary charge....... 2,144 1,149
Income tax (expense)........................................ (898) (117)
------- -------
Earnings before extraordinary charge........................ 1,246 1,032
Extraordinary charge for early retirement of debt, net of
tax benefit of $1,258..................................... (1,737) --
------- -------
Net earnings (loss)......................................... (491) 1,032
Retained earnings at beginning of period.................... 8,616 1,296
------- -------
Retaining earnings at end of period......................... $ 8,125 $ 2,328
======= =======
Net earnings before extraordinary item per common
share -- Basic............................................ $ 0.16 $ 0.24
Extraordinary charge for early retirement of debt, net of
tax....................................................... (0.22) --
------- -------
Net earnings (loss) per common share -- Basic............... $ (0.06) $ 0.24
======= =======
Net earnings before extraordinary item per common
share -- Diluted.......................................... $ 0.15 $ 0.23
Extraordinary charge for early retirement of debt, net of
tax....................................................... (0.21) --
------- -------
Net earnings (loss) per common share -- Diluted............. $ (0.06) $ 0.23
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE> 135
HOME PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------
MARCH 28, MARCH 29,
1998 1997
--------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................................... $ (491) $ 1,032
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization.......................... 2,929 1,721
Changes in assets and liabilities:
Decrease (increase) in accounts receivable........... 2,807 (1,960)
(Increase) in inventories............................ (361) (1,086)
Increase (decrease) in accounts payable.............. 1,449 (310)
(Decrease) increase in accrued liabilities........... (4,290) 697
Other operating activities, net........................ 2,116 160
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 4,159 254
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Seymour acquisition, net of cash acquired................. (14,882) --
Tamor acquisition, net of cash acquired................... -- (27,792)
Capital expenditures, net................................. (4,034) (597)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES...................... (18,916) (28,389)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings.................................... (99,218) (11,744)
Net proceeds from borrowings and warrants................. 117,538 43,671
Payment of capital lease obligation....................... (42) (9)
Exercise of common stock options and issuance of common
stock under stock purchase plan........................ 59 47
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 18,337 31,965
Net increase in cash and cash equivalents................. 3,580 3,830
Cash and cash equivalents at beginning of period.......... 583 2,879
-------- --------
Cash and cash equivalents at end of period................ $ 4,163 $ 6,709
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................. $ 2,686 $ 300
-------- --------
Income taxes, net......................................... $ 905 $ --
-------- --------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-29
<PAGE> 136
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. Home Products International, Inc. (the "Company") and its
subsidiary companies design, manufacture and market products in two industry
segments: housewares products and home improvement products. Housewares products
are marketed principally through mass market trade channels throughout the
United States and internationally. Home improvement products are sold
principally through wholesalers that service the residential construction,
repair, and remodeling industry throughout the United States.
The condensed consolidated financial statements include the accounts of the
Company and its subsidiary companies. All significant intercompany transactions
and balances have been eliminated.
The unaudited condensed financial statements included herein as of and for
the thirteen weeks ended March 28, 1998 and for the thirteen weeks ended March
29, 1997 reflect, in the opinion of the Company, all adjustments (which include
only normal recurring adjustments) necessary for the fair presentation of the
financial position, the results of operations and cash flows. These unaudited
financial statements should be read in conjunction with the audited financial
statements and related notes thereto included in this Prospectus. The results
for the interim periods presented are not necessarily indicative of results to
be expected for the full year.
NOTE 2. Effective December 30, 1997 (within fiscal 1998) the Company
completed the acquisition of Seymour Sales Corporation and its wholly owned
subsidiary Seymour Housewares Corporation, (collectively "Seymour"). Seymour,
headquartered in Seymour, Indiana is an industry leading manufacturer and
marketer of consumer laundry care products, including a full line of ironing
boards, ironing board covers and pads and numerous laundry related accessories.
On December 30, 1997, in connection with the Company's acquisition of
Seymour, the Company refinanced its primary credit facility. As a result, the
Company was required to record a extraordinary charge related to the write-off
of certain deferred financing fees previously capitalized.
The pro forma impact of the acquisition of Seymour and the related
financing on the Company's historical results together with a detailed
description of the related financing is more fully described in Note 16 to the
Consolidated Financial Statements of the Company included in this Prospectus.
NOTE 3. Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 28, DECEMBER 27,
1998 1997
--------- ------------
<S> <C> <C>
Finished goods....................................... $13,059 $ 7,335
Work-in-process...................................... 4,516 2,225
Raw materials........................................ 7,181 3,237
------- -------
$24,756 $12,797
======= =======
</TABLE>
NOTE 4. During fiscal 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share," which established standards
for the computation and presentation of earnings per share information. Prior
period net earnings (loss) per share have been restated. Net earnings (loss) per
common share-basic, was calculated by dividing net earnings (loss) applicable to
common shares by the weighted average number of common shares outstanding during
each period. Net earnings (loss) per common share-diluted, reflects the
potential dilution that could occur assuming exercise of all outstanding
"in-the-
F-30
<PAGE> 137
HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
money" stock options. A reconciliation of the net earnings (loss) and the number
of shares used in computing basic and diluted earnings per share was as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
FOR THE THIRTEEN
WEEKS ENDED
----------------------
MARCH 28, MARCH 29,
1998 1997
--------- ---------
<S> <C> <C>
NET EARNINGS (LOSS) PER COMMON SHARE-BASIC:
Net earnings (loss) applicable to common shares............. $ (491) $1,032
====== ======
Weighted average common shares outstanding for the period... 7,929 4,299
====== ======
Net earnings (loss) per common share-Basic.................. $(0.06) $ 0.24
====== ======
Net earnings (loss) per common share-Diluted:
Net earnings (loss) applicable to common shares............. $ (491) $1,032
====== ======
Weighted average common shares outstanding for the period... 7,929 4,299
Increase in shares which would result from exercise of
"in-the-money" stock options.............................. 387 215
------ ------
Weighted average common shares assuming conversion of the
above securities.......................................... 8,316 4,514
====== ======
Net earnings (loss) per common share--Diluted............... $(0.06) $ 0.23
====== ======
</TABLE>
NOTE 5. The provision for income taxes is determined by applying an
estimated annual effective tax rate (federal, state and foreign combined) to
income before taxes. The estimated annual effective income tax rate is based
upon the most recent annualized forecast of pretax income, permanent book/tax
differences and tax credits.
F-31
<PAGE> 138
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Seymour Sales Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Seymour
Sales Corporation and subsidiaries as of June 30, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Seymour Sales Corporation and subsidiaries at June 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles.
Indianapolis, Indiana ERNST & YOUNG, LLP
August 15, 1997, except for Note 10
as to which the date is August 25, 1997
and Note 11, as to which the date is
December 30, 1997
F-32
<PAGE> 139
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,529 $ 713
Accounts receivable, net (Note 2)......................... 15,897 16,762
Income taxes recoverable.................................. 346 346
Inventories (Note 3)...................................... 14,160 14,747
Prepaid pension cost (Note 6)............................. 448 --
Prepaid expenses and sundry............................... 450 623
-------- --------
Total current assets........................................ 32,830 33,191
Property and equipment (Note 4)............................. 12,512 14,868
Prepaid pension cost (Note 6)............................... -------- 674
Intangible assets, less accumulated amortization
(1997 -- $17,701; 1996 -- $13,055):
Goodwill.................................................. 48,127 49,554
Non-compete............................................... 6,481 9,086
Other..................................................... 3,238 3,950
-------- --------
57,846 62,590
-------- --------
Total assets................................................ $103,188 $111,323
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 7,303 $ 5,806
Other liabilities and accrued expenses.................... 4,377 4,558
Current maturity of long-term debt (Note 5)............... 4,488 571
State and local taxes..................................... 434 584
Deferred income taxes (Note 7)............................ 158 68
-------- --------
Total current liabilities................................... 16,760 11,587
Long-term debt (Note 5)..................................... 71,813 83,201
Postretirement benefit plan (Note 6)........................ 2,969 2,640
Deferred income taxes (Note 7).............................. 2,881 3,045
Stockholders' equity (Note 8):
Common Stock, $.0001 par value:
Authorized shares -- 750,000
Issued shares -- 153,608 in 1997 and 1996.............. -- --
Preferred Stock, $1 par value:
Authorized shares -- 24,000
Issued shares -- 19,762 in 1997 and 1996............... 20 20
Common Stock warrants..................................... 400 400
Additional paid-in capital................................ 26,168 26,168
Retained earnings (deficit)............................... (17,615) (15,596)
-------- --------
8,973 10,992
Less shares in treasury, at cost:
Common Stock -- 1,132 in 1997 and 819 in 1996
Preferred Stock -- 130 in 1997 and 89 in 1996............. (208) (142)
-------- --------
Total stockholders' equity.................................. 8,765 10,850
-------- --------
Total liabilities and stockholders' equity.................. $103,188 $111,323
======== ========
</TABLE>
See accompanying notes.
F-33
<PAGE> 140
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------
1997 1996 1995
------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Sales (Note 1).............................................. $98,274 $105,532 $92,554
Cost of products sold (Note 1).............................. 68,756 79,845 67,288
------- -------- -------
Gross profit................................................ 29,518 25,687 25,266
Operating expenses:
Marketing and selling..................................... 13,326 14,775 12,479
General and administrative................................ 5,312 6,775 4,958
Research and development.................................. 275 407 435
Amortization of intangible assets......................... 4,385 4,414 3,657
------- -------- -------
23,298 26,371 21,529
------- -------- -------
Operating income (loss)..................................... 6,220 (684) 3,737
Other (income) expenses:
Interest, net............................................. 7,923 8,384 7,394
Other..................................................... 57 223 (125)
------- -------- -------
7,980 8,607 7,269
------- -------- -------
Loss before income taxes.................................... (1,760) (9,291) (3,532)
Income taxes (Note 7)....................................... 259 2,597 (1,122)
------- -------- -------
Net loss.................................................... $(2,019) $(11,888) $(2,410)
======= ======== =======
</TABLE>
See accompanying notes.
F-34
<PAGE> 141
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, 1997, 1996 AND 1995
----------------------------------------------------------------------------
COMMON ADDITIONAL RETAINED
COMMON PREFERRED STOCK PAID-IN EARNINGS TREASURY
STOCK STOCK WARRANTS CAPITAL (DEFICIT) STOCK TOTAL
------ --------- -------- ---------- --------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994.... $-- $ 2 $255 $ 5,963 $ (1,298) $ (12) $ 4,910
Conversion of Junior
Subordinated Notes..... -- 18 -- 17,334 -- -- 17,352
Stock issued.............. -- -- 145 2,840 -- -- 2,985
Purchase for treasury..... -- -- -- -- -- (8) (8)
Net loss.................. -- -- -- -- (2,410) -- (2,410)
--- --- ---- ------- -------- ----- --------
Balance at June 30, 1995.... -- 20 400 26,137 (3,708) (20) 22,829
Stock issued.............. -- -- -- 31 -- -- 31
Purchase for treasury..... -- -- -- -- -- (122) (122)
Net loss.................. -- -- -- -- (11,888) -- (11,888)
--- --- ---- ------- -------- ----- --------
Balance at June 30, 1996.... -- 20 400 26,168 (15,596) (142) 10,850
Purchase for treasury..... -- -- -- -- -- (66) (66)
Net loss.................. -- -- -- -- (2,019) -- (2,019)
--- --- ---- ------- -------- ----- --------
Balance at June 30, 1997.... $-- $20 $400 $26,168 $(17,615) $(208) $ 8,765
=== === ==== ======= ======== ===== ========
</TABLE>
See accompanying notes.
F-35
<PAGE> 142
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------------
1997 1996 1995
------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(2,019) $(11,888) $ (2,410)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation of property and equipment................. 3,517 3,262 2,542
Amortization of intangible assets...................... 4,385 4,414 3,657
Deferred income taxes.................................. (74) 2,422 (885)
Benefit applied to reduce goodwill..................... 101 101 60
Non-cash interest expense.............................. 306 357 1,194
Changes in operating assets and liabilities net of
effects from purchase of Magla:
Accounts receivable.................................. 865 3,052 (5,099)
Inventories.......................................... 587 3,216 (5,975)
Prepaid expenses and sundry.......................... 173 79 31
Prepaid pension cost................................. 226 114 430
Accounts payable and accrued liabilities............. 1,317 (2,896) 3,380
Other current assets and liabilities................. (150) 512 (626)
Postretirement benefit plan.......................... 329 250 203
------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES...................................... 9,563 2,995 (3,498)
INVESTING ACTIVITIES
Net cash paid for acquired business....................... -- -- (42,841)
Purchases of property and equipment, net.................. (1,161) (2,595) (1,124)
Other..................................................... (10) (127) 397
------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES............. (1,171) (2,722) (43,568)
Financing activities
Purchase of treasury stock................................ (66) (122) (8)
Proceeds from sale of Common and Preferred Stock.......... -- 31 2,611
Principal borrowing (repayment) on revolving credit note,
net.................................................... (6,960) 850 10,500
Principal payment on other long-term debt................. (550) (1,000) (838)
Proceeds from long-term debt.............................. -- 48 35,827
Debt issuance costs....................................... -- -- (1,022)
------- -------- --------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES...................................... (7,576) (193) 47,070
------- -------- --------
Increase in cash and cash equivalents....................... 816 80 4
Cash and cash equivalents at beginning of year.............. 713 633 629
------- -------- --------
Cash and cash equivalents at end of year.................... $ 1,529 $ 713 $ 633
======= ======== ========
</TABLE>
See accompanying notes.
F-36
<PAGE> 143
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The consolidated financial statements include the accounts of Seymour Sales
Corporation (SSC), its wholly owned subsidiary, Seymour Housewares Corporation
(SHC), and Seymour, S.A. de C.V., a wholly owned subsidiary of SHC,
(collectively referred to as "the Company"). All significant intercompany
balances and transactions have been eliminated. SSC is owned by Chase Capital
Partners, members of management of the Company and others.
The Company designs, manufactures and markets a broad range of ironing
boards, ironing board covers and pads, laundry accessories, juvenile gates and
tote carts. The Company's customers are principally located throughout North
America. Two of the Company's customers accounted for approximately 18% and 14%,
respectively, of gross sales for the year ended June 30, 1997.
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less at
the date of purchase are considered to be cash equivalents.
Financial Instruments
The Company's financial instruments generally consist of cash and cash
equivalents, trade and other receivables, accounts payable and long-term debt.
The fair value of the Company's fixed rate debt was estimated using discounted
cash flow analyses based upon the Company's current incremental borrowing rates.
The carrying amounts of these financial instruments approximated their fair
value at June 30, 1997 and 1996.
Inventories
Inventories are stated at the lower of cost, determined utilizing the
first-in, first-out (FIFO) method, or market.
In December 1994, as part of the allocation of the acquisition purchase
price (see Note 9), the Company wrote up inventory acquired from original cost
to the fair value in accordance with applicable accounting principles. This
write up of inventory ($498,000) was charged to cost of goods sold in its
entirety during the year ended June 30, 1995.
A reserve is maintained for obsolete inventory and shrinkage of inventory.
This reserve is reviewed on a periodic basis during the year and at year end and
is adjusted, if necessary, based upon historical experience, known problems and
management's judgment. Actual write-offs of obsolete products are charged
against the reserve as identified.
Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated by the
straight-line, half-year convention method at rates based upon the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings................................................... 25 years
Building improvements....................................... 10 years
Machinery and equipment..................................... 5 years
</TABLE>
All costs of major improvements to existing facilities or equipment are
capitalized. The cost of repairs and maintenance to an existing asset that does
not improve or extend the life of that respective asset is expensed as incurred.
F-37
<PAGE> 144
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Intangibles
Goodwill is being amortized over 40 years and organization costs are being
amortized over 5 years using the straight-line method. Debt issuance costs and
noncompete agreements are being amortized over the lives of the agreements
(ranging from 5-10 years) using the straight-line method.
The carrying amount of goodwill is reviewed if facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will not
be recoverable, as determined based on the estimated undiscounted cash flows of
the entity acquired over the remaining amortization period, the carrying amount
of the goodwill is reduced by the estimated shortfall of cash flows. In
addition, the Company assesses long-lived assets for impairment under Statement
of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Under those
rules, goodwill associated with assets acquired in a purchase business
combination is included in impairment evaluations when events or circumstances
exist that indicate the carrying amount of those assets may not be recoverable.
Sales
Sales are presented in the income statement net of allowances for returns,
cash discounts and freight out. Gross sales were $101,700,000, $109,609,000 and
$96,638,000 for the years ended June 30, 1997, 1996 and 1995 respectively.
Advertising
The Company expenses the production costs of advertising as incurred except
for cooperative advertising where costs are expensed at the same time the
related revenue is recognized. For the years ended June 30, 1997, 1996 and 1995,
advertising expense totaled $3,042,000, $3,819,000 and $4,000,000, respectively.
Income Taxes
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, ("FAS
109"). FAS 109 requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities. These deferred taxes are
measured by applying the provisions of tax laws in effect at the balance sheet
date.
SHC joins with SSC in the filing of a consolidated federal income tax
return. Substantially all current and deferred income tax expenses are allocated
to SHC and subsidiary as the primary operating entities.
Stock Based Compensation
The Company accounts for its stock compensation arrangements under
requirements prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. In 1997, the Company adopted the
disclosure provisions of Financial Accounting Standards Board Statement No. 123,
Accounting for Stock Based Compensation. The Company has granted no new stock
options or awards after July 1, 1995.
Use of Estimates
The preparation of consolidated financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
F-38
<PAGE> 145
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain amounts in the 1995 financial statements have been reclassified to
conform to the 1997 and 1996 presentation.
2. ACCOUNTS RECEIVABLE
A summary of accounts receivable at June 30 follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Trade accounts receivable................................ $19,937 $20,477
Less allowances:
Doubtful accounts...................................... (1,059) (1,026)
Discounts and returns.................................. (629) (571)
Advertising............................................ (2,352) (2,118)
------- -------
$15,897 $16,762
======= =======
</TABLE>
The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral for amounts
outstanding.
3. INVENTORIES
A summary of inventories at June 30 follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Raw materials............................................ $ 4,113 $ 5,507
Work-in-process.......................................... 3,308 4,791
Finished goods........................................... 8,370 6,428
------- -------
15,791 16,726
Less allowance for obsolescence and shrinkage............ (1,631) (1,979)
------- -------
$14,160 $14,747
======= =======
</TABLE>
4. PROPERTY AND EQUIPMENT
A summary of property and equipment at June 30 follows:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land.................................................... $ 878 $ 878
Buildings and improvements.............................. 6,613 6,551
Machinery and equipment................................. 15,584 15,199
Capital leases.......................................... 358 362
Construction in progress................................ 462 --
-------- -------
23,895 22,990
Less allowances for depreciation and amortization....... (11,383) (8,122)
-------- -------
$ 12,512 $14,868
======== =======
</TABLE>
F-39
<PAGE> 146
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt at June 30 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revolving Credit Note....................................... $ 6,390 $13,350
Senior Term Note............................................ 51,000 51,000
Senior Subordinated Note.................................... 19,000 19,000
Capital leases.............................................. 164 234
Other....................................................... -- 480
------- -------
76,554 84,064
Less unamortized discount................................... (253) (292)
------- -------
76,301 83,772
Less current portion........................................ (4,488) (571)
------- -------
$71,813 $83,201
======= =======
</TABLE>
The Company has a Revolving Credit Note with its principal lenders, Jackson
National Life Insurance Company, individually and as successor by merger to
Jackson National Life Insurance Company of Michigan (collectively referred to as
"JNL") which matures December 31, 2002. Under this Note, borrowings can be made
once per week up to a maximum outstanding of $14.0 million, further limited to a
percentage of eligible receivables and inventory. Interest is based on the
lesser of (A) the three-month LIBOR (adjusted for any required reserve
percentages) plus 3.0% or (B) a major bank prime lending rate plus 1.5%.
Additionally, a commitment fee of .5% is paid on the unused revolver balance
along with a 2% guarantee fee for the open letter of credit balance. The
interest rate was 8.7% at June 30, 1997. Interest is payable monthly.
The Senior Term Note is held by JNL. This Note bears a variable interest
rate based on the lower of the following: (A) the three-month LIBOR (adjusted
for any required reserve percentages) plus 3.25% or (B) a major bank prime
lending rate plus 1.75%. The interest rate was 9.0% at June 30, 1997. Interest
is payable monthly. Required principal payments are $4.4 million beginning on
June 30, 1998 and every six months thereafter through December 31, 1999. The
required payment beginning on June 30, 2000 is $4.9 million every 6 months
through December 31, 2001 followed by $6.9 million on June 30, 2002 and December
31, 2002. The Senior Term Note has a provision for optional prepayments and for
mandatory excess cash flow prepayment. Certain optional prepayments result in a
penalty. There is no mandatory excess cash flow prepayment for the period ended
June 30, 1997.
The Senior Subordinated Note, held by JNL, has a fixed interest rate of 12%
payable semi-annually in June and December. This Note has a maturity of December
31, 2004. The Note may be prepaid, in part or in whole, with penalty after
December 31, 1996. The prepayment penalty in 1998 is 9% (unless certain criteria
are met in which case the penalty is 4%) of the principal amount prepaid and
decreases each year thereafter. JNL also holds warrants to purchase shares of
common stock of SSC, as part of the Subordinated Note.
The Revolving Credit Note, the Senior Term Note and the Senior Subordinated
Note are collateralized by substantially all of SHC's assets and pledged stock
of SSC. In addition, the debt agreements require maintenance of certain debt
service ratios, limit additional borrowings, and require compliance with various
other restrictive covenants. Modifications to certain of these covenants were
made with agreements dated as of November 1, 1996.
Maturities of long-term debt are as follows: 1998, $4.5 million; 1999, $8.8
million; 2000, $9.3 million; 2001, $9.8 million; and 2002, $11.8 million; and
thereafter, $32.4 million.
F-40
<PAGE> 147
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company paid interest of $7,732,000, $8,088,000 and $6,200,000, for the
years ended June 30, 1997, 1996 and 1995, respectively.
6. EMPLOYEE BENEFIT PLANS
Pension Plan
SHC has a defined benefit pension plan covering all of its employees
working at its facilities in Seymour, Indiana. Plan benefits are based on years
of service and earnings. Plan assets consist of equity securities, as well as
government, corporate and other fixed-income obligations. SHC's policy is to
fund the Plan based on tax funding requirements.
The funded status and amounts recognized in the consolidated balance sheets
for the Plan at June 30, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
------ -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits......................................... $7,052 $ 5,424
====== =======
Accumulated benefit obligation.......................... $7,052 $ 5,588
====== =======
Projected benefit obligation.............................. $7,052 $ 8,312
Plan assets at fair value................................. 7,052 7,002
------ -------
Funded status............................................. -- (1,310)
Unrecognized net loss..................................... 448 1,984
------ -------
Prepaid pension costs..................................... $ 448 $ 674
====== =======
</TABLE>
Net pension cost included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost....................................... $ 120 $ 485 $ 386
Interest cost on projected benefit obligation...... 522 557 419
Actual return on plan assets....................... (276) (657) (690)
Net amortization and deferral...................... (140) 269 316
----- ----- -----
Net periodic pension cost.......................... $ 226 $ 654 $ 431
===== ===== =====
</TABLE>
The assumptions used in determining the pension expense and obligations
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Rate of compensation increase............................... 4.5% 4.5% 4.5%
Weighted-average discount rate.............................. 7.0% 7.5% 7.5%
Long-term rate of return on assets.......................... 7.0% 7.5% 7.0%
</TABLE>
The Pension Plan Administrative Committee on August 7, 1996, resolved that
the Pension Plan be frozen (resulting in no additional accumulation of benefits
under the plan) effective September 30, 1996, and the Plan was terminated as of
November 15, 1996. Accumulated benefits aggregating approximately $7,052,000
were fully vested for the eligible participants and assets of the Plan of
$7,052,000 were utilized to purchase investments that earn approximately 6%
interest to satisfy the pension obligation. Termination of the Pension Plan was
approved by the Internal Revenue Service on July 21, 1997. Distribution of
assets is expected to
F-41
<PAGE> 148
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
occur by October 1997. Anticipated expense related to the Plan for 1998 is
expected to total $448,000, consisting entirely of settlement loss.
Retirement Savings Plan
SHC has established a 401(k) savings plan named the "Seymour Housewares
Corporation Savings Plan" (Savings Plan) effective as of January 7, 1993. All
SHC employees who have completed certain minimum service requirements are
eligible to participate in the Savings Plan. Participants may defer specified
percentages of their compensation which the Company will match based upon a
specified formula. The Savings Plan provides for participant elective investment
of the deferred amounts in several funds. Company contributions charged to
expense were $341,000, $332,000 and $293,000 for the years ended June 30, 1997,
1996 and 1995, respectively.
Effective September 29, 1996, the Company amended its Savings Plan to
provide an additional discretionary employer profit-sharing contribution equal
to 3% of eligible compensation. For the year ended June 30, 1997, profit sharing
expense was $347,000.
Postretirement Benefit Plan
SHC also sponsors a defined benefit plan that provides postretirement
medical benefits and life insurance to full-time employees at the Seymour,
Indiana facilities who have worked 10 years, attained age 55 while in service
with the Company, and participated in the Company's health care plan for at
least one year immediately preceding leaving the Company. The Plan is
contributory, with retiree contributions adjusted annually, and contains other
cost-sharing features such as deductibles and coinsurance. The accounting for
the Plan anticipates future cost-sharing changes to the written Plan that are
consistent with the Company's expressed intent to increase the retiree
contribution annually for the expected general inflation rate for that year. In
addition, the Plan provides that the Company's share of benefit costs is limited
to 150% of the 1991 benefit cost level.
The Company's policy is to fund the cost of medical benefits and life
insurance in amounts determined at the discretion of management.
The following table presents the Plan's funded status reconciled with
amounts recognized in the Company's consolidated statement of financial
position.
<TABLE>
<CAPTION>
JUNE 30,
-----------------------
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................... $ 808 $ 983
Fully eligible active plan participants..................... 301 302
Other active plan participants.............................. 1,314 1,456
------ ------
Accumulated postretirement benefit obligation in excess of
plan assets............................................... 2,423 2,741
Unrecognized net gain (loss)................................ 546 (101)
------ ------
Accrued postretirement benefit cost......................... $2,969 $2,640
====== ======
</TABLE>
F-42
<PAGE> 149
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................ $164 $133 $116
Interest cost............................................... 203 165 151
---- ---- ----
Net periodic postretirement benefit cost.................... $367 $298 $267
==== ==== ====
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) is 14 percent, 15
percent and 16 percent for 1997, 1996 and 1995, respectively, and is assumed to
decrease gradually (the assumed rate for 1998 is 13 percent) to 4 percent for
2003 and remain at that level thereafter. Increasing the assumed health care
cost trend rates by one percentage point each year would not have a material
effect on the accumulated postretirement benefit obligation or the aggregate of
the service and interest cost components of net periodic postretirement benefit
cost.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5 percent at June 30, 1997, 1996 and
1995.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of June 30 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Intangibles............................................... $ 2,730 $ 2,665
Prepaid pension........................................... 152 229
Depreciation.............................................. 151 151
Other, net................................................ 6 68
------- -------
Total deferred tax liabilities.................... 3,039 3,113
Deferred tax assets:
Net operating loss carryforwards.......................... 3,640 3,111
Alternative minimum tax credit carryforwards.............. 50 50
Depreciation.............................................. 523 317
Health claims incurred but not reported................... 149 203
Postretirement benefit obligation......................... 1,009 896
Vacation pay.............................................. 169 172
Allowances related to receivables......................... 984 1,053
Allowances related to inventories......................... 382 366
Other, net................................................ 399 321
------- -------
7,305 6,489
Valuation allowance for deferred tax assets............... (7,305) (6,489)
------- -------
Total deferred tax assets......................... -- --
------- -------
Net deferred tax liabilities................................ $(3,039) $(3,113)
======= =======
</TABLE>
F-43
<PAGE> 150
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At June 30, 1997, the Company has net operating loss carryforwards of
$10,706,000 for income tax purposes that expire in 2010, 2011 and 2012, and
alternative minimum tax credit carryforwards of $50,000 which may be carried
forward indefinitely.
Significant components of the provision for income taxes for the years
ended June 30 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................. $ -- $ (222) $ (227)
State................................................... 102 282 (153)
Foreign................................................. 130 14 83
----- ------- -------
Total current............................................. 232 74 (297)
Deferred federal:
Change in valuation allowance........................... 816 5,451 70
Other................................................... (890) (3,029) (955)
----- ------- -------
Total deferred federal.................................... (74) 2,422 (885)
Benefit applied to reduce goodwill........................ 101 101 60
----- ------- -------
$ 259 $ 2,597 $(1,122)
===== ======= =======
</TABLE>
The effect of state income taxes, the increase in the valuation allowance
and the benefit of excess tax-deductible goodwill amortization applied to reduce
goodwill are the only significant reconciling differences between income tax
expense for the periods and the amount of income tax expense that would result
from applying the U.S. statutory rate to pretax income.
A deferred tax asset was established as a result of an acquisition in a
previous year. For financial reporting purposes, a valuation allowance of
$643,000 was recognized as of the acquisition date to offset this deferred tax
asset. When realized, the tax benefit for this item will be applied to reduce
goodwill related to the acquisition.
An income tax refund of approximately $223,000 was received in 1996 while
income taxes paid for 1995 were approximately $350,000.
8. STOCKHOLDERS' EQUITY
Common stock consists of the following:
<TABLE>
<CAPTION>
SHARES
--------------------
CLASS AUTHORIZED ISSUED
- ----- ---------- -------
<S> <C> <C>
A........................................................ 250,000 142,008
B........................................................ 250,000 --
C........................................................ 250,000 11,600
</TABLE>
The three classes of common stock are identical in all respects except
voting rights. Holders of Class A Common are entitled to one vote per share on
all matters submitted to stockholders for a vote; Class B holders receive
one-quarter vote per share, except on certain critical issues (for which they
receive one vote per share); and Class C holders have no voting rights. For the
most part, any share of common stock may be converted into one share of common
stock of either of the other classes of common stock.
F-44
<PAGE> 151
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred stock consists of the following:
<TABLE>
<CAPTION>
SHARES
-------------------
CLASS AUTHORIZED ISSUED
- ----- ---------- ------
<S> <C> <C>
A......................................................... 4,000 2,372
B......................................................... 20,000 17,390
</TABLE>
The preferred stock has no voting rights and entitles the holder to receive
dividends at the rate of 15% (Class A) or 13 1/4% (Class B) of liquidation value
($1,000 per share), payable in cash or additional shares of preferred stock.
Dividends are payable only when declared, and any unpaid dividends accumulate
and are compounded quarterly. No dividends were declared in the years ended June
30, 1997, 1996 or 1995. Cumulative preferred dividends in arrears were
$8,379,000, $4,877,000 and $1,825,000 as of June 30, 1997, 1996 and 1995,
respectively. The preferred stock is redeemable at the option of SSC at any
time.
In connection with the issuance of the Senior Subordinated Note, the lender
received warrants to purchase approximately 31,500 shares of Class B common
stock of SSC at any time through December 9, 2004 at a price of $.0033 per
share. A portion of the proceeds of the Note issuance ($400,000) was assigned to
the warrants, representing their estimated fair value at December 9, 1994.
In connection with the formation of SSC, options to acquire approximately
7,987 shares of Class A common stock were granted to certain members of
management. One-third of the options vest and become exercisable monthly over
various periods ending June 30, 1999. Another third of the options vest and
become exercisable over a five year period based on achievement of prescribed
annual operating cash flow targets. The cash flow target for one of the four
periods subsequent to January 7, 1993 was achieved. The final third vests and
becomes exercisable if, and when, the cumulative return on investment to SSC's
principal shareholder exceeds a specific threshold. As options vest, they become
exercisable at $.01 per share. None of the vested options to acquire 4,833
shares of common stock had been exercised at June 30, 1997.
Compensation expense attributable to the options that vest over time has
been measured by the difference between the fair value of the underlying shares
at January 7, 1993 and the exercise price. This expense is being recognized
ratably over the various periods ending June 30, 1999. Compensation expense with
respect to the other groups of options will be recognized, if earned, in the
periods that the related targets are met. The amount recognized as compensation
expense for the years ended June 30, 1997, 1996 and 1995 totaled $57,000,
$39,000 and $44,000, respectively.
9. ACQUISITION
In December 1994, SHC acquired the assets of Magla Products' (Magla)
laundry products business and certain of its affiliates. Concurrently, 100% of
the stock of Seymour, S.A. de C.V., formerly Magla Productos de Mexico, was
acquired. The total purchase price was approximately $45,357,000, which
consisted primarily of cash and an earnout provision with guaranteed minimum
payments, payable in 1995 through 1998. If payments in excess of the guaranteed
minimum are required pursuant to the earnout provision, they will be accounted
for as additional goodwill at the time of payment. The Company modified existing
long-term debt agreements to obtain funding for this acquisition. Pursuant to
this acquisition, certain stockholders of SSC infused capital into the Company
through the purchase of additional shares of Common and Preferred Stock.
The acquisition has been accounted for using the purchase method of
accounting, and the net assets and results of operations are included in the
consolidated financial statements from the acquisition date forward.
In June 1995, SHC acquired specific assets of Magla Metal Productos de
Mexico, S.A. de C.V. of Monterey, Mexico, a manufacturer of ironing boards, for
$450,000. The acquisition was financed through the
F-45
<PAGE> 152
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's working capital and was accounted for using the purchase method of
accounting, resulting in a cost in excess of net assets acquired of $342,000.
10. SUBSEQUENT EVENT -- CONSOLIDATION (UNAUDITED)
Subsequent to year-end, management recommended to the Board of Directors,
and announced to the Company's employees, a plan to consolidate certain
production operations during the year ended June 30, 1998. If enacted, one-time
costs associated with this consolidation are estimated to range from $800,000 to
$1,000,000. Management expects that future annual savings from this
consolidation will exceed the one-time costs.
11. SUBSEQUENT EVENT -- SALE OF THE COMPANY
On December 30, 1997, the stockholders of the Company entered into an
agreement with Home Products International, Inc., a Delaware corporation
("HPI"), whereby HPI acquired all of the capital stock of the Company. Total
consideration for the acquisition was $100,700,000 consisting of $16,400,000 in
cash, $14,300,000 in stock (1,320,700 shares of HPI common stock), and the
assumption of $70,000,000 of the Company's debt. HPI's common stock is publicly
traded on the NASDAQ National Stock Marketsm, under the ticker symbol HPII.
F-46
<PAGE> 153
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 27,
1997
--------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,696
Accounts receivable, net.................................. 12,386
Inventories, net.......................................... 11,598
Prepaid expenses and other current assets................. 333
--------
Total current assets.............................. 26,013
--------
Property, plant and equipment, net.......................... 12,121
Intangible and other assets................................. 55,676
--------
Total assets................................................ $ 93,810
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations............... $ 87
Accounts payable.......................................... 5,032
Accrued liabilities....................................... 11,267
--------
Total current liabilities......................... 16,386
--------
Long-term obligations -- net of current maturities.......... 69,916
Other long-term obligations................................. 6,270
Stockholders' equity
Common Stock.............................................. --
Preferred Stock........................................... 20
Additional paid-in capital................................ 26,568
Retained earnings......................................... (25,102)
Common Stock held in treasury -- at cost.................. (248)
--------
Total stockholders' equity........................ 1,238
--------
Total liabilities and stockholders' equity.................. $ 93,810
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-47
<PAGE> 154
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 27, 1997 AND DECEMBER 28, 1996
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $43,096 $45,248
Cost of goods sold.......................................... 32,863 32,665
------- -------
Gross profit.............................................. 10,233 12,583
Operating expenses.......................................... 13,404 11,395
------- -------
Operating profit (loss)................................... (3,171) 1,188
Interest (expense).......................................... (3,708) (4,047)
Other income (expense)...................................... (550) 32
------- -------
Loss before income taxes.................................... (7,429) (2,827)
Income tax expense.......................................... (58) (56)
------- -------
Net loss.................................................... $(7,487) $(2,883)
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-48
<PAGE> 155
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
DECEMBER 27, DECEMBER 28,
1997 1996
------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(7,487) $(2,883)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 4,129 4,089
Changes in assets and liabilities:
Decrease in accounts receivable...................... 3,511 4,984
Decrease in inventories.............................. 2,563 2,981
Decrease in prepaids and other assets................ 476 468
Increase (decrease) in accounts payable and accrued
liabilities......................................... 4,029 (1,171)
Other operating activities, net........................... 841 (298)
------- -------
Net cash provided by operating activities................... 8,062 8,170
------- -------
Cash flows from investing activities:
Capital expenditures, net................................. (1,556) (310)
------- -------
Net cash used for investing activities...................... (1,556) (310)
------- -------
Cash flows from financing activities:
Decrease in debt and repurchase of Common Stock........... (6,339) (6,927)
------- -------
Net cash used for financing activities...................... (6,339) (6,927)
------- -------
Net increase in cash and cash equivalents................. 167 933
Cash and cash equivalents at beginning of period.......... 1,529 713
------- -------
Cash and cash equivalents at end of period................ $ 1,696 $ 1,646
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-49
<PAGE> 156
SEYMOUR SALES CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
NOTE 1. Unless the context otherwise requires, the reference to the
"Company" is to Seymour Sales Corporation, its wholly owned subsidiary, Seymour
Housewares Corporation, and Seymour S.A. de C.V., a wholly owned subsidiary of
Seymour Housewares Corporation. All significant intercompany balances and
transactions have been eliminated.
The Company designs, manufactures, and markets a broad range of ironing
boards, ironing board covers and pads, laundry accessories, juvenile gates and
tote carts.
The unaudited condensed consolidated interim financial statements included
herein as of December 27, 1997 and for the six months ended December 27, 1997
and December 28, 1996 reflect, in the opinion of the Company, all adjustments
(which include only normal recurring adjustments) necessary for the fair
presentation of the financial position, the results of operations, and cash
flows. The results of the interim periods are not necessarily indicative of
results to be expected for the full years.
NOTE 2. Inventories are stated at the lower of cost, determined using the
first-in, first-out (FIFO) method, or market. A reserve is maintained for
obsolete inventory and shrinkage of inventory. This reserve is reviewed on a
periodic basis during the year and at year end is adjusted, if necessary, based
upon historical experience, known problems and management's judgment. Actual
write-offs of obsolete products are charged against the reserve as identified.
NOTE 3. Within the six month interim period ended December 27, 1997, in
connection with the termination of the Company's defined benefit plan, (the plan
was terminated in November 1996, and the termination was approved by the
Internal Revenue Service on July 21, 1997), the Company recorded a charge to
Other Expense of approximately $550. Distribution of the plan assets to the
participants was completed in December 1997. Also included within the six month
interim period ended December 27, 1997, the Company recorded a charge to
Operating Expenses of approximately $2,600, related to consolidation and
disposal of certain manufacturing facilities.
NOTE 4. Effective July 1, 1997 the Company changed its method of computing
depreciation expense, from a "half-year" convention to a "month placed in
service" convention. The effect of this change was to increase 1997 depreciation
expense by $233.
NOTE 5. Subsequent Event. On December 30, 1997, the stockholders of the
Company entered into an agreement with Home Products International, Inc., a
Delaware Corporation, ("HPI"), whereby HPI acquired all of the capital stock of
the Company. Total consideration for the acquisition was $100,700 consisting of
$16,400 in cash, $14,300 in stock (1,320,700 shares of HPI common stock), and
the assumption of $70,000 of the Company's debt. HPI's common stock is publicly
traded on the NASDAQ National Market(sm), under the ticker symbol, HPII.
F-50
<PAGE> 157
============================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................... 1
Risk Factors................................ 13
The Exchange Offer.......................... 22
Use of Proceeds............................. 30
Capitalization.............................. 31
Selected Historical Financial Data.......... 32
Unaudited Pro Forma Combined Financial
Data...................................... 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 40
Business.................................... 50
Management.................................. 59
Principal Stockholders...................... 62
Certain Transactions........................ 65
Description of Other Indebtedness........... 66
Description of the Exchange Notes........... 68
Book-Entry; Delivery and Form............... 93
Plan of Distribution........................ 94
Certain Federal Income Tax Consequences..... 95
Legal Matters............................... 97
Experts..................................... 97
Available Information....................... 98
Incorporation of Certain Documents by
Reference................................. 99
Index to Consolidated Financial
Statements................................ F-1
</TABLE>
============================================================
============================================================
$125,000,000
HOME PRODUCTS
INTERNATIONAL, INC.
OFFER TO EXCHANGE
9 5/8% SENIOR SUBORDINATED NOTES
DUE 2008 FOR ALL OUTSTANDING
9 5/8% SENIOR SUBORDINATED NOTES
DUE 2008 OF
HOME PRODUCTS INTERNATIONAL, INC.
--------------------
PROSPECTUS
--------------------
, 1998
============================================================
<PAGE> 158
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to the Company's Certificate of Incorporation and to
Section 145 of the Delaware General Corporation Law ("DGCL"). Section 145 of the
DGCL authorizes a corporation to provide indemnification against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred, in non-derivative actions, suits or
proceedings brought by third parties against an officer, director, employee or
agent of the corporation, if such party acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful as determined in accordance
with the statute.
In a derivative action, i.e., one by or in the right of the corporation,
indemnification may be made only for expenses actually and reasonably incurred
by directors, officers, employees or agents in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to which
they shall have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the Court in which the
action or suit was brought shall determine upon application that the defendant
directors, officers, employees or agents are fairly and reasonably entitled to
indemnity for such expenses despite such adjudication of liability.
The Company's Certificate of Incorporation limits the personal liability of
directors to the fullest extent permitted by Delaware law. In addition, the
Company's Certificate of Incorporation and By-laws provide that the Company
shall to the fullest extent permitted by Delaware law, indemnify 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 by reason of the fact that he or she is or was a director,
officer, employee or agent of the Company or is or was serving at the request of
the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any and all
expenses, liabilities or other matters referred to or covered by Delaware law,
which were reasonably incurred by such person. This indemnification is in
addition to any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation, By-laws, any
agreement or notice of shareholders or disinterested directors. The Company's
Certificate of Incorporation and By-laws also permit it to secure insurance on
behalf of any director, officer, employee or other agent for any liability
arising out of his or her actions in such capacity, regardless of whether
Delaware law, the Certificate of Incorporation or By-laws would permit
indemnification. The Company maintains officers and directors liability
insurance.
Reference is also made to Section 102(b)(7) of the DGCL, which enables a
corporation in its original certificate of incorporation or an amendment thereto
to eliminate or limit the personal liability of a director for violations of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payments of dividends of unlawful stock purchase or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. The Company's Certificate of Incorporation limits the
personal liability of directors to the fullest extent permitted by Delaware law.
ITEM 21. EXHIBITS.
(a) See Exhibit Index filed herewith, which is incorporated herein by
reference.
(b) Financial Statement Schedules: None.
II-1
<PAGE> 159
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim of indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred by the Registrants in the successful defense of any action, suit paid
by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(b) The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrants' annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE> 160
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois on June 9, 1998.
HOME PRODUCTS INTERNATIONAL, INC.
By /s/ JAMES R. TENNANT
------------------------------------
James R. Tennant
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints James R. Tennant and James E. Winslow, and each
of them, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all amendment (including post-effective amendments
to this Registration Statement) and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES R. TENNANT Chairman of the Board of Directors June 9, 1998
- ----------------------------------------------------- and Chief Executive Officer
James R. Tennant (Principal Executive Officer)
/s/ JAMES E. WINSLOW Executive Vice President, Chief June 9, 1998
- ----------------------------------------------------- Financial Officer and Secretary
James E. Winslow (Principal Financial and
Principal Accounting Officer)
Director June 9, 1998
- -----------------------------------------------------
Charles R. Campbell
</TABLE>
II-3
<PAGE> 161
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOSEPH GANTZ Director June 9, 1998
- -----------------------------------------------------
Joseph Gantz
Director June , 1998
- -----------------------------------------------------
Stephen P. Murray
/s/ MARSHALL RAGIR Director June 9, 1998
- -----------------------------------------------------
Marshall Ragir
Director June , 1998
- -----------------------------------------------------
Jeffrey C. Rubenstein
/s/ DANIEL B. SHURE Director June 9, 1998
- -----------------------------------------------------
Daniel B. Shure
/s/ JOEL D. SPUNGIN Director June 9, 1998
- -----------------------------------------------------
Joel D. Spungin
</TABLE>
II-4
<PAGE> 162
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois on June 9, 1998.
SELFIX, INC.
By /s/ JAMES R. TENNANT
------------------------------------
James R. Tennant
Chairman of the Board of Directors
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints James R. Tennant and James E. Winslow, and each
of them, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all amendment (including post-effective amendments
to this Registration Statement) and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES R. TENNANT Chairman of the Board of Directors June 9, 1998
- ----------------------------------------------------- (Principal Executive Officer)
James R. Tennant
/s/ JAMES E. WINSLOW Secretary (Principal Financial and June 9, 1998
- ----------------------------------------------------- Principal Accounting Officer)
James E. Winslow
Director June , 1998
- -----------------------------------------------------
Charles R. Campbell
/s/ MARSHALL RAGIR Director June 9, 1998
- -----------------------------------------------------
Marshall Ragir
Director June , 1998
- -----------------------------------------------------
Jeffrey C. Rubenstein
/s/ DANIEL B. SHURE Director June 9, 1998
- -----------------------------------------------------
Daniel B. Shure
/s/ JOEL D. SPUNGIN Director June 9, 1998
- -----------------------------------------------------
Joel D. Spungin
</TABLE>
II-5
<PAGE> 163
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois on June 9, 1998.
SHUTTERS, INC.
By /s/ JAMES R. TENNANT
------------------------------------
James R. Tennant
President
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints James R. Tennant and James E. Winslow, and each
of them, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all amendment (including post-effective amendments
to this Registration Statement) and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES R. TENNANT President and Director June 9, 1998
- ----------------------------------------------------- (Principal Executive
James R. Tennant Officer)
/s/ JAMES E. WINSLOW Secretary and Director June 9, 1998
- ----------------------------------------------------- (Principal Financial and
James E. Winslow Principal Accounting
Officer)
</TABLE>
II-6
<PAGE> 164
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois on June 9, 1998.
TAMOR CORPORATION, INC.
By /s/ JAMES R. TENNANT
------------------------------------
James R. Tennant
Chairman of the Board of Directors
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints James R. Tennant and James E. Winslow, and each
of them, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all amendment (including post-effective amendments
to this Registration Statement) and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES R. TENNANT Chairman of the Board of June 9, 1998
- ----------------------------------------------------- Directors (Principal
James R. Tennant Executive Officer)
/s/ JAMES E. WINSLOW President, Treasurer and Clerk June 9, 1998
- ----------------------------------------------------- (Principal Financial and
James E. Winslow Principal Accounting
Officer)
</TABLE>
II-7
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois on June 9, 1998.
SEYMOUR HOUSEWARES CORPORATION
By /s/ JAMES R. TENNANT
------------------------------------
James R. Tennant
Chairman of the Board of Directors
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints James R. Tennant and James E. Winslow, and each
of them, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all amendment (including post-effective amendments
to this Registration Statement) and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES R. TENNANT Chairman of the Board of June 9, 1998
- ----------------------------------------------------- Directors (Principal
James R. Tennant Executive Officer)
/s/ JAMES E. WINSLOW Senior Vice President, Chief June 9, 1998
- ----------------------------------------------------- Financial Officer and
James E. Winslow Secretary (Principal
Financial and Principal
Accounting Officer)
</TABLE>
II-8
<PAGE> 166
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1.1* -- Purchase Agreement between Home Products International,
Inc., Selfix, Inc., Seymour Housewares Corporation,
Shutters, Inc., Tamor Corporation, Chase Securities Inc.
and NationsBanc Montgomery Securities, LLC dated May 7,
1998.
3.1.1 -- Amended and Restated Certificate of Incorporation of Home
Products International, Inc.
3.1.2* -- Certificate of Incorporation of Selfix, Inc., as amended.
3.1.3* -- Certificate of Incorporation of Seymour Housewares
Corporation, as amended.
3.1.4* -- Articles of Incorporation of Tamor Corporation, as
amended.
3.1.5* -- Articles of Incorporation of Shutters, Inc., as amended.
3.2.1 -- By-laws of Home Products International, Inc.
3.2.2* -- By-laws of Selfix, Inc.
3.2.3* -- By-laws of Seymour Housewares Corporation.
3.2.4* -- By-laws of Tamor Corporation.
3.2.5* -- By-laws of Shutters, Inc.
4.1.1* -- Indenture between Home Produces International, Inc., the
Subsidiary Guarantors (as defined therein) and LaSalle
National Bank dated May 14, 1998.
4.1.2* -- Specimen Certificate of 9 5/8% Senior Subordinated Notes
due 2008 ("Original Notes") (included in Exhibit 4.1.1
hereto).
4.1.3* -- Specimen Certificate of 9 5/8% Senior Subordinated Notes
due 2008 (the "Exchange Notes") (included in Exhibit
4.1.1 hereto).
4.1.4* -- Exchange and Registration Rights Agreement, by and among
Home Products International, Inc., Chase Securities Inc.
and NationsBanc Montgomery Securities LLC dated May 14,
1998.
5.1.1* -- Opinion of Sonnenschein Nath & Rosenthal Regarding
Legality.
10.1.1* -- Credit Agreement among Home Products International, Inc.,
the several banks and other financial institutions or
entities from time to time parties to the Credit
Agreement and the Chase Manhattan Bank, as Administrative
Agent, dated May 14, 1998.
12.1.1* -- Statement Regarding Computation of Earnings to Fixed
Charges.
21.1.1 -- List of Subsidiaries.
23.1.1* -- Consent of Arthur Andersen LLP.
23.1.2* -- Consent of Grant Thorton LLP.
23.1.3* -- Consent of Ernst & Young LLP.
23.1.4* -- Consent of Sonnenschein Nath & Rosenthal (included in
Exhibit 5.1.1 hereto).
24.1.1* -- Power of Attorney (included with the signature page to
the Registration Statement).
25.1.1* -- Statement of Eligibility of Trustee.
99.1.1* -- Form of Letter of Transmittal.
</TABLE>
- ---------------
* Filed herewith
<PAGE> 1
Exhibit 1.1.1
HOME PRODUCTS INTERNATIONAL, INC.
$125,000,000
9 5/8% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
May 7, 1998
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Home Products International, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell $125,000,000 aggregate principal amount of its
95/8% Senior Subordinated Notes due 2008 (the "Securities"). The Company's
payment obligations under the Securities will be unconditionally guaranteed
(the "Guarantees"), jointly and severally, by the Subsidiary Guarantors (as
defined in the Indenture). The Securities will be issued pursuant to an
Indenture to be dated as of May 14, 1998 (the "Indenture") among the Company,
the Subsidiary Guarantors and LaSalle National Bank, as trustee (the
"Trustee"). The Company hereby confirms its agreement with Chase Securities
Inc. ("CSI") and NationsBanc Montgomery Securities LLC ("NationsBanc", and
together with CSI, the "Initial Purchasers") concerning the purchase of the
Securities from the Company by the Initial Purchasers.
The Securities will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon an exemption therefrom. The Company has prepared a
preliminary offering memorandum dated April 27, 1998 (the "Preliminary Offering
Memorandum") and will prepare an offering memorandum dated the date hereof (the
"Offering Memorandum") setting forth information concerning the Company and the
Securities. Copies of the Preliminary Offering Memorandum have been, and
copies of the Offering Memorandum will be, delivered by the Company to the
Initial Purchasers pursuant to the terms of this Agreement. Any references
herein to the Preliminary Offering Memorandum and the Offering Memorandum shall
be deemed to include all amendments and supplements thereto, unless otherwise
noted. The Company hereby
<PAGE> 2
2
confirms that it has authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offering and resale of the
Securities by the Initial Purchasers in accordance with Section 2.
Holders of the Securities (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of an
Exchange and Registration Rights Agreement, substantially in the form attached
hereto as Annex A (the "Exchange and Registration Rights Agreement"), pursuant
to which the Company will agree to file with the Securities and Exchange
Commission (the "Commission") (i) a registration statement under the Securities
Act (the "Exchange Offer Registration Statement") registering an issue of
senior subordinated notes of the Company (the "Exchange Securities") which are
identical in all material respects to the Securities (except that the Exchange
Securities will not contain terms with respect to transfer restrictions) and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement").
In connection with the offering and sale of the Securities, the Company
intends to enter into a $100 million senior secured revolving credit facility
(the "Senior Credit Facility"). The proceeds of the initial borrowing under
the Senior Credit Facility, together with the proceeds from the offering of the
Securities, will be applied by the Company to refinance certain of its existing
indebtedness and to obtain additional funds to be used for working capital and
general corporate purposes, including permitted acquisitions (collectively, the
"Refinancing").
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Offering Memorandum.
1. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, the Initial Purchasers on
and as of the date hereof and the Closing Date (as defined in Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and on the Closing Date
the Offering Memorandum will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that the Company makes no representation or warranty as to
information contained in or omitted from the Preliminary Offering
Memorandum or the Offering Memorandum in reliance upon and in conformity
with written information relating to the Initial Purchasers furnished to
the Company by or on behalf of any Initial Purchaser specifically for use
therein (collectively, the "Initial Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, contains all of the information
that, if requested by a prospective purchaser of the Securities, would be
required to be provided to such prospective purchaser pursuant to Rule
144A(d)(4) under the Securities Act.
<PAGE> 3
3
(c) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 2 and their compliance with
the agreements set forth therein, it is not necessary, in connection with
the issuance and sale of the Securities to the Initial Purchasers and the
offer, resale and delivery of the Securities by the Initial Purchasers in
the manner contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
(d) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership or
lease of property or the conduct of their respective businesses requires
such qualification, and have all power and authority necessary to own or
hold their respective properties and to conduct the businesses in which
they are engaged, except where the failure to so qualify or have such
power or authority would not, singularly or in the aggregate, have a
material adverse effect on the condition (financial or otherwise),
results of operations, business or prospects of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect").
(e) The Company has an authorized capitalization as set forth in
the Offering Memorandum under the heading "Capitalization"; all of the
outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable; and
the capital stock of the Company conforms in all material respects to the
description thereof contained in the Offering Memorandum. All of the
outstanding shares of capital stock of each subsidiary of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly or indirectly by the Company, free
and clear of any lien, charge, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third
party.
(f) The Company has full right, power and authority to execute and
deliver this Agreement, the Indenture, the Exchange and Registration
Rights Agreement, the Securities and the Senior Credit Agreement
(collectively, the "Transaction Documents") and to perform its
obligations hereunder and thereunder; and all corporate action required
to be taken for the due and proper authorization, execution and delivery
of each of the Transaction Documents and the consummation of the
transactions contemplated thereby have been duly and validly taken.
(g) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and legally binding agreement of
the Company, enforceable against the Company in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally
and by general equitable principles (whether considered in a proceeding
in equity or at law).
<PAGE> 4
4
(h) The Exchange and Registration Rights Agreement has been duly
authorized by the Company and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute
a valid and legally binding agreement of the Company enforceable against
the Company in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(i) The Indenture has been duly authorized by each of the Company
and the Subsidiary Guarantors and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute
a valid and legally binding agreement of the Company and the Subsidiary
Guarantors enforceable against the Company and the Subsidiary Guarantors
in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law). On the Closing
Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder.
(j)(i) The Securities have been duly authorized by the Company and,
when duly executed, authenticated, issued and delivered as provided in
the Indenture and paid for as provided herein, will be duly and validly
issued and outstanding and will constitute valid and legally binding
obligations of the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except to
the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by
general equitable principles (whether considered in a proceeding in
equity or at law).
(ii) The Guarantees have been duly authorized by each of the
Subsidiary Guarantors and, when duly executed, authenticated, issued and
delivered as provided in the Indenture and paid for as provided herein,
will be duly and validly issued and outstanding and will constitute valid
and legally binding obligations of the Subsidiary Guarantors entitled to
the benefits of the Indenture and enforceable against the Subsidiary
Guarantors in accordance with their terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(k) The Senior Credit Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and legally binding
agreement of the Company enforceable against the Company in accordance
with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting
<PAGE> 5
5
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
(l) Each Transaction Document conforms in all material respects to
the description thereof contained in the Offering Memorandum.
(m) The execution, delivery and performance by the Company of each
of the Transaction Documents, the issuance, authentication, sale and
delivery of the Securities and compliance by the Company with the terms
thereof and the consummation of the transactions contemplated by the
Transaction Documents will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any material indenture, mortgage, deed of
trust, loan agreement or other material agreement or instrument to which
the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor will
such actions result in any violation of the provisions of the charter or
by-laws of the Company or any of its subsidiaries or any statute or any
judgment, order, decree, rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets; and no consent,
approval, authorization or order of, or filing or registration with, any
such court or arbitrator or governmental agency or body under any such
statute, judgment, order, decree, rule or regulation is required for the
execution, delivery and performance by the Company of each of the
Transaction Documents, the issuance, authentication, sale and delivery of
the Securities and compliance by the Company with the terms thereof and
the consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations, filings,
registrations or qualifications (i) which shall have been obtained or
made prior to the Closing Date and (ii) as may be required to be obtained
or made under the Securities Act and applicable state securities laws as
provided in the Exchange and Registration Rights Agreement.
(n) The historical financial statements (including the related
notes) contained in the Offering Memorandum comply in all material
respects with the requirements applicable to a registration statement on
Form S-1 under the Securities Act (except that certain supporting
schedules are omitted); such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods covered thereby and fairly present the
financial position of the entities purported to be covered thereby at the
respective dates indicated and the results of their operations and their
cash flows for the respective periods indicated; and the financial
information contained in the Offering Memorandum under the headings
"Summary--Summary Pro Forma Combined Financial Data", "Capitalization",
"Selected Historical Financial Data", "Unaudited Pro Forma Combined
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are derived from the accounting
records of the Company and its subsidiaries and fairly present the
information purported to be shown thereby. The pro forma financial
information
<PAGE> 6
6
contained in the Offering Memorandum has been prepared on a basis
consistent with the historical financial statements contained in the
Offering Memorandum (except for the pro forma adjustments specified
therein), includes all material adjustments to the historical financial
information required by Rule 11-02 of Regulation S-X under the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange
Act") to reflect the transactions described in the Offering Memorandum,
gives effect to assumptions made on a reasonable basis and fairly
presents the historical and proposed transactions contemplated by the
Offering Memorandum and the Transaction Documents. The other historical
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, fairly presented.
(o) There are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any
property or assets of the Company or any of its subsidiaries is the
subject which, singularly or in the aggregate, if determined adversely to
the Company or any of its subsidiaries, could reasonably be expected to
have a Material Adverse Effect; and to the best knowledge of the Company,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(p) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency or
body which prevents the issuance of the Securities or suspends the sale
of the Securities in any jurisdiction; no injunction, restraining order
or order of any nature by any federal or state court of competent
jurisdiction has been issued with respect to the Company or any of its
subsidiaries which would prevent or suspend the issuance or sale of the
Securities or the use of the Preliminary Offering Memorandum or the
Offering Memorandum in any jurisdiction; no action, suit or proceeding is
pending against or, to the best knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries before any
court or arbitrator or any governmental agency, body or official,
domestic or foreign, which could reasonably be expected to interfere with
or adversely affect the issuance of the Securities or in any manner draw
into question the validity or enforceability of any of the Transaction
Documents or any action taken or to be taken pursuant thereto; and the
Company has complied with any and all requests by any securities
authority in any jurisdiction for additional information to be included
in the Preliminary Offering Memorandum and the Offering Memorandum.
(q) Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or by-laws, (ii) in default in any material
respect, and no event has occurred which, with notice or lapse of time or
both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject or (iii) in violation
in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject, except where such default or violation would not, singularly or
in the aggregate, have a Material Adverse Effect.
<PAGE> 7
7
(r) The Company and each of its subsidiaries possess all material
licenses, certificates, authorizations and permits issued by, and have
made all declarations and filings with, the appropriate federal, state or
foreign regulatory agencies or bodies which are necessary or desirable
for the ownership of their respective properties or the conduct of their
respective businesses as described in the Offering Memorandum, except
where the failure to possess or make the same would not, singularly or in
the aggregate, have a Material Adverse Effect, and neither the Company
nor any of its subsidiaries has received notification of any revocation
or modification of any such license, certificate, authorization or permit
or has any reason to believe that any such license, certificate,
authorization or permit will not be renewed in the ordinary course,
except where such revocation, modification or nonrenewal would not,
singularly or in the aggregate, have a Material Adverse Effect.
(s) The Company and each of its subsidiaries have filed all
federal, state, local and foreign income and franchise tax returns
required to be filed through the date hereof and have paid all taxes due
thereon, and no tax deficiency has been determined adversely to the
Company or any of its subsidiaries which has had (nor does the Company or
any of its subsidiaries have any knowledge of any tax deficiency which,
if determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have) a Material Adverse Effect.
(t) Neither the Company nor any of its subsidiaries is (i) an
"investment company" or a company "controlled by" an investment company
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules and regulations of the
Commission thereunder or (ii) a "holding company" or a "subsidiary
company" of a holding company or an "affiliate" thereof within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(u) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in accordance
with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to
any differences.
(v) The Company and each of its subsidiaries have insurance
covering their respective properties, operations, personnel and
businesses, which insurance is in amounts and insures against such losses
and risks as are adequate to protect the Company and its subsidiaries and
their respective businesses. Neither the Company nor any of its
subsidiaries has received notice from any insurer or agent of such
insurer that capital improvements or other expenditures are required or
necessary to be made in order to continue such insurance.
<PAGE> 8
8
(w) The Company and each of its subsidiaries own or possess
adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service
mark registrations, copyrights, licenses and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) necessary for the
conduct of their respective businesses, except where the failure to so
own or possess such rights would not, singularly or in the aggregate,
have a Material Adverse Effect; and the conduct of their respective
businesses will not conflict in any material respect with, and the
Company and its subsidiaries have not received any notice of any claim of
conflict with, any such rights of others, in either case which would,
singularly or in the aggregate, have a Material Adverse Effect.
(x) The Company and each of its subsidiaries have good and
marketable title in fee simple to, or have valid rights to lease or
otherwise use, all items of real and personal property which are material
to the business of the Company and its subsidiaries, in each case free
and clear of all liens, encumbrances, claims and defects and
imperfections of title except such as (i) do not materially interfere
with the use made and proposed to be made of such property by the Company
and its subsidiaries or (ii) could not reasonably be expected to have a
Material Adverse Effect.
(y) No labor disturbance by or dispute with the employees of the
Company or any of its subsidiaries exists or, to the best knowledge of
the Company, is contemplated or threatened.
(z) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time (the "Code")) or "accumulated funding deficiency" (as defined in
Section 302 of ERISA) or any of the events set forth in Section 4043(b)
of ERISA (other than events with respect to which the 30-day notice
requirement under Section 4043 of ERISA has been waived) has occurred
with respect to any employee benefit plan of the Company or any of its
subsidiaries which could reasonably be expected to have a Material
Adverse Effect; each such employee benefit plan is in compliance in all
material respects with applicable law, including ERISA and the Code; the
Company and each of its subsidiaries have not incurred and do not expect
to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any pension plan for which the
Company or any of its subsidiaries would have any liability, except for
any such liability that could not reasonably be expected to have,
singularly or in the aggregate, a Material Adverse Effect; and each such
pension plan that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which could reasonably be
expected to cause the loss of such qualification, except events that
could not reasonably be expected to have, singularly or in the aggregate,
a Material Adverse Effect.
<PAGE> 9
9
(aa) There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission or other release of
any kind of toxic or other wastes or other hazardous substances by, due
to or caused by the Company or any of its subsidiaries (or, to the best
knowledge of the Company, any other entity (including any predecessor)
for whose acts or omissions the Company or any of its subsidiaries is or
could reasonably be expected to be liable) upon any of the property now
or previously owned or leased by the Company or any of its subsidiaries,
or upon any other property, in violation of any statute or any ordinance,
rule, regulation, order, judgment, decree or permit or which would, under
any statute or any ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any
liability, except for any violation or liability could not reasonably be
expected to have, singularly or in the aggregate with all such violations
and liabilities, a Material Adverse Effect; and there has been no
disposal, discharge, emission or other release of any kind onto such
property or into the environment surrounding such property of any toxic
or other wastes or other hazardous substances with respect to which the
Company has knowledge, except for any such disposal, discharge, emission
or other release of any kind which could not reasonably be expected to
have, singularly or in the aggregate with all such discharges and other
releases, a Material Adverse Effect.
(bb) Neither the Company nor, to the best knowledge of the Company,
any director, officer, agent, employee or other person associated with or
acting on behalf of the Company has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of
the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.
(cc) Except as described in the Offering Memorandum, there are no
outstanding subscriptions, rights, warrants, calls or options to acquire,
or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares of
capital stock of or other equity or other ownership interest in the Company
or any of its subsidiaries.
(dd) None of the proceeds of the sale of the Securities will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security, for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or
for any other purpose which might cause any of the Securities to be
considered a "purpose credit" within the meanings of Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System.
(ee) Neither the Company nor any of its subsidiaries is a party to
any contract, agreement or understanding with any person that would give
rise to a valid claim against the Company or the Initial Purchasers for a
brokerage commission, finder's fee or like payment in connection with the
offering and sale of the Securities.
<PAGE> 10
10
(ff) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(gg) None of the Company, any of its affiliates or any person
acting on its or their behalf has engaged or will engage in any directed
selling efforts (as such term is defined in Regulation S under the
Securities Act ("Regulation S")), and all such persons have complied and
will comply with the offering restrictions requirement of Regulation S to
the extent applicable.
(hh) Neither the Company nor any of its affiliates has, directly or
through any agent, sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any security (as such term is defined
in the Securities Act), which is or will be integrated with the sale of
the Securities in a manner that would require registration of the
Securities under the Securities Act.
(ii) None of the Company or any of its affiliates or any other
person acting on its or their behalf has engaged, in connection with the
offering of the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
Securities Act.
(jj) There are no securities of the Company other than the
Company's common stock registered under the Exchange Act or listed on a
national securities exchange or quoted in a U.S. automated inter-dealer
quotation system.
(kk) The Company has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act
in connection with the offering of the Securities.
(ll) No forward-looking statement (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act) contained
in the Preliminary Offering Memorandum or the Offering Memorandum has
been made or reaffirmed without a reasonable basis or has been disclosed
other than in good faith.
(mm) Since the date as of which information is given in the
Offering Memorandum, except as otherwise stated therein, (i) there has
been no material adverse change or any development involving a
prospective material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, management or business
prospects of the Company and its subsidiaries taken as a whole, whether
or not arising in the ordinary course of business, (ii) the Company has
not incurred any material liability or obligation, direct or contingent,
other than in the ordinary course of business, (iii) the Company has not
entered into any material transaction other than in the ordinary course
of business and (iv) there has not been any change in the capital stock
or long-term debt of the Company, or any dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock, except as disclosed in the Offering Memorandum.
<PAGE> 11
11
2. Purchase and Resale of the Securities. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Company agrees to issue and sell to
each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Company, the principal amount of Securities set forth opposite the name of such
Initial Purchaser on Schedule 1 hereto at a purchase price equal to 97.25% of
the principal amount thereof. The Company shall not be obligated to deliver any
of the Securities except upon payment for all of the Securities to be purchased
as provided herein.
(b) The Initial Purchasers have advised the Company that they propose to
offer the Securities for resale upon the terms and subject to the conditions
set forth herein and in the Offering Memorandum. Each Initial Purchaser,
severally and not jointly, represents and warrants to, and agrees with, the
Company that (i) it is purchasing the Securities pursuant to a private sale
exempt from registration under the Securities Act, (ii) it has not solicited
offers for, or offered or sold, and will not solicit offers for, or offer or
sell, the Securities by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("Regulation D") or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act and (iii) it has
solicited and will solicit offers for the Securities only from, and has offered
or sold and will offer, sell or deliver the Securities, as part of its initial
offering, only (A) within the United States to persons whom it reasonably
believes to be qualified institutional buyers ("Qualified Institutional
Buyers"), as defined in Rule 144A under the Securities Act ("Rule 144A"), or if
any such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented
to it that each such account is a Qualified Institutional Buyer to whom notice
has been given that such sale or delivery is being made in reliance on Rule
144A and in each case, in transactions in accordance with Rule 144A and (B)
outside the United States to persons other than U.S. persons in reliance on
Regulation S under the Securities Act ("Regulation S").
(c) In connection with the offer and sale of Securities in reliance on
Regulation S, each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:
(i) the Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except pursuant to an exemption
from, or in transactions not subject to, the registration requirements of
the Securities Act.
(ii) such Initial Purchaser has offered and sold the Securities,
and will offer and sell the Securities, (A) as part of their distribution
at any time and (B) otherwise until 40 days after the later of the
commencement of the offering of the Securities and the Closing Date, only
in accordance with Regulation S or Rule 144A or any other available
exemption from registration under the Securities Act.
(iii) none of such Initial Purchaser or any of its affiliates or
any other person acting on its or their behalf has engaged or will engage
in any directed selling efforts with
<PAGE> 12
12
respect to the Securities, and all such persons have complied and will
comply with the offering restrictions requirement of Regulation S.
(iv) at or prior to the confirmation of sale of any Securities sold
in reliance on Regulation S, it will have sent to each distributor,
dealer or other person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted
period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering of the Securities and the
date of original issuance of the Securities, except in accordance
with Regulation S or Rule 144A or any other available exemption
from registration under the Securities Act. Terms used above have
the meanings given to them by Regulation S."
(v) it has not and will not enter into any contractual arrangement
with any distributor with respect to the distribution of the Securities,
except with its affiliates or with the prior written consent of the
Company.
Terms used in this Section 2(c) have the meanings given to them by Regulation
S.
(d) Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that (i) it has not offered or sold and prior to the date
six months after the Closing Date will not offer or sell any Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 and the Public Offers
of Securities Regulations 1995 with respect to anything done by it in relation
to the Securities in, from or otherwise involving the United Kingdom; and (iii)
it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom such document may otherwise lawfully be issued or passed
on.
(e) Each Initial Purchaser, severally and not jointly, agrees that, prior
to or simultaneously with the confirmation of sale by such Initial Purchaser to
any purchaser of any of the Securities purchased by such Initial Purchaser from
the Company pursuant hereto, such Initial Purchaser shall furnish to that
purchaser a copy of the Offering Memorandum (and any amendment or supplement
thereto that the Company shall have furnished to such Initial Purchaser prior
to the date of such confirmation of sale). In addition to the foregoing, each
Initial Purchaser acknowledges and agrees that the Company and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Sections
5(d) and (e), counsel for the Company and for the
<PAGE> 13
13
Initial Purchasers, respectively, may rely upon the accuracy of the
representations and warranties of the Initial Purchasers and their compliance
with their agreements contained in this Section 2, and each Initial Purchaser
hereby consents to such reliance.
(f) The Company acknowledges and agrees that the Initial Purchasers may
sell Securities to any affiliate of an Initial Purchaser and that any such
affiliate may sell Securities purchased by it to an Initial Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of and
payment for the Securities shall be made at the offices of Simpson Thacher &
Bartlett, New York, New York, or at such other place as shall be agreed upon by
the Initial Purchasers and the Company, at 10:00 A.M., New York City time, on
May 14, 1998, or at such other time or date, not later than seven full business
days thereafter, as shall be agreed upon by the Initial Purchasers and the
Company (such date and time of payment and delivery being referred to herein as
the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the Securities
shall be made to the Company by wire or book-entry transfer of same-day funds
to such account or accounts as the Company shall specify prior to the Closing
Date or by such other means as the parties hereto shall agree prior to the
Closing Date against delivery to the Initial Purchasers of the certificates
evidencing the Securities. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligations of the Initial Purchasers hereunder. Upon delivery, the
Securities shall be in global form, contain the legends required by the
Indenture and be registered in such names and in such denominations as CSI on
behalf of the Initial Purchasers shall have requested in writing not less than
two full business days prior to the Closing Date. The Company agrees to make
one or more global certificates evidencing the Securities available for
inspection by CSI on behalf of the Initial Purchasers in New York, New York at
least 24 hours prior to the Closing Date.
4. Further Agreements of the Company. The Company agrees with each of
the Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes
any statement of a material fact made in the Offering Memorandum untrue
or which requires the making of any additions to or changes in the
Offering Memorandum (as amended or supplemented from time to time) in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; to advise the Initial
Purchasers promptly of any order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum, of any
suspension of the qualification of the Securities for offering or sale in
any jurisdiction and of the initiation or threatening of any proceeding
for any such purpose; and to use its best efforts to prevent the issuance
of any such order preventing or suspending the use of the Preliminary
Offering Memorandum or the Offering Memorandum or suspending any such
qualification and, if any such suspension is issued, to obtain the
lifting thereof at the earliest possible time;
<PAGE> 14
14
(b) to furnish promptly to each of the Initial Purchasers and
counsel for the Initial Purchasers, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and any
amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to each of the Initial Purchasers
and counsel for the Initial Purchasers and not to effect any such
amendment or supplement to which the Initial Purchasers shall reasonably
object by notice to the Company after a reasonable period to review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel for
the Initial Purchasers or counsel for the Company, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not
include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement
the Offering Memorandum to comply with applicable law, to promptly
prepare such amendment or supplement as may be necessary to correct such
untrue statement or omission or so that the Offering Memorandum, as so
amended or supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon request of
such holders or such prospective purchasers, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless
the Company is then subject to and in compliance with Section 13 or 15(d)
of the Exchange Act (the foregoing agreement being for the benefit of the
holders from time to time of the Securities and prospective purchasers of
the Securities designated by such holders);
(f) for so long as the Securities are outstanding, to furnish to
the Initial Purchasers copies of any annual reports, quarterly reports
and current reports filed by the Company with the Commission on Forms
10-K, 10-Q and 8-K, or such other similar forms as may be designated by
the Commission, and such other documents, reports and information as
shall be furnished by the Company to the Trustee or to the holders of the
Securities pursuant to the Indenture or the Exchange Act or any rule or
regulation of the Commission thereunder;
(g) to promptly take from time to time such actions as the Initial
Purchasers may reasonably request to qualify the Securities for offering
and sale under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchasers may designate and to continue such qualifications
in effect for so long as required for the resale of the Securities; and
to arrange for the determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial Purchasers
may reasonably
<PAGE> 15
15
request; provided that the Company and its subsidiaries shall not be
obligated to qualify as foreign corporations in any jurisdiction in which
they are not so qualified or to file a general consent to service of
process in any jurisdiction;
(h) to assist the Initial Purchasers in arranging for the
Securities to be designated Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL
Market and for the Securities to be eligible for clearance and settlement
through The Depository Trust Company ("DTC");
(i) not to, and to cause its affiliates not to, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as such term is defined in the Securities Act) which could be
integrated with the sale of the Securities in a manner which would
require registration of the Securities under the Securities Act;
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case
may be, not to, and to cause its affiliates not to, and not to authorize
or knowingly permit any person acting on their behalf to, solicit any
offer to buy or offer to sell the Securities by means of any form of
general solicitation or general advertising within the meaning of
Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act; and not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, contract or
disposition would cause the exemption afforded by Section 4(2) of the
Securities Act to cease to be applicable to the offering and sale of the
Securities as contemplated by this Agreement and the Offering Memorandum;
(k) for a period of 180 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise
dispose of, directly or indirectly, or file a registration statement for,
or announce any offer, sale, contract for sale of or other disposition of
any debt securities issued or guaranteed by the Company or any of its
subsidiaries (other than the Securities) without the prior written
consent of the Initial Purchasers;
(l) during the period from the Closing Date until three years after
the Closing Date, without the prior written consent of the Initial
Purchasers, not to, and not permit any of its subsidiaries to, resell any
of the Securities that have been reacquired by them, except for
Securities purchased by the Company or any of its subsidiaries and resold
in a transaction registered under the Securities Act;
(m) in connection with the offering of the Securities, until CSI on
behalf of the Initial Purchasers shall have notified the Company of the
completion of the resale of the Securities, not to, and to cause its
affiliated purchasers (as defined in Regulation M under the Exchange Act)
not to, either alone or with one or more other persons, bid for or
purchase, for any account in which it or any of its affiliated purchasers
has a beneficial
<PAGE> 16
16
interest, any Securities, or attempt to induce any person to purchase any
Securities; and not to, and to cause its affiliated purchasers not to,
make bids or purchase for the purpose of creating actual, or apparent,
active trading in or of raising the price of the Securities;
(n) in connection with the offering of the Securities, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
(o) to furnish to each of the Initial Purchasers on the date hereof
a copy of the independent accountants' report included in the Offering
Memorandum signed by the accountants rendering such report;
(p) prior to the Closing Date, not to issue any press release or
other communication directly or indirectly or hold any press conference
with respect to the Company, its condition, financial or otherwise, or
earnings, business affairs or business prospects (except for routine oral
marketing communications in the ordinary course of business and
consistent with the past practices of the Company and of which the
Initial Purchasers are notified), without the prior written consent of
the Initial Purchasers, unless in the judgment of the Company and its
counsel, and after notification to the Initial Purchasers, such press
release or communication is required by law; and
(q) to apply the net proceeds from the sale of the Securities as
set forth in the Offering Memorandum under the heading "Use of Proceeds".
5. Conditions of Initial Purchasers' Obligations. The respective
obligations of the Initial Purchasers hereunder are subject to the accuracy, on
and as of the date hereof and the Closing Date, of the representations and
warranties of the Company contained herein, to the accuracy of the statements
of the Company and its officers made in any certificates delivered pursuant
hereto, to the performance by the Company of its obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial
Purchasers may agree; and no stop order suspending the sale of the
Securities in any jurisdiction shall have been issued and no proceeding
for that purpose shall have been commenced or shall be pending or
threatened.
(b) None of the Initial Purchasers shall have discovered and
disclosed to the Company on or prior to the Closing Date that the
Offering Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel for the
Initial Purchasers, is material or omits to state any fact which, in the
opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
<PAGE> 17
17
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of each of the Transaction Documents
and the Offering Memorandum, and all other legal matters relating to the
Transaction Documents and the transactions contemplated thereby, shall be
satisfactory in all material respects to the Initial Purchasers, and the
Company shall have furnished to the Initial Purchasers all documents and
information that they or their counsel may reasonably request to enable
them to pass upon such matters.
(d) Sonnenschein, Nath & Rosenthal shall have furnished to the
Initial Purchasers their written opinion, as counsel to the Company,
addressed to the Initial Purchasers and dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchasers,
substantially to the effect set forth in Annex B hereto.
(e) The Initial Purchasers shall have received from Simpson Thacher
& Bartlett, counsel for the Initial Purchasers, such opinion or opinions,
dated the Closing Date, with respect to such matters as the Initial
Purchasers may reasonably require, and the Company shall have furnished
to such counsel such documents and information as they request for the
purpose of enabling them to pass upon such matters.
(f) The Company shall have furnished to the Initial Purchasers a
letter (the "Initial Letter") of Arthur Andersen LLP, Grant Thornton LLP
and Ernst & Young LLP, addressed to the Initial Purchasers and dated the
date hereof, in form and substance satisfactory to the Initial
Purchasers, substantially to the effect set forth in Annex C hereto.
(g) The Company shall have furnished to the Initial Purchasers a
letter (the "Bring-Down Letter") of Arthur Andersen LLP, Grant Thornton
LLP and Ernst & Young LLP, addressed to the Initial Purchasers and dated
the Closing Date (i) confirming that they are independent public
accountants with respect to the Company and its subsidiaries within the
meaning of Rule 101 of the Code of Professional Conduct of the AICPA and
its interpretations and rulings thereunder, (ii) stating, as of the date
of the Bring-Down Letter (or, with respect to matters involving changes
or developments since the respective dates as of which specified
financial information is given in the Offering Memorandum, as of a date
not more than three business days prior to the date of the Bring-Down
Letter), that the conclusions and findings of such accountants with
respect to the financial information and other matters covered by the
Initial Letter are accurate and (iii) confirming in all material respects
the conclusions and findings set forth in the Initial Letter.
(h) The Company shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, of its chief executive officer and
its chief financial officer stating that (A) such officers have carefully
examined the Offering Memorandum, (B) in their opinion, the Offering
Memorandum, as of its date, did not include any untrue statement of a
material fact and did not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, and since the date of the Offering Memorandum,
<PAGE> 18
18
no event has occurred which should have been set forth in a supplement or
amendment to the Offering Memorandum so that the Offering Memorandum (as
so amended or supplemented) would not include any untrue statement of a
material fact and would not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading
and (C) as of the Closing Date, the representations and warranties of the
Company in this Agreement are true and correct, the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder on or prior to the Closing Date, and
subsequent to the date of the most recent financial statements contained
in the Offering Memorandum, there has been no material adverse change in
the financial position or results of operation of the Company and its
subsidiaries taken as a whole, or any change, or any development
including a prospective change, in or affecting the condition (financial
or otherwise), results of operations, business or prospects of the
Company and its subsidiaries taken as a whole, except as set forth in the
Offering Memorandum.
(i) The Initial Purchasers shall have received a counterpart of the
Exchange and Registration Rights Agreement which shall have been executed
and delivered by a duly authorized officer of the Company.
(j) The Indenture shall have been duly executed and delivered by
the Company and the Trustee, and the Securities shall have been duly
executed and delivered by the Company and duly authenticated by the
Trustee.
(k) The Securities shall have been approved by the NASD for trading
in the PORTAL Market.
(l) If any event shall have occurred that requires the Company
under Section 4(d) to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof shall have been delivered to the
Initial Purchasers reasonably in advance of the Closing Date.
(m) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the
Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission which in the judgment of the Initial Purchasers
would materially impair the ability of the Initial Purchasers to
purchase, hold or effect resales of the Securities as contemplated
hereby.
(n) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there
shall not have been any change in the capital stock or long-term debt or
any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), results of operations,
business or prospects of the Company and its subsidiaries taken as a
whole, the effect of
<PAGE> 19
19
which, in any such case described above, is, in the judgment of the
Initial Purchasers, so material and adverse as to make it impracticable
or inadvisable to proceed with the sale or delivery of the Securities on
the terms and in the manner contemplated by this Agreement and the
Offering Memorandum (exclusive of any amendment or supplement thereto).
(o) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date, prevent
the issuance or sale of the Securities; and no injunction, restraining
order or order of any other nature by any federal or state court of
competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance or sale of the Securities.
(p) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Securities
or any of the Company's other debt securities or preferred stock by any
"nationally recognized statistical rating organization", as such term is
defined by the Commission for purposes of Rule 436(g)(2) of the rules and
regulations of the Commission under the Securities Act and (ii) no such
organization shall have publicly announced that it has under surveillance
or review (other than an announcement with positive implications of a
possible upgrading), its rating of the Securities or any of the Company's
other debt securities or preferred stock.
(q) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the over-the-counter market shall have been suspended or
limited, or minimum prices shall have been established on any such
exchange or market by the Commission, by any such exchange or by any
other regulatory body or governmental authority having jurisdiction, or
trading in any securities of the Company on any exchange or in the
over-the-counter market shall have been suspended or (ii) any moratorium
on commercial banking activities shall have been declared by federal or
New York state authorities or (iii) an outbreak or escalation of
hostilities or a declaration by the United States of a national emergency
or war or (iv) a material adverse change in general economic, political
or financial conditions (or the effect of international conditions on the
financial markets in the United States shall be such) the effect of
which, in the case of this clause (iv), is, in the judgment of the
Initial Purchasers, so material and adverse as to make it impracticable
or inadvisable to proceed with the sale or the delivery of the Securities
on the terms and in the manner contemplated by this Agreement and in the
Offering Memorandum (exclusive of any amendment or supplement thereto).
(r) The Initial Purchasers shall have received (i) copies of the
documentation evidencing the Senior Credit Facility (the "Bank
Documents"), in each case certified by the secretary of the Company as
being true, complete and correct and (ii) evidence, reasonably
satisfactory to them, that the initial funding is occurring under the
Bank Documents.
<PAGE> 20
20
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers hereunder may
be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Company prior to delivery of and payment
for the Securities if, prior to that time, any of the events described in
Section 5(m), (n), (o), (p) or (q) shall have occurred and be continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for the
purchase of the Securities which such defaulting Initial Purchaser agreed but
failed to purchase by other persons satisfactory to the Company and the
non-defaulting Initial Purchasers, but if no such arrangements are made within
36 hours after such default, this Agreement shall terminate without liability
on the part of the non-defaulting Initial Purchasers or the Company, except
that the Company will continue to be liable for the payment of expenses to the
extent set forth in Sections 8 and 12 and except that the provisions of
Sections 9 and 10 shall not terminate and shall remain in effect. As used in
this Agreement, the term "Initial Purchasers" includes, for all purposes of
this Agreement unless the context otherwise requires, any party not listed in
Schedule 1 hereto that, pursuant to this Section 7, purchases Securities which
a defaulting Initial Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial Purchaser
of any liability it may have to the Company or any non-defaulting Initial
Purchaser for damages caused by its default. If other persons are obligated or
agree to purchase the Securities of a defaulting Initial Purchaser, either the
non-defaulting Initial Purchasers or the Company may postpone the Closing Date
for up to seven full business days in order to effect any changes that in the
opinion of counsel for the Company or counsel for the Initial Purchasers may be
necessary in the Offering Memorandum or in any other document or arrangement,
and the Company agrees to promptly prepare any amendment or supplement to the
Offering Memorandum that effects any such changes.
8. Reimbursement of Initial Purchasers' Expenses. If (a) this Agreement
shall have been terminated pursuant to Section 6 or 7, (b) the Company shall
fail to tender the Securities for delivery to the Initial Purchasers for any
reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Securities for any reason permitted under this
Agreement, the Company shall reimburse the Initial Purchasers for such
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
as shall have been reasonably incurred by the Initial Purchasers in connection
with this Agreement and the proposed purchase and resale of the Securities. If
this Agreement is terminated pursuant to Section 7 by reason of the default of
one or more of the Initial Purchasers, the Company shall not be obligated to
reimburse any defaulting Initial Purchaser on account of such expenses.
9. Indemnification. (a) The Company and the Subsidiary Guarantors
shall, jointly and severally, indemnify and hold harmless each Initial
Purchaser, its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who
<PAGE> 21
21
controls any Initial Purchaser within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 9(a) and
Section 10 as an Initial Purchaser), from and against any loss, claim, damage
or liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of the Securities), to which that Initial Purchaser may
become subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering Memorandum
or the Offering Memorandum or in any amendment or supplement thereto or in any
information provided by the Company pursuant to Section 4(e) or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
shall reimburse each Initial Purchaser promptly upon demand for any legal or
other expenses reasonably incurred by that Initial Purchaser in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
and the Subsidiary Guarantors shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with any Initial Purchasers' Information furnished by such Initial
Purchaser; and provided, further, that with respect to any such untrue
statement in or omission from the Preliminary Offering Memorandum, the
indemnity agreement contained in this Section 9(a) shall not inure to the
benefit of any such Initial Purchaser to the extent that the sale to the person
asserting any such loss, claim, damage, liability or action was an initial
resale by such Initial Purchaser and any such loss, claim, damage, liability or
action of or with respect to such Initial Purchaser results from the fact that
both (A) to the extent required by applicable law, a copy of the Offering
Memorandum was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities to such person and (B) the untrue
statement in or omission from the Preliminary Offering Memorandum was corrected
in the Offering Memorandum unless such failure to deliver the Offering
Memorandum was a result of non-compliance by the Company with Section 4(b).
(b) Each Initial Purchaser, severally and not jointly, shall indemnify
and hold harmless the Company, the Subsidiary Guarantors, their respective
affiliates, officers, directors, employees, representatives and agents, and
each person, if any, who controls the Company and the Subsidiary Guarantors
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 9(b) and Section 10 as the Company),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
<PAGE> 22
22
the circumstances under which they were made, not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
any Initial Purchasers' Information furnished by such Initial Purchaser, and
shall reimburse the Company for any legal or other expenses reasonably incurred
by the Company in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any
such loss, claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section 9
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 9(a) or 9(b), notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 9 except to the extent that it
has been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and, provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 9. If any such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any
other similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
an indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (i)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (ii) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there
may be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based upon advice of counsel to
the indemnified party) between the indemnified party and the indemnifying party
(in which case the indemnifying party will not have the right to direct the
defense of such action on behalf of the indemnified party) or (iv) the
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be
at the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm of
attorneys (in addition to any local counsel) at any one time for all such
indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 9(a) and 9(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent
<PAGE> 23
23
shall not be unreasonably withheld), but if settled with its written consent or
if there be a final judgment for the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of
the indemnified party (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
The obligations of the Company and the Initial Purchasers in this Section
9 and in Section 10 are in addition to any other liability that the Company or
the Initial Purchasers, as the case may be, may otherwise have, including in
respect of any breaches of representations, warranties and agreements made
herein by any such party.
10. Contribution. If the indemnification provided for in Section 9 is
unavailable or insufficient to hold harmless an indemnified party under Section
9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in
respect thereof, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the Initial
Purchasers on the other from the offering of the Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Initial Purchasers on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities purchased under this Agreement (before deducting expenses)
received by or on behalf of the Company, on the one hand, and the total
discounts and commissions received by the Initial Purchasers with respect to
the Securities purchased under this Agreement, on the other, bear to the total
gross proceeds from the sale of the Securities under this Agreement, in each
case as set forth in the table on the cover page of the Offering Memorandum.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to the Company
and its subsidiaries or information supplied by the Company on the one hand or
to any Initial Purchasers' Information on the other, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 10 were to be determined by pro rata allocation (even
if the Initial Purchasers were treated as one entity for such purpose) or by
any other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 10 shall be deemed
to include, for purposes of this Section 10, any legal or other expenses
reasonably incurred by such indemnified party in
<PAGE> 24
24
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 10, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total discounts and commissions received by such Initial Purchaser
with respect to the Securities purchased by it under this Agreement exceeds the
amount of any damages which such Initial Purchaser has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute as
provided in this Section 10 are several in proportion to their respective
purchase obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the Initial Purchasers, the Company and
their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except as provided in
Sections 9 and 10 with respect to affiliates, officers, directors, employees,
representatives, agents and controlling persons of the Company, the Subsidiary
Guarantors and the Initial Purchasers and in Section 4(e) with respect to
holders and prospective purchasers of the Securities. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 11, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
12. Expenses. The Company agrees with the Initial Purchasers to pay (a)
the costs incident to the authorization, issuance, sale, preparation and
delivery of the Securities and any taxes payable in that connection; (b) the
costs incident to the preparation, printing and distribution of the Preliminary
Offering Memorandum, the Offering Memorandum and any amendments or supplements
thereto; (c) the costs of reproducing and distributing each of the Transaction
Documents; (d) the costs incident to the preparation, printing and delivery of
the certificates evidencing the Securities, including stamp duties and transfer
taxes, if any, payable upon issuance of the Securities; (e) the fees and
expenses of the Company's counsel and independent accountants; (f) the fees and
expenses of qualifying the Securities under the securities laws of the several
jurisdictions as provided in Section 4(g) and of preparing, printing and
distributing Blue Sky Memoranda (including related fees and expenses of counsel
for the Initial Purchasers); (g) any fees charged by rating agencies for rating
the Securities; (h) the fees and expenses of the Trustee and any paying agent
(including related fees and expenses of any counsel to such parties); (i) all
expenses and application fees incurred in connection with the application for
the inclusion of the Securities on the PORTAL Market and the approval of the
Securities for book-entry transfer by DTC; and (j) all other costs and expenses
incident to the performance of the obligations of the Company under this
Agreement which are not otherwise specifically provided for in this Section 12;
provided, however, that except as provided in this Section 12 and Section 8,
the Initial Purchasers shall pay their own costs and expenses.
13. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Initial
Purchasers contained in this Agreement or made by or on behalf of the Company
or the Initial Purchasers pursuant to this
<PAGE> 25
25
Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any of their respective
affiliates, officers, directors, employees, representatives, agents or
controlling persons.
14. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by mail
or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New
York, New York 10017, Attention: James Neary (telecopier no.: (212)
270-0994); or
(b) if to the Company, shall be delivered or sent by mail or
telecopy transmission to the address of the Company set forth in the
Offering Memorandum, Attention: James Winslow (telecopier no.: (773)
890-0523);
provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement
given or made on behalf of the Initial Purchasers by CSI.
15. Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
16. Initial Purchasers' Information. The parties hereto acknowledge and
agree that, for all purposes of this Agreement, the Initial Purchasers'
Information consists solely of the following information in the Preliminary
Offering Memorandum and the Offering Memorandum: (i) the last paragraph on the
front cover page concerning the terms of the offering by the Initial
Purchasers; (ii) the legend on the inside front cover page concerning
over-allotment and trading activities by the Initial Purchasers; (iii) the
statements concerning the Initial Purchasers contained in the fifth paragraph
under the heading "Certain Transactions"; and (iv) the statements concerning
the Initial Purchasers contained in the first and second sentences of the third
paragraph and paragraph twelve under the heading "Plan of Distribution".
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
<PAGE> 26
26
19. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the
parties hereto.
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE> 27
27
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company, the Subsidiary
Guarantors and the Initial Purchasers in accordance with its terms.
Very truly yours,
HOME PRODUCTS INTERNATIONAL, INC.
By______________________________
Name:
Title:
SELFIX, INC.,
as a Subsidiary Guarantor
By______________________________
Name:
Title:
SEYMOUR HOUSEWARES CORPORATION,
as a Subsidiary Guarantor
By______________________________
Name:
Title:
SHUTTERS, INC.,
as a Subsidiary Guarantor
By______________________________
Name:
Title:
TAMOR CORPORATION,
as a Subsidiary Guarantor
By______________________________
Name:
Title:
<PAGE> 28
28
Accepted:
CHASE SECURITIES INC.
By____________________________
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
NATIONSBANC MONTGOMERY SECURITIES LLC
By____________________________
Authorized Signatory
Address for notices pursuant to Section 9(c):
600 Montgomery Street
San Francisco, CA 94111
Attention: Legal Department
<PAGE> 29
29
SCHEDULE 1
Senior Subordinated Notes
<TABLE>
<CAPTION>
Principal
Amount
Initial Purchasers of Securities
------------------------------------- -------------
<S> <C>
Chase Securities Inc. $81,250,000
NationsBanc Montgomery Securities LLC $43,750,000
Total $125,000,000
</TABLE>
<PAGE> 30
A-1
ANNEX A
[Form of Exchange and Registration Rights Agreement]
<PAGE> 31
B-1
ANNEX B
[Form of Opinion of Counsel for the Company]
Sonnenschein, Nath & Rosenthal shall have furnished to the Initial
Purchasers their written opinion, as counsel to the Company, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers, substantially to the effect set forth
below:
(i) the Company and each of its subsidiaries are validly existing
as corporations in good standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business and are
in good standing as foreign corporations in each jurisdiction in which
their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power and
authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged (except where the
failure to so qualify or have such power or authority would not,
singularly or in the aggregate, have a Material Adverse Effect);
(ii) the Company has an authorized capitalization as set forth in
the Offering Memorandum;
(iii) the descriptions in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts and other documents are
accurate in all material respects; the statements in the Offering
Memorandum under the heading "Certain Federal Income Tax Consequences",
to the extent that they constitute summaries of matters of law or
regulation or legal conclusions, have been reviewed by such counsel and
fairly summarize the matters described therein in all material respects;
and such counsel does not have actual knowledge of any current or pending
legal or governmental actions, suits or proceedings which would be
required to be described in the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement on Form
S-1 which are not described as so required;
(iv) the Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of
the Commission applicable to an indenture which is qualified thereunder;
(v) the Company has full right, power and authority to execute and
deliver each of the Transaction Documents and to perform its obligations
thereunder; and all corporate action required to be taken for the due and
proper authorization, execution and delivery of each of the Transaction
Documents and the consummation of the transactions contemplated thereby
have been duly and validly taken;
<PAGE> 32
B-2
(vi) each of the Purchase Agreement and the Exchange and
Registration Rights Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding
agreement of the Company enforceable against the Company in accordance
with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered
in a proceeding in equity or at law) and except to the extent that the
indemnification provisions thereof may be unenforceable;
(vii) the Indenture has been duly authorized, executed and delivered
by the Company and the Subsidiary Guarantors and, assuming due
authorization, execution and delivery thereof by the Trustee, constitutes
a valid and legally binding agreement of the Company and the Subsidiary
Guarantors enforceable against the Company and the Subsidiary Guarantors
in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law);
(viii)(a) the Securities have been duly authorized and issued by
the Company and, assuming due authentication thereof by the Trustee and
upon payment and delivery in accordance with the Purchase Agreement, will
constitute valid and legally binding obligations of the Company entitled
to the benefits of the Indenture and enforceable against the Company in
accordance with their terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law);
(b) the Guarantees have been duly authorized and issued by each of
the Subsidiary Guarantors and, assuming due authentication of the
Securities by the Trustee and upon payment and delivery of the Securities
in accordance with the Purchase Agreement, will constitute valid and
legally binding obligations of the Subsidiary Guarantors entitled to the
benefits of the Indenture and enforceable against the Subsidiary
Guarantors in accordance with their terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law);
(x) each Transaction Document conforms in all material respects to
the description thereof contained in the Offering Memorandum;
(xi) the execution, delivery and performance by the Company of each
of the Transaction Documents, the issuance, authentication, sale and
delivery of the Securities and compliance by the Company with the terms
thereof and the consummation of the transactions contemplated by the
Transaction Documents will not conflict with or result
<PAGE> 33
B-3
in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, any material indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws of
the Company or any of its subsidiaries or any statute or any judgment,
order, decree, rule or regulation of any court or arbitrator or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties or assets; and no consent,
approval, authorization or order of, or filing or registration with, any
such court or arbitrator or governmental agency or body under any such
statute, judgment, order, decree, rule or regulation is required for the
execution, delivery and performance by the Company of each of the
Transaction Documents, the issuance, authentication, sale and delivery of
the Securities and compliance by the Company with the terms thereof and
the consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations, filings,
registrations or qualifications (i) which have been obtained or made
prior to the Closing Date and (ii) as may be required to be obtained or
made under the Securities Act and applicable state securities laws as
provided in the Exchange and Registration Rights Agreement;
(xii) to the knowledge of such counsel, there are no pending
actions or suits or judicial, arbitral, rule-making, administrative or
other proceedings to which the Company or any of its subsidiaries is a
party or of which any property or assets of the Company or any of its
subsidiaries is the subject which (A) singularly or in the aggregate, if
determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have a Material Adverse Effect or (B) questions
the validity or enforceability of any of the Transaction Documents or any
action taken or to be taken pursuant thereto; and to the best knowledge
of such counsel, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others; and
(xiii) assuming the accuracy of the representations, warranties and
agreements of the Company and of the Initial Purchasers contained in the
Purchase Agreement, no registration of the Securities under the Securities Act
or qualification of the Indenture under the Trust Indenture Act is required in
connection with the issuance and sale of the Securities by the Company and the
offer, resale and delivery of the Securities by the Initial Purchasers in the
manner contemplated by the Purchase Agreement and the Offering.
Such counsel shall also state that they have participated in conferences
with representatives of the Company, representatives of its independent
accountants and counsel and representatives of the Initial Purchasers and their
counsel at which conferences the contents of the Preliminary Offering
Memorandum and the Offering Memorandum and any amendment and supplement thereto
and related matters were discussed and, although such counsel assumes no
responsibility for the accuracy, completeness or fairness of the Offering
Memorandum or any amendment or supplement thereto (except as expressly provided
above), nothing has come to the
<PAGE> 34
B-4
attention of such counsel to cause such counsel to believe that the Offering
Memorandum or any amendment or supplement thereto (other than the financial
statements and other financial and statistical information contained therein,
as to which such counsel need express no belief), as of the date thereof and as
of the Closing Date, contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact, to
the extent such counsel deems proper, on certificates of responsible officers
of the Company and public officials which are furnished to the Initial
Purchasers.
<PAGE> 35
C-1
ANNEX C
[Form of Initial Comfort Letter]
The Company shall have furnished to the Initial Purchasers a letter of
Arthur Andersen LLP, Grant Thornton LLP and Ernst & Young LLP, addressed to the
Initial Purchasers and dated the date of the Purchase Agreement, in form and
substance satisfactory to the Initial Purchasers, substantially to the effect
set forth below:
(i) they are independent certified public accountants with respect
to the Company within the meaning of Rule 101 of the Code of Professional
Conduct of the AICPA and its interpretations and rulings;
(ii) in their opinion, the audited financial statements included in
the Offering Memorandum and reported on by them comply in form in all
material respects with the accounting requirements of the Exchange Act
and the related published rules and regulations of the Commission
thereunder that would apply to the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement on Form
S-1 under the Securities Act (except that certain supporting schedules
are omitted);
(iii) based upon a reading of the latest unaudited financial
statements made available by the Company, the procedures of the AICPA for
a review of interim financial information as described in Statement of
Auditing Standards No. 71, reading of minutes and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters and certain other limited procedures requested by the
Initial Purchasers and described in detail in such letter, nothing has
come to their attention that causes them to believe that (A) any
unaudited financial statements included in the Offering Memorandum do not
comply as to form in all material respects with applicable accounting
requirements, (B) any material modifications should be made to the
unaudited financial statements included in the Offering Memorandum for
them to be in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements included in the Offering Memorandum or (C) the
information included under the headings "Summary--Summary [Pro Forma]
Financial Data", "Capitalization", "Selected Consolidated Historical
Financial Data", "Unaudited Pro Forma Condensed Combined Financial Data",
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" and "Management--Executive Compensation" is not in
conformity with the disclosure requirements of Regulation S-K that would
apply to the Offering Memorandum if the Offering Memorandum were a
prospectus included in a registration statement on Form S-1 under the
Securities Act;
<PAGE> 36
C-2
(iv) based upon the procedures detailed in such letter with respect
to the period subsequent to the date of the last available balance sheet,
including reading of minutes and inquiries of certain officials of the
Company who have responsibility for financial and accounting matters,
nothing has come to their attention that causes them to believe that (A)
at a specified date not more than three business days prior to the date
of such letter, there was any change in capital stock, increase in
long-term debt or decrease in net current assets as compared with the
amounts shown in the March 28, 1998 unaudited balance sheet included in
the Offering Memorandum or (B) for the period from December 27, 1997 to a
specified date not more than three business days prior to the date of
such letter, there were any decreases, as compared with the corresponding
period in the preceding year, in net sales, income from operations,
EBITDA or net income, except in all instances for changes, increases or
decreases that the Offering Memorandum discloses have occurred or which
are set forth in such letter, in which case the letter shall be
accompanied by an explanation by the Company as to the significance
thereof unless said explanation is not deemed necessary by the Initial
Purchasers;
(v) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the general
accounting records of the Company) set forth in the Offering Memorandum
agrees with the accounting records of the Company, excluding any
questions of legal interpretation; and
(vi) on the basis of a reading of the unaudited pro forma financial
information included in the Offering Memorandum, carrying out certain
specified procedures, reading of minutes and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters and proving the arithmetic accuracy of the application
of the pro forma adjustments to the historical amounts in the pro forma
financial information, nothing came to their attention which caused them
to believe that the pro forma financial information does not comply in
form in all material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X or that the pro forma adjustments have
not been properly applied to the historical amounts in the compilation of
such information.
<PAGE> 1
Exhibit 3.1.2
CERTIFICATE OF INCORPORATION
OF
SELFIX, INC.
The undersigned, a natural person, for the purposes 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:
SELFIX, INC.
SECOND: The address, including street, number, city and county of the
registered office of the Corporation in the State of Delaware is 229 South
State Street, City of Dover, County of Kent, and the name of the registered
agent of the Corporation in the State of Delaware at such address is United
States Corporation 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 the authority to issue is 5,500,000 shares. Of such authorization,
5,000,000 shares shall be designated as Common Stock and shall have a par value
of $0.01 per share and 500,000 shares shall be designated as Preferred Stock
and shall have a par value of $0.01 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.
<PAGE> 2
FIFTH:The name and the mailing address of the sole incorporator is as follows:
Name Mailing Address
---- ---------------
Karen J. Gilbert 30 South Wacker Drive
Suite 2900
Chicago, Illinois 60606
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 179 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 of 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 may be 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,
- 2 -
<PAGE> 3
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 pre-emptive right to
subscribe to any capital stock to be hereafter issued, whether now
authorized and unissued or hereafter authorized.
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 hereafter be 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 is 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
- 3 -
<PAGE> 4
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 right to indemnification conferred in this paragraph
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 of 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.
(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, 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.
(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
- 4 -
<PAGE> 5
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 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.
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 15th day of May, 1987.
__________________________
Karen J. Gilbert
Incorporator
- 5 -
<PAGE> 6
PLAN AND AGREEMENT OF MERGER
by and between
Selfix, Inc.,
an Illinois Corporation
and
Selfix, Inc.,
a Delaware Corporation
This Plan and Agreement of Merger is made pursuant to Section 11.35 of the
Illinois Business Corporation Act of 1983 and Section 252 of the Delaware
General Corporation Law by and between Selfix, Inc., an Illinois corporation
(the "Terminating Corporation") and Selfix, Inc., a Delaware corporation (the
"Surviving Corporation").
RECITALS
WHEREAS,
A. The Terminating Corporation is authorized to issue 1,000 shares of
$100.00 par value Common Stock of which 500 shares are issued and outstanding;
and
B. The Surviving Corporation, of which the Terminating Corporation is the
sole stockholder, is authorized to issue 5,000,000 shares of $0.01 par value
Common Stock, of which one share is issued and outstanding, and 500,000 shares
of $0.01 par value Preferred Stock, of which no shares have been issued; and
C. The respective Boards of Directors of the Terminating Corporation and
the Surviving Corporation have determined that it is in the best interests of
the parties to merge the Terminating Corporation into the Surviving Corporation
(the "Merger") in a transaction intended to qualify as a reorganization under
Section 368(a)(1)(F) of the Internal Revenue Code of 1986 on the terms and
conditions herein contained in order to create a single entity organized under
the laws of the State of Delaware;
D. Jeffrey C. Rubenstein of 30 South Wacker Drive, Suite 2900, Chicago,
Illinois 60606, is the registered agent of the Terminating Corporation upon
whom process against the Terminating Corporation may be served in the State of
Illinois; and
E. United States Corporation Company of 229 South State Street, Dover,
Delaware 19901 is the registered agent of the Surviving Corporation upon whom
process against the Surviving Corporation may be served in the State of
Delaware; and
F. Jeffrey C. Rubenstein of 30 South Wacker Drive, Suite 2900, Chicago,
Illinois 60606 will be the registered agent of the Surviving Corporation upon
whom process against the Surviving Corporation may be served in the State of
Illinois; and
G. The Surviving Corporation has not commenced to do business and has no
liabilities other than the reasonable costs incurred in conjunction with its
incorporation.
<PAGE> 7
TERMS AND CONDITIONS
NOW, THEREFORE, the parties to this Plan and Agreement of Merger, in
consideration of the premises, mutual covenants, agreements and provisions
herein contained, do hereby agree to and prescribe the terms and conditions of
the Merger and the mode of carrying the same into effect as follows:
1. Merger. The Terminating Corporation shall be merged into the Surviving
Corporation.
2. Effective Date. The Merger shall become effective on May 20, 1987 (the
"Effective Date").
3. Surviving Corporation. The Surviving Corporation shall survive the
Merger and shall continue to be governed by the laws of the State of Delaware,
but the separate corporate existence of the Terminating Corporation shall cease
forthwith upon the Effective Date, or as soon thereafter as is reasonably
possible.
4. Name of Surviving Corporation. The name of the Surviving Corporation
shall be Selfix, Inc.
5. Authorized Capital. The authorized capital stock of the Surviving
Corporation following the Effective Date will be 5,000,000 shares of Common
Stock, $0.01 par value per share, and 500,000 shares of Preferred Stock, $0.01
par value per share, the same as at present, unless and until such authorized
capital shall be changed in accordance with the laws of the State of Delaware.
6. Certificate of Incorporation. The present Certificate of Incorporation
of the Surviving Corporation shall continue to be the Surviving Corporation's
Certificate of Incorporation following the Effective Date, unless and until the
same shall be otherwise amended or repealed in accordance with the provisions
thereof and in accordance with the laws of the State of Delaware.
7. By-Laws. The present By-Laws of the Surviving Corporation shall be the
By-Laws of the Surviving Corporation following the Effective Date unless and
until the same shall be otherwise amended or repealed in accordance with the
provisions thereof and of the Surviving Corporation's Certificate of
Incorporation and in accordance with the laws of the State of Delaware.
8. Employees. Immediately upon the Effective Date, the employees of the
Terminating Corporation shall become the employees of the Surviving
Corporation, and shall continue to be entitled to the same rights and benefits
they enjoyed as employees of the Terminating Corporation.
-7-
<PAGE> 8
9. Incentive Stock Option Plan. Immediately upon the Effective Date, the
Surviving Corporation will assume and continue as its own the Incentive and
Nonstatutory Stock Option Plan (the "Plan") of the Terminating Corporation as
it exists on the Effective Date, subject only to (a) the substitution of 2,615
shares of the Surviving Corporation's Common Stock, $0.01 par value per share
for each share of Common Stock of the Terminating Corporation subject to such
plan, and (b) those adjustments in the exercise price and the number of shares
subject to each outstanding option previously granted pursuant to the Plan, as
such adjustments are effected pursuant to Article VI of the Plan.
10. Directors and Officers. The Terminating Corporation and the Surviving
Corporation hereby agree to cause the election or appointment of the
Terminating Corporation's directors and officers as the directors and officers
of the Surviving Corporation effective on or prior to the day preceding the
Effective Date. All such directors and officers shall continue in office until
their successors shall have been duly elected and qualified.
11. Conversion of Outstanding Shares of Terminating Corporation. The
manner and basis of converting the outstanding shares of capital stock of the
Terminating Corporation into the shares of the Surviving Corporation shall be
as follows:
a. As of the Effective Date, by virtue of the Merger and without
any further action on the part of the Surviving Corporation, the
Terminating Corporation or the holders thereof, each share of the
Common Stock of the Terminating Corporation which is issued and
outstanding immediately prior thereto shall be converted into 2,615 shares
of the Surviving Corporation's Common Stock, $0.01 par value, except that
the one share of such stock currently owned by the Terminating Corporation
shall thereupon be surrendered and cancelled.
b. Upon surrender of the certificates of the capital stock of the
Terminating Corporation to the Surviving Corporation, said
Certificates shall be cancelled by the Surviving Corporation and the
Surviving Corporation's Common Stock, $0.01 par value, will be issued to
the holders of such certificates of record as of the Effective Date in the
appropriate amounts as calculated in accordance with the preceding
paragraph. Until so surrendered, each certificate representing the
Terminating Corporation's Common Stock shall be deemed for all corporate
purposes to evidence the number of shares of the Surviving Corporation's
Common Stock into which such shares of the Terminating Corporation's
Common Stock have been converted in the Merger.
12. Transfer of Tangible and Intangible Property Interests upon the
Effective Date. Immediately upon the Effective Date, without limiting the
force and effect of any applicable provisions of the Illinois Business
Corporation Act of 1983 and the Delaware General Corporation Law with respect
to the legal effect of the Merger, all the real and personal property rights
and interests, privileges, franchises, patents, trade secrets, confidential
information, trademarks, licenses, registrations and all other legal rights and
assets of every kind and description of the Terminating Corporation, whether
tangible or intangible, shall be automatically
-8-
<PAGE> 9
transferred to, vested in and devolve upon the Surviving Corporation without
further act or deed; and all property, rights and every other interest of the
Surviving Corporation and of the Terminating Corporation shall be as
effectively the property of the Surviving Corporation as they theretofore were
of the Surviving Corporation and the Terminating Corporation, respectively.
The Terminating Corporation, and its directors and officers, hereby agree from
time to time as and when requested by the Surviving Corporation or by its
successors or assigns, to execute and deliver or cause to be executed and
delivered all such deeds and instruments and to take or cause to be taken such
further or other actions as the Surviving Corporation may deem necessary or
desirable in order to vest in, and confirm to, the Surviving Corporation, title
to and possession of any and all property of such Terminating Corporation
acquired or to be acquired by reason or as a result of the Merger and otherwise
to carry out all of the intents and purposes hereof. The proper officers and
directors of the Terminating Corporation and the proper officers and directors
of the Surviving Corporation are hereby fully authorized in the name of the
Terminating Corporation and the Surviving Corporation, respectively, to take
any and all such actions on behalf of the respective corporations.
13. Assumption of Contracts. Immediately upon the Effective Date, without
limiting the force and effect of any applicable provisions of the Illinois
Business Corporation Act of 1983 and the Delaware General Corporation Law with
respect to the legal effect of the Merger, all of contracts and agreements to
which the Terminating Corporation is a party shall be automatically assumed by
the Surviving Corporation.
14. Representations of the Terminating Corporation and the Surviving
Corporation. The Terminating Corporation and the Surviving Corporation each
hereby represents and warrants that it is not a party, jointly or severally, to
any contract or agreement, the terms of which would be violated or breached by
it upon execution and consummation of this Plan and Agreement of Merger, such
that this Plan and Agreement of Merger is enforceable against each of the
respective corporations in accordance with its terms.
15. Survival of Representations. All representations and warranties of
the Terminating Corporation and of the Surviving Corporation contained in this
or any other instrument delivered by or on behalf of any of them are true and
correct now, will be true and correct on the Effective Date with the same force
and effect as if made on and as of said date, and will survive the Effective
Date for a period of two (2) years.
16. Entire Agreement. This Plan and Agreement of Merger constitutes the
entire agreement by and between the parties hereto with respect to the matters
herein contemplated. This Plan and Agreement of Merger supersedes all previous
agreements, negotiations and commitments in respect thereto. This Plan and
Agreement of Merger shall not be changed or modified in any manner, except by
mutual consent in a writing of subsequent date signed by the duly authorized
representations of each party hereto.
17. Further Assurances. Following the receipt of all required approvals
of this Plan and Agreement of Merger by the respective stockholders of the
parties, as applicable, each of
-9-
<PAGE> 10
the parties hereto shall immediately execute and deliver to the other party
hereto and file with appropriate governmental authorities such instruments as
may be reasonably required in connection with the consummation of the Merger
contemplated hereby.
18. Binding Effect. This Plan and Agreement of Merger shall be binding
upon and inure to the benefit of all of the parties hereto and their respective
successors in interest.
19. Miscellaneous. Paragraph headings do not form a part of this Plan and
Agreement of Merger, but are for convenience of reference only and shall not
limit or affect in any way the meaning or interpretation hereof. The failure
of either party to enforce any of the provisions hereof shall not waive or
limit the right of such party thereafter to strictly enforce such provision, or
of the right of such party thereafter to enforce each and every provision
hereof.
20. Revocability of Plan and Agreement. Anything herein or elsewhere to
the contrary notwithstanding, this Plan and Agreement of Merger may be
terminated and abandoned by the Board of Directors of the Terminating
Corporation or of the Surviving Corporation at any time prior to the date of
filing the required Plan and Agreement of Merger or Certificate of Merger and
the required Articles of Merger, respectively, with the Secretaries of State of
the States of Delaware and Illinois.
21. Service of Process. The Surviving Corporation hereby agrees that it
may be served with process in the States of Delaware and Illinois in any
proceeding for the enforcement of any obligation of the Terminating Corporation
and in any proceeding for the enforcement of rights of dissenting shareholders,
if any, of such corporation. The Surviving Corporation hereby irrevocably
appoints the Secretary of State of the State of Illinois as its agent to accept
service of process in any such proceeding; hereby designates the following
address to which a copy of any such process shall be mailed by such Secretary
of State: Jeffrey C. Rubenstein, 30 South Wacker Drive, Suite 2900, Chicago,
Illinois 60606; and hereby agrees that it will pay the dissenting
shareholders, if any, of the Terminating Corporation the amount, if any, to
which they shall be entitled under the provisions of the Illinois Business
Corporation Act of 1983 with respect to the rights of dissenting shareholders.
IN WITNESS WHEREOF, the parties hereto, pursuant to the approval and
authority duly given by resolutions adopted by their respective Boards of
Directors, have caused this Plan and
-10-
<PAGE> 11
Agreement of Merger to be executed by their respective Presidents and
attested by their respective Secretaries or Assistant Secretaries this ______
day of __________, 1998.
Selfix, Inc.,
an Illinois corporation
Attest: By:
---------------------
Meyer J. Ragir, Chief
Executive Officer
- ----------------------
Jeffrey C. Rubenstein,
Asst. Secretary
Selfix, Inc.,
a Delaware corporation
Attest: By:
---------------------
Meyer J. Ragir, Chief
Executive Officer
- ----------------------
Jeffrey C. Rubenstein,
Asst. Secretary
-11-
<PAGE> 12
CERTIFICATE
I, Jeffrey C. Rubenstein, Assistant Secretary of SELFIX, INC. (the
"Corporation"), a corporation organized and existing under the laws of the
State of Delaware, hereby certify as such Assistant Secretary, that the Plan
and Agreement of Merger to which this certificate is attached, after having
been first duly signed on behalf of the Corporation and having been signed on
behalf of SELFIX, INC., a corporation of the State of Illinois, has been
consented to in writing by all of the stockholders of the Corporation entitled
to vote on the Plan and Agreement of Merger.
WITNESS my hand on this ______ day of _________________, 1998.
-------------------
Assistant Secretary
-12-
<PAGE> 13
CERTIFICATE
I, Jeffrey C. Rubenstein, Assistant Secretary of SELFIX, INC. (the
"Corporation"), a corporation organized and existing under the laws of the
State of Illinois, hereby certify, as such Assistant Secretary, that the Plan
and Agreement of Merger to which this certificate is attached, after having
been first duly signed on behalf of the Corporation and having been signed on
behalf of SELFIX, INC., a corporation of the State of Delaware, has been
consented to in writing by all of the shareholders of the Corporation entitled
to vote on the Plan and Agreement of Merger.
WITNESS my hand on this ______ day of _________________, 1998.
-------------------
Assistant Secretary
-13-
<PAGE> 14
THE ABOVE PLAN AND AGREEMENT OF MERGER, having been executed on behalf of
each corporate party thereto, and having been adopted separately by each
corporate party thereto, in accordance with the provisions of the General
Corporation Law of the State of Delaware and the Illinois Business Corporation
Act of 1983, the President of each corporate party thereto does now hereby
execute the said Plan and Agreement of Merger and the Secretary or Assistant
Secretary of each corporate party thereto does now hereby attest the said Plan
and Agreement of Merger, as the respective act, deed and agreement of each of
said corporations, on this ______ day of __________________, 1998.
SELFIX, INC.,
a Delaware corporation
Attest: By:
---------------------
Meyer J. Ragir, Chief
Executive Officer
- ----------------------
Jeffrey C. Rubenstein,
Asst. Secretary
SELFIX, INC.,
an Illinois corporation
Attest: By:
---------------------
Meyer J. Ragir, Chief
Executive Officer
- ----------------------
Jeffrey C. Rubenstein,
Asst. Secretary
-14-
<PAGE> 15
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF SELFIX, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Selfix, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended
as follows:
Amendment of Article NINTH to be restated in its entirety as follows:
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, 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 at 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 right to indemnification conferred in this
paragraph shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of
<PAGE> 16
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.
(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
or 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.
<PAGE> 17
(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 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.
<PAGE> 18
3. The Amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Sections 228 and 242 of
the General Corporation Law of the State of Delaware.
Signed and attested to on June 30, 1987.
__________________________________________
President
ATTEST:
__________________________
Asst. Secretary
<PAGE> 19
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SELFIX, INC.
Selfix, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth a proposed amendment to the
Corporation's Certificate of Incorporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:
RESOLVED, that the Corporation's Certificate of Incorporation
be amended by changing ARTICLE FOURTH thereof so that, as amended,
said ARTICLE FOURTH shall be and read as follows:
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.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of the Corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
<PAGE> 20
THIRD; That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Selfix, Inc. has caused this Certificate to be
signed by James E. Winslow, its Senior Vice President, this 6th day of June,
1995.
SELFIX, INC.
By:________________________________________
James E. Winslow, Senior Vice President
<PAGE> 21
CERTIFICATE OF OWNERSHIP AND MERGER
OF
SAFETY SOURCE, INC.
(AN ILLINOIS CORPORATION)
INTO
SELFIX, INC.
(A DELAWARE CORPORATION)
IT IS HEREBY CERTIFIED THAT:
FIRST: Selfix, Inc. (hereinafter sometimes referred to as the
"Corporation") is a business corporation of the State of Delaware.
SECOND: The Corporation is the owner of all of the issued and
outstanding shares of stock of Safety Source, Inc., which is a business
corporation of the State of Illinois.
THIRD: The laws of the jurisdiction of organization of Safety
Source, Inc. permit the merger of a business corporation of that jurisdiction
with a business corporation of another jurisdiction.
FOURTH: The Corporation hereby merges Safety Source, Inc. into the
Corporation effective at 12:00:01 a.m. on February 18, 1997.
FIFTH: The following is a copy of certain resolutions adopted on
February 13, 1997, by the Board of Directors of the Corporation to merge said
Safety Source, Inc. into the Corporation:
RESOLVED, that Safety Source, Inc. be merged into this
Corporation, and that all of the estate, property, rights,
privileges, powers, and franchises of Safety Source, Inc. be
vested in and held and enjoyed by this Corporation as fully and
entirely and without change or diminution as the same were before
held and enjoyed by Safety Source, Inc. in its name.
RESOLVED, that this Corporation assume all of the
obligations of Safety Source, Inc.
RESOLVED, that this Corporation shall cause to be executed
and filed and/or recorded.
RESOLVED, that the Chairman of the Board and Secretary of the
Corporation are hereby authorized, empowered and directed to
execute and deliver, in the name and on behalf of this
<PAGE> 22
Corporation, the documents prescribed by the laws of the
State of Delaware and by the laws of the State of Illinois, and
will cause to be performed all necessary acts within the
jurisdiction of organization of Safety Source, Inc. and of this
Corporation, and to take such actions, execute and deliver such
certificates and such additional documents and effectuate such
filings as are necessary, appropriate or expedient to implement
the terms and provisions of the foregoing resolutions, the making
of any such modifications, the execution and delivery of any such
other documents and the taking of such other action to
conclusively evidence their having so deemed.
Executed on this 14th day of February, 1997.
SELFIX, INC.
By: _______________________________________
James R. Tennant, Chairman of the Board
<PAGE> 23
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF SELFIX, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Selfix, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended
as follows:
Amendment of Article NINTH to be restated in its entirety as follows:
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, 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 at 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 right to indemnification conferred in this
paragraph shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of
<PAGE> 24
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.
(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
or 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.
<PAGE> 25
(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 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.
<PAGE> 26
3. The Amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Sections 228 and 242 of
the General Corporation Law of the State of Delaware.
Signed and attested to on September 26, 1988.
___________________________________ President
ATTEST:
__________________________
Secretary
<PAGE> 27
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of ____________
, 1998, 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.
<PAGE> 28
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 effect immediately prior to the Effective Time, shall be amended
as set forth 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 DGCL 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.
<PAGE> 29
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 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
<PAGE> 30
(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 Commons Stock
into which such shares of Selfix Common Stock were converted pursuant to
Section 2.01(a).
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.
<PAGE> 31
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
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.
<PAGE> 32
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.
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.
<PAGE> 33
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 ___ day of February, 1997.
ATTEST: SELFIX, INC.
By:
- ---------------------------- ------------------------------
Secretary James R. Tennant,
Chairman of the Board
ATTEST: HPI MERGER, INC.
By:
- ---------------------------- ------------------------------
Secretary James R. Tennant,
Chairman of the Board
ATTEST: HOME PRODUCTS INTERNATIONAL, INC.
By:
- ---------------------------- ------------------------------
Secretary James R. Tennant,
Chairman of the Board
<PAGE> 34
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 ____ day of February, 1997.
________________________________
Secretary
<PAGE> 35
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 ____ day of February, 1997.
________________________________
Secretary
<PAGE> 36
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 ____ day of February, 1997.
________________________________
Secretary
<PAGE> 1
CERTIFICATE OF INCORPORATION EXHIBIT 3.1.3
OF
SEYMOUR HOUSEWARES CORPORATION
ARTICLE ONE
The name of the corporation is Seymour Housewares Corporation.
ARTICLE TWO
The address of the corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L-100, Dover Delaware, Kent County,
19901. The name of the registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
The total number of shares of stock which the corporation has authority to
issue is one thousand (1,000) shares of common stock, par value one cent
($0.01) per share.
ARTICLE FIVE
The name and mailing address of the sole incorporator are as follows:
NAME MAILING ADDRESS
Karen D. Bielars 200 East Randolph Drive
Suite 5700
Chicago, Illinois 60601
ARTICLE SIX
The corporation is to have perpetual existence.
1
<PAGE> 2
ARTICLE SEVEN
In furtherance and not in limitation of the powers conferred by statue,
the board of directors of the corporation is expressly authorized to make,
alter or repeal the by-laws of the corporation.
ARTICLE EIGHT
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept 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. Election of directors need not be by written
ballot unless the by-laws of the corporation so provide.
ARTICLE NINE
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, the director
of this corporation shall not be liable to the corporation or its stockholders
for monetary damages for a breach of fiduciary duty as a director. Any repeal
or modification of this Article Nine shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE TEN
The corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
ARTICLE ELEVEN
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this certificate of incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
2
<PAGE> 3
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, hereby declaring and
certifying that this is my act and deed and the facts stated herein are true,
and accordingly have hereunto set my hand on this 22nd day of December, 1992.
_____________________________________
Karen D. Bielars, Sole Incorporator
3
<PAGE> 4
CERTIFICATE OF OWNERSHIP AND MERGER
OF
SEYMOUR SALES CORPORATION
(A DELAWARE CORPORATION)
INTO
SEYMOUR HOUSEWARES CORPORATION
(A DELAWARE CORPORATION)
IT IS HEREBY CERTIFIED THAT:
FIRST: Seymour Sales Corporation (hereinafter referred to as the
"CORPORATION") is a business corporation of the State of Delaware.
SECOND: The Corporation, as the owner of all of the issued and outstanding
shares of stock of Seymour Housewares Corporation, a business corporation of
the State of Delaware ("HOUSEWARES"), hereby merges itself into Housewares.
THIRD: The following is a copy of certain resolutions adopted on December
30, 1997, by the sole Director of the Corporation to merge the Corporation into
Housewares:
RESOLVED, that the Corporation be merged into Housewares
pursuant to the laws of the State of Delaware as hereinafter provided
("Merger"), so that the separate existence of the Corporation shall
cease as soon as the Merger shall become effective, and thereupon the
Corporation and Housewares will become a single corporation, which
shall continue to exist under, and be governed by, the laws of the
State of Delaware.
RESOLVED, that the terms and conditions of the proposed Merger
are as follows:
(a) From and after the Effective Date (as hereinafter defined) of
the Merger, all of the estate, property, rights, privileges,
powers, and franchises of the Corporation shall become vested in
and be held by Housewares as fully and entirely and without
change or diminution as the same were held and enjoyed by the
Corporation, and Housewares shall assume all of the obligations
of the Corporation.
(b) Each issued and outstanding share of Common Stock, $0.01 par
value per share, of the Corporation owned by the sole
Stockholder of the Corporation immediately prior to the
Effective Date of the Merger, shall, on the Effective Date of
the Merger, be converted into one share of Common Stock, $0.01
par value per share, of Housewares; each issued and outstanding
share of Common Stock, $0.01 par value per share of Housewares
owned by the Corporation immediately prior to the Effective
<PAGE> 5
Date of the Merger shall, on the Effective Date of the Merger,
be canceled.
(c) After the Effective Date of the Merger, the sole holder of
record of the outstanding certificate theretofore representing
stock of the Corporation may surrender the same to Housewares at
its principal office and such holder shall be entitled upon
surrender to receive in exchange therefor a certificate
representing an equal number of shares of stock of Housewares.
Until so surrendered, the outstanding certificate which prior to
the Effective Date of the Merger represented shares of stock of
the Corporation shall be deemed for all corporate purposes to
evidence ownership of an equal number of shares of stock of
Housewares.
(d) From and after the Effective Date of the Merger, the Certificate
of Incorporation and the By-Laws of Housewares shall be the
Certificate of Incorporation and the By-Laws of Housewares, as
in effect immediately prior to such Effective Date, and said
Certificate of Incorporation shall continue in full force and
effect until amended and changed in accordance with the
provisions of the General Corporation Law of the State of
Delaware.
(e) The sole member of the Board of Directors and officers of the
Corporation shall be the sole member of the Board of Directors
and the corresponding officers of Housewares immediately before
the Effective Date of the Merger.
(f) From and after the Effective Date of the Merger, the assets and
liabilities of the Corporation and of Housewares shall be
entered on the books of Housewares at the amounts at which they
shall be carried at such time on the respective books of the
Corporation and of Housewares subject to such inter-corporate
adjustments or eliminations, if any, as may be required to give
effect to the Merger; and subject to such action as may be taken
by the Board of Directors of Housewares, in accordance with
generally accepted accounting principles, the capital and
surplus of Housewares shall be equal to the capital and surplus
of the Corporation and of Housewares.
RESOLVED, that the Effective Date of the Certificate of
Ownership and Merger setting forth a copy of these resolutions
shall be December 30, 1997 ("Effective Date"), and that, insofar
as the General Corporation Law of the State of Delaware shall
govern the same, said time shall be the effective Merger time.
RESOLVED, that these resolutions to merge be submitted to
the sole Stockholder of the Corporation.
<PAGE> 6
RESOLVED, that the Chairman of the Board, President and
Secretary of the Corporation, either acting singly or jointly,
are hereby authorized, empowered and directed to execute and
deliver, in the name and on behalf of the Corporation, the
documents prescribed by the laws of the State of Delaware,
including, without limitation, a "CERTIFICATE OF OWNERSHIP AND
MERGER" and will cause to be performed all necessary acts within
the jurisdiction of organization of Housewares and of the
Corporation, and to take such actions, execute and deliver such
certificates and such additional documents and effectuate such
filings as are necessary, appropriate or expedient to implement
the terms and provisions of the foregoing resolutions, and/or
are necessary or incident to effectuate the transactions
identified in or contemplated by the Agreement, the making of
any such modifications, the execution and delivery of any such
other documents and the taking of such other action to
conclusively evidence their having so deemed.
FOURTH: The proposed Merger therein certified has been approved and adopted
in writing by the sole Stockholder of the Corporation in accordance with
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
FIFTH: The Effective Date of the Certificate of Ownership and Merger, and
the time when the Merger therein certified shall become effective, shall be
December 30, 1997.
Executed on this 30th day of December, 1997.
SEYMOUR SALES CORPORATION
By:_______________________________________
James E. Winslow, Executive Vice President
<PAGE> 1
Exhibit 3.1.4
THE COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF CORPORATION AND TAXATION
HENRY F. LONG, COMMISSIONER
230 STATE HOUSE, BOSTON
ARTICLES OF ORGANIZATION
We PETER MORRONI, ANTHONY M. TATA AND DOMENIC P. TATA being a majority of
the directors of TAMOR PLASTICS CORP. elected at its first meeting, in
compliance with the requirements of General Laws, Chapter 156, Section 10,
hereby certify that the following is a true copy of the agreement of
association to form said corporation, with the names of the subscribers
thereto:
We, whose names are hereto subscribed, do, by this agreement, associate
ourselves with the intention of forming a corporation under the provision of
General Laws, Chapter 156.
The name by which the corporation shall be known is TAMOR PLASTICS CORP.
The location of the principal office of the corporation in Massachusetts
is to be the CITY of LEOMINSTER, and outside Massachusetts, the _____________
of ________________________, State of _________________________.
[The business address of the corporation is to be 147 SEVENTH ST.
LEOMINSTER.
- --------------------------------------------------------------------------------
If such business address is not yet determined, give the name and
business address of the treasurer or other officer to receive mail.
- --------------------------------------------------------------------------------
The purposes for which the corporation is formed and the nature of the
business to be transacted by it are as follows:
To manufacture plastic or celluloid materials and articles of all kinds,
the buying and selling of the same, and to purchase, here, and lease all
machinery, equipment or buildings necessary for said purposes.
<PAGE> 2
The total capital stock to be authorized is as follows:
=============================================================================
WITHOUT PAR VALUE WITH PAR VALUE
-------------------------------------------------------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE AMOUNT
- -----------------------------------------------------------------------------
Preferred $
- -----------------------------------------------------------------------------
Common 100 $100 10,000
- -----------------------------------------------------------------------------
=============================================================================
Restriction, if any, imposed upon the transfer of shares:
(PRINTED OR PHOTOSTATIC RESTRICTIONS MUST NOT BE ATTACHED IN THIS SPACE.)
Any Stockholder, including the heirs, assigns, executor or administrators of a
deceased Stockholder, desiring to sell such stock owned by him or them, shall
first offer it to the Corporation through the Board of Directors, in the manner
following:
He shall notify the directors of his desire to sell by notice in writing, which
notice shall contain the price at which he is willing to sell and the name of
one arbitrator. The director shall within thirty days thereafter either accept
the officer, or by notice to him in writing name a second arbitrator, and these
two shall name a third. It shall then be the duty of the arbitrators to
ascertain the value of the stock, and if either party shall neglect or refuse to
appear at the hearing appointed by the arbitrators, they may act in the absence
of such party.
After the acceptance of the officer, or the report of the arbitrators as to the
value of the stock, the directors shall have thirty days within which to
purchase the same at such valuation, but if at the expiration of thirty days,
the corporation shall not have exercised the right so to purchase, the owner of
the stock shall be at liberty to dispose of the same in any manner he may see
fit.
No shares of stock shall be sold or transferred on the books of the corporation
until these provisions have been complied with, but the Board of Directors may
in any particular instance waive the requirement.
A description of the different classes of stock, if there are to be two or
more classes, and a statement of the terms on which they are to be created and
the method of voting thereon:
Other lawful provisions, if any, for the conduct and regulation of the
business of the corporation, for its voluntary dissolution, or for limiting,
defining, or regulating the powers of the corporation, or of its directors or
stockholders, or of any class of stockholders:
<PAGE> 3
[If seven days' notice is given, complete the following paragraph.]
The first meeting shall be called by
[If notice is waived, fill in the following paragraph.]
We hereby waive all requirements of the General Laws of Massachusetts for
notice of the first meeting of the incorporators for the purpose of
organization, and appoint the fourth day of March, 1947, at 10:00 o'clock A.M.,
at Leominster as the time and place for holding such first meeting.
The names and residences of the incorporators and the amount of stock
subscribed for by each are as follows:
<TABLE>
<CAPTION>
NAME
FIRST NAME MUST BE WRITTEN IN FULL CITY OR TOWN OF RESIDENCE AMOUNT OF STOCK SUBSCRIBED FOR
Initials and abbreviations are not sufficient Actual place of domicile must be given Preferred Common
<S> <C> <C> <C>
Domenic P. Tata Leominster 49
Anthony M. Tata Leominster 51
Peter Morroni Leominster 50
</TABLE>
IN WITNESS WHEREOF we hereto sign our names, this 14th day of February, 1947.
(Type or plainly print the name of each incorporator as signed to the Agreement
of Association)
<PAGE> 4
And we further certify that:
The first meeting of the subscribers to said agreement was held on the
fourth day of March, 1947.
The amount of capital stock now to be issued is as follows:
<TABLE>
<CAPTION>
===================================================
NUMBER OF SHARES
- ---------------------------------------------------
CLASS OF STOCK WITHOUT PAR VALUE WITH PAR VALUE
- ---------------------------------------------------
<S> <C> <C>
Preferred
- ---------------------------------------------------
Common 100
- ---------------------------------------------------
===================================================
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
PREFERRED COMMON
- -----------------------------------------------------------------------------
<S> <C> <C>
TO BE PAID FOR:
- -----------------------------------------------------------------------------
IN CASH:
- -----------------------------------------------------------------------------
In full $10,000
- -----------------------------------------------------------------------------
By installments to be paid commencing business
- -----------------------------------------------------------------------------
Amount of installment
- -----------------------------------------------------------------------------
IN PROPERTY:
- -----------------------------------------------------------------------------
REAL ESTATE
- -----------------------------------------------------------------------------
Location
- -----------------------------------------------------------------------------
Area
- -----------------------------------------------------------------------------
PERSONAL PROPERTY:
- -----------------------------------------------------------------------------
Accounts receivable
- -----------------------------------------------------------------------------
Notes receivable
- -----------------------------------------------------------------------------
Merchandise
- -----------------------------------------------------------------------------
Supplies
- -----------------------------------------------------------------------------
Securities
- -----------------------------------------------------------------------------
Machinery
- -----------------------------------------------------------------------------
Motor vehicles and trailers
- -----------------------------------------------------------------------------
Equipment and tools
- -----------------------------------------------------------------------------
Furniture and fixtures
- -----------------------------------------------------------------------------
Patent rights
- -----------------------------------------------------------------------------
Trade-marks
- -----------------------------------------------------------------------------
Copyrights
- -----------------------------------------------------------------------------
Goodwill
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
IN SERVICES
- -----------------------------------------------------------------------------
IN EXPENSES
- -----------------------------------------------------------------------------
</TABLE>
<PAGE> 5
No stock shall be at any time issued unless the cash, so far as due, or
the property, services or expenses for which it was authorized to be
issued, has been actually received or incurred by, or conveyed or
rendered to, the corporation, or is in its possession as surplus; nor
shall any note or evidence of indebtedness, secured or unsecured, of
any person to whom stock is issued, be deemed to be payment therefor;
and the president, treasurer and directors shall be jointly and
severally liable to any stockholder of the corporation for actual
damages caused to him by such issues.
SERVICES AND EXPENSES: Service must have been rendered and expenses
incurred before stock is issued therefor State clearly the nature of
such services or expenses and the amount of stock to be issued
therefor.
<PAGE> 6
The name, residence, and post office of each of the officers of the
corporation is as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
CITY OR TOWN OF RESIDENCE POST OFFICE ADDRESS
NAME Actual place of domicile must be given HOME OR BUSINESS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
President Peter Morroni Leominster, Mass. 248 Seventh St.
- -----------------------------------------------------------------------------------------
Treasurer Peter Morroni Leominster, Mass. 248 Seventh St.
- -----------------------------------------------------------------------------------------
Clerk Anthony M. Tata Leominster, Mass. 148 Sixth St.
- -----------------------------------------------------------------------------------------
Directors Peter Morroni Leominster, Mass. 248 Seventh St.
- -----------------------------------------------------------------------------------------
Anthony M. Tata Leominster, Mass. 248 Seventh St.
- -----------------------------------------------------------------------------------------
Domenic P. Tata Leominster, Mass. 167 Seventh St.
- -----------------------------------------------------------------------------------------
</TABLE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we hereto sign our
names this 4th day of March, 1947.
<PAGE> 7
THE COMMONWEALTH OF MASSACHUSETTS
WRITING NOTHING BELOW
Tamor Plastics Corp.
______________________________
Fee $50 Paid
______________________________
ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156, SECTION 10
Filed in the office of the Secretary of the Commonwealth and Certificate
of Incorporation issued
as of March 6, 1947
===========================================
I hereby certify that, upon an examination of the
within-written articles of organization, the agreement
of association, and the record of the first meeting of
the incorporators, including the by-laws, duly submitted
to me, it appears that the provisions of the General Laws
relative to the organization of corporations have been
complied with, and I hereby approve said articles
this 6th day of March, 1947.
______________________________/s/
Commissioner of Corporations and Taxation
CHARTER TO BE SENT TO
James R. Oliver
47 Monument Square
Leominster
FILING FEE: 1/20 of the 1% of the total amount of the
authorized capital stock, with par value, and one cent
a share for all authorized shares without par value, but
not less than $50. General Laws, Chapter 156, Section 53.
<PAGE> 8
THE COMMONWEALTH OF MASSACHUSETTS
Office of the Secretary of State
FEDERAL IDENTIFICATION
Michael Joseph Connolly, Secretary NO. 041072885
CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS
OF DOMESTIC BUSINESS CORPORATIONS
General Laws, Chapter 136b, Section 53
I, Louis Rocca, Clerk or Assistant Clerk of the
Tamor Plastics Corporation
(Name of Corporation)
located at 106 Carter Street, Leominster, MA 01453
(Business Address of Corporation: Number and Street, City or Town)
hereby certify in compliance with the provisions of law, that a change in the
officers of said corporation has been made, and the names of the present
officers are as follows:
ADDRESS
GIVE NUMBER AND STREET EXPIRATION OF
TITLE NAME OF DOMICILE TERM OF OFFICES
===============================================================================
President Michael Tata 1100 Main Street
Leominster, MA 01453
- -------------------------------------------------------------------------------
Treasurer Leonard J. Tocci 128 Legate Hill Road UNTIL
Leominster, MA 01453
- -------------------------------------------------------------------------------
Clerk Louis Rocca 53 Highland Avenue SUCCESSORS
Leominster, MA 01453
- -------------------------------------------------------------------------------
Directors Louise Rocca 53 Highland Avenue ARE
Leominster, MA 01453
- -------------------------------------------------------------------------------
Michael Tata 1100 Main Street ELECTED
Leominster, MA 01453
- -------------------------------------------------------------------------------
Leonard J. Tocci 128 Legate Hill Road
Leominster, MA 01453
- -------------------------------------------------------------------------------
Richard M. Tocci 121 Scenic Drive
Leominster, MA 01453
===============================================================================
SUBSCRIBED THIS 1st day of March 1989, UNDER THE PENALTIES OF PERJURY.
SIGNATURE ___________________________/s/, Clerk or Assistant Clerk
<PAGE> 9
THE COMMONWEALTH OF MASSACHUSETTS
MICHAEL JOSEPH CONNOLLY
Secretary of State FEDERAL IDENTIFICATION
State House, Boston, Mass 02133
NO. 041072885
CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS
OF DOMESTIC BUSINESS CORPORATIONS
General Laws, Chapter 156b, Section 53
I, Mark C. Bodanza, Clerk or Assistant Clerk of the
Tamor Plastics Corporation
(Name of Corporation)
located at 106 Carter Street, Leominster, MA 01453
(Business Address of Corporation: Number and Street, City or Town)
hereby certify in compliance with the provisions of law, that a change in the
officers of said corporation has been made, and the names of the present
officers are as follows:
Address
Give Number and Street Expiration of
Title Name of Domicile Term of Offices
===============================================================================
128 Legate Hill
President Leonard J. Tocci Leominster, MA 01453 until successors
- -------------------------------------------------------------------------------
Treasurer Michael P. Tata 1100 Main Street are elected
Leominster, MA 01453
- -------------------------------------------------------------------------------
Clerk Mark C. Bodanza 77 Merriam Avenue " "
Leominster, MA 01453
- -------------------------------------------------------------------------------
Directors Lucille M. Tata 1100 Main Street " "
Leominster, MA 01453
- -------------------------------------------------------------------------------
Michael P. Tata 1100 Main Street " "
Leominster, MA 01453
- -------------------------------------------------------------------------------
Leonard J. Tocci 128 Legate Hill Road " "
Leominster, MA 01453
- -------------------------------------------------------------------------------
Richard M. Tocci 121 Scenic Drive " "
Leominster, MA 01453
===============================================================================
SUBSCRIBED THIS 1st day of March 1990,UNDER THE PENALTIES OF PERJURY.
SIGNATURE ___________________________/s/, Clerk or Assistant Clerk
Mark C. Bodanza
<PAGE> 10
(1) Federal Information
Number
04-1072885
The Commonwealth of Massachusetts
Office of the Secretary of State
Michael J. Connolly, Secretary
One Ashburton Place, Boston, Massachusetts 02108
CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS
OF DOMESTIC BUSINESS CORPORATIONS
General Laws, Chapter 156b, Section 53
(2) I, Mark C. Bodanza, Clerk or Assistant Clerk
(3) of Tamor Plastics Corporation
(Name of Corporation)
(4) located at 106 Carter Street, Leominster, MA 01453
(Business Address of Corporation: Number and Street, City or Town)
hereby certify in compliance with the provisions of law, that a change in the
officers of said corporation has been made and the names of the present
officers are as follows:
(5B) Address
Give Number & Street (5C) Expiration of
Title (5A) Name of Domicile Term of Offices
===============================================================================
President Leonard J. Tocci 128 Legate Hill
Leominster, MA 01453
- -------------------------------------------------------------------------------
Treasurer Lucille M. Tata 2442 N.E. 2nd Street
Lighthouse Point, FL 33064
- -------------------------------------------------------------------------------
Mark C. Bodanza 77 Merriam Avenue
Clerk Leominster, MA 01453 UNTIL
- -------------------------------------------------------------------------------
Leonard J. Tocci 128 Legate Hill Road
Directors Leominster, MA 01453 SUCCESSORS
Lucille M. Tata 121 Scenic Drive
Leominster, MA 01453 ARE
- -------------------------------------------------------------------------------
Richard M. Tocci 121 Scenic Drive ELECTED
Leominster, MA 01453
- -------------------------------------------------------------------------------
Lawrence Tata 1100 Main Street
Leominster, MA 01453
===============================================================================
(6) SUBSCRIBED THIS 18th day of June 1992, UNDER PENALTIES OF PERJURY.
(7) SIGNATURE ______________________________/s/ CLERK
PHOTOCOPIES WILL NOT BE ACCEPTED! INSTRUCTIONS ON BACK PAGE
<PAGE> 11
ROOM 1717
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE SECRETARY OF STATE
MICHAEL J. CONNOLLY, SECRETARY
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
CERTIFICATE OF CHANGE OF FISCAL YEAR END
FEDERAL IDENTIFICATION NUMBER
04 307 2885
-----------------------------
The undersigned Clerk of
- --------------------------------------------------------------------------------
Tomar Plastics Corporation
- --------------------------------------------------------------------------------
(EXACT Name of Corporation)
located at 106 Carter Street, Leominster, MA 01453
- --------------------------------------------------------------------------------
(Business address of corporation in Massachusetts)
hereby certifies that at a meeting duly held, the fiscal year end (i.e. the tax
year end) of the corporation was changed to: the last day of the month of
December
SUBSCRIBED TO ON May 3, 1993 UNDER THE PENALTIES OF PERJURY BY
-----------
(date)
SIGNATURE_________________________
Clerk
Mark C. Bodanza
NO OFFICER OTHER THAN THE CLERK OR ASSISTANT CLERK MAY SIGN THIS CERTIFICATE.
<PAGE> 12
(1) FEDERAL IDENTIFICATION
THE COMMONWEALTH OF MASSACHUSETTS NUMBER
OFFICE OF THE SECRETARY OF STATE 04 307 2885
MICHAEL J. CONNOLLY, SECRETARY -----------------------
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS
OF DOMESTIC BUSINESS CORPORATIONS
GENERAL LAWS, CHAPTER 156b, SECTION 53
(2) I, Mark C. Bodanza Clerk or Assistant Clerk (2A)
(3) of Tamor Plastics Corporation 02108
(Name of Corporation)
(4) located at 106 Carter Street, Leominster, MA 01453
---------------------------------------
(Business Address of Corporation, Number and Street, City or Town)
hereby certify in compliance with the provisions of law, that a change in the
officers of said corporation has been made and that the names of the present
officers are as follows:
===============================================================================
Title (5A) Name (5B) Address: (5C) Expiration of
Give Number & Street Term of Office
of Domicile
- --------------------------------------------------------------------------------
President Leonard J. Tocci 128 Legate Hill Road
Leominster, MA 01453
- --------------------------------------------------------------------------------
Treasurer Lucille M. Tata 2442 N.E. 25th Street
Lighthouse Point, FL
33064
- --------------------------------------------------------------------------------
Clerk Mark C. Bodanza 77 Merriam Avenue UNTIL
Leominster, MA 01453 SUCCESSORS
ARE ELECTED
- --------------------------------------------------------------------------------
Directors Leonard J. Tocci 122 Legate Hill Road
Leominster, MA 01453
- --------------------------------------------------------------------------------
Richard M. Tocci 121 Scenic Drive
Leominster, Ma 01453
- --------------------------------------------------------------------------------
Lawrence Tata 1100 Main Street
Leominster, MA 01453
- --------------------------------------------------------------------------------
Francis S. Wyman 19 Water Street
Leominster, MA 01453
================================================================================
(6) SUBSCRIBED THIS 25th DAY OF MARCH, 1993, UNDER PENALTIES OF PERJURY.
(7) SIGNATURE _________________ CLERK OR ASSISTANT CLERK
PHOTOCOPIES WILL NOT BE ACCEPTED INSTRUCTIONS ON BACK PAGE
<PAGE> 13
THE COMMONWEALTH OF MASSACHUSETTS
MICHAEL JOSEPH CONNOLLY
SECRETARY OF STATE
ONE ASHBURTON PLACE
BOSTON, MASS. 02108
ARTICLES OF CONSOLIDATION MERGER
PURSUANT TO GENERAL LAWS, CHAPTER 156b, SECTION 78
The fee for filing this certificate is prescribed by General Laws, Chapter
156b, Section 114
Make checks payable to the Commonwealth of Massachusetts
MERGER OF Victory Button Company, Inc.
----------------------------
Tamor Plastics Corp.
-----------------------------
-----------------------------
-----------------------------
the constituent corporations
into
Tamor Plastics Corp.
one of the constituent corporations*
The undersigned officers of each of the constituent corporations certify
under the penalties of perjury as follows:
1. An agreement of merger has been duly adopted in compliance with the
requirements of subsections (b) and (c) of General Laws, Chapter 156b, Section
78, and will be kept as provided by subsection (d) thereof. The surviving
corporation will furnish a copy of said agreement to any of its stockholders,
or to any person who was a stockholder of any constituent corporation, upon
written request and without charge.
2. The effective date of the merger determined pursuant to the agreement
referred to in paragraph 1 shall be January 1, 1995.
3. (For a merger)
**The following amendments to the articles of organization of the
SURVIVING corporation have been affected pursuant to the agreement of
merger referred to in paragraph 1.
The restriction upon the transfer of shares as contained in the Articles
of Organization of the surviving corporation dated March 4, 1947 is hereby
deleted.
"See attachment to paragraph no. 3A"
*Delete the inapplicable words.
**If there are no provisions state "NONE".
NOTE: If the space provided under article 3 is insufficient,
additions shall be set forth on separate 8 1/2 x 11 inch
sheets of paper, leaving a left hand margin of at least
1 inch for binding. Additions more than one article may
be continued on a single sheet so long as each article
requiring each such addition is clearly indicated.
<PAGE> 14
ATTACHMENT TO PARAGRAPH NO. 3A
The purpose clause of the Surviving Corporation shall be amended to read
as follows:
(a) To manufacture, buy, sell, export, import, or in any manner
trade or deal in or with plastic products, plastic materials, or in
or with raw materials, moulds, forms, tools, machinery, equipment or
factory space; to enter into and perform contracts of sale or
purchase, employment, mortgage, pledge, borrowing, guaranty, or for
rental or for services to be rendered or received, or any other
manner of contract; to invent or design or contrive equipment,
patterns, moulds, processes, formulae or sales devices, and to
acquire, hold, sell, assign, or license , or do any act to protect
any patent, copyright, or trade-name or trade-mark rights in or
relating thereto; and to enter into any joint venture, combination,
contract, or licensing arrangement with any other corporation or
association for doing any of the foregoing;
(b) To carry on any business permitted by the Laws of the Commonwealth of
Massachusetts to a corporation organized under Chapter 156b of the
Massachusetts General Laws.
<PAGE> 15
4. The following information shall not for any purpose be treated as a
permanent part of the ____________________ organization of the surviving
corporation.
(a) The post office address of the initial principal office of the
surviving corporation in Massachusetts _________ is: 106 Carter Street,
Leominster, MA ________.
(b) The name, residence and post office address of each of the initial
directors and President, Treasurer and Clerk of the resulting surviving
corporation is as follows:
Name Residence Post Office
President Leonard J. Tocci 128 Legate Hill Road, Leominster, MA 01453
Treasurer Richard M. Tocci 121 Scenic Drive, Leominster, Ma 01453
Clerk Mark C. Bodanza 36 School Street, Leominster, MA 01453
Directors Leonard J. Tocci 122 Legate Hill Road, Leominster, MA 01453
Richard M. Tocci 121 Scenic Drive, Leominster, Ma 01453
Francis S. Wyman Newell Hill Road, Leominster, MA 01453
Lawrence Tata 1100 Main Street, Leominster, MA 01453
(c) The date initially adopted on which the fiscal year of the surviving
corporation ends is December 31st
(d) The date initially fixed in the by-laws for the Annual Meeting of
stockholders of the surviving corporation is: Second Monday in January
The undersigned officers of the several constituent corporations listed
above further state under the penalties of perjury as to their respective
corporations that the agreement of consolidation merger referred to in
paragraph 1 has been duly executed on behalf of such corporation and duly
approved by the stockholders of such corporation in the manner required by
General Laws, Chapter 156b, Section 78.
______________________________ President Vice President
______________________________ Clerk Assistant Clerk
of Victory Button Co., Inc._________________________________________
(name of constituent corporation)
______________________________ President Vice President
______________________________ Clerk Assistant Clerk
of Tamor Plastics Corporation_________________________________________
(name of constituent corporation)
*Delete the inapplicable words
<PAGE> 16
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF CONSOLIDATION/MERGER
(GENERAL LAWS, CHAPTER 156b, SECTION 78)
I hereby approve the within articles of merger and, the filing fee in the
amount of $250.00 having been paid, said articles are deemed to have been filed
with me this 15th day of December, 1994.
Effective Date
January 1, 1995 MICHAEL JOSEPH CONNOLLY
- --------------- Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF ARTICLES OF MERGER TO BE SENT
TO:
MARK C. BODANZA, ESQUIRE
------------------------
36 SCHOOL STREET
----------------
LEOMINSTER, MA 01453
---------------------
TELEPHONE (508) 840-0500
------------------------
COPY MAILED
<PAGE> 17
FEDERAL IDENTIFICATION
NO. 04-2073885
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
SECRETARY OF THE COMMONWEALTH
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 021080-1512
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156b, SECTION 72)
We, Leonard J. Tocci Vice President, CEO and Mark C. Bodanza, Clerk of
Tamor Plastics Corp.
- ---------------------
(Exact Name of corporation)
located at: 106 Carter Street, Leominster, MA 01453
----------------------------------------
(Street Address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered: Article
-------
1___________________________________________________________________________
(Number those articles 1,2,3,4,5, and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on
December 30, 1996, by vote of 38.771 shares of common of 38.771 shares
- ------------------ ------ ------ ------
(type, class & series, if any)
outstanding._______ shares of
______________________________________ of _______ shares outstanding and
(type, class & series, if any)
_________ shares of ______________ of ____________ shares outstanding.
(type, class & series, if any)
being at least two-thirds of each type, class or series outstanding and
entitled to vote thereon and of each type, class or series of stock whose
rights are adversely affected thereby:
*Delete the inapplicable words. Delete the inapplicable clause.
1 For amendments adopted pursuant to Chapter 156b Section 70.
2 For amendments adopted pursuant to Chapter 156b Section 71.
NOTE: If the space provided under any article or item on this
form is insufficient, additions shall be set forth on
one side only of separate 8 1/2 x 11 sheets of paper
with a left margin of at least 1 inch. Additions to
more than one article may be made on a single sheet so
long as each article requiring such addition is
clearly indicated.
<PAGE> 18
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
===============================================================================
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -------------------------------------------------------------------------------
Common: Common:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Preferred: Preferred:
- -------------------------------------------------------------------------------
===============================================================================
Change the total authorized to:
===============================================================================
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -------------------------------------------------------------------------------
Common: Common:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Preferred: Preferred:
- -------------------------------------------------------------------------------
===============================================================================
<PAGE> 19
The name of the corporation shall be changed to:
Tamor Corporation
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156b, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: January 1, 1997.
SIGNED UNDER THE PENALTIES OF PERJURY, this 30th day of December, 1996.
____________________________________________ Vice President/CEO
Leonard J. Tocci
____________________________________________, Clerk
Mark C. Bodanza
*Delete the inapplicable words.
<PAGE> 1
Exhibit 3.1.5
BCA-2.10 (Rev. Jul. 1984) File #
- ------------------------ ------------------------
Submit In Duplicate This Space for Use by
Payment must be made by JIM EDGAR Secretary of State
Certified Check, SECRETARY OF STATE
Cashier's Check, STATE OF ILLINOIS Date 2-18-88
Illinois Attorney's
Check, Illinois C.P.A.'s ARTICLES OF
Check of Money order INCORPORATION License Fee $ .50
payable to "Secretary or Franchise Tax $ 25.00
State" Filing Fee $ 75.00
DO NOT SEND CASH Clerk 100.50
- ------------------------ -------------------------
Pursuant to the provisions of "The Business Corporation Act of 1983" the
undersigned incorporator(s) hereby adopt the following Articles of
Incorporation.
ARTICLE ONE The name of the corporation is Selfix Shutters Inc.
-----------------------------------
(Shall contain the word
"corporation" "company"
"incorporated"
-----------------------------------------------------------------
"limited" or an abbreviation thereof
ARTICLE TWO The name and address of the initial registered agent and its
registered office are:
Registered Agent
Jeffrey C. Rubenstein
------------------------------------------------------
First Name Middle Name Last Name
Registered Office
30 South Wacker Drive Suite 2900
------------------------------------------------------
Number Street Suite # (A.P.O. Box alone is not
acceptable)
Chicago, 60606-9611 Cook
------------------------------------------------------
City Zip Code County
ARTICLE THREE The purpose or purposes for which the corporation is organized
are:
If not sufficient space to cover this point add one
or more sheets of this size.
To transact any or all lawful activities and businesses which
are authorized by the Illinois Business Corporation Act of 1983,
and to purchase or otherwise acquire, hold, use, own, mortgage,
sell, convey, lease or otherwise dispose of and deal in real and
personal property of every class and description or any interest
therein.
ARTICLE FOUR PARAGRAPH 1: THE AUTHORIZED SHARES SHALL BE:
CLASS PAR VALUE PER SHARE NUMBER OF SHARES AUTHORIZED
-----------------------------------------------------------------
Common $0.01 10,000
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
PARAGRAPH 2: THE PREFERENCES, QUALIFICATIONS, LIMITATIONS,
RESTRICTIONS AND THE SPECIAL OR RELATIVE RIGHTS IN RESPECT OF
THE SHARES OF EACH CLASS ARE:
IF NOT SUFFICIENT SPACE TO COVER THIS POINT ADD
ONE OR MORE SHEETS OF THIS SIZE.
<PAGE> 2
ARTICLE FIVE The number of shares to be issued initially, and the
consideration to be received by the corporation therefor, are:
Par Value Number of shares Consideration to be
Class per share proposed to be issued received therefor
-----------------------------------------------------------------
Common $0.01 1,000 $ 1,000.00
-----------------------------------------------------------------
$
-----------------------------------------------------------------
$
-----------------------------------------------------------------
$
-----------------------------------------------------------------
TOTAL $ 1,000.00
-----------
ARTICLE SIX OPTIONAL
THE NUMBER OF DIRECTORS CONSTITUTING THE INITIAL BOARD OF
DIRECTORS OF THE CORPORATION IS ______________, AND THE NAMES
AND ADDRESSES OF THE PERSONS WHO ARE TO SERVE AS DIRECTORS UNTIL
THE FIRST ANNUAL MEETING OF SHAREHOLDERS OR UNTIL THEIR
SUCCESSORS BE ELECTED AND QUALIFY ARE:
Name Residential Address
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
ARTICLE SEVEN OPTIONAL
(a) It is estimated that the value of all property
to be owned by the corporation for the following
year wherever located will be: $
-----------
(b) It is estimated that the value of the property
to be located within the State of
Illinois during the following year will be: $
-----------
(c) It is estimated that the gross amount of
business which will be transacted by
the corporation during the following
year will be: $
-----------
(d) It is estimated that the gross amount of
business which will be transacted from
places of business in the State of Illinois
during the following year will be: $
-----------
ARTICLE EIGHT OTHER PROVISIONS
Attach a separate sheet of this size for any other provision to
be included in the Articles of Incorporation. e.g., authorizing
pre-emptive rights; denying cumulative voting: regulating
internal affairs: voting majority requirements: fixing a
duration other than perpetual; etc.
NAMES & ADDRESSES OF INCORPORATORS
The undersigned incorporator(s) hereby declare(s), under penalties of
perjury, that the statements made in the foregoing Articles of Incorporation
are true.
Dated February 17, 1988
SIGNATURES AND NAMES POST OFFICE ADDRESS
1. 1. 30 South Wacker Drive - Suite 2900
------------------------- ------------------------------------------
Signature Street
Karen Gilbert Chicago, Illinois 60606-9611
------------------------- ------------------------------------------
Name (Please print) City/Town State Zip
2. 2.
------------------------- ------------------------------------------
Signature Street
------------------------- ------------------------------------------
Name (Please print) City/Town State Zip
3. 3.
------------------------- ------------------------------------------
Signature Street
------------------------- ------------------------------------------
Name (Please print) City/Town State Zip
(Signatures must be in ink on original document. Carbon copy xerox or rubber
stamp signatures may only be used on conformed copies.)
NOTE: If a corporation acts as incorporator, the name of the corporation and
the state of incorporation shall be shown and the execution shall be by its
President or Vice-President and verified by him, and attested by its Secretary
or an Assistant Secretary.
<PAGE> 3
ATTACHMENT
TO THE ARTICLES OF INCORPORATION
OF
SELFIX SHUTTERS, INC.
ARTICLE EIGHT
a) The affirmative vote of the holders of a majority of the
outstanding shares entitled to vote shall be required for the
adoption or authorization of 1) an amendment to the articles of
incorporation, 2) a plan of merger, consolidation or exchange,
3) the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the corporation
and 4) the voluntary dissolution of the corporation by vote of
shareholders in accordance with Section 12.15 of the Illinois
Business Corporation Act of 1983.
b) Cumulative voting rights shall be denied in all circumstances.
<PAGE> 4
File # 5497-126-5
-------------------------
This Space for Use by
BCC-10.30 (Form Rev. Jan. 1986) Secretary of State
JIM EDGAR
Submit in Duplicate SECRETARY OF STATE Date
STATE OF ILLINOIS
Remit payment in Check or Money License Fee $
Order payable to "Secretary of Franchise Tax $
State". ARTICLES OF AMENDMENT Filing Fee $
DO NOT SENT CASH! Clerk
-------------------------
Pursuant to the provisions of "The Business Corporation Act of 1983", the
undersigned corporation hereby adopts these Articles of Amendment to its
Articles of Incorporation.
ARTICLE ONE The name of the corporation is Selfix Shutters, Inc.
------------------------------------
-----------------------------------------------------------(Note I)
ARTICLE TWO The following amendment of the Articles of Incorporation was
adopted on May 17, 1988 in the manner indicated below. ("X" one box
only.)
[ ] By a majority of the incorporators provided no directors were
named in the articles of incorporation and no directors have been
elected: or by a majority of the board of directors, in accordance
with Section 1010 the corporation having issued no shares as of the
time of adoption of this amendment;
(Note 2)
[ ] By a majority of the board of directors in accordance with Section
1015 shares having been issued but shareholder action not being
required to the adoption of the amendment;
(Note 3)
[ ] By shareholders in accordance with Section 10.20, a resolution of
the board of directors having been duly adopted and submitted to
the shareholders. At a meeting of shareholders, not less than the
minimum number of votes required by statute and by the articles of
incorporation were voted in favor of the amendment;
(Note 4)
[ ] By the shareholders, in accordance with Section 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been
signed by shareholders having not less than the minimum number of
votes required by statute and by the articles of incorporation.
Shareholders who have not consented in writing have been given
notice in accordance with Section 7.10;
(Note 4)
[X] By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors have been duly adopted and
submitted to the shareholders. A consent in writing has been
signed by all the shareholders entitled to vote on this amendment.
(Note 4)
(INSERT AMENDMENT)
(Any article being amended is required to be set forth in its entirety.)
(Suggested language for an amendment to change the corporate name is RESOLVED
that the Articles of Incorporation be amended to read as follows:)
RESOLVED, that Article One of the Articles of Incorporation be amended to
read in its entirety as follows:
- -------------------------------------------------------------------------------
(NEW NAME)
The name of the corporation is
Shutters, Inc.
All changes other than name, include on page 2
(over)
<PAGE> 5
Page 2
Resolution
<PAGE> 6
PAGE 3
ARTICLE THREE The manner in which any exchange, reclassification or
cancellation of issued shares or a reduction of the number of
authorized shares of any class below the number of issued
shares of that class, provided for or effected by this
amendment, is as follows: (If not applicable, insert "No
change")
No Change
ARTICLE FOUR (a) The manner in which said amendment effects a change in the
amount of paid-in capital (paid-in capital replaces the terms
Stated Capital and Paid in Surplus and is equal to the total
of these accounts) is as follows: (If not applicable insert "No
change")
No Change
(b) The amount of paid-in capital (Paid in Capital
replaces the terms Stated Capital and Paid in Surplus and is
equal to the total of these accounts) as changed by this
amendment is as follows: (In not applicable insert "No Chnage")
No Change
Before Amendment After Amendment
Paid-in Capital $ $
---------------- ---------------
(COMPLETE EITHER ITEM 1 OR 2 BELOW)
(1) The undersigned corporation has caused these articles to be signed by its
duly authorized officers, each of whom affirm, under penalties of perjury, that
the facts stated herein are true.
Date May 20, 1988 Selfix Shutters, Inc.
------------- -----------------------------------
(Exact Name of Corporation)
attested by by
------------------------------ ---------------------------------
(Signature of Secretary or (Signature of President or
Assistant Secretary) Vice President)
Charles F. Veseltis, Secretary Robert K. Manani, President
------------------------------ ---------------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
(2) If amendment is authorized by the incorporators, the incorporators must
sign below:
OR
If amendment is authorized by the directors and there are no officers then a
majority of the directors of such directors as may be designated by the board,
must sign below.
The undersigned affirms, under penalties of perjury, that the facts stated
herein are true.
Dated , 19
-------- ----
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
<PAGE> 7
PAGE 4
NOTE AND INSTRUCTIONS
NOTE 1: State the true exact corporate name as it appears on the records of
the office of the Secretary of State BEFORE any amendment herein
reported.
NOTE 2: Incorporators are permitted to adopt amendments ONLY before any
shares have been issued and before any directors have been named or
elected.
(Section 10.10)
NOTE 3: Directors may adopt amendments without shareholder approval in only
six instances as follows:
(a) to remove the names and addresses of directors named in the
articles of incorporation.
(b) to remove the name and address of the initial registered agent
and registered office provided a statement pursuant to
Section 5.10 is also filed;
(c) to split the issued whole shares and unissued authorized shares
by multiplying them by a whole number so long as no class or
series is adversely affected thereby;
(d) to change the corporate name by substituting the word
"corporation", "incorporated", "company", "limited", or the
abbreviation "Corp", "inc." "Co", or "ltd." for a similar word or
abbreviation in the name, or by adding a geographical attribution
to the name.
(e) to reduce the authorized shares of any class pursuant to a
cancellation statement filed in accordance with Section 9.05.
(f) to restate the articles of incorporation as currently amended.
(Section 10.15)
NOTE 4: All amendments not adopted under Section 10.10 or Section 10.15
require (1) that the board of directors adopt a resolution setting
forth the proposed amendment and (2) that the shareholders approve the
amendment.
Shareholder approval may be (1) by vote at a shareholders' meeting
(either annual or special) or (2) by consent, in writing, without a
meeting.
To be adopted, the amendment must receive the affirmative vote or
consent of the holders of at least 2/3 of the outstanding shares
entitled to vote on the amendment (but if class voting applies, then
also at least 2/3 vote within each class is required).
The articles of incorporation may supersede the 2/3 vote
requirement by specifying any smaller or larger voter requirement not
less than a majority of the outstanding shares entitled to vote and
not less than a majority within each class when class voting applies.
(Section 10.20)
NOTE 5: When shareholder approval is by written consent, all shareholders must
be given notice of the proposed amendment at least 5 days before the
consent is signed. If the amendment is adopted, shareholders who have
not signed the consent must be promptly notified of the passage of
the amendment (Sections 7.10 & 10.20).
<PAGE> 8
File # 5497-126-5
- --------------------------------
Form BCA-5.10
NFP-105.10
(Rev. April 1995)
George H. Ryan
Secretary of State
Department of Business Services -------------------------
Springfield, IL 62755 SUBMIT IN DUPLICATE
Telephone (217) 782-3647
- -------------------------------- FILED -------------------------
This space for use by
June 21, 1996 Secretary of State
STATE OF
CHANGE GEORGE H. RYAN Date
OF REGISTERED AGENT SECRETARY OF STATE --------------------------
AND/OR REGISTERED Filing Fee $5
OFFICE PAID
JUL 08 1996 --------------------------
Approved:
--------------------------
Remit payment in check
or money order payable to
"Secertary of State
- -------------------------------------------------------------------------------
Type or print in black ink only
See reverse side fo signatures(s)
1. CORPORATE NAME: Shutters, Inc.
------------------------------------------------------------
2. STATE OR COUNTRY OF INCORPORATION: Illinois
- -------------------------------------------------------------------------------
3. Name and address of the registered agent and registered office as they
appear on the records of the office of the Secretary of State (before
change):
Registered Agent Charles F. Vaselitis
----------------------------------------------------
First Name Middle Name Last Name
Registered Office 4501 West 47th Street
-----------------------------------------
Number Street Suite No. (A.P.O. Box alone is not acceptable)
Chicago 60632 Cook
-----------------------------------------------------------------------
City Zip Code County
4. Name and address of the registered agent and registered office shall be
(after all changes herein reported):
Registered Agent James E. Winslow
----------------------------------------------------
First Name Middle Name Last Name
Registered Office 4501 West 47th Street
------------------------------------------
Number Street Suite No.
(A.P.O. Box alone is not acceptable)
Chicago 60632 Cook
---------------------------------------------------------------------
City Zip Code County
<PAGE> 9
5. The address of the registered office and the address of the business
office of the registered agent, as changed, will be identical.
6. The above change was authorized by: ("X" one box only)
a. [X] By resolution duly adopted by the board of directors. (Note 5)
b. [ ] By action of the registered agent. (Note 6)
NOTE: When the registered agent changes, the signatures of both president
and secretary are required.
7. (If authorized by the board of directors, sign here. See Note 5)
The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirms, under penalties of perjury,
that the facts stated herein are true.
<TABLE>
<S> <C> <C>
Date May 21 1996 Shutters, Inc.
- ------------------------------------------------------------ -------------------------------------------------------
attested by By
----------------------------------------------- -------------------------------------------------------
(Signature of Secretary or Assistant Secretary) (Signature of President or Vice President
James E. Winslow James R. Tennant, President
----------------------------------------------- -------------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
</TABLE>
(If change of registered office by registered agent, sign here. See Note 6)
The undersigned, under penalties of perjury, affirms that the facts stated
herein are true.
Date June 6 19, 96
------ ------- ------------------------------------------------
(Signature of Registered Agent of Record)
NOTES
1. The registered office may, but need not be the same as the principal
office of the corporation. However, the registered office and the office
address of the registered agent must be the same.
2. The registered office must include a street or road address: a post
office box number alone is not acceptable.
3. A corporation cannot act as its own registered agent.
4. If the registered office is changed from one county to another, then the
corporation must file with the recorder of deeds of the new county a
certified copy of the articles of incorporation and a certified copy of
the statement of change of registered office. Such certified copies may
be obtained ONLY from the Secretary of State.
5. Any change of registered agent must be by resolution adopted by the board
of directors. This statement must then be signed by the president (or
vice-president) and by the secretary (or an assistant secretary).
6. The registered agent may report a change of the registered office of the
corporation for which he or she is registered agent. When the agent
reports such a change, this statement must be signed by the registered
agent.
<PAGE> 1
Exhibit 3.2.2
By-Laws
of
SELFIX, INC.
(a Delaware Corporation)
Adopted
May 18, 1987
This Document Prepared By:
Sachnoff Weaver & Rubenstein, Ltd.
30 South Wacker Drive
Suite 2900
Chicago, Illinois 60606
(312) 207-1000
<PAGE> 2
SELFIX, INC. BY-LAWS
ARTICLE 1
OFFICES
The principal office of the Corporation shall be in the State of Illinois,
in the City of Chicago, County of Cook. The Corporation may have such other
offices, either within or without the State of Illinois, as the business of the
Corporation may require from time to time.
The registered office of the Corporation required by the General
Corporation Law of Delaware to be maintained in the State of Delaware shall be
229 South State Street, City of Dover, County of Kent. The name of the
registered agent of the Corporation in Delaware shall be United States
Corporation Company.
ARTICLE 2
STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING. The annual meeting of the stockholders shall
be held on the third Wednesday of May 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.
Page 1
<PAGE> 3
SELFIX, INC. BY-LAWS
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 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
Page 2
<PAGE> 4
SELFIX, INC. BY-LAWS
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 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.
Page 3
<PAGE> 5
SELFIX, INC. BY-LAWS
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 may be viva
voce.
Page 4
<PAGE> 6
SELFIX, INC. BY-LAWS
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. The
directors 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 with 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 __________________________ [PAGE 6 IS MISSING]
SECTION 3.6 QUORUM.
Page 5
<PAGE> 7
SELFIX, INC. BY-LAWS
SECTION 3.7 MANNER OF ACTING.
SECTION 3.8 VACANCIES.
SECTION 3.9 COMPENSATION.
SECTION 3.10 INFORMAL ACTION BY BOARD OF DIRECTORS.
SECTION 3.11 PARTICIPATION BY CONFERENCE TELEPHONE.
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
Page 6
<PAGE> 8
SELFIX, INC. BY-LAWS
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.
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 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
Page 7
<PAGE> 9
SELFIX, INC. BY-LAWS
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 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-
Page 8
<PAGE> 10
SELFIX, INC. BY-LAWS
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 $100duties 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 $100the Board of Directors.
The Assistant Treasurers and Assistant Secretaries, in g$100eneral, 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 employee benefit plans, whether the basis of such proceeding is
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SELFIX, INC. BY-LAWS
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 exercise
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 a 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
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SELFIX, INC. BY-LAWS
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, 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
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SELFIX, INC. BY-LAWS
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.
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 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
President, Vice President, Secretary or Assistant Secretary and, where
authorized by resolution of the Board of Directors, any transfer agent may be
facsimiles. In
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SELFIX, INC. BY-LAWS
case any such 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 thought 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 therefore 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 or
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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SELFIX, INC. BY-LAWS
ARTICLE 8
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of June in
each year and end on the last day of May in each year.
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.
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SELFIX, INC. BY-LAWS
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.
Page 15
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SELFIX, INC. BY-LAWS
Amended 6/29/87
ARTICLE 2
STOCKHOLDERS
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 ten percent (10%) 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.
<PAGE> 18
SELFIX, INC. BY-LAWS
Amended 6/29/87
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 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, 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 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
<PAGE> 19
SELFIX, INC. BY-LAWS
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 or conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
<PAGE> 20
SELFIX, INC. BY-LAWS
TABLE OF CONTENTS
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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 . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.5 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. . . . . . 2
SECTION 2.6 VOTING LISTS. . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.7 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.8 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.9 VOTING OF SHARES. . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.10 INSPECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.11 VOTING OF SHARES BY CERTAIN HOLDERS. . . . . . . . . . . . . 4
SECTION 2.12 VOTING BY BALLOT . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3 DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.1 GENERAL POWERS. . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.2 NUMBER, TENURE AND QUALIFICATION. . . . . . . . . . . . . . . 5
SECTION 3.3 REGULAR MEETINGS. . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.4 SPECIAL MEETINGS. . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.5 NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.6 QUORUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.7 MANNER OF ACTING. . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.8 VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.9 COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.10 INFORMAL ACTION BY BOARD OF DIRECTORS. . . . . . . . . . . . 6
SECTION 3.11 PARTICIPATION BY CONFERENCE TELEPHONE. . . . . . . . . . . . 6
SECTION 3.12 COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4 OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.1 NUMBER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.2 ELECTION AND TERMS OF OFFICE. . . . . . . . . . . . . . . . . 7
SECTION 4.3 REMOVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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SELFIX, INC. BY-LAWS
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SECTION 4.4 VACANCIES. . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.5 THE CHAIRMAN OF THE BOARD. . . . . . . . . . . . . . . . . . 7
SECTION 4.6 THE PRESIDENT. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.7 THE VICE PRESIDENTS. . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.8 THE TREASURER. . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.9 THE CONTROLLER . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.10 THE SECRETARY . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.11 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. . . . . . . 9
SECTION 4.12 SALARIES. . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5 INDEMNIFICATION AND INSURANCE. . . . . . . . . . . . . . . . . . . 9
SECTION 5.1 RIGHT TO INDEMNIFICATION . . . . . . . . . . . . . . . . . . 9
SECTION 5.2 RIGHT OF CLAIMANT TO BRING SUIT. . . . . . . . . . . . . . . 10
SECTION 5.3 NON-EXCLUSIVITY OF RIGHTS. . . . . . . . . . . . . . . . . . 11
SECTION 5.4 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.5 CONSOLIDATION. . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6 CONTRACTS, LOANS, CHECKS AND DEPOSITS. . . . . . . . . . . . . . . 12
SECTION 6.1 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.2 LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.3 CHECKS, DRAFTS, ETC. . . . . . . . . . . . . . . . . . . . . 12
SECTION 6.4 DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 7 CERTIFICATES FOR SHARES AND THEIR TRANSFER . . . . . . . . . . . . 12
SECTION 7.1 CERTIFICATES FOR SHARES. . . . . . . . . . . . . . . . . . . 12
SECTION 7.2 TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . . . 13
SECTION 7.3 REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 7.4 FACSIMILE SIGNATURES . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 8 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 9 DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 10 SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 11 WAIVER OF NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . 14
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ARTICLE 12 AMENDMENTS TO THE BY-LAWS . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 1
Exhibit 3.2.3
BY-LAWS
OF
SEYMOUR HOUSEWARES CORPORATION
A DELAWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be located at Prentice Hall Corporation System,
Inc., 32 Loockerman Square, Suite L-100, Dover, Delaware, County of Kent,
19901. The name of the corporation's registered agent at such address shall be
Prentice-Hall Corporation System, Inc. The registered office and/or registered
agent of the corporation may be changed from time to time by action of the
board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall
be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall determine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or
without the State of Delaware, as shall be stated in a notice of meeting or in
a duly executed waiver of notice thereof.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special
<PAGE> 2
meeting be otherwise called, the place of meeting shall be the principal
executive office of the corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting
not less than ten (10) nor more than sixty (60) days before the date of the
meeting. All such notices shall be delivered, either personally or by mail, by
or at the direction of the board of directors, the president or the secretary,
and if mailed, such notice shall be deemed to be delivered when deposited in
the United States mail, postage prepaid, addressed to the stockholder at his,
her or its address as the same appears on the records of the corporation.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends for the express purpose of objecting at
the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present,
the holders of a majority of the shares present in person or represented by
proxy at the meeting, and entitled to vote at the meeting, may adjourn the
meeting to another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than thirty (30) days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which
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by express provisions of an applicable law or of the certificate of
incorporation a different vote is required, in which case such express provision
shall govern and control the decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of
Article VI hereof, every stockholder shall at every meeting of the stockholders
be entitled to one (1) vote in person or by proxy for each share of common
stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the State of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested provided, however, that no consent or consents
delivered by certified or registered mail shall be deemed delivered until such
consent or consents are actually received at the registered office. All consents
properly delivered in accordance with this section shall be deemed to be
recorded when so delivered. No written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered to the corporation as required by this section,
written consents signed by the holders of a sufficient number of
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shares to take such corporate action are so recorded. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Any action taken pursuant to such written consent or consents of the
stockholders shall have the same force and effect as if taken by the
stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the first board shall be four (4). Thereafter, the
number of directors shall be established from time to time by resolution of the
board. The directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote in
the election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Any director may resign at any time upon written
notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected 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.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board
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of directors may be called by or at the request of the president on at least
twenty-four (24) hours notice to each director, either personally, by telephone,
by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed by
a majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation, which to the
extent provided in such resolution or these by-laws shall have and may exercise
the powers of the board of directors in the management and affairs of the
corporation except as otherwise limited by law. The board of directors 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. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the
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meeting or unless his or her written dissent to such action shall be filed with
the person acting as the secretary of the meeting before the adjournment thereof
or shall be forwarded by registered mail to the secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, 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, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the
board of directors and shall consist of a chairman, president, one or more
secretaries, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person. In its discretion, the board of directors may choose
not to fill any office for any period as it may deem advisable, except that the
offices of president and secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The president shall be elected annually by the board of directors at
the first meeting of the board of directors held after each annual meeting of
stockholders or as soon thereafter as conveniently may be. The president shall
appoint other officers to serve for such terms as he or she deems desirable.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected 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. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
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Section 6. The President. The president shall be the chief executive
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he is present; subject to the powers of the
board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors or as may be provided in these by-laws.
Section 7. Vice-presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors
or by the president, shall, in the absence or disability of the president, act
with all of the powers and be subject to all the restrictions of the president.
The vice-presidents shall also perform such other duties and have such other
powers as the board of directors, the president or these by-laws may, from time
to time, prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these
by-laws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the president, or
secretary may, from time to time, prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall have
the custody of the corporate funds and securities; shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation;
shall deposit all monies and other valuable effects in the name and to the
credit of the corporation as may be ordered by the board of directors; shall
cause the funds of the corporation to be disbursed when such disbursements have
been duly authorized, taking proper vouchers for such disbursements; and shall
render to the president and the board of directors, at its regular meeting or
when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by the
board of directors, the treasurer shall give the corporation a bond (which
shall
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be rendered every six (6) years) in such sums and with such surety or sureties
as shall be satisfactory to the board of directors for the faithful performance
of the duties of the office of treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the president or
treasurer may, from time to time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 11. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director of officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, 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 actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his heirs, executors and administrators; provided,
however, that, except as provided in Section 2 hereof, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the corporation. The right to indemnification
conferred in this Article V shall be a contract right and, subject to Sections
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and 5 hereof, shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
The corporation may, by action of its board of directors, provide
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall
be made promptly, and in any event within thirty (30) days, upon the written
request of the director of officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification
or advancing of expenses, in whole or in part, or if payment in full pursuant
to such request is not made within thirty (30) days, the right to
indemnification or advances as granted by this Article V shall be enforceable
by the director or officer in any court of competent jurisdiction. Such
person's costs and expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the corporation. 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, has been tendered to the corporation) that
the claimant has not met the standards of conduct which make it permissible
under the General Corporation Law of the State of Delaware for the corporation
to indemnify the claimant for the amount claimed, but the burden of 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 has met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, 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.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V 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 4. Insurance. The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director,
officer, employee, fiduciary, or agent of the corporation or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity,
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whether or not the corporation would have the power to indemnify such person
against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall 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 a
director, officer, employee or agent of such constituent 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 this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or
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its employee or (2) by a registrar, other than the corporation or its employee,
the signature of any such president, vice-president, secretary, or assistant
secretary may be facsimiles. In case any officer or officers who have signed,
or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. 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. Shares of
stock of the corporation shall only be transferred on the books of the
corporation by the holder of record thereof or by such holder's attorney duly
authorized in writing, upon surrender to the corporation of the certificate or
certificates for such shares endorsed by the appropriate person or persons, with
such evidence of the authenticity of such endorsement, transfer, authorization,
and other matters as the corporation may reasonably require, and accompanied by
all necessary stock transfer stamps. In that event, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate or certificates, and record the transaction on its books.
The board of directors may appoint a bank or trust company organized under the
laws of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by
the board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting;
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provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call
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when such payment is due, the corporation may proceed to collect the amount due
in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation. Before
payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or any other purpose and the directors may
modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and 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 be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to 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 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the
13
<PAGE> 14
corporation and the words "Corporate Seal, Delaware". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
14
<PAGE> 1
Exhibit 3.2.4
BY-LAWS
OF
TAMOR PLASTICS CORPORATION
ARTICLE I - CHANGES OF BY-LAWS
Section 1. The By-Laws may be amended only at an annual or specifically called
meeting of the Corporation, provided notice has been given of the proposed
amendment at least seven days before such meeting, and by vote of a majority of
all the stock outstanding.
ARTICLE II - MEETINGS
Section 1. Stockholders meetings shall be held at the principal office or
place of business of this corporation in the Commonwealth of Massachusetts.
Section 2. The annual meeting of the stockholders of this company shall be
held at its principal office, 106 Carter Street, in the City of Leominster,
Commonwealth of Massachusetts, at 10 o'clock in the forenoon on the second
Monday of April of each year.
Section 3. At any meeting a quorum shall consist of one stockholder
representing at least a majority of shares, but a majority of stockholders
present and voting may adjourn any meeting from time to time until the business
shall have been finished.
Section 4. At all meetings each stockholder may cast one vote for each share
owned by him; absent stockholders may vote by proxy authorized by a writing
executed and dated within six months previous to the meeting at which it is
used, if the maker thereof resides in the United States. All proxies shall be
filed with the clerk at or before the time of voting.
ARTICLE III - OFFICERS OF THE CORPORATION
Section 1. The officers of the corporation need not, except for the President,
be stockholders and shall consist of a President, Treasurer and Clerk, and a
board of four Directors, and such other officers as the corporation may from
time to time authorize.
ARTICLE IV - ELECTION OF OFFICERS
Section 1. The Directors, Treasurer and Clerk shall be chosen by ballot at the
annual meeting, an adjournment thereof, or at a meeting in lieu of such annual
meeting as above
<PAGE> 2
provided, and shall hold their office for one year from the time in the year in
which they were chosen, and thereafter until others are chosen and qualified in
their stead.
ARTICLE V - DIRECTORS
Section 1. Any vacancy occurring in the board of directors from death,
resignation or inability to serve of any director, shall be filled by the
remaining members of the board at their next regular meeting, or at a special
meeting to be called for the purpose.
Section 2. Special meetings may be called as hereinafter provided in Article
VI, or at any time, at the request of a director, provided all the directors
have notice thereof and thereto in writing.
Section 3. At all meetings a quorum shall consist of not less than two of the
directors.
Section 4. The directors shall annually, immediately after their election,
choose one of their number President.
Section 5. The directors shall have the management of the affairs of the
company and are hereby invested with all the powers which the corporation itself
possesses not incompatible with the provisions of these by-laws and the laws of
the Commonwealth.
Section 6. They may appoint and remove at pleasure such officers and employees
as may seem to them wise; shall have access to the books, vouchers and funds of
the treasurer; shall determine upon the form of certificate of stock and of
transfer thereof; and upon a corporate seal; shall fix all salaries; shall
declare dividends as they may deem best; shall fill all vacancies that may occur
at any time during the year in any office; shall make for their government such
rules and regulations not inconsistent with these by-laws as they may think fit,
and at every annual meeting of the stockholders shall present a brief report of
the financial condition of the company and of the state of its property and
assets.
ARTICLE VI - THE PRESIDENT
Section 1. The President shall preside at all meetings of the stockholders and
of the board; shall be chairman ex-officio of all committees of the directors;
shall sign all certificates of stock; shall exercise a general supervision of
the company's affairs; and shall have the custody of the treasurer's bond where
one is required.
Section 2. He may at any time call a special meeting of the directors by
depositing in the post office or delivering personally one day's notice in
writing thereof to each director.
2
<PAGE> 3
ARTICLE VII - THE CLERK
Section 1. The clerk, who shall be sworn, shall be clerk both of the Directors
and of the Company, shall attend all their meetings and keep accurate records
thereof, and perform all other duties incident to his office.
Section 2. In the absence of the clerk from any meeting, a clerk pro tempore
shall be chosen, who shall be sworn.
ARTICLE VIII - THE TREASURER
Section 1. The treasurer shall have the custody of the corporate seal and of
the funds of the company; shall receive moneys and make disbursements as
directed; shall keep accurate books of account and be custodian of the company's
deeds, bonds, agreements, and other business papers. He shall sign all
certificates of stock which shall be under the seal of the corporation.
ARTICLE IX - MANAGER AND EMPLOYEES
Section 1. The directors may employ some suitable person as manager of the
company, who shall have such control and direction of its interests as the
directors may deem best and he shall receive such compensation as they may
determine. The manager shall employ and discharge such general employees and
laborers as in his judgment the interests of the company may require.
ARTICLE X - CERTIFICATE OF STOCK
Section 1. Each stockholder shall be entitled to a certificate of his stock
under the seal of the corporation and signed by the President and Treasurer. In
case of the loss of a certificate a duplicate certificate may be issued upon
such reasonable terms as the directors may prescribe.
ARTICLE XI - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the extent permitted by law, indemnify each
person who may serve or who has served at any time as a director or officer of
the corporation or of any of its subsidiaries, or who at the request of the
corporation may serve or at any time has served as a director or officer,
administrator or trustee of, or in a similar capacity with, another organization
or any employee benefit plan, against all expenses and liabilities, including
counsel fees, reasonably incurred by or imposed upon such person in connection
with any proceeding in which he may become involved by reason of his serving or
having served in such capacity (other than a proceeding voluntarily initiated by
such person unless he is successful on the merits, the proceeding was authorized
by a majority of the full board or the proceeding seeks a declaratory
3
<PAGE> 4
judgment regarding his own conduct); provided that no indemnification shall be
provided for any such person with respect to any matter as to which he shall
have been finally adjudicated in any proceeding not to have acted in good faith
in the reasonable belief that his action was in the best interests of the
corporation or to the extent such matter relates to service with respect to an
employee benefit plan in the reasonable belief that his action was in the best
interests of the participants or beneficiaries of such employee benefit plan.
Such indemnification may, to the extent authorized by the corporation,
include payment by the corporation of expenses incurred in defending a civil or
criminal action or proceeding in advance of the final disposition of such action
or proceeding, upon receipt of an undertaking by the person indemnified to repay
such payment if he shall be adjudicated to be not entitled to indemnification
under this article, which undertaking may be accepted without regard to the
financial ability of such person to make repayment. The payment of any such
indemnification shall be conclusively deemed authorized by the corporation under
this article, and each director of the corporation approving such payment shall
be wholly protected, if:
(i) the payment has been approved or ratified (1) by a majority vote of
a quorum of the directors consisting of persons who are not at that
time parties to the proceeding, (2) by a majority vote of a
committee of two or more directors who are not at that time parties
to the proceeding and are selected for this purpose by the full
board (in which selection directors who are parties may
participate), or (3) by a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of
stockholders who are not at that time parties to the proceeding; or
(ii) the action is taken in reliance upon the opinion of independent
legal counsel (who may be counsel to the corporation) appointed for
the purpose by vote of the directors or in the manner specified in
clauses (1), (2) or (3) of subparagraph (i); or
(iii) the directors have otherwise acted in accordance with the standard
of conduct set forth in the Massachusetts Business Corporation Law,
as amended.
The indemnification provided hereunder shall inure to the benefit of the
heirs, executors and administrators of a director, officer or other person
entitled to indemnification hereunder.
The foregoing right of indemnification shall be in addition to and not
exclusive of any other rights to which such director or officer or other person
may be entitled under any agreement or pursuant to any action taken by the
directors or stockholders of the corporation or otherwise.
4
<PAGE> 1
Exhibit 3.2.5
By-Laws
of
Selfix Shutters, Inc.
(an Illinois Corporation)
Adopted
February 18, 1988
This Document Prepared By:
Sachnoff Weaver & Rubenstein, Ltd.
30 South Wacker Drive
Suite 2900
Chicago, Illinois 60606
(312) 207-1000
<PAGE> 2
TABLE OF CONTENTS
Page Number
Article 1 -- CORPORATE OFFICES................................... 1
Section 1.1 Principal Corporate Office......................... 1
Section 1.2 Registered Office in Illinois...................... 1
Article 2 -- SHAREHOLDERS........................................ 1
Section 2.1 Annual Meeting..................................... 1
Section 2.2 Special Meetings................................... 2
Section 2.3 Place of Meeting................................... 2
Section 2.4 Notice of Meeting.................................. 2
Section 2.5 Meeting of All Shareholders........................ 2
Section 2.6 Fixing of Record Date.............................. 2
Section 2.7 Voting Lists....................................... 3
Section 2.8 Quorum of Shareholders............................. 3
Section 2.9 Proxies............................................ 3
Section 2.10 Voting of Shares.................................. 4
Section 2.11 Voting of Shares by Certain Holders............... 4
Section 2.12 Voting by Ballot; Inspectors...................... 5
Section 2.13 Informal Action by Shareholders................... 5
Article 3 -- DIRECTORS........................................... 5
Section 3.1 General Powers..................................... 6
Section 3.2 Number, Tenure and Qualification................... 6
Section 3.3 Regular Meetings................................... 6
Section 3.4 Special Meetings................................... 6
Section 3.5 Notice............................................. 6
Section 3.6 Quorum............................................. 6
Section 3.7 Manner of Action................................... 7
Section 3.8 Vacancies.......................................... 7
Section 3.9 Removal of Directors............................... 7
Section 3.10 Compensation...................................... 7
Section 3.11 Presumption of Assent............................. 8
Section 3.12 Informal Action By Directors...................... 8
Section 3.13 Participation By Conference Telephone............. 8
Section 3.14 Committees........................................ 8
Section 3.15 Director Conflict of Interest..................... 9
Article 4 -- OFFICERS............................................ 10
Section 4.1 Number............................................. 10
Section 4.2 Election and Term of Office........................ 10
Section 4.3 Removal............................................ 10
-i-
<PAGE> 3
Section 4.4 Vacancies.......................................... 11
Section 4.5 The Chairman of the Board.......................... 11
Section 4.6 The President...................................... 11
Section 4.7 The Vice-Presidents................................ 11
Section 4.8 The Secretary...................................... 11
Section 4.9 The Treasurer...................................... 12
Section 4.10 Assistant Secretaries and Assistant Treasurers.... 12
Section 4.11 Salaries.......................................... 12
Article 5 -- INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS; INSURANCE..................... 13
Section 5.1 Actions Other Than Actions By or in the Right of the
Corporation........................................ 13
Section 5.2 Actions By or in the Right of the Corporation...... 13
Section 5.3 Indemnification in Event of Successful Defense..... 14
Section 5.4 Procedures for Indemnification..................... 14
Article 6 -- CONTRACTS, LOANS, CHECKS AND DEPOSITS............... 15
Section 6.1 Contracts.......................................... 15
Section 6.2 Loans.............................................. 15
Section 6.3 Pledges of Property and Assets..................... 16
Section 6.4 Checks, Drafts, Etc................................ 16
Section 6.5 Deposits........................................... 16
Article 7 -- SHARES AND THEIR TRANSFER........................... 16
Section 7.1 Consideration for Shares........................... 16
Section 7.2 Payment for Shares................................. 16
Section 7.3 Shares Represented by Certificates................. 17
Section 7.4 Uncertificated Shares.............................. 17
Article 8 -- FISCAL YEAR........................................ 18
Article 9 -- DIVIDENDS.......................................... 18
Article 10 -- SEAL............................................... 18
Article 11 -- WAIVER OF NOTICE................................... 18
Article 12 -- AMENDMENTS TO THE BY-LAWS.......................... 19
Article 13 -- STATUTORY REFERENCES............................... 19
-ii-
<PAGE> 4
SELFIX SHUTTERS, INC. BY-LAWS
Article 1
CORPORATE OFFICES
Section 1.1 Principal Corporate Office. The principal corporate office of
Selfix Shutters, Inc. in Illinois shall be located in the Village of Hebron,
County of McHenry, or at such other place as the Board of Directors may
determine by resolution from time to time. The Corporation may have such other
offices, either within or without the State of Illinois, as the Board of
Directors may designate or the Corporation's business may require from time to
time. [BCA Section 3.10(j)]
Section 1.2 Registered Office in Illinois. The Registered Office of the
Corporation required by the Illinois Business Corporation Act of 1983 ("BCA") to
be maintained in the State of Illinois may be, but need not be, the same as the
principal corporate office or its principal place of business in the State of
Illinois, but shall in any event be identical with the business office of the
Corporation's Registered Agent in Illinois. [BCA Section 5.05] The address of
the Registered Office in Illinois may be changed from time to time by the Board
of Directors or by such Registered Agent. [BCA Sections 5.10, 5.20]
Article 2
SHAREHOLDERS
Section 2.1 Annual Meeting. Except as the Board of Directors of the
Corporation may otherwise provide by resolution duly adopted pursuant to the
authority granted hereby, the Annual Meeting of Shareholders of the Corporation
shall be held each year on the third Wednesday of May (beginning with the year
1989), commencing at the hour of 10:00 A.M., for the purpose of electing
Directors and for the transaction of such other business as may properly 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. [BCA
Section 7.05]
Section 2.2 Special Meetings. Special Meetings of the Shareholders may be
called by the President, by the Board of Directors, or by the holders of not
less than one-fifth of all the outstanding shares of the Corporation entitled to
vote on the matter for which the Special Meeting is called. [BCA Section 7.05]
Section 2.3 Place of Meeting. The Board of Directors may by resolution
designate any place, either within or without the State of Illinois, as the
place of meeting for any Annual Meeting of Shareholders or for any Special
Meeting called by the Board of Directors or by the President, and may designate
any place within the State of Illinois for any Special Meeting called by
Shareholders. A waiver of notice signed by all Shareholders may designate any
place, either within or without the State of Illinois, as the place for the
holding of any Meeting. If no designation of a meeting place is made, or if a
Special Meeting be otherwise called, the place of meeting shall be the
Registered Office of the Corporation in the State of Illinois, except as
otherwise provided in Section 2.5 of these By-Laws. [BCA Section 7.05]
<PAGE> 5
SELFIX SHUTTERS, INC. BY-LAWS
Section 2.4 Notice of Meeting. Written notice stating the place, day and
hour of the Meeting, and, in the case of a Special Meeting, the purpose or
purposes for which the Meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the Meeting, or, in the
case of a merger, consolidation, share exchange, dissolution, or sale, lease or
exchange of assets requiring Shareholder approval, not less than twenty (20) nor
more than sixty (60) days before the date of the Meeting, either personally or
by mail, by or at the direction of the President, or the Secretary, or the
Officer or persons calling the Meeting, to each Shareholder 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 Shareholder at his or
her address as it appears on the records of the Corporation, with postage
thereon prepaid. [BCA Section 7.15]
Section 2.5 Meeting of All Shareholders. If all of the Shareholders shall
meet at any time and place, either within or without the State of Illinois, and
consent to the holding of a Meeting at such time and place, such Meeting shall
be valid without call or notice, and at such Meeting any corporate action may be
taken. [BCA Section 7.20]
Section 2.6 Fixing of Record Date. For the purpose of determining
Shareholders entitled to notice of or to vote at any Meeting of Shareholders, or
Shareholders entitled to receive payment of any dividend or distribution, or in
order to make a determination of Shareholders for any other proper purpose, the
Board of Directors of the Corporation may fix in advance a date as the record
date for any such determination of Shareholders, such date in any case to be not
more than sixty (60) days immediately preceding the date of the Meeting, payment
or other transaction, and, for a Meeting of Shareholders, not less than ten (10)
days, or in the case of a merger, consolidation, share exchange, dissolution, or
sale, lease or exchange of assets requiring Shareholder approval, not less than
twenty (20) days, immediately preceding such Meeting. If no record date is
fixed for the determination of Shareholders entitled to notice of or to vote at
a Meeting of Shareholders, or Shareholders entitled to receive payment of a
dividend or other distribution, the date on which notice of the Meeting is
mailed or the date on which the resolution of the Board of Directors declaring
such dividend or distribution is adopted, as the case may be, shall be the
record date for such determination of Shareholders. When a determination of
Shareholders entitled to vote at any Meeting of Shareholders has been made as
provided in this Section 2.6, such determination shall apply to any adjournment
thereof. [BCA Section 7.25]
Section 2.7 Voting Lists. The Officer or agent having charge of the
transfer books and records for shares of the Corporation shall make, within
twenty (20) days after the record date for a Meeting of Shareholders or ten (10)
days before such Meeting, whichever is earlier, a complete list of the
Shareholders 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 (10) 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
Shareholder, and to copying at the Shareholder's expense,
Page 2
<PAGE> 6
SELFIX SHUTTERS, INC. BY-LAWS
at any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the Meeting and shall be subject to the
inspection of any Shareholder during the whole time of the Meeting. The
original share ledger or transfer book, or a duplicate thereof kept in Illinois,
shall be prima facie evidence as to who are the Shareholders entitled to examine
such list or share ledger or transfer book, or to vote at any Meeting of
Shareholders. Failure to comply with the requirements of this Section 2.7 shall
not affect the validity of any action taken at such Meeting. An Officer or
agent having charge of the transfer books or records who shall fail to prepare
the list of Shareholders, or keep the same on file for a period of ten (10)
days, or produce and keep the same open for inspection at the Meeting, as
provided in this Section 2.7, shall be liable to any Shareholder suffering
damage on account of such failure, to the extent of such damage as provided by
law. [BCA Section 7.30]
Section 2.8 Quorum of Shareholders. A majority of the outstanding shares
of the Corporation entitled to vote on a matter, represented in person or by
proxy, shall constitute a quorum for consideration of such matter at a meeting
of Shareholders. If a quorum is present, the affirmative vote of the majority
of the shares represented at the Meeting and entitled to vote on a matter shall
be the act of the Shareholders, unless the vote of a greater number or voting by
classes is required by the Illinois Business Corporation Act of 1983, by the
Corporation's Articles of Incorporation, or by these By-Laws. [BCA Section
7.60]
Section 2.9 Proxies. A Shareholder may appoint a proxy to vote or
otherwise act for him or her by signing an appointment form and delivering it to
the person so appointed. No proxy shall be valid after the expiration of eleven
(11) months from the date thereof unless otherwise provided in the proxy. Every
proxy continues in full force and effect until revoked by the person executing
it prior to the vote pursuant thereto, except as otherwise provided in this
Section 2.9 and in Section 7.50 of the Illinois Business Corporation Act of
1983. Such revocation may be effected by a writing delivered to the Corporation
stating that the proxy is revoked or by a subsequent proxy executed by, or by
attendance at the Meeting and voting in person by, the person executing the
proxy. The dates contained on the forms of proxy presumptively determine the
order of execution, regardless of any postmark dates on envelopes in which they
are mailed. An appointment of a proxy is revocable by the Shareholder unless
the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest in the shares or in the Corporation
generally. Unless the appointment of a proxy contains an express limitation on
the proxy's authority, the Corporation may accept the proxy's vote or other
action as that of the Shareholder making the appointment. [BCA Section 7.50]
Section 2.10 Voting of Shares. Each outstanding share of the Corporation
shall be entitled to one vote in each matter submitted to a vote by the
Shareholders, except as the Illinois Business Corporation Act of 1983 and the
Corporation's Articles of Incorporation may otherwise limit or deny voting
rights or provide special voting rights as to any class or classes or series of
shares. [BCA Section 7.40]
Page 3
<PAGE> 7
SELFIX SHUTTERS, INC. BY-LAWS
Section 2.11 Voting of Shares by Certain Holders. Shares of its own stock
belonging to this Corporation shall not be voted, directly or indirectly, at any
Meeting and shall not be counted in determining the total of outstanding shares
at any given time, but shares of the Corporation held by the Corporation in a
fiduciary capacity may be voted and shall be counted in determining the total
number of outstanding shares entitled to vote at any given time.
Shares registered in the name of another corporation, domestic or foreign,
may be voted by any Officer, agent, proxy or other legal representative
authorized to vote such shares under the law of incorporation of such
corporation. The Corporation may treat the president or other person holding
the position of chief executive officer of such other corporation as authorized
to vote such shares, together with any other person indicated and any other
holder of an office indicated by the corporate Shareholder to the Corporation
as a person or office authorized to vote such shares. Such persons and offices
indicated shall be registered by the Corporation on the transfer books for
shares and included in any voting list prepared in accordance with Section 2.7
of these By-Laws.
Shares registered in the name of a deceased person, a minor ward or a
person under legal disability may be voted by his or her administrator,
executor or court appointed guardian, either in person or by proxy without a
transfer of such shares into the name of such administrator, executor or court
appointed guardian. Shares registered in the name of a trustee may be voted by
him or her, either in person or by proxy.
Shares registered 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 or her name if authority so to
do is contained in an appropriate order of the court by which such receiver was
appointed.
A Shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
[BCA Section 7.45]
Section 2.12 Voting by Ballot: Inspectors. Voting by Shareholders on any
matter or in any election may be viva voce unless the Chairman of the Meeting
shall order, or any Shareholder entitled to vote thereon shall demand, that
voting be by ballot.
At any Meeting of Shareholders, the Chairman of the Meeting may, or upon
the request of any Shareholder shall, appoint one or more persons as inspectors
for such Meeting. Such inspectors shall ascertain and report the number of
shares represented at the Meeting, based upon their determination of the
validity and effect of proxies; count all votes and report the results; and do
such other acts as are proper to conduct the election and voting with
impartiality and fairness to all the Shareholders. Each report of an inspector
shall be in writing and signed by him or her or by a majority of them if there
be more than one inspector acting at such Meeting.
Page 4
<PAGE> 8
SELFIX SHUTTERS, INC. BY-LAWS
If there is more than one inspector, the report of a majority shall be the
report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the Meeting and the results of the voting shall
be prima facie evidence thereof. [BCA Section 7.35]
Section 2.13 Informal Action by Shareholders. Any action required to be
taken at any Annual or Special Meeting of Shareholders of the Corporation, or
any other action which may be taken at a Meeting of the Shareholders, may be
taken without a Meeting and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed (i) by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voting or (ii) by all of the Shareholders entitled
to vote with respect to the subject matter thereof. If such consent is signed
by less than all of the Shareholders entitled to vote, then such consent shall
become effective only if, at least five (5) days prior to the execution of the
consent, a notice of the proposed action is delivered in writing to all of the
Shareholders entitled to vote with respect to the subject matter thereof and,
after the effective date of the consent, prompt notice of the taking of the
action without a meeting by less than unanimous written consent shall be
delivered in writing to those Shareholders who have not consented in writing.
[BCA Section 7.10]
Article 3
DIRECTORS
Section 3.1 General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. [BCA
Section 8.05]
Section 3.2 Number, Tenure and Qualification. The number of Directors of
the Corporation shall be three. Each Director shall serve until the next Annual
Meeting of Shareholders or until his or her successor shall have been elected
and qualified. Directors need not be residents of Illinois or Shareholders of
the Corporation.
A Director may resign at any time by giving written notice to the Board of
Directors, its Chairman, or to the President or Secretary of the Corporation.
A resignation is effective when the notice is given unless the notice specifies
a future date. The pending vacancy may be filled before the effective date,
but the successor shall not take office until the effective date. [BCA Sections
8.01, 8.10]
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 Shareholders. The Board of Directors
may provide, by resolution, the time and place, either within or without the
State of Illinois, for the holding of additional Regular Meetings without other
notice than such resolution. [BCA Sections 8.20, 8.25]
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Section 3.4 Special Meetings. Special Meetings of the Board of Directors
may be called by or at the request of the President or any two Directors. 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 Illinois, as the place
for holding any Special Meeting of the Board of Directors called by them. [BCA
Sections 8.20, 8.25]
Section 3.5 Notice. Notice of any Special Meeting shall be given at least
three days previous thereto by written notice delivered personally or by
telegram or mailgram to each Director at his or her business address, or given
at least five (5) days previous thereto if mailed. If mailed, such notice shall
be deemed to be delivered on the second day following the date on which it was
deposited in the United States mail so addressed, proper postage thereon
prepaid. If notice be given by telegram or mailgram, such notice shall be
deemed to be delivered when the telegram or mailgram is delivered to the
telegraph company. Any Director may waive notice of any Meeting by executing a
waiver of notice. 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. [BCA Section 8.25]
Section 3.6 Quorum. A majority of the number of Directors fixed by these
By-Laws shall constitute a quorum for transaction of business at any Meeting of
the Board of Directors, provided that if less than a majority of such number of
Directors is present at said Meeting, a majority of the Directors present may
adjourn the Meeting from time to time without further notice. [BCA Section
8.15(a)]
Section 3.7 Manner of Action. The act of the majority of Directors present
at a Meeting at which a quorum is present shall be the act of the Board of
Directors. [BCA Section 8.15(c)]
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 election at an Annual Meeting or at a Special
Meeting of Shareholders called for that purpose. In the absence of a Special
Meeting of Shareholders, the Board of Directors may fill the vacancy, except as
otherwise specified in the Articles of Incorporation. A Director elected by
the Shareholders to fill a vacancy shall hold office for the balance of the
term for which he or she was elected. A Director appointed to fill a vacancy
shall serve until the next Meeting of Shareholders at which Directors are to be
elected. [BCA Section 8.30]
Section 3.9 Removal of Directors. One or more of the Directors may be
removed, with or without cause, at a Meeting of Shareholders by the affirmative
vote of the holders of a majority of the outstanding shares then entitled to
vote at an election of Directors, except that:
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(a) No Director shall be removed at a Meeting of Shareholders unless the
notice of such Meeting shall state that a purpose of the Meeting is to vote upon
the removal of one or more Directors named in the notice. Only the named
Director or Directors may be removed at such Meeting.
(b) If less than the entire Board of Directors is to be removed, no
Director may be removed, with or without cause, if the votes cast against his or
her removal would be sufficient to elect him or her if then cumulatively voted
at an election of the entire Board of Directors. [BCA Section 8.35]
Section 3.10 Compensation. Except as otherwise provided in any written
agreement and except as otherwise set forth below, 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 services to the
Corporation as Directors, Officers or otherwise. [BCA Section 8.05(b)] By
resolution of the Board of Directors, the Directors may be paid their expenses,
if any, of attendance at each Meeting of the Board of Directors. In the event
the Internal Revenue Service shall determine any such compensation paid to a
Director to be unreasonable or excessive, such Director must repay to the
Corporation the excess over what is determined to be reasonable compensation,
with interest on such excess at the rate of nine percent (9%) per annum, within
ninety (90) days after notice from the Corporation.
Section 3.11 Presumption of Assent. A Director of the Corporation who is
present at a Meeting of the Board of Directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his or her dissent shall be entered in the minutes of the Meeting
or unless he or she shall file his or her written dissent to such action with
the person acting as the Secretary of the Meeting before the adjournment thereof
or shall forward such dissent by registered or certified mail to the Secretary
of the Corporation immediately after the adjournment of the Meeting. Such right
to dissent shall not apply to a Director who voted in favor of such action.
[BCA Section 8.65(b)]
Section 3.12 Informal Action By Directors. Unless specifically prohibited
by the Articles of Incorporation or by these By-Laws, any action required to be
taken at a Meeting of the Board of Directors, or any other action which may be
taken at a Meeting of the Board of Directors or of a Committee thereof, may be
taken without a Meeting if a consent in writing, setting forth the action so
taken, is signed by all the Directors entitled to vote with respect to the
subject matter thereof, or by all the members of such Committee, as the case may
be. The consent shall be evidenced by one or more written approvals, each of
which sets forth the action taken and bears the signature of one or more
Directors. All the approvals evidencing the consent shall be delivered to the
Secretary to be filed in the corporate records. The action taken shall be
effective when all the Directors have approved the consent unless the consent
specifies a
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different effective date. Any such consent signed by all the Directors or all
the members of a Committee shall have the same effect as a unanimous vote.
[BCA Section 8.45]
Section 3.13 Participation By Conference Telephone. Members of the Board
of Directors or of any Committee of the Board of Directors may participate in
and act at any Meeting of the Board of Directors or any Committee through the
use of a conference telephone or other 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. [BCA Section 8.15(d)]
Section 3.14 Committees. A majority of the Directors may create one or
more Committees and appoint members of the Board to serve on such Committee or
Committees. Each Committee shall two or more members, who serve at the pleasure
of the Board of Directors.
Unless the appointment by the Board of Directors requires a greater
number, a majority of any Committee shall constitute a quorum and a majority of
a quorum is necessary for Committee action. A Committee may act by unanimous
consent in writing without a meeting and, subject to the provisions of these
By-Laws or action by the Board of Directors, such Committee, by majority vote
of its members, shall determine the time and place of meetings and the notice
required therefor.
To the extent specified by the Board of Directors, each Committee may
exercise the authority of the Board of Directors under Section 3.1 of these
By-Laws; provided, however, that a Committee may not:
(a) authorize distributions;
(b) approve or recommend to Shareholders any act which is required to be
approved by Shareholders;
(c) fill vacancies on the Board of Directors or on any of its Committees;
(d) elect or remove Officers or fix the compensation of any member of the
Committee;
(e) adopt, amend or repeal these By-Laws;
(f) approve a plan of merger not requiring Shareholder approval;
(g) authorize or approve reacquisition of shares, except according to a
general formula or method prescribed by the Board of Directors;
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(h) authorize or approve the issuance or sale, or contract for sale, of
shares or determine the designation and relative rights, preferences and
limitations of a series of shares, except that the Board of Directors may direct
a Committee to fix the specific terms of the issuance or sale or contract for
sale or the number of shares to be allocated to particular employees under an
employee benefit plan; or
(i) amend, alter, repeal or take action inconsistent with any resolution or
action of the Board of Directors when the resolution or action of the Board of
Directors provides by its terms that it shall not be amended, altered or
repealed by action of a Committee. [BCA Section 8.40]
Section 3.15 Director Conflict of Interest. If a transaction is fair to
the Corporation at the time it is authorized, approved or ratified, the fact
that a Director of the Corporation is directly or indirectly a party to the
transaction is not grounds for invalidating the transaction.
In a proceeding contesting the validity of a transaction described in the
preceding paragraph, the person asserting validity has the burden of proving
fairness unless:
(1) the material facts of the transaction and the Director's interest or
relationship were disclosed or known to the Board of Directors or a Committee
of the Board of Directors and the Board of Directors or Committee authorized,
approved or ratified the transaction by the affirmative votes of a majority of
disinterested Directors, even though the disinterested Directors be less than a
quorum; or
(2) the material facts of the transaction and the Director's interest or
relationship were disclosed or known to the Shareholders entitled to vote and
they authorized, approved or ratified the transaction without counting the vote
of any Shareholder who was an interested Director.
The presence of the Director, who is directly or indirectly a party to the
transaction described in the first paragraph of this section, or a Director who
is otherwise not disinterested, may be counted in determining whether a quorum
is present but may not be counted when the Board of Directors or a Committee of
the Board of Directors takes action on the transaction.
A Director is "indirectly" a party to a transaction if the other party to
the transaction is an entity in which the Director has a material financial
interest or of which the Director is an Officer, Director or General Partner.
[BCA Section 8.60]
Article 4
OFFICERS
Section 4.1 Number. The Officers of the Corporation shall be a Chairman of
the Board of Directors, a President, one or more Vice Presidents (the number
thereof to be determined by
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the Board of Directors), a Secretary, and a Treasurer, and such Assistant
Secretaries, Assistant Treasurers 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. All Officers and agents of the Corporation shall have such express
authority and perform such duties in the management of the property and affairs
of the Corporation as may be provided herein, or as may be determined by
resolution of the Board of Directors not inconsistent with these By-Laws, and
such implied authority as is recognized by the common law from time to time.
[BCA Section 8.50]
Section 4.2 Election and Term of Office. The Officers of the Corporation
shall be elected by the Board of Directors at the first Meeting of the Board of
Directors and thereafter at each Annual Meeting of the Board of Directors. The
Board of Directors may create and fill new offices at Annual or Special
Meetings. If the election of Officers shall not be held at such Meeting, such
election shall be held as soon thereafter as is convenient. Each Officer shall
hold office until his or her successor shall have been duly elected and shall
have qualified or until his or her death or until he or she 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.
[BCA Section 8.50]
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. [BCA Section 8.55]
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.
Section 4.5 The Chairman of the Board. The Chairman of the Board of
Directors shall be the chief executive officer of the Corporation and, subject
to the Board of Directors, shall be in general charge of the affairs of the
Corporation. The Chairman of the Board shall preside at all meetings of the
shareholders 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 and
the Board itself, have general charge of the business and affairs of the
Corporation. He shall keep the Board of Directors and its Chairman fully
informed and shall freely consult with 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 on behalf
of the Corporation, 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 to the President alone, or
shall
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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. [BCA Section 8.50]
Section 4.7 The Vice-Presidents. In the absence of the President or in the
event of his or her 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 or her by the President
or by the Board of Directors. [BCA Section 8.50]
Section 4.8 The Secretary. The Secretary shall: (a) keep, or supervise
and be responsible for the keeping of, the minutes and records of all Meetings
and official actions of the Shareholders and of the Board of Directors, and any
Committees of the Board of Directors in one or more books provided for that
purpose; (b) see that all notices of such Meetings are duly given or waivers of
notice obtained 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 issuance 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 Shareholder which shall be furnished
to the Secretary by such Shareholder; (e) sign with the President, or a Vice
President, certificates for shares of the Corporation, the issuance of which
shall have been authorized by resolution of the Board of Directors; (f) have
general charge of the stock transfer books and records of the Corporation; (g)
have the authority to certify the By-Laws, resolutions of the Board of Directors
and Committees thereof, and other documents of the Corporation as true and
correct copies thereof; and (h) 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 or her by the President or by the Board of Directors. [BCA Section 8.50]
Section 4.9 The Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his or her duties in
sum and with such surety or sureties as the Board of Directors shall determine.
He or she 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 as shall be selected in accordance with the provisions of
Article 6 of these By-Laws; and (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 or her by the President or by the Board of Directors. [BCA
Section 8.50]
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Section 4.10 Assistant Secretaries and Assistant Treasurers. 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
issuance of which shall have been authorized by a resolution of the Board of
Directors. 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 and Assistant Treasurers, in general, shall perform such
duties and exercise such authority as shall be assigned or granted to them by
the Secretary or the Treasurer, respectively, or by the President or the Board
of Directors. [BCA Section 8.50]
Section 4.11 Salaries. Except as otherwise provided in any written
employment agreement duly executed on behalf of the Corporation and except as
otherwise set forth below, the compensation (including salaries and benefits) of
the Officers shall be fixed from time to time by resolution of the Board of
Directors and no Officer shall be prevented from receiving such salary by reason
of the fact that he or she is also a Director of the Corporation. [BCA Section
8.50] In the event the Internal Revenue Service shall determine any such
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 to be reasonable compensation, with interest on such
excess at the rate of nine percent (9%) per annum, within ninety (90) days after
notice from the Corporation.
Article 5
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS; INSURANCE
Section 5.1 Actions Other Than Actions By or in the Right of the
Corporation. The Corporation shall indemnify any of its Directors or Officers
and may indemnify any of its employees and agents 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
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she or it is or was a Director, Officer, employee or agent of
the Corporation, or who is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding, if
such person acted in good faith and in a manner he or she or it reasonably
believed to be in, or not opposed to, the best interests of the Corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her or its conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he or she or it
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reasonably believed to be in, or not opposed to, the best interests of the
Corporation or, with respect to any criminal action or proceeding, that the
person had reasonable cause to believe that his or her or its conduct was
unlawful. [BCA Section 8.75(c)]
Section 5.2 Actions By or in the Right of the Corporation . The
Corporation may indemnify any person who was or is a party, or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person 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, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit, if such person acted in good faith and in
a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Corporation, provided that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the Corporation, unless, and only to the extent that, the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability, but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. [BCA Section 8.75(b)]
Section 5.3 Indemnification in Event of Successful Defense. To the extent
that a Director, Officer, employee or agent of the Corporation has been
successful, on the merits or otherwise, in the defense of any action, suit or
proceeding referred to in Sections 5.1 or 5.2, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith. [BCA Section 8.75(c)]
Section 5.4 Procedures for Indemnification. Any indemnification under
Sections 5.1 and 5.2 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case, upon a determination that
indemnification of the Director, Officer, employee or agent is proper in the
circumstances because he or she or it has met the applicable standard of conduct
set forth in said Sections. Such determination shall be made (a) by the Board
of Directors by a majority vote of a quorum consisting of Directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or even if obtainable, if a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (c) by the
Shareholders. [BCA, Section 8.75(d)]
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding, as authorized by the Board of Directors in the
specific case, upon receipt of a written undertaking by or on behalf of the
Director, Officer, employee or agent to repay such amount unless it shall
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ultimately be determined that he or she or it is entitled to be indemnified by
the Corporation as authorized in this Article 5. [BCA Section 8.75(e)]
The indemnification provided by this Article 5 shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any By-Law, agreement, vote of Shareholders or disinterested
Directors, or otherwise, both as to action in his or her or its official
capacity and as to action in another capacity while holding such Office, and
shall continue as to a person who has ceased to be a Director, Officer, employee
or agent, and shall inure to the benefit of the heirs, executors and
administrators of such a person. [BCA Section 8.75(f)]
If the Corporation has paid indemnity or has advanced expenses to a
Director, Officer, employee or agent, the Corporation shall report the
indemnification or advance in writing to the Shareholders with or before the
notice of the next Shareholders' Meeting. [BCA Section 8.75(h)]
For purposes of this Article 5, references to the "Corporation" shall
include, in addition to the surviving corporation, any merging corporation
(including any corporation having merged with a merging corporation) absorbed in
a merger which, if its separate existence had continued, would have had the
power and authority to indemnify its Directors, Officers, and employees or
agents, so that any person who was a director, officer, employee or agent of
such merging corporation, or was serving at the request of such merging
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 5 with respect to the surviving
corporation as such person would have with respect to such merging corporation
if its separate existence had continued. [BCA Section 8.75(i)]
For purposes of this Article 5, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an 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. A person who acted in good faith and in a manner he or she or it
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interest of the Corporation" as referred to in
this Article 5. [BCA Section 8.75(j)]
Section 5.5 Indemnity Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, Officer, employee or
agent of the Corporation, or who is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of his or her status as such, whether or not the Corporation
would have
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the power to indemnify such person against such liability under the provisions
of this Article 5 or under the provisions of Section 8.75 of the Illinois
Business Corporation Act of 1983. [BCA Section 8.75(g)]
Article 6
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 6.1 Contracts. The Board of Directors may expressly authorize any
Officer or Officers and agent or agents of the Corporation to enter into any
contract or execute and deliver any instrument in the name and on behalf of the
Corporation, and such authority may be general or confined to specific
instances. [BCA Section 8.50]
Section 6.2 Loans. All loans contracted on behalf of the Corporation and
all evidence of indebtedness issued in the Corporation's name shall be
authorized by resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 6.3 Pledges of Property and Assets. The pledge of all, or
substantially all, the property and assets of the Corporation in the usual and
regular course of business may be authorized by the Board of Directors upon such
terms and conditions as the Board of Directors deems necessary or desirable,
without authorization or consent of the Shareholders of the Corporation. [BCA
Section 11.55]
Section 6.4 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 6.5 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.
Article 7
SHARES AND THEIR TRANSFER
Section 7.1 Consideration for Shares. Shares may be issued for such
consideration as shall be authorized from time to time by the Board of Directors
through action which establishes a price in cash or other consideration, or
both, or a minimum price or a general formula or method by which the price can
be determined. Upon authorization by the Board of Directors, the Corporation
may issue its own shares in exchange for or in conversion of its outstanding
shares, or may distribute its own shares pro rata to its Shareholders or the
Shareholders of one
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or more classes or series to effectuate dividends or splits, and any such
transactions shall not require consideration; provided that no such issuance of
shares of any class or series shall be made to the holders of shares of any
other class or series unless it is either expressly provided for in the Articles
of Incorporation or authorized by an affirmative vote of the holders of at least
a majority of the outstanding shares of the class or series in which the
distribution is to be made. [BCA Section 6.25]
Section 7.2 Payment for Shares. The consideration for the issuance of
shares shall be paid, in whole or in part, in money, in other property, tangible
or intangible, or in labor or services actually performed for the Corporation,
as determined by the Board of Directors. When payment of the consideration for
which shares are to be issued shall have been received by the Corporation, such
shares shall be deemed to be fully paid and non-assessable. In the absence of
actual fraud in the transaction, and subject to the provisions of the Business
Corporation Act of 1983, the judgment of the Board of Directors or the
Shareholders, as the case may be, as to the value of the consideration received
for shares shall be conclusive. [BCA Section 6.30]
Section 7.3 Shares Represented by Certificates. Except as otherwise
provided pursuant to this Article 7, the issued shares of the Corporation shall
be represented by certificates. Certificates shall be signed by the appropriate
corporate Officers and may be sealed with the seal, or a facsimile of the seal,
of the Corporation. In case the seal of the Corporation is changed after the
certificate is sealed with the seal or a facsimile of the seal of the
Corporation, but before it is issued, the certificate may be issued by the
Corporation with the same effect as if the seal had not been changed. If a
certificate is countersigned by a transfer agent or registrar, other than the
Corporation itself or its employee, any other signatures or countersignatures on
the certificate may be facsimiles. In case any Officer of the Corporation, or
any officer or employee of the transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon, such certificate ceases to be an
Officer of the Corporation, or an officer or employee of the transfer agent or
registrar, before such certificate is issued, the certificate may be issued by
the Corporation with the same effect as if the Officer of the Corporation, or
the officer or employee of the transfer agent or registrar, had not ceased to be
such at the date of its issue.
Every certificate representing shares issued by the Corporation at a time
when the Corporation is authorized to issue shares of more than one class shall
set forth upon the face or back of the certificate a full summary or statement
of all of the designations, preferences, qualifications, limitations,
restrictions and special or relative rights of the shares of each class
authorized to be issued, and, if the Corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined, and the authority of the Board of Directors to fix and
determine the relative rights and preferences of subsequent series. Such
statement may be omitted from the certificate if it shall be set forth upon the
face or back of the
Page 16
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SELFIX SHUTTERS, INC. BY-LAWS
certificate that such statement, in full, will be furnished by the Corporation
to any Shareholder upon request and without charge.
Each certificate representing shares shall also state:
(a) That the Corporation is organized under the laws of Illinois;
(b) The name of the person to whom issued; and
(c) The number and class of shares, and the designation of the series, if
any, which such certificate represents.
No certificate shall be issued for any share until such share is fully
paid. [BCA Section 6.35]
Section 7.4 Uncertificated Shares. The Board of Directors of the
Corporation may provide by resolution that some or all of any or all classes and
series of its shares shall be uncertificated shares, provided that such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Within a reasonable time after
the issuance or transfer of uncertificated shares, the Corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this Article 7.
Except as otherwise expressly provided by law, the rights and obligations of the
holders of uncertificated shares and the rights and obligations of holders of
certificates representing shares of the same class and series shall be
identical. [BCA Section 6.35]
Article 8
FISCAL YEAR
Except as the Board of Directors of the Corporation may otherwise provide
by resolution duly adopted pursuant to the authority granted hereby, the fiscal
year of the Corporation shall begin on the first day of June in each year and
end on the last day of May in each year.
Article 9
DIVIDENDS
The Board of Directors may from time to time declare or effect, and the
Corporation may pay or make dividends on its outstanding shares or other
distributions to Shareholders, including without limitation purchases of shares
of the Corporation, subject in each case to any and all terms, conditions,
preferences and restrictions provided by law, by the Articles of Incorporation
and by any binding contract or instrument duly executed on behalf of the
Corporation. [BCA Sections 9.05, 9.10]
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SELFIX SHUTTERS, INC. BY-LAWS
Article 10
SEAL
The Board of Directors may provide a corporate seal which shall be in the
form of a circle and shall have inscribed thereon the name of the Corporation
and the words "Corporate Seal, Illinois." [BCA Section 3.10]
Article 11
WAIVER OF NOTICE
Whenever any notice whatever is required to be given to any Shareholder or
Director of the Corporation under the provisions of these By-Laws or under the
provisions of the Articles of Incorporation or under the Illinois Business
Corporation Act of 1983, 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. Attendance at
any Meeting shall constitute waiver of notice thereof unless the person at the
Meeting objects to the holding of the Meeting because proper notice was not
given. [BCA Section 7.20]
Article 12
AMENDMENTS TO THE BY-LAWS
The By-Laws of the Corporation may be made, altered, amended or repealed by
the Shareholders or the Board of Directors of the Corporation, but, if such
By-Law expressly so provides, no By-Law adopted by the Shareholders may be
altered, amended or repealed by the Board of Directors. These By-Laws may be
altered or amended to contain any provisions for the regulation and management
of the affairs of the Corporation not inconsistent with law or with the Articles
of Incorporation. [BCA Section 2.25]
Article 13
STATUTORY REFERENCES
The statutory references in these By-Laws to the "Business Corporation Act
of 1983" refer, except where the context otherwise requires, to the Illinois
Business Corporation Act of 1983, as amended from time to time. The citations
to sections of the BCA appearing in brackets throughout the text of these
By-Laws are for convenience of reference only, are not made a part hereof, shall
not be construed as incorporating the referenced provisions of the law into
these By-Laws and shall not be deemed in any way to alter, affect or qualify the
meaning or effect of these By-Laws as written and adopted.
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<PAGE> 1
Exhibit 4.1.1
============================================================
HOME PRODUCTS INTERNATIONAL, INC.,
THE SUBSIDIARY GUARANTORS (as defined herein),
and
LASALLE NATIONAL BANK,
as Trustee
9 5/8% Senior Subordinated Notes due 2008
=====================
INDENTURE
Dated as of May 14, 1998
====================
=============================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
Definitions and Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.3. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.4. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II
The Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.1. Form, Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.4. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.5. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.7. Form of Certificate to be Delivered in Connection with
Transfers to Institutional Accredited Investors . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.8. Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.10. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.11. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.12. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.13. Payment of Interest; Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.14. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.15. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.1. Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.2. SEC Reports and Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.3. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.4. Limitation on Layering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.5. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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SECTION 3.6. Limitation on Restrictions on Distributions from
Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.7. Limitation on Sales of Assets and Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . 41
SECTION 3.8. Limitation on Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 3.9. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3.10. Limitation on Capital Stock of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . 47
SECTION 3.11. Future Subsidiary Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.12. Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.13. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.14. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.15. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 3.16. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 3.17. Further Instruments and Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE IV
Successor Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.1. Merger and Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE V
Redemption of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.1. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.2. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.3. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.4. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 5.5. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.6. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.7. Notes Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 5.8. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VI
Defaults and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.7. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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SECTION 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE VII
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.6. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.9. Successor Trustee by Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VIII
Discharge of Indenture; Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.1. Discharge of Liability on Securities; Defeasance . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.2. Conditions to Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.3. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.4. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 8.5. Indemnity for U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.6. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE IX
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.1. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.2. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.3. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.4. Revocation and Effect of Consents and Waivers . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.5. Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.6. Trustee To Sign Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
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ARTICLE X
Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.1. Agreement To Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.2. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.3. Default on Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.4. Acceleration of Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.5. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.6. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.7. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.8. Subordination May Not Be Impaired by Company . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.9. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.10. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.11. Article X Not To Prevent Events of Default or
Limit Right To Accelerate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.12. Trust Moneys Not Subordinated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.14. Trustee To Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . 73
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XI
Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.1. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.2. Limitation on Liability; Termination, Release and Discharge . . . . . . . . . . . . . . . . 75
SECTION 11.3. Right of Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 11.4. No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE XII
Subordination of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 12.1. Agreement To Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 12.2. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 12.3. Default on Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 12.4. Acceleration of Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 12.5. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 12.6. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 12.7. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.8. Subordination May Not Be Impaired by Subsidiary Guarantor . . . . . . . . . . . . . . . . . 79
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SECTION 12.9. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.10. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 12.11. Article XII Not To Prevent Events of Default or
Limit Right To Accelerate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.12. Trust Moneys Not Subordinated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.14. Trustee To Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 12.15. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . 80
SECTION 12.16. Reliance on Subordination Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE XIII
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.1. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 13.3. Communication by Holders with other Holders . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13.4. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13.5. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 13.6. When Securities Disregarded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.7. Rules by Trustee, Paying Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.8. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.10. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.12. Multiple Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.13. Variable Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.14. Qualification of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 13.15. Table of Contents; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
</TABLE>
v
<PAGE> 7
EXHIBIT A Form of the Initial Security
EXHIBIT B Form of the Exchange Security
EXHIBIT C Form of Subsidiary Guarantee
vi
<PAGE> 8
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2; 3.10; 13.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 13.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.6
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1
</TABLE>
N.A. means Not Applicable.
- --------------------
Note: This Cross-Reference Table shall not, for any purpose, be
deemed to be part of the Indenture.
vii
<PAGE> 9
INDENTURE dated as of May 14, 1998, among HOME PRODUCTS
INTERNATIONAL, INC., a Delaware corporation (the "Company"), THE SUBSIDIARY
GUARANTORS (as defined) and LASALLE NATIONAL BANK (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's 9
5/8% Senior Subordinated Notes due 2008 (the "Initial Securities") and, if and
when issued in exchange for Initial Securities as provided in the Exchange and
Registration Rights Agreement (as hereinafter defined), the Company's 9 5/8%
Senior Subordinated Notes due 2008 (the "Exchange Securities" and, together
with the Initial Securities, the "Securities"):
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.
"Additional Assets" means (i) any property or assets (other
than Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or a Restricted Subsidiary of the Company; or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary of the Company; provided, however, that, in the case
of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a
Related Business.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Disposition" means any sale, lease, transfer, issuance
or other disposition (or series of related sales, leases, transfers, issuances
or dispositions that are part of a common plan) of shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Restricted Subsidiaries (including
any disposition by means of a merger, consolidation or similar transaction)
other than (i) a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly-Owned Subsidiary, (ii) the
sale of Cash Equivalents in the ordinary course of business, (iii) a
disposition of inventory in the ordinary course of business, (iv) a disposition
of obsolete or worn out equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Restricted Subsidiaries and that
is disposed of in each case in the ordinary course of business, (v) the sale,
discount or factoring (with or without recourse on commercially reasonable
terms) of accounts receivable arising in the ordinary course of business, (vi)
transactions permitted under Section 4.1 of this Indenture and (vii) for
purposes
<PAGE> 10
2
of Section 3.7 of this Indenture only, a disposition that constitutes a
Restricted Payment permitted under Section 3.5 of this Indenture.
"Attributable Indebtedness" in respect of a sale/leaseback
transaction means, as of the time of determination, the present value
(discounted at the interest rate assumed in making calculations in accordance
with GAAP) of the total obligations of the lessee for rental payments during
the remaining term of the lease included in such sale/leaseback transaction
(including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Indebtedness or Preferred Stock multiplied by the amount of such payment by
(ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether
outstanding on the Issue Date or thereafter Incurred, payable by the Company or
any Subsidiary under or in respect of the Senior Credit Agreement and any
related notes, collateral documents, letters of credit and guarantees or any
Interest Rate Agreement entered into with a Lender or an Affiliate of a Lender
(as defined in the Senior Credit Agreement) in connection with the Senior
Credit Agreement, including principal, premium, if any, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company at the rate specified therein whether or
not a claim for post filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof.
"Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
"Borrowing Base" means, as of any date, an amount equal to the
sum of (i) 40% of the aggregate book value of inventory and (ii) 75% of the
aggregate book value of all accounts receivable of the Company and its
Restricted Subsidiaries on a consolidated basis, as determined in accordance
with GAAP consistently applied. To the extent that information is not available
as to the amount of inventory or accounts receivable as of a specific date, the
Company shall use the most recent available information for purposes of
calculating the Borrowing Base.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banking institutions are authorized or required
by law to close in New York City.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
<PAGE> 11
3
"Capitalized Lease Obligation" means an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized amount of
such obligation determined in accordance with GAAP, and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date such lease may be terminated without
penalty.
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof, having maturities of not more than one year from the
date of acquisition; (ii) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (iii) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances
having maturities of not more than one year from the date of acquisition
thereof issued by any commercial bank the long-term debt of which is rated at
the time of acquisition thereof at least "A" or the equivalent thereof by
Standard & Poor's Rating Group, or "A" or the equivalent thereof by Moody's
Investors Service, Inc., and having capital and surplus in excess of $250
million (or foreign currency equivalent thereof); (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (i), (ii) and (iii) entered into with any bank meeting the
qualifications specified in clause (iii) above; (v) commercial paper rated at
the time of acquisition thereof at least "A-2" or the equivalent thereof by
Standard & Poor's Rating Group or "P-2" or the equivalent thereof by Moody's
Investors Service, Inc., or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease
publishing ratings of investments, and in either case maturing within 270 days
after the date of acquisition thereof; and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses
(i) through (v) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Home Products International, Inc. or a
successor.
"Consolidated Coverage Ratio" as of any date of determination
means, with respect to any Person, the ratio of (i) the aggregate amount of
Consolidated EBITDA of such Person for the period of the most recent four
consecutive fiscal quarters for which financial statements are available ending
prior to the date of such determination to (ii) Consolidated Interest Expense
for such four fiscal quarters; provided, however, that (A) If the Company or
any Restricted Subsidiary (1) has Incurred any Indebtedness since the beginning
of such period that remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period (except that in making such computation, the
amount of Indebtedness under any revolving credit facility outstanding on the
date of such calculation
<PAGE> 12
4
shall be computed based on (a) the average daily balance of such Indebtedness
during such four fiscal quarters or such shorter period for which such facility
was outstanding or (b) if such facility was created after the end of such four
fiscal quarters, the average daily balance of such Indebtedness during the
period from the date of creation of such facility to the date of such
calculation) and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, or (2) has
repaid, repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of the period that is no longer outstanding on such date of
determination or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves a discharge of Indebtedness (in each case
other than Indebtedness incurred under any revolving credit facility unless
such Indebtedness has been permanently repaid), Consolidated EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such discharge of such Indebtedness, including
with the proceeds of such new Indebtedness, as if such discharge had occurred
on the first day of such period, (B) if since the beginning of such period the
Company or any Restricted Subsidiary shall have made any Asset Disposition or
if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Asset Disposition, the Consolidated EBITDA for such period
shall be reduced by an amount equal to the Consolidated EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period or increased by an amount equal to the Consolidated
EBITDA (if negative) directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (C) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business,
Consolidated EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first
day of such period and (D) if since the beginning of such period any Person
(that subsequently became a Restricted Subsidiary or was merged with or into
the Company or any Restricted Subsidiary since the beginning of such period)
shall have made any Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (B) or (C)
above if made by the Company or a Restricted Subsidiary during such period,
Consolidated EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition
or Investment or acquisition occurred on the first day of such period. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest
<PAGE> 13
5
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the Consolidated
Interest Expense on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (any Interest Rate Agreement applicable to such Indebtedness for a
period (not in excess of 12 months) corresponding to the remaining term of such
Interest Rate Agreement as of the date of determination).
"Consolidated EBITDA" for any period means the Consolidated
Net Income for such period, plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) income tax expense, (ii)
Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization of
intangibles and (v) other non-cash charges reducing Consolidated Net Income
(excluding any such non-cash charge to the extent it represents an accrual of
or reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period not included in the calculation).
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the interest, depreciation and amortization of, a Restricted
Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated EBITDA of such Person only to the extent (and in the same
proportion) that the net income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person.
"Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its Consolidated Subsidiaries, plus,
to the extent not included in such interest expense, (i) interest expense
attributable to Capitalized Lease Obligations and the interest portion of rent
expense associated with Attributable Indebtedness in respect of the relevant
lease giving rise thereto, determined as if such lease were a capitalized lease
in accordance with GAAP, (ii) amortization of debt discount and debt issuance
cost (other than costs incurred in connection with the Refinancing), (iii)
capitalized interest and accrued interest, (iv) non-cash interest expense, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) interest actually paid by the
Company or any such Subsidiary under any Guarantee of Indebtedness or other
obligation of any other Person, (vii) net costs associated with Hedging
Obligations (including amortization of fees), (viii) dividends in respect of
all Disqualified Stock of the Company and all Preferred Stock of Subsidiaries,
in each case, held by Persons other than the Company or a Wholly-Owned
Subsidiary and (ix) the cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Company) in
connection with Indebtedness Incurred by such plan or trust; provided, however,
that there shall be excluded therefrom any such interest expense of any
Unrestricted Subsidiary to the extent the related Indebtedness is not
Guaranteed or paid by the Company or any Restricted Subsidiary. For purposes of
the foregoing, total interest expense shall be determined after giving effect
to any net payments made or received by the Company and its Subsidiaries with
respect to Interest Rate Agreements. Notwithstanding the foregoing, the
Consolidated Interest Expense with respect to any Restricted Subsidiary of the
Company that was not a Wholly-Owned Subsidiary shall be
<PAGE> 14
6
included only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its Consolidated Subsidiaries; provided,
however, that there shall not be included in such Consolidated Net Income: (i)
any net income (loss) of any Person if such Person is not a Restricted
Subsidiary, except that (A) subject to the limitations contained in (iv) below,
the Company's equity in the net income of any such Person for such period shall
be included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net Income to the
extent such loss has been funded with cash from the Company or a Restricted
Subsidiary; (ii) any net income (loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; (iii) any net income (loss) of any Restricted
Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the limitations contained in (iv) below the Company's equity in the
net income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution that could have been
made to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period will be included in determining such Consolidated
Net Income; (iv) any gain (loss) realized upon the sale or other disposition of
any property, plant, equipment or other asset of the Company or its
consolidated Subsidiaries which is not sold or otherwise disposed of in the
ordinary course of business and any gain (loss) realized upon the sale or other
disposition of any Capital Stock of any Person; (v) any extraordinary gain or
loss and (vi) the cumulative effect of a change in accounting principles.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning set forth in
Section 2.13.
"DTC" means The Depository Trust Company, its nominees and
their respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
<PAGE> 15
7
"Designated Senior Indebtedness" means (i) the Bank
Indebtedness in the case of the Company and (ii) any other Senior Indebtedness
which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $25 million and is specifically
designated in the instrument evidencing or governing such Senior Indebtedness
as "Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock of such Person which by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable) or upon
the happening of any event (i) matures or is mandatorily redeemable pursuant to
a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding capital stock which is
convertible or exchangeable solely at the option of the Company or a Restricted
Subsidiary) or (iii) is redeemable at the option of the holder thereof, in
whole or in part, in each case on or prior to the Stated Maturity of the
Securities, provided, that only the portion of Capital Stock which so matures
or is mandatorily redeemable, is so convertible or exchangeable or is so
redeemable at the option of the holder thereof prior to such Stated Maturity
shall be deemed to be Disqualified Stock.
"Equity Offering" means an offering for cash by the Company of
its common stock, or options, warrants or rights with respect to its common
stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange and Registration Rights Agreement" means the
Exchange and Registration Rights Agreement, dated May 14, 1998, among the
Company, the Subsidiary Guarantors, Chase Securities Inc. and NationsBanc
Montgomery Securities LLC.
"Exchange Securities" means, if and when issued in exchange
for the Initial Securities as provided in the Exchange and Registration Rights
Agreement, the Company's 9 5/8% Senior Subordinated Notes due 2008.
"Fiscal Year" means a 52 or 53 week period ending on the last
Saturday in December.
"Foreign Subsidiary" means any Subsidiary that is not
organized under the laws of the United States of America or any state thereof
or the District of Columbia.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of this Indenture,
including those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations based on GAAP
contained in this Indenture shall be computed in conformity with GAAP.
<PAGE> 16
8
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means, with respect to a
Subsidiary Guarantor, the following obligations, whether outstanding on the
date of this Indenture or thereafter issued, without duplication: (i) any
Subsidiary Guarantee of the Bank Indebtedness by such Subsidiary Guarantor and
all other Subsidiary Guarantees by such Subsidiary Guarantor of Senior
Indebtedness of the Company or Guarantor Senior Indebtedness for any other
Subsidiary Guarantor; and (ii) all obligations consisting of the principal of
and premium, if any, and accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Subsidiary Guarantor regardless of whether post
filing interest is allowed in such proceeding) on, and fees and other amounts
owing in respect of, all other Indebtedness of the Subsidiary Guarantor,
unless, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is expressly provided that the obligations in
respect of such Indebtedness are not senior in right of payment to the
obligations of such Subsidiary Guarantor under the Subsidiary Guarantee;
provided, however, that Guarantor Senior Indebtedness shall not include (A) any
obligations of such Subsidiary Guarantor to another Subsidiary Guarantor or any
other Subsidiary of the Subsidiary Guarantor, (B) any liability for Federal,
state, local, foreign or other taxes owed or owing by such Subsidiary
Guarantor, (C) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities), (D) any Indebtedness of such
Subsidiary Guarantor that is expressly subordinate in right of payment to any
of the Indebtedness of such Subsidiary Guarantor, including any Guarantor
Senior Subordinated Indebtedness and Guarantor Subordinated Obligations of such
Subsidiary Guarantor or (E) any obligation with respect to Capital Stock.
"Guarantor Senior Subordinated Indebtedness" means with
respect to a Subsidiary Guarantor, the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee and any other Indebtedness of such Subsidiary
Guarantor (whether outstanding on the Issue Date or thereafter Incurred) that
specifically provides that such Indebtedness is to rank pari passu in right of
payment with the obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee and is not expressly subordinated by its terms in right of payment to
any Indebtedness of such Subsidiary Guarantor which is not Guarantor Senior
Indebtedness of such Subsidiary Guarantor.
<PAGE> 17
9
"Guarantor Subordinated Obligation" means, with respect to a
Subsidiary Guarantor, any Indebtedness of such Subsidiary Guarantor (whether
outstanding on the Issue Date or thereafter Incurred) which is expressly
subordinate in right of payment to the obligations of such Subsidiary Guarantor
under its Subsidiary Guarantee pursuant to a written agreement.
"Hedging Obligations" of any Person means the obligations of
such Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Incur" means issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
a Person existing at the time such person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary.
"Indebtedness" means, with respect to any Person on any date
of determination (without duplication), (i) the principal of and premium, if
any, in respect of indebtedness of such Person for borrowed money; (ii) the
principal of and premium, if any, in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto); (iv)
all obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except trade payables), which purchase price is due more
than six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services; (v) all
Capitalized Lease Obligations and all Attributable Indebtedness of such Person;
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary, any Preferred Stock (but excluding, in each case,
any accrued dividends); (vii) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person; provided, however, that the amount of such Indebtedness shall
be the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other Persons;
(viii) all Indebtedness of other Persons to the extent Guaranteed by such
Person; and (ix) to the extent not otherwise included in this definition, net
obligations of such Person under Currency Agreements and Interest Rate
Agreements (the amount of any such obligations to be equal at any time to the
net termination value of such agreement or arrangement giving rise to such
obligation that would be payable by such Person at such time). The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Initial Securities" means the Company's 9 5/8% Senior
Subordinated Notes due 2008 issued under this Indenture.
<PAGE> 18
10
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business) or other extension of credit (including by way of Guarantee or
similar arrangement, but excluding any debt or extension of credit represented
by a bank deposit other than a time deposit) or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by, such Person. For purposes of Section 3.5, (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in a Restricted
Subsidiary to be designated as an Unrestricted Subsidiary) of the fair market
value of the net assets of such Restricted Subsidiary of the Company at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(A) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (B) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so re-designated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors of
the Company.
"Issue Date" means the date on which the Initial Securities
are originally issued.
"Legal Holiday" has the meaning ascribed to it in Section
13.8.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received
in the form of assumption by the acquiring person of Indebtedness or other
obligations relating to the properties or assets that are the subject of such
Asset Disposition or received in any other noncash form) therefrom, in each
case net of (i) all legal, accounting, investment banking, title and recording
tax expenses, commissions and other fees and expenses Incurred, and all
Federal, state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien
upon, or other
<PAGE> 19
11
security agreement of any kind with respect to, such assets, or which must by
its terms, or in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and retained
by the Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
Incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"Non-U.S. Person" means a person who is not a U.S person, as
defined in Regulation S.
"Note Register" means the register of Securities, maintained
by the Trustee, pursuant to Section 2.3.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holders" means (i) directors and officers of the
Company on the Issue Date and (ii) Chase Venture Capital Associates, L.P. and
any Affiliate thereof.
"Permitted Investment" means an Investment by the Company or
any Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which
shall, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys
all or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) cash and Cash Equivalents; (iv) receivables owing to the Company or any
Restricted Subsidiary created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary trade
terms as the Company or any such Restricted Subsidiary deems reasonable under
the circumstances; (v) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for
<PAGE> 20
12
accounting purposes and that are made in the ordinary course of business; (vi)
loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) any Investment in an entity conducting a Related Business that is not a
Restricted Subsidiary; provided that the aggregate fair market value of all
Investments made pursuant to this clause (vii) (valued on the date each such
Investment was made and without giving effect to subsequent changes in value)
may not at any one time exceed $5 million; (viii) Investments in Selfix Europe,
L.L.C. or its Successors; provided that the aggregate fair market value of all
Investments made pursuant to this clause (viii) (valued on the date each such
Investment was made and without giving effect to subsequent changes in value)
may not at any one time exceed $3 million; (ix) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to the Company or any Restricted Subsidiary or in
satisfaction of judgments; (x) any Investment in securities or other assets
received in connection with Asset Dispositions made in accordance with the
provisions of Section 3.7; and (xi) Currency Agreements, Interest Rate
Agreements and related Hedging Obligations entered into in compliance with
Section 3.3 and hedging arrangements with respect to the purchase of raw
materials entered into in the ordinary course of business on customary terms
for bona fide hedging purposes.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Private Exchange Securities" shall have the meaning set forth
in the Exchange and Registration Rights Agreement.
A "Public Market" exists at any time with respect to the
common stock of the Company if (i) the common stock of the Company is then
registered with the Commission pursuant to Section 12(b) or 12(g) of the
Exchange Act and traded either on a national securities exchange or in the
National Association of Securities Dealers Automated Quotation System and (ii)
at least 15% of the total issued and outstanding common stock of the Company
has been distributed prior to such time by means of an effective registration
statement under the Securities Act.
"Purchase Money Indebtedness" of any Person means any
Indebtedness of such person to any seller or other person incurred to finance
the acquisition or construction of any asset (or, in each case, any interest
therein) acquired or constructed after the Issue Date which is related to a
Related Business of the Company and which is incurred concurrently with, or
within 180 days of, such acquisition or the completion of such construction
and, if secured, is secured only by the assets so financed.
<PAGE> 21
13
"QIB" means any "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act).
"Refinancing Indebtedness" means Indebtedness that is Incurred
to refund, refinance, replace, renew, repay, redeem, retire or extend
(including pursuant to any defeasance or discharge mechanism) (collectively,
"refinance", "refinances," and "refinanced" shall have a correlative meaning)
any Indebtedness existing on the date of this Indenture or Incurred in
compliance with this Indenture (including Indebtedness of the Company that
refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any
Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness,
provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being refinanced, (ii)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced, and (iii) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the sum of
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding (plus fees and expenses, including
any premium and defeasance costs) of the Indebtedness being refinanced.
"Registered Exchange Offer" shall have the meaning set forth
in the Exchange and Registration Rights Agreement.
"Related Business" means any business which is the same as or
related, ancillary or complementary to any of the businesses of the Company and
its Restricted Subsidiaries on the date of this Indenture.
"Representative" means any trustee, agent or representative
(if any) of an issue of Senior Indebtedness.
"Restricted Period" means the 40 consecutive days beginning on
and including the later of (A) the day on which the Initial Securities are
offered to persons other than distributors (as defined in Regulation S under
the Securities Act) and (B) the Issue Date.
"Restricted Securities Legend" means the Private Placement
Legend set forth in clause (A) of Section 2.1(c) or the Regulation S Legend set
forth in clause (B) of Section 2.1(c), as applicable.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company
secured by a Lien.
<PAGE> 22
14
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to the
Global Security (as appointed by DTC), or any successor Person thereto and
shall initially be the Trustee.
"Senior Credit Agreement" means (i) the Credit Agreement dated
as of May 14, 1998 among the Company, The Chase Manhattan Bank, as
Administrative Agent, and the lenders parties thereto from time to time, as the
same may be amended, supplemented or otherwise modified from time to time and
any guarantees issued thereunder and (ii) any renewal, extension, refunding,
restructuring, replacement or refinancing thereof (whether with the original
Administrative Agent and lenders or another administrative agent or agents or
other lenders and whether provided under the original Senior Credit Agreement
or any other credit or other agreement or indenture).
"Senior Indebtedness" means, whether outstanding on the Issue
Date or thereafter issued, created, incurred or assumed, the Bank Indebtedness
and all other Indebtedness of the Company, including accrued and unpaid
interest thereon (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company at the
rate specified in the documentation with respect thereto whether or not a claim
for post filing interest is allowed in such proceeding) and fees relating
thereto, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that the obligations in
respect of such Indebtedness are not superior in right of, or are subordinate
to, payment of the Securities; provided, however, that Senior Indebtedness will
not include (i) any obligation of the Company to any Subsidiary, (ii) any
liability for Federal, state, foreign, local or other taxes owed or owing by
the Company, (iii) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities), (iv) any Indebtedness, Guarantee or
obligation of the Company that is expressly subordinate or junior in right of
payment to any other Indebtedness, Guarantee or obligation of the Company,
including any Senior Subordinated Indebtedness and any Subordinated Obligations
or (v) any obligations in respect of Capital Stock.
"Senior Subordinated Indebtedness" means the Securities and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Securities in right of payment and
is not subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and
<PAGE> 23
15
payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency beyond the
control of the issuer unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
"Subsequent Series Securities" has the meaning ascribed to it
in Section 2.2.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person. Unless otherwise specified herein, each reference
to a Subsidiary shall refer to a Subsidiary of the Company.
"Subsidiary Guarantee" means, individually, any Guarantee of
payment of the Securities by a Subsidiary Guarantor pursuant to the terms of
this Indenture, and, collectively, all such Guarantees. Each such Subsidiary
Guarantee by any Restricted Subsidiary created or acquired by the Company after
the Issue Date (other than a Foreign Subsidiary) which Guarantees the Bank
Indebtedness or Incurs Indebtedness under paragraph (a) of Section 3.3 will be
in the form set forth in Exhibit C of this Indenture.
"Subsidiary Guarantor" means each Subsidiary of the Company in
existence on the Issue Date (Selfix, Inc., Seymour Housewares Corporation,
Shutters, Inc. and Tamor Corporation) and any Restricted Subsidiary created or
acquired by the Company after the Issue Date (other than a Foreign Subsidiary)
which Guarantees the Bank Indebtedness or Incurs Indebtedness under paragraph
(a) of Section 3.3.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as in effect on the date of this
Indenture.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" shall mean, when used with respect to the
Trustee, any officer within the corporate trust department of the Trustee,
including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such person's knowledge of and familiarity with
the particular subject and who shall have direct responsibility for the
administration of this Indenture.
<PAGE> 24
16
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness
of, or owns or holds any Lien on any property of, the Company or any Restricted
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if such
Subsidiary has consolidated assets greater than $10,000, then such designation
would be permitted under Section 3.5. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (i) the Company could Incur
$1.00 of additional Indebtedness pursuant to Section 3.3(a) and (ii) no Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the
Company, all of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or one or more Wholly-Owned Subsidiaries.
<PAGE> 25
17
SECTION 1.2. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -----------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8
"Agent Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(d)
"Authenticating Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"Blockage Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
"Change of Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
"Change of Control Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
"Change of Control Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
"Company Order" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
"covenant defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(b)
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"Definitive Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(e)
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
"Exchange Global Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Global Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
"Institutional Accredited Investor Global Note" . . . . . . . . . . . . . . . . . 2.1
"Institutional Accredited Investor Note" . . . . . . . . . . . . . . . . . . . . . 2.1
"legal defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1(b)
"Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
"Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
"pay the Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Payment Blockage Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
"Private Placement Legend" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Regulation S" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(a)
"Regulation S Certificate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Regulation S Global Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Regulation S Legend" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Regulation S Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Release Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Resale Restriction Termination Date" . . . . . . . . . . . . . . . . . . . . . . 2.6
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
"Rule 144A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
"Rule 144A Global Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Rule 144A Note" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Special Interest Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
"Special Record Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
"Subsequent Series Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
"Successor Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
</TABLE>
SECTION 1.3. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA which
are incorporated by reference in and made a part of this Indenture. The
following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
<PAGE> 26
18
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined in the TIA by reference to another statute or defined by SEC
rule have the meanings assigned to them by such definitions.
SECTION 1.4. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in
the plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to Secured Indebtedness merely by virtue of its
nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing or
other discount security at any date shall be the principal amount
thereof that would be shown on a balance sheet of the issuer dated
such date prepared in accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be
(i) the maximum liquidation value of such Preferred Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with
respect to such Preferred Stock, whichever is greater.
ARTICLE II
The Securities
SECTION 2.1. Form, Dating and Terms. (a) The Initial
Securities are being offered and sold by the Company pursuant to a Purchase
Agreement, dated May 7, 1998,
<PAGE> 27
19
among the Company, the Subsidiary Guarantors, Chase Securities Inc. and
NationsBanc Montgomery Securities LLC.
Initial Securities offered and sold to the qualified
institutional buyers (as defined in Rule 144A under the Securities Act ("Rule
144A")) in the United States of America (the "Rule 144A Note") will be issued
on the Issue Date in the form of a permanent global Security substantially in
the form of Exhibit A, which is hereby incorporated by reference and made a
part of this Indenture, together with appropriate legends as set forth in
Section 2.1(c) (the "Rule 144A Global Note"), deposited with the Trustee, as
custodian for DTC, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Rule 144A Global Note may be represented
by more than one certificate, if so required by DTC's rules regarding the
maximum principal amount to be represented by a single certificate. The
aggregate principal amount of the Rule 144A Global Note may from time to time
be increased or decreased by adjustments made on the records of the Trustee, as
custodian for DTC or its nominee, as hereinafter provided.
Initial Securities offered and sold outside the United States
of America ("Regulation S Note") in reliance on Regulation S will be issued on
the Issue Date in the form of a permanent global Security, without interest
coupons, substantially in the form set forth in Exhibit A, which is hereby
incorporated by reference and made a part of this Indenture, together with
appropriate legends as set forth in Section 2.1(c) (the "Regulation S Global
Note") deposited with the Trustee, as custodian for DTC, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The
Regulation S Global Note may be represented by more than one certificate, if so
required by DTC's rules regarding the maximum principal amount to be
represented by a single certificate. The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for DTC or its
nominee, as hereinafter provided.
Initial Securities resold to institutional "accredited
investors" (as defined in Rules 501(a)(1), (2), (3) and (7) under the
Securities Act) in the United States of America (the "Institutional Accredited
Investor Note") will be issued in the form of a permanent global Security
substantially in the form of Exhibit A, which is hereby incorporated by
reference and made a part of this Indenture, together with appropriate legends
as set forth in Section 2.1(c) (the "Institutional Accredited Investor Global
Note") deposited with the Trustee, as custodian for DTC, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The
Institutional Accredited Investor Global Note may be represented by more than
one certificate, if so required by DTC's rules regarding the maximum principal
amount to be represented by a single certificate. The aggregate principal
amount of the Institutional Accredited Investor Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for DTC or its nominee, as hereinafter provided.
Exchange Securities exchanged for interests in the Rule 144A
Note, the Regulation S Note and the Institutional Accredited Investor Note will
be issued in the form of a permanent global Security substantially in the form
of Exhibit B, which is hereby
<PAGE> 28
20
incorporated by reference and made a part of this Indenture, deposited with the
Trustee as hereinafter provided, with the appropriate legend set forth in
Section 2.1(c) (the "Exchange Global Note"). The Exchange Global Note may be
represented by more than one certificate, if so required by DTC's rules
regarding the maximum principal amount to be represented by a single
certificate.
The Rule 144A Global Note, the Regulation S Global Note, the
Exchange Global Note and the Institutional Accredited Investor Global Note are
sometimes collectively herein referred to as the "Global Securities."
The principal of (and premium, if any) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose pursuant to Section 2.3;
provided, however, that, at the option of the Company, each installment of
interest may be paid by (i) check mailed to addresses of the Persons entitled
thereto as such addresses shall appear on the Note Register or (ii) wire
transfer to an account located in the United States maintained by the payee.
The Private Exchange Securities shall be in the form of
Exhibit A. The Securities may have notations, legends or endorsements required
by law, stock exchange rule or usage, in addition to those set forth on
Exhibits A and B and in Section 2.1(c). The Company and the Trustee shall
approve the forms of the Securities and any notation, endorsement or legend on
them. Each Security shall be dated the date of its authentication. The terms
of the Securities set forth in Exhibit A and Exhibit B are part of the terms of
this Indenture and, to the extent applicable, the Company and the Trustee, by
their execution and delivery of this Indenture, expressly agree to be bound by
such terms.
(b) Denominations. The Securities shall be issuable only in
fully registered form, without coupons, and only in denominations of $1,000 and
any integral multiple thereof.
(c) Restrictive Legends. Unless and until (i) an Initial
Security is sold under an effective registration statement or (ii) an Initial
Security is exchanged for an Exchange Security in connection with an effective
registration statement, in each case pursuant to the Exchange and Registration
Rights Agreement, (A) such Rule 144A Global Note and the Institutional
Accredited Investor Global Note shall bear the following legend (the "Private
Placement Legend") on the face thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION UNLESS SUCH
<PAGE> 29
21
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, ON ITS
OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS
PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION
DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH
SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION
INVOLVING A MINIMUM PRINCIPAL AMOUNT OF $250,000 OF SECURITIES, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) AND (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE."; and
(B) the Regulation S Global Note shall bear the following
legend (the "Regulation S Legend") on the face thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED
<PAGE> 30
22
STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT
PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S
UNDER THE SECURITIES ACT ("REGULATION S"), (2) BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS
TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S,
(E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A TRANSACTION
INVOLVING A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM AND IN THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE
TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS
BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON WHICH THE
SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED
IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE ORIGINAL
OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED
STATES" AND "U.S. PERSON" HAVE THE
<PAGE> 31
23
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT."
The Global Securities, whether or not an Initial Security,
shall bear the following legend on the face thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW
YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF."
(d) Book-Entry Provisions. (i) This Section 2.1(d) shall
apply only to Global Securities deposited with the Trustee, as custodian for
DTC.
(ii) Each Global Security initially shall (x) be registered
in the name of DTC for such Global Security or the nominee of DTC, (y) be
delivered to the Trustee as custodian for DTC and (z) bear legends as set forth
in Section 2.1(c).
(iii) Members of, or participants in, DTC ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by DTC or by the Trustee as the custodian of DTC or under
such Global Security, and DTC may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Agent Members,
the operation of customary practices of DTC governing the exercise of the
rights of a holder of a beneficial interest in any Global Security.
<PAGE> 32
24
(iv) In connection with any transfer of a portion of the
beneficial interest in a Global Security pursuant to subsection (e) of this
Section to beneficial owners who are required to hold Definitive Securities,
the Security Trustee shall reflect on its books and records the date and a
decrease in the principal amount of such Global Security in an amount equal to
the principal amount of the beneficial interest in the Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Definitive Securities of like tenor and amount.
(v) In connection with the transfer of an entire Global
Security to beneficial owners pursuant to subsection (e) of this Section, such
Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by DTC in exchange for its
beneficial interest in such Global Security, an equal aggregate principal
amount of Definitive Securities of authorized denominations.
(e) Definitive Securities. Except as provided below, owners
of beneficial interests in Global Securities will not be entitled to receive
certificated Securities ("Definitive Securities"). If required to do so
pursuant to any applicable law or regulation, beneficial owners may obtain
Definitive Securities in exchange for their beneficial interests in a Global
Security upon written request in accordance with DTC's and the Registrar's
procedures. In addition, Definitive Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global
Security if (i) DTC notifies the Company that it is unwilling or unable to
continue as depositary for such Global Security or DTC ceases to be a clearing
agency registered under the Exchange Act, at a time when DTC is required to be
so registered in order to act as depositary, and in each case a successor
depositary is not appointed by the Company within 90 days of such notice or,
(ii) the Company executes and delivers to the Trustee and Registrar an
Officers' Certificate stating that such Global Security shall be so
exchangeable or (iii) an Event of Default has occurred and is continuing and
the Registrar has received a request from DTC.
(f) Any Definitive Security delivered in exchange for an
interest in a Global Security pursuant to Section 2.1(d)(iv) or (v) shall,
except as otherwise provided by Section 2.6(c), bear the applicable legend
regarding transfer restrictions applicable to the Definitive Security set forth
in Section 2.1(c).
(g) The registered holder of a Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Securities.
SECTION 2.2. Execution and Authentication. One Officer shall
sign the Securities for the Company by manual or facsimile signature. If an
Officer whose signature is on a Security no longer holds that office at the
time the Trustee authenticates the Security, the Security shall be valid
nevertheless.
<PAGE> 33
25
A Security shall not be valid until an authorized signatory of
the Trustee manually authenticates the Security. The signature of the Trustee
on a Security shall be conclusive evidence that such Security has been duly and
validly authenticated and issued under this Indenture.
At any time and from time to time after the execution and
delivery of this Indenture, the Trustee shall authenticate and make available
for delivery: (1) Initial Securities for original issue on the Issue Date in an
aggregate principal amount of $125.0 million and (2) Exchange Securities for
issue only in a Registered Exchange Offer pursuant to the Exchange and
Registration Rights Agreement, and only in exchange for Initial Securities of
an equal principal amount, and (3) additional series of notes which may be
offered subsequent to the Issue Date (the "Subsequent Series Securities") in an
aggregate principal amount not to exceed $125,000,000, in each case upon a
written order of the Company signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Company (the "Company
Order"). Such Company Order shall specify the amount of the Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities or
Exchange Securities. The aggregate principal amount of notes which may be
authenticated and delivered under this Indenture is limited to $250.0 million
outstanding except as provided in Section 2.9. No Subsequent Series
Securities may be authenticated and delivered in an aggregate principal amount
of less than $25,000,000. All Securities issued on the Issue Date and all
Subsequent Series Securities shall be identical in all respects other than
issue dates, the date from which interest accrues and any changes relating
thereto. Notwithstanding anything to the contrary contained in this Indenture,
all notes issued under this Indenture shall vote and consent together on all
matters as one class and no series of notes will have the right to vote or
consent as a separate class on any matter.
The Trustee may appoint an agent (the "Authenticating Agent")
reasonably acceptable to the Company to authenticate the Securities. Unless
limited by the terms of such appointment, any such Authenticating Agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by the
Authenticating Agent.
In case the Company or any Subsidiary Guarantor, pursuant to
Article IV, shall be consolidated or merged with or into any other Person or
shall convey, transfer, lease or otherwise dispose of its properties and assets
substantially as an entirety to any Person, and the successor Person resulting
from such consolidation, or surviving such merger, or into which the Company or
any Subsidiary Guarantor shall have been merged, or the Person which shall have
received a conveyance, transfer, lease or other disposition as aforesaid, shall
have executed an indenture supplemental hereto with the Trustee pursuant to
Article IV, any of the Securities authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Securities executed in the name of the successor Person with such changes
in phraseology and form as may be appropriate, but otherwise in substance of
like tenor as the Securities surrendered for such exchange and of like
principal amount; and the Trustee, upon Company Order of the successor Person,
shall authenticate and deliver
<PAGE> 34
26
Securities as specified in such order for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of
a successor Person pursuant to this Section 2.2 in exchange or substitution for
or upon registration of transfer of any Securities, such successor Person, at
the option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time outstanding for Securities authenticated
and delivered in such new name.
SECTION 2.3. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Company
shall cause each of the Registrar and the Paying Agent to maintain an office or
agency in the Borough of Manhattan, The City of New York. The Registrar shall
keep a register of the Securities and of their transfer and exchange (the "Note
Register"). The Company may have one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement
the provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of each such agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such
and shall be entitled to appropriate compensation therefor pursuant to Section
7.7. The Company or any of its domestically incorporated Wholly-Owned
Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer
agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent for the Securities.
SECTION 2.4. Paying Agent To Hold Money in Trust. By at
least 12:00 p.m. (New York City time) on the date on which any principal of or
interest on any Security is due and payable, the Company shall deposit with the
Paying Agent a sum sufficient to pay such principal or interest when due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that such Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by such Paying Agent for the
payment of principal of or interest on the Securities and shall notify the
Trustee in writing of any default by the Company or any Subsidiary Guarantor in
making any such payment. If the Company or a Subsidiary acts as Paying Agent,
it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a Paying Agent (other
than the Trustee) to pay all money held by it to the Trustee and to account for
any funds disbursed by such Paying Agent. Upon complying with this Section,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money delivered to the Trustee. Upon any bankruptcy,
reorganization or similar proceeding with respect to the Company, the Trustee
shall serve as Paying Agent for the Securities.
SECTION 2.5. Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the most recent list
available to it of the names and
<PAGE> 35
27
addresses of Securityholders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee, in writing at least seven Business Days before
each interest payment date and at such other times as the Trustee may request
in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
SECTION 2.6. Transfer and Exchange.
(a) The following provisions shall apply with respect to any
proposed transfer of a Rule 144A Note or an Institutional Accredited Investor
Note prior to the date which is two years after the later of the date of
original issue and the last date on which the Company or any affiliate of the
Company was the owner of such Securities (or any predecessor thereto) (the
"Resale Restriction Termination Date"):
(i) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to a QIB
shall be made upon the representation of the transferee that it is
purchasing the Security for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such account is a "qualified institutional buyer" within the meaning
of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A;
(ii) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to an
institutional accredited investor shall be made upon receipt by the
Trustee or its agent of a certificate substantially in the form set
forth in Section 2.7 from the proposed transferee and, if requested by
the Company or the Trustee, the delivery of an opinion of counsel,
certification and/or other information satisfactory to each of them;
and
(iii) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to a
Non-U.S. Person shall be made upon receipt by the Trustee or its agent
of a certificate substantially in the form set forth in Section 2.8
from the proposed transferee and, if requested by the Company or the
Trustee, the delivery of an opinion of counsel, certification and/or
other information satisfactory to each of them.
(b) The following provisions shall apply with respect to any
proposed transfer of a Regulation S Note prior to the expiration of the
Restricted Period:
(i) a transfer of a Regulation S Note or a beneficial
interest therein to a QIB shall be made upon the representation of the
transferee, in the form of assignment on the reverse of the
certificate, that it is purchasing the Security for its own account or
an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of
<PAGE> 36
28
Rule 144A, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A;
(ii) a transfer of a Regulation S Note or a beneficial
interest therein to an institutional accredited investor shall be made
upon receipt by the Trustee or its agent of a certificate
substantially in the form set forth in Section 2.7 from the proposed
transferee and, if requested by the Company or the Trustee, the
delivery of an opinion of counsel, certification and/or other
information satisfactory to each of them; and
(iii) a transfer of a Regulation S Note or a beneficial
interest therein to a Non-U.S. Person shall be made upon receipt by
the Trustee or its agent of a certificate substantially in the form
set forth in Section 2.8 from the proposed transferee and, if
requested by the Company or the Trustee, receipt by the Trustee or its
agent of an opinion of counsel, certification and/or other information
satisfactory to each of them.
After the expiration of the Restricted Period, interests in
the Regulation S Note may be transferred without requiring certification set
forth in Section 2.8 or any additional certification.
(c) Restricted Securities Legend. Upon the transfer,
exchange or replacement of Securities not bearing a Restricted Securities
Legend, the Registrar shall deliver Securities that do not bear a Restricted
Securities Legend. Upon the transfer, exchange or replacement of Securities
bearing a Restricted Securities Legend, the Registrar shall deliver only
Securities that bear a Restricted Securities Legend unless there is delivered
to the Registrar an Opinion of Counsel to the effect that neither such legend
nor the related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
(d) The Company shall deliver to the Trustee an Officer's
Certificate setting forth the Resale Restriction Termination Date and the
Restricted Period.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.1 or this Section
2.6. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.
(e) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges,
the Company shall, subject to the other terms and conditions of this
Article II, execute and the Trustee shall authenticate Definitive
Securities and Global Securities at the Registrar's or co-registrar's
request.
<PAGE> 37
29
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax, assessments, or
similar governmental charge payable in connection therewith (other
than any such transfer taxes, assessments or similar governmental
charges payable upon exchange or transfer pursuant to Sections 3.7,
3.9 or 9.5).
(iii) The Registrar or co-registrar shall not be required
to register the transfer of or exchange of any Security for a period
beginning (1) 15 days before the mailing of a notice of an offer to
repurchase or redeem Securities and ending at the close of business on
the day of such mailing or (2) 15 days before an interest payment date
and ending on such interest payment date.
(iv) Prior to the due presentation for registration of
transfer of any Security, the Company, the Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the person in
whose name a Security is registered as the absolute owner of such
Security for the purpose of receiving payment of principal of and
interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) Any Definitive Security delivered in exchange for an
interest in a Global Security pursuant to Section 2.1(d) shall, except
as otherwise provided by Section 2.6(c), bear the applicable legend
regarding transfer restrictions applicable to the Definitive Security
set forth in Section 2.1(c).
(vi) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(f) No Obligation of the Trustee. (i) The Trustee shall have
no responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in, DTC or other Person with respect to the
accuracy of the records of DTC or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Securities or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than DTC) of any notice (including any notice of redemption) or
the payment of any amount or delivery of any Securities (or other security or
property) under or with respect to such Securities. All notices and
communications to be given to the Holders and all payments to be made to
Holders in respect of the Securities shall be given or made only to or upon the
order of the registered Holders (which shall be DTC or its nominee in the case
of a Global Security). The rights of beneficial owners in any Global Security
shall be exercised only through DTC subject to the applicable rules and
procedures of DTC. The Trustee may rely and shall be fully protected in
relying upon information furnished by DTC with respect to its members,
participants and any beneficial owners.
<PAGE> 38
30
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers between
or among DTC participants, members or beneficial owners in any Global Security)
other than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
SECTION 2.7. Form of Certificate to be Delivered in
Connection with Transfers to Institutional Accredited Investors.
[Date]
LaSalle National Bank
135 South LaSalle Street, Suite 1825
Chicago, Illinois 60603
Attention: Corporate Trust Services Division
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the 9 5/8% Senior Subordinated Notes due 2008 (the
"Securities") of Home Products International, Inc. (the "Company").
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act")) purchasing for our own account or for the
account of such an institutional "accredited investor" at least $250,000
principal amount of the Securities, and we are acquiring the Securities not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risk of our investment in the Securities and we invest in or purchase
securities similar to the Securities in the normal course of our business. We
and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
2. We understand that the Securities have not been
registered under the Securities Act and, unless so registered, may not be sold
except as permitted in the following sentence. We agree on our own behalf and
on behalf of any investor account for which we are purchasing Securities to
offer, sell or otherwise transfer such Securities prior to the date which is
two years after the later of the date of original issue and the last date on
which the Company or any affiliate of the Company was the owner of such
Securities (or any
<PAGE> 39
31
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to
the Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales that occur outside the United States within the meaning of
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of
such an institutional "accredited investor," in each case in a minimum
principal amount of Securities of $250,000 or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will
not apply subsequent to the Resale Restriction Termination Date. If any resale
or other transfer of the Securities is proposed to be made pursuant to clause
(e) above prior to the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in the form of this
letter to the Company and the Trustee, which shall provide, among other things,
that the transferee is an institutional "accredited investor" (within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and that
it is acquiring such Securities for investment purposes and not for
distribution in violation of the Securities Act. Each purchaser acknowledges
that the Company and the Trustee reserve the right prior to any offer, sale or
other transfer prior to the Resale Termination Date of the Securities pursuant
to clauses (d), (e) or (f) above to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to the Company
and the Trustee.
TRANSFEREE:
---------------------
BY
------------------------------
SECTION 2.8. Form of Certificate to be Delivered in
Connection with Transfers Pursuant to Regulation S.
[Date]
LaSalle National Bank
135 South LaSalle Street, Suite 1825
Chicago, Illinois 60603
Attention: Corporate Trust Services Division
Re: Home Products International, Inc.
9 5/8% Senior Subordinated Notes due 2008 (the
"Securities")
<PAGE> 40
32
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(a) the offer of the Securities was not made to a person
in the United States;
(b) either (i) at the time the buy order was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States or (ii) the transaction was executed in, on
or through the facilities of a designated off-shore securities market
and neither we nor any person acting on our behalf knows that the
transaction has been pre- arranged with a buyer in the United States;
(c) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable; and
(d) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period
and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may
be.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------
------------------------------
Authorized Signature Signature Medallion Guaranteed
SECTION 2.9. Mutilated, Destroyed, Lost or Stolen Securities.
If a mutilated Security is surrendered to the Registrar or if the Holder of a
Security claims that the Security has been lost, destroyed or wrongfully taken,
the Company shall issue and the Trustee shall authenticate a replacement
Security if the requirements of Section 8-405 of the Uniform
<PAGE> 41
33
Commercial Code are met and the Holder satisfies any other reasonable
requirements of the Trustee. If required by the Trustee or the Company, such
Holder shall furnish an indemnity bond sufficient in the judgment of the
Company and the Trustee to protect the Company, the Trustee, the Paying Agent,
the Registrar and any co-registrar from any loss which any of them may suffer
if a Security is replaced, and, in the absence of notice to the Company, any
Subsidiary Guarantor or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and upon Company Order the
Trustee shall authenticate and make available for delivery, in exchange for any
such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) in connection
therewith.
Every new Security issued pursuant to this Section in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, any Subsidiary Guarantor (if
applicable) and any other obligor upon the Securities, whether or not the
mutilated, destroyed, lost or stolen Security shall be at any time enforceable
by anyone, and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.10. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.9, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture,
<PAGE> 42
34
then on and after that date such Securities (or portions thereof) cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.11. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee
shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of Definitive Securities but may have variations that
the Company considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities. After the preparation of Definitive
Securities, the temporary Securities shall be exchangeable for Definitive
Securities upon surrender of the temporary Securities at any office or agency
maintained by the Company for that purpose and such exchange shall be without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute, and the Trustee shall
authenticate and make available for delivery in exchange therefor, one or more
Definitive Securities representing an equal principal amount of Securities.
Until so exchanged, the Holder of temporary Securities shall in all respects be
entitled to the same benefits under this Indenture as a holder of Definitive
Securities.
SECTION 2.12. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the
Paying Agent shall forward to the Trustee any Securities surrendered to them
for registration of transfer, exchange or payment. The Trustee and no one else
shall cancel and return to the Company all Securities surrendered for
registration of transfer, exchange, payment or cancellation. The Company may
not issue new Securities to replace Securities it has paid or delivered to the
Trustee for cancellation for any reason other than in connection with a
transfer or exchange.
SECTION 2.13. Payment of Interest; Defaulted Interest.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any interest payment date shall be paid to the Person in whose
name such Security (or one or more predecessor Securities) is registered at the
close of business on the regular record date for such interest at the office or
agency of the Company maintained for such purpose pursuant to Section 2.3.
Any interest on any Security which is payable, but is not paid
when the same becomes due and payable and such nonpayment continues for a
period of 30 days shall forthwith cease to be payable to the Holder on the
regular record date by virtue of having been such Holder, and such defaulted
interest and (to the extent lawful) interest on such defaulted interest at the
rate borne by the Securities (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest") shall be paid by the Company,
at its election in each case, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective predecessor Securities) are registered at the close of
business on a Special Record Date (as defined below) for the payment
of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount
of Defaulted Interest
<PAGE> 43
35
proposed to be paid on each Security and the date (not less than 30
days after such notice) of the proposed payment (the "Special Interest
Payment Date"), and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix
a record date (the "Special Record Date") for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the Special Interest Payment Date and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date, and in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date and Special Interest Payment Date
therefor to be given in the manner provided for in Section 13.2, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record
Date and Special Interest Payment Date therefor having been so given,
such Defaulted Interest shall be paid on the Special Interest Payment
Date to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to
the following clause (b).
(b) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
SECTION 2.14. Computation of Interest. Interest on the
Securities shall be computed on the basis of a 360-day year of twelve 30-day
months.
SECTION 2.15. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such CUSIP numbers.
<PAGE> 44
36
In the event that the Company shall issue and the Trustee
shall authenticate any Subsequent Series Securities pursuant to Section 2.2,
the Company shall use its best efforts to obtain the same CUSIP number for such
Subsequent Series Securities as is printed on the Securities outstanding at
such time; provided, however, that if any series of Subsequent Series
Securities is determined, pursuant to an Opinion of Counsel, to be a different
class of security than the Securities outstanding at such time for federal
income tax purposes, the Company may obtain a CUSIP number for such series of
Subsequent Series Securities that is different from the CUSIP number printed on
the Securities then outstanding.
ARTICLE III
Covenants
SECTION 3.1. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and
in the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee
or the Paying Agent holds in accordance with this Indenture money sufficient to
pay all principal and interest then due and the Trustee or the Paying Agent, as
the case may be, is not prohibited from paying such money to the
Securityholders on that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
Notwithstanding anything to the contrary contained in this
Indenture, the Company may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States
of America from principal or interest payments hereunder.
SECTION 3.2. SEC Reports and Available Information.
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, to the extent
permitted by the Exchange Act, the Company will file with the SEC, and provide,
within 15 days after the Company is required to file the same with the SEC, the
Trustee and the holders of the Securities with the annual reports and the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that are
specified in Sections and 15(d) of the Exchange Act. In the event that the
Company is not permitted to file such reports, documents and information with
the SEC pursuant to the Exchange Act, the Company shall nevertheless provide
such Exchange Act information to the Trustee and the holders of the Securities
as if the Company were subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act. The Company shall also comply with the other
provisions of TIA Section 314(a). Delivery of such reports, information and
documents to the Trustee is for informational purposes only and the Trustee's
receipt of such
<PAGE> 45
37
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 3.3. Limitation on Indebtedness. (a) The Company
shall not, and shall not permit any of its Restricted Subsidiaries to, Incur
any Indebtedness; provided, however, that the Company may Incur Indebtedness if
on the date thereof the Consolidated Coverage Ratio for the Company and its
Restricted Subsidiaries is at least (i) 2.00 to 1.00, if such Indebtedness is
Incurred on or prior to the second anniversary of the Issue Date and (ii) 2.25
to 1.00, if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (i)(A)
Indebtedness Incurred pursuant to the Senior Credit Agreement in an aggregate
principal amount not to exceed the greater of (1) $100 million less the amount
of all mandatory reductions of the revolving credit commitments thereunder and
(2) the Borrowing Base and (B) Indebtedness Incurred under any other senior
credit facility or facilities, providing for revolving loans; provided, that
the aggregate principal amount of all such additional revolving Indebtedness
under such other senior credit facility or facilities after giving effect to
such Incurrence, does not exceed (1) the Borrowing Base, less (2) the maximum
aggregate commitments under the Senior Credit Agreement; (ii) the Subsidiary
Guarantees and Guarantees of, or Liens in respect of, Indebtedness Incurred
pursuant to paragraph (a) above or clause (i) of this paragraph (b); (iii)
Indebtedness of the Company owing to and held by any Wholly-Owned Subsidiary or
Indebtedness of a Restricted Subsidiary owing to and held by the Company or any
Wholly-Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any such
Wholly-Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any
subsequent transfer of any such Indebtedness (except to the Company or another
Wholly-Owned Subsidiary) will be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof; (iv) Indebtedness
represented by (A) the Securities, (B) any Indebtedness (other than the
Indebtedness described in clauses (i), (ii) and (iii)) outstanding on the Issue
Date and (C) any Refinancing Indebtedness Incurred in respect of any
Indebtedness described in this clause (iv), clause (v) or clause (vii) or
Incurred pursuant to paragraph (a) above; (v) Indebtedness of a Restricted
Subsidiary Incurred and outstanding on the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness Incurred (A) to
provide all or any portion of the funds utilized to consummate the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Subsidiary or was otherwise acquired by the Company or (B) otherwise
in connection with, or in contemplation of, such acquisition); provided,
however, that at the time such Restricted Subsidiary is acquired by the
Company, the Company would have been able to Incur $1.00 of additional
Indebtedness pursuant to paragraph (a) above after giving effect to the
Incurrence of such Indebtedness pursuant to this clause (v); (vi) Indebtedness
under Currency Agreements and Interest Rate Agreements and certain raw material
hedging transactions; provided, however, that in the case of Currency
Agreements and Interest Rate Agreements, such Currency Agreements and Interest
Rate Agreements are entered into for bona fide hedging purposes of the Company
or its Restricted
<PAGE> 46
38
Subsidiaries (as determined in good faith by the Board of Directors or senior
management of the Company) and correspond in terms of notional amount,
duration, currencies and interest rates, as applicable, to Indebtedness of the
Company or its Restricted Subsidiaries Incurred without violation of this
Indenture or to business transactions of the Company or its Restricted
Subsidiaries on customary terms entered into in the ordinary course of business
and in the case of raw material hedging transactions, such are entered into
with respect to the purchase of raw materials and are entered in the ordinary
course of business for bona fide hedging purposes; (vii) Purchase Money
Indebtedness and Capitalized Lease Obligations Incurred on or after the Issue
Date; provided, however, that the aggregate principal amount of such
Indebtedness Incurred on or after the Issue Date and outstanding at any time
pursuant to this clause (vii) shall not exceed $15 million, and such
Indebtedness as originally Incurred shall not constitute more than 100% of the
cost (determined in accordance with GAAP) of the property so purchased or
leased; and (viii) Indebtedness (other than Indebtedness described in clauses
(i) - (vii)) in a principal amount which, when taken together with the
principal amount of all other Indebtedness Incurred pursuant to this clause
(viii) and then outstanding, will not exceed $10 million.
(c) Neither the Company nor any Restricted Subsidiary shall Incur any
Indebtedness under Section 3.3(b) if the proceeds thereof are used, directly or
indirectly, to refinance any Subordinated Obligations of the Company unless
such Indebtedness shall be subordinated to the Securities to at least the same
extent as such Subordinated Obligations. No Subsidiary Guarantor shall incur
any Indebtedness under Section 3.3(b) if the proceeds thereof are used,
directly or indirectly to refinance any Guarantor Subordinated Obligations of
such Subsidiary Guarantor unless such Indebtedness shall be subordinated to the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee to at
least the same extent as such Guarantor Subordinated Obligations.
(d) In addition, the Company shall not Incur any Secured Indebtedness
which is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Securities equally and ratably with such
Secured Indebtedness for so long as such Secured Indebtedness is secured by a
Lien. No Subsidiary Guarantor shall Incur any Secured Indebtedness which is
not Guarantor Senior Indebtedness of such Subsidiary Guarantor unless
contemporaneously therewith effective provision is made to secure such
Subsidiary Guarantor's obligations under its Subsidiary Guarantee equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien.
(e) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this Section 3.3, (i) in the event that Indebtedness meets the
criteria of more than one of the types of Indebtedness described in Section
3.3(b), the Company, in its sole discretion, shall classify, or later
reclassify, such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of such clauses; and (ii) the
amount of Indebtedness issued at a price that is less than the principal amount
thereof will be equal to the amount of the liability in respect thereof
determined in accordance with GAAP.
<PAGE> 47
39
SECTION 3.4. Limitation on Layering. The Company shall not
Incur any Indebtedness if such Indebtedness is subordinate or junior in ranking
in any respect to any Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is contractually subordinated in right of payment
to Senior Subordinated Indebtedness. No Subsidiary Guarantor shall Incur any
Indebtedness if such Indebtedness is contractually subordinate or junior in
ranking in any respect to any Guarantor Senior Indebtedness of such Subsidiary
Guarantor unless such Indebtedness is Guarantor Senior Subordinated
Indebtedness of such Subsidiary Guarantor or is contractually subordinated in
right of payment to Guarantor Senior Subordinated Indebtedness of such
Subsidiary Guarantor.
SECTION 3.5. Limitation on Restricted Payments. (a) The
Company shall not, and shall not permit any of its Restricted Subsidiaries,
directly or indirectly, to (i) declare or pay any dividend or make any
distribution on or in respect of its Capital Stock (including any payment in
connection with any merger or consolidation involving the Company or any of its
Restricted Subsidiaries) except (A) dividends or distributions payable in its
Capital Stock (other than Disqualified Stock) or in options, warrants or other
rights to purchase such Capital Stock and (B) dividends or distributions
payable to the Company or a Restricted Subsidiary of the Company (and if such
Restricted Subsidiary is not a Wholly-Owned Subsidiary, to its other holders of
Capital Stock or other equity interests, as applicable, on a pro rata basis),
(ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock
of the Company held by Persons other than a Restricted Subsidiary of the
Company or any Capital Stock of a Restricted Subsidiary of the Company held by
any Affiliate of the Company, other than another Restricted Subsidiary (in
either case, other than in exchange for its Capital Stock (other than
Disqualified Stock)), (iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled maturity, scheduled repayment
or scheduled sinking fund payment, any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of purchase,
repurchase or acquisition) or (iv) make any Investment (other than a Permitted
Investment) in any Unrestricted Subsidiary or any other Person (any such
dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment being herein referred to in clauses (i)
through (iv) as a "Restricted Payment"), if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment: (A) a Default shall have
occurred and be continuing (or would result therefrom); or (B) the Company is
not able to Incur an additional $1.00 of Indebtedness pursuant to Section
3.3(a); or (C) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made (without double counting) subsequent to
the Issue Date would exceed the sum of: (1) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting period) from the Issue
Date to the end of the most recent fiscal quarter ending prior to the date of
such Restricted Payment as to which financial results are available (or, in
case such Consolidated Net Income is a deficit, minus 100% of such deficit);
(2) the aggregate Net Cash Proceeds received by the Company from the issue or
sale of its Capital Stock (other than Disqualified Stock) or other capital
contributions subsequent to the Issue Date (other than net proceeds received
from an issuance or sale of such Capital Stock to a Subsidiary of the Company
or an employee stock ownership plan or similar trust to the extent such sale to
an employee stock ownership plan or similar trust is financed by loans
<PAGE> 48
40
from or guaranteed by the Company or any Restricted Subsidiary unless such
loans have been repaid with cash on or prior to the date of determination); (3)
the amount by which Indebtedness of the Company is reduced on the Company's
balance sheet upon the conversion or exchange (other than by a Subsidiary of
the Company) subsequent to the Issue Date of any Indebtedness of the Company
convertible or exchangeable for Capital Stock of the Company (less the amount
of any cash, or other property, distributed by the Company upon such conversion
or exchange); and (4) the amount equal to the net reduction in Investments made
by the Company or any of its Restricted Subsidiaries in any Person resulting
from (x) repurchases or redemptions of such Investments by such Person,
proceeds realized upon the sale of such Investment to an unaffiliated
purchaser, repayments of loans or advances or other transfers of assets
(including by way of dividend or distribution) by such Person to the Company or
any Restricted Subsidiary of the Company or (y) the redesignation of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investment") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which
amount was included in the calculation of the amount of Restricted Payments;
provided, however, that no amount shall be included under this clause (4) to
the extent it is already included in Consolidated Net Income.
(b) The provisions of Section 3.5(a) shall not prohibit: (i) any
purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock of the Company issued or sold to a Subsidiary or
an employee stock ownership plan or similar trust to the extent such sale to an
employee stock ownership plan or similar trust is financed by loans from or
guaranteed by the Company or any Restricted Subsidiary unless such loans have
been repaid with cash on or prior to the date of determination); provided,
however, that (A) such purchase or redemption will be excluded in subsequent
calculations of the amount of Restricted Payments and (B) the Net Cash Proceeds
from such sale will be excluded from clause (C) (2) of paragraph (a); (ii) any
purchase or redemption of Subordinated Obligations of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Obligations of the Company; provided, however, that such purchase
or redemption will be excluded in subsequent calculations of the amount of
Restricted Payments; (iii) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted under Section 3.7;
provided, however, that such purchase or redemption will be excluded in
subsequent calculations of the amount of Restricted Payments; (iv) dividends
paid within 60 days after the date of declaration if at such date of
declaration such dividend would have complied with this provision; provided,
however, that such dividends will be included in subsequent calculations of the
amount of Restricted Payments; (v) repurchases of Capital Stock deemed to occur
upon the exercise of stock options if such Capital Stock represents a portion
of the exercise price hereof; provided, however, that such repurchases will be
excluded from the calculation of the amount of Restricted Payments; and (vi)
any repurchase, retirement or other acquisition or retirement for value of
Capital Stock of the Company held by any future, present or former employee of
the Company or any Subsidiary pursuant to any management equity plan or stock
option plan or any other management or employee benefit plan or agreement;
provided, however, that the aggregate Restricted Payment made under this
<PAGE> 49
41
clause (vi) does not exceed in any calendar year $2 million; provided further
that such amount in any calendar year may be increased by any unused amounts
from any of the three years prior to such calendar year.
SECTION 3.6. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and will not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or pay any Indebtedness or other obligations
owed to the Company, (ii) make any loans or advances to the Company or (iii)
transfer any of its property or assets to the Company, except (A) any
encumbrance or restriction pursuant to an agreement in effect at or entered
into on the date of this Indenture (including, without limitation, the Senior
Credit Agreement); (B) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by a Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
utilized to consummate, the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or
was acquired by the Company) and outstanding on such date; (C) any encumbrance
or restriction with respect to a Restricted Subsidiary pursuant to an agreement
effecting a refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (A) or (B) of this Section 3.6 or this clause (C) or
contained in any amendment to an agreement referred to in clause (A) or (B) of
this Section 3.6 or this clause (C); provided, however, that the encumbrances
and restrictions with respect to such Restricted Subsidiary contained in any
such agreement or amendment are no less favorable to the Holders of the
Securities than encumbrances and restrictions contained in such agreements; (D)
in the case of clause (iii) above, any encumbrance or restriction (1) that
restricts in a customary manner the subletting, assignment or transfer of any
property or asset that is subject to a lease, license or similar contract, or
the assignment or transfer of any such lease, license or other contract, (2) by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Company or any Restricted
Subsidiary not otherwise prohibited by this Indenture, (3) contained in
mortgages, pledges or other security agreements securing Indebtedness of a
Restricted Subsidiary to the extent such encumbrance or restrictions restrict
the transfer of the property subject to such mortgages, pledges or other
security agreements or (4) pursuant to customary provisions restricting
dispositions of real property interests set forth in any reciprocal easement
agreements of the Company or any Restricted Subsidiary; (E) any restriction
with respect to a Restricted Subsidiary (or any of its property or assets)
imposed pursuant to an agreement entered into for the direct or indirect sale
or disposition of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary (or the property or assets that are subject to such
restriction) pending the closing of such sale or disposition; and (F)
encumbrances or restrictions arising or existing by reason of applicable law.
SECTION 3.7. Limitation on Sales of Assets and Subsidiary
Stock. (a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration
<PAGE> 50
42
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time of
such Asset Disposition at least equal to the fair market value, as determined
in good faith by the Board of Directors (including as to the value of all
non-cash consideration), of the shares and assets subject to such Asset
Disposition, (ii) at least 80% of the consideration thereof received by the
Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents and (iii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company or any
Restricted Subsidiary, as the case may be, elects (or is required by the terms
of any Senior Indebtedness, Guarantor Senior Indebtedness or Indebtedness
(other than Preferred Stock) of a Wholly-Owned Subsidiary), to prepay, repay or
purchase Senior Indebtedness or Indebtedness (other than any Preferred Stock)
of a Wholly-Owned Subsidiary (in each case other than Indebtedness owed to the
Company or an Affiliate of the Company) within 180 days from the later of the
date of such Asset Disposition or the receipt of such Net Available Cash; (B)
second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), at the Company's election to invest
in Additional Assets (including by means of an Investment in Additional Assets
by a Restricted Subsidiary with Net Available Cash received by the Company or
another Restricted Subsidiary) within one year from the later of the date of
such Asset Disposition or the receipt of such Net Available Cash; (C) third, to
the extent of the balance of such Net Available Cash after application and in
accordance with clauses (A) and (B) (the "Excess Proceeds"), to make an offer
to purchase the Securities and other Senior Subordinated Indebtedness
outstanding with similar provisions requiring the Company to make an offer to
purchase such Indebtedness with the proceeds from any Asset Disposition ("Pari
Passu Notes") at 100% of the principal amount thereof (or 100% of the accreted
value of such Pari Passu Notes so tendered if such Pari Passu Notes were issued
at a discount) plus accrued and unpaid interest, if any, to the date of
purchase; and (D) fourth, to the extent of the balance of the Excess Proceeds,
after application in accordance with clause (C), to fund other corporate
purposes not prohibited by this Indenture; provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A) above, the Company or such Restricted Subsidiary will retire such
Indebtedness and will cause the related loan commitment, if any, to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions, (i) the Company
and its Restricted Subsidiaries will not be required to apply any Net Available
Cash in accordance herewith except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this Section 3.7 exceed $5 million and (ii) in addition, the Company and
its Restricted Subsidiaries may make in the aggregate $1 million in Asset
Dispositions each year which are not subject to the provisions of this Section
3.7.
For the purposes of this Section 3.7, the following will be deemed to
be cash: (i) the assumption by the transferee of Senior Indebtedness of the
Company or Indebtedness of any Restricted Subsidiary of the Company and the
release of the Company or such Restricted Subsidiary from all liability on such
Senior Indebtedness or Indebtedness in connection with such Asset Disposition
(in which case the Company will, without further action, be deemed to have
applied such assumed Indebtedness in accordance with clause (iii) (A) of the
preceding paragraph) and (ii) securities received by the
<PAGE> 51
43
Company or any Restricted Subsidiary of the Company from the transferee that
are promptly converted by the Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to clause (iii)(C) of paragraph (a), the Company will be
required to apply such Excess Proceeds to the repayment of the Securities and
any Pari Passu Notes as follows: (i) the Company will make an offer to purchase
(an "Offer") within ten days of such time from all holders of the Securities in
accordance with the procedures set forth in this Indenture in the maximum
principal amount (expressed as a multiple of $1,000) of Securities that may be
purchased out of an amount (the "Note Amount") equal to the product of such
Excess Proceeds multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Securities and the denominator of which is
the sum of the outstanding principal amount of the Securities and the
outstanding principal amount (or accreted value, as the case may be) of the
Pari Passu Notes at a purchase price of 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase and (ii) the
Company will make an offer to purchase any Pari Passu Notes (a "Pari Passu
Offer") in an amount equal to the excess of the Excess Proceeds over the Note
Amount at a purchase price of 100% of the principal amount (or accreted value,
as the case may be) thereof plus accrued and unpaid interest, if any, to the
date of purchase in accordance with the procedures (including prorating in the
event of oversubscription) set forth in the documentation governing such Pari
Passu Notes with respect to the Pari Passu Offer. If the aggregate purchase
price of the Securities and Pari Passu Notes tendered pursuant to the Offer and
the Pari Passu Offer is less than the Excess Proceeds, the remaining Excess
Proceeds will be available to the Company for use in accordance with clause
(iii)(D) of paragraph (a) of this Section 3.7. The Company will not be
required to make an Offer for Securities pursuant to this Section 3.7 if the
Excess Proceeds available therefor are less than $10 million (which lesser
amounts will be carried forward for purposes of determining whether an Offer is
required with respect to the Excess Proceeds from any subsequent Asset
Disposition).
(c) (1) Promptly, and in any event within 10 days after the
Company is required to make an Offer, the Company will deliver to the Trustee
and send, by first-class mail to each Holder, a written notice stating that the
Holder may elect to have his Securities purchased by the Company either in
whole or in part (subject to prorating as hereinafter described in the event
the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date of such notice
(the "Purchase Date").
(2) Not later than the date upon which such written notice of
an Offer is delivered to the Trustee and the Holders, the Company will deliver
to the Trustee an Officers' Certificate setting forth (i) the amount of the
Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from
the Asset Dispositions as a result of which such Offer is being made and (iii)
the compliance of such allocation with the provisions of Section 3.7(a). Upon
the expiration of the period (the "Offer Period") for which the Offer remains
open, the Company shall deliver to the Trustee for cancellation the Securities
or portions thereof which have been properly tendered to and are to be accepted
by the Company. The Trustee shall, on the Purchase Date, mail or deliver
payment to each tendering Holder in the amount of the
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44
purchase price of the Securities tendered by such Holder to the extent such
funds are available to the Trustee.
(3) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form entitled "Option
of Holder to Elect Purchase" duly completed, to the Company at the address
specified in the notice prior to the expiration of the Offer Period. Each
Holder will be entitled to withdraw its election if the Trustee or the Company
receives, not later than one Business Day prior to the expiration of the Offer
Period, a facsimile transmission or overnight mail from such Holder setting
forth the name of such Holder, the principal amount of the Security or
Securities which were delivered for purchase by such Holder and a statement
that such Holder is withdrawing his election to have such Security or
Securities purchased. If at the expiration of the Offer Period the aggregate
principal amount of Securities surrendered by Holders exceeds the Offer Amount,
the Company shall select the Securities to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Securities are purchased only in part will be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(d) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 3.7, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Indenture by virtue thereof.
SECTION 3.8. Limitation on Affiliate Transactions. (a) The
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or conduct any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") unless:
(i) the terms of such Affiliate Transaction are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that
could be obtained at the time of such transaction in arm's-length dealings with
a Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $5 million, the terms of
such transaction have been approved by a majority of the members of the Board
of Directors of the Company having no personal stake in such transaction, if
any (and such majority determines that such Affiliate Transaction satisfies the
criteria in (i) above); and (iii) in the event such Affiliate Transaction
involves an aggregate amount in excess of $10 million, the Company has received
a written opinion from an independent investment banking firm of nationally
recognized standing that such Affiliate Transaction is not materially less
favorable than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate.
(b) The foregoing paragraph (a) will not apply to (i) any Restricted
Payment permitted to be made pursuant to Section 3.5, (ii) any issuance of
securities, or other payments, awards or grants in cash, securities or
otherwise pursuant to, or the funding of,
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45
employment arrangements or bonuses (whether or not pursuant to an employment
agreement), stock options and stock ownership plans approved by the Board of
Directors of the Company, (iii) loans or advances to employees in the ordinary
course of business of the Company or any of its Restricted Subsidiaries, (iv)
the payment of reasonable fees to directors of the Company and its Restricted
Subsidiaries who are not employees of the Issuer or its Restricted
Subsidiaries, (v) any payments to the Company by the Restricted Subsidiaries
pursuant to a tax sharing agreement, (vi) transactions in the ordinary course
of business between the Company or any Restricted Subsidiary with Selfix Europe
L.L.C. or its successors and (vii) any transaction between the Company and a
Wholly-Owned Subsidiary or between Wholly-Owned Subsidiaries.
SECTION 3.9. Change of Control. Upon the occurrence of any
of the following events (each a "Change of Control"), unless the Company shall
have exercised its right to redeem the Securities as described in Section 5.1,
each holder will have the right to require the Company to repurchase all or any
part of such holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
(i) (A) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed
to have "beneficial ownership" of all shares that any such person has
the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than
40% of the total voting power of the Voting Stock of the Company (or
its successor by merger, consolidation or purchase of all or
substantially all of its assets); and (B) the Permitted Holders
"beneficially own" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of the Voting Stock of the
Company (or its successor by merger, consolidation or purchase of all
or substantially all of its assets) than such other person and do not
have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors
of the Company or such successor; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of at least a
majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved or is a designee of
the Permitted Holders or was nominated or elected by such Permitted
Holders or any of their designees) cease for any reason to constitute
a majority of the Board of Directors of the Company then in office; or
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46
(iii) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or
a series of related transactions, of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole
to any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) other than a Permitted Holder; or
(iv) the adoption by the stockholders of a plan for the
liquidation or dissolution of the Company.
Within 30 days following any Change of Control, unless the
Company has mailed a redemption notice with respect to all the outstanding
Securities in connection with such Change of Control as described in Section
5.1, the Company shall mail a notice to each holder with a copy to the Trustee
stating: (i) that a Change of Control has occurred and that such holder has the
right to require the Company pursuant to this Section 3.9 to purchase such
holder's Securities (the "Change of Control Offer") at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of holders of record on a
record date to receive interest on the relevant interest payment date); (ii)
the repurchase date (which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed); (iii) that any Security not tendered
shall continue to accrue interest, if any; (iv) that, unless the Company
defaults in the payment of principal or interest, all Securities accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest,
if any, after the Change of Control Payment Date; (v) that holders electing to
have any Securities purchased pursuant to a Change of Control Offer shall be
required to surrender the Securities to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business
Day preceding the date of purchase for the Change of Control Payment Date; (vi)
that holders shall be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a facsimile transmission or
letter setting forth the name of the holder, the principal amount of Securities
delivered for purchase, and a statement that such holder is withdrawing his
election to have the Securities purchased; and (vii) that holders whose
Securities are being purchased only in part shall be issued new Securities
equal in principal amount to the unpurchased portion of the Securities
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof.
On a Business Day that is no earlier than 30 days nor later
than 60 days from the date that the Company mails or causes to be mailed notice
of the Change of Control to the holders (the "Change of Control Payment Date"),
the Company shall, to the extent lawful, (i) accept for payment all Securities
or portions thereof properly tendered pursuant to the Change of Control Offer,
(ii) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all the Securities or portions thereof so tendered and
(iii) deliver or cause to be delivered to the Trustee the Securities so
accepted together with an Officers' Certificate stating the aggregate principal
amount of such Securities or portions thereof being purchased by the Company.
The Paying Agent shall promptly mail to each Holder of the Securities so
tendered the Change of Control Payment for such Securities, and the Trustee
shall promptly authenticate and mail (or cause to be transferred by book-entry)
to
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47
each Holder a new Security equal in principal amount to any unpurchased portion
of the Securities surrendered, if any; provided that each such new Security
shall be in a principal amount of $1,000 or an integral multiple thereof. The
Company shall publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 3.9. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Indenture, the Company will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations described in this Indenture by virtue thereof.
SECTION 3.10. Limitation on Capital Stock of Restricted
Subsidiaries. The Company shall not sell any shares of Capital Stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell any shares of its Capital Stock except: (i) to
the Company or a Wholly-Owned Subsidiary; or (ii) (A) in compliance with
Section 3.7 if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would continue to be a Restricted Subsidiary or (B) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer be a Restricted Subsidiary, and, in each case, the
Investment of the Company in such Person after giving effect to such issuance
or sale would have been permitted to be made under Section 3.5 as if made on
the date of such issuance or sale. Notwithstanding the foregoing, the Company
may sell all the Capital Stock of a Subsidiary as long as the Company is in
compliance with the terms of Section 3.7.
SECTION 3.11. Future Subsidiary Guarantors. After the Issue
Date, the Company will cause each Restricted Subsidiary other than a Foreign
Subsidiary created or acquired by the Company which Guarantees the Bank
Indebtedness or Incurs Indebtedness under paragraph (a) of Section 3.3 to
execute and deliver to the Trustee a Subsidiary Guarantee pursuant to which
such Restricted Subsidiary will unconditionally Guarantee, on a joint and
several basis with the other Subsidiary Guarantors, the full and prompt payment
of the principal of, premium, if any and interest on the Securities on a senior
subordinated basis and become a party to this Indenture as a Subsidiary
Guarantor for all purposes of the Indenture.
SECTION 3.12. Limitation on Lines of Business. The Company
shall not, and will not permit any Restricted Subsidiary to, engage in any
business other than a Related Business. Notwithstanding the foregoing, the
Company may acquire and operate any business which is primarily engaged in a
Related Business at the time of acquisition.
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SECTION 3.13. Maintenance of Office or Agency. The Company
will maintain in The City of New York, an office or agency where the Securities
may be presented or surrendered for payment, where, if applicable, the
Securities may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The principal corporate trust office (the
"Corporate Trust Office") of the Trustee shall be such office or agency of the
Company, unless the Company shall designate and maintain some other office or
agency for one or more of such purposes. The Company will give prompt written
notice to the Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
SECTION 3.14. Corporate Existence. Subject to Article IV and
Section 11.2, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect the corporate existence and that of
each Restricted Subsidiary and the corporate rights (charter and statutory)
licenses and franchises of the Company and each Restricted Subsidiary;
provided, however, that the Company shall not be required to preserve any such
existence (except the Company), right, license or franchise if the Board of
Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and each of its
Restricted Subsidiaries, taken as a whole, and that the loss thereof is not,
and will not be, disadvantageous in any material respect to the Holders.
SECTION 3.15. Payment of Taxes and Other Claims. The Company
will pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all material taxes, assessments and governmental charges
levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary and (ii) all lawful claims
for labor, materials and supplies, which, if unpaid, might by law become a
material liability or lien upon the property of the Company or any Restricted
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings and for which appropriate reserves, if necessary (in
the good faith judgment of management of the Company), are being maintained in
accordance with GAAP or where the failure to effect such payment will not be
disadvantageous to the Holders.
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SECTION 3.16. Compliance Certificate. The Company shall
deliver to the Trustee within 120 days after the end of each Fiscal Year of the
Company an Officers' Certificate stating that in the course of the performance
by the signers of their duties as Officers of the Company they would normally
have knowledge of any Default or Event of Default and whether or not the
signers know of any Default or Event of Default that occurred during such
period. If they do, the certificate shall describe the Default or Event of
Default, its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA Section
314(a)(4).
SECTION 3.17. Further Instruments and Acts. Upon request of
the Trustee, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE IV
Successor Company
SECTION 4.1. Merger and Consolidation. The Company shall not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a corporation, partnership, trust,
limited liability company or other similar entity organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia and the Successor Company (if not
the Company) shall expressly assume, by supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Securities and
this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness that becomes an obligation of the Successor
Company or any Restricted Subsidiary of the Successor Company as a
result of such transaction as having been Incurred by the Successor
Company or such Restricted Subsidiary at the time of such
transaction), no Default or Event of Default shall have occurred and
be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur at least an additional $1.00
of Indebtedness pursuant to paragraph (a) of Section 3.3 of this
Indenture; and
(iv) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental
indenture, if any, comply with this Indenture.
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The Successor Company will succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Indenture,
but, in the case of a lease of all or substantially all its assets, the Company
will not be released from the obligation to pay the principal of and interest
on the Securities.
Notwithstanding clauses (ii) and (iii) of the first sentence
of this Section 4.1, (i) any Restricted Subsidiary of the Company may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company and (ii) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction to realize tax or other benefits.
ARTICLE V
Redemption of Securities
SECTION 5.1. Optional Redemption. The Securities may or
shall, as the case may be, be redeemed, as a whole or from time to time in
part, subject to the conditions and at the Redemption Prices specified in the
form of Securities set forth in Exhibits A and B hereto, which are hereby
incorporated by reference and made a part of this Indenture, together with
accrued and unpaid interest to the redemption date.
SECTION 5.2. Applicability of Article. Redemption of
Securities at the election of the Company or otherwise, as permitted or
required by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 5.3. Election to Redeem; Notice to Trustee. The
election of the Company to redeem any Securities pursuant to Section 5.1 shall
be evidenced by a Board Resolution. In case of any redemption at the election
of the Company, the Company shall, upon not less than 30 and not more than 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the principal amount of Securities to be redeemed and shall deliver
to the Trustee such documentation and records as shall enable the Trustee to
select the Securities to be redeemed pursuant to Section 5.4.
SECTION 5.4. Selection by Trustee of Securities to Be
Redeemed. If less than all the Securities are to be redeemed at any time
pursuant to an optional redemption, the particular Securities to be redeemed
shall be selected not more than 90 days prior to the Redemption Date by the
Trustee, from the outstanding Securities not previously called for redemption,
in compliance with the requirements of the principal securities exchange, if
any, on which such Securities are listed, or, if such Securities are not so
listed, on a pro rata basis, by lot or by such other method as the Trustee
shall deem fair and appropriate (and in such manner as complies with applicable
legal requirements) and which may provide for the selection for redemption of
portions of the principal of the Securities; provided, however, that no such
partial redemption shall reduce the portion of the principal amount of a
Security not redeemed to less than $1,000.
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The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Securities shall
relate, in the case of any Security redeemed or to be redeemed only in part, to
the portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 5.5. Notice of Redemption. Notice of redemption
shall be given in the manner provided for in Section 13.2 not less than 30 nor
more than 60 days prior to the Redemption Date, to each Holder of Securities to
be redeemed. The Trustee shall give notice of redemption in the Company's name
and at the Company's expense; provided, however, that the Company shall deliver
to the Trustee, at least 45 days prior to the Redemption Date, an Officers'
Certificate requesting that the Trustee give such notice and setting forth the
information to be stated in such notice as provided in the following items.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued
interest to the Redemption Date payable as provided in Section 5.7, if
any,
(3) if less than all outstanding Securities are to be
redeemed, the identification of the particular Securities (or portion
thereof) to be redeemed, as well as the aggregate principal amount of
Securities to be redeemed and the aggregate principal amount of
Securities to be Outstanding after such partial redemption,
(4) in case any Security is to be redeemed in part only,
the notice which relates to such Security shall state that on and
after the Redemption Date, upon surrender of such Security, the holder
will receive, without charge, a new Security or Securities of
authorized denominations for the principal amount thereof remaining
unredeemed,
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as provided
in Section 5.7) will become due and payable upon each such Security,
or the portion thereof, to be redeemed, and, unless the Company
defaults in making the redemption payment, that interest on Securities
called for redemption (or the portion thereof) will cease to accrue on
and after said date,
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued interest,
if any,
(7) the name and address of the Paying Agent,
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(8) that Securities called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price,
(9) the CUSIP number, and that no representation is made
as to the accuracy or correctness of the CUSIP number, if any, listed
in such notice or printed on the Securities, and
(10) the paragraph of the Securities pursuant to which the
Securities are to be redeemed.
SECTION 5.6. Deposit of Redemption Price. Prior to any
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 2.4) an amount of money sufficient to pay the
Redemption Price of, and accrued interest on, all the Securities which are to
be redeemed on that date.
SECTION 5.7. Notes Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified (together with accrued interest, if any, to the Redemption
Date), and from and after such date (unless the Company shall default in the
payment of the Redemption Price and accrued interest) such Securities shall
cease to bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Regular Record Date or Special Record Date,
as the case may be, according to their terms and the provisions of Section
2.13.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate borne by
the Securities.
SECTION 5.8. Securities Redeemed in Part.
Any Security which is to be redeemed only in part (pursuant to
the provisions of this Article) shall be surrendered at the office or agency of
the Company maintained for such purpose pursuant to Section 3.13 (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall authenticate and make
available for delivery to the Holder of such Security at the expense of the
Company, a new Security or Securities, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Security so
surrendered, provided, that each such new Security will be in a principal
amount of $1,000 or integral multiple thereof.
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ARTICLE VI
Defaults and Remedies
SECTION 6.1. Events of Default. An "Event of Default" occurs
if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article X of this Indenture, and such
default continues for a period of 30 days;
(2) the Company defaults in the payment of the principal or
premium, if any, of any Security when the same becomes due and payable
at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise, whether or not such payment
shall be prohibited by Article X of this Indenture;
(3) the Company fails to comply with Article IV of this
Indenture;
(4) the Company fails to comply with any of Sections 3.2,
3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, and
3.15 (in each case other than a failure to repurchase Securities when
required pursuant to Sections 3.7 or 3.9, which failure shall
constitute an Event of Default under Section 6.1(2)) and such failure
continues for 30 days after the notice specified below;
(5) the Company defaults in the performance of or a breach by
the Company of any other covenant or agreement in this Indenture or
under the Securities (other than those referred to in (1), (2), (3) or
(4) above) and such default continues for 60 days after the notice
specified below;
(6) Indebtedness of the Company or any Restricted Subsidiary
is not paid within any applicable grace period after final maturity or
is accelerated by the holders thereof and the total amount of such
unpaid or accelerated Indebtedness exceeds $5.0 million or its foreign
currency equivalent at the time;
(7) the Company or a Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law (as defined below):
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian (as
defined below) of it or for any substantial part of its
property; or
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(D) makes a general assignment for the benefit of
its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any
Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of the
Company or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order,
decree or relief remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess
of $5.0 million or its foreign currency equivalent at the time is
rendered against the Company or a Significant Subsidiary if such
judgment or decree remains undischarged or unstayed for a period of 60
days following such judgment or decree becomes final and
non-appealable; or
(10) any Subsidiary Guarantee ceases to be in full force and
effect (except as contemplated by the terms hereof) or any Subsidiary
Guarantor denies or disaffirms its obligations under the terms of this
Indenture or its Subsidiary Guarantee.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
Notwithstanding the foregoing, a Default under clause (4) or
(5) of this Section 6.1 will not constitute an Event of Default until the
Trustee or the Holders of more than 25% in principal amount of the outstanding
Securities notify the Company of the Default and the Company does not cure such
Default within the time specified in said clause (4) or (5) after receipt of
such notice. Such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default".
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The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any Default or Event of Default under clauses (3), (4), (5), (6), (9) or
(10) of this Section 6.1.
SECTION 6.2. Acceleration. If an Event of Default (other
than an Event of Default specified in Section 6.1(7) or (8) with respect to the
Company or a Significant Subsidiary) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in outstanding principal
amount of the Securities by notice to the Company and the Trustee, may, and the
Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued but unpaid interest on all the Securities to be
due and payable. Upon such a declaration, such principal, premium and interest
shall, subject to Section 10.4 of this Indenture, be immediately due and
payable. In the event of a declaration of acceleration because an Event of
Default set forth in Section 6.1(6) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if
the event of default or payment default triggering such Event of Default
pursuant to Section 6.1(6) shall be remedied or cured by the Company and/or the
relevant Significant Subsidiaries or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration with respect
thereto. If an Event of Default specified in Section 6.1(7) or (8) with
respect to the Company occurs, the principal of, premium and accrued and unpaid
interest on all the Securities will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holders.
The Holders of a majority in principal amount of the Securities by notice to
the Trustee may waive all past defaults (except with respect to nonpayment of
principal, premium or interest) and rescind an acceleration with respect to the
Securities and its consequences if (i) the rescission would not conflict with
any judgment or decree of a court of competent jurisdiction and (ii) all
existing Events of Default, other than the nonpayment of principal or interest
that has become due solely because of such acceleration, have been cured or
waived. No such rescission shall affect any subsequent Default or Event of
Default or impair any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.4. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except (i) a
Default or Event of Default in the payment of the principal of or interest on a
Security or (ii) a Default or Event of Default in respect of a provision that
under Section 9.2 cannot be amended without the consent of each
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Securityholder affected. When a Default or Event of Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any consequent right.
SECTION 6.5. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture
or, subject to Sections 7.1 and 7.2, that the Trustee determines is unduly
prejudicial to the rights of other Securityholders or would involve the Trustee
in personal liability; provided, however, that the Trustee may take any other
action deemed proper by the Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against all losses
and expenses caused by taking or not taking such action.
SECTION 6.6. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in outstanding principal
amount of the Securities make a request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense
(including reasonable attorneys' fees and expenses);
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
SECTION 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of, premium (if any) or interest on the
Securities held by such Holder, on or after the respective due dates expressed
in the Securities, or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.8. Collection Suit by Trustee. If an Event of
Default specified in Section 6.1(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.7.
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SECTION 6.9. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its Subsidiaries
or its or their respective creditors or properties and, unless prohibited by
law or applicable regulations, may vote on behalf of the Holders in any
election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.7.
SECTION 6.10. Priorities. If the Trustee collects any money
or property pursuant to this Article VI, it shall pay out the money or property
in the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to holders of Senior Indebtedness to the extent
required by Article X;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section does not apply
to a suit by the Trustee, a suit by the Company, a suit by a Holder pursuant to
Section 6.7 or a suit by Holders of more than 10% in outstanding principal
amount of the Securities.
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ARTICLE VII
Trustee
SECTION 7.1. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, in the case of any such certificates or
opinions which by any provisions hereof are specifically required to
be furnished to the Trustee, the Trustee shall examine such
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts
stated therein).
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
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(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(i) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(j) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses (including
reasonable attorneys' fees and expenses) and liabilities that might be incurred
by it in compliance with such request or direction.
SECTION 7.2. Rights of Trustee. Subject to Section 7.1, (a)
The Trustee may rely on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on an Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection,
and the advice or opinion of counsel with respect to legal matters relating to
this Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
SECTION 7.3. Individual Rights of Trustee. The Trustee in
its individual or any other capacity may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Trustee.
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Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Trustee must comply with Sections 7.10 and
7.11.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for
any statement of the Company in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default or Event of
Default occurs and is continuing and if a Trust Officer has actual knowledge
thereof, the Trustee shall mail to each Securityholder notice of the Default or
Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment of principal of, premium (if any), or
interest on any Security (including payments pursuant to the optional
redemption or required repurchase provisions of such Security, if any), the
Trustee may withhold the notice if and so long as its board of directors, a
committee of its board of directors or a committee of its Trust Officers in
good faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.6. Reports by Trustee to Holders. As promptly as
practicable after each April 15 beginning with the April 15 following the date
of this Indenture, and in any event prior to June 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of such April 15 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA
Section 313(b). The Trustee shall also transmit by mail all reports required
by TIA Section 313(c).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.7. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time reasonable compensation for its acceptance
of this Indenture and services hereunder as the Company and the Trustee shall
from time to time agree in writing. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection,
costs of preparing and reviewing reports, certificates and other documents,
costs of preparation and mailing of notices to Securityholders and reasonable
costs of counsel retained by the Trustee in connection with the delivery of an
Opinion of Counsel or otherwise, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Company shall indemnify the Trustee against any
and all loss, liability or expense (including reasonable attorneys' fees and
expenses) incurred by it without negligence or bad faith on its part in
connection with the administration of this trust and the performance
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of its duties hereunder, including the costs and expenses of enforcing this
Indenture (including this Section 7.7) and of defending itself against any
claims (whether asserted by any Securityholder, the Company or otherwise). The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee may have separate counsel and the Company shall pay the fees
and expenses of such counsel provided that the Company shall not be required to
pay such fees and expenses if it assumes the Trustee's defense, and, in the
reasonable judgement of outside counsel to the Trustee, there is no conflict of
interest between the Company and the Trustee in connection with such defense.
The Company need not reimburse any expense or indemnify against any loss,
liability or expense incurred by the Trustee through the Trustee's own wilful
misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 6.1(7) or (8)
with respect to the Company, the expenses are intended to constitute expenses
of administration under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in
principal amount of the Securities may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Company shall remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed by the Company or by the
Holders of a majority in principal amount of the Securities and such Holders do
not reasonably promptly appoint a successor Trustee, or if a vacancy exists in
the office of the Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring
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Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The successor
Trustee shall mail a notice of its succession to Securityholders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in principal amount of the Securities may petition, at the
Company's expense, any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.7 shall continue for
the benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor to the Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The
Trustee shall have a combined capital and surplus of at least $100 million as
set forth in its most recent published annual report of condition. The Trustee
shall comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
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ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION 8.1. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.9) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or upon redemption and the Company irrevocably deposits
with the Trustee funds sufficient to pay at maturity or upon redemption all
outstanding Securities (other than Securities replaced pursuant to Section
2.9), including interest thereon to maturity or such redemption date, and if in
either case the Company pays all other sums payable hereunder by the Company,
then this Indenture shall, subject to Section 8.1(c), cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Company (accompanied by an Officers' Certificate and
an Opinion of Counsel stating that all conditions precedent specified herein
relating to the satisfaction and discharge of this Indenture have been complied
with) and at the cost and expense of the Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company at any
time may terminate (i) all its obligations under the Securities and this
Indenture ("legal defeasance option"), and after giving effect to such legal
defeasance, any omission to comply with such obligations shall no longer
constitute a Default or Event of Default or (ii) its obligations under Sections
3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14 and 3.15,
and 4.1(iii) and the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall no longer constitute a Default or an Event of Default under
Section 6.1(3) and 6.1(4) ("covenant defeasance option"), but except as
specified above, the remainder of this Indenture and the Securities shall be
unaffected thereby. The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option. If the
Company exercises its covenant defeasance option, the Company may, by written
notice to the Trustee prior to the delivery of the Opinion of Counsel referred
to in Section 8.2(8), elect to have any Subsidiary Guarantees in effect at such
time terminate.
If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of any event that, in the
absence of such legal defeasance, would have constituted an Event of Default,
and the Subsidiary Guarantees in effect at such time shall terminate. If the
Company exercises its covenant defeasance option, the events specified in
Sections 6.1(4), 6.1(6), 6.1(7) (but only with respect to a Significant
Subsidiary), 6.1(8) (but only with respect to a Significant Subsidiary), 6.1(9)
and 6.1(10) will no longer constitute an Event of Default, and payment of the
Securities may not be accelerated because of the occurrence of any such event
or because of the failure of the Company to comply with Sections 4.1(iii).
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Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.
(c) Notwithstanding the provisions of Sections 8.1(a) and
(b), the Company's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.9, 7.7,
7.8, 8.4, 8.5 and 8.6 shall survive until the Securities have been paid in
full. Thereafter, the Company's obligations in Sections 7.7 and 8.5 and the
Trustee's obligations in Section 8.4 shall survive.
SECTION 8.2. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the
Trustee for the benefit of the Holders money in U.S. dollars or U.S.
Government Obligations or a combination thereof for the payment of
principal of and interest on the Securities to maturity or redemption,
as the case may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and
interest when due on all the Securities to maturity;
(3) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default with respect to this Indenture resulting from the
Incurrence of Indebtedness, all or a portion of which will be used to
defease the Securities concurrently with such Incurrence);
(4) such legal defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a Default under,
this Indenture or any other material agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(5) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that (A) the Securities and (B)
assuming no intervening bankruptcy of the Company between the date of
deposit and the 91st day following the deposit and that no Holder of
the Securities is an insider of the Company, after 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' right generally;
(6) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article X;
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(7) the Company delivers to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the Investment Company Act of 1940;
(8) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not recognize
income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such legal defeasance had not occurred;
(9) in the case of the covenant defeasance option, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States to the effect that the Securityholders will not
recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(10) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Securities
and this Indenture as contemplated by this Article VIII have been
complied with.
SECTION 8.3. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant
to this Article VIII. It shall apply the deposited money and the money from
U.S. Government Obligations through the Paying Agent and in accordance with
this Indenture to the payment of principal of and interest on the Securities.
Money and securities so held in trust are not subject to Article X.
SECTION 8.4. Repayment to Company. The Trustee and the
Paying Agent shall promptly turn over to the Company upon request any excess
money or securities held by them upon payment of all the obligations under this
Indenture.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal of or interest on the Securities that remains
unclaimed for two years, and, thereafter, Securityholders entitled to the money
must look to the Company for payment as general creditors.
SECTION 8.5. Indemnity for U.S. Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
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SECTION 8.6. Reinstatement. If the Trustee or Paying Agent
is unable to apply any money or U.S. Government Obligations in accordance with
this Article VIII by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the obligations of the Company under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE IX
Amendments
SECTION 9.1. Without Consent of Holders. The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the
Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article IV in respect of the assumption by
a Successor Company of an obligation of the Company under this
Indenture;
(3) to provide for uncertificated Securities in addition to
or in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes
of Section 163(f) of the Code or in a manner such that the
uncertificated Securities are described in Section 163(f)(2)(B) of the
Code;
(4) to add guarantees with respect to the Securities or to
secure the Securities;
(5) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon
the Company;
(6) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA;
(7) to make any change that does not adversely affect the
rights of any Securityholder; or
(8) to provide for the issuance of the Exchange Securities,
which will have terms substantially identical in all material respects
to the Initial Securities (except that the transfer restrictions
contained in the Initial Securities will be modified or
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eliminated, as appropriate), and which will be treated, together with
any outstanding Initial Securities, as a single issue of securities.
An amendment under this Section may not make any change that
adversely affects the rights under Article X of any holder of Senior
Indebtedness or under Article XII of any holder of Guarantor Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness
(or any group or representative thereof authorized to give a consent) consent
to such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.2. With Consent of Holders. The Company, the
Subsidiary Guarantors and the Trustee may amend this Indenture or the
Securities without notice to any Securityholder but with the written consent of
the Holders of at least a majority in principal amount of the Securities.
However, without the consent of each Securityholder affected, an amendment may
not:
(1) reduce the amount of Securities whose Holders must
consent to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the Stated Maturity of
any Security;
(4) reduce the premium payable upon the redemption or
repurchase of any Security or change the time at which any Security
may or shall be redeemed or repurchased in accordance with this
Indenture;
(5) make any Security payable in money other than that stated
in the Security;
(6) impair the right of any Holder to receive payment of
principal of and interest on such Holder's Securities on or after the
due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Securities;
(7) make any change to the amendment provisions which require
each Holder's consent or to the waiver provisions.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
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An amendment under this Section may not make any change that
adversely affects the rights under Article X or Article XII of any holder of
Senior Indebtedness or Guarantor Senior Indebtedness then outstanding unless
the holders of such Senior Indebtedness or Guarantor Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section.
SECTION 9.3. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers.
A consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective.
After an amendment or waiver becomes effective, it shall bind every
Securityholder. An amendment or waiver shall become effective upon receipt by
the Trustee of the requisite number of written consents under Section 9.1 or
9.2 as applicable.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Securityholders at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to give such consent or to revoke any
consent previously given or to take any such action, whether or not such
Persons continue to be Holders after such record date. No such consent shall
become valid or effective more than 120 days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder
of the Security to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make
the appropriate notation or to issue a new Security shall not affect the
validity of such amendment.
SECTION 9.6. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article IX if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need
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not sign it. In signing such amendment the Trustee shall be entitled to
receive indemnity reasonably satisfactory to it and to receive, and (subject to
Sections 7.1 and 7.2) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such amendment is authorized
or permitted by this Indenture.
ARTICLE X
Subordination
SECTION 10.1. Agreement To Subordinate. The Company agrees,
and each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities and other obligations relating to the Securities
are subordinated in right of payment, to the extent and in the manner provided
in this Article X, to the prior payment when due in cash or Cash Equivalents of
all Senior Indebtedness and that the subordination is for the benefit of and
enforceable by the holders of Senior Indebtedness. The Securities shall in all
respects rank pari passu with all other Senior Subordinated Indebtedness of the
Company and only Indebtedness of the Company which is Senior Indebtedness will
rank senior to the Securities in accordance with the provisions set forth
herein. All provisions of this Article X shall be subject to Section 10.12.
SECTION 10.2. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets or securities of the Company upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its respective properties:
(1) holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full in cash or Cash Equivalents of the
Senior Indebtedness (including interest accruing after, or which would
accrue but for, the commencement of any proceeding at the rate
specified in the applicable Senior Indebtedness, whether or not a
claim for such interest would be allowed) before Securityholders shall
be entitled to receive any payment of principal of or interest on or
other amounts with respect to the Securities; and
(2) until the Senior Indebtedness is paid in full in cash or
Cash Equivalents, any payment or distribution to which Securityholders
would be entitled but for this Article X shall be made to holders of
Senior Indebtedness as their respective interests may appear.
SECTION 10.3. Default on Senior Indebtedness. The Company
shall not pay the principal of, premium (if any) or interest on or other
amounts with respect to the Securities or make any deposit pursuant to Section
8.1 or repurchase, redeem or otherwise retire any Securities ("pay the
Securities") if (i) any Senior Indebtedness of the Company is not paid when due
in cash or Cash Equivalents or (ii) any other default on Senior Indebtedness of
the Company occurs and the maturity of such Senior Indebtedness of the Company
is accelerated in accordance with its terms unless, in either case, (x) the
default has
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been cured or waived and any such acceleration has been rescinded in writing or
(y) such Senior Indebtedness of the Company has been paid in full in cash or
Cash Equivalents; provided, however, that the Company may pay the Securities
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the Senior
Indebtedness of the Company with respect to which either of the events set
forth in clause (i) or (ii) of this sentence has occurred or is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
the Company may not pay the Securities for a period (a "Payment Blockage
Period") commencing upon the receipt by the Trustee (with a copy to the
Company) of written notice (a "Blockage Notice") of such default from the
Representative of the holders of such Designated Senior Indebtedness specifying
an election to effect a Payment Blockage Period and ending 179 days thereafter
(or earlier if such Payment Blockage Period is terminated (i) by written notice
to the Trustee and the Company from the Person or Persons who gave such
Blockage Notice, (ii) because the default giving rise to such Blockage Notice
is no longer continuing or (iii) because such Designated Senior Indebtedness
has been repaid in full in cash or Cash Equivalents). Notwithstanding the
provisions of the immediately preceding sentence, unless the holders of such
Designated Senior Indebtedness or the Representative of such holders shall have
accelerated the maturity of such Designated Senior Indebtedness, the Company
may resume payments on the Securities after the end of such Payment Blockage
Period. Not more than one Blockage Notice may be given in any consecutive
360-day period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness during such period.
SECTION 10.4. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness (or their Representatives) of the acceleration; provided,
however, that the Company and the Trustee shall be obligated to notify such a
Representative only if such Representative has delivered or caused to be
delivered to the Company and the Trustee an address for service of such a
notice (and the Company and the Trustee shall only be obligated to deliver the
notice to the address so specified). If any Designated Senior Indebtedness is
outstanding, the Company shall not pay the Securities until five Business Days
after the holders or Representative of such Designated Senior Indebtedness
receives notice of such acceleration and, thereafter, may pay the Securities
only if this Article X otherwise permits payments at that time.
SECTION 10.5. When Distribution Must Be Paid Over. If a
payment or distribution is made to the Trustee or Securityholders that because
of this Article X should not have been made to them, the Trustee or the
Securityholders who receive the payment or distribution shall hold it in trust
for holders of Senior Indebtedness and promptly pay it over to them as their
respective interests may appear.
SECTION 10.6. Subrogation. After all Senior Indebtedness is
paid in full in cash or Cash Equivalents and until the Securities are paid in
full, Securityholders shall be subrogated to the rights of holders of Senior
Indebtedness to receive distributions applicable to
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Senior Indebtedness. A payment or distribution made under this Article X to
holders of Senior Indebtedness which otherwise would have been made to
Securityholders is not, as between the Company and Securityholders, a payment
by the Company of Senior Indebtedness.
SECTION 10.7. Relative Rights. This Article X defines the
relative rights of Securityholders and holders of Senior Indebtedness. Nothing
in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default or Event of Default, subject to
the rights of holders of Senior Indebtedness to receive payments and
distributions otherwise payable to Securityholders.
SECTION 10.8. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness to enforce the subordination of
the Indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Company or by the failure of any of them to comply with
this Indenture.
SECTION 10.9. Rights of Trustee and Paying Agent.
Notwithstanding Section 10.3, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than one Business Day prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article X. The Company, the Registrar or co-registrar, the
Paying Agent, a Representative or a holder of Senior Indebtedness may give the
notice; provided, however, that, if an issue of Senior Indebtedness has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
The Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article X with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior Indebtedness; and
nothing in Article VII shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article X shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 7.7. Each Paying Agent shall have the
same rights and obligations under this Article X as does the Trustee.
SECTION 10.10. Distribution or Notice to Representative.
Whenever a payment or distribution is to be made or a notice given to holders
of Senior Indebtedness, the payment or distribution may be made and the notice
given to their Representative (if any).
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SECTION 10.11. Article X Not To Prevent Events of Default or
Limit Right To Accelerate. The failure to make a payment in respect of the
Securities by reason of any provision in this Article X shall not be construed
as preventing the occurrence of a Default or Event of Default. Nothing in this
Article X shall have any effect on the right of the Securityholders or the
Trustee to accelerate the maturity of the Securities.
SECTION 10.12. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments from money
or the proceeds of U.S. Government Obligations held in trust under Article VIII
by the Trustee for the payment of principal of and interest on the Securities
shall not be subordinated to the prior payment of any Senior Indebtedness or
subject to the restrictions set forth in this Article X, and none of the
Securityholders shall be obligated to pay over any such amount to the Company,
any holder of Senior Indebtedness of the Company, or any other creditor of the
Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article X, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other Indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article X. In the event that the Trustee determines, in
good faith, that evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article X, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article X, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.1 and 7.2 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article X.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
its behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Senior Indebtedness as provided in this Article X and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and, subject to Section 10.9, shall not be
liable to any such holders if it shall mistakenly pay over or distribute to
Securityholders or the Company or any other Person, money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
X or otherwise.
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SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and
are intended to be, an inducement and a consideration to each holder of any
Senior Indebtedness, whether such Senior Indebtedness was created or acquired
before or after the issuance of the Securities, to acquire and continue to
hold, or to continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Indebtedness.
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ARTICLE XI
Guarantee
SECTION 11.1. Guarantee. Each Subsidiary Guarantor hereby
fully, unconditionally and irrevocably guarantees, as primary obligor and not
merely as surety, jointly and severally with each other Subsidiary Guarantor,
to each Holder of the Securities and the Trustee, the full and punctual payment
when due, whether at maturity, by acceleration, by redemption or otherwise, of
the principal of, premium, if any, and interest on the Securities (all the
foregoing being hereinafter collectively called the "Obligations"). Each
Subsidiary Guarantor further agrees (to the extent permitted by law) that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from it, and that it will remain bound under this Article XI
notwithstanding any extension or renewal of any Obligation.
Each Subsidiary Guarantor waives presentation to, demand of
payment from and protest to the Company of any of the Obligations and also
waives notice of protest for nonpayment. Each Subsidiary Guarantor waives
notice of any default under the Securities or the Obligations. The obligations
of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure
of any Holder to assert any claim or demand or to enforce any right or remedy
against the Company or any other person under this Indenture, the Securities or
any other agreement or otherwise; (b) any extension or renewal of any thereof;
(c) any rescission, waiver, amendment or modification of any of the terms or
provisions of this Indenture, the Securities or any other agreement; (d) the
release of any security held by any Holder or the Trustee for the Obligations
or any of them; (e) the failure of any Holder to exercise any right or remedy
against any other Subsidiary Guarantor; or (f) any change in the ownership of
the Company.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guarantee herein constitutes a Guarantee of payment when due (and not a
Guarantee of collection) and waives any right to require that any resort be had
by any Holder to any security held for payment of the Obligations.
The Subsidiary Guarantee of each Subsidiary Guarantor is, to
the extent and in the manner set forth in Article XII, subordinated and subject
in right of payment to the prior payment in full of all Guarantor Senior
Indebtedness of such Subsidiary Guarantor and the Subsidiary Guarantee is made
subject to such provisions of such Guarantees.
The obligations of each Subsidiary Guarantor hereunder shall
not be subject to any reduction, limitation, impairment or termination for any
reason (other than payment of the Obligations in full), including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Obligations
or otherwise. Without limiting the generality of the foregoing, the
obligations of each Subsidiary Guarantor herein shall not be discharged or
impaired or otherwise affected by
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the failure of any Holder to assert any claim or demand or to enforce any
remedy under this Indenture, the Securities or any other agreement, by any
waiver or modification of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Obligations, or by any other
act or thing or omission or delay to do any other act or thing which may or
might in any manner or to any extent vary the risk of any Subsidiary Guarantor
or would otherwise operate as a discharge of such Subsidiary Guarantor as a
matter of law or equity.
Each Subsidiary Guarantor further agrees that its Subsidiary
Guarantee herein shall continue to be effective or be reinstated, as the case
may be, if at any time payment, or any part thereof, of principal of or
interest on any of the Obligations is rescinded or must otherwise be restored
by any Holder upon the bankruptcy or reorganization of the Company or
otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder has at law or in equity against any Subsidiary
Guarantor by virtue hereof, upon the failure of the Company to pay any of the
Obligations when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, each Subsidiary Guarantor hereby
promises to and will, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders an amount equal to the sum of
(i) the unpaid amount of such Obligations then due and owing and (ii) accrued
and unpaid interest on such Obligations then due and owing (but only to the
extent not prohibited by law).
Each Subsidiary Guarantor further agrees that, as between such
Subsidiary Guarantor, on the one hand, and the Holders, on the other hand, (x)
the maturity of the Obligations guaranteed hereby may be accelerated as
provided in this Indenture for the purposes of the Subsidiary Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby and (y) in the
event of any such declaration of acceleration of such Obligations, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Subsidiary Guarantor for the purposes of this Subsidiary
Guarantee.
Each Subsidiary Guarantor also agrees to pay any and all
reasonable costs and expenses (including reasonable attorneys' fees) incurred
by the Trustee or the Holders in enforcing any rights under this Section.
SECTION 11.2. Limitation on Liability; Termination, Release
and Discharge. The obligations of each Subsidiary Guarantor will be limited to
the maximum amount as will, after giving effect to all other contingent and
fixed liabilities of such Subsidiary Guarantor (including, without limitation,
any guarantees under the Senior Credit Agreement) and after giving effect to
any collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Subsidiary Guarantee or pursuant to its contribution obligations
under this Indenture, result in the obligations of such Subsidiary Guarantor
under its Subsidiary Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law.
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Each Subsidiary Guarantor may consolidate with or merge into or sell
its assets to the Company or another Subsidiary Guarantor without limitation.
Each Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a corporation, partnership or trust other than
the Company or another Subsidiary Guarantor except that if the surviving
corporation of any such merger or consolidation is a Subsidiary of the Company,
such Subsidiary shall not be a Foreign Subsidiary. Upon the sale or disposition
of a Subsidiary Guarantor (by merger, consolidation, the sale of its Capital
Stock or the sale of all or substantially all of its assets) to a Person
(whether or not an Affiliate of the Subsidiary Guarantor) which is not a
Subsidiary of the Company, which sale or disposition is otherwise in compliance
with this Indenture (including Section 3.7), such Subsidiary Guarantor will be
deemed released from all its obligations under this Indenture and its
Subsidiary Guarantee and such Subsidiary Guarantee will terminate; provided,
however, that any such termination will occur only to the extent that all
obligations of such Subsidiary Guarantor under the Senior Credit Agreement and
all of its guarantees of, and under all of its pledges of assets or other
security interests which secure, any other Indebtedness of the Company will
also terminate upon such release, sale or transfer.
SECTION 11.3. Right of Contribution. Each Subsidiary
Guarantor hereby agrees that to the extent that any Subsidiary Guarantor shall
have paid more than its proportionate share of any payment made on the
obligations under the Subsidiary Guarantees, such Subsidiary Guarantor shall be
entitled to seek and receive contribution from and against the Company or any
other Subsidiary Guarantor who has not paid its proportionate share of such
payment. Each Subsidiary Guarantor's right of contribution shall be subject to
the terms and conditions of Section 3.6. The provisions of this Section 11.3
shall in no respect limit the obligations and liabilities of each Subsidiary
Guarantor to the Trustee and the Holders and each Subsidiary Guarantor shall
remain liable to the Trustee and the Holders for the full amount guaranteed by
such Subsidiary Guarantor hereunder.
SECTION 11.4. No Subrogation. Notwithstanding any payment or
payments made by each Subsidiary Guarantor hereunder, no Subsidiary Guarantor
shall be entitled to be subrogated to any of the rights of the Trustee or any
Holder against the Company or any other Subsidiary Guarantor or any collateral
security or guarantee or right of offset held by the Trustee or any Holder for
the payment of the Obligations, nor shall any Subsidiary Guarantor seek or be
entitled to seek any contribution or reimbursement from the Company or any
other Subsidiary Guarantor in respect of payments made by such Subsidiary
Guarantor hereunder, until all amounts owing to the Trustee and the Holders by
the Company on account of the Obligations are paid in full. If any amount
shall be paid to any Subsidiary Guarantor on account of such subrogation rights
at any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Subsidiary Guarantor in trust for the Trustee and
the Holders, segregated from other funds of such Subsidiary Guarantor, and
shall, forthwith upon receipt by such Subsidiary Guarantor, be turned over to
the Trustee in the exact form received by such Subsidiary Guarantor (duly
indorsed by such Subsidiary Guarantor to the Trustee, if required), to be
applied against the Obligations.
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ARTICLE XII
Subordination of Subsidiary Guarantees
SECTION 12.1. Agreement To Subordinate. Each Subsidiary
Guarantor agrees, and each Securityholder by accepting a Security agrees, that
the Indebtedness evidenced by each Subsidiary Guarantee and other obligations
relating to the Securities are subordinated in right of payment, to the extent
and in the manner provided in this Article XII, to the prior payment when due
in cash or Cash Equivalents of all Guarantor Senior Indebtedness and that the
subordination is for the benefit of and enforceable by the holders of Guarantor
Senior Indebtedness. Each Subsidiary Guarantee shall in all respects rank pari
passu with all other Guarantor Senior Subordinated Indebtedness of such
Subsidiary Guarantor and only Indebtedness of the Subsidiary Guarantor which is
Guarantor Senior Indebtedness will rank senior to such Subsidiary Guarantee in
accordance with the provisions set forth herein. All provisions of this
Article XII shall be subject to Section 12.12.
SECTION 12.2. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets or securities of any Subsidiary Guarantor
upon a total or partial liquidation or a total or partial dissolution of a
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to any Subsidiary Guarantor or its
respective properties:
(1) holders of Guarantor Senior Indebtedness shall be
entitled to receive payment in full in cash or Cash Equivalents of the
Guarantor Senior Indebtedness (including interest accruing after, or
which would accrue but for, the commencement of any proceeding at the
rate specified in the applicable Guarantor Senior Indebtedness,
whether or not a claim for such interest would be allowed) before
Securityholders shall be entitled to receive any payment of principal
of, premium, if any, or interest on or other amounts with respect to
the Securities; and
(2) until the Guarantor Senior Indebtedness is paid in full
in cash or Cash Equivalents, any payment or distribution to which
Securityholders would be entitled but for this Article XII shall be
made to holders of Guarantor Senior Indebtedness as their respective
interests may appear.
SECTION 12.3. Default on Senior Indebtedness. No Subsidiary
Guarantor shall pay the principal of, premium (if any) or interest on or other
amounts with respect to the Securities or make any deposit pursuant to Section
8.1 or pay the Securities if (i) any Guarantor Senior Indebtedness or Senior
Indebtedness of the Company is not paid when due in cash or Cash Equivalents or
(ii) any other default on Guarantor Senior Indebtedness or Senior Indebtedness
of the Company occurs and the maturity of such Guarantor Senior Indebtedness or
Senior Indebtedness of the Company is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded in writing or (y) such Guarantor Senior
Indebtedness or Senior Indebtedness of the Company has been paid in full in
cash or Cash Equivalents; provided, however, that a Subsidiary Guarantor may
pay the Securities without regard to the
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foregoing if the Company and the Trustee receive written notice approving such
payment from the Representative of the Guarantor Senior Indebtedness or the
Senior Indebtedness of the Company with respect to which either of the events
set forth in clause (i) or (ii) of this sentence has occurred or is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
the Subsidiary Guarantor may not pay the Securities for a Payment Blockage
Period commencing upon the receipt by the Trustee (with a copy to the Company)
of a Blockage Notice of such default from the Representative of the holders of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Trustee and the
Company from the Person or Persons who gave such Blockage Notice, (ii) because
the default giving rise to such Blockage Notice is no longer continuing or
(iii) because such Designated Senior Indebtedness has been repaid in full in
cash or Cash Equivalents). Notwithstanding the provisions of the immediately
preceding sentence, unless the holders of such Designated Senior Indebtedness
or the Representative of such holders shall have accelerated the maturity of
such Designated Senior Indebtedness, a Subsidiary Guarantor may resume payments
on the Securities after the end of such Payment Blockage Period. Not more than
one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period.
SECTION 12.4. Acceleration of Payment of Securities. If
payment of the Securities is accelerated because of an Event of Default and if
any Designated Senior Indebtedness is outstanding, no Subsidiary Guarantor
shall pay the Securities until five Business Days after the holders or
Representative of the Designated Senior Indebtedness receives notice of such
acceleration as provided in this Indenture and, thereafter, Subsidiary
Guarantors may pay the Securities only if this Article XII otherwise permits
payments at that time.
SECTION 12.5. When Distribution Must Be Paid Over. If a
payment or distribution is made to the Trustee or Securityholders that because
of this Article XII should not have been made to them, the Trustee or the
Securityholders who receive the payment or distribution shall hold it in trust
for holders of Guarantor Senior Indebtedness and promptly pay it over to them
as their respective interests may appear.
SECTION 12.6. Subrogation. After all Guarantor Senior
Indebtedness is paid in full in cash or Cash Equivalents and the Securities are
paid in full, Securityholders shall be subrogated to the rights of holders of
Guarantor Senior Indebtedness to receive distributions applicable to Guarantor
Senior Indebtedness. A payment or distribution made under this Article XII to
holders of Guarantor Senior Indebtedness which otherwise would have been made
to Securityholders is not, as between a Subsidiary Guarantor and
Securityholders, a payment by such Subsidiary Guarantor of Guarantor Senior
Indebtedness.
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SECTION 12.7. Relative Rights. This Article XII defines the
relative rights of Holders and holders of Guarantor Senior Indebtedness.
Nothing in the Subsidiary Guarantee shall:
(1) impair, as between a Subsidiary Guarantor and Holders,
the obligation of a Subsidiary Guarantor which is absolute and
unconditional, to pay the Obligations in accordance with the terms of
the Subsidiary Guarantee; or
(2) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default or Event of Default, subject to
the rights of holders of Guarantor Senior Indebtedness to receive
payments and distributions otherwise payable to Securityholders.
SECTION 12.8. Subordination May Not Be Impaired by Subsidiary
Guarantor. No right of any holder of Guarantor Senior Indebtedness to enforce
the subordination of the Indebtedness evidenced by the Subsidiary Guarantee
shall be impaired by any act or failure to act by a Subsidiary Guarantor or by
the failure of any of them to comply with the Subsidiary Guarantee or this
Indenture.
SECTION 12.9. Rights of Trustee and Paying Agent.
Notwithstanding Section 12.3, the Trustee or Paying Agent may continue to make
payments on the Securities and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than one Business Day prior to the date of such payment, a Trust
Officer of the Trustee receives notice satisfactory to it that payments may not
be made under this Article XII. A Subsidiary Guarantor, the Company, the
Registrar or co-registrar, the Paying Agent, a Representative or a holder of
Senior Indebtedness of the Company or Guarantor Senior Indebtedness may give
the notice; provided, however, that, if an issue of Senior Indebtedness of the
Company or Guarantor Senior Indebtedness has a Representative, only the
Representative may give the notice.
The Trustee in its individual or any other capacity may hold
Guarantor Senior Indebtedness with the same rights it would have if it were not
Trustee. The Registrar and co-registrar and the Paying Agent may do the same
with like rights. The Trustee shall be entitled to all the rights set forth in
this Article XII with respect to any Guarantor Senior Indebtedness which may at
any time be held by it, to the same extent as any other holder of Guarantor
Senior Indebtedness; and nothing in Article VII shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article XII shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.7. Each
Paying Agent shall have the same rights and obligations under this Article XII
as does the Trustee.
SECTION 12.10. Distribution or Notice to Representative.
Whenever a payment or distribution is to be made or a notice given to holders
of Guarantor Senior Indebtedness, the payment or distribution may be made and
the notice given to their Representative (if any).
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SECTION 12.11. Article XII Not To Prevent Events of Default
or Limit Right To Accelerate. The failure to make a payment in respect of the
Securities by reason of any provision in this Article XII shall not be
construed as preventing the occurrence of a Default or Event of Default.
Nothing in this Article XII shall have any effect on the right of the
Securityholders or the Trustee to accelerate the maturity of the Securities.
SECTION 12.12. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments from money
or the proceeds of U.S. Government Obligations held in trust under Article VIII
by the Trustee for the payment of principal of and interest on the Securities
shall not be subordinated to the prior payment of any Guarantor Senior
Indebtedness or subject to the restrictions set forth in this Article XII, and
none of the Securityholders shall be obligated to pay over any such amount to a
Subsidiary Guarantor, any holder of Guarantor Senior Indebtedness or Senior
Indebtedness of the Company, or any other creditor of a Subsidiary Guarantor or
the Company.
SECTION 12.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article XII, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.2
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Guarantor
Senior Indebtedness or Senior Indebtedness of the Company for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Guarantor Senior Indebtedness or Senior
Indebtedness and other Indebtedness of the Company or a Subsidiary Guarantor,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
XII. In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any Person as a holder of Guarantor
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article XII, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Guarantor Senior
Indebtedness held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article XII, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.1 and 7.2 shall be applicable to all actions or
omissions of actions by the Trustee pursuant to this Article XII.
SECTION 12.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on
its behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Securityholders and the
holders of Guarantor Senior Indebtedness and Senior Indebtedness of the Company
as provided in this Article XII and appoints the Trustee as attorney-in-fact
for any and all such purposes.
SECTION 12.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Guarantor Senior
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Indebtedness or Senior Indebtedness of the Company and, subject to Section
12.9, shall not be liable to any such holders if it shall mistakenly pay over
or distribute to Securityholders or the Company or any other Person, money or
assets to which any holders of Guarantor Senior Indebtedness shall be entitled
by virtue of this Article XII or otherwise.
SECTION 12.16. Reliance on Subordination Provisions. Each
Securityholder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Guarantor Senior Indebtedness,
whether such Guarantor Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Guarantor Senior Indebtedness and such holder of
Guarantor Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Guarantor Senior Indebtedness.
ARTICLE XIII
Miscellaneous
SECTION 13.1. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which
is required to be included in this Indenture by the TIA, the provision required
by the TIA shall control.
SECTION 13.2. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Home Products International, Inc.
4501 West 47th Street
Chicago, Illinois 60632
Attention: James Winslow
With a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Kenneth Kolmin
<PAGE> 90
82
if to the Trustee:
LaSalle National Bank
135 South LaSalle Street, Suite 1825
Chicago, Illinois 60603
Attention: Corporate Trust Services Division
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a registered
Securityholder shall be mailed to the Securityholder at the Securityholder's
address as it appears on the registration books of the Registrar and shall be
sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.3. Communication by Holders with other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA Section 312(c).
SECTION 13.4. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 13.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate
or opinion has read such covenant or condition;
<PAGE> 91
83
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
In giving such Opinion of Counsel, counsel may rely as to
factual matters on an Officer's Certificate or on certificates of public
officials.
SECTION 13.6. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at
the time shall be considered in any such determination.
SECTION 13.7. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by, or a meeting of,
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 13.8. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or other day on which commercial banking institutions are
authorized or required to be closed in New York City. If a payment date is a
Legal Holiday, payment shall be made on the next succeeding day that is not a
Legal Holiday, and no interest shall accrue for the intervening period. If a
regular record date is a Legal Holiday, the record date shall not be affected.
SECTION 13.9. GOVERNING LAW. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 13.10. No Recourse Against Others. An incorporator,
director, officer, employee, stockholder or controlling person, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By
<PAGE> 92
84
accepting a Security, each Securityholder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Securities.
SECTION 13.11. Successors. All agreements of the Company in
this Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough
to prove this Indenture.
SECTION 13.13. Variable Provisions. The Company initially
appoints the Trustee as Paying Agent and Registrar and custodian with respect
to any Global Securities.
SECTION 13.14. Qualification of Indenture. The Company shall
qualify this Indenture under the TIA in accordance with the terms and
conditions of the Exchange and Registration Rights Agreement and shall pay all
reasonable costs and expenses (including attorneys' fees and expenses for the
Company, the Trustee and the Holders) incurred in connection therewith,
including, but not limited to, costs and expenses of qualification of this
Indenture and the Securities and printing this Indenture and the Securities.
The Trustee shall be entitled to receive from the Company any such Officers'
Certificates, Opinions of Counsel or other documentation as it may reasonably
request in connection with any such qualification of this Indenture under the
TIA.
SECTION 13.15. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
<PAGE> 93
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
HOME PRODUCTS INTERNATIONAL, INC.
By:
----------------------------
Name:
Title:
SELFIX, INC.,
as a Subsidiary Guarantor
By:
-------------------------------
Name:
Title:
SEYMOUR HOUSEWARES CORPORATION,
as a Subsidiary Guarantor
By:
-------------------------------
Name:
Title:
SHUTTERS, INC.,
as a Subsidiary Guarantor
By:
-------------------------------
Name:
Title:
TAMOR CORPORATION,
as a Subsidiary Guarantor
By:
-------------------------------
Name:
Title:
LASALLE NATIONAL BANK
By:
-------------------------------
Name:
Title:
<PAGE> 94
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
No. [___] Principal Amount $[_______]
CUSIP NO. ____________
9 5/8% Senior Subordinated Notes due 2008
Home Products International, Inc., a Delaware corporation,
promises to pay to [___________], or registered assigns, the principal sum of
[__________________] Dollars on May 15, 2008.
Interest Payment Dates: May 15 and November 15, commencing on
November 15, 1998
Record Dates: May 1 and November 1
Additional provisions of this Security are set forth on the
other side of this Security.
HOME PRODUCTS INTERNATIONAL, INC.
By:
--------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
LASALLE NATIONAL BANK
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By
------------------------------
Authorized Signatory Date: _____________, 1998
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<PAGE> 95
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
9 5/8% Senior Subordinated Note due 2008
1. Interest
Home Products International, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above.
The Company will pay interest semiannually on May 15 and
November 15 of each year commencing on November 15, 1998. Interest on the
Securities will accrue from the most recent date to which interest has been
paid on the Securities or, if no interest has been paid, from November 15,
1998. The Company shall pay interest on overdue principal or premium, if any
(plus interest on such interest to the extent lawful), at the rate borne by the
Securities to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment
By at least 12:00 p.m. (New York City time) on the date on
which any principal of or interest on any Security is due and payable, the
Company shall irrevocably deposit with the Trustee or the Paying Agent money
sufficient to pay such principal, premium, if any, and/or interest. The
Company will pay interest (except Defaulted Interest) to the Persons who are
registered Holders of Securities at the close of business on the May 1 or
November 1 immediately preceding the interest payment date even if Securities
are cancelled, repurchased or redeemed after the record date and on or before
the interest payment date. Holders must surrender Securities to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal
and interest by check payable in such money. It may mail an interest check to
a Holder's registered address.
3. Paying Agent and Registrar
Initially, LaSalle National Bank, a banking corporation duly
organized and existing under the laws of the State of Illinois (the "Trustee"),
will act as Trustee, Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company or any of its domestically incorporated
Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of May 14, 1998 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), between the Company and
the Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939
A-2
<PAGE> 96
(15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture
(the "Act"). Capitalized terms used herein and not defined herein have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and Securityholders are referred to the Indenture and the Act for a
statement of those terms.
The Securities are general unsecured senior subordinated
obligations of the Company limited to $125.0 million aggregate principal amount
(subject to Section 2.9 of the Indenture). The aggregate principal amount of
notes which may be authenticated and delivered under the Indenture, including
the Securities, is limited to $250.0 million (subject to Section 2.9 of the
Indenture). This Security is one of the Initial Securities referred to in the
Indenture. The Securities include the Initial Securities and any Exchange
Securities issued in exchange for the Initial Securities pursuant to the
Indenture and the Exchange and Registration Rights Agreement. The Initial
Securities and the Exchange Securities are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on:
the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries,
the Incurrence of Indebtedness by the Company and its Subsidiary Guarantors if
subordinate or junior in any respect to any Senior Indebtedness or Guarantor
Senior Indebtedness, respectively, the payment of dividends and other
distributions on the Capital Stock of the Company and its Restricted
Subsidiaries, the purchase or redemption of Capital Stock of the Company and
Capital Stock of such Restricted Subsidiaries, certain purchases or redemptions
of Subordinated Indebtedness, the sale or transfer of assets and Capital Stock
of Restricted Subsidiaries, the issuance or sale of Capital Stock of Restricted
Subsidiaries, the business activities and investments of the Company and its
Restricted Subsidiaries and transactions with Affiliates. In addition, the
Indenture limits the ability of the Company and its Restricted Subsidiaries to
restrict distributions and dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal,
premium, if any, and interest on the Securities and all other amounts payable
by the Company under the Indenture and the Securities when and as the same
shall be due and payable, whether at maturity, by acceleration or otherwise,
according to the terms of the Securities and the Indenture, the Subsidiary
Guarantors have unconditionally guaranteed (and future Subsidiary Guarantors,
together with the Subsidiary Guarantors, will unconditionally guarantee),
jointly and severally, such obligations on a senior subordinated basis pursuant
to the terms of the Indenture.
5. Redemption
Except as set forth below, the Securities will not be
redeemable at the option of the Company prior to May 15, 2003. On and after
such date, the Securities will be redeemable, at the Company's option, in whole
or in part, at any time upon not less than 30 nor more than 60 days prior
notice mailed by first-class mail to each holder's registered address, at the
following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest to the redemption date (subject to the right
of holders of record on the relevant record date to receive interest due on the
relevant interest payment date):
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<PAGE> 97
If redeemed during the 12-month period commencing on May 15 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ------ ----------------
<S> <C>
2003 104.813 %
2004 103.208 %
2005 101.604 %
2006 and thereafter 100.000 %
</TABLE>
In addition, at any time and from time to time prior to May
15, 2001, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Securities with the proceeds of one or more Equity
Offerings received by, or invested in, the Company so long as there is a Public
Market at the time of such redemption, at a redemption price (expressed as a
percentage of principal amount) of 109.625% plus accrued and unpaid interest,
if any, to the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant interest
payment date); provided, however, that at least 65% of the original principal
amount of the Securities must remain outstanding after each such redemption;
provided, further, that each such redemption occurs within 90 days after the
closing of each Equity Offering.
In the case of any partial redemption, selection of the Securities for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Securities of $1,000 in original principal amount or
less will be redeemed in part. If any Security is to be redeemed in part only,
the notice of redemption relating to such Security shall state the portion of
the principal amount thereof to be redeemed. A new Security in principal amount
equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original Security.
6. Repurchase Provisions
(a) Upon a Change of Control, unless the Company has
exercised its right to redeem the Securities as described under Section 5
hereof, any Holder of Securities will have the right to cause the Company to
repurchase all or any part of the Securities of such Holder at a purchase price
in cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) as provided in, and subject to the terms of, the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales permitted by the Indenture, when the aggregate amount of Excess
Proceeds equals or exceeds $10.0 million, the Company shall make an Offer for
all outstanding Securities pro rata up to a maximum principal amount (expressed
as a multiple of $1,000) of Securities equal to such Excess Proceeds, at a
purchase price in cash equal to 100% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of purchase in
accordance with the procedures set forth in Section 3.7 of the Indenture.
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<PAGE> 98
7. Subordination
The Securities are subordinated to Senior Indebtedness and the
Guarantees are subordinated to Guarantor Senior Indebtedness, each as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give them effect and
appoints the Trustee as attorney-in-fact for such purpose. The Securities will
in all respects rank pari passu with all other Senior Subordinated
Indebtedness.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the
transfer of or exchange (i) any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) for a period beginning 15 days before the mailing of a notice
of Securities to be redeemed and ending on the date of such mailing or (ii) any
Securities for a period beginning 15 days before an interest payment date and
ending on such interest payment date.
9. Persons Deemed Owners
The registered holder of this Security may be treated as the
owner of it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must
look only to the Company and not to the Trustee for payment.
11. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the then outstanding
Securities and (ii) any default (other than with respect to nonpayment) or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in principal amount of the then outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent
of any Securityholder, the Company and the
A-5
<PAGE> 99
Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article IV of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the Act,
or to make any change that does not adversely affect the rights of any
Securityholder, or to provide for the issuance of Exchange Securities.
13. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest when due on the Securities; (ii) default in
payment of principal on the Securities at maturity, upon required repurchase or
upon redemption pursuant to paragraphs 5 and 6 of the Securities, upon
declaration or otherwise; (iii) the failure by the Company to comply with its
obligations under Article IV of the Indenture, (iv) failure by the Company to
comply for 30 days after notice with any of its obligations under the covenants
described under Sections 3.2 through 3.15 inclusive of the Indenture (in each
case, other than a failure to purchase Securities, which shall constitute an
Event of Default under clause (ii) above), (v) the failure by the Company to
comply for 60 days after notice with its other agreements contained in the
Indenture, (vi) Indebtedness of the Company or any Restricted Subsidiary if not
paid within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $5 million (the "cross acceleration
provision"), (vii) certain events of bankruptcy, insolvency or reorganization
of the Company or a Significant Subsidiary (the "bankruptcy provisions"),
(viii) any judgment or decree for the payment of money in excess of $5.0
million is rendered against the Company or a Significant Subsidiary and such
judgment or decree shall remain undischarged or unstayed for a period of 60
days after such judgment becomes final and non-appealable (the "judgment
default provision") or (ix) any Subsidiary Guarantee ceases to be in full force
and effect (except as contemplated by the terms of the Indenture) or any
Subsidiary Guarantor denies or disaffirms its obligations under the Indenture
or its Subsidiary Guarantee. However, a default under clauses (iv) and (v) will
not constitute an Event of Default until the Trustee or the holders of more
than 25% in principal amount of the outstanding Securities notify the Company
of the default and the Company does not cure such default within the time
specified in clauses (iv) and (v) hereof after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Securities may
declare all the Securities to be due and payable immediately. Certain events
of bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Securityholders notice of
any continuing Default or Event of Default (except a Default or Event of
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
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<PAGE> 100
14. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its affiliates with the same rights it would
have if it were not Trustee.
15. No Recourse Against Others
An incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Company shall not have any liability for
any obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent acting on its behalf) manually signs
the certificate of authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to
Minors Act).
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
19. Governing Law
This Security shall be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
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<PAGE> 101
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
---------------------- -------------------------
Signature Guarantee:
------------------------------------
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
1 [ ] acquired for the undersigned's own account, without
transfer; or
2 [ ] transferred to the Company; or
3 [ ] transferred pursuant to and in compliance with Rule
144A under the Securities Act of 1933, as amended
(the "Securities Act"); or
4 [ ] transferred pursuant to an effective registration
statement under the Securities Act; or
5 [ ] transferred pursuant to and in compliance with
Regulation S under the Securities Act; or
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<PAGE> 102
6 [ ] transferred to an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act), that has furnished to the
Trustee a signed letter containing certain
representations and agreements (the form of which
letter appears as Section 2.7 of the Indenture); or
7 [ ] transferred pursuant to another available exemption
from the registration requirements of the Securities
Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (5), (6) or
(7) is checked, the Trustee or the Company may require, prior to registering
any such transfer of the Securities, in their sole discretion, such legal
opinions, certifications and other information as the Trustee or the Company
may reasonably request to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
------------------------------
Signature
Signature Guarantee:
- ------------------------------ ------------------------------
(Signature must be guaranteed) Signature
- ----------------------------------------------
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
of 1933, as amended, and is aware that the sale to it is being made in reliance
on Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
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<PAGE> 103
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
- -----------------------
Dated:
A-10
<PAGE> 104
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global
Security have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Security authorized signatory
Date of Principal Amount of Principal Amount of following such of Trustee or
Exchange this Global Security this Global Security decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
_______ ______________ __________ ____________ ______________
</TABLE>
A-11
<PAGE> 105
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 3.7 or 3.9 of the Indenture, check either box:
[ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 3.7 or 3.9 of the Indenture, state
the amount in principal amount (must be integral multiple of $1,000): $
Date: Your Signature
--------- --------------------------------------
(Sign exactly as your name appears on the
other side of the Security)
Signature Guarantee:
------------------------------------------------
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
A-12
<PAGE> 106
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
No. [_____] Principal Amount $[____________]
CUSIP NO. _____________
9 5/8% Senior Subordinated Notes due 2008
Home Products International, Inc., a Delaware corporation,
promises to pay to [______________], or registered assigns, the principal sum
of [_______________] Dollars on May 15, 2008.
Interest Payment Dates: May 15 and November 15, commencing on
November 15, 1998
Record Dates: May 1 and November 1
Additional provisions of this Security are set forth on the
other side of this Security.
HOME PRODUCTS INTERNATIONAL, INC.
By:
----------------------------
By:
----------------------------
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TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
LASALLE NATIONAL BANK
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
By:
-----------------------------
Authorized Signatory Date:
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[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
9 5/8% Senior Subordinated Note due 2008
1. Interest
Home Products International, Inc., a Delaware corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises to pay
interest on the principal amount of this Security at the rate per annum shown
above.
The Company will pay interest semiannually on May 15 and
November 15 of each year commencing on November 15, 1998. Interest on the
Securities will accrue from the most recent date to which interest has been
paid on the Securities or, if no interest has been paid, from November 15,
1998. The Company shall pay interest on overdue principal or premium, if any
(plus interest on such interest to the extent lawful), at the rate borne by the
Securities to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment
By at least 12:00 p.m. (New York City time) on the date on
which any principal of or interest on any Security is due and payable, the
Company shall irrevocably deposit with the Trustee or the Paying Agent money
sufficient to pay such principal, premium, if any, and/or interest. The
Company will pay interest (except Defaulted Interest) to the Persons who are
registered Holders of the Securities at the close of business on the May 1 or
November 1 immediately preceding the interest payment date even if Securities
are cancelled, repurchased or redeemed after the record date and on or before
the interest payment date. Holders must surrender Securities to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal
and interest by check payable in such money. It may mail an interest check to
a Holder's registered address.
3. Paying Agent and Registrar
Initially, LaSalle National Bank, a banking corporation duly
organized and existing under the laws of the State of Illinois (the "Trustee"),
will act as Trustee, Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice to any
Securityholder. The Company or any of its domestically incorporated
Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of May 14, 1998 (as it may be amended or supplemented from time to time in
accordance with the terms thereof, the "Indenture"), between the Company and
the Trustee. The terms of the Securities include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the
Indenture (the "Act"). Capitalized terms
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used herein and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Securityholders
are referred to the Indenture and the Act for a statement of those terms.
The Securities are general unsecured senior subordinated
obligations of the Company limited to $125.0 million aggregate principal amount
(subject to Section 2.9 of the Indenture). The aggregate principal amount of
notes which may be authenticated and delivered under the Indenture, including
the Securities, is limited to $250.0 million (subject to Section 2.9 of the
Indenture). This Security is one of the Exchange Securities referred to in the
Indenture. The Securities include the Initial Securities and any Exchange
Securities issued in exchange for the Initial Securities pursuant to the
Indenture and the Exchange and Registration Rights Agreement. The Initial
Securities and the Exchange Securities are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on:
the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries,
the Incurrence of Indebtedness by the Company and its Subsidiary Guarantors if
subordinate or junior in any respect to any Senior Indebtedness or Guarantor
Senior Indebtedness, respectively, the payment of dividends and other
distributions on the Capital Stock of the Company and its Restricted
Subsidiaries, the purchase or redemption of Capital Stock of the Company and
Capital Stock of such Restricted Subsidiaries, certain purchases or redemptions
of Subordinated Indebtedness, the sale or transfer of assets and Capital Stock
of Restricted Subsidiaries, the issuance or sale of Capital Stock of Restricted
Subsidiaries, the business activities and investments of the Company and its
Restricted Subsidiaries, and transactions with Affiliates. In addition, the
Indenture limits the ability of the Company and its Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal,
premium, if any, and interest on the Securities and all other amounts payable
by the Company under the Indenture and the Securities when and as the same
shall be due and payable, whether at maturity, by acceleration or otherwise,
according to the terms of the Securities and the Indenture, the Subsidiary
Guarantors have unconditionally guaranteed (and future Subsidiary Guarantors,
together with the Subsidiary Guarantors, will unconditionally guarantee),
jointly and severally, such obligations on a senior subordinated basis pursuant
to the terms of the Indenture.
5. Optional Redemption
Except as set forth below, the Securities will not be
redeemable at the option of the Company prior to May 15, 2003. On and after
such date, the Securities will be redeemable, at the Company's option, in whole
or in part, at any time upon not less than 30 nor more than 60 days prior
notice mailed by first-class mail to each holder's registered address, at the
following redemption prices (expressed in percentages of principal amount),
plus accrued and unpaid interest to the redemption date (subject to the right
of holders of record on the relevant record date to receive interest due on the
relevant interest payment date):
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If redeemed during the 12-month period commencing on May 15 of the
years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- ------ ----------------
<S> <C>
2003 104.813%
2004 103.208%
2005 101.604%
2006 and thereafter 100.000%
</TABLE>
In addition, at any time and from time to time prior to May 15, 2001,
the Company may redeem in the aggregate up to 35% of the original principal
amount of the Securities with the proceeds of one or more Equity Offerings
received by, or invested in, the Company so long as there is a Public Market at
the time of such redemption, at a redemption price (expressed as a percentage
of principal amount) of 109.625% plus accrued and unpaid interest, if any, to
the redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the original principal amount of the
Securities must remain outstanding after each such redemption; provided,
further, that each such redemption occurs within 90 days after the closing of
each Equity Offering.
In the case of any partial redemption, selection of the Securities for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Securities of $1,000 in original principal amount or
less will be redeemed in part. If any Security is to be redeemed in part only,
the notice of redemption relating to such Security shall state the portion of
the principal amount thereof to be redeemed. A new Security in principal amount
equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original Security.
6. Repurchase Provisions
(a) Upon a Change of Control, unless the Company has
exercised its right to redeem the Securities as described under Section 5
hereof, any Holder of Securities will have the right to cause the Company to
repurchase all or any part of the Securities of such Holder at a purchase price
in cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) as provided in, and subject to the terms of, the
Indenture.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales permitted by the Indenture, when the aggregate amount of Excess
Proceeds equals or exceeds $10.0 million, the Company shall make an Offer for
all outstanding Securities pro rata up to a maximum principal amount (expressed
as a multiple of $1,000) of Securities equal to such Excess Proceeds, at a
purchase price in cash equal to 100% of the principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the date of purchase in
accordance with the procedures set forth in Section 3.7 of the Indenture.
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7. Subordination
The Securities are subordinated to Senior Indebtedness and the
Guarantees are subordinated to Guarantor Senior Indebtedness, each as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give them effect and
appoints the Trustee as attorney-in-fact for such purpose. The Securities will
in all respects rank pari passu with all other Senior Subordinated
Indebtedness.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of principal amount of $1,000 and whole multiples of $1,000. A
Holder may transfer or exchange Securities in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the
transfer of or exchange (i) any Securities selected for redemption (except, in
the case of a Security to be redeemed in part, the portion of the Security not
to be redeemed) or for a period beginning 15 days before the mailing of a
notice of Securities to be redeemed and ending on the date of such mailing or
(ii) any Securities for a period beginning 15 days before an interest payment
date and ending on such interest payment date.
9. Persons Deemed Owners
The registered holder of this Security may be treated as the
owner of it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its request unless an abandoned property law designates
another person. After any such payment, Holders entitled to the money must
look only to the Company and not to the Trustee for payment.
11. Defeasance
Subject to certain conditions set forth in the Indenture, the
Company at any time may terminate some or all of its obligations under the
Securities and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount of the then outstanding
Securities and (ii) any default (other than with respect to nonpayment) or
noncompliance with any provision may be waived with the written consent of the
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Holders of a majority in principal amount of the then outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the consent
of any Securityholder, the Company and the Trustee may amend the Indenture or
the Securities to cure any ambiguity, omission, defect or inconsistency, or to
comply with Article IV of the Indenture, or to provide for uncertificated
Securities in addition to or in place of certificated Securities, or to add
guarantees with respect to the Securities or to secure the Securities, or to
add additional covenants or surrender rights and powers conferred on the
Company or Communications or to comply with any request of the SEC in
connection with qualifying the Indenture under the Act, or to make any change
that does not adversely affect the rights of any Securityholder, or to provide
for the issuance of Exchange Securities.
13. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest when due on the Securities; (ii) default in
payment of principal on the Securities at maturity, upon required repurchase,
upon required repurchase or upon redemption pursuant to paragraphs 5 and 6 of
the Securities, upon declaration or otherwise; (iii) the failure by the Company
to comply with its obligations under Article IV of the Indenture (iv) failure
by the Company to comply for 30 days after notice with any of its obligations
under the covenants described under Sections 3.2 through 3.15 inclusive of the
Indenture (in each case, other than a failure to purchase Securities, which
shall constitute an Event of Default under clause (ii) above), (v) the failure
by the Company to comply for 60 days after notice with its other agreements
contained in the Indenture, (vi) Indebtedness of the Company or any Restricted
Subsidiary if not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5.0 million (the
"cross acceleration provision"), (vii) certain events of bankruptcy, insolvency
or reorganization of the Company or a Significant Subsidiary (the "bankruptcy
provisions"), (viii) any judgment or decree for the payment of money in excess
of $5.0 million is rendered against the Company or a Significant Subsidiary and
such judgment or decree shall remain undischarged or unstayed for a period of
60 days after such judgment becomes final and non-appealable (the "judgment
default provision") or (ix) any Subsidiary Guarantee ceases to be in full force
and effect (except as contemplated by the terms of the Indenture) or any
Subsidiary Guarantor denies or disaffirms its obligations under the Indenture
or its Subsidiary Guarantee. However, a default under clauses (iv) and (v)
will not constitute an Event of Default until the Trustee or the holders of
more than 25% in principal amount of the outstanding Securities notify the
Company of the default and the Company does not cure such default within the
time specified in clauses (iv) and (v) hereof after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Securities may
declare all the Securities to be due and payable immediately. Certain events
of bankruptcy or insolvency are Events of Default which will result in the
Securities being due and payable immediately upon the occurrence of such Events
of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Securityholders notice of
any continuing Default or Event of Default (except a
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Default or Event of Default in payment of principal or interest) if it
determines that withholding notice is in their interest.
14. Trustee Dealings with the Company
Subject to certain limitations set forth in the Indenture, the
Trustee under the Indenture, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and may
otherwise deal with the Company or its affiliates with the same rights it would
have if it were not Trustee.
15. No Recourse Against Others
An incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Company shall not have any liability for
any obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent acting on its behalf) manually signs
the certificate of authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entirety), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to
Minors Act).
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
19. Governing Law
This Security shall be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law to the extent that the application of
the laws of another jurisdiction would be required thereby.
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ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature
------------------ -------------------------
Signature Guarantee:
-------------------------------------------------
(Signature must be guaranteed)
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 3.7 or 3.9 of the Indenture, check either box:
[ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 3.7 or 3.9 of the Indenture, state
the amount in principal amount (must be integral multiple of $1,000): $
Date: Your Signature:
--------- --------------------------------------
(Sign exactly as your name appears on
the other side of the Security)
Signature Guarantee:
--------------------------------------------
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
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EXHIBIT C
FORM OF SUBSIDIARY GUARANTEE
This Supplemental Indenture, dated as of [__________] (this
"Supplemental Indenture" or "Guarantee"), among [name of future Subsidiary
Guarantor] (the "Guarantor"), Home Products International, Inc. (together with
its successors and assigns, the "Company"), each other then existing Subsidiary
Guarantor under the Indenture referred to below, and LaSalle National Bank, as
Trustee under the Indenture referred to below.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore executed
and delivered an Indenture, dated as of May 14, 1998 (as amended, supplemented,
waived or otherwise modified, the "Indenture"), providing for the issuance of
an aggregate principal amount of $125.0 million of 9 5/8% Senior Subordinated
Notes due 2008 of the Company (the "Securities");
WHEREAS, Section 3.11 of the Indenture provides that the
Company is required to cause each Restricted Subsidiary (other than a Foreign
Subsidiary) created or acquired by the Company which Guarantees the Bank
Indebtedness or Incurs Indebtedness under paragraph (a) of Section 3.3 of the
Indenture to execute and deliver to the Trustee a Subsidiary Guarantee pursuant
to which such Subsidiary Guarantor will unconditionally Guarantee, on a joint
and several basis, the full and prompt payment of the principal of, premium, if
any and interest on the Securities on a senior subordinated basis; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee
and the Company are authorized to execute and deliver this Supplemental
Indenture to amend the Indenture, without the consent of any Securityholder;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Guarantor, the Company, the other Subsidiary Guarantors and
the Trustee mutually covenant and agree for the equal and ratable benefit of
the holders of the Securities as follows:
ARTICLE I
Definitions
SECTION 1.1 Defined Terms. As used in this Subsidiary
Guarantee, terms defined in the Indenture or in the preamble or recital hereto
are used herein as therein defined, except that the term "Holders" in this
Guarantee shall refer to the term "Holders" as defined in the Indenture and the
Trustee acting on behalf or for the benefit of such holders. The words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
to any particular section hereof.
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ARTICLE II
Agreement to be Bound; Guarantee
SECTION 2.1 Agreement to be Bound. The Guarantor hereby
becomes a party to the Indenture as a Subsidiary Guarantor and as such will
have all of the rights and be subject to all of the obligations and agreements
of a Subsidiary Guarantor under the Indenture. The Guarantor agrees to be
bound by all of the provisions of the Indenture applicable to a Subsidiary
Guarantor and to perform all of the obligations and agreements of a Subsidiary
Guarantor under the Indenture.
SECTION 2.2 Guarantee. (a) The Guarantor hereby fully,
unconditionally and irrevocably guarantees, as primary obligor and not merely
as surety, jointly and severally with each other Subsidiary Guarantor, to each
Holder of the Securities and the Trustee, the full and punctual payment when
due, whether at maturity, by acceleration, by redemption or otherwise, of the
Obligations pursuant to Article XI of the Indenture.
(b) The Guarantor agrees that the Indebtedness evidenced by
its Subsidiary Guarantee shall be subordinated in right of payment, to the
extent and in the manner provided in Article XII of the Indenture, to the prior
payment when due in cash or Cash Equivalents of all Guarantor Senior
Indebtedness of the Guarantor and that the subordination is for the benefit of
and enforceable by the holders of Guarantor Senior Indebtedness of the
Guarantor. This Guarantee shall in all respects rank pari passu with all other
Guarantor Senior Subordinated Indebtedness of the Guarantor and only
Indebtedness of the Guarantor which is Guarantor Senior Indebtedness will rank
senior to this Guarantee in accordance with the provisions set forth herein.
ARTICLE III
Miscellaneous
SECTION 3.1 Notices. All notices and other communications to
the Guarantor shall be given as provided in the Indenture to the Guarantor, at
its address set forth below, with a copy to the Company as provided in the
Indenture for notices to the Company.
SECTION 3.2 Parties. Nothing expressed or mentioned herein
is intended or shall be construed to give any Person, firm or corporation,
other than the Holders and the Trustee and the holders of any Guarantor Senior
Indebtedness, any legal or equitable right, remedy or claim under or in respect
of this Supplemental Indenture or the Indenture or any provision herein or
therein contained.
SECTION 3.3 Governing Law. This Supplemental Indenture shall
be governed by the laws of the State of New York.
SECTION 3.4 Severability Clause. In case any provision in
this Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby and such provision shall be ineffective
only to the extent of such invalidity, illegality or unenforceability.
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SECTION 3.5 Ratification of Indenture; Supplemental
Indentures Part of Indenture. Except as expressly amended hereby, the
Indenture is in all respects ratified and confirmed and all the terms,
conditions and provisions thereof shall remain in full force and effect. This
Supplemental Indenture shall form a part of the Indenture for all purposes, and
every holder of Securities heretofore or hereafter authenticated and delivered
shall be bound hereby. The Trustee makes no representation or warranty as to
the validity or sufficiency of this Supplemental Indenture.
SECTION 3.6 Counterparts. The parties hereto may sign one or
more copies of this Supplemental Indenture in counterparts, all of which
together shall constitute one and the same agreement.
SECTION 3.7 Headings. The headings of the Articles and the
sections in this Guarantee are for convenience of reference only and shall not
be deemed to alter or affect the meaning or interpretation of any provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NAME OF GUARANTOR],
as a Subsidiary Guarantor
By:
----------------------------
Name:
Title:
HOME PRODUCTS INTERNATIONAL, INC.
By:
----------------------------
Name:
Title:
SELFIX, INC.,
as a Subsidiary Guarantor
By:
----------------------------
Name:
Title:
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SEYMOUR HOUSEWARES CORPORATION,
as a Subsidiary Guarantor
By:
----------------------------
Name:
Title:
SHUTTERS, INC.,
as a Subsidiary Guarantor
By:
----------------------------
Name:
Title:
TAMOR CORPORATION,
as a Subsidiary Guarantor
By:
----------------------------
Name:
Title:
[Add signature block for any other existing Subsidiary Guarantors]
LASALLE NATIONAL BANK
By:
----------------------------
Name:
Title:
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Exhibit 4.1.4
HOME PRODUCTS INTERNATIONAL, INC.
$125,000,000
9 5/8% Senior Subordinated Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
May 14, 1998
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
Home Products International, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Chase Securities Inc. ("CSI") and NationsBanc
Montgomery Securities LLC ("NationsBanc" and, together with CSI, the "Initial
Purchasers"), upon the terms and subject to the conditions set forth in a
purchase agreement dated May 7, 1998 (the "Purchase Agreement"), $125,000,000
aggregate principal amount of its 9 5/8% Senior Subordinated Notes due 2008
(together with the related Subsidiary Guarantees, the "Securities").
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Company agrees with the Initial Purchasers, for the
benefit of the holders (including the Initial Purchasers and the Market-Maker
(as defined herein)) from time to time of the Securities, the Exchange
Securities (as defined herein) and the Private Exchange Securities (as defined
herein) (collectively, the "Holders"), as follows:
<PAGE> 2
2
1. Registered Exchange Offer. The Company shall (i) prepare and, not later
than 60 days following the date of original issuance of the Securities (the
"Issue Date"), file with the Securities and Exchange Commission (the
"Commission") a registration statement (together with the prospectus included
therein, the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act of 1933, as amended (the "Securities Act") with
respect to a proposed offer to the Holders of the Securities (the "Registered
Exchange Offer"), to issue and deliver to such Holders, in exchange for the
Securities, a like aggregate principal amount of debt securities of the Company
and the Subsidiary Guarantors (the "Exchange Securities") that are identical in
all material respects to the Securities, except for the transfer restrictions
relating to the Securities, (ii) use commercially reasonable efforts to cause
the Exchange Offer Registration Statement to become effective under the
Securities Act no later than 150 days after the Issue Date and the Registered
Exchange Offer to be consummated no later than 180 days after the Issue Date
and (iii) keep the Exchange Offer Registration Statement effective for not less
than 30 days (or longer, if required by applicable law) after the date on which
notice of the Registered Exchange Offer is mailed to the Holders (such period
being called the "Exchange Offer Registration Period"). The Exchange
Securities will be issued under the Indenture dated as of May 14, 1998, among
the Company, the Subsidiary Guarantors and LaSalle National Bank, as trustee
(the "Indenture") or an indenture (the "Exchange Securities Indenture") among
the Company, the Subsidiary Guarantors and LaSalle National Bank (or such other
bank or trust company that is reasonably satisfactory to the Initial
Purchasers) as trustee (the "Exchange Securities Trustee"), such indenture to
be identical in all material respects to the Indenture, except for the transfer
restrictions relating to the Securities (as described above). All references
in this Agreement to "prospectus" and "Registration Statement" shall, except
where the context otherwise requires, include any prospectus (or amendment or
supplement thereto) and Registration Statement (or amendment thereto),
respectively, filed with the Commission pursuant to Section 6 of this
Agreement.
Upon the effectiveness of the Exchange Offer Registration Statement, the
Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (i) is
not an affiliate of the Company or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (ii) is not an Initial
Purchaser holding Securities that have, or that are reasonably likely to have,
the status of an unsold allotment in an initial distribution, (iii) acquires
the Exchange Securities in the ordinary course of such Holder's business and
(iv) has no arrangements or understandings with any person to participate in
the distribution of the Exchange Securities) and to trade such Exchange
Securities from and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under the securities
laws of the several states of the United States. The Company, the Initial
Purchasers and each Exchanging Dealer acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
each Holder that is a broker-dealer electing to exchange Securities, acquired
for its own account as a result of market-making activities or other trading
activities, for Exchange Securities (an "Exchanging Dealer"), is required to
deliver a prospectus containing substantially the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in
<PAGE> 3
3
Annex C hereto in the "Plan of Distribution" section of such prospectus in
connection with a sale of any such Exchange Securities received by such
Exchanging Dealer pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any Holder
holds any Securities acquired by it that have, or that are reasonably likely to
be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "Private Exchange"), a like aggregate
principal amount of debt securities of the Company and the Subsidiary
Guarantors (the "Private Exchange Securities") that are identical in all
material respects to the Exchange Securities, except for the transfer
restrictions relating to such Private Exchange Securities. The Private
Exchange Securities will be issued under the same indenture as the Exchange
Securities, and the Company shall use commercially reasonable efforts to cause
the Private Exchange Securities to bear the same CUSIP number as the Exchange
Securities.
In connection with the Registered Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date on which
notice of the Registered Exchange Offer is mailed to the Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
(iv) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York City time, on the last business
day on which the Registered Exchange Offer shall remain open; and
(v) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer
and any Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(ii) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
<PAGE> 4
4
(iii) cause the Trustee or the Exchange Securities Trustee, as the case may
be, promptly to authenticate and deliver to each Holder, Exchange Securities or
Private Exchange Securities, as the case may be, equal in principal amount to
the Securities of such Holder so accepted for exchange.
The Company shall use commercially reasonable efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may be,
shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private
Exchange Securities will have the right to vote or consent as a separate class
on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Securities surrendered in exchange therefor or, if no interest has been paid on
the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of
the Registered Exchange Offer (i) any Exchange Securities received by such
Holder will be acquired in the ordinary course of business, (ii) such Holder
will have no arrangements or understandings with any person to participate in
the distribution of the Securities or the Exchange Securities within the
meaning of the Securities Act and (iii) such Holder is not an affiliate of the
Company or, if it is such an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus
<PAGE> 5
5
forming part of any Exchange Offer Registration Statement, and any supplement
to such prospectus, does not, as of the consummation of the Registered Exchange
Offer, include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or applicable
interpretations thereof by the Commission's staff the Company is not permitted
to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or
(ii) any Securities validly tendered pursuant to the Registered Exchange Offer
are not exchanged for Exchange Securities within 180 days after the Issue Date,
or (iii) any Initial Purchaser so requests with respect to Securities or
Private Exchange Securities not eligible to be exchanged for Exchange
Securities in the Registered Exchange Offer and held by it following the
consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities, or (vi) the Company so elects, then the following
provisions shall apply:
(A) The Company shall use commercially reasonable efforts to file as
promptly as practicable (but in no event more than 30 days after so required or
requested pursuant to this Section 2) with the Commission, and thereafter shall
use commercially reasonable efforts to cause to be declared effective, a shelf
registration statement on an appropriate form under the Securities Act relating
to the offer and sale of the Transfer Restricted Securities (as defined herein)
by the Holders thereof from time to time in accordance with the methods of
distribution set forth in such registration statement (hereafter, a "Shelf
Registration Statement" and, together with any Exchange Offer Registration
Statement, a "Registration Statement").
(B) The Company shall use commercially reasonable efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer Restricted
Securities for a period of two years from the Issue Date or such shorter period
that will terminate when all the Transfer Restricted Securities covered by the
Shelf Registration Statement have been sold pursuant thereto (in any such case,
such period being called the "Shelf Registration Period"). The Company shall
be deemed not to have used commercially reasonable efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Transfer Restricted Securities
covered thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action is required by applicable
law.
(C) Notwithstanding any other provisions hereof, the Company will ensure
that (1) any Shelf Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (2) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included
therein in reliance upon or in conformity with written information furnished to
the Company by or on behalf of any Holder specifically for use therein (the
<PAGE> 6
6
"Holders' Information")) does not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (3) any prospectus
forming part of any Shelf Registration Statement, and any supplement to such
prospectus (in either case, other than with respect to Holders' Information),
does not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Liquidated Damages. (a) The parties hereto agree that the Holders of
Transfer Restricted Securities will suffer damages if the Company fails to
fulfill its obligations under Section 1 or Section 2, as applicable, and that
it would not be feasible to ascertain the extent of such damages. Accordingly,
if (i) the applicable Registration Statement is not filed with the Commission
on or prior to 60 days after the Issue Date, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 150 days after the Issue Date (or in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or the applicable interpretations of the Commission's staff, if later,
within 45 days after publication of the change in law or interpretation), (iii)
the Registered Exchange Offer is not consummated on or prior to 180 days after
the Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 150 days after the Issue Date (or in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
the applicable interpretations of Commission's staff, if later, within 45 days
after publication of the change in law or interpretation) but shall thereafter
cease to be effective (at any time that the Company is obligated to maintain
the effectiveness thereof) without being succeeded within 45 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
will be obligated to pay liquidated damages to each Holder of Transfer
Restricted Securities, during the period of one or more such Registration
Defaults, in an amount equal to $ 0.192 per week per $1,000 principal amount of
Transfer Restricted Securities held by such Holder until (i) the applicable
Registration Statement is filed, (ii) the Exchange Offer Registration Statement
is declared effective and the Registered Exchange Offer is consummated, (iii)
the Shelf Registration Statement is declared effective or (iv) the Shelf
Registration Statement again becomes effective, as the case may be. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease. As used herein, the term "Transfer Restricted Securities" means (i)
each Security until the date on which such Security has been exchanged for a
freely transferable Exchange Security in the Registered Exchange Offer, (ii)
each Security or Private Exchange Security until the date on which it has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iii) each Security or Private
Exchange Security until the date on which it is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act. Notwithstanding anything to the contrary in
this Section 3(a), the Company shall not be required to pay liquidated damages
to a Holder of Transfer Restricted Securities if such Holder failed to comply
with its obligations to make the representations set forth in the second to
last paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
<PAGE> 7
7
(b) The Company shall notify the Trustee and the Paying Agent under the
Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time, on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on
each interest payment date specified by the Indenture and the Securities to the
record holder entitled to receive the interest payment to be made on such date.
Each obligation to pay liquidated damages shall be deemed to accrue from and
including the date of the applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided for in
this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration Statement,
the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to the
filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use commercially reasonable efforts to reflect in each such
document, when so filed with the Commission, such comments as any Initial
Purchaser may reasonably propose; (ii) include the information set forth in
Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in
Annex C hereto in the "Plan of Distribution" section of the prospectus forming
a part of the Exchange Offer Registration Statement, and include the
information set forth in Annex D hereto in the Letter of Transmittal delivered
pursuant to the Registered Exchange Offer; and (iii) if requested by any
Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K, as applicable, in the prospectus forming a part of the Exchange
Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser, each Exchanging
Dealer and each of the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of
the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has been
filed with the Commission and when such Registration Statement or any
post-effective amendment thereto has become effective;
<PAGE> 8
8
(ii) of any request by the Commission for amendments or supplements to
any Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Securities, the Exchange
Securities or the Private Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included therein
in order that the statements therein are not misleading and do not omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(c) The Company will make every reasonable effort to obtain the withdrawal
at the earliest possible time of any order suspending the effectiveness of any
Registration Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one conformed copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and, if any such Holder so requests in writing, all
exhibits thereto (including those, if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of such prospectus
or any amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale of the
Transfer Restricted Securities covered by such prospectus or any amendment or
supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each Exchanging
Dealer, and to any other Holder who so requests, without charge, at least one
conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if any Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period or the
Shelf Registration Period, as applicable, promptly deliver to each Initial
Purchaser, each
<PAGE> 9
9
Exchanging Dealer and such other persons that are required to deliver a
prospectus following the Registered Exchange Offer, without charge, as many
copies of the final prospectus included in the Exchange Offer Registration
Statement or the Shelf Registration Statement and any amendment or supplement
thereto as such Initial Purchaser, Exchanging Dealer or other persons may
reasonably request; and the Company consents to the use of such prospectus or
any amendment or supplement thereto by any such Initial Purchaser, Exchanging
Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the Company
will use commercially reasonable efforts to register or qualify, or cooperate
with the Holders of Securities, Exchange Securities or Private Exchange
Securities included therein and their respective counsel in connection with the
registration or qualification of, such Securities, Exchange Securities or
Private Exchange Securities for offer and sale under the securities or blue sky
laws of such jurisdictions as any such Holder reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities, Exchange Securities or
Private Exchange Securities covered by such Registration Statement; provided
that the Company will not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(i) The Company will cooperate with the Holders of Securities, Exchange
Securities or Private Exchange Securities to facilitate the timely preparation
and delivery of certificates representing Securities, Exchange Securities or
Private Exchange Securities to be sold pursuant to any Registration Statement
free of any restrictive legends and in such denominations and registered in
such names as the Holders thereof may request in writing prior to sales of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company is required to maintain an effective
Registration Statement, the Company will promptly prepare and file with the
Commission a post-effective amendment to the Registration Statement or a
supplement to the related prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Securities, Exchange
Securities or Private Exchange Securities from a Holder, the prospectus will
not include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may be,
and provide the applicable trustee with printed certificates for the
Securities, the Exchange Securities or the Private Exchange Securities, as the
case may be, in a form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and regulations of
the Commission and will make generally available to its security holders as
soon as practicable after
<PAGE> 10
10
the effective date of the applicable Registration Statement an earning
statement satisfying the provisions of Section 11(a) of the Securities Act;
provided that in no event shall such earning statement be delivered later than
45 days after the end of a 12-month period (or 90 days, if such period is a
fiscal year) beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the applicable Registration
Statement, which statement shall cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted Securities
to be registered pursuant to any Shelf Registration Statement to furnish to the
Company such information concerning the Holder and the distribution of such
Transfer Restricted Securities as the Company may from time to time reasonably
require for inclusion in such Shelf Registration Statement, and the Company may
exclude from such registration the Transfer Restricted Securities of any Holder
that fails to furnish such information within a reasonable time after receiving
such request.
(o) In the case of a Shelf Registration Statement, each Holder of Transfer
Restricted Securities to be registered pursuant thereto agrees by acquisition
of such Transfer Restricted Securities that, upon receipt of any notice from
the Company pursuant to Section 4(b)(ii) through (v), such Holder will
discontinue disposition of such Transfer Restricted Securities until such
Holder's receipt of copies of the supplemental or amended prospectus
contemplated by Section 4(j) or until advised in writing (the "Advice") by the
Company that the use of the applicable prospectus may be resumed. If the
Company shall give any notice under Section 4(b)(ii) through (v) during the
period that the Company is required to maintain an effective Registration
Statement (the "Effectiveness Period"), such Effectiveness Period shall be
extended by the number of days during such period from and including the date
of the giving of such notice to and including the date when each seller of
Transfer Restricted Securities covered by such Registration Statement shall
have received (x) the copies of the supplemental or amended prospectus
contemplated by Section 4(j) (if an amended or supplemental prospectus is
required) or (y) the Advice (if no amended or supplemental prospectus is
required).
(p) In the case of a Shelf Registration Statement, the Company shall enter
into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold or the managing
underwriters (if any) shall reasonably request in order to facilitate any
disposition of Securities, Exchange Securities or Private Exchange Securities
pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall (i)
make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Securities,
<PAGE> 11
11
Exchange Securities and Private Exchange Securities being sold and any
underwriter participating in any disposition of Securities, Exchange Securities
or Private Exchange Securities pursuant to such Shelf Registration Statement,
all relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries and (ii) use commercially
reasonable efforts to have its officers, directors, employees, accountants and
counsel supply all relevant information reasonably requested by such
representative, Special Counsel or any such underwriter (an "Inspector") in
connection with such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the Company shall, if
requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel, or the managing underwriters (if any) in connection with
such Shelf Registration Statement, use commercially reasonable efforts to cause
(i) its counsel to deliver an opinion relating to the Shelf Registration
Statement and the Securities, Exchange Securities or Private Exchange
Securities, as applicable, in customary form, (ii) its officers to execute and
deliver all customary documents and certificates requested by Holders of a
majority in aggregate principal amount of the Securities, Exchange Securities
and Private Exchange Securities being sold, their Special Counsel, or the
managing underwriters (if any) and (iii) its independent public accountants to
provide a comfort letter in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
5. Registration Expenses. The Company will bear all expenses incurred in
connection with the performance of its obligations under Sections 1, 2, 3 and 4
and the Company will reimburse the Initial Purchasers and the Holders for the
reasonable fees and disbursements of one firm of attorneys (in addition to any
local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Securities, the Exchange Securities and the Private Exchange
Securities to be sold pursuant to each Registration Statement (the "Special
Counsel") acting for the Initial Purchasers or Holders in connection therewith.
6. Market Making
(a) The Company will, for the sole benefit of Chase Securities Inc. (the
"Market-Maker"), unless the Market Maker, in the opinion of counsel to the
Company, is not an affiliate of the Company, for so long as the Market-Maker
proposes to make a market in the Securities, Exchange Securities or Private
Exchange Securities as part of its business in the ordinary course:
(i) (A) On the date that the Exchange Offer Registration Statement
is filed with the Commission, the Company shall file a Registration
Statement (which may be the Exchange Offer Registration Statement or the
Shelf Registration Statement if permitted by the rules and regulations of
the Commission) and shall use commercially reasonable efforts to cause
such Registration Statement to be declared effective by the Commission
prior to or on the consummation of the Exchange Offer; (B) periodically
amend such Registration Statement so that the information contained
therein complies with the
<PAGE> 12
12
requirements of Section 10(a) under the Securities Act; (C) file on a
timely basis all reports and proxy and information statements required to
be filed by the Company with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act or, if the Company is not eligible
to use Form S-3 (or any successor form) under the Securities Act, file a
supplement to the prospectus contained in the Registration Statement
within 45 days following the end of each of the Company's fiscal quarters
which sets forth the financial results of the Company for such quarter;
(D) amend the Registration Statement or supplement the related prospectus
when necessary to reflect any material changes in the information
provided therein; provided, however, that (1) prior to filing with the
Commission any post-effective amendment to the Registration Statement or
any supplement to the related prospectus (other than reports to be filed
under the Exchange Act which will be deemed to be incorporated by
reference in the Registration Statement and related prospectus), the
Company will furnish to the Market-Maker copies of all such documents
proposed to be filed, which documents will be subject to the review of
the Market-Maker and its counsel, (2) the Company will not file such
documents to which the Market-Maker and its counsel shall reasonably
object after having been given reasonable notice of the proposed filing
thereof unless the Company is required by law to make such filing and (3)
the Company will provide the Market-Maker and its counsel with copies of
each amendment or supplement filed.
(ii) If at any time the Company becomes no longer eligible to use
Form S-3 under the Securities Act with respect to sales of the
Securities, Exchange Securities or Private Exchange Securities, file a
post-effective amendment to the Registration Statement to convert it to a
Form S-1 registration statement as soon as practicable.
(iii) Notify the Market-Maker, and (if requested by the
Market-Maker) confirm such advice in writing, (A) when any post-effective
amendment to the Registration Statement or any amendment or supplement to
the related prospectus has been filed, and, with respect to any
post-effective amendment, when the same has become effective; (B) of any
request by the Commission for any post-effective amendment to the
Registration Statement, any supplement or amendment to the related
prospectus or for additional information; (C) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose; (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for sale
in any jurisdiction or the initiation or threatening of any proceedings
for such purpose; (E) of the happening of any event which makes any
statement made in the Registration Statement, the related prospectus or
any amendment or supplement thereto untrue or which requires the making
of any changes in the Registration Statement, such prospectus or any
amendment or supplement thereto, in order to make the statements therein
not misleading; and (F) of any advice from a nationally recognized
statistical rating organization that such organization has placed the
Company under surveillance or review with negative implications or has
determined to downgrade the rating of the Securities, Exchange Securities
or Private Exchange Securities or any other debt obligation of the
Company whether or not such downgrade shall have been publicly announced.
<PAGE> 13
13
(iv) Furnish to the Market-Maker, without charge, (i) at least one
conformed copy of any post-effective amendment to the Registration
Statement; and (ii) as many copies of the related prospectus and any
amendment or supplement thereto as the Market-Maker may reasonably
request.
(v) Consent to the use of the prospectus contained in the
Registration Statement or any amendment or supplement thereto by the
Market-Maker in connection with the offering and sale of the Securities.
(vi) For so long as the Securities, Exchange Securities or Private
Exchange Securities shall be outstanding, furnish to the Market-Maker (A)
as soon as practicable after the end of each of the Company's fiscal
years, the number of copies reasonably requested by the Market-Maker of
the Company's annual report to stockholders for such year, (B) as soon as
available, the number of copies reasonably requested by the Market-Maker
of each report (including, without limitation, Reports on Forms 10-K,
10-Q and 8-K) or definitive proxy statements of the Company filed under
the Exchange Act or mailed to stockholders and (C) all public reports and
all reports and financial statements furnished by the Company to the
Nasdaq National Market System or any U.S. national securities exchange or
quotation service upon which the Securities or Exchange Securities may be
listed pursuant to requirements of or agreements with such exchange or
quotation service or to the Commission pursuant to the Exchange Act or
any rule or regulation of the Commission thereunder.
(vii) In the event of the issuance of any stop order suspending the
effectiveness of the Registration Statement or of any order suspending
the qualification of the Securities, Exchange Securities or Private
Exchange Securities for sale in any jurisdiction, to use promptly its
best efforts to obtain its withdrawal.
(b) The Company represents that any post-effective amendments to the
Registration Statement, any amendments or supplements to the related prospectus
and any documents filed by it under the Exchange Act will, when they become
effective or are filed with the Commission, as the case may be, conform in all
material respects to the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission thereunder and will not, as
of the effective date of such post-effective amendments and as of the filing
date of amendments or supplements to such prospectus or filings under the
Exchange Act, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided that no representation or warranty is made as
to information contained in or omitted from the Registration Statement or the
related prospectus in reliance upon and in conformity with Holders' Information
furnished to the Company by the Market-Maker specifically for inclusion
therein.
(c) Each time that the Registration Statement or the related prospectus
shall be amended or such prospectus shall be supplemented, the Company shall
(at the reasonable request of the Market-Maker), concurrently with such
amendment or supplement, furnish the Market-
<PAGE> 14
14
Maker and its counsel with a certificate of its Chairman of the Board or its
President and its chief financial officer to the effect that:
(i) The Registration Statement has been declared effective and such
amendment has become effective under the Securities Act as of the date
and time specified in such certificate, if applicable, such amendment to
the prospectus (or such supplement to the prospectus, as the case may be)
was filed with the Commission pursuant to the subparagraph of Rule 424(b)
under the Securities Act specified in such certificate on the date
specified therein; and, to the knowledge of such officers, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose is pending or threatened by the
Commission; and
(ii) Such officers have carefully examined the Registration
Statement and the prospectus and such amendment or supplement thereto
and, in their opinion, as of the date of such amendment or supplement,
the Registration Statement and the prospectus, as amended or
supplemented, as the case may be, did not include any untrue statement of
a material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(d) Each time that the Registration Statement or the related prospectus
shall be amended or such prospectus shall be supplemented, the Company shall
(at the reasonable request of the Market-Maker), concurrently with such
amendment or supplement, furnish the Market-Maker and its counsel with the
written opinion of counsel for the Company satisfactory to the Market-Maker to
the effect that:
(i) The Registration Statement has been declared effective and such
amendment has become effective under the Securities Act as of the date
and time specified in such certificate, if applicable, such amendment to
the prospectus (or such supplement to the prospectus, as the case may be)
was filed with the Commission pursuant to the subparagraph Rule 424(b)
under the Securities Act specified in such opinion on the date specified
therein; and, to the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose is pending or threatened by the Commission;
and
(ii) Counsel for the Company has reviewed such amendment or
supplement and participated with officers of the Company and independent
public accountants for the Company in the preparation of such amendment
or supplement and has no reason to believe that the Registration
Statement (or any post-effective amendment thereto), at the time of its
effective date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
prospectus contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading.
<PAGE> 15
15
(e) Each time that the Registration Statement or the related prospectus
shall be amended or such prospectus shall be supplemented to include audited
annual financial information, the Company shall (at the reasonable request of
the Market-Maker), concurrently with such amendment or supplement, furnish the
Market-Maker and its counsel with a letter of Arthur Andersen LLP (or other
independent public accountants for the Company of nationally recognized
standing), in form satisfactory to the Market-Maker, addressed to the
Market-Maker and dated the date of delivery of such letter, (i) confirming that
they are independent public accountants within the meaning of the Securities
Act and are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission and (ii) a letter substantially in the form of the letter delivered
to the Underwriters pursuant to Section 5(f) of the Purchase Agreement with
such changes as may be necessary to reflect the amended or supplemental
financial information.
(f) The agreements contained in this Section 6 and the representations,
warranties and agreements contained in this Agreement shall survive all offers
and sales of the Securities and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
(g) For purposes of this Section 6, any reference to the terms "amend",
"amendment" or "supplement" with respect to the Registration Statement or the
prospectus contained therein shall be deemed to refer to and include the filing
under the Exchange Act of any document deemed to be incorporated therein by
reference.
7. Indemnification. (a) In the event of a Shelf Registration Statement
or in connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, or in connection with any prospectus delivery by the Market-Maker,
the Company shall indemnify and hold harmless each Holder (including, without
limitation, any such Initial Purchaser, the Market-Maker or any such Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 7 and Section 8 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action
in respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Securities, Exchange
Securities or Private Exchange Securities), to which that Holder may become
subject, whether commenced or threatened, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any such Registration Statement or
any prospectus forming part thereof or in any amendment or supplement thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or
(iii) in the case of the Market-Maker, any material breach by the Company of
its representations, warranties and agreements contained in Section 6, and
shall reimburse each Holder promptly upon demand for any legal or
<PAGE> 16
16
other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with any Holders'
Information furnished to the Company by such Holder; and provided, further,
that with respect to any such untrue statement in or omission from any related
preliminary prospectus, the indemnity agreement contained in this Section 7(a)
shall not inure to the benefit of any Holder from whom the person asserting any
such loss, claim, damage, liability or action received Securities, Exchange
Securities or Private Exchange Securities to the extent that such loss, claim,
damage, liability or action of or with respect to such Holder results from the
fact that both (A) a copy of the related final prospectus or any amendment or
supplement thereto was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities, Exchange Securities or
Private Exchange Securities to such person and (B) the untrue statement in or
omission from the related preliminary prospectus was corrected in the related
final prospectus or any amendment or supplement thereto unless such failure to
deliver the final prospectus was a result of non-compliance by the Company with
Section 4(d), 4(e), 4(f), 4(g) or Section 6.
(b) In the event of a Shelf Registration Statement, or in connection with
any prospectus delivery by the Market-Maker, each Holder (including if
applicable, the Market-Maker) shall indemnify and hold harmless the Company,
its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 7(b) and Section 8 as the Company),
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any such Registration Statement or any prospectus forming
part thereof or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any
Holders' Information furnished to the Company by such Holder, and shall
reimburse the Company for any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that no such Holder shall be liable for any indemnity claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Securities, Exchange Securities or Private Exchange Securities
pursuant to such Shelf Registration Statement.
<PAGE> 17
17
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 7(a) or 7(b), notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 7. If any such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any
other similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there
may be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying
party has not in fact employed counsel reasonably satisfactory to the
indemnified party to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be
at the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm of
attorneys (in addition to any local counsel) at any one time for all such
indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 7(a) and 7(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of
the indemnified party (which consent shall not be unreasonably withheld),
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless
<PAGE> 18
18
such settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such proceeding.
8. Contribution. If the indemnification provided for in Section 7 is
unavailable or insufficient to hold harmless an indemnified party under Section
7(a) or 7(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in
respect thereof, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company from the offering and sale of the
Securities, on the one hand, and a Holder with respect to the sale by such
Holder of Securities, Exchange Securities or Private Exchange Securities, on
the other, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and such Holder on the other with
respect to the statements or omissions that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and a Holder on the other with respect to such offering
and such sale shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses)
received by or on behalf of the Company as set forth in the table on the cover
of the Offering Memorandum, on the one hand, bear to the total proceeds
received by such Holder with respect to its sale of Securities, Exchange
Securities or Private Exchange Securities, on the other. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to the Company or information supplied by the
Company on the one hand or to any Holders' Information furnished by such Holder
on the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The parties hereto agree that it would not be just and equitable if
contributions pursuant to this Section 8 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 8 shall be deemed
to include, for purposes of this Section 8, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 8, an indemnifying party that is a Holder of
Securities, Exchange Securities or Private Exchange Securities shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Securities, Exchange Securities or Private Exchange
Securities sold by such indemnifying party to any purchaser exceeds the amount
of any damages which such indemnifying party has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
9. Rules 144 and 144A. The Company shall use commercially reasonable
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely
<PAGE> 19
19
manner and, if at any time the Company is not required to file such reports, it
will, upon the written request of any Holder of Transfer Restricted Securities
or the Market-Maker, make publicly available other information so long as
necessary to permit sales of such Holder's securities pursuant to Rules 144 and
144A. The Company covenants that it will take such further action as any
Holder of Transfer Restricted Securities or the Market-Maker may reasonably
request, all to the extent required from time to time to enable such Holder or
the Market-Maker to sell Transfer Restricted Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rules 144 and 144A (including, without limitation, the requirements of Rule
144A(d)(4)). Upon the written request of any Holder of Transfer Restricted
Securities or the Market-Maker, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 9 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
10. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement is to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders
of a majority in aggregate principal amount of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such Holders shall
be responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
11. Miscellaneous. (a) Amendments and Waivers. No failure or delay by
any Holder or the Market-Maker in exercising any right under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or any abandonment or discontinuance of steps to enforce any
such right preclude any other or further exercise thereof or the exercise of
any other right. The provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
Holders of a majority in aggregate principal amount of the Securities, the
Exchange Securities and the Private Exchange Securities, taken as a single
class (and, with respect to the provisions of Section 6, the written consent of
the Market-Maker). Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose Securities, Exchange Securities or
Private Exchange Securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other Holders may
be given by Holders of a majority in aggregate principal amount of the
Securities, the Exchange Securities and the Private Exchange Securities being
sold by such Holders pursuant to such Registration Statement.
<PAGE> 20
20
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or air courier guaranteeing next-day delivery:
(i) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 11(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to CSI and NationsBanc;
(ii) if to an Initial Purchaser or the Market-Maker, initially at
its address set forth in the Purchase Agreement; and
(iii) if to the Company, initially at the address of the Company
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (i) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (ii) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (iii) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(G) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 21
21
(h) Remedies. In the event of a breach by the Company or by any Holder of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted
by law, including recovery of damages (other than the recovery of damages for a
breach by the Company of its obligations under Sections 1 or 2 hereof for which
liquidated damages have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. The Company represents, warrants and
agrees that (i) it has not entered into, shall not, on or after the date of
this Agreement, enter into any agreement that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in
aggregate principal amount of the then outstanding Transfer Restricted
Securities and the Market-Maker, it shall not grant to any person the right to
request the Company to register any debt securities of the Company under the
Securities Act which are in conflict or inconsistent with the provisions of
this Agreement.
(j) No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holders of Transfer Restricted Securities in
such capacity and the Market-Maker) shall have the right to include any
securities of the Company in any Shelf Registration or Registered Exchange
Offer other than Transfer Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ
an alternative means to achieve the same or substantially the same result as
that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
<PAGE> 22
22
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the Initial Purchasers.
Very truly yours,
HOME PRODUCTS INTERNATIONAL, INC.
By
------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By
----------------------------------
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By
----------------------------------
Name:
Title:
<PAGE> 23
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
consummation of the Exchange Offer, it will make this prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
- 23 -
<PAGE> 24
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account
in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
- 24 -
<PAGE> 25
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Securities. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received
in exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the consummation of the Exchange Offer, it
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
_______________, 199_, all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.1
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Registered Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to
the Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the consummation of the Exchange Offer the
Company will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Registered Exchange Offer (including the expenses of
one counsel for the Holders of the Securities) other than commissions or
concessions of any broker-dealers and will indemnify the Holders of the
- --------------------
1 In addition, the legend required by Item 502(e) of Regulation S-K will appear
on the back cover page of the Registered Exchange Offer prospectus.
- 25 -
<PAGE> 26
Securities (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
- 26 -
<PAGE> 27
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
- 27 -
<PAGE> 1
EXHIBIT 5.1.1
Sonnenschein Nath & Rosenthal
1221 Avenue of the Americas
Suite 2400
New York, New York 10020
June 10, 1998
Home Products International, Inc.
4501 West 47th Street
Chicago, Illinois 60632
Ladies and Gentlemen:
You have requested our opinion as special securities counsel to Home
Products International, Inc., a Delaware corporation (the "Company"), in
connection with the preparation and filing of the Company's Registration
Statement on Form S-4 (the "Registration Statement") relating to the proposed
offer to exchange (the "Exchange Offer") the Company's 9 5/8% Senior
Subordinated Notes due 2008 (the "Exchange Notes"), for all outstanding 9 5/8%
Senior Subordinated Notes due 2008 (the "Original Notes") of the Company, such
Exchange Notes to be issued pursuant to an Indenture, dated as of May 14, 1998
(the "Indenture"), by and among the Company, certain of its subsidiaries (the
"Subsidiary Guarantors") and LaSalle National Bank, as Trustee (the "Trustee").
Payment of the Exchange Notes will be guaranteed by the Subsidiary Guarantors
in accordance with the terms of the Indenture (the "Subsidiary Guarantees" and,
together with the Exchange Notes, the "Securities").
We have participated in the preparation of the Registration Statement and,
in connection therewith, have examined and relied upon the originals or copies
of such records, agreements, documents and other instruments, and have made
such inquiries of such officers and representatives, as we have deemed relevant
and necessary as the basis for the opinion hereinafter set forth. In such
examination, we have assumed, without independent verification, the genuineness
of all signatures (whether original or photostatic), the legal capacity of
natural persons, the authenticity of all documents submitted to us as
originals, and the conformity to authentic original documents of all documents
submitted to us as certified or photostatic copies. We have assumed, without
independent verification, the accuracy of the relevant facts stated therein. In
making our examination of documents executed by parties other than the Company
and its subsidiaries, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof. As to any other facts material to the
opinion expressed herein that were not independently established or verified,
we have relied upon statements and representations of officers and employees of
the Company.
Based upon the foregoing and subject to the assumptions and qualifications
set forth herein, we are of the opinion that the Securities have been duly
authorized, and when issued, assuming the due authentication of the Exchange
Notes by the Trustee, will be valid and binding obligations of the Company or
the respective Subsidiary Guarantors, as the case may be, enforceable against
them in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject to general
<PAGE> 2
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
The foregoing opinions are limited to the laws of the States of New York
and Illinois, the laws of the United States of America and the general
corporate law of the State of Delaware, and do not purport to express any
opinion on the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm and this opinion under
the heading "Legal Matters" in the prospectus comprising a part of such
Registration Statement and any amendment thereto. In giving such consent, we do
not hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
Except to the extent provided in the preceding paragraph, this opinion is
rendered solely to the Company in connection with the Exchange Offer and may
not be relied upon by, nor may copies be delivered to, any other person or
entity for any purpose without our prior written consent.
Very truly yours,
SONNENSCHEIN NATH & ROSENTHAL
By: /S/ PHILIP A. HABER
-------------------
Philip A. Haber
- -2-
<PAGE> 1
Exhibit 10.1.1
________________________________________________________________________________
$100,000,000
CREDIT AGREEMENT
AMONG
HOME PRODUCTS INTERNATIONAL, INC.,
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
AND
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
DATED AS OF MAY 14, 1998
____________________________
CHASE SECURITIES INC.,
AS ARRANGER
(LOGO)
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C>
SECTION 1. DEFINITIONS................................................... 1
1.1 Defined Terms................................................... 1
1.2 Other Definitional Provisions................................... 19
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................... 19
2.1 Revolving Commitments........................................... 19
2.2 Procedure for Revolving Loan Borrowing.......................... 20
2.3 Swingline Commitment............................................ 20
2.4 Procedure for Swingline Borrowing; Refunding of Swingline Loans. 21
2.5 Commitment Fees, etc............................................ 22
2.6 Termination or Reduction of Revolving Commitments............... 23
2.7 Optional Prepayments............................................ 23
2.8 Mandatory Prepayments and Commitments Reductions................ 23
2.9 Conversion and Continuation Options............................. 24
2.10 Limitations on Eurodollar Tranches............................. 24
2.11 Interest Rates and Payment Dates............................... 25
2.12 Computation of Interest and Fees............................... 25
2.13 Inability to Determine Interest Rate........................... 26
2.14 Pro Rata Treatment and Payments................................ 26
2.15 Requirements of Law............................................ 27
2.16 Taxes.......................................................... 29
2.17 Indemnity...................................................... 30
2.18 Change of Lending Office....................................... 31
2.19 Replacement of Lenders......................................... 31
2.20 Reporting Requirements of Issuing Lenders...................... 31
SECTION 3. LETTERS OF CREDIT............................................. 31
3.1 L/C Commitment.................................................. 31
3.2 Procedure for Issuance of Letter of Credit...................... 32
3.3 Fees and Other Charges.......................................... 32
3.4 L/C Participations.............................................. 33
3.5 Reimbursement Obligation of the Borrower........................ 34
3.6 Obligations Absolute............................................ 34
3.7 Letter of Credit Payments....................................... 34
3.8 Applications.................................................... 35
SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 35
4.1 Financial Condition............................................. 35
4.2 No Change....................................................... 36
4.3 Corporate Existence; Compliance with Law........................ 36
4.4 Corporate Power; Authorization; Enforceable Obligations......... 36
4.5 No Legal Bar.................................................... 36
4.6 Litigation...................................................... 37
4.7 No Default...................................................... 37
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.8 Ownership of Property; Liens..................................... 37
4.9 Intellectual Property............................................ 37
4.10 Taxes............................................................ 37
4.11 Federal Regulations.............................................. 37
4.12 Labor Matters.................................................... 38
4.13 ERISA............................................................ 38
4.14 Investment Company Act; Other Regulations........................ 38
4.15 Subsidiaries..................................................... 38
4.16 Use of Proceeds.................................................. 38
4.17 Environmental Matters............................................ 39
4.18 Accuracy of Information, etc..................................... 39
4.19 Security Documents............................................... 40
4.20 Solvency......................................................... 40
4.21 Senior Indebtedness.............................................. 40
4.22 Year 2000 Matters................................................ 41
4.23 Regulation H..................................................... 41
SECTION 5. CONDITIONS PRECEDENT............................................ 41
5.1 Conditions to Initial Extension of Credit........................ 41
5.2 Conditioins to Each Extension of Credit.......................... 45
SECTION 6. AFFIRMATIVE COVENANTS........................................... 45
6.1 Financial Statements............................................. 45
6.2 Certificates; Other Information.................................. 46
6.3 Payment of Obligations........................................... 47
6.4 Maintenance of Existence; Compliance............................. 47
6.5 Maintenance of Property, Insurance............................... 48
6.6 Inspection of Property; Books and Records; Discussions........... 48
6.7 Notices.......................................................... 48
6.8 Environmental Laws............................................... 49
6.9 Additional Collateral, etc....................................... 49
SECTION 7. NEGATIVE COVENANTS.............................................. 51
7.1 Financial Condition Covenants.................................... 51
7.2 Indebtedness..................................................... 52
7.3 Liens............................................................ 53
7.4 Fundamental Changes.............................................. 55
7.5 Disposition of Property.......................................... 55
7.6 Restricted Payments.............................................. 55
7.7 Capital Expenditures............................................. 56
7.8 Investments...................................................... 56
7.9 Optional Payments and Modifications of Debt Instruments etc...... 57
7.10 Transactions with Affiliates..................................... 58
7.11 Changes in Fiscal Periods........................................ 58
7.12 Negative Pledge Clauses.......................................... 58
7.13 Clauses Restricting Subsidiary Distributions..................... 58
7.14 Lines of Business................................................ 58
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8. EVENTS OF DEFAULT............................................ 59
SECTION 9. THE ADMINISTRATIVE AGENT..................................... 62
9.1 Appointment.................................................. 62
9.2 Delegation of Duties......................................... 62
9.3 Exculpatory Provisions....................................... 62
9.4 Reliance by Administrative Agent............................. 63
9.5 Notice of Default............................................ 63
9.6 Non-Reliance on Administrative Agent and Other Lenders....... 64
9.7 Indemnification.............................................. 64
9.8 Administrative Agent in Its Individual Capacity.............. 65
9.9 Successor Administrative Agent............................... 65
9.10 Authorization to Release Liens............................... 65
SECTION 10. MISCELLANEOUS............................................... 65
10.1 Amendments and Waivers...................................... 65
10.2 Notices..................................................... 66
10.3 No Waiver; Cumulative Remedies.............................. 67
10.4 Survival of Representations and Warranties.................. 68
10.5 Payment of Expenses and Taxes............................... 68
10.6 Successors and Assigns; Participations and Assignments...... 69
10.7 Adjustments; Set-off........................................ 71
10.8 Counterparts................................................ 71
10.9 Severability................................................ 71
10.10 Integration................................................. 72
10.11 GOVERNING LAW............................................... 72
10.12 Submission To Jurisdiction; Waivers......................... 72
10.13 Acknowledgements............................................ 72
10.14 WAIVERS OF JURY TRIAL....................................... 73
10.15 Confidentiality............................................. 73
</TABLE>
- iii -
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ANNEX:
<S> <C>
A Pricing Grid
SCHEDULES:
1.1A Revolving Commitments
1.1B Mortgaged Property
3.1 Existing Letters of Credit
4.1(b) Contingent Liabilities
4.4 Consents, Authorizations, Filings and Notices
4.6 Litigation
4.13 ERISA Matters
4.15 Subsidiaries
4.17 Environmental Matters
4.19(a) UCC Filing Jurisdictions
4.19(b) Mortgage Filing Jurisdictions
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
7.5 Planned Dispositions
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Mortgage
E Form of Assignment and Acceptance
F Form of Legal Opinion of Sonnenschein Nath & Rosenthal
</TABLE>
<PAGE> 6
CREDIT AGREEMENT, dated as of May 14, 1998, among HOME PRODUCTS
INTERNATIONAL, INC., a Delaware corporation (the "Borrower"), the several banks
and other financial institutions or entities from time to time parties to this
Agreement (the "Lenders"), and THE CHASE MANHATTAN BANK, as administrative
agent.
The parties hereto hereby agree as follows:
1. DEFINITIONS
1. Defined Terms. As used in this Agreement, the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For
purposes hereof: "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Reference Lender as its prime rate
in effect at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by the Reference Lender in
connection with extensions of credit to debtors); "Base CD Rate" shall mean the
sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a
fraction, the numerator of which is one and the denominator of which is one
minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; and
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on
such day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so reported
on such day or such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Reference Lender from three New York City
negotiable certificate of deposit dealers of recognized standing selected by
it. Any change in the ABR due to a change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of
the opening of business on the effective day of such change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"ABR Loans": Loans the rate of interest applicable to which is based upon
the ABR.
"Acquisition": any acquisition, whether in a single transaction or series
of related transactions, by the Borrower or any one or more of its Subsidiaries
of (a) all or a substantial majority of the assets, or of a business, unit or
division, of any Person, whether through purchase of assets or securities, by
merger or otherwise; (b) any Person that becomes a Subsidiary after
<PAGE> 7
2
giving effect to such acquisition; or (c) control (as defined in clause (b) of
the definition of "Affiliate") of a partnership, joint venture or other Person.
"Adjustment Date": as defined in the Pricing Grid.
"Administrative Agent": The Chase Manhattan Bank, together with its
affiliates, as the arranger of the Revolving Commitments and as the
administrative agent for the Lenders under this Agreement and the other Loan
Documents, together with any of its successors.
"Affiliate": as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors (or
persons performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"Aggregate Exposure": with respect to any Lender at any time, an amount
equal to such Lender's Revolving Commitment then in effect or, if the Revolving
Commitments have been terminated, the amount of such Lender's Revolving
Extensions of Credit then outstanding.
"Aggregate Exposure Percentage": with respect to any Lender at any time,
the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at
such time to the Aggregate Exposure of all Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented or otherwise
modified from time to time.
"Applicable Margin": for each Type of Loan, the rate per annum set forth
under the relevant column heading below:
<TABLE>
<CAPTION>
ABR Loans Eurodollar Loans
--------- ----------------
<S> <C> <C>
Revolving Loans 0.75% 1.75%
Swingline Loans 0.75% Not applicable
</TABLE>
; provided, that on and after the first Adjustment Date occurring after the
Closing Date, the Applicable Margin with respect to Revolving Loans and
Swingline Loans will be determined pursuant to the Pricing Grid.
"Application": an application, in such form as the applicable Issuing
Lender may specify from time to time, requesting the Issuing Lender to open a
Letter of Credit.
"Asset Sale": any Disposition of property or series of related
Dispositions of property (excluding any such Disposition permitted by clause
(a), (b), (c) or (d) of Section 7.5) that yields gross proceeds to the Borrower
or any of its Subsidiaries (valued at the initial
<PAGE> 8
3
principal amount thereof in the case of non-cash proceeds consisting of notes
or other debt securities and valued at fair market value in the case of other
non-cash proceeds) in excess of $250,000.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Available Revolving Commitment": as to any Lender at any time, an amount
equal to the excess, if any, of (a) such Lender's Revolving Commitment over (b)
such Lender's Revolving Extensions of Credit; provided, that in calculating any
Lender's Revolving Extensions of Credit for the purpose of determining such
Lender's Available Revolving Commitment pursuant to Section 2.5(a), the
aggregate principal amount of Swingline Loans then outstanding shall be deemed
to be zero.
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrowing Date": any Business Day specified by the Borrower as a date on
which the Borrower requests the relevant Lenders to make Loans hereunder.
"Business": as defined in Section 4.17.
"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks in New York City or Chicago, Illinois are authorized or
required by law to close, provided, that with respect to notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, such day is also a day for trading by and between banks in
Dollar deposits in the interbank eurodollar market.
"Capital Expenditures": for any period, with respect to any Person, the
aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that are required to be capitalized under GAAP
on a consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP and, for the
purposes of this Agreement, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests
<PAGE> 9
4
in a Person (other than a corporation) and any and all warrants, rights or
options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of one year or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States of America or any state thereof having combined
capital and surplus of not less than $500,000,000; (c) commercial paper of an
issuer rated at least A-1 by Standard & Poor's Ratings Group ("S&P") or P-1 by
Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating
by a nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of commercial paper issuers generally, and
maturing within one year from the date of acquisition; and (d) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States or by
any political subdivision or taxing authority of any such state, commonwealth
or territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) carry the highest possible rating from S&P or
Moody's.
"C/D Assessment Rate": for any day as applied to any ABR Loan, the annual
assessment rate in effect on such day that is payable by a member of the Bank
Insurance Fund maintained by the Federal Deposit Insurance Corporation (the
"FDIC") classified as well-capitalized and within supervisory subgroup "B" (or
a comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.4 (or any successor provision) to the FDIC (or any
successor) for the FDIC's (or such successor's) insuring time deposits at
offices of such institution in the United States.
"C/D Reserve Percentage": for any day as applied to any ABR Loan, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board as in effect
from time to time) in respect of new non-personal time deposits in Dollars
having a maturity of 30 days or more.
"Closing Date": the date on which the conditions precedent set forth in
Section 5.1 shall have been satisfied, which date is May 14, 1998.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
"Collateral": all property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security
Document.
<PAGE> 10
5
"Commitment Fee Rate": 1/2 of 1% per annum; provided, that on and after
the first Adjustment Date occurring after the Closing Date, the Commitment Fee
Rate will be determined pursuant to the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not incorporated,
that is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group that includes the Borrower and that is
treated as a single employer under Section 414(b) or (c) of the Code or, for
purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Section 414 (m), (n), (o) or (p) of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible
Officer substantially in the form of Exhibit B.
"Confidential Information Memorandum": the Confidential Information
Memorandum dated April 1998 and furnished to the Lenders.
"Consolidated EBITDA": for any period, Consolidated Net Income for such
period plus, without duplication and to the extent reflected as a charge in the
statement of such Consolidated Net Income for such period, the sum of (a)
income tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans), (c) depreciation
and amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income
for such period, non-cash losses on sales of assets outside of the ordinary
course of business), (f) any other non-cash charges (including, without
limitation, the amount of any non-cash deduction to Consolidated Net Income as
a result of any grant to members of management of any Capital Stock of the
Borrower) and (g) the prepayment costs associated with the termination of the
Existing Credit Agreement, not to exceed an aggregate amount of $3,100,000, and
minus, to the extent included in the statement of such Consolidated Net Income
for such period, the sum of (a) any extraordinary, unusual or non-recurring
income or gains (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period, gains on
the sales of assets outside of the ordinary course of business) and (b) any
other non-cash income, all as determined on a consolidated basis; provided,
that for purposes of determining Consolidated EBITDA for the four quarter
period ending on or about June 30, 1998, there shall be added to Consolidated
EBITDA for such period the amount of $3,500,000 and for purposes of determining
Consolidated EBITDA for the four quarter period ending on or about September
30, 1998, there shall be added to Consolidated EBITDA for such period the
amount of $3,350,000.
"Consolidated Interest Coverage Ratio": for any period, the ratio of (a)
Consolidated EBITDA for such period to (b) Consolidated Interest Expense for
such period.
<PAGE> 11
6
"Consolidated Interest Expense": for any period, total cash interest
expense (including that attributable to Capital Lease Obligations) of the
Borrower and its Subsidiaries for such period with respect to all outstanding
Indebtedness of the Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income": for any period, the consolidated net income
(or loss) of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded (a) the
income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of the Borrower or is merged into or consolidated with the Borrower
or any of its Subsidiaries, (b) the income (or deficit) of any Person (other
than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Net Worth": as of the date of determination, all items which
in conformity with GAAP would be included under shareholders' equity on a
consolidated balance sheet of the Borrower at such date.
"Consolidated Senior Debt": at any date, the aggregate principal amount
of all Indebtedness of the Borrower and its Subsidiaries (including the Loans)
which is not by its terms subordinated to any other Indebtedness of the
Borrower or any such Subsidiary at such date, determined on a consolidated
basis in accordance with GAAP.
"Consolidated Senior Leverage Ratio": as at the last day of any period,
the ratio of (a) Consolidated Senior Debt on such day to (b) Consolidated
EBITDA for such period.
"Consolidated Total Debt": at any date, the aggregate principal amount of
all Indebtedness of the Borrower and its Subsidiaries at such date, determined
on a consolidated basis in accordance with GAAP.
"Consolidated Total Leverage Ratio": as at the last day of any period,
the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA
for such period.
"Continuing Directors": the directors of the Borrower on the Closing
Date, after giving effect to the Refinancing and the other transactions
contemplated hereby, and each other director, if, in each case, such other
director's nomination for election to the board of directors of the Borrower is
recommended by at least a majority of the then Continuing Directors.
<PAGE> 12
7
"Contractual Obligation": as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Default": any of the events specified in Section 8, whether or not any
requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Disposition": with respect to any property, any sale, lease, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof; and
the terms "Dispose" and "Disposed of" shall have correlative meanings.
"Dollars" and "$": dollars in lawful currency of the United States of
America.
"Domestic Subsidiary": any Subsidiary of the Borrower organized under the
laws of any jurisdiction within the United States of America.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of
Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board) maintained by a member bank of the
Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum determined on the
basis of the rate for deposits in Dollars for a period equal to such Interest
Period appearing on Page 3750 of the Dow Jones Markets screen as of 11:00 A.M.,
London time, two Business Days prior to the beginning of such Interest Period.
In the event that such rate does not appear on Page 3750 of the Dow Jones
Markets screen (or otherwise on such screen), the "Eurodollar Base Rate" shall
be determined by reference to such other comparable publicly available service
for displaying eurodollar rates as may be selected by the Administrative Agent
or, in the absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where its eurodollar and foreign
currency and
<PAGE> 13
8
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall originally
have been made on the same day).
"Event of Default": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Excluded Foreign Subsidiary": any Foreign Subsidiary in respect of which
either (a) the pledge of all of the Capital Stock of such Subsidiary as
Collateral or (b) the guaranteeing by such Subsidiary of the Obligations,
would, in the good faith judgment of the Borrower, result in adverse tax
consequences to the Borrower.
"Excluded Taxes": as defined in Section 2.16(a).
"Existing Credit Agreement": as defined in Section 5.1(b).
"Federal Funds Effective Rate": for any day, the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by the Reference Lender
from three federal funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
Domestic Subsidiary.
"Funding Office": the office of the Administrative Agent specified in
Section 10.2.
"GAAP": generally accepted accounting principles in the United States of
America as in effect from time to time set forth in the opinions and
pronouncements of the
<PAGE> 14
9
Accounting Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial Accounting
Standards Board and the rules and regulations of the Securities and Exchange
Commission, or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession, that are
applicable to the circumstances of the Borrower as of the date of
determination, except that for purposes of Section 7.1, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the most recent audited
financial statements delivered pursuant to Section 4.1(b). In the event that
any "Accounting Change" (as defined below) shall occur and such change results
in a change in the method of calculation of financial covenants, standards or
terms in this Agreement, then the Borrower and the Administrative Agent agree
to enter into negotiations in order to amend such provisions of this Agreement
so as to equitably reflect such Accounting Changes with the desired result that
the criteria for evaluating the Borrower's financial condition shall be the
same after such Accounting Changes as if such Accounting Changes had not been
made. Until such time as such an amendment shall have been executed and
delivered by the Borrower, the Administrative Agent and the Required Lenders,
all financial covenants, standards and terms in this Agreement shall continue
to be calculated or construed as if such Accounting Changes had not occurred.
"Accounting Changes" refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the Securities and Exchange Commission (or
successors thereto or agencies with similar functions).
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
(including, without limitation, the National Association of Insurance
Commissioners).
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by the Borrower and each Subsidiary
Guarantor, substantially in the form of Exhibit A, as the same may be amended,
supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit), as to which, to
induce the creation of such obligation, the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of
<PAGE> 15
10
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the owner of any such primary obligation against loss in
respect thereof; provided, however, that the term Guarantee Obligation shall
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lesser of (a) an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation shall be
such guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by the Borrower in good faith.
"Incur": as defined in Section 7.2; and the terms "Incurred" and
"Incurrence" shall have correlative meanings.
"Indebtedness": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than
current trade payables incurred in the ordinary course of such Person's
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all Capital Lease
Obligations of such Person, (f) all obligations of such Person, contingent or
otherwise, as an account party under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person, contingent or otherwise, to
purchase, redeem, retire or otherwise acquire for value any Capital Stock of
such Person, (h) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (g) above; (i) all
obligations of the kind referred to in clauses (a) through (h) above secured by
(or for which the holder of such obligation has an existing right, contingent
or otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, whether or not
such Person has assumed or become liable for the payment of such obligation;
and (j) for the purposes of Section 8(e) only, all obligations of such Person
in respect of Interest Rate Protection Agreements.
"Insolvency": with respect to any Multiemployer Plan, the condition that
such Plan is insolvent within the meaning of Section 4245(b) of ERISA and any
section incorporated by reference therein.
"Insolvent": pertaining to a condition of Insolvency.
<PAGE> 16
11
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, technology, know-how and processes, and all
rights to sue at law or in equity for any infringement or other impairment
thereof, including the right to receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is outstanding and
the final maturity date of such Loan, (b) as to any Eurodollar Loan having an
Interest Period of three months or less, the last day of such Interest Period,
(c) as to any Eurodollar Loan having an Interest Period longer than three
months, each day that is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period and
(d) as to any Eurodollar Loan, the date of any repayment or prepayment made in
respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the period
commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of
the foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a day that is not
a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event
such Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Revolving Termination Date shall end on the Revolving Termination Date;
(iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an Interest
Period for such Loan.
<PAGE> 17
12
"Interest Rate Protection Agreement": any interest rate protection
agreement, interest rate futures contract, interest rate option, interest rate
cap or other interest rate hedge arrangement, to or under which the Borrower or
any of its Subsidiaries is a party or a beneficiary on the date hereof or
becomes a party or a beneficiary after the date hereof.
"Investments": as defined in Section 7.8.
"Issuing Lender": The Chase Manhattan Bank (or any of its Affiliates,
including, without limitation, Chase Manhattan Bank Delaware), LaSalle National
Bank or any other Lender (or any of their respective Affiliates), in its
capacity as issuer of any Letter of Credit, as determined by the Borrower for
the applicable Letter of Credit.
"L/C Commitment": $15,000,000.
"L/C Fee Payment Date": the last day of each March, June, September and
December and the last day of the Revolving Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit that
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the Lenders other
than the Issuing Lender.
"Letters of Credit": as defined in Section 3.1(a).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as any of the
foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents and the Notes.
"Loan Parties": the Borrower and each Subsidiary of the Borrower that is
a party to a Loan Document.
"Material Adverse Effect": a material adverse effect on (a) the
Refinancing, (b) the business, property, assets, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole
or (c) the validity or enforceability of this Agreement or any of
<PAGE> 18
13
the other Loan Documents or the rights or remedies of the Administrative Agent
or the Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Mortgaged Properties": the real properties listed on Schedule 1.1B, as
to which the Administrative Agent for the benefit of the Lenders shall be
granted a Lien pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by any Loan
Party in favor of, or for the benefit of, the Administrative Agent for the
benefit of the Lenders, substantially in the form of Exhibit D (with such
changes thereto as shall be advisable under the law of the jurisdiction in
which such mortgage or deed of trust is to be recorded), as the same may be
amended, supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured
by a Lien expressly permitted hereunder on any asset that is the subject of
such Asset Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (b) in connection with any
issuance or sale of equity securities or debt securities or instruments or the
incurrence of loans, the cash proceeds received from such issuance or
incurrence, net of attorneys' fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.16(a).
"Non-U.S. Lender": as defined in Section 2.16(b).
"Notes": the collective reference to any promissory note evidencing
Loans.
<PAGE> 19
14
"Obligations": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) the Loans
and all other obligations and liabilities of the Borrower to the Administrative
Agent or to any Lender (or, in the case of Interest Rate Protection Agreements,
any affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, any other Loan
Document, the Letters of Credit, any Interest Rate Protection Agreement entered
into with any Lender or any affiliate of any Lender or any other document made,
delivered or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all fees, charges and disbursements of
counsel to the Administrative Agent or to any Lender that are required to be
paid by the Borrower pursuant hereto) or otherwise.
"Participant": as defined in Section 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA (or any successor).
"Permitted Acquisition": as defined in Section 7.8(g).
"Permitted Investors": the collective reference to officers and directors
of the Borrower on the date hereof and any holder of more than 15% of the
outstanding common stock of the Borrower on the date hereof.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan": at a particular time, any employee benefit plan that is covered
by ERISA and in respect of which the Borrower or a Commonly Controlled Entity
is (or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Preferred Stock": any Capital Stock entitled by its terms to a
preference (a) as to dividends or (b) upon a distribution of assets.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
<PAGE> 20
15
"Properties": as defined in Section 4.17.
"Purchase Price": with respect to any Acquisition, the sum (without
duplication) of (a) the amount of cash paid by the Borrower and its
Subsidiaries in connection with such Acquisition, (b) the value (as determined
for purposes of such Acquisition in accordance with the applicable acquisition
agreement) of all Capital Stock of the Borrower issued or given as
consideration in connection with such Acquisition, (c) the principal amount
(or, if less, the accreted value) at the time of such Acquisition of all
Indebtedness incurred, assumed or acquired by Borrower and its Subsidiaries in
connection with such Acquisition, (d) all additional purchase price amounts in
connection with such Acquisition in the form of earnouts, deferred purchase
price and other contingent obligations that should be recorded as a liability
on the balance sheet of the Borrower and its Subsidiaries in accordance with
GAAP, Regulation S-X under the Securities Act of 1933, as amended, or any other
rule or regulation of the United States Securities and Exchange Commission, (e)
all amounts paid by the Borrower and its Subsidiaries in respect of covenants
not to compete, consulting agreements and other affiliated contracts in
connection with such Acquisition, and (f) the aggregate fair market value of
all other consideration given by the Borrower and its Subsidiaries in
connection with such Acquisition.
"Recovery Event": any settlement of or payment in respect of any property
or casualty insurance claim or any condemnation proceeding relating to any
asset of the Borrower or any of its Subsidiaries.
"Reference Lender": The Chase Manhattan Bank.
"Reference Period": with respect to any date, means the period of four
consecutive fiscal quarters of the Borrower immediately preceding such date or,
if such date is the last day of a fiscal quarter, ending on such date.
"Refinancing": as defined in Section 5.1(b).
"Refunded Swingline Loans": as defined in Section 2.4.
"Refunding Date": as defined in Section 2.4.
"Register": as defined in Section 10.6(d).
"Regulation U": Regulation U of the Board as in effect from time to time.
"Reimbursement Obligation": the obligation of the Borrower to reimburse
the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of
Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment Event,
the aggregate Net Cash Proceeds received by the Borrower or any of its
Subsidiaries in connection
<PAGE> 21
16
therewith that are not applied to reduce the Revolving Commitments pursuant to
Section 2.8(b) as a result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible Officer
stating that no Event of Default has occurred and is continuing and that the
Borrower (directly or indirectly through a Subsidiary) intends and expects to
use all or a specified portion of the Net Cash Proceeds of an Asset Sale or
Recovery Event to acquire assets useful in its business.
"Reinvestment Prepayment Amount": with respect to any Reinvestment Event,
the Reinvestment Deferred Amount relating thereto less any amount expended
prior to the relevant Reinvestment Prepayment Date to acquire assets useful in
the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment Event,
the earlier of (a) the date occurring six months after such Reinvestment Event
and (b) the date on which the Borrower shall have determined not to, or shall
have otherwise ceased to, acquire assets useful in the Borrower's business with
all or any portion of the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of
ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .22, .23, .27, .28, .29, .30, .31, .32, .34 or .35 of
PBGC Reg. Section 4043.
"Required Lenders": the holders of more than 50% of the Total Revolving
Commitments or, if the Revolving Commitments have been terminated, the Total
Revolving Extensions of Credit.
"Requirement of Law": as to any Person, the Certificate of Incorporation
and By-Laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Responsible Officer": the chief executive officer, president or chief
financial officer of the Borrower, but in any event, with respect to financial
matters, the chief financial officer of the Borrower.
"Restricted Payments": as defined in Section 7.6.
<PAGE> 22
17
"Revolving Commitment": as to any Lender, the obligation of such Lender,
if any, to make Revolving Loans and participate in Swingline Loans and Letters
of Credit, in an aggregate principal and/or face amount not to exceed the
amount set forth under the heading "Revolving Commitment" opposite such
Lender's name on Schedule 1.1A, as the same may be changed from time to time
pursuant to the terms hereof. The original amount of the Total Revolving
Commitments is $100,000,000.
"Revolving Commitment Period": the period from and including the Closing
Date to the Revolving Termination Date.
"Revolving Extensions of Credit": as to any Lender at any time, an amount
equal to the sum of (a) the aggregate principal amount of all Revolving Loans
made by such Lender then outstanding, (b) such Lender's Revolving Percentage of
the L/C Obligations then outstanding and (c) such Lender's Revolving Percentage
of the aggregate principal amount of Swingline Loans then outstanding.
"Revolving Facility": the Revolving Commitments and the extensions of
credit made thereunder.
"Revolving Loans": as defined in Section 2.1.
"Revolving Percentage": as to any Lender at any time, the percentage
which such Lender's Revolving Commitment then constitutes of the Total
Revolving Commitments (or, at any time after the Revolving Commitments shall
have expired or terminated, the percentage which the aggregate principal amount
of such Lender's Revolving Loans then outstanding constitutes of the aggregate
principal amount of the Revolving Loans then outstanding).
"Revolving Termination Date": May 13, 2003.
"Security Documents": the collective reference to the Guarantee and
Collateral Agreement, the Mortgages and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any property of any
Person to secure the obligations and liabilities of any Loan Party under any
Loan Document.
"Senior Subordinated Note Indenture": the Indenture entered into by the
Borrower and certain of its Subsidiaries in connection with the issuance of the
Senior Subordinated Notes, together with all instruments and other agreements
entered into by the Borrower or such Subsidiaries in connection therewith, as
the same may be amended, supplemented or otherwise modified from time to time
in accordance with Section 7.9.
"Senior Subordinated Notes": the subordinated notes of the Borrower
issued on the Closing Date pursuant to the Senior Subordinated Note Indenture.
<PAGE> 23
18
"Single Employer Plan": any Plan that is covered by Title IV of ERISA,
but that is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state
laws governing determinations of the insolvency of debtors, (b) the present
fair saleable value of the assets of such Person will, as of such date, be
greater than the amount that will be required to pay the probable liability of
such Person on its debts as such debts become absolute and matured, (c) such
Person will not have, as of such date, an unreasonably small amount of capital
with which to conduct its business, and (d) such Person will be able to pay its
debts as they mature. For purposes of this definition, (i) "debt" means
liability on a "claim", and (ii) "claim" means any (x) right to payment,
whether or not such a right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured or (y) right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured or unmatured, disputed, undisputed, secured or unsecured.
"Specified Change of Control": a "Change of Control" as defined in the
Senior Subordinated Note Indenture.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, directly
or indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.
"Subsidiary Guarantor": each Subsidiary of the Borrower other than any
Excluded Foreign Subsidiary.
"Swingline Commitment": the obligation of the Swingline Lender to make
Swingline Loans pursuant to Section 2.3 in an aggregate principal amount at any
one time outstanding not to exceed $5,000,000.
"Swingline Lender": The Chase Manhattan Bank, in its capacity as the
lender of Swingline Loans.
"Swingline Loans": as defined in Section 2.3.
<PAGE> 24
19
"Swingline Participation Amount": as defined in Section 2.4.
"Total Revolving Commitments": at any time, the aggregate amount of the
Revolving Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate amount
of the Revolving Extensions of Credit of the Lenders outstanding at such time.
"Transferee": any Assignee or Participant.
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"U.S. Taxes": as defined in Section 10.6(d).
"Wholly Owned Subsidiary": as to any Person, any other Person all of the
Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is a
Wholly Owned Subsidiary of the Borrower.
2 Other Definitional Provisions. (a) Unless otherwise specified therein,
all terms defined in this Agreement shall have the defined meanings when used in
the other Loan Documents or any certificate or other document made or delivered
pursuant hereto or thereto.
(a) As used herein and in the other Loan Documents, and any certificate or
other document made or delivered pursuant hereto or thereto, (i) accounting
terms relating to the Borrower and its Subsidiaries not defined in Section 1.1
and accounting terms partly defined in Section 1.1, to the extent not defined,
shall have the respective meanings given to them under GAAP and (ii) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, Capital Stock, securities, accounts and contract rights.
(b) For the purposes of calculating Consolidated EBITDA for any Reference
Period pursuant to any determination of the Consolidated Senior Leverage Ratio
and the Consolidated Total Leverage Ratio, (i) if at any time during such
Reference Period the Borrower or any Subsidiary shall have made any Material
Disposition, the Consolidated EBITDA for such Reference Period shall be reduced
by an amount equal to the Consolidated EBITDA (if positive) attributable to the
property that is the subject of such Material Disposition for such Reference
Period or increased by an amount equal to the Consolidated EBITDA (if negative)
attributable
<PAGE> 25
20
thereto for such Reference Period and (ii) if during such Reference Period the
Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated
EBITDA for such Reference Period shall be calculated after giving pro forma
effect thereto as if such Material Acquisition occurred on the first day of
such Reference Period. As used in this paragraph, "Material Acquisition" means
any acquisition of property or series of related acquisitions of property that
(a) constitutes assets comprising all or substantially all of an operating unit
of a business or constitutes all or substantially all of the common stock of a
Person and (b) involves the payment of consideration by the Borrower and its
Subsidiaries in excess of $10,000,000 (including any Indebtedness assumed or
incurred in connection therewith); and "Material Disposition" means any
Disposition of property or series of related Dispositions of property that
yields gross proceeds to the Borrower or any of its Subsidiaries in excess of
$10,000,000.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. AMOUNT AND TERMS OF COMMITMENTS
1 Revolving Commitments. (a) Subject to the terms and conditions hereof,
each Lender severally agrees to make revolving credit loans ("Revolving Loans")
to the Borrower from time to time during the Revolving Commitment Period in an
aggregate principal amount at any one time outstanding which, when added to
such Lender's Revolving Percentage of the sum of (i) the L/C Obligations then
outstanding and (ii) the aggregate principal amount of the Swingline Loans then
outstanding, does not exceed the amount of such Lender's Revolving Commitment.
During the Revolving Commitment Period the Borrower may use the Revolving
Commitments by borrowing, prepaying the Revolving Loans in whole or in part,
and reborrowing, all in accordance with the terms and conditions hereof. The
Revolving Loans may from time to time be Eurodollar Loans or ABR Loans, as
determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.9, provided that no Revolving Loan shall be
made as a Eurodollar Loan after the day that is one month prior to the
Revolving Termination Date.
(b) The Borrower shall repay all outstanding Revolving Loans on the
Revolving Termination Date.
2 Procedure for Revolving Loan Borrowing. The Borrower may borrow under
the Revolving Commitments during the Revolving Commitment Period on any
Business Day, provided that the Borrower shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 12:00 Noon, New York City time, (a) three Business Days prior to the
requested Borrowing Date, in the case of Eurodollar Loans, or
<PAGE> 26
21
(b) on the requested Borrowing Date, in the case of ABR Loans), specifying (i)
the amount and Type of Revolving Loans to be borrowed, (ii) the requested
Borrowing Date and (iii) in the case of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Period therefor. Any Revolving Loans made on the Closing Date shall
initially be ABR Loans. Each borrowing under the Revolving Commitments shall
be in an amount equal to (x) in the case of ABR Loans, $500,000 or a whole
multiple of $250,000 in excess thereof (or, if the then aggregate Available
Revolving Commitments are less than $500,000, such lesser amount) and (y) in
the case of Eurodollar Loans, $1,000,000 or a whole multiple of $500,000 in
excess thereof; provided, that the Swingline Lender may request, on behalf of
the Borrower, borrowings under the Revolving Commitments that are ABR Loans in
other amounts pursuant to Section 2.4. Upon receipt of any such notice from
the Borrower, the Administrative Agent shall promptly notify each Lender
thereof. Each Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 2:00 P.M., New York City time, on the Borrowing
Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the
Borrower by the Administrative Agent crediting the account of the Borrower on
the books of such office with the aggregate of the amounts made available to
the Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent or by depositing such amounts to such other account as
shall be directed by the Borrower.
3 Swingline Commitment. (a) Subject to the terms and conditions hereof,
the Swingline Lender agrees to make a portion of the credit otherwise available
to the Borrower under the Revolving Commitments from time to time during the
Revolving Commitment Period by making swing line loans ("Swingline Loans") to
the Borrower; provided that (i) the aggregate principal amount of Swingline
Loans outstanding at any time shall not exceed the Swingline Commitment then in
effect (notwithstanding that the Swingline Loans outstanding at any time, when
aggregated with the Swingline Lender's other outstanding Revolving Loans
hereunder, may exceed the Swingline Commitment or such Lender's Revolving
Commitment then in effect) and (ii) the Borrower shall not request, and the
Swingline Lender shall not make, any Swingline Loan if, after giving effect to
the making of such Swingline Loan, the aggregate amount of the Available
Revolving Commitments would be less than zero. During the Revolving Commitment
Period, the Borrower may use the Swingline Commitment by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof. Swingline
Loans shall be ABR Loans only.
(a) The Borrower shall repay all outstanding Swingline Loans on the
Revolving Termination Date.
4 Procedure for Swingline Borrowing; Refunding of Swingline Loans.
Whenever the Borrower desires that the Swingline Lender make Swingline Loans it
shall give the Swingline Lender irrevocable telephonic notice confirmed
promptly in writing (which telephonic notice must be received by the Swingline
Lender not later than 1:00 P.M., New York City time, on the proposed Borrowing
Date), specifying (i) the amount to be borrowed and (ii)
<PAGE> 27
22
the requested Borrowing Date (which shall be a Business Day during the
Revolving Commitment Period). Each borrowing under the Swingline Commitment
shall be in an amount equal to $250,000 or a whole multiple of $100,000 in
excess thereof. Not later than 3:00 P.M., New York City time, on the Borrowing
Date specified in a notice in respect of Swingline Loans, the Swingline Lender
shall make available to the Administrative Agent at the Funding Office an
amount in immediately available funds equal to the amount of the Swingline Loan
to be made by the Swingline Lender. The Administrative Agent shall make the
proceeds of such Swingline Loan available to the Borrower on such Borrowing
Date by depositing such proceeds in the account of the Borrower with the
Administrative Agent or such other account as shall be directed by the Borrower
on such Borrowing Date in immediately available funds.
(a) The Swingline Lender, at any time and from time to time in its sole
and absolute discretion may, on behalf of the Borrower (which hereby
irrevocably directs the Swingline Lender to act on its behalf), on one Business
Day's notice given by the Swingline Lender no later than 12:00 Noon, New York
City time, request each Lender to make, and each Lender hereby agrees to make,
a Revolving Loan, in an amount equal to such Lender's Revolving Percentage of
the aggregate amount of the Swingline Loans (the "Refunded Swingline Loans")
outstanding on the date of such notice, to repay the Swingline Lender. Each
Lender shall make the amount of such Revolving Loan available to the
Administrative Agent at the Funding Office in immediately available funds, not
later than 10:00 A.M., New York City time, one Business Day after the date of
such notice. The proceeds of such Revolving Loans shall be immediately made
available by the Administrative Agent to the Swingline Lender for application
by the Swingline Lender to the repayment of the Refunded Swingline Loans. The
Borrower irrevocably authorizes the Swingline Lender to charge the Borrower's
accounts with the Administrative Agent (up to the amount available in each such
account) in order to immediately pay the amount of such Refunded Swingline
Loans to the extent amounts received from the Lenders are not sufficient to
repay in full such Refunded Swingline Loans.
(b) If prior to the time a Revolving Loan would have otherwise been made
pursuant to Section 2.4(b), one of the events described in Section 8(f) shall
have occurred and be continuing with respect to the Borrower or if for any
other reason, as determined by the Swingline Lender in its sole discretion,
Revolving Loans may not be made as contemplated by Section 2.4(b), each Lender
shall, on the date such Revolving Loan was to have been made pursuant to the
notice referred to in Section 2.4(b) (the "Refunding Date"), purchase for cash
an undivided participating interest in the then outstanding Swingline Loans by
paying to the Swingline Lender an amount (the "Swingline Participation Amount")
equal to (i) such Lender's Revolving Percentage times (ii) the sum of the
aggregate principal amount of Swingline Loans then outstanding that were to
have been repaid with such Revolving Loans.
(c) Whenever, at any time after the Swingline Lender has received from
any Lender such Lender's Swingline Participation Amount, the Swingline Lender
receives any payment on account of the Swingline Loans, the Swingline Lender
will distribute to such Lender its Swingline Participation Amount
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender's participating interest was
outstanding and
<PAGE> 28
23
funded and, in the case of principal and interest payments, to reflect such
Lender's pro rata portion of such payment if such payment is not sufficient to
pay the principal of and interest on all Swingline Loans then due); provided,
however, that in the event that such payment received by the Swingline Lender
is required to be returned, such Lender will return to the Swingline Lender any
portion thereof previously distributed to it by the Swingline Lender.
(d) Each Lender's obligation to make the Revolving Loans referred to in
Section 2.4(b) and to purchase participating interests pursuant to Section
2.4(c) shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right that such Lender or the Borrower may have
against the Swingline Lender, the Borrower or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default or an Event of
Default or the failure to satisfy any of the other conditions specified in
Section 5; (iii) any adverse change in the condition (financial or otherwise)
of the Borrower; (iv) any breach of this Agreement or any other Loan Document
by the Borrower, any other Loan Party or any other Lender; or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
5 Commitment Fees, etc. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee for the
period from and including the Closing Date to the last day of the Revolving
Commitment Period, computed at the Commitment Fee Rate on the average daily
amount of the Available Revolving Commitment of such Lender during the period
for which payment is made, payable quarterly in arrears on the last day of each
March, June, September and December and on the Revolving Termination Date,
commencing on the first of such dates to occur after the date hereof.
(a) The Borrower agrees to pay to the Administrative Agent the fees in
the amounts and on the dates previously agreed to in writing by the Borrower
and the Administrative Agent.
6 Termination or Reduction of Revolving Commitments. The Borrower shall
have the right, upon not less than three Business Days' notice to the
Administrative Agent, to terminate the Revolving Commitments or, from time to
time, to reduce the amount of the Revolving Commitments; provided that no such
termination or reduction of Revolving Commitments shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Loans and
Swingline Loans made on the effective date thereof, the Total Revolving
Extensions of Credit would exceed the Total Revolving Commitments. Any such
reduction shall be in an amount equal to $1,000,000, or a whole multiple
thereof, and shall reduce permanently the Revolving Commitments then in effect.
7 Optional Prepayments. The Borrower may at any time and from time to
time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent at least three Business
Days prior thereto in the case of Eurodollar Loans and by 12:00 Noon, New York
City time on the Business Day of such
<PAGE> 29
24
prepayment in the case of ABR Loans, which notice shall specify the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans or ABR
Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the
last day of the Interest Period applicable thereto, the Borrower shall also pay
any amounts owing pursuant to Section 2.17. Upon receipt of any such notice
the Administrative Agent shall promptly notify each relevant Lender thereof.
If any such notice is given, the amount specified in such notice shall be due
and payable on the date specified therein, together with (in the case of
Eurodollar Loans) accrued interest to such date on the amount prepaid. Partial
prepayments of Revolving Loans shall be in an aggregate principal amount of
$1,000,000 or a whole multiple thereof. Partial prepayments of Swingline Loans
shall be in an aggregate principal amount of $100,000 or a whole multiple
thereof.
8 Mandatory Prepayments and Commitment Reductions. (a) Unless the
Required Lenders shall otherwise agree, if any Indebtedness shall be issued or
Incurred by the Borrower or any of its Subsidiaries (excluding any Indebtedness
Incurred in accordance with Section 7.2), an amount equal to 100% of the Net
Cash Proceeds thereof shall be applied on the date of such issuance or
Incurrence toward the reduction of the Revolving Commitments as set forth in
Section 2.8(c).
(a) Unless the Required Lenders shall otherwise agree, if on any date the
Borrower or any of its Subsidiaries shall receive Net Cash Proceeds from any
Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be
delivered in respect thereof, such Net Cash Proceeds shall be applied on such
date toward the reduction of the Revolving Commitments as set forth in Section
2.8(c); provided, that, notwithstanding the foregoing, on each Reinvestment
Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with
respect to the relevant Reinvestment Event shall be applied toward the
reduction of the Revolving Commitments as set forth in Section 2.8(c).
(b) Amounts to be applied in connection with Revolving Commitment
reductions made pursuant to this Section 2.8 shall be accompanied by prepayment
of the Revolving Loans and/or Swingline Loans to the extent, if any, that the
Total Revolving Extensions of Credit exceed the amount of the Total Revolving
Commitments as so reduced, provided that if the aggregate principal amount of
Revolving Loans and Swingline Loans then outstanding is less than the amount of
such excess (because L/C Obligations constitute a portion thereof), the
Borrower shall, to the extent of the balance of such excess, replace
outstanding Letters of Credit and/or deposit an amount in cash in a cash
collateral account established with the Administrative Agent for the benefit of
the Lenders on terms and conditions satisfactory to the Administrative Agent.
The application of any prepayment pursuant to this Section 2.8 shall be made
first to ABR Loans and second to Eurodollar Loans. Each prepayment of the
Revolving Loans under this Section 2.8 (in the case of Eurodollar Loans) shall
be accompanied by accrued interest to the date of such prepayment on the amount
prepaid.
9 Conversion and Continuation Options. (a) The Borrower may elect from
time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion
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25
of Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to convert ABR Loans
to Eurodollar Loans by giving the Administrative Agent at least three Business
Days' prior irrevocable notice of such election (which notice shall specify the
length of the initial Interest Period therefor), provided that no ABR Loan may
be converted into a Eurodollar Loan (i) when any Event of Default has occurred
and is continuing and the Administrative Agent or the Required Lenders have
determined in its or their sole discretion not to permit such conversions or
(ii) after the date that is one month prior to the Revolving Termination Date.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each relevant Lender thereof.
(a) Any Eurodollar Loan may be continued as such upon the expiration of
the then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1,
of the length of the next Interest Period to be applicable to such Revolving
Loans, provided that no Eurodollar Loan may be continued as such (i) when any
Event of Default has occurred and is continuing and the Administrative Agent
has or the Required Lenders have determined in its or their sole discretion not
to permit such continuations or (ii) after the date that is one month prior to
the Revolving Termination Date, and provided, further, that if the Borrower
shall fail to give any required notice as described above in this paragraph or
if such continuation is not permitted pursuant to the preceding proviso such
Revolving Loans shall be automatically converted to ABR Loans on the last day
of such then expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.
10 Limitations on Eurodollar Tranches. Notwithstanding anything to the
contrary in this Agreement, all borrowings, conversions, continuations and
optional prepayments of Eurodollar Loans hereunder and all selections of
Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections so that, (a) after giving effect thereto, the aggregate
principal amount of the Eurodollar Loans comprising each Eurodollar Tranche
shall be equal to $1,000,000 or a whole multiple of $500,000 in excess thereof
and (b) no more than ten Eurodollar Tranches shall be outstanding at any one
time.
11 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at
a rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(a) Each ABR Loan shall bear interest at a rate per annum equal to the ABR
plus the Applicable Margin.
(b) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and
Reimbursement Obligations (whether or not overdue) shall bear interest at a
rate per annum equal to (x) in the case of the Loans, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
Section 2.11 plus 2%
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26
or (y) in the case of Reimbursement Obligations, the rate applicable to ABR
Loans plus 2%, and (ii) if all or a portion of any interest payable on any Loan
or Reimbursement Obligation or any commitment fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a rate
per annum equal to the rate then applicable to ABR Loans plus 2%, in each case,
with respect to clauses (i) and (ii) above, from the date of such non-payment
until such amount is paid in full (as well after as before judgment).
(c) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this Section 2.11
shall be payable from time to time on demand.
12 Computation of Interest and Fees. (a) Interest and fees payable
pursuant hereto shall be calculated on the basis of a 360-day year for the
actual days elapsed, except that, with respect to ABR Loans the rate of interest
on which is calculated on the basis of the Prime Rate, the interest thereon
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from
a change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Lenders of the effective date and the amount of each
such change in interest rate.
(a) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.11(a).
13 Inability to Determine Interest Rate. If prior to the first day of any
Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost
to such Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Loans during such Interest Period,
<PAGE> 32
27
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the relevant Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as ABR Loans or not borrowed, at the
Borrower's option, (y) any Revolving Loans that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be prepaid or
continued as ABR Loans at the Borrower's option and (z) any outstanding
Eurodollar Loans shall be prepaid or converted at the Borrower's option, on the
first day of such Interest Period, to ABR Loans. Until such notice has been
withdrawn by the Administrative Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall the Borrower have the right to convert
Revolving Loans to Eurodollar Loans.
14 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower
from the Lenders hereunder, each payment by the Borrower on account of any
commitment fee and any reduction of the Revolving Commitments of the Lenders
shall be made pro rata according to the respective Revolving Percentages of the
Lenders.
(a) Each payment (including each prepayment) by the Borrower on account
of principal of and interest on the Revolving Loans shall be made pro rata
according to the respective outstanding principal amounts of the Revolving
Loans then held by the Lenders.
(b) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for
the account of the Lenders, at the Funding Office, in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If
any payment hereunder (other than payments on the Eurodollar Loans) becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day. If any payment on a Eurodollar Loan
becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day unless the result
of such extension would be to extend such payment into another calendar month,
in which event such payment shall be made on the immediately preceding Business
Day. In the case of any extension of any payment of principal pursuant to the
preceding two sentences, interest thereon shall be payable at the then
applicable rate during such extension.
(c) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available
<PAGE> 33
28
to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this Section
2.14(d) shall be conclusive in the absence of manifest error. If such Lender's
share of such borrowing is not made available to the Administrative Agent by
such Lender within three Business Days of such Borrowing Date, the
Administrative Agent shall also be entitled to recover such amount with
interest thereon at the rate per annum applicable to ABR Loans, on demand, from
the Borrower.
(d) Unless the Administrative Agent shall have been notified in writing
by the Borrower prior to the date of any payment being made hereunder that the
Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding
sentence, such amount with interest thereon at the rate per annum equal to the
daily average Federal Funds Effective Rate. Nothing herein shall be deemed to
limit the rights of the Administrative Agent or any Lender against the
Borrower.
15 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall change the basis of Excluded Taxes of any Lender with
respect to this Agreement, any Letter of Credit, any Application or any
Eurodollar Loan made by it;
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by,
any office of such Lender that is not otherwise included in the
determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable; provided that the Borrower
shall not be required to compensate a Lender pursuant to this paragraph for any
amounts incurred more than six months prior to the date that such Lender
notifies the Borrower of such Lender's intention to claim compensation
therefor; and provided further that, if the circumstances giving rise to such
<PAGE> 34
29
claim have a retroactive effect, then such six-month period shall be extended
to include the period of such retroactive effect. If any Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.15, it
shall promptly notify the Borrower (with a copy to the Administrative Agent) of
the event by reason of which it has become so entitled.
(b) If any Lender shall have determined that the adoption of or any change
in any Requirement of Law regarding capital adequacy or in the interpretation
or application thereof or compliance by such Lender or any corporation
controlling such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter
of Credit to a level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to the Borrower (with a copy to
the Administrative Agent) of a written request therefor, the Borrower shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such reduction; provided that the Borrower shall not be required to
compensate a Lender pursuant to this paragraph for any amounts incurred more
than six months prior to the date that such Lender notifies the Borrower of
such Lender's intention to claim compensation therefor; and provided further
that, if the circumstances giving rise to such claim have a retroactive effect,
then such six-month period shall be extended to include the period of such
retroactive effect.
(c) A certificate as to any additional amounts payable pursuant to this
Section 2.15 submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error.
The obligations of the Borrower pursuant to this Section 2.15 shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
16 Taxes. (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Administrative Agent or any Lender as a result of a
present or former connection between the Administrative Agent or such Lender
and the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document) (such excluded
taxes, "Excluded Taxes"). If any such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are
required to be withheld from any amounts payable to the Administrative Agent or
any Lender hereunder, the amounts so payable
<PAGE> 35
30
to the Administrative Agent or such Lender shall be increased to the extent
necessary to yield to the Administrative Agent or such Lender (after payment of
all Non-Excluded Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement, provided, however,
that the Borrower shall not be required to increase any such amounts payable to
any Lender that is not organized under the laws of the United States of America
or a state thereof to the extent such Lender's compliance with the requirements
of Section 2.16(b) at the time such Lender becomes a party to this Agreement
fails to establish a complete exemption from such withholding; provided,
further, that the Borrower shall not be required to increase any such amounts
pursuant to this paragraph for any amounts incurred more than six months prior
to the date such Lender notified the Borrower of such Lender's intention to
claim compensation therefor unless (x) such Lender did not have actual
knowledge of the circumstances giving rise to the obligation of the Borrower to
so increase such amount or (y) the Borrower did have actual knowledge of the
circumstances giving rise to its obligation to so increase such amount; and
provided further that, if the circumstances giving rise to such claim have a
retroactive effect, then such six-month period shall be extended to include the
period of such retroactive effect. Whenever any Non-Excluded Taxes are payable
by the Borrower, as promptly as possible thereafter the Borrower shall send to
the Administrative Agent for its own account or for the account of such Lender,
as the case may be, a certified copy of an original official receipt, if
available, received by the Borrower showing payment thereof. If the Borrower
fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts
or other required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as
a result of any such failure. The agreements in this Section 2.16 shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
(a) Each Lender (or Transferee) that is not a citizen or resident of the
United States of America, a corporation, partnership or other entity created or
organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a Form W-8, or any subsequent versions
thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form
W-8, an annual certificate representing that such Non-U.S. Lender is not a
"bank" for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such
Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S.
federal withholding tax on all payments by the Borrower under this Agreement
and the other Loan Documents. Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the
case of any Participant, on or before the date such
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Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify the Borrower at any time it determines that it is no
longer in a position to provide any previously delivered certificate to the
Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
Section 2.16(b), a Non-U.S. Lender shall not be required to deliver any form
pursuant to this Section 2.16(b) that such Non-U.S. Lender is not legally able
to deliver.
17 Indemnity. The Borrower agrees to indemnify each Lender and to hold
each Lender harmless from any loss or expense that such Lender may sustain or
incur as a consequence of (a) default by the Borrower in making a borrowing of,
conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a day that
is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest that would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Revolving
Loans provided for herein (excluding, however, the Applicable Margin included
therein, if any) over (ii) the amount of interest (as reasonably determined by
such Lender) that would have accrued to such Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank eurodollar market. A certificate as to any amounts payable pursuant
to this Section 2.17 submitted to the Borrower by any Lender shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
18 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.15 or 2.16(a)
with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or
regulatory disadvantage, and provided, further, that nothing in this Section
2.18 shall affect or postpone any of the obligations of any Borrower or the
rights of any Lender pursuant to Section 2.15 or 2.16(a).
19 Replacement of Lenders. The Borrower shall be permitted to replace
any Lender that (a) requests reimbursement for amounts owing pursuant to
Section 2.15 or 2.16 or (b) defaults in its obligation to make Loans hereunder,
with a replacement financial institution; provided that (i) such replacement
does not conflict with any Requirement of Law, (ii) no Event
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of Default shall have occurred and be continuing at the time of such
replacement, (iii) if applicable, prior to any such replacement, such Lender
shall have taken no action under Section 2.18 so as to eliminate the continued
need for payment of amounts owing pursuant to Section 2.15 or 2.16, (iv) the
replacement financial institution shall purchase, at par, all Loans and other
amounts owing to such replaced Lender on or prior to the date of replacement,
(v) the Borrower shall be liable to such replaced Lender under Section 2.17 if
any Eurodollar Loan owing to such replaced Lender shall be purchased other than
on the last day of the Interest Period relating thereto, (vi) the replacement
financial institution, if not already a Lender, shall be reasonably
satisfactory to the Administrative Agent, (vii) the replaced Lender shall be
obligated to make such replacement in accordance with the provisions of Section
10.6 (provided that the Borrower shall be obligated to pay the registration and
processing fee referred to therein), (viii) until such time as such replacement
shall be consummated, the Borrower shall pay all additional amounts (if any)
required pursuant to Section 2.15 or 2.16, as the case may be, and (ix) any
such replacement shall not be deemed to be a waiver of any rights that the
Borrower, the Administrative Agent or any other Lender shall have against the
replaced Lender.
20 Reporting Requirements of Issuing Lenders. Within two Business Days
following the last day of each calendar month, each Issuing Lender shall
deliver to the Administrative Agent a report detailing all activity during the
preceding month with respect to any Letters of Credit issued by any such
Issuing Lender, including the face amount, the account party, the beneficiary
and the expiration date of such Letters of Credit and any other information
with respect thereto as may be requested by the Administrative Agent.
3. LETTERS OF CREDIT
1 L/C Commitment. (a) Subject to the terms and conditions hereof, the
Issuing Lender, in reliance on the agreements of the other Lenders set forth in
Section 3.4(a), agrees to issue letters of credit ("Letters of Credit") for the
account of the Borrower on any Business Day during the Revolving Commitment
Period in such form as may be approved from time to time by the Issuing Lender;
provided that the Issuing Lender shall have no obligation to issue any Letter
of Credit if, after giving effect to such issuance, (i) the L/C Obligations
would exceed the L/C Commitment or (ii) the aggregate amount of the Available
Revolving Commitments would be less than zero. Letters of Credit may be either
standby letters of credit or commercial letters of credit. Notwithstanding the
foregoing, each of the letters of credit described on Schedule 3.1 shall, from
and after the Closing Date, be deemed to have been issued pursuant to this
Section 3.1(a) with the issuing lender listed on such schedule being deemed to
be the Issuing Lender in respect of such letters of credit. Each Letter of
Credit shall (i) be denominated in Dollars and (ii) expire no later than the
earlier of (x) the first anniversary of its date of issuance and (y) the date
that is five Business Days prior to the Revolving Termination Date, provided
that any Letter of Credit with a one-year term may provide for the renewal
thereof for additional one-year periods (which shall in no event extend beyond
the date referred to in clause (y) above), provided, however, that any Letter
of Credit which is a commercial letter of credit shall expire no later than 180
days after its date of issuance.
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33
(a) Each Letter of Credit shall be subject to the Uniform Customs and, to
the extent not inconsistent therewith, the laws of the State of New York.
(b) The Issuing Lender shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
2 Procedure for Issuance of Letter of Credit. The Borrower may from time
to time request that the Issuing Lender issue a Letter of Credit by delivering
to the Issuing Lender and the Administrative Agent at their respective
addresses for notices specified herein (or to such other address provided by
such Issuing Lender) an Application therefor, completed to the satisfaction of
the Issuing Lender, and such other certificates, documents and other papers and
information as the Issuing Lender may request. Upon receipt of any
Application, the Issuing Lender will process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall
the Issuing Lender be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing
Lender shall furnish a copy of such Letter of Credit to the Borrower promptly
following the issuance thereof. The Issuing Lender shall promptly furnish to
the Administrative Agent, which shall in turn promptly furnish to the Lenders,
notice of the issuance of each Letter of Credit (including the amount thereof).
3 Fees and Other Charges. (a) The Borrower will pay a fee on all
outstanding Letters of Credit at a per annum rate equal to (i) the Applicable
Margin then in effect with respect to Eurodollar Loans minus 1/8% times (ii)
the average daily undrawn face amount of all such Letters of Credit, shared
ratably among the Lenders and payable quarterly in arrears on each L/C Fee
Payment Date after the issuance date. In addition, the Borrower shall pay to
the relevant Issuing Lender for its own account a fronting fee at a rate to be
agreed with such Issuing Lender, payable quarterly in arrears on each L/C Fee
Payment Date after the Issuance Date.
(a) In addition to the foregoing fees, the Borrower shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses
as are incurred or charged by the Issuing Lender in issuing, negotiating,
effecting payment under, amending or otherwise administering any Letter of
Credit.
4 L/C Participations. (a) The Issuing Lender irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's
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34
Revolving Percentage in the Issuing Lender's obligations and rights under each
Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Lender thereunder. Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Lender that, if a draft is paid under any
Letter of Credit for which the Issuing Lender is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such L/C Participant
shall pay to the Issuing Lender upon demand at the Issuing Lender's address for
notices specified herein an amount equal to such L/C Participant's Revolving
Percentage of the amount of such draft, or any part thereof, that is not so
reimbursed.
(a) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant to
Section 3.4(a) is not made available to the Issuing Lender by such L/C
Participant within three Business Days after the date such payment is due, the
Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to ABR Loans. A certificate of the Issuing Lender
submitted to any L/C Participant with respect to any amounts owing under this
Section shall be conclusive in the absence of manifest error.
(b) Whenever, at any time after the Issuing Lender has made payment under
any Letter of Credit and has received from any L/C Participant its pro rata
share of such payment in accordance with Section 3.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from
the Borrower or otherwise, including proceeds of collateral applied thereto by
the Issuing Lender), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
5 Reimbursement Obligation of the Borrower. The Borrower agrees to
reimburse the Issuing Lender on each date on which the Issuing Lender notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Lender for the amount of (a) such draft so paid
and (b) any taxes, fees, charges or other costs or expenses incurred by the
Issuing Lender in connection with such payment. Each such payment shall be
made to the Issuing Lender at its address for notices specified herein in
lawful money of the United States of America and in immediately available
funds. Interest shall be payable on any and all amounts remaining unpaid by
the Borrower under this Section from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment
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35
in full at the rate set forth in (i) until the second Business Day following
the date of the applicable drawing, Section 2.11(b) and (ii) thereafter,
Section 2.11(c).
6 Obligations Absolute. The Borrower's obligations under this Section 3
shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment that the
Borrower may have or have had against the Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower also agrees with the
Issuing Lender that the Issuing Lender shall not be responsible for, and the
Borrower's Reimbursement Obligations under Section 3.5 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged (subject to the immediately succeeding sentence),
or any dispute between or among the Borrower and any beneficiary of any Letter
of Credit or any other party to which such Letter of Credit may be transferred
or any claims whatsoever of the Borrower against any beneficiary of such Letter
of Credit or any such transferee. The Issuing Lender shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions resulting from the gross
negligence or willful misconduct of the Issuing Lender. The Borrower agrees
that any action taken or omitted by the Issuing Lender under or in connection
with any Letter of Credit or the related drafts or documents, if done in the
absence of gross negligence or willful misconduct and in accordance with the
standards or care specified in the Uniform Commercial Code of the State of New
York, shall be binding on the Borrower and shall not result in any liability of
the Issuing Lender to the Borrower.
7 Letter of Credit Payments. If any draft shall be presented for payment
under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
8 Applications. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Administrative Agent
and each Lender that:
1 Financial Condition. (a) The unaudited pro forma consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at March 28, 1998
(including the notes
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36
thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been
furnished to each Lender, has been prepared giving effect (as if such events
had occurred on such date) to (i) the consummation of the Refinancing, (ii) the
Loans to be made and the Senior Subordinated Notes to be issued on the Closing
Date and the use of proceeds thereof and (iii) the payment of fees and expenses
in connection with the foregoing. The Pro Forma Balance Sheet has been
prepared based upon good faith estimates and assumptions believed by management
of the Borrower to be reasonable as of the date of delivery thereof, and
presents fairly on a pro forma basis the estimated financial position of
Borrower and its consolidated Subsidiaries as at March 28, 1998, assuming that
the events specified in the preceding sentence had actually occurred at such
date.
(a) The audited consolidated balance sheets of the Borrower as at
December 28, 1996 and December 27, 1997, and the related audited consolidated
statements of income and of cash flows for the fiscal years ended on such dates
and the unaudited consolidating balance sheet of the Borrower as at December
27, 1997, and the related unaudited consolidating statement of income and of
cash flows for the fiscal year ended on such date, in each case, reported on,
in the case of the consolidated statements, by and accompanied by an
unqualified report from Arthur Andersen LLP, present fairly the consolidated
and consolidating financial condition of the Borrower as at such date, and the
consolidated and consolidating results of its operations and its consolidated
and consolidating cash flows for the respective fiscal years then ended. The
unaudited consolidated and consolidating balance sheets of the Borrower as at
March 28, 1998, and the related unaudited consolidated and consolidating
statements of income and cash flows for the thirteen-week period ended on such
date, present fairly the consolidated and consolidating financial condition of
the Borrower as at such date and the consolidated and consolidating results of
its operations and its consolidated and consolidating cash flows for the
thirteen-week period then ended (subject to normal year-end audit adjustments).
All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by the aforementioned firm
of accountants and disclosed therein). Except as set forth in Schedule 4.1(b),
the Borrower and its Subsidiaries do not have any material Guarantee
Obligations, contingent liabilities or liabilities for taxes, or any long-term
leases or unusual forward or long-term commitments, including, without
limitation, any interest rate or foreign currency swap or exchange transaction
or other obligation in respect of derivatives, that are not reflected in the
most recent financial statements referred to in this paragraph. During the
period from December 27, 1997 to and including the date hereof there has been
no Disposition by the Borrower of any material part of its business or
property.
2 No Change. Since December 27, 1997 there has been no development or
event that has had or could reasonably be expected to have a Material Adverse
Effect.
3 Corporate Existence; Compliance with Law. Each of the Borrower and its
Subsidiaries (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has the corporate power
and authority, and the legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the
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37
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except where the failure to be so qualified could
not reasonably be expected to have a Material Adverse Effect, and (d) is in
compliance with all Requirements of Law except to the extent that the failure
to comply therewith could not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.
4 Corporate Power; Authorization; Enforceable Obligations. Each Loan
Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Refinancing and the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 4.4, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect and (ii)
the filings referred to in Section 4.19. Each Loan Document has been duly
executed and delivered on behalf of each Loan Party party thereto. This
Agreement constitutes, and each other Loan Document upon execution will
constitute, a legal, valid and binding obligation of each Loan Party party
thereto, enforceable against each such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of the Borrower or any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation (other than the Liens
created by the Security Documents).
6 Litigation. Except as set forth on Schedule 4.6, no litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of the Borrower, threatened by or
against the Borrower or any of its Subsidiaries or against any of their
respective properties or revenues (a) with respect to any of the Loan Documents
or any of the transactions contemplated hereby or thereby, or (b) that could
reasonably be expected to have a Material Adverse Effect.
7 No Default. Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect that could reasonably be
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38
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
8 Ownership of Property; Liens. Each of the Borrower and its
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its real property, and good title to, or a valid leasehold interest in, all its
other material property, and none of such property is subject to any Lien
except as permitted by Section 7.3.
9 Intellectual Property. The Borrower and each of its Subsidiaries owns,
or is licensed to use, all Intellectual Property necessary for the conduct of
its business as currently conducted. No material claim has been asserted and
is pending by any Person challenging or questioning the use of any Intellectual
Property or the validity or effectiveness of any Intellectual Property, nor
does the Borrower know of any valid basis for any such claim. To the knowledge
of the Borrower, the use of Intellectual Property by the Borrower and its
Subsidiaries does not infringe on the rights of any Person in any material
respect.
10 Taxes. Each of the Borrower and each of its Subsidiaries has filed or
caused to be filed all Federal, state and other material tax returns that are
required to be filed and has paid all taxes shown to be due and payable on said
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (in each case, other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings
and with respect to which reserves in conformity with GAAP have been provided
on the books of the Borrower or its Subsidiaries, as the case may be); no tax
Lien has been filed, and, to the knowledge of the Borrower, no claim is being
asserted, with respect to any such tax, fee or other charge.
11 Federal Regulations. No part of the proceeds of any Loans will be used
for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U as now and from time to
time hereafter in effect or for any purpose that violates the provisions of the
Regulations of the Board. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR
Form U-1 referred to in Regulation U.
12 Labor Matters. Except as, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect: (a) there are no strikes or other
labor disputes against the Borrower or any of its Subsidiaries pending or, to
the knowledge of the Borrower, threatened; (b) hours worked by and payment made
to employees of the Borrower and its Subsidiaries have not been in violation of
the Fair Labor Standards Act or any other applicable Requirement of Law dealing
with such matters; (c) all payments due from the Borrower or any of its
Subsidiaries on account of employee health and welfare insurance have been paid
or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.
<PAGE> 44
39
13 ERISA. Except as set forth on Schedule 4.13, neither a Reportable
Event nor an "accumulated funding deficiency" (within the meaning of Section
412 of the Code or Section 302 of ERISA) has occurred during the five-year
period prior to the date on which this representation is made or deemed made
with respect to any Plan, and each Plan has complied in all material respects
with the applicable provisions of ERISA and the Code. Except as set forth on
Schedule 4.13, no termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan
(based on those assumptions used to fund such Plans) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits by a material amount. Neither the Borrower nor any Commonly
Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan that has resulted or could reasonably be expected to result
in a material liability under ERISA, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any material liability under ERISA if
the Borrower or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding
the date on which this representation is made or deemed made. No such
Multiemployer Plan is in Reorganization or Insolvent.
14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law that limits its
ability to incur Indebtedness.
15 Subsidiaries. The Subsidiaries listed on Schedule 4.15 constitute all
the Subsidiaries of the Borrower at the date hereof.
16 Use of Proceeds. The proceeds of the Revolving Loans and the
Swingline Loans, and the Letters of Credit, shall be used to refinance the
Existing Credit Agreement, to finance working capital needs and for general
corporate purposes (including Permitted Acquisitions).
17 Environmental Matters. Except as, in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect and except as set
forth on Schedule 4.17:
(a) the facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "Properties") do not contain,
and have not previously contained, any Materials of Environmental Concern
in amounts or concentrations or under circumstances that constitute or
constituted a violation of, or could give rise to liability under, any
Environmental Law;
(b) neither the Borrower nor any of its Subsidiaries has received
or is aware of any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to
<PAGE> 45
40
any of the Properties or the business operated by the Borrower or any of
its Subsidiaries (the "Business"), nor does the Borrower have knowledge
or reason to believe that any such notice will be received or is being
threatened;
(c) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a
location that could give rise to liability under, any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Properties in violation
of, or in a manner that could give rise to liability under, any
applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be
named as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with
respect to the Properties or the Business;
(e) there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or
related to the operations of the Borrower or any Subsidiary in connection
with the Properties or otherwise in connection with the Business, in
violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws;
(f) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws; and
(g) neither the Borrower nor any of its Subsidiaries has assumed
any liability of any other Person under Environmental Laws.
18 Accuracy of Information, etc. No statement or information contained
in this Agreement, any other Loan Document, the Confidential Information
Memorandum or any other document, certificate or statement furnished to the
Administrative Agent or the Lenders or any of them, by or on behalf of any Loan
Party for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the date such statement,
information, document or certificate was so furnished (or, in the case of the
Confidential Information Memorandum, as of the Closing Date), any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein not misleading. The
projections and pro forma financial information contained in the materials
referenced above are based upon good faith estimates and assumptions believed
by management of the Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual
<PAGE> 46
41
results during the period or periods covered by such financial information may
differ from the projected results set forth therein by a material amount.
19 Security Documents. (a) The Guarantee and Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of
the Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of the Pledged Stock
described in the Guarantee and Collateral Agreement, when stock certificates
representing such Pledged Stock are delivered to the Administrative Agent, and
in the case of the other Collateral described in the Guarantee and Collateral
Agreement, when financing statements in appropriate form are filed in the
offices specified on Schedule 4.19(a), the Guarantee and Collateral Agreement
shall constitute a fully perfected Lien on, and security interest in, all
right, title and interest of the Loan Parties in such Collateral and the
proceeds thereof, as security for the Obligations (as defined in the Guarantee
and Collateral Agreement), in each case prior and superior in right to any
other Person other than the holders of the Liens permitted pursuant to Section
7.3.
(a) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.19(b), each such Mortgage shall constitute a legal, valid and enforceable
Lien on, and security interest in, all right, title and interest of the Loan
Parties in the Mortgaged Properties and the proceeds thereof, as security for
the Obligations (as defined in the relevant Mortgage), in each case prior and
superior in right to any other Person other than the holders of the Liens
permitted with respect to such Mortgaged Properties pursuant to Section 7.3.
20 Solvency. Each Loan Party is, and after giving effect to the
Refinancing and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
21 Senior Indebtedness. The Obligations constitute "Senior Indebtedness"
of the Borrower under and as defined in the Senior Subordinated Note Indenture.
The obligations of each Subsidiary Guarantor under the Guarantee and
Collateral Agreement constitute "Guarantor Senior Indebtedness" of such
Subsidiary Guarantor under and as defined in the Senior Subordinated Note
Indenture.
22 Year 2000 Matters. Any reprogramming reasonably foreseen to be
necessary in accordance with customary business practices to permit the proper
functioning (but only to the extent that such proper functioning would
otherwise be impaired by the occurrence of the year 2000) in and following the
year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by the Borrower or any of its
Subsidiaries and the testing of all such systems and other equipment as so
reprogrammed, will be completed by June 30, 1999 (or September 30, 1999 in the
case of Tamor Corporation). The Borrower will make reasonable inquiry of all
Persons the computer systems of which interface with the Borrower's computer
systems (other than those of any Lender or any immaterial
<PAGE> 47
42
customer or vendor) with regard to such Person's year 2000 compliance. The
Borrower does not have actual knowledge that any of such Persons will not be
year 2000 compliant. The Borrower does not have any actual knowledge that the
reasonably anticipated remaining costs to the Borrower and its Subsidiaries for
such reprogramming and testing and for the other reasonably foreseeable
consequences to them of any improper functioning of other computer systems and
equipment containing embedded microchips due to the occurrence of the year 2000
could result in a Default or Event of Default or to have a Material Adverse
Effect. Except for any reprogramming referred to above, the computer systems
of the Borrower and its Subsidiaries are and, with ordinary course upgrading
and maintenance, will continue for the term of this Agreement to be, sufficient
for the conduct of their business as currently conducted. The Borrower does
not make any representations other than as set forth above about any other
Person's year 2000 compliance.
23 Regulation H. No Mortgage encumbers improved real property that is
located in an area that has been identified by the Secretary of Housing and
Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
5. CONDITIONS PRECEDENT
1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date, of the following conditions precedent:
(a) Credit Agreement; Guarantee and Collateral Agreement. The
Administrative Agent shall have received (i) this Agreement, executed and
delivered by a duly authorized officer of the Borrower and (ii) the
Guarantee and Collateral Agreement, executed and delivered by a duly
authorized officer of the Borrower and each Subsidiary Guarantor.
(b) Refinancing. The following transactions shall have been
consummated, in each case on terms and conditions reasonably satisfactory
to the Lenders (such events, collectively, the "Refinancing"):
(i) all amounts owing under the Amended and Restated Credit
Agreement, dated as of December 30, 1997 (the "Existing Credit
Agreement"), among Selfix, Inc., Tamor Corporation, Shutters, Inc.
and Seymour Housewares Corporation, as borrowers, the other credit
parties signatory thereto, the lenders from time to time signatory
thereto and General Electric Capital Corporation, as agent, shall
have been repaid in full contemporaneously with the drawing of the
Loans on the Closing Date, the Existing Credit Agreement and all
documents executed in connection therewith shall have been
terminated and the liens securing the obligations under the
Existing Credit Agreement shall have been
<PAGE> 48
43
terminated pursuant to documentation in form and substance
satisfactory to the Administrative Agent;
(ii) the Subordinated Notes (as defined in the Existing
Credit Agreement) shall have been repaid in full contemporaneously
with the drawing of the Loans on the Closing Date; and
(iii) the Borrower shall have received at least $125,000,000
in gross cash proceeds from the issuance of the Senior Subordinated
Notes on terms and conditions satisfactory to the Lenders.
(c) Pro Forma Balance Sheet; Financial Statements. The Lenders
shall have received (i) the Pro Forma Balance Sheet, (ii) audited
consolidated and unaudited consolidating financial statements of the
Borrower for the 1996 and 1997 fiscal years and (iii) unaudited interim
consolidated financial statements of the Borrower for each fiscal
quarterly period ended subsequent to the date of the latest applicable
financial statements delivered pursuant to clause (ii) of this paragraph
as to which such financial statements are available, and such financial
statements shall not, in the reasonable judgment of the Lenders, reflect
any material adverse change in the consolidated financial condition of
the Borrower, as reflected in the financial statements or projections
contained in the Confidential Information Memorandum.
(d) Approvals. All governmental and third party approvals
(including landlords' and other consents) necessary or, in the discretion
of the Administrative Agent, advisable in connection with the
Refinancing, the continuing operations of the Borrower and its
Subsidiaries and the transactions contemplated hereby shall have been
obtained and be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened
by any competent authority that would restrain, prevent or otherwise
impose adverse conditions on the Refinancing or the financing
contemplated hereby.
(e) Lien Searches. The Administrative Agent shall have received
the results of a recent lien search in each of the jurisdictions where
assets of the Loan Parties are located, and such search shall reveal no
liens on any of the assets of the Borrower or its Subsidiaries except for
liens permitted by Section 7.3.
(f) Environmental Audit. The Administrative Agent shall have
received a reasonably satisfactory environmental audit with respect to
the real properties of the Borrower and its Subsidiaries specified by the
Administrative Agent.
(g) Closing Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit C,
with appropriate insertions and attachments.
<PAGE> 49
44
(h) Legal Opinions. The Administrative Agent shall have received
the following executed legal opinions:
(i) the legal opinion of Sonnenschein Nath & Rosenthal,
counsel to the Borrower and its Subsidiaries, substantially in the
form of Exhibit F; and
ii) the legal opinion of local counsel in each jurisdiction
where a Mortgaged Property is located and of such other special and
local counsel, in each case, as may be required by the
Administrative Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require.
(i) Pledged Stock; Stock Powers. The Administrative Agent shall
have received the certificates representing the shares of Capital Stock
pledged pursuant to the Guarantee and Collateral Agreement, together with
an undated stock power for each such certificate executed in blank by a
duly authorized officer of the pledgor thereof.
(j) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by the Security Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or recorded
in order to create in favor of the Administrative Agent, for the benefit
of the Lenders, a perfected Lien on the Collateral described therein,
prior and superior in right to any other Person (other than with respect
to Liens expressly permitted by Section 7.3), shall be in proper form for
filing, registration or recordation.
(k) Mortgages, etc. (i) The Administrative Agent shall have
received a Mortgage with respect to each Mortgaged Property, executed and
delivered by a duly authorized officer of each party thereto.
(ii) If requested by the Administrative Agent, the
Administrative Agent shall have received, and the title insurance
company issuing the policy referred to in clause (iii) below (the
"Title Insurance Company") shall have received, maps or plats of an
as-built survey of the sites of the Mortgaged Properties certified
to the Administrative Agent (if the Administrative Agent determines
such certification to it is reasonably practicable) and the Title
Insurance Company in a manner satisfactory to them, dated a date
satisfactory to the Administrative Agent and the Title Insurance
Company by an independent professional licensed land surveyor
satisfactory to the Administrative Agent and the Title Insurance
Company, which maps or plats and the surveys on which they are
based shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted
by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality
of the foregoing, there shall be surveyed and shown on
<PAGE> 50
45
such maps, plats or surveys the following: (A) the locations on
such sites of all the buildings, structures and other improvements
and the established building setback lines; (B) the lines of
streets abutting the sites and width thereof; (C) all access and
other easements appurtenant to the sites; (D) all roadways, paths,
driveways, easements, encroachments and overhanging projections and
similar encumbrances affecting the site, whether recorded, apparent
from a physical inspection of the sites or otherwise known to the
surveyor; (E) any encroachments on any adjoining property by the
building structures and improvements on the sites; (F) if the site
is described as being on a filed map, a legend relating the survey
to said map; and (G) the flood zone designations, if any, in which
the Mortgaged Properties are located.
(iii) The Administrative Agent shall have received in respect
of each Mortgaged Property a mortgagee's title insurance policy (or
policies) or marked up unconditional binder for such insurance.
Each such policy shall (A) be in an amount satisfactory to the
Administrative Agent; (B) be issued at ordinary rates; (C) insure
that the Mortgage insured thereby creates a valid first Lien on
such Mortgaged Property free and clear of all defects and
encumbrances, except as disclosed therein; (D) name the
Administrative Agent for the benefit of the Lenders as the insured
thereunder; (E) be in the form of ALTA Loan Policy - 1970 (Amended
10/17/70 and 10/17/84) (or equivalent policies); (F) contain such
endorsements and affirmative coverage as the Administrative Agent
may reasonably request and (G) be issued by title companies
satisfactory to the Administrative Agent (including any such title
companies acting as co-insurers or reinsurers, at the option of the
Administrative Agent). The Administrative Agent shall have
received evidence satisfactory to it that all premiums in respect
of each such policy, all charges for mortgage recording tax, and
all related expenses, if any, have been paid.
(iv) If requested by the Administrative Agent, the
Administrative Agent shall have received (A) a policy of flood
insurance that (1) covers any parcel of improved real property that
is encumbered by any Mortgage, (2) is written in an amount not less
than the outstanding principal amount of the indebtedness secured
by such Mortgage that is reasonably allocable to such real property
or the maximum limit of coverage made available with respect to the
particular type of property under the National Flood Insurance Act
of 1968, whichever is less, and (3) has a term ending not later
than the maturity of the Indebtedness secured by such Mortgage and
(B) confirmation that the Borrower has received the notice required
pursuant to Section 208(e)(3) of Regulation H of the Board.
(v) The Administrative Agent shall have received a copy of
all recorded documents referred to, or listed as exceptions to
title in, the title policy or policies referred to in clause (iii)
above and a copy of all other material documents affecting the
Mortgaged Properties.
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46
(1) Fees. The Lenders and the Administrative Agent shall have
received all fees required to be paid, and all expenses for which
invoices have been presented, on or before the Closing Date.
2 Conditions to Each Extension of Credit. The agreement of each Lender
to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
and warranties made by any Loan Party in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as of
such date as if made on and as of such date except to the extent any such
representation or warranty relates specifically to an earlier date, in
which case such representation or warranty shall be true and correct in
all material respects on and as of such earlier date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions
of credit requested to be made on such date.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Revolving Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or the Administrative Agent hereunder, the
Borrower shall and shall cause each of its Subsidiaries to:
1 Financial Statements. Furnish to the Administrative Agent and each
Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related audited
consolidated statements of income and of cash flows for such year,
setting forth in each case in comparative form the figures for the
previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by Arthur Andersen LLP or other independent certified public
accountants of nationally recognized standing; and
<PAGE> 52
47
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated statements of income and of cash
flows for such quarter and the portion of the fiscal year through the end
of such quarter, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as
being fairly stated in all material respects (subject to normal year-end
audit adjustments).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
2 Certificates; Other Information. Furnish to the Administrative Agent
and each Lender (or, in the case of clause (f), to the relevant Lender):
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of
any Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer
stating that such Responsible Officer has obtained no knowledge of any
Default or Event of Default during the period covered by such financial
statements except as specified in such certificate (including, in the
case of any such Default or Event of Default, an explanation of the
proposed actions the Borrower intends to take with respect thereto), (ii)
a Compliance Certificate containing all information necessary for
determining compliance by the Borrower and its Subsidiaries with the
provisions of this Agreement referred to therein as of the last day of
the fiscal quarter or fiscal year of the Borrower, as the case may be,
(iii) to the extent not previously disclosed to the Administrative Agent,
a listing of the locations within the United States as to which UCC
financing statements in favor of the Administrative Agent have not been
filed and in which any Loan Party keeps inventory or equipment with an
aggregate value for all such locations and all such Loan Parties in
excess of $500,000, (iv) in the case of annual financial statements, a
report of all Intellectual Property owned by any Loan Party and (v) in
the case of quarterly financial statements, a report of any material
Intellectual Property acquired by any Loan Party since the date of the
most recent list delivered pursuant to this clause (v) (or, in the case
of the first such list so delivered, since the Closing Date);
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of the Borrower, a detailed
consolidated budget for the following fiscal
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48
year (including a projected consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of the following fiscal year, and the
related consolidated statements of projected cash flow, projected changes
in financial position and projected income and a statement and
explanation of the principal assumptions underlying such projections),
and, as soon as available, significant revisions, if any, of such budget
and projections with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be accompanied by a
certificate of a Responsible Officer stating that such Projections are
based on reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are
incorrect or misleading in any material respect;
(d) no later than 10 Business Days prior to the effectiveness
thereof, copies of substantially final drafts of any proposed amendment,
supplement, waiver or other modification with respect to the Senior
Subordinated Note Indenture (other than any such amendments or
supplements which are administrative or corrective in nature, in which
case final copies of which shall be delivered within five days after the
effectiveness thereof);
(e) within five days after the same are sent, copies of all
financial statements and reports that the Borrower sends to the holders
of any class of its debt securities or public equity securities and,
promptly after the same are filed, copies of all financial statements and
reports that the Borrower may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental Authority;
and
(f) promptly, such additional financial and other information as
any Lender may from time to time reasonably request.
3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be.
4 Maintenance of Existence; Compliance. (a) (i) Continue to engage
in business of the same general type as now conducted by it, (ii) preserve,
renew and keep in full force and effect its corporate existence and (iii) take
all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business, except, in each
case, as otherwise permitted by Section 7.4 or in connection with the
dissolution of any Subsidiary with de minimis assets and except, in the case of
clause (iii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and (b) comply with all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
<PAGE> 54
49
5 Maintenance of Property; Insurance. (a) Keep all property useful and
necessary in its business in good working order and condition, ordinary wear
and tear excepted and (b) maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks (but including in any event public liability,
product liability and business interruption) as are usually insured against in
the same general area by companies engaged in the same or a similar business.
6 Inspection of Property; Books and Records; Discussions. (a) Keep
proper books of records and account in which proper entries in conformity with
GAAP and all Requirements of Law shall be made of all dealings and transactions
in relation to its business and activities and (b) permit, upon two Business
Days' prior notice to the chief financial officer or other Responsible Officer
of the Borrower (except when a Default or Event of Default has occurred and is
continuing, in which case, no notice shall be required), representatives of the
Administrative Agent or any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Borrower and its Subsidiaries with officers and employees of the Borrower and
its Subsidiaries and with its independent certified public accountants;
provided that all such visits and inspections shall be coordinated through the
Administrative Agent; provided, further, that such visits and inspections (i)
shall be at the expense of the Borrower (A) upon the occurrence and during the
continuance of an Event of Default and (B) in respect of up to two visits a
year by the Administrative Agent and (ii) shall otherwise be at the expense of
the Administrative Agent or the relevant Lender, as the case may be.
7 Notices. Promptly give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding that may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority, that
in either case, if not cured or if adversely determined, as the case may
be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of
its Subsidiaries in which the amount involved is $1,000,000 or more and
not believed by the Borrower to be covered by insurance or in which
injunctive or similar relief is sought;
(d) (i) any release or discharge by the Borrower or any Subsidiary
of any Materials of Environmental Concern required to be reported under
Environmental Laws to any Governmental Authority; (ii) any condition,
circumstance, occurrence or event that could result in a material
liability under Environmental Laws or could result in the imposition of
any lien or other restriction on the title, ownership or transferability
of any Property; and (iii) any proposed action to be taken by the
Borrower or any Subsidiary that
<PAGE> 55
50
could subject the Borrower or any Subsidiary to any additional or
different requirements or liabilities under Environmental Law that could
reasonably be expected to result in a Material Adverse Effect;
(e) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence of any Reportable Event with respect to any Plan, a
failure to make any required contribution to a Plan, the creation of any
Lien in favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan; and
(f) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary
proposes to take with respect thereto.
8 Environmental Laws. Except as could not in the aggregate reasonably be
expected to result in a Material Adverse Effect:
(a) comply with, and use reasonable efforts to ensure compliance by
all tenants and subtenants, if any, with, all applicable Environmental
Laws, and obtain and comply with and maintain, and use reasonable efforts
to ensure that all tenants and subtenants obtain and comply with and
maintain, any and all licenses, approvals, notifications, registrations
or permits required by applicable Environmental Laws; and
(b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws.
9 Additional Collateral, etc. (a) With respect to any property acquired
after the Closing Date by the Borrower or any of its Subsidiaries (other than
(x) any property described in paragraph (b), (c) or (d) below and (y) any
property subject to a Lien expressly permitted by Section 7.3(g) or 7.3(i)) as
to which the Administrative Agent, for the benefit of the Lenders, does not
have a perfected Lien, promptly (i) execute and deliver to the Administrative
Agent such amendments to the Guarantee and Collateral Agreement or such other
documents as the Administrative Agent deems necessary or reasonably advisable
to grant to the Administrative Agent, for the benefit of the Lenders, a
security interest in such property and (ii) take all actions necessary or
reasonably advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority security interest in such property,
subject to the Liens permitted
<PAGE> 56
51
pursuant to Section 7.3, including without limitation, the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required
by the Guarantee and Collateral Agreement or by law or as may otherwise be
reasonably requested by the Administrative Agent.
(a) With respect to any fee interest in any real property having a value
(together with improvements thereof) of at least $1,000,000 acquired after the
Closing Date by the Borrower or any of its Subsidiaries (other than any such
real property subject to a Lien expressly permitted by Section 7.3(g) or
7.3(i)), promptly (i) execute and deliver a first priority Mortgage, subject to
the Liens permitted pursuant to Section 7.3, in favor of the Administrative
Agent, for the benefit of the Lenders, covering such real property, (ii) if
requested by the Administrative Agent, provide the Lenders with (x) title and
extended coverage insurance covering such real property in an amount at least
equal to the purchase price of such real property (or such other amount as
shall be reasonably specified by the Administrative Agent) as well as, to the
extent reasonably practicable in the judgment of the Administrative Agent, a
current ALTA survey thereof, together with a surveyor's certificate and (y) any
consents or estoppels reasonably deemed necessary or advisable by the
Administrative Agent in connection with such mortgage or deed of trust, each of
the foregoing in form and substance reasonably satisfactory to the
Administrative Agent and (iii) if requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
(b) With respect to any new Subsidiary (other than an Excluded Foreign
Subsidiary) created or acquired after the Closing Date by the Borrower (which,
for the purposes of this paragraph (c), shall include any existing Subsidiary
that ceases to be an Excluded Foreign Subsidiary), the Borrower or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative
Agent deems necessary or advisable to grant to the Administrative Agent, for
the benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary that is owned by the Borrower or any of
its Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of the Borrower or such
Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a
party to the Guarantee and Collateral Agreement and (B) to take such actions
necessary or reasonably advisable to grant to the Administrative Agent for the
benefit of the Lenders a perfected first priority security interest, subject to
the Liens permitted pursuant to Section 7.3, in the Collateral described in the
Guarantee and Collateral Agreement with respect to such new Subsidiary,
including, without limitation, the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Guarantee and
Collateral Agreement or by law or as may be requested by the Administrative
Agent, and (iv) if reasonably requested by the Administrative Agent, deliver to
the Administrative Agent legal opinions relating to the matters described
above, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.
<PAGE> 57
52
(c) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by the Borrower or any of its Subsidiaries,
promptly (i) execute and deliver to the Administrative Agent such amendments to
the Guarantee and Collateral Agreement as the Administrative Agent deems
necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority security interest in the Capital Stock
of such new Subsidiary that is owned by the Borrower or any of its Subsidiaries
(provided that in no event shall more than 65% of the total outstanding Capital
Stock of any such new Subsidiary be required to be so pledged or, following any
change in applicable law, such greater or lesser percentage which would not
result in adverse tax consequences), (ii) deliver to the Administrative Agent
the certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be, and take such other action as
may be necessary or, in the opinion of the Administrative Agent, desirable to
perfect the Administrative Agent's security interest therein, and (iii) if
reasonably requested by the Administrative Agent, deliver to the Administrative
Agent legal opinions relating to the matters described above, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to
the Administrative Agent.
7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Revolving Commitments
remain in effect, any Letter of Credit remains outstanding or any Loan or other
amount is owing to any Lender or the Administrative Agent hereunder, the
Borrower shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly:
1 Financial Condition Covenants.
(a) Consolidated Total Leverage Ratio. Permit the Consolidated Total
Leverage Ratio as at the last day of any period of four consecutive fiscal
quarters of the Borrower ending on or about any date occurring during the
periods set forth below to exceed the ratio set forth below opposite such
period:
<TABLE>
<CAPTION>
Consolidated Total
Period Leverage Ratio
----------------------------------------------- --------------------
<S> <C>
June 30, 1998 - June 30, 1999 5.75 to 1.00
September 30, 1999 - June 30, 2000 5.50 to 1.00
September 30, 2000 - June 30, 2001 5.25 to 1.00
September 30, 2001 - June 30, 2002 5.00 to 1.00
September 30, 2002 - Revolving Termination Date 4.75 to 1.00
</TABLE>
(b) Consolidated Senior Leverage Ratio. Permit the Consolidated Senior
Leverage Ratio as at the last day of any period of four consecutive fiscal
quarters of the Borrower
<PAGE> 58
53
ending on or about any date occurring during the periods set forth below to
exceed the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Consolidated Senior
Period Leverage Ratio
----------------------------------------------- ---------------------
<S> <C>
June 30, 1998 - June 30, 2000 3.00 to 1.00
September 30, 2000 - June 30, 2002 2.75 to 1.00
September 30, 2002 - Revolving Termination Date 2.50 to 1.00
</TABLE>
(c) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower ending on or about any date occurring during the periods set forth
below to be less than the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Consolidated Interest
Period Coverage Ratio
----------------------------------------------- -----------------------
<S> <C>
June 30, 1998 - June 30, 1999 1.75 to 1.00
September 30, 1999 - June 30, 2001 2.00 to 1.00
September 30, 2001 - June 30, 2002 2.25 to 1.00
September 30, 2002 - Revolving Termination Date 2.50 to 1.00
</TABLE>
2 Indebtedness and Preferred Stock. Create, incur, assume or suffer to
exist (in each case, to "Incur") any Indebtedness or issue any Preferred Stock,
except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Wholly Owned Subsidiary Guarantor to the Borrower or any other
Subsidiary;
(c) Indebtedness incurred to finance, contemporaneously therewith,
the acquisition of fixed or capital assets and Capital Lease Obligations
in an aggregate principal amount not to exceed $7,500,000 at any one time
outstanding;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(d) and any refinancings, refundings, renewals or extensions
thereof (without increasing, or shortening the maturity of, the principal
amount thereof);
(e) Guarantee Obligations Incurred in the ordinary course of
business by the Borrower or any of its Subsidiaries of obligations of any
Wholly Owned Subsidiary Guarantor;
<PAGE> 59
54
(f) (i) Indebtedness of the Borrower in respect of the Senior
Subordinated Notes in an aggregate principal amount not to exceed
$125,000,000 and (ii) Guarantee Obligations of any Subsidiary Guarantor
in respect of such Indebtedness, provided that such Guarantee Obligations
are subordinated to the same extent as the obligations of the Borrower in
respect of the Senior Subordinated Notes;
(g) Indebtedness of the Borrower or any of its Subsidiaries
Incurred to finance the Purchase Price of any Permitted Acquisition
permitted by Section 7.8(g) (including, without limitation any assumed
Indebtedness or any Indebtedness of a Subsidiary acquired in any such
Permitted Acquisition so long as the Borrower complies with the
provisions of Section 6.9(c)), in an aggregate principal amount (for the
Borrower and all Subsidiaries) not to exceed $7,500,000 at any one time
outstanding, provided that such Indebtedness is Incurred substantially
simultaneously with such Permitted Acquisition;
(h) the Borrower may issue Preferred Stock so long as such
Preferred Stock is not mandatorily redeemable by the Borrower and is not
convertible into debt obligations of the Borrower or any of its
Subsidiaries, in each case, during the term of this Agreement, the
dividends payable with respect thereto would not be in violation of
Section 7.9, and is otherwise on terms and conditions satisfactory to the
Administrative Agent; and
(i) additional Indebtedness of the Borrower or any of its
Subsidiaries in an aggregate principal amount (for the Borrower and all
Subsidiaries) not to exceed $5,000,000 at any one time outstanding.
3 Liens. Create, incur, assume or suffer to exist any Lien upon any of
its property or revenues, whether now owned or hereafter acquired, except for:
(a) Liens for taxes, assessments and other governmental charges not
yet due or that are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are
maintained on the books of the Borrower or its Subsidiaries, as the case
may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that, in the aggregate, are not substantial in amount and that
do not in any case materially detract from the value of the property
subject thereto or materially interfere with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance, social security and other similar legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
<PAGE> 60
55
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the
aggregate, are not substantial in amount and that do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule
7.3(f), securing Indebtedness permitted by Section 7.2(d), provided that
no such Lien is spread to cover any additional property after the Closing
Date and that the principal amount of Indebtedness secured thereby is not
increased;
(g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Section 7.2(c) (and Liens associated with
any immaterial intangibles related to the assets financed with such
Indebtedness), provided that (i) such Liens shall be created
substantially simultaneously with the acquisition or lease of the assets
financed thereby, (ii) such Liens do not at any time encumber any
property other than the property financed by such Indebtedness and (iii)
the principal amount of Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any lease entered into
by the Borrower or any other Subsidiary in the ordinary course of its
business and covering only the assets so leased;
(j) deposits of money securing statutory obligations of the
Borrower or any Subsidiary;
(k) Liens arising by reason of any judgment, decree or order of any
court or other Governmental Authority, if appropriate legal proceedings
which may have been duly initiated for the review of such judgment,
decree or order, are being diligently prosecuted and shall not have been
finally terminated or the period within which such proceedings may be
initiated shall not have expired and the amount of all such judgments,
decrees and orders are in an aggregate amount not to exceed $1,000,000 at
any one time outstanding;
(l) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which the Borrower or any Subsidiary is a party;
(m) cash deposits to secure the performance of the Borrower under
any hedging agreements with respect to resin in the ordinary course of
business for legitimate hedging purposes; and
<PAGE> 61
56
(n) Liens not otherwise permitted by this Section 7.3 so long as
the aggregate outstanding principal amount of the obligations secured
thereby does not exceed (as to the Borrower and all Subsidiaries)
$2,500,000 at any one time.
4 Fundamental Changes. Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (provided that the Borrower shall be the
continuing or surviving corporation) or with or into any Wholly Owned
Subsidiary Guarantor or into any Person which contemporaneously with such
merger or consolidation is to become a Wholly Owned Subsidiary Guarantor
(provided that the Wholly Owned Subsidiary Guarantor shall be the
continuing or surviving corporation); and
(b) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Wholly Owned Subsidiary Guarantor or to the extent permitted by Section
7.5.
5 Disposition of Property. Dispose of any of its property (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares
of such Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Wholly Owned Subsidiary Guarantor;
(e) the Dispositions set forth on Schedule 7.5; and
(f) the Disposition of other property having a fair market value
not to exceed $10,000,000 in the aggregate during the term of this
Agreement.
<PAGE> 62
57
6 Restricted Payments. Declare or pay any dividend (other than dividends
payable solely in common stock of the Person making such dividend) on, or make
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any Capital Stock of the Borrower or any Subsidiary, whether now or
hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
the Borrower or any Subsidiary (collectively, "Restricted Payments"); provided,
that (i) any Subsidiary may make Restricted Payments to the Borrower or any
Wholly Owned Subsidiary Guarantor, (ii) the Borrower may repurchase shares of
its common stock or rights, options or units in respect thereof, from its
officers and directors for an aggregate purchase price not to exceed $1,000,000
in any fiscal year, (iii) so long as no Default or Event of Default has
occurred and is continuing, the Borrower may, at any time after January 1,
1999, otherwise repurchase shares of its common stock so long as (A) there are
no Revolving Extensions of Credit outstanding at the time of such repurchase
(other than outstanding L/C Obligations which have not become Reimbursement
Obligations) and (B) after giving effect to such repurchase, Consolidated Net
Worth at such time shall be an amount at least equal to the sum of (x)
$52,000,000, (y) the aggregate amount of any Preferred Stock permitted to be
issued pursuant to Section 7.2(h) which has been issued prior to the date of
such repurchase and (z) 25% of the cumulative amount of any Consolidated Net
Income since the Closing Date reflected on the financial statements of the
Borrower which have been delivered pursuant to Section 6.1(a) on or prior to
the date of such repurchase and (iv) so long as no Default or Event of Default
has occurred and is continuing, the Borrower may make Restricted Payments up to
$2,000,000 in any fiscal year with respect to Preferred Stock which has been
issued in accordance with Section 7.2(h).
7 Capital Expenditures. Make or commit to make (by way of the
acquisition of securities of a Person or otherwise) any Capital Expenditure,
except Capital Expenditures of the Borrower and its Subsidiaries in the
ordinary course of business not exceeding $15,000,000 in any fiscal year;
provided, that (i) up to $5,000,000 of any such amount referred to above, if
not so expended in the fiscal year for which it is permitted, may be carried
over for expenditure in the next succeeding fiscal year and (ii) Capital
Expenditures made pursuant to this clause (a) during any fiscal year shall be
deemed made, first, in respect of amounts carried over from the prior fiscal
year pursuant to subclause (i) above and, second, in respect of amounts
permitted for such fiscal year as provided above.
8 Investments. Make any advance, loan, extension of credit (by way of
guaranty or otherwise) or capital contribution to, or purchase any Capital
Stock, bonds, notes, debentures or other securities of, or any assets
constituting all or a material part of a business unit of, or make any other
investment in, any Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) Investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
<PAGE> 63
58
(d) loans and advances to employees of the Borrower or any of its
Subsidiaries in the ordinary course of business (including, without
limitation, for travel, entertainment and relocation expenses) in an
aggregate amount for the Borrower and its Subsidiaries not to exceed
$100,000 with respect to any one employee and $500,000 in the aggregate
at any one time outstanding;
(e) Investments by the Borrower or any of its Subsidiaries in the
Borrower or any Person that, prior to such investment, is a Wholly Owned
Subsidiary Guarantor;
(f) Investments by Seymour Housewares Corporation ("Seymour") in or
to Seymour S.A. de C.V. (the "Mexican Subsidiary") in such amounts as are
necessary to fund the working capital requirements of the Mexican
Subsidiary in the ordinary course of business and to maintain level
capital expenditure requirements of the Mexican Subsidiary; provided,
that Seymour shall not permit cash or Cash Equivalents in excess of such
immediate needs to be accumulated or held by the Mexican Subsidiary;
(g) any Acquisition of any Person or business, either through the
purchase of the assets (including the goodwill) of such Person or
business or the purchase of 100% of the Capital Stock of such Person, if
each of the following conditions is satisfied: (i) the Borrower would
have been in compliance as of the last day (such day relating to any
Acquisition, the "Related Test Date") of the most recently completed
fiscal quarter for which financial statements are available, on a pro
forma basis, with each of the financial covenants contained in Section
7.1 as if such Acquisition had been made on the first day of the
Reference Period ending on the Related Test Date for such Acquisition,
and if the Purchase Price for such Acquisition is greater than
$10,000,000, the Borrower shall deliver to the Lenders 10 days prior to
the consummation of such Acquisition a certificate of its chief financial
officer, supported by detailed calculations, demonstrating such pro forma
compliance; (ii) no Default or Event of Default has occurred and is
continuing, or would occur after giving effect to such Acquisition
(including, without limitation, under Section 7.1); (iii) such
Acquisition shall be in compliance with Section 7.14; and (iv) any such
Acquisition shall have been approved by the Board of Directors or such
comparable governing body of the Person or business being acquired (all
such Acquisitions, the "Permitted Acquisitions"); and
(h) other Investments by the Borrower or any of its Subsidiaries in
an aggregate amount (for the Borrower and all Subsidiaries) not to exceed
$7,500,000 during the term of this Agreement.
9 Optional Payments and Modifications of Debt Instruments, etc. (a)
Make or offer to make any payment, prepayment, repurchase or redemption of or
otherwise defease or segregate funds (any such event or combination thereof
referred to herein as a "Take-Out") with respect to the Senior Subordinated
Notes (other than scheduled interest payments required to be made in cash);
provided, that the Borrower may Take Out the Senior Subordinated Notes with
<PAGE> 64
59
the proceeds of any issuance of Capital Stock by the Borrower (to the extent
the issuance of such Capital Stock is permitted under Section 7.2), (b) amend,
modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the Senior
Subordinated Notes (other than any such amendment, modification, waiver or
other change that (x) (i) would extend the maturity or reduce the amount of any
payment of principal thereof or reduce the rate or extend the date for payment
of interest thereon and (ii) does not involve the payment of a consent fee or
(y) is administrative or corrective in nature and is not adverse to the
interests of the Lenders) or (c) designate any Indebtedness (other than
obligations of the Loan Parties pursuant to the Loan Documents) as "Designated
Senior Indebtedness" for the purposes of the Senior Subordinated Note
Indenture.
10 Transactions with Affiliates. Enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property, the
rendering of any service or the payment of any management, advisory or similar
fees, with any Affiliate (other than the Borrower or any Wholly Owned
Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under
this Agreement, (b) in the ordinary course of business of the Borrower or such
Subsidiary, as the case may be, and (c) upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person that is not an
Affiliate; provided, that the Borrower and its Subsidiaries may (i) enter into
transactions with Selfix Europe L.L.C. in the ordinary course of business and
consistent in character with past practice, (ii) make loans and advances to
employees permitted under Section 7.8(d), (iii) pay directors' fees to members
of the Borrower's board of directors who are not employees of the Borrower,
(iv) issue securities in connection with the Borrower's stock option plan to
the extent such plan has been approved by the board of directors of the
Borrower and (v) in the case of any Subsidiary, make payments to the Borrower
pursuant to a tax sharing agreement.
11 Changes in Fiscal Periods. Permit the fiscal year of the Borrower to
end on a day other than the last Saturday in December or change the Borrower's
method of determining fiscal quarters.
12 Negative Pledge Clauses. Enter into or suffer to exist or become
effective any agreement that prohibits or limits the ability of the Borrower or
any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property or revenues, whether now owned or hereafter acquired,
other than (a) this Agreement and the other Loan Documents and (b) any
agreements governing any purchase money Liens or Capital Lease Obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby).
13 Clauses Restricting Subsidiary Distributions. Enter into or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Subsidiary of the Borrower to (a) pay dividends or make any
other distributions in respect of any Capital Stock of such Subsidiary held by,
or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the
Borrower, (b) make loans or advances to the Borrower or any other Subsidiary
<PAGE> 65
60
of the Borrower or (c) transfer any of its assets to the Borrower or any other
Subsidiary of the Borrower, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under the Loan
Documents and (ii) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement that has been entered into in connection with the
Disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary.
14 Lines of Business. Enter into any business, either directly or
through any Subsidiary, except for those businesses in which the Borrower and
its Subsidiaries are engaged on the date of this Agreement or that are
reasonably related thereto.
8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount
becomes due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other
Loan Document shall prove to have been inaccurate in any material respect
on or as of the date made or deemed made; or
(c) (i) any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of Section
6.4(a) (with respect to the Borrower only), Section 6.7(a) or Section 7
of this Agreement or (ii) an "Event of Default" under and as defined in
any Mortgage shall have occurred and be continuing; or
(d) any Loan Party shall default in the observance or performance
of any other agreement contained in this Agreement or any other Loan
Document (other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period of 30
days after notice from the Administrative Agent or the Required Lenders;
or
(e) the Borrower or any of its Subsidiaries shall (i) default in
making any payment of any principal of any Indebtedness (including,
without limitation, any Guarantee Obligation, but excluding the Loans) on
the scheduled or original due date with respect thereto; or (ii) default
in making any payment of any interest on any such Indebtedness beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created; or (iii) default in the observance
or
<PAGE> 66
61
performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating to such Indebtedness, or any other event shall occur
or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or
beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or (in the case
of any such Indebtedness constituting a Guarantee Obligation) to become
payable; provided, that a default, event or condition described in clause
(i), (ii) or (iii) of this paragraph (e) shall not at any time constitute
an Event of Default unless, at such time, one or more defaults, events or
conditions of the type described in clauses (i), (ii) and (iii) of this
paragraph (e) shall have occurred and be continuing with respect to
Indebtedness the outstanding principal amount of which exceeds in the
aggregate $1,000,000; or
(f) (i) the Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or the Borrower or
any of its Subsidiaries shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against the Borrower
or any of its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of
an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against
all or any substantial part of its assets that results in the entry of an
order for any such relief that shall not have been vacated, discharged,
or stayed or bonded pending appeal within 60 days from the entry thereof;
or (iv) the Borrower or any of its Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or any of its Subsidiaries shall generally
not, or shall be unable to, or shall admit in writing its inability to,
pay its debts as they become due; or
(g) (i) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to
any Plan or any Lien in favor of the PBGC or a Plan shall arise on the
assets of the Borrower or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single
<PAGE> 67
62
Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a withdrawal
from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any,
could, in the sole judgment of the Required Lenders, reasonably be
expected to have a Material Adverse Effect; or
(h) one or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance as to which the
relevant insurance company has acknowledged coverage) of $1,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 30 days from the entry
thereof; or
(i) any of the Security Documents shall cease, for any reason, to
be in full force and effect, or any Loan Party or any Affiliate of any
Loan Party shall so assert, or any Lien created by any of the Security
Documents shall cease to be enforceable and of the same effect and
priority purported to be created thereby; or
(j) the guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party shall so
assert; or
(k) (i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than the Permitted Investors shall become, or
obtain rights (whether by means or warrants, options or otherwise) to
become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5
under the Exchange Act), directly or indirectly, of more than 25% of the
outstanding common stock of the Borrower; (ii) the board of directors of
the Borrower shall cease to consist of a majority of Continuing
Directors; or (iii) a Specified Change of Control shall occur; or
(l) the Senior Subordinated Notes or the guarantees thereof shall
cease, for any reason, to be validly subordinated to the Obligations or
the obligations of the Subsidiary Guarantors under the Guarantee and
Collateral Agreement, as the case may be, as provided in the Senior
Subordinated Note Indenture, or any Loan Party, any Affiliate of any Loan
Party, the trustee in respect of the Senior Subordinated Notes or the
holders of at least 25% in aggregate principal amount of the Senior
Subordinated Notes shall so assert;
<PAGE> 68
63
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Revolving Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the other Loan Documents (including, without
limitation, all amounts of L/C Obligations, whether or not the beneficiaries of
the then outstanding Letters of Credit shall have presented the documents
required thereunder) shall immediately become due and payable, and (B) if such
event is any other Event of Default, either or both of the following actions
may be taken: (i) unless and to the extent previously cured or waived, with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Revolving Commitments to be terminated forthwith,
whereupon the Revolving Commitments shall immediately terminate; and (ii) with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower, declare the Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement and the other Loan Documents
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) to be due and payable forthwith,
whereupon the same shall immediately become due and payable. With respect to
all Letters of Credit with respect to which presentment for honor shall not
have occurred at the time of an acceleration pursuant to this paragraph, the
Borrower shall at such time deposit in a cash collateral account opened by the
Administrative Agent an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon,
if any, shall be applied to repay other obligations of the Borrower hereunder
and under the other Loan Documents. After all such Letters of Credit shall
have expired or been fully drawn upon, all Reimbursement Obligations shall have
been satisfied and all other obligations of the Borrower hereunder and under
the other Loan Documents shall have been paid in full, the balance, if any, in
such cash collateral account shall be returned to the Borrower (or such other
Person as may be lawfully entitled thereto). Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of
any kind are hereby expressly waived by the Borrower.
<PAGE> 69
64
9. THE ADMINISTRATIVE AGENT
1 Appointment. Each Lender hereby irrevocably designates and appoints
the Administrative Agent as the agent of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
2 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.
3 Exculpatory Provisions. Neither the Administrative Agent nor any of
its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable to any Lender for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or any other Loan Document (except to the extent that any of the
foregoing are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
any Loan Party or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under
or in connection with, this Agreement or any other Loan Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document or for any failure of any Loan Party
a party thereto to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
4 Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any instrument,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
<PAGE> 70
65
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders (or, if so
specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, all Lenders), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.
5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all Lenders); provided that unless and until the Administrative
Agent shall have received such directions, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Administrative Agent nor any of its
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no act by
the Administrative Agent hereinafter taken, including any review of the affairs
of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute
any representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and
their affiliates and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Loan
<PAGE> 71
66
Parties and their affiliates. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, property, condition (financial or otherwise), prospects
or creditworthiness of any Loan Party or any affiliate of a Loan Party that may
come into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
7 Indemnification. The Lenders agree to indemnify the Administrative
Agent in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Aggregate Exposure Percentages in effect on the date on which
indemnification is sought under this Section 9.7 (or, if indemnification is
sought after the date upon which the Revolving Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with such Aggregate Exposure Percentages immediately prior to such date), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever that may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Revolving Commitments, this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements that are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from the Administrative Agent's gross negligence or willful misconduct. The
Administrative Agent shall have the right to deduct any amount owed to it by
any Lender under this Section from any payment made by it to such Lender
hereunder. The agreements in this Section 9.7 shall survive the payment of the
Loans and all other amounts payable hereunder.
8 Administrative Agent in Its Individual Capacity. The Administrative
Agent and its affiliates may make loans to, accept deposits from and generally
engage in any kind of business with any Loan Party as though the Administrative
Agent was not the Administrative Agent. With respect to its Loans made or
renewed by it and with respect to any Letter of Credit issued or participated
in by it, the Administrative Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Lender and may exercise the
same as though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
9 Successor Administrative Agent. The Administrative Agent may resign as
Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If
the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default under Section 8(a)
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67
or Section 8(f) with respect to the Borrower shall have occurred and be
continuing) be subject to approval by the Borrower (which approval shall not be
unreasonably withheld or delayed), whereupon such successor agent shall succeed
to the rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor
agent has accepted appointment as Administrative Agent by the date that is 10
days following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon become
effective and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 9 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
10 Authorization to Release Liens. The Administrative Agent is hereby
irrevocably authorized by each of the Lenders to release any Lien covering any
property of the Borrower or any of its Subsidiaries that is the subject of a
Disposition or to release the guarantee of any Subsidiary Guarantor which is
the subject of a fundamental change permitted by Section 7.4, in either case,
that is permitted by this Agreement or that has been consented to in accordance
with Section 10.1.
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68
MISCELLANEOUS
1 Amendments and Waivers. Neither this Agreement, any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may,
or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders or the Administrative Agent,
as the case may be, may specify in such instrument, any of the requirements of
this Agreement or the other Loan Documents or any Default or Event of Default
and its consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (i) forgive or reduce the principal
amount or extend the final scheduled date of maturity of any Loan, reduce the
stated rate of any interest or fee payable hereunder, or increase the amount or
extend the expiration date of any Lender's Revolving Commitment, in each case
without the consent of each Lender directly affected thereby; (ii) amend,
modify or waive any provision of this Section 10.1 or reduce any percentage
specified in the definition of Required Lenders, consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents, release all or substantially all of the
Collateral or release all or substantially all of the Subsidiary Guarantors
from their obligations under the Guarantee and Collateral Agreement, in each
case without the written consent of all Lenders; (iii) amend, modify or waive
any provision of Section 9 without the written consent of the Administrative
Agent; (iv) amend, modify or waive any provision of Section 2.3 or 2.4 without
the written consent of the Swingline Lender; or (v) amend, modify or waive any
provision of Section 3 without the written consent of each of the Issuing
Lenders. Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the Loan
Parties, the Lenders, the Administrative Agent and all future holders of the
Loans. In the case of any waiver, the Loan Parties, the Lenders and the
Administrative Agent shall be restored to their former position and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
2 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by telecopy),
and, unless otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered, or three Business Days after being deposited
in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:
<PAGE> 74
69
<TABLE>
<S> <C>
The Borrower: Home Products International, Inc.
4501 West 47th Street
Chicago, Illinois 60632
Attention: James E. Winslow, Executive Vice
President and Chief Financial Officer
Telecopy: (773) 890-0523
Telephone: (773) 890-8904
The Administrative Agent: The Chase Manhattan Bank
The Loan and Agency Services Group
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Margaret Swales
Telecopy: (212) 552-5662
Telephone: (212) 552-7472
with a copy to: The Chase Manhattan Bank
10 South Lasalle Street
23rd Floor
Chicago, Illinois 60603
Attention: Jonathan Twichell
Telecopy: (312) 807-4550
Telephone: (312) 807-4038
in the case of
Letters of Credit,
with a copy to: Chase Manhattan Bank Delaware
Corporate Banking Department
1201 Market Street
Wilmington, Delaware 19801
Attention: Michael Handago
Telecopy: (302) 428-3390
Telephone: (302) 428-3311
</TABLE>
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received.
3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
<PAGE> 75
70
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
4 Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of
the Loans and other extensions of credit hereunder.
5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation,
the reasonable fees and disbursements of counsel to the Administrative Agent
and filing and recording fees and expenses, with statements with respect to the
foregoing to be submitted to the Borrower prior to the Closing Date (in the
case of amounts to be paid on the Closing Date) and from time to time
thereafter on a quarterly basis or such other periodic basis as the
Administrative Agent shall deem appropriate, (b) to pay or reimburse each
Lender and the Administrative Agent for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to each Lender and of counsel
to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and
the Administrative Agent harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, that may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent and their respective officers, directors, employees,
affiliates, agents and controlling persons (each, an "Indemnitee") harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the use of proceeds of the Loans or the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrower or any of its Subsidiaries or any of the Properties (all the
foregoing in this clause (d), collectively, the "Indemnified Liabilities"),
provided, that the Borrower shall have no obligation hereunder to any
Indemnitee (x) with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities resulted from the gross negligence or willful
misconduct of such Indemnitee, (y) with respect to any proceeding initiated by
the Administrative Agent against any Lender or by any Lender against the
Administrative Agent or any other Lender or (z) to the extent arising in
connection with any action by or on behalf of the Borrower against such
<PAGE> 76
71
Indemnitee where the Borrower is found to be the prevailing party pursuant to a
final and nonappealable decision of a court of competent jurisdiction. Without
limiting the foregoing, and to the extent permitted by applicable law, the
Borrower agrees not to assert and to cause its Subsidiaries not to assert, and
hereby waives and agrees to cause its Subsidiaries to so waive, all rights for
contribution or any other rights of recovery with respect to all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee.
The agreements in this Section 10.5 shall survive repayment of the Loans and
all other amounts payable hereunder.
6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender.
(a) Any Lender may, without the consent of the Borrower, in accordance
with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other
Loan Documents, and the Borrower and the Administrative Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and the other Loan Documents. In
no event shall any Participant under any such participation have any right to
approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest
on, the Loans or any fees payable hereunder, or postpone the date of the final
maturity of the Loans, in each case to the extent subject to such
participation. The Borrower agrees that if amounts outstanding under this
Agreement and the Loans are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 10.7(a) as fully as if it were a Lender
hereunder. The Borrower also agrees that each Participant shall be entitled to
the benefits of Sections 2.15, 2.16 and 2.17 with respect to its participation
in the Revolving Commitments and the Loans outstanding from time to time as if
it was a Lender; provided that, in the case of Section 2.16, such Participant
shall have complied with the requirements of said Section and provided,
further, that no Participant shall be entitled to receive any greater amount
<PAGE> 77
72
pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such Participant had no such transfer occurred.
(b) Any Lender (an "Assignor") may, in accordance with applicable law, at
any time and from time to time assign to any Lender or any affiliate thereof
or, with the consent of the Borrower and the Administrative Agent (which, in
each case, shall not be unreasonably withheld or delayed), to an additional
bank, financial institution or other entity (an "Assignee") all or any part of
its rights and obligations under this Agreement pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit E, executed by such Assignee,
such Assignor and any other Person whose consent is required pursuant to this
Section 10.6(c), and delivered to the Administrative Agent for its acceptance
and recording in the Register; provided that no such assignment to an Assignee
(other than any Lender or any affiliate thereof) shall be in an aggregate
principal amount of less than $5,000,000 (other than in the case of an
assignment of all of a Lender's interests under this Agreement), unless
otherwise agreed by the Borrower and the Administrative Agent. Upon such
execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment and/or Loans as set forth therein, and (y) the
Assignor thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of an Assignor's rights and
obligations under this Agreement, such Assignor shall cease to be a party
hereto). Notwithstanding any provision of this Section 10.6, the consent of
the Borrower shall not be required for any assignment that occurs when an Event
of Default pursuant to Section 8(f) shall have occurred and be continuing with
respect to the Borrower.
(c) The Administrative Agent shall maintain at its address referred to in
Section 10.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of the
Lenders and the Revolving Commitment of, and the principal amount of the Loans
owing to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, each other Loan
Party, the Administrative Agent and the Lenders shall treat each Person whose
name is recorded in the Register as the owner of the Loans and any Notes
evidencing the Loans recorded therein for all purposes of this Agreement. Any
assignment of any Loan, whether or not evidenced by a Note, shall be effective
only upon appropriate entries with respect thereto being made in the Register
(and each Note shall expressly so provide). Any assignment or transfer of all
or part of a Loan evidenced by a Note shall be registered on the Register only
upon surrender for registration of assignment or transfer of the Note
evidencing such Loan, accompanied by a duly executed Assignment and Acceptance,
and thereupon one or more new Notes shall be issued to the designated Assignee.
(d) Upon its receipt of an Assignment and Acceptance executed by an
Assignor, an Assignee and any other Person whose consent is required by Section
10.6(c), together with
<PAGE> 78
73
payment to the Administrative Agent of a registration and processing fee of
$4,000, the Administrative Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) record the information contained therein in the Register on
the effective date determined pursuant thereto.
(e) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section 10.6 concerning assignments of Loans and
Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
(f) The Borrower agrees to issue Notes to any Lender requiring Notes to
facilitate transactions of the type described in paragraph (f) above.
7 Adjustments; Set-off. (a) If any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of the Obligations owing to it,
or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 8(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of the Obligations owing to such other Lender, such Benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of the Obligations owing to each such other Lender, or shall provide
such other Lenders with the benefits of any such collateral, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(a) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall upon the occurrence and during the continuance of an
Event of Default have the right, without prior notice to the Borrower, any such
notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise), to
set off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency,
and any other credits, indebtedness or claims, in any currency, in each case
whether direct or indirect, absolute or contingent, matured or unmatured, at
any time held or owing by such Lender or any Affiliate, branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such setoff and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such setoff and application.
Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken
<PAGE> 79
74
together shall be deemed to constitute one and the same instrument. Delivery
of an executed signature page of this Agreement by facsimile transmission shall
be effective as delivery of a manually executed counterpart hereof. A set of
the copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.
9 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10 Integration. This Agreement and the other Loan Documents represent
the agreement of the Borrower, the Administrative Agent and the Lenders with
respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Administrative Agent or any Lender
relative to subject matter hereof not expressly set forth or referred to herein
or in the other Loan Documents.
11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably
and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Section 10.2 or at such other
address of which the Administrative Agent shall have been notified
pursuant thereto;
<PAGE> 80
75
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this Section 10.12 any special, exemplary, punitive or
consequential damages.
13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between Administrative Agent and Lenders, on one hand,
and the Borrower, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders.
14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.
<PAGE> 81
76
15 Confidentiality. Each of the Administrative Agent and each Lender
agrees to keep confidential all non-public information provided to it by any
Loan Party pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent the Administrative
Agent or any Lender from disclosing any such information (a) to the
Administrative Agent, any other Lender or any affiliate of any Lender, (b) to
any Transferee or prospective Transferee that agrees to comply with the
provisions of this Section 10.15, (c) to its employees, directors, agents,
attorneys, accountants and other professional advisors or those of any of its
affiliates that agree to comply with this Section 10.15, (d) upon the request
or demand of any Governmental Authority, (e) in response to any order of any
court or other Governmental Authority or as may otherwise be required pursuant
to any Requirement of Law, in which case the Administrative Agent or such
Lender shall give notice of such order to the Borrower, (f) if requested or
required to do so in connection with any litigation or similar proceeding, (g)
that has been publicly disclosed, (h) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about a Lender's investment
portfolio in connection with ratings issued with respect to such Lender, or (i)
in connection with the exercise of any remedy hereunder or under any other Loan
Document.
<PAGE> 82
77
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
HOME PRODUCTS INTERNATIONAL, INC.
By: --------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Administrative
Agent and as a Lender
By:----------------------------------------
Name:
Title:
<PAGE> 83
Annex A
PRICING GRID FOR REVOLVING LOANS, SWINGLINE LOANS,
AND COMMITMENT FEES
<TABLE>
<CAPTION>
Consolidated Total Applicable Margin Applicable Margin
Leverage Ratio for Eurodollar Loans for ABR Loans Commitment Fee Rate
<S> <C> <C> <C>
Greater than or
equal to 4.75 to
1.00 2.00% 1.00% .50%
Less than 4.75 to
1.00 and greater
than or equal to
3.75 to 1.00 1.75% .75% .50%
Less than 3.75 to
1.00 1.50% .50% .375%
</TABLE>
Changes in the Applicable Margin with respect to Revolving Loans or Swingline
Loans or in the Commitment Fee Rate resulting from changes in the Consolidated
Total Leverage Ratio shall become effective on the date (the "Adjustment Date")
on which financial statements are delivered to the Lenders pursuant to Section
6.1 (but in any event not later than the 45th day after the end of each of the
first three quarterly periods of each fiscal year or the 90th day after the end
of each fiscal year, as the case may be) and shall remain in effect until the
next change to be effected pursuant to this paragraph. If any financial
statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, if the
Administrative Agent or the Required Lenders so determine, the Consolidated
Total Leverage Ratio as at the end of the fiscal period that would have been
covered thereby shall for the purposes of this definition be deemed to be
greater than 4.75 to 1.00. In addition, at all times while an Event of Default
shall have occurred and be continuing and the Administrative Agent or the
Required Lenders so determine, the Consolidated Total Leverage Ratio shall for
the purposes of this definition be deemed to be greater than 4.75 to 1.00.
Each determination of the Consolidated Total Leverage Ratio pursuant to this
definition shall be made with respect to the period of four consecutive fiscal
quarters of the Borrower ending at the end of the period covered by the
relevant financial statements.
<PAGE> 1
EXHIBIT 12.1.1
HOME PRODUCTS INTERNATIONAL, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE FIVE YEARS ENDED DECEMBER 27, 1997
AND THE THIRTEEN WEEKS ENDED MARCH 28, 1998
<TABLE>
<CAPTION>
THIRTEEN
WEEKS
YEAR ENDED ENDED
------------------------------------------------------------------------ -----------
DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 28, DECEMBER 27, MARCH 28,
1993 1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Earnings (loss) before
interest, income taxes,
extraordinary charge, and
cumulative effect of change
in accounting principles $ 3,119 $ (4,783) $ (3,387) $ 1,513 $ 12,818 $ 5,150
Portion of rent expense
representing interest 105 133 127 118 395 151
------- -------- -------- ------- -------- -------
Total earnings $ 3,224 $ (4,650) $ (3,260) $ 1,631 $ 13,213 $ 5,301
======= ======== ======== ======= ======== =======
FIXED CHARGES:
Interest expense $ 1,066 $ 999 $ 896 $ 707 $ 5,152 $ 3,006
Capitalized interest - - - - - -
Portion of rent expense
representing interest 105 133 127 118 395 151
------- -------- -------- ------- -------- -------
Total fixed charges $ 1,171 $ 1,132 $ 1,023 $ 825 $ 5,547 $ 3,157
======= ======== ======== ======= ======== =======
RATIO OF EARNINGS TO
FIXED CHARGES: 2.8 - (a) - (a) 2.0 2.4 1.7
======= ======== ======== ======= ======== =======
</TABLE>
(a) The 1994 and 1995 coverage deficiencies were $5.8 million and $4.3 million,
respectively.
<PAGE> 1
EXHIBIT 23.1.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
included in this registration statement and to the incorporation by reference
in this registration statement of our reports dated February 6, 1998 included
in the Company's Form 10-K for the year ended December 27, 1997 and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN, LLP
Chicago, Illinois
June 8, 1998
<PAGE> 1
EXHIBIT 23.1.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We have issued our report dated February 9, 1996 accompanying the
consolidated financial statements of Home Products International, Inc.
(formerly "Selfix, Inc.") ended December 30, 1995. We consent to the use of
the above report in the Registration Statement of Home Products International,
Inc. (formerly "Selfix, Inc.") on Form S-4 and to the use of our name as it
appears under the caption "Experts."
GRANT THORNTON LLP
Chicago, Illinois
June 8, 1998
<PAGE> 1
EXHIBIT 23.1.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 15, 1997 (except Note 11, as to which the date
is December 30, 1997), with respect to the consolidated financial statements of
Seymour Sales Corporation and subsidiaries in the Registration Statement (Form
S-4) and the related Prospectus of Home Products International, Inc. for the
registration of $125,000,000 of its 9 5/8 % Senior Subordinated Notes due 2008.
Ernst & Young LLP
Indianapolis, Indiana
June 5, 1998
<PAGE> 1
EXHIBIT 25.1.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------
LASALLE NATIONAL BANK
(Exact name of trustee as specified in its charter)
36-0884183
(I.R.S. Employer
Identification No.)
135 South LaSalle Street, Chicago, Illinois 60603
(Address of principal executive offices) (Zip Code)
-----------------------
M. ROBERT K. QUINN
Group Senior Vice President
General Counsel and Secretary
Telephone: (312) 904-2010
135 South LaSalle Street
Chicago, Illinois 60603
(Name, address and telephone number of agent for service)
-----------------------
HOME PRODUCTS INTERNATIONAL, INC.
(Exact name of obligor as specified in its charter)
Delaware 36-4147027
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
4501 West 47th Street
Chicago, Illinois
60632
(Address of Principal Executive Offices) (Zip Code)
-----------------------
$125,000,000 9 5/8% Senior Subordinated Notes Due 2008
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
1. Comptroller of the Currency, Washington D.C.
2. Federal Deposit Insurance Corporation, Washington,
D.C.
3. The Board of Governors of the Federal Reserve
Systems, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an affiliate of the
trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of the
trustee:
Not applicable
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each other
indenture.
Not applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of Section
310(b)(1) of the Act arises as a result of the trusteeship under such
other indenture, including a statement as to how the indenture
securities will rank as compared with the securities issued under such
other indenture.
Not applicable
<PAGE> 3
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or any of the directors or executive officers of the trustee is
a director, officer, partner, employee, appointee, or representative of the
obligor or of any underwriter for the obligor, identify each such person having
any such connection and state the nature of each such connection.
Not applicable
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner and executive
officer of the obligor.
Not applicable
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the trustee
owned beneficially by each underwriter for the obligor and each director,
partner, and executive officer of each such underwriter.
Not applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
Not applicable
ITEM 9. SECURITIES OF THE UNDERWRITER OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of such
underwriter any of which are so owned or held by the trustee.
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge of
the trustee (1) owns 10 percent or more of the voting securities of the obligor
or (2) is an affiliate, other than a subsidiary, of the obligor, furnish the
following information as to the voting securities of such person.
Not applicable
<PAGE> 4
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of the
trustee, owns 50 percent or more of the voting securities of the obligor,
furnish the following information as to each class of securities of such person
any of which are so owned or held by the trustee.
Not applicable
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
If the obligor is indebted to the trustee, furnish the following information.
Not applicable
ITEM 13. DEFAULTS BY THE OBLIGOR.
a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such default.
Not applicable
b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
Not applicable
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is authorized
to act as sole trustee under indentures qualified or to be qualified.
Not applicable
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility and
qualification.
1. A copy of the Articles of Association of LaSalle National Bank
now in effect.
2. A copy of the certificate of authority to commence business.
3. A copy of the authorization to exercise corporate trust
powers.
4. A copy of the existing By-Laws of LaSalle National Bank.
<PAGE> 5
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
8. Not applicable.
9. Not applicable.
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
LaSalle National Bank, a corporation organized and existing under the laws of
the United States of America, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Chicago, State of Illinois, on the 21st day of
April, 1997.
LASALLE NATIONAL BANK
By: /s/ Sarah H. Webb
-----------------
Sarah H. Webb
FirstVice President
<PAGE> 7
EXHIBIT 1
ARTICLES
OF
ASSOCIATION
LA SALLE NATIONAL BANK (LOGO)
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
<PAGE> 8
(LOGO)
LaSalle National Bank
ARTICLES OF ASSOCIATION
FIRST. The title of this association, which shall carry on the
business of banking under the laws of the United States shall be "LaSalle
National Bank."
SECOND. The place where the main banking house or office of this
association shall be located, its operations of discount and deposit carried
on, and its general business conducted, shall be Chicago, County of Cook, State
of Illinois.
THIRD. The Board of Directors of this association shall consist of
such number of its shareholders, not less than five nor more than twenty-five,
as from time to time shall be determined by a majority of the votes to which
all of its shareholders are at the time entitled. A majority of the Board of
Directors shall be necessary to constitute a quorum for the transaction of
business. The Board of Directors, by vote of a majority of the full board, may,
between annual meetings of shareholders increase the membership of the Board
where the number of directors last elected by shareholders was 15 or less, by
not more than two members, and where the number of directors last elected by
shareholders was 16 or more, by not more than four members and by a like vote
appoint qualified persons to fill the vacancies created thereby; provided that
the number of Directors shall at no time exceed twenty-five.
FOURTH. The regular annual meeting of the shareholders of this
association shall be held at its main banking house, or other convenient place
duly authorized by the board of directors on such day of each year as is
specified therefor in the bylaws.
FIFTH. The amount of capital stock which this association is
authorized to issue shall be Twenty Million Dollars ($20,000,000.00) divided
into 2,000,000 shares of common capital stock of the par value of $10.00 each;
but said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
If the capital stock is increased by the sale of additional shares
thereof, other than to key officers and employees of the association upon the
exercise of options granted pursuant to the terms of a stock option plan then
in effect, as to which sales all pre-emptive rights are waived, each
shareholder shall be entitled to subscribe for such additional shares in
proportion to the number of shares of said capital stock owned by him at the
time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a
resolution adopted by the shareholders at the time the increase is authorized.
The board of directors shall have the power to prescribe a reasonable period of
time within which the pre-emptive rights to subscribe to the new shares of
capital stock may be exercised.
The association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The board of directors shall appoint one of its members
president of this association, who shall be chairman of the board, but the
board of directors may appoint a director in lieu of the president to be
chairman of the board, who shall perform such duties as may be designated by
the board of directors. The board of directors shall have the power to appoint
one or more vice presidents, a cashier and such other officers as may be
required to transact the business of this association; to fix the salaries to
be paid to all officers of this association; and to dismiss such officers, or
any of them.
<PAGE> 9
The board of directors shall have the power to define the duties of
officers and employees of this association, to require bonds from them, and to
fix the penalty thereof; to regulate the manner in which directors shall be
elected or appointed, and to appoint judges of the election; to make all bylaws
that it may be lawful for them to make for the general regulation of the
business of this association and the management of its affairs; and generally
to do and perform all acts that it may be lawful for a board of directors to do
and perform.
SEVENTH. This association shall have succession from the date of its
organization certificate until such time as it be dissolved by act of its
shareholders in accordance with the provisions of the banking laws of the
United States, or until its franchise becomes forfeited by reason of violation
of law, or until terminated by either a general or a special act of Congress,
or until its affairs be placed in the hands of a receiver and finally wound up
by him.
EIGHTH. The board of directors of this association, or any three or
more shareholders owning, in the aggregate, not less than ten percentum of the
stock of this association, may call a special meeting of shareholders at any
time: Provided, however, that, unless otherwise provided by law, not less than
ten days prior to the date fixed for any such meeting, a notice of the time,
place, and purpose of the meeting shall be given by first-class mail, postage
prepaid, to all shareholders of record of this association at their respective
addresses as shown upon the books of the association. These articles of
association may be amended at any regular or special meeting of the
shareholders by the affirmative vote of the shareholders owning at least a
majority of the stock of this association, subject to the provisions of the
banking laws of the United States. The notice of any shareholders' meeting, at
which an amendment to the articles of association of this association is to be
considered, shall be given as herein-above set forth.
NINTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of the association or of any firm,
corporation, or organization which he served in any such capacity at the
request of the association: Provided, however, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit, or
proceeding as to which he shall finally be adjudged to have been guilty of or
liable for negligence or wilful misconduct in the performance of his duties to
the association: And, provided further, that no person shall be so indemnified
or reimbursed in relation to any matter in such action, suit, or proceeding
which has been made the subject of a compromise settlement except with the
approval of a court of competent jurisdiction, or the holders of record of a
majority of the outstanding shares of the association, or the board of
directors, acting by vote of directors not parties to the same or substantially
the same action, suit, or proceeding, constituting a majority of the whole
number of the directors. The foregoing right of indemnification or
reimbursement shall not be exclusive of other rights to which such person, his
heirs, executors, or administrators, may be entitled as a matter of law.
********
May 17, 1982
Form No. 181, Rev 5/17/82 GW
<PAGE> 10
EXHIBIT 2
CERTIFICATE OF AUTHORITY
TO COMMENCE BUSINESS
<PAGE> 11
STATE OF ILLINOIS
AUDITOR'S OFFICE
NO. 333 (LOGO)
NATIONAL BANK TRUST CERTIFICATE
Springfield, FEBRUARY 15th 1928
I, OSCAR NELSON, Auditor of Public Accounts of the State of Illinois,
do hereby certify that the NATIONAL BUILDERS BANK OF CHICAGO located at
CHICAGO, County of COOK and State of Illinois, a corporation organized under
and by authority of the statutes of the United States governing National Banks
and authority granted by the Federal Reserve Act for the purpose of accepting
and executing trusts, has this day deposited in this office, securities in the
sum of TWO HUNDRED THOUSAND Dollars, $200,000.00 of the character designated by
Section 6 of the Act of the Legislature of the State of Illinois entitled "An
Act to provide for and regulate the administration of trusts by trust
companies,"
The said deposit is made for the benefit of the creditors of said
NATIONAL BUILDERS BANK OF CHICAGO under and by virtue of the provisions of the
Act above referred to and the said securities are now held by me in this office
in my official capacity as such Auditor of Public Accounts, for the uses and
purposes aforesaid.
I further certify that by virtue of the Acts aforesaid, the NATIONAL
BUILDERS BANK OF CHICAGO is hereby authorized to accept and execute trusts and
receive deposits of trust funds under the provisions and limitations of "An Act
to provide for and regulate the administration of trusts in Illinois.
IN TESTIMONY WHEREOF, I hereunto subscribe my name and
(SEAL) affix the seal of my office, the day and year first
above written.
/s/ Oscar Nelson
---------------------------
AUDITOR OF PUBLIC ACCOUNTS.
STATE OF ILLINOIS.
<PAGE> 12
NO. 13146.
TREASURY DEPARTMENT (LOGO)
OFFICE OF COMPTROLLER OF THE CURRENCY
Washington, D.C., NOVEMBER 29, 1927.
WHEREAS, by satisfactory evidence presented to the undersigned, it has
been made to appear that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of
CHICAGO in the County of COOK and State of ILLINOIS has complied with all the
provisions of the Statutes of the United States, required to be complied with
before an association shall be authorized to commence the business of Banking;
NOW THEREFORE I, J.W. MCINTOSH, Comptroller of the Currency, do hereby
certify that "NATIONAL BUILDERS BANK OF CHICAGO" in the CITY of CHICAGO in the
County of COOK and State of ILLINOIS is authorized to commence the business of
Banking as provided in Section Fifty one hundred and sixty nine of the Revised
Statutes of the United States.
IN TESTIMONY WHEREOF witness my hand and Seal of (SEAL)
(SEAL) office this TWENTY-NINTH day of NOVEMBER, 1927.
/s/ J.W. McIntosh
---------------------------
Comptroller of the Currency
<PAGE> 13
CERTIFICATE OF CHANGE OF CORPORATE TITLE
(LOGO)
NO. 13146.
TREASURY DEPARTMENT
OFFICE OF THE COMPTROLLER OF THE CURRENCY
WASHINGTON, D.C., MAY 1, 1940.
WHEREAS, by satisfactory evidence presented to me, it appears that
under authority of sections 2, 3, and 4, of the Act of Congress approved May 1,
1886, entitled "An Act to enable national banking associations to increase
their capital stock and to change their names or location," shareholders owning
two-thirds of the stock of the national banking association heretofore known
as-- "NATIONAL BUILDERS BANK OF CHICAGO," located in CHICAGO, County of COOK,
State of ILLINOIS, have voted to change the name of said association to--
"LASALLE NATIONAL BANK," and have complied with all the provisions of the said
Act relative to national banking associations changing their name.
NOW, THEREFORE, IT IS HEREBY CERTIFIED, that the name of the said
association has been changed to-- "LASALLE NATIONAL BANK," and that such change
of name is hereby approved under authority conferred by said Act.
(SEAL) IN TESTIMONY WHEREOF, witness my hand and seal of
office this FIRST day of MAY, 1940.
/s/
-----------------------------------
ACTING Comptroller of the Currency.
<PAGE> 14
EXHIBIT 3
AUTHORIZATION TO EXERCISE
CORPORATE TRUST POWERS
<PAGE> 15
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM [LETTERHEAD]
WASHINGTON
May 9, 1940
LaSalle National Bank,
Chicago, Illinois.
Gentlemen:
The Board of Governors of the Federal Reserve System has been
officially advised by the Comptroller of the Currency that on May 1, 1940,
National Builders Bank of Chicago, Chicago, Illinois, changed its title to
LaSalle National Bank, and accordingly there is enclosed herewith a certificate
showing that LaSalle National Bank has authority to exercise the fiduciary
powers enumerated therein.
Kindly acknowledge receipt of this certificate.
Very truly yours,
S. R. Carpenter
--------------------------
S. R. Carpenter,
Assistant Secretary.
Enclosure
<PAGE> 16
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON
I, S. R. Carpenter, Assistant Secretary of the Board of Governors of
the Federal Reserve System (formerly known as the Federal Reserve Board), do
hereby certify that it appears from the records of the Board of Governors of
the Federal Reserve System that:
(1) Pursuant to the authority vested in the Federal Reserve Board by
an Act of Congress approved December 23, 1913, known as the Federal Reserve
Act, as amended, the Federal Reserve Board on December 8, 1927, granted to
National Builders Bank of Chicago, Chicago, Illinois, the right to act, when
not in contravention of State or local law, as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, committee of estates of lunatics, or in any other fiduciary capacity
in which State banks, trust companies or other corporations which come into
competition with national banks are permitted to act under the laws of the
State of Illinois;
(2) Under the provisions of an Act of Congress approved May 1, 1886,
National Builders Bank of Chicago, Chicago, Illinois, on May 1, 1940, changed
its title to LaSalle National Bank; and
(3) By virtue of the foregoing, LaSalle National Bank, Chicago,
Illinois, has authority to act, when not in contravention of State or local
law, as trustee, executor, administrator, registrar of stocks and bonds,
guardian of estates, assignee, receiver, committee of estates of lunatics, or
in any other fiduciary capacity in which State banks, trust companies or other
corporations which come into competition with national banks are permitted to
act under the laws of the State of Illinois, subject to regulations prescribed
by the Board of Governors of the Federal Reserve System.
IN WITNESS WHEREOF, I have hereunto subscribed my name and caused the
seal of the Board of Governors of the Federal Reserve System to be affixed at
the City of Washington in the District of Columbia.
/s/ S. R. Carpenter
--------------------
Assistant Secretary.
Dated May 9, 1940
<PAGE> 17
EXHIBIT 4
BYLAWS
OF
LA SALLE NATIONAL BANK
CHICAGO, ILLINOIS
LA SALLE NATIONAL BANK (LOGO)
Organized Under the National Banking Laws
of the United States
<PAGE> 18
BYLAWS
of the
LA SALLE NATIONAL BANK
(a National Banking Association which association
is herein referred to as the "bank")
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the
shareholders for the election of directors and the transaction of whatever
other business may properly come before the meeting, shall be held at the main
office of the Bank, 135 South LaSalle Street, Chicago, Illinois, or such other
place as the Board of Directors may designate, at 9:00 A.M., on the third
Wednesday of March of each year. Notice of such meeting shall be mailed,
postage prepaid, at least ten days prior to the date thereof, addressed to each
shareholder at his address appearing on the books of the Bank. If for any
cause, an election of directors is not made on the said day, the Board of
Directors shall order the election to be held on some subsequent day as soon
thereafter as practicable, according to the provisions of law; and notice
thereof shall be given in the manner herein provided for the annual meeting.
SECTION 1.2. SPECIAL MEETINGS. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be called for any
purpose at anytime by the board of directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock
of the bank. Every such special meeting, unless otherwise provided by law,
shall be called by mailing, postage pre-paid, not less than ten days prior to
the date fixed for such meeting, to each shareholder at his address appearing
on the books of the bank, a notice stating the purpose of the meeting.
SECTION 1.3. NOMINATIONS FOR DIRECTOR. Nominations for election to
the board of directors may be made by the board of directors or by any
shareholder of any outstanding class of capital stock of the bank entitled to
vote for the election of directors. Nominations, other than those made by or on
behalf of the existing management of the bank, shall be made in writing and
shall be delivered or mailed to the president of the bank and to the
Comptroller of the Currency, Washington, D.C., not less than 14 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors, provided, however, that if less than 21 days' notice of the meeting
is given to the shareholders, such nomination shall be mailed or delivered to
the president of the bank and to the Comptroller of the Currency not later than
the close of business on the seventh day following the day on which the notice
of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the total number of shares of capital stock of each proposed
nominee; (d) the name and address of the notifying shareholder; and (e) the
number of shares of capital stock of the bank owned by the notifying
shareholder. Nominations not made in accordance herewith, may, in his
discretion, be disregarded by the chairman of the meeting, and upon his
instructions, the vote tellers may disregard all votes cast for each such
nominee.
SECTION 1.4. JUDGES OF ELECTION. Every election of directors shall
be managed by three judges, who shall be appointed by the board of directors
prior lo the time of said election. The
<PAGE> 19
judges of election shall hold and conduct the election at which they are
appointed to serve; and after the election, they shall file with the cashier a
certificate under their hands, certifying the result thereof and the names of
the directors elected. The judges of election. at the request of the chairman
of the meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall certify the result thereof.
SECTION 1.5. PROXIES. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this bank shall act as proxy. Proxies shall be valid only for one meeting,
to be specified therein, and any adjournments of such meeting. Proxies shall be
dated and shall be filed with the records of the meeting.
SECTION 1.6. QUORUM. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the articles of association.
ARTICLE II
DIRECTORS
SECTION 2.1. BOARD OF DIRECTORS. The board of directors
(hereinafter referred to as the "board"), shall have power to manage and
administer the business affairs of the bank. Except as expressly limited by
law, all corporate powers of the bank shall be vested in and may be exercised
by said board.
SECTION 2.2. NUMBER. The board shall consist of not less than five
or more than twenty-five shareholders, the exact number within such minimum and
maximum limits to be fixed and determined from time to time by resolution of a
majority of the full board or by resolution of the shareholders at any meeting
thereof; provided, however, that a majority of the full board may not increase
the number of directors by more than two if the number of directors last
elected by shareholders was fifteen or less and by not more than four where the
number of directors last elected by shareholders was sixteen or more, provided
that in no event shall the number of directors exceed twenty-five.
SECTION 2.3. ORGANIZATION MEETING. The cashier, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the main office of the bank for the purpose of organizing the new board
and electing and appointing officers of the bank for the succeeding year. Such
meeting shall be appointed to be held on the day of election or as soon
thereafter as practicable, and, in any event, within thirty days thereof. If,
at the time fixed for such meeting, there shall not be a quorum present the
directors present may adjourn the meeting, from time to time, until a quorum
is obtained.
SECTION 2.4 REGULAR MEETINGS. The regular meetings of the board
shall be held, without notice, on the third Wednesday of each month at the main
office. When any regular meeting of the board falls upon a holiday, the meeting
shall be held on the next banking business day unless the board shall designate
some other day.
SECTION 2.5 SPECIAL MEETINGS. Special meetings of the board may
be called by the
<PAGE> 20
chairman of the board, the president, or at the request of three or more
directors. Each member of the board shall be given notice stating the time and
place, by telegram, letter or in person, of each such special meeting.
SECTION 2.6. QUORUM. A majority of the directors shall constitute
a quorum at any meeting, except when otherwise provided by law; but a less
number may adjourn any meeting from time to time, and the meeting may be held,
as adjourned, without further notice.
SECTION 2.7. VACANCIES. When any vacancy occurs among the
directors, the remaining members of the board, in accordance with the laws of
the United States, may appoint a director to fill such vacancy at any regular
meeting of the board, or at a special meeting called for that purpose.
SECTION 2.8. RETIREMENT POLICY. A retirement policy adopted by the
board of directors shall be applicable to directors who are not active officers
of the bank.
ARTICLE III
COMMITTEES OF THE BOARD
SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive
committee of the board. The members of the executive committee shall be chosen
by the board from time to time, shall hold office during its pleasure, and
shall consist of the chairman of the board, the chairman of the executive
committee selected by the board, who may but need not be the same person
designated to be president, and the president, ex officio, and not less than
seven additional members of the board who shall not be active officers of the
bank. It shall be the duty of this committee to exercise such powers and
perform such duties in respect to the making of loans and discounts as shall
from time to time be specified by resolution of the board. During such periods
as the board shall not be in session, the executive committee shall have and
may exercise all the powers of the board except such as are by law or by these
bylaws required to be exercised only by the board. The executive committee may
make rules for holding and conducting its meetings and keep in the minute book
of the bank a report of all action taken which shall be submitted for approval
at each regular meeting of the board and the action of the board shall be
recorded in the minutes of that meeting. A quorum of the executive committee
shall consist of not less than five of its members, at least three of whom
shall not be active officers of the bank. The chairman of the board, or in his
absence in the order named if present, the chairman of the executive committee
or the president, may designate any director who is not an active officer of
the bank, or a designated member, to serve as a member of the executive
committee at any specified meeting. Vacancies in the executive committee at any
time existing may be filled by appointment by the board. The board may at
anytime revise or change the membership and chairmanship of the executive
committee and make new or additional appointments thereto. The chairman of the
executive committee shall be ex officio a member of all committees except the
examining committee and the trust audit committee, and shall have such other
duties as may from time to time be assigned him by the board.
SECTION 3.2. OFFICERS' COMPENSATION COMMITTEE. There shall be an
officers' compensation committee of the board. The members of the officers'
compensation committee shall consist of the members ex officio provided for in
other sections of these bylaws and not less than three additional non-officer
members of the board who shall be appointed by the board each year at its first
meeting after the directors have been elected and qualified. It shall be the
duty of this committee to study the compensation of all officers of the bank
and from time to time report their recommendations to the board; and such other
duties, if any, as may from time to time be assigned to it by the board. A
majority of the committee, including at least two non-officer members, shall be
necessary for the committee to keep records of its action.
<PAGE> 21
SECTION 3.3. EXAMINING COMMITTEE. There shall be an examining
committee of the board. The members of the examining committee shall consist of
the members ex officio provided for in other sections of these bylaws, but
exclusive of any active officer of the bank and not less than three additional
non-officer members of the board who shall be appointed by the board each year
at its first meeting after the directors have been elected and qualified. It
shall be the duty of this committee to make an examination at least twice each
year into the affairs of the bank or to cause the examinations to be made by
accountants (who may be the bank's own accountants) responsible only to the
board in such examinations, and to report the result of such examinations in
writing to the board at the next regular meeting thereafter, or it may, at its
sole discretion, submit the reports of the national bank examiner or of the
Chicago Clearing House Association examination, with or without additional
comments by the committee itself, for, and in lieu of its personal
examinations. Such reports shall state whether the bank is in sound condition,
whether adequate internal audit controls and procedures are being maintained
and shall recommend to the board such changes in the manner of doing business
or conducting the affairs of the bank as shall be deemed advisable.
SECTION 3.4. OTHER COMMITTEES. The board may appoint, from time to
time, from its own members, other committees of one or more persons, for such
purposes and with such powers as the board may determine.
ARTICLE IV
OFFICERS AND EMPLOYEES
SECTION 4.1. CHAIRMAN OF THE BOARD. The board shall appoint one of
its members to be chairman of the board. The chairman of the board shall
supervise the carrying out of the policies adopted or approved by the board. He
shall have general executive powers, as well as the specific powers conferred
by these bylaws. He shall be ex officio a member of all committees, except the
examining committee and the trust audit committee. He shall have general
supervision and direction of the business, affairs and personnel of the bank.
He shall also have and may exercise such further powers and duties as from time
to time may be conferred upon, or assigned to him by the board.
SECTION 4. 2. VICE CHAIRMAN OF THE BOARD. The board may appoint one
of its members to be vice chairman of the board. He shall perform such duties
as may from time to time be assigned to him by the board.
SECTION 4.3. PRESIDENT. The board shall appoint one of its members
to be president of the bank. He shall be the chief executive officer and the
chief administrative officer of the bank and in the absence of the chairman of
the board, he shall preside at any meeting of the board at which he is present.
The president shall have general executive powers, and shall have and may
exercise any and all other powers and duties pertaining by law, regulation, or
practice to the office of president, or imposed by these bylaws. He shall be ex
officio a member of all committees, except the examining committee and trust
audit committee. He shall have general supervision of the business, affairs and
personnel of the bank and in the absence of the chairman of the board, shall
exercise the powers and perform the duties of the chairman of the board. He
shall also have and may exercise such further powers and duties as from time to
time may be conferred upon or assigned to him by the board.
<PAGE> 22
SECTION 4.4. SENIOR OFFICERS. The board may appoint one or more
executive vice presidents and one or more senior vice presidents. Each such
senior officer shall have such powers and duties as may be assigned to him by
the board, the chairman of the board, or the president.
SECTION 4.5. VICE PRESIDENT. The board may appoint one or more
vice presidents. Each vice president shall have such powers and duties as may
be assigned to him by the board, the chairman of the board, or the president.
SECTION 4.6. CASHIER. The board shall appoint a cashier who shall
have such powers and duties as may be assigned to him by the board, the
chairman of the board, or the president. The cashier shall be custodian of the
corporate seal, records, documents and papers of the bank. He shall provide for
keeping of proper records of all transactions of the bank.
SECTION 4.7. SECRETARY. The board shall appoint a secretary who
shall be secretary of the bank. He shall also perform such duties as may be
assigned to him from time to time by the board. The board may appoint a
secretary of the board who shall keep accurate minutes of all meetings. He
shall attend to the giving of all notices; he shall also perform such other
duties as may be assigned to him from time to time by the board.
SECTION 4.8. OTHER OFFICERS. The board may appoint one or more
assistant vice presidents, one or more trust officers, one or more assistant
secretaries, one or more assistant cashiers, and such other officers and
attorneys-in-fact as from time to time may appear to the board to be required
or desirable to transact the business of the bank. Such officers, respectively,
shall exercise such powers and perform such duties as pertain to their several
offices or as may be conferred upon or assigned to them by the board the
chairman of the board or the president.
SECTION 4.9. CLERKS AND AGENTS. The chairman of the board, the
president, or any other active officer of the bank authorized by the chairman
of the board, or the president, may appoint and dismiss all or any paying
tellers receiving tellers note tellers, vault custodians, bookkeepers and other
clerks, agents and employees as they may deem advisable for the prompt and
orderly transaction of the business of the bank, define their duties, fix the
salaries to be paid them and the conditions of their employment.
SECTION 4.10. RESPONSIBILITY FOR MONEYS, ETC. Each of the active
officers and clerks of this bank shall be responsible for all moneys, funds
valuables and property of every kind and description that may from time to time
be entrusted to his care or placed in his hands by the board or others, or that
otherwise may come into his possession as an active officer or clerk of this
bank.
SECTION 4.11. SURETY BONDS. All the active officers and clerks of
this bank may be covered by one of the blanket form bonds customarily written
by the surety companies, drawn for such an amount, and executed by such surety
company, as the board may from time to time require, and duly approve; or at
the discretion of the board, all such active officers and clerks shall, each
for himself, give such bond, with such security, and in such denominations as
the board may from time to time require and direct. All bonds approved by the
board shall assure the faithful and honest discharge of the respective duties
of such active officer or clerk and shall provide that such active officer or
clerk shall faithfully apply and account for all moneys, funds, valuables and
property of every kind and description that may from time to time come into his
hands or be entrusted to his care, and pay over and deliver the same to the
order of the board or to such other person or persons as may be authorized to
demand and receive the same.
SECTION 4.12. TERM OF OFFICE - OFFICER DIRECTOR. The chairman of
the board, the vice chairman of the board and the president, together with any
other active officers who may be
<PAGE> 23
duly elected members of the board, shall hold their respective offices for the
current year for which the board (of which they shall be members) was elected
and until their successors are appointed, unless they shall resign, be
disqualified, or be removed; and any vacancy occurring in the office of the
chairman of the board, the vice chairman of the board, the president, or in the
board, shall, if required by these bylaws, be filled by the remaining members.
SECTION 4.13. TERM OF OFFICE - OFFICER. The executive vice
presidents, the senior vice presidents, the vice presidents, the assistant vice
presidents, the cashier, the secretary, the trust officers and all other
officers and attorneys-in-fact who are not duly elected members of the board,
shall be appointed to hold their offices, respectively, during the pleasure of
the board.
ARTICLE V
TRUST DEPARTMENT
SECTION 5.1. TRUST DEPARTMENT. There shall be a department of the
bank known as the trust department which shall perform the fiduciary
responsibilities of the bank.
SECTION 5.2. TRUST OFFICER. There shall be a senior vice president
and trust officer, or vice president and trust officer of this bank, who shall
be designated as the managing officer of the trust department and whose duties
shall be to manage, supervise and direct all the activities of the trust
department. He shall do, or cause to be done, all things necessary or proper in
carrying on the business of the trust department in accordance with provisions
of law and regulations. He shall act pursuant to opinion of counsel where such
opinion is deemed necessary. Opinions of counsel shall be retained on file in
connection with all important matters pertaining to fiduciary activities. The
trust officer shall be responsible for all assets and documents held by the
bank in connection with fiduciary matters. The board may appoint such other
officers of the trust department as it may deem necessary, with such duties as
may be assigned to them by the board, the chairman of the board, or the
president.
SECTION 5.3. TRUST INVESTMENT COMMITTEE. There shall be appointed
by the board a trust investment committee of this bank composed of not less
than four members, including members ex officio provided for in other sections
of these bylaws, who shall be capable and experienced officers or directors of
the bank. All investments of funds held in a fiduciary capacity shall be made,
retained or disposed of only with the approval of the trust investment
committee; and the committee shall keep minutes of all its meetings, showing
the disposition of all matters considered and passed upon by it. The committee
shall, promptly after the acceptance of an account for which the bank has
investment responsibilities, review the assets thereof, to determine the
advisability of retaining or disposing of such assets. The committee shall
conduct a similar review at least once during each calendar year thereafter and
within fifteen months of the last such review. A report of all such reviews,
together with the action taken as a result thereof, shall be noted in the
minutes of the committee. Three members of the trust investment committee shall
constitute a quorum, and any action approved by a majority of those present
shall constitute the action of the committee.
SECTION 5.4. TRUST AUDIT COMMITTEE. The board shall appoint a
committee of not less than three directors, including members ex officio
provided for in other sections of these bylaws, exclusive of any active
officers of the bank, which shall at least once during each calendar year and
within fifteen months of the last such audit make suitable audits of the trust
department, or cause suitable audits to be made, by auditors responsible only
to the board, and at such time shall ascertain whether the department has been
administered in accordance with law, Regulation 9, and sound fiduciary
principles. Notwithstanding the provisions of this Section, the board at any
time may assign to
<PAGE> 24
the Examining Committee, in addition to the duties of the Examining Committee
set forth in Section 3.3 of these bylaws, all of the duties of the Trust Audit
Committee and during such time as the Examining Committee is performing the
duties of both committees, the Trust Audit Committee shall cease to function as
a committee of this board. The board at any time may reassign the duties
provided for in this Section to the Trust Audit Committee.
SECTION 5.5. TRUST DEPARTMENT FILES. There shall be maintained in
the trust department, files containing all fiduciary records necessary to
assure that its fiduciary responsibilities have been properly undertaken and
discharged.
SECTION 5.6. TRUST INVESTMENTS. Funds held in a fiduciary capacity
shall be invested in accordance with the instrument establishing the fiduciary
relationship and local law. Where such instrument does not specify the
character and class of investments to be made and does not vest in the bank a
discretion in the matter, fund shield pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest under local
law.
ARTICLE VI
STOCK AND STOCK CERTIFICATES
SECTION 6.1. TRANSFERS. Shares of capital stock shall be
transferable on the books of the bank and a transfer book shall be kept in
which all transfers of stock shall be recorded. Every person becoming a
shareholder be such transfer shall in proportion to his shares, succeed to all
rights and liabilities of the prior holder of such shares.
SECTION 6.2. STOCK CERTIFICATES. Certificates of capital stock
shall bear the signature of any one of, the chairman of the board, or the
president (which may be engraved, printed or impressed) and shall be signed
manually or by facsimile process by the secretary, assistant secretary,
cashier, assistant cashier, or any other officer appointed by the board for
that purpose, to be known as an authorized officer and the seal of the bank
shall be engraven thereon. Each certificate shall recite on its face that the
stock represented thereby is transferable, properly endorsed, only on the books
of the bank.
ARTICLE VII
CORPORATE SEAL
SECTION 7.1. CORPORATE SEAL. The chairman of the board, the
president, the cashier, the secretary or any assistant cashier or assistant
secretary, or other officer thereunto designated by the board, shall have
authority to affix the corporate seal to any document requiring such seal, and
to attest the same. Such seal shall be substantially in the form set forth
herein.
ARTICLE VIII
INDEMNIFYING OFFICERS AND DIRECTORS
SECTION 8.1. INDEMNIFYING OFFICERS AND DIRECTORS. Any person, his
heirs, executors or administrators, may be indemnified or reimbursed by the
bank for reasonable expenses actually incurred in connection with any action,
suit or proceeding, civil or criminal, to which he or
<PAGE> 25
they shall be made a party by reason of his being or having been a director,
officer or employee of the bank or of any firm, corporation or organization
which he served in any such capacity at the request of the bank; provided,
however, that no person shall be so indemnified or reimbursed in relation to
any matter in such action, suit or proceeding as to which he shall finally be
adjudged to have been guilty of or liable for negligence or willful misconduct
in the performance of his duties to the bank; and, provided further, that no
person shall be so indemnified or reimbursed in relation to any matter in such
action, suit or proceeding which has been made the subject of a compromise
settlement except with the approval of a court of competent jurisdiction, or
the holders of record of a majority of the outstanding shares of the bank, or
the board, acting by vote of directors not parties to the same or substantially
the same action suit or proceeding, constituting a majority of the whole number
of the directors. The foregoing right of indemnification or reimbursement shall
not be exclusive of other rights to which such person, his heirs, executors or
administrators, may be entitled as a matter of law.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. FISCAL YEAR. The fiscal year of the bank shall be the
calendar year.
SECTION 9.2. EXECUTION OF INSTRUMENTS. All agreements, indentures
mortgages, deeds, conveyances transfers certificates declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or
accepted for the bank by the chairman of the board, or the vice chairman of the
board, or the president, or any executive vice president, or any senior vice
president, or any vice president, or the secretary or the cashier, or, if in
connection with the exercise of fiduciary powers of the bank by any of said
officers or by any officer in the trust department. Any such instruments may
also be signed, executed, acknowledged, verified, delivered or accepted for the
bank in such other manner and by such other officers as the board may from time
to time direct. The provisions of this Section 9.2 are supplementary to any
other provisions of these bylaws.
SECTION 9.3. RECORDS. The articles of association, the bylaws, and
the proceedings of all meetings of the shareholders and of the board shall be
recorded in appropriate minute books provided for the purpose; where these
bylaws so provide, the proceedings of standing committees of the board shall be
recorded in appropriate minute books provided for the purpose.
ARTICLE X
EMERGENCIES
SECTION 10.1. CONTINUATION OF BUSINESS. In the event of a state of
emergency of sufficient severity to interfere with the conduct and management
of the affairs of this bank, the officers and employees will continue to
conduct the affairs of the bank under such guidance from the directors as may
be available except as to matters which by statute require specific approval of
the board of directors and subject to conformance with any governmental
directives during the emergency.
SECTION 10.2. DESIGNATION OF PLACE OF BUSINESS. The offices of the
bank at which its business shall be conducted shall be the main office thereof
located at 135 South LaSalle Street, Chicago, Illinois, and any other legally
authorized location which may be leased or acquired by this bank to carry on
its business. During an emergency resulting in any authorized place of business
of
<PAGE> 26
this bank being unable to function, the business ordinarily conducted at such
location shall be relocated elsewhere in suitable quarters, in addition to or
in lieu of the locations heretofore mentioned, as may be designated by the
board of directors or by the executive committee or by such persons as are
then, in accordance with resolutions adopted from time to time by the board of
directors dealing with the exercise of authority in the time of such emergency,
conducting the affairs of this bank. Any temporarily relocated place of
business of this bank shall be returned to its legally authorized location as
soon as practicable and such temporary place of business shall then be
discontinued.
ARTICLE XI
BYLAWS
SECTION 11.1 INSPECTION. A copy of the bylaws with all amendments
thereto, shall at all times be kept in a convenient place at the main office of
the bank and shall be open for inspection to all shareholders, during banking
hours.
SECTION 11.2 AMENDMENTS. The bylaws may be amended, altered or
repealed, at any regular meeting of the board, by a vote of a majority of the
whole number of the directors.
***
I........................................... hereby certify that I am
the................................ Cashier/Secretary of LaSalle National
Bank, Chicago, Illinois and that the foregoing is a true and correct copy of
the bylaws of this bank as amended and that the same are in full force and
effect ............. day of...................19........
...............................
Cashier/Secretary.
December 15, 1982
(SEAL)
<PAGE> 27
EXHIBIT 5
NOT APPLICABLE
<PAGE> 28
EXHIBIT 6
LaSalle National Bank hereby consents in accordance with the provisions of
Section 321(b) of the Trust Indenture Act of 1939, that reports of examinations
by Federal, State, Territorial and District authorities may be furnished by
such authorities to the Securities and Exchange Commission upon its request
therefor.
LA SALLE NATIONAL BANK
By: /s/ Sarah H. Webb
----------------------
Sarah H. Webb
First Vice President
<PAGE> 29
EXHIBIT 7
Latest Report of Condition of
Trustee published pursuant to
law or the requirement of its
surviving or examining authority.
<PAGE> 30
EXHIBIT 8
NOT APPLICABLE
<PAGE> 31
EXHIBIT 9
NOT APPLICABLE
<PAGE> 1
EXHIBIT 99.1.1
LETTER OF TRANSMITTAL
HOME PRODUCTS INTERNATIONAL, INC.
OFFER TO EXCHANGE
ALL 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ALL OUTSTANDING 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON
UNLESS EXTENDED (THE "EXPIRATION DATE").
The Exchange Agent for the Exchange Offer is:
LASALLE NATIONAL BANK
By Hand, Registered or Certified Mail or Overnight Courier:
LaSalle National Bank
135 South LaSalle Street
Room 1825
Chicago, Illinois 60603
Attention: Sarah Webb
By Facsimile:
(312) 904-2236
Attention: Sarah Webb
Confirm by Telephone: (312) 904-2444
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY. THE
INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (as it may be amended or supplemented from time to time, the
"Prospectus") of Home Products International, Inc., a Delaware corporation (the
"Company"), and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange an aggregate of up to
$125,000,000 principal amount of its 9 5/8% Senior Subordinated Notes due 2008
(the "New Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for an identical principal amount of its outstanding
9 5/8% Senior Subordinated Notes due 2008 (the "Old Notes"). The term
"Expiration Date" shall mean 5:00 p.m., New York City time on ,
unless the Exchange Offer is extended, in which case the term "Expiration Date"
means the latest date and time to which the Exchange Offer is extended.
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
This Letter of Transmittal is to be used (i) if certificates of Old Notes
are to be forwarded herewith, (ii) if delivery of Old Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company (the "Depository") or "DTC") pursuant to the procedures
set forth in "The Exchange Offer-Procedures for Tendering Old Notes" in the
Prospectus or (iii) if tender of the Old
<PAGE> 2
Notes is to be made according to the guaranteed delivery procedures described in
the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or any other documents required by this Letter of Transmittal to the
Exchange Agent on or prior to the Expiration Date of (iii) who cannot complete
the procedure for book-entry transfer on a timely basis, may tender their Old
Notes according to the guaranteed delivery procedures set forth herein. See
Instruction 2.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amount on a separate signed schedule and attach that schedule to this
Letter of Transmittal. See Instruction 4.
ALL TENDERING HOLDERS COMPLETE THIS BOX:
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- -----------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER (FILL IN, IF BLANK) OLD NOTES TENDERED
- -----------------------------------------------------------------------------------------------------------------
CERTIFICATE OR AGGREGATE PRINCIPAL
REGISTRATION AMOUNT REPRESENTED PRINCIPAL AMOUNT
NUMBER(S)* BY OLD NOTES TENDERED**
------------------------------------------------------------------------
$ $
========================================================================
TOTAL AMOUNT TENDERED: $ $
- -----------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry holders. Such holders should check the appropriate box below and provide
the requested information.
** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount
represented by such Old Notes. All tenders must be in integral multiples of $1,000.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this letter in its entirety.
(THE FOLLOWING BOXES ARE TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY.)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
DTC Account Number:
---------------------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------------------------------
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
---------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------------------------------------------------------
Name of Eligible Institution Which Guaranteed Delivery:
---------------------------------------------------
If Guaranteed Deliver is to be made by book-entry transfer:
DTC Account Number:
---------------------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OLD NOTES FOR YOUR OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
---------------------------------------------------------------------------
Address:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Telephone Number and Contact Person:
----------------------------------------------------------------------
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above described principal amount
of Old Notes in exchange for an identical principal amount of New Notes. Subject
to, and effective upon, the acceptance for exchange of the Old Notes tendered
herewith, the undersigned hereby exchanges, assigns and transfers to or upon the
order of the Company all right, title and interest in and to such Old Notes as
are being tendered herewith, including all rights to accrued and unpaid interest
thereon as of the Expiration Date. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company in connection with the Exchange Offer) to cause the Old Notes to be
assigned, transferred and exchanged.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, ASSIGN AND TRANSFER THE OLD NOTES
TENDERED HEREBY AND TO ACQUIRE NEW NOTES ISSUABLE UPON THE EXCHANGE OF SUCH
TENDERED OLD NOTES, AND THAT, WHEN THE OLD NOTES ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES
<PAGE> 4
TENDERED HEREBY. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "Terms of the Exchange Offer -- Procedures for
Tendering Old Notes" in the Prospectus and in the instructions herein will, upon
the Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Old Notes or transfer ownership of such Old Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that acceptance of any tendered Old Notes by the Company and the issuance of New
Notes in exchange therefor shall constitute performance in full by the Company
of its obligations under the Registration Rights Agreement and that the Company
shall have no further obligations or liabilities thereunder for the registration
of the Old Notes or the New Notes.
The Exchange Offer is not conditioned upon any principal amount of Old
Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions set forth in the Prospectus under the caption "Terms of the
Exchange Offer -- Conditions." The undersigned recognizes that as a result of
these conditions (which may be waived, in whole or in part, by the Company), as
more particularly set forth in the Prospectus, the Company may not be required
to exchange any of the Old Notes tendered hereby and, in such event, the Old
Notes not exchanged will be returned to the undersigned at the address shown
below the signature of the undersigned.
The name(s) and addressee(s) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on the position of the staff of the Securities and Exchange Commission
(the "Commission") as set forth in certain interpretive letters addressed to
third parties in other transactions substantially similar to the Exchange Offer,
which lead the Company to believe that New Notes issued pursuant to the Exchange
Offer to a holder in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by a holder (other than (i) a broker-dealer who
purchased Old Notes directly from the Company for resale pursuant to Rule 144A
or any other available exemption under the Securities Act, (ii) an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act or (iii)
a broker-dealer who acquired the Old Securities as a result of market-making or
other trading activities) without further compliance with the registration and
prospectus delivery provisions of the Securities Act, provided, that such holder
is acquiring the New Notes in the ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Accordingly, the undersigned
represents that (i) it is not an "affiliate" of the Company as defined in Rule
405 of the Securities Act, (ii) it is not a broker-dealer that acquired Old
Notes directly from the Company in order to resell them pursuant to Rule 144A of
the Securities Act or any other available exemption under the Securities Act,
(iii) it will acquire the New Notes in the ordinary course of business and (iv)
it is not participating, and does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes. The undersigned acknowledges that if it is unable to make
these representations to the Company, it will not be able to rely on the
interpretations of the staff of the Commission described above and therefore
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Notes unless such sale is made pursuant to an exemption from such
requirements. If the undersigned is a broker-dealer that will receive New Notes
for its own account in exchange for Old Notes, it represents that it acquired
the Old Notes for its own account as a result of market-making activities or
other trading activities and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes; however, by so
<PAGE> 5
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of Section 2(11) of the
Securities Act. Failure to comply with any of the above-mentioned requirements
could result in the undersigned or any such other person incurring liability
under the Securities Act for which such persons are not indemnified by the
Company.
Unless otherwise indicated in the box entitled "Special Exchange
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all New Notes delivered in exchange for
tendered Old Notes, and any Old Notes delivered herewith but not exchanged, will
be registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If a
New Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the New Note is to be mailed to someone other than
the person(s) signing this Letter of Transmittal or to the person(s) signing
this Letter of Transmittal at an address different than the address shown on
this letter of Transmittal, the appropriate boxes of this Letter of Transmittal
should be completed. If Old Notes are surrendered by holder(s) that have
completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (as defined in Instruction 2).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Tendered Old
Notes may be withdrawn in accordance with Instruction 3 hereto at any time prior
to the Expiration Date.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES
TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX.
<PAGE> 6
REGISTERED HOLDERS OF OLD NOTES SIGN HERE
(IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 BELOW)
<TABLE>
<S> <C>
PLEASE SIGN HERE PLEASE SIGN HERE
- ------------------------------------------------ ------------------------------------------------
Authorized Signature of Registered Holder Authorized Signature of Registered Holder
</TABLE>
Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Old Notes or on a security position listing as the owner of the Old Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith. See Instruction 4. If signature is by
attorney-in-fact, trustee, executor, administrator, guardian, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please provide the following information:
<TABLE>
<S> <C>
Name: ------------------------------------------ Name: ------------------------------------------
Title: ----------------------------------------- Title: -----------------------------------------
Address: --------------------------------------- Address: ---------------------------------------
- ------------------------------------------------ ------------------------------------------------
Telephone Number: ------------------------------ Telephone Number: ------------------------------
Dated: ----------------------------------------- Dated: -----------------------------------------
- ------------------------------------------------ ------------------------------------------------
Taxpayer Identification or Social Security Taxpayer Identification or Social Security
Number Number
</TABLE>
<PAGE> 7
SIGNATURE GUARANTEE
(IF REQUIRED -- SEE INSTRUCTION 4)
Signature(s) Guaranteed by an Eligible Institution:
-----------------------------
(Authorized Signature)
Date:
---------------------------------------------------------------------------
Name of Eligible Institution
Guaranteeing Signature:
---------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity (full title):
----------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
SPECIAL EXCHANGE INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if the New Notes or any Old Notes that are not tendered or
not accepted are to be issued in the name of someone other than the undersigned.
Issue:
[ ] New Notes to:
[ ] Old Notes to:
Name(s)
-------------------------------------------------
Address
-------------------------------------------------
- --------------------------------------------------------
Telephone Number:
---------------------------------------
Book-Entry Transfer Facility Account:
-------------------
- --------------------------------------------------------
- --------------------------------------------------------
(Tax Identification or Social Security Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if the New Notes or any Old Notes that are not tendered or
not accepted are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above under "Description of Old
Notes Tendered."
Mail:
[ ] New Notes to:
[ ] Old Notes to:
Name(s)
------------------------------------------------
Address
------------------------------------------------
- -------------------------------------------------------
Telephone Number:
--------------------------------------
- -------------------------------------------------------
(Tax Identification or Social Security Number)
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of This Letter of Transmittal and Certificates. All physically
delivered Old Notes or confirmation of any book-entry transfer to the Exchange
Agent's account at DTC, as well as a properly completed and duly executed copy
of this Letter of Transmittal (or facsimile thereof), and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at any of its addresses set forth herein on or prior to the Expiration Date. The
method of delivery of this Letter of Transmittal, the Old Notes and all other
required documents is at the election and risk of the holder. Instead of
delivery by mail, it is recommended that holders use an overnight or hand
delivery service. Except as otherwise provided below, the delivery will be
deemed made only when actually received by the Exchange Agent.
Any beneficial holder whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Old Notes in the Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender on such beneficial
holder's behalf. If such beneficial holder wishes to tender directly, such
beneficial holder must, prior to completing and executing the Letter of
Transmittal and tendering Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such beneficial holder's own name or
obtain a properly completed bond power from the registered holder. Beneficial
holders should be aware that the transfer of registered ownership may make
considerable time.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the ones set forth herein, will not constitute a
valid delivery.
The Company expressly reserves the right, at any time or from time to time,
to extend the Expiration Date by complying with certain conditions set forth in
the Prospectus.
LETTERS OF TRANSMITTAL SHOULD NOT BE SENT TO THE COMPANY OR TO DTC
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and (i) whose Old Notes are not immediately available, (ii) who cannot
delivery their Old Notes, the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Exchange Agent prior to the
Expiration Date or (iii) who cannot complete the procedures for book-entry
transfers on a timely basis, may effect a tender if:
a. the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent
in the United States or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
b. prior to the Expiration Date, the Exchange Agent receives from such
holder and the Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder of the Old
Notes, the certificate or registration number(s) of the tendered Old Notes,
and the principal amount of Old Notes tendered, stating that the tender is
being made thereby and guaranteeing that, at least within four (4) New York
Stock Exchange trading days after the Expiration Date, the tendered Old
Notes, a duly executed Letter of Transmittal (or facsimile thereof) and any
other required documents will be deposited by the Eligible Institution with
the Exchange Agent; and
c. a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), any other required documents and tendered Old Notes in
proper form for transfer (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC) must be received by the
Exchange Agent at least within four (4) New York Stock Exchange trading
days after the Expiration Date.
<PAGE> 9
Any holder who wishes to tender Old Notes pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent receives
the Notice of Guaranteed Delivery relating to such Old Notes prior to the
Expiration Date. Failure to complete the guaranteed delivery procedures outlined
above will not, of itself, affect the validity or effect a revocation of any
Letter of Transmittal form properly completed and executed by a holder who
attempted to use the guaranteed delivery procedures.
3. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted only
in integral multiples of $1,000 principal amount at maturity. If less than the
entire principal amount of Old Notes evidenced by a submitted certificate is
tendered, the tendering holder should fill in the principal amount tendered in
the column entitled "Principal Amount Tendered" of the box entitled "Description
of Old Notes Tendered." A newly issued Old Note for the principal amount of Old
Notes submitted but not tendered will be sent to such holder, unless the
appropriate boxes on this Letter of Transmittal are completed, as soon as
practicable after the Expiration Date. All Old Notes delivered to the Exchange
Agent will be deemed to have been tendered in full unless otherwise indicated.
Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date, after which tenders of Old Notes are
irrevocable. To withdraw a tender of Old Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent by 5:00 p.m., New York City time, on the Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate or registration number(s) and principal
amount of such Old Notes, or, in the case of Old Notes transferred by book-entry
transfer, the name and number of the account at DTC to be credited), (iii) be
signed by the Depositor in the same manner as the original signature on this
Letter of Transmittal (including any required signature guarantees) or be
accompanied by a bond power in the name of the person withdrawing the tender, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder, with the signature thereon guaranteed by a
Eligible Institution together with the other documents required upon transfer by
the Indenture, (iv) specify the name in which such Old Notes are to be
registered, if different from that of the Depositor, pursuant to such documents
of transfer and (v) include a statement that such holder is withdrawing his
election to have such Old Notes exchanged. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, in its sole discretion, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as promptly as practicable after withdrawal.
4. Signature on This Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed
by the registered holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificates without
alteration or enlargement or any change whatsoever. If this Letter of
Transmittal is signed by a participant in DTC, the signature must correspond
with the name as it appears on the security position listing as the owner of the
Old Notes.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Old Notes
tendered hereby are tendered (i) by a registered holder who has not completed
the box entitled "Special Exchange Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
<PAGE> 10
If this Letter of Transmittal is signed by the registered holder or holders
of Old Notes (which term, for the purposes described herein, shall include a
participant in DTC whose name appears on a security listing as the owner of the
Old Notes) listed and tendered hereby, no endorsements of the tendered Old Notes
or separate written instruments of transfer or exchange are required. In any
other case, the registered holder (or acting holder) must either properly
endorse the Old Notes or transmit properly completed bond powers with this
Letter of Transmittal (in either case executed exactly as the name(s) of the
registered holder(s) appear(s) on the Old Notes, and, with respect to a
participant in DTC whose name appears on a security position listing as the
owner of Old Notes, exactly as the name of the participant appears on such
security position listing), with the signature on the Old Notes or bond power
guaranteed by an Eligible Institution (except where the Old Notes are tendered
for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by attorneys-in-fact, trustees,
executors, administrators, guardians, officers of corporations or others acting
in a fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, proper evidence satisfactory to the
Company of their authority so to act must be submitted.
5. Special Exchange and Delivery Instructions. Tendering holders should
indicate, in the applicable box, the name and address (or account at DTC) in
which the New Notes or Old Notes for principal amounts not tendered or not
accepted for exchange are to be issued and delivered (or deposited), if
different from the names and addresses or accounts of the person signing this
Letter of Transmittal. In the case of issuance in a different name, the taxpayer
identification number of social security number of the person named must also be
indicated and the tendering holder should complete the applicable box.
If no instructions are given, the New Notes (and any Old Notes not tendered
or not accepted) will be issued in the name of and delivered to the acting
holder of the Old Notes or deposited at such holder's account at the Depository.
6. Transfer Taxes. The Company shall pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Notes tendered, or if tendered Old Notes are registered in the name
of any person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted herewith, the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Old Notes listed in the Letter of
Transmittal.
7. Waiver of Conditions. The Company reserves the absolute right to waive,
in whole or in part, any of the specified conditions to the Exchange Offer set
forth in the Prospectus.
8. Mutilated, Lost, Stolen or Destroyed Notes. Any holder whose Old Notes
have been mutilated, lost, stolen or destroyed should contact the Exchange Agent
at the address indicated above for further instructions.
9. Requests for Assistance or Additional Copies. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal may be directed to the Exchange Agent
at the address and telephone number set forth above.
10. Validity and Form. All questions as to the validity, form, eligibility
(including time of receipt), acceptance of tendered Old Notes and withdrawal of
tendered Old Notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the absolute right
<PAGE> 11
to waive any irregularities or conditions of tender as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in this Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of Old Notes, nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holders of Old Notes, unless otherwise provided herein, as soon as practicable
following the Expiration Date.
11. Important Tax Information. Under U.S. federal income tax law, a holder
tendering Old Notes is required to provide the Exchange Agent with such holder's
correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If
such holder is an individual, the TIN is the holder's social security number.
The Certificate of Awaiting Taxpayer Identification Number should be completed
if the tendering holder has not been issued a TIN and has applied for a number
or intends to apply for a number in the near future. If the Exchange Agent is
not provided with the correct TIN, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such holder with respect to tendered Old Notes may be subject to back up
withholding.
Certain holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a holder who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9 should
execute the certification following such Part 2. In order for a foreign holder
to qualify as an exempt recipient, that holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-9, signed under penalties
of perjury, attesting to that holder's exempt status. A copy of such form is
attached to this Letter of Transmittal.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any amounts otherwise payable to the holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
To prevent backup withholding on payments that are made to a holder with
respect to Old Notes tendered for exchange, the holder is required to notify the
Exchange Agent of its, his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
holder is awaiting a TIN) and that (i) such holder is exempt, (ii) such holder
has not been notified by the Internal Revenue Service that it, he or she is
subject to backup withholding as a result of failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified such holder that
it, he or she is no longer subject to backup withholding.
Each holder is required to give the Exchange Agent the social security
number or employer identification number of the record holder(s) of the Old
Notes. If Old Notes are in more than one name or are not in the name of the
actual holder, consult the instructions on Internal Revenue Service Form W-9,
which are attached to this Letter of Transmittal, for additional guidance on
which number to report.
If the tendering holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
<PAGE> 12
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE> 13
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS:
PAYOR'S NAME HOME PRODUCTS INTERNATIONAL, INC.
<TABLE>
<CAPTION>
<S><C>
- ---------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN ON THE SOCIAL SECURITY NUMBER OR
FORM W-9 LINE AT RIGHT AND CERTIFY BY SIGNING AND EMPLOYER IDENTIFICATION NUMBER
DATING BELOW.
------------------------------
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DEPARTMENT OF THE TREASURY PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that:
INTERNAL REVENUE SERVICE (1) The number shown on this form is my correct taxpayer identification number (or I
am waiting for a number to be issued to me):
(2) I am not subject to backup withholding either because: (a) I am exempt from
backup withholding; (b) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends; or (c) the IRS has notified me that I am no
longer subject to backup withholding; and
PAYOR'S REQUEST FOR TAXPAYER'S (3) Any other information provided on this form is true and correct.
IDENTIFICATION NUMBER (TIN)
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of under
reporting interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
----------------------------------------------------------------------------------
SIGNATURE
------------------------------------------ PART 3 --
DAT Awaiting
------------------------------------------------- TIN [ ]
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Services Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future, I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all payments made to me on account of the Exchange
Notes shall be retained until I provide a taxpayer identification number to
the Exchange Agent and that, if I do not provide my taxpayer identification
number within 60 days, such retain amounts shall be remitted to the Internal
Revenue Service as backup withholding and 31% of all reportable payments made
to me thereafter will be withheld and remitted to the Internal Revenue Service
until I provide a taxpayer identification number.
SIGNATURE DATE
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